Hurt v Freeman - [2002] NSWSC 264

No judgment structure available for this case.

CITATION: Hurt v Freeman [2002] NSWSC 264 revised - 09/04/2002

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 4126/99

HEARING DATE(S): 21/08/01-23/08/01, 07/09/01, 20/09/01

JUDGMENT DATE: 4 April 2002

PARTIES :

Bruce Raymond Mostyn HURT (First Plaintiff)
Robert Charles Mostyn HURT (Second Plaintiff)
Sally Mostyn WHITE (nee Hurt) (Third Plaintiff)
Gina Mostyn SUTTON (nee Hurt) (Fourth Plaintiff)
Andrew Bruce Mostyn HURT (Fifth Plaintiff)
Eric Kenneth Mostyn HURT (Sixth Plaintiff)
Robert Thomas Mostyn HURT (Seventh Plaintiff)
Raymond Sydney FREEMAN (First Defendant)

JUDGMENT OF: Santow J

COUNSEL : J T Gleeson, SC/ R A Dick (Plaintiffs)
I G Harrison, SC (Defendant)

SOLICITORS: Kanjian & Company (Plaintiffs)
Makinson & d'Apice (Defendant)

CATCHWORDS: EQUITY - Unconscionability - Alleged representations preceding contract later departed from by purchaser who had earlier acquired house property at gross under-value - Vendor much older woman of whom purchaser a close friend despite 44 year age difference - Family of the vendor apply in equity for remedial constructive trust assisted by tracing into proceeds of sale of property (as reinvested) - Estoppel - Limitation period - Laches.

LEGISLATION CITED: Limitation Act 1969 (NSW) ss47 and 48

CASES CITED: Ausotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582
Baumgartner v Baumgartner (1987) 164 CLR 137
Brady v Stapleton (1952) 88 CLR 322
Commonwealth v Verwayen 170 CLR 394
El Anjou v Dollar Land Holdings P/c [1993] Ch 717; [1994] 1 BCLC 464 (CA)
Fairey v Fairey (Santow J, 14 September 1998 unreported)
Guimelli v Guimelli (1999) 196 CLR 101
Hohol v Hohol [1981] VR 221
Hospital Products v United States Surgical Corporation (1984) 156 CLR 41
Hourigan v Trustees Executors and Agency Co. Ltd (1934) 51 CLR 619
Murray's Meats Pty Ltd v Bevillesta Pty Ltd (McLelland CJ in Eq, SC(NSW) 28 October 1993 unreported)
Muschinski v Dodds (1986) 160 CLR 683
Optus Productions Pty Ltd v Popwing Pty Limited (Santow J, 28 February 1995, unreported)
Rasmussen v Rasmussen [1995] 1 VR 613
Stafford v Stafford (1857) 44 ER 697
Taylor v Plumer (1815) 3 M & S 562
Thwaites v Ryan [1984] VR 65
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

DECISION: paras 251 to 253

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SANTOW J

Bruce Raymond Mostyn HURT

Robert Charles Mostyn HURT

Sally Mostyn WHITE (nee Hurt)

Gina Mostyn SUTTON (nee Hurt)

Andrew Bruce Mostyn HURT

Eric Kenneth Mostyn HURT

Robert Thomas Mostyn HURT

Raymond Sydney FREEMAN
First Defendant

(revised 9 April 2002)

Table of Contents

Page

INTRODUCTION AND OVERVIEW

NARRATIVE OF FACTS

Events of 1980

Events of 1981

Events of 1982

Events of 1983

The September 1993 contract for sale

Late 1983

Events of 1984

Mrs Hurt’s final Will

Events of 1985

Completion of contract for sale

The Defendant sells the property without accounting for the proceeds to the Plaintiffs

The Plaintiffs Statement of Claim

QUESTIONS FOR RESOLUTION

Question 1 - Representations

Conclusion on Question 1

Question 2 - Assumption operative at time of contract

Conclusion on Question 2

Question 3 - Enforceability by Defendant of rights under Contract of Sale

Question 4 - Assumption operative at time of completion of contract.

Question 5 - Unconscionability

Conclusion

Question 6 - Minimum equity to remedy

Conclusion

Question 7 - Constructive Trust and Tracing

Unconscionability

Conclusion

Equitable Estoppel

Conclusion

Common intention

Conclusion

Tracing

Question 8 - Limitations

Conclusion

Question 9 - Laches

Conclusion

Incidental Questions

(a)

If the Defendant had made the promise, why would he have sold the property in 1997 or not have hidden the proceeds?

(b)

The representations do not make sense and clearly were not in the self-interest of the Defendant.

OVERALL CONCLUSION 93
ORDERS AND COSTS 94

INTRODUCTION AND OVERVIEW

1 This is a claim for equitable relief commenced on 28 September 1999. It is brought by the Plaintiffs who are in the first two cases the two children (married sons) while the remaining five Plaintiffs are the five grandchildren of the now deceased Mrs Hurt. It arises out of representations said to have been made by the Defendant, who was a close friend of the deceased. The Defendant denies making them. The basis of the Plaintiffs’ claim is that when Mrs Hurt entered into a written contract in September 1983 for the sale of the family home at Longueville to the Defendant (Mr Ray Freeman) for a sum substantially below its market price, she did so in reliance on these alleged representations made to her by the Defendant. She had known him since 1973. At the time of the contract, she was 90 years of age. There was a 44 year age difference between them, their’s being a companionate friendship in which (according to the Plaintiffs) he was clearly in the ascendant. It began in 1973 and continued until her death in 1986 at the age of 93.

2 The representations are said to have been operative both at the time of Mrs Hurt’s entry into the contract and at its completion in June 1985, fourteen months before her death. They were, according to the Plaintiffs, promises that if the Defendant acquired the property he would return it, or the proceeds arising from its sale (subject to deductions made for his purchase price and any capital expenditure incurred by him), to the family of Mrs Hurt when he no longer had any use for the property. On the basis of those representations the Plaintiffs claim that after acquiring title to the property the Defendant held the Property (or such net proceeds as resulted from its sale) upon trust for the Plaintiffs, subject to his rights for indefinite occupation.

3 Following Mrs Hurt’s death in August 1986, and a nine year period overseas the Defendant returned to Australia and departed from these alleged representations. He did so by selling the Longueville property without notifying the Plaintiffs or distributing to them any net proceeds (in accordance with his alleged representations). It is contended that the Defendant acted unconscionably in so doing and in departing from the shared assumption brought about by those representations, relied upon by Mrs Hurt to her detriment. Using the proceeds from the sale the Defendant purchased a property in Paddington. Accordingly, the Plaintiffs seek to trace into the Paddington property and into the Defendant’s assets, such being in aid of relief by way of remedial constructive trust over that property as well as over a policy, purchased using the proceeds of sale.

4 The Defendant strenuously disputes all these claims and in particular that he ever made such representations to Mrs Hurt in relation to the property. He contends that in any event, the causes of action relied upon by the Plaintiffs arose more than six years prior to commencement of these proceedings and as such are either barred by the Limitation Act 1969 (NSW) or by laches. The Plaintiffs respond by contending that their cause of action arose at the earliest in October 1997 when the Defendant refused to honour and fulfil his alleged promises to Mrs Hurt. This was when the Defendant sold the Property, after ceasing to reside there, failing (according to the Plaintiffs) properly to account for the proceeds in accordance with the alleged representations. Alternatively (say the Plaintiffs) their cause of action arose in July 1998 being the first date the Plaintiffs discovered, and with reasonable diligence could have discovered, the facts giving rise to their cause of action. Laches is denied. The Plaintiffs seek to explain their not bringing proceedings earlier, on the basis that they waited to see whether or not the Defendant would perform his promise when the time came for it to be performed.

5 The other issues are set out later in this judgment, under the heading “Questions for Resolution”.

NARRATIVE OF FACTS

6 I include below a narrative of largely uncontroversial facts, but identifying any points of dispute between the parties and their alternative versions. Where the late Mrs Hurt’s correspondence has been summarised, or its effect given, this was done by the Plaintiffs’ legal advisers, as to selected passages which the Plaintiffs contend bear on the issues of this case. It is accepted by the Defendant as an accurate summation of what those passages actually say. The Defendant would still draw different conclusions from the Plaintiffs, as to the significance of what is said in the letters, in relation to the issues in this case. The Defendant invited a reading of all the letters for overall impression but did not identify any other letter or other passages for specific attention.

7 The First and Second Plaintiffs (Dr Bruce Hurt and Mr Robert Hurt respectively) are the sons of the late Winfred Amelia Hurt. I shall refer to them as Bruce Hurt and Robert Hurt respectively. Mrs Hurt was born on 4 May 1893 and died on 6 August 1986 aged 93 years. The Third to Seventh Plaintiffs are the grandchildren of Mrs Hurt.

8 Mrs Hurt lived in the home at 32 Lucretia Avenue Longueville (“the Property”) between 1928 and 1984. Until 1968 she lived there with her husband, Eric Hurt, and thereafter she lived there on her own as a widow.

9 Until 1968 the title to the property was in her husband’s name. The title then passed under her husband’s Will to Mrs Hurt.

10 The property consisted of an older style home with separate lounge, dining room, sleep out and sunroom on a 901 metre square block in Longueville. It was a north facing waterfront block with views overlooking Woodford Bay of some value.

11 After her husband’s death, Mrs Hurt remained in regular contact with her sons. She was particularly close to the Second Plaintiff, Robert Hurt even though he worked in the Public Service in Canberra. They very frequently exchanged lengthy letters and shared many thoughts and feelings.

12 The Defendant says that he first met Mrs Hurt in about February 1973. The Defendant was then 36 years of age and Mrs Hurt was almost 80 years of age such that there was a 44 year age difference. At that stage he was Special Events Manager for David Jones Australia. He was attempting to set up a museum of vintage merchandise which had been purchased from David Jones in years gone by. Mrs Hurt offered to donate a dress she had made from material purchased from David Jones. A month or two later the Defendant visited Mrs Hurt at home and later collected the dress (Defendant’s affidavit paras 9-13).

13 The Defendant asserts that by about 1975 or 1976 he and Mrs Hurt developed a close relationship of friendship. He says the relationship was based on their common interests including the opera and ballet. They were both involved in charities. Mrs Hurt was the Secretary of the Lady Mayoress’ Fundraising Committee. The Defendant says he was involved in a number of charities. The Defendant says that by 1975 they would see each other one a week for lunch when he was in Sydney, either at a restaurant in David Jones or at her house; they went to some social events together, including the opera, ballet and symphony. He says that when he was in Sydney they spoke almost every day by telephone and when he was overseas on business he would telephone her about once a week. The Defendant says that he gave gifts to Mrs Hurt, such as flowers, soaps, perfumes, catalogues or magazines which he had purchased overseas. He says that she brought gifts to him such as cookies, cakes, pies, coins, stamps and other mementoes and keepsakes (Defendant paras 14-30).

14 The Defendant says he came to consider Mrs Hurt as one of his closest friends (Defendant para 25).

15 The Defendant says that in January 1977 Mrs Hurt inquired whether he would come and live with her if she put another floor on the house. He says he rejected the offer as out of the question because he was very happy where he was (Defendant para 31).

16 The Defendant says that in about 1978 Mrs Hurt asked him to consider one day living at the house in Longueville. According to him she said “this is a beautiful area and much nicer than where you are living. After I leave the house, I would like someone who really appreciates the view and the area to live here” (Defendant para 33).

17 Although the Plaintiffs have been unable to locate a copy, there is other evidence that Mrs Hurt’s Will in 1980 left the property and all of her assets to her two sons in equal shares: (see for example letter 7 May 1980, Mrs Hurt to Robert Hurt at p5). By 1980 the ages of Mrs Hurt’s sons and grandchildren were as follows:

18 Apart from the property, Mrs Hurt had very few other assets which she could leave to her children or grandchildren. She was by 1980, 87 years old.

19 By early to mid 1980, Mrs Hurt had formed the view that she wanted the Defendant to live in the property after she died or no longer needed it. She had a number of reasons. These are brought out in her correspondence to the Second Plaintiff. She believed that the Defendant would appreciate the peace and beauty of the property (See letters from Mrs Hurt to Robert 7 May 1980 (PX1 at 92); 22 June 1980 (PX1 at 110)). She wanted him to live in something better than what she believed to be his current dark rented home in Surry Hills, set in a poor neighbourhood (See letter from Mrs Hurt to Robert 15 April 1980 (PX1 at 81)). She believed that she and the Defendant shared much in common, especially in terms of spiritual and moral values (See letter from Mrs Hurt to Robert 27 May 1980 (PX1 at 98)). She thought he was a good man who had worked very hard from humble upbringings to make a great success of his life (See letters from Mrs Hurt to Robert 7 May 1980 (PX1 at 92); 8 February 1982 (PX1 at 177-78)). She thought that he was highly regarded in society (See letters from Mrs Hurt to Robert 7 May 1980 (PX1 at 91); 8 October 1980 (PX1 at 120)). She believed he was extremely generous to his mother and his sister and her two children (See letter from Mrs Hurt to Robert 27 May 1980 (PX1 at 98)). She also thought that her two sons may not wish to live there (See letters from Mrs Hurt to Robert 25 January 1981 (PX1 at 156); 16 February 1982 (PX1 at 183); 28 October 1982 (PX1 at 216)).

20 The correspondence from Mrs Hurt to the Second Plaintiff suggests that Mrs Hurt had made or believed she had made a promise to the Defendant that he could live in the house after she ceased to need it, and that she felt morally bound to keep this promise: (see letters from Mrs Hurt to Robert 7 May 1980 (PX1 at 93); 22 June 1980 (PX1 at 109-110); 27 June 1980 (PX1 at 112-113)).

21 Mrs Hurt’s correspondence also evidences her anxiety not to disinherit her children and grandchildren (See letters from Mrs Hurt to Robert 6 May 1980 (PX1 at 88); 15 April 1980 (PX1 at 79); 3 June 1980 (PX1 at 103)). She appreciated that the property was her only substantial asset and that in the ordinary course it would pass to her sons.

22 Accordingly, it is the Plaintiffs’ case (disputed by the Defendant) that Mrs Hurt formed the view, notwithstanding her promise to the Defendant, that the most appropriate compromise by which to resolve this dilemma would be that the Defendant might live in the property for so long as he wished, and that the property would revert to the Hurt family after the Defendant ceased to live in it or no longer needed it (for example see letter from Mrs Hurt to Robert 25 January 1981 (PX1 at 123)).

23 Consistent with that case the Plaintiffs contend that in the period from 1980 until June 1985 (when he acquired title to the property upon completion of the sale) the Defendant repeatedly both acquiesced in Mrs Hurt’s expressed wish and intention and moreover expressly promised Mrs Hurt that he would observe it. Again this is disputed by the Defendant.

24 The manner in which the sale transaction between the Defendant and Mrs Hurt developed between 1980 and 1985 is set out below. As evidence of these facts the Plaintiffs rely on statements made by Mrs Hurt in her letters, especially to the Second Plaintiff. The Plaintiffs contend that those letters are reliable and accurate in what they record as to conversations between the Defendant and Mrs Hurt, and Mrs Hurt’s state of mind from time to time. On the other hand, the Defendant claims that Mrs Hurt’s competing loyalties led her to seek to reassure the Plaintiffs that they would not be disadvantaged by her wish to benefit the Defendant. Accordingly, the Defendant denies (Affidavit para 42) having made the representations hereafter referred to (in the letters of 22 October 1980, 13 January 1981, 3 March 1981 and 23 January 1983) and contends that Mrs Hurt’s letters to the Second Plaintiff are wholly consistent with her wishing only to alleviate any concerns that he or his brother may have had.

25 The first document that the Plaintiffs claim evidences Mrs Hurt’s promise to the Defendant is contained in her letter to the Second Plaintiff dated 15 April 1980 (PX1 at 72), especially pages 8-10 (PX1 at 79-81). The following points emerge:

(b) it was her chance remark to the Defendant which brought forth the request he would like the opportunity to buy the property;

(c) she would know the person who would occupy the house when she had to leave it;

(d) the Defendant assured her she could live in the house as long as she wanted to; and

(e) Mrs Hurt said she could not believe what the real estate agents were saying the property was worth. She offered the property to the Defendant for purchase at a maximum price of $50,000 – to which he agreed.

26 Mrs Hurt’s letter to the Second Plaintiff of 18 April 1980 (PX1 at 85) records that:

(b) she should not proceed to sell the property to the Defendant. This closed the chapter;

(c) she had heard on the news that real estate prices were increasing in Sydney because of a shortage of dwellings. There was an increase from $42,000 in 1978 to $65,000 in 1980 for a suburban home. Prices had not increased in Melbourne.

27 Mrs Hurt’s letter to the Second Plaintiff of 6 May1980 (PX1 at 87) records:

(b) she again referred to escalating property prices in Sydney.

28 Mrs Hurt wrote again to the Second Plaintiff the next day, 7 May1980 (PX1 at 89) once more raising the house at length. The letter records:

(b) she is concerned she has broken her promise to the Defendant;

(c) if there is no other way she would hope to add a codicil to her Will that it is her wish that the Defendant be given the house at a price he can afford, and he certainly can’t meet the present stupid outlandish figures the agents are advertising; and

(d) she would like to be able to settle at $50,000 with the Second Plaintiff’s consent.

29 Mrs Hurt’s letter to the Second Plaintiff of 3 June 1980 (PX1 at 101) records:

(b) Mrs Hurt thought it an adequate, realistic price; and

(c) she hoped that her father’s Will could be worked out to Robert’s advantage to make up for any deficiency in No. 32.

30 Mrs Hurt’s letter to the Second Plaintiff of 22 June 1980 (PX1 at 109) recorded:

(b) she had learned that she could not do as she liked with what she thought was hers;

(c) she had received a letter from the Defendant who was in Bali. He had expressed thoughts and dreams of the future at No. 32 with real appreciation and wonder. She did not know how she could tell him.

31 Mrs Hurt’s letter to the Second Plaintiff of 27 June 1980 (PX1 at 111) records:

(b) she said that she had accepted the Defendant’s offer of $60,000 and had intended going ahead and making it legal, accepting a deposit and letting him pay monthly instalments, with him agreeing never to press to come and live here whilst she needed No. 32 as her home;

(c) if she could have afforded it she would have gladly put a top storey on so he could live in it and to protect her;

(d) she was so unhappy at the thought of telling him they could not go ahead with the agreed plan as Bruce was not happy for it to take place at present. Bruce was trying to protect her;

(e) she wished to be fair in honouring her promise that Ray could have the house when she no longer required to live here at a price he could afford; and

(f) she was making arrangements to get a valuation of No. 32. This was for her own satisfaction only.

32 A certificate of valuation was obtained from the Valuer General on or about 16 July 1980. It was a valuation of Mrs Hurt’s interest as owner of the land with vacant possession. It included fixed floor and window coverings and light fittings. The value was $90,000. (Mrs Hurt later obtained a certified copy of the valuation on 17 December 1980).

33 So the position as of July 1980 was that Mrs Hurt wanted to sell the property to the Defendant so he could live in it as a home. The price discussed was $60,000. This sum was then well below the valuation of $90,000. Her sons, especially Bruce, had expressed opposition and the sale was not going ahead.

34 There is a gap in the correspondence until 8 October 1980. Mrs Hurt’s letter to the Second Plaintiff of that date (PX1 at 117) records:

(b) the Defendant was offering a deposit of $15,000 also and regular payments through his solicitors.

35 Mrs Hurt’s letter of 22 October 1980 (PX1 at 121) to the Second Plaintiff records:

(b) Mrs Hurt and the Defendant had already agreed that when she died or no longer required to live in the house, the Defendant would be in a position to immediately occupy the dwelling and make arrangements to borrow the full amount owing on the house and settle with Robert and Bruce. There was never any idea of continuing with instalments at regular intervals;

(c) “Ray is a very fine person and does not want to do anything to upset anyone – as a matter of fact he has said that he would rather lose the house than for me to have any worry about it - he has also said that when he no longer requires to live here he will want to arrange his affairs so that the house goes back into the Hurt family – He asks me to be sure and sends his regards to you and Emily and hopes to see you when you are in Sydney” [representation 1A].

36 Mrs Hurt’s letter probably written on 8 December 1980 (PX1 at 133) recorded she was still in a very disturbed state about No. 32 and her promise to the Defendant. She was waiting for the new valuation to have bargaining power.

37 Mrs Hurt’s letter of 9 December 1980 (PX1 at 135) to the Second Plaintiff records:

(b) the Defendant was willing to put a $20,000 deposit (which would be paid to Robert and Bruce) and whatever monthly instalments are necessary. Mrs Hurt could live in the house for as long as she required to; and

(c) the Defendant needed helping morally and spiritually. She would be failing him by not keeping her word.

38 As mentioned above, the Valuer General on 17 December 1980 sent to Mrs Hurt a certified copy of the valuation dated 16 July 1980 at $90,000. It is not clear from her letter of 9 December 1980 what was the total purchase price which the Defendant was offering to pay.

39 The Defendant says that he received a retrenchment package of approximately $18,000 from David Jones after he finished work on 21 November 1980. Thereafter he was unemployed until about September 1981 when he started with Wedgwood (Defendant para 40).

40 Mrs Hurt’s letter to the Second Plaintiff dated 13 January 1981 (PX1 at 137) records:

(b) Mrs Hurt would die happy if she knew the Defendant could live in the house whilst he required to do so;

(c) the Defendant was so anxious to bring it about now because he was about to receive the lump sum from David Jones which he must invest and he would feel in his older age that he would have a place of peace to come to;

(d) Mrs Hurt had spoken with Bruce whom she quotes as saying to her that he would buy the house at the price his contact suggested ¾ $175,000;

(e) the letter concluded “By the way – Ray says he would make provision for 32 to go back to the Hurt family when he no longer requires to live here” [representation 1B].

41 There is a letter from the Second Plaintiff to Mrs Hurt dated 18 January 1981 (PX1 at 141) which records:

(b) Mrs Hurt apparently wished to set a sale price of $75,000 which was about three quarters (¾) of the Valuer General’s valuation and probably half the current open market value;

(c) a company could be established comprising five equal shares for each of the grandchildren to finance a loan to the Defendant of the balance between $75,000 and the initial payment of $22,000. There would be regular repayments including interest at a minimum of bank rates;

(d) if the Defendant wished to reside elsewhere at any time the property would be offered to the finance company for repurchase on the same conditions as the Defendant brought it. He would finance its repurchase under the same conditions of contract;

(e) these were some of the points which Mrs Hurt had told Robert about;

(f) Robert’s frank view was that the financing or mortgage agreement was unworkable. It would be far too expensive for Ray. They should protect him from an unhappily obligated future.

42 Mrs Hurt responded to this letter on 25 January 1981 (PX1 at 155):

(b) the Defendant realised that he must be thinking about his own future and a home – he never had anywhere that he could call home, only a place to eat and sleep;

(c) Mrs Hurt had said enough – they would speak no more of selling No. 32;

(d) the letter also records the Defendant’s latest offer for the house was $90,000 not $75,000.

43 The Defendant says that in about February 1981 he purchased a derelict property at 291 Chalmers Street Redfern. The purchase price was $81,000. He says that he paid $20,000 and raised the balance by mortgage. This would appear to be use of the redundancy payment from David Jones. The Defendant says that in buying and renovating the property he spent in total about $165,000. Renovations were complete by November 1981 (Defendant paras 41-42).

44 Mrs Hurt’s letter to the Second Plaintiff of 3 March 1981 (PX1 at 164) records:

(b) she feels morally bound to keep her promise to Ray that some day, when she no longer requires to, he can live at No. 32;

(c) the only way to do this was to make it his home, when she leaves, with him undertaking to keep it up to saleable value, carrying out necessary repairs or alterations, maintain it so that when finally it is vacated by him, Robert and family, Bruce and family can have it back as heritage. If he spends money increasing the value of the property he would be reimbursed [representation 1C];

(d) she had discussed the legal aspect of this with her solicitor. She is not sure whether the Defendant would accept her terms as he hoped to buy the home. The Defendant was coming to see her that week and they would discuss it.

45 Mrs Hurt’s letter to both sons written about 31 May1981 (PX1 at 173) discloses that she had instructed her solicitor to prepare a new Will which permitted the Defendant to possess the house to live in for as long as he wished to do so and at the end of such time the house would be sold and the proceeds divided into six shares, five for the grandchildren and one for the Defendant’s own direction. Although this Will has not been located there is further evidence of it in the letter from Bruce to Robert dated 12 February 1982 recording statements made by Mrs Hurt about its contents.

46 Mrs Hurt’s description of this Will records that:

(b) It would then return to the Hurt family (or more specifically to the grandchildren, with the Defendant now being entitled to a one sixth share of the proceeds).

47 During 1981 Mrs Hurt gave the Defendant a cheque for $5,000 or $6,000. He asserts that it was a gift to help him come into No. 32 eventually (Defendant’s Affidavit, paras 43 and 44).

48 There is then a gap in the correspondence until 1982.

49 Mrs Hurt’s letter to Robert dated 8 February 1982 (PX1 at 177) records:

(b) Mrs Hurt still seems concerned to assist the Defendant to move away from Redfern or Surry Hills to “heaven” in Longueville.

50 Bruce’s letter to Robert dated 12 February 1982 (PX1 at 181) also refers to these discussions with Mrs Hurt. There is reference to the Will apparently made in 1981 as referred to above. Bruce suggested she should change her Will back to simple linear inheritance: (see Bruce’s affidavit, para 7).

51 Bruce’s letter to Mr O’Reilly from Marshall Landers (Mrs Hurt’s solicitors) dated 1 March 1982 (PX1 at 190) records:

(b) Mrs Hurt had obtained a valuation on the property in June 1981 for $175,000. She is to send Mr O’Reilly a copy of the document;

(c) the up-to-date Valuer General’s figure of land value alone would probably be in the order of $100,000 to $150,000;

(d) this shows that there is value in the property above the $60,000-$90,000 she had in mind in the previous week.

52 Also on 1 March 1982 Mrs Hurt sent a letter to Robert (PX1 at 192). It records:

(b) the suggestion that the Defendant buy the house and the sons divide the proceeds equally. The price would be a reasonable price to be determined when the time comes.

53 Mrs Hurt’s letter to Robert of 3 March 1982 (PX1 at 196) records:

(b) all past ideas expressed in former Wills made by her have been revoked.

54 Bruce’s letter to Robert dated 4 March 1982 (PX1 at 198) records:

(b) Bruce had rung Mrs Hurt that day who was confused. She had received the proposed Will from Mr O’Reilly but it was three pages long and complicated. She needed time to consider it. It was possible that she had already written down her wishes and had them witnessed by Mr O’Reilly. If so, that record is not in evidence.

55 There is then a letter of 1 May1982 which is not relevant and then a break in the correspondence until 28 October 1982 with a letter to Robert. That letter (PX1 at 215) records:

56 Thus, assuming as is reasonable for the purposes of the chronology that the content of Mrs Hurt’s correspondence is accurate and reliable the position by the end of 1982 was that it was Mrs Hurt’s intention that the proceeds of No. 32 would go back to the family (more particularly the two sons, because of Robert’s financial needs). Mrs Hurt’s promise that the Defendant could occupy the property after she needed it had not been implemented in any legal fashion.

57 On or about 17 January 1983 Robert Hurt sent to Mrs Hurt a Will for her to sign. This Will (PX1 at 220):

(b) left all of Mrs Hurt’s property in equal shares to Robert and Bruce;

(c) referred to Mrs Hurt’s wish that her trustees’ offer the Defendant an option to purchase 32 Lucretia Avenue under terms and conditions “both at the time of the sale and for the future, which I have orally made known to my Trustees”.

58 In a letter from Mrs Hurt to Robert dated 19 January 1983 (PX1 at 221), Mrs Hurt:

(b) that she would explain in detail why not as well as her promise to Mr Freeman.

59 Mrs Hurt wrote to Robert on 23 January 1983 which letter (PX1 at 222) records:

that Mrs Hurt has given 32 to Ray to occupy after her death for as long as he wishes to live there; at the end of which time – for any reason – he will honour a promise made to Mrs Hurt that Robert and Bruce (if still living) will share equally the proceeds of the house if sold and in due course the children of Robert and Bruce will benefit

(b) that the Defendant has undertaken to make arrangements for the transfer after Mrs Hurt’s death of certain of her belongings into a new museum as well as ensuring that other household items are offered to Robert and Bruce;

(c) that the Defendant is conversant with all Mrs Hurt’s wishes in this direction and she has implicit faith in his promise to do the best he can for her family when she is no longer on this earth;

(d) the last thing Mrs Hurt would want to happen is to hurt Robert in any way - he has always been so wonderful to her and she loves him very dearly and is sad and distressed with all that is happening in his own environment;

(e) that Mrs Hurt had given her furniture (an old lounge, tub chairs, dining room table and chairs) to the Defendant together with a lamp and glass top wrought iron table and chairs from the front veranda;

(f) that Mrs Hurt wanted Robert and the Defendant to be friends and felt sure they would be able to work things out together when the time arrived – the Defendant promises this.

60 The Defendant denies making representation 1D (Defendant’s affidavit, para 50).

61 On 4 February 1983 (PX1 at 227), Mrs Hurt wrote to Robert. The letter recorded:

(b) that Mrs Hurt told Mr O’Reilly that she wished that her house property, the dwelling only, be offered to the Defendant for purchase at a reasonable value and be divided into three shares as between the Defendant, Bruce and Robert with the Defendant’s share to be accepted as the deposit on the sale. The Defendant would take immediate possession and occupy the house;

(c) Mrs Hurt’s request to Robert to try and accept what she has done and is now sharing with Robert, because she is convinced it is better this way for the present and as time passes and minds become less baffled, we can talk of these matters again and discuss more fully all the circumstances; and

(d) that Mrs Hurt wished most of all that Robert and Ray be friends and be natural with each other – that the Defendant will want Robert to accept the idea of both he and Robert being able to express themselves freely.

62 On 12 February 1983 (PX1 at 235) Robert wrote to Mrs Hurt. A copy of this letter was retained by the Plaintiffs. In that letter inter alia:

(b) Robert said the Defendant could not have the “fine understanding” ascribed to him by Mrs Hurt because he is letting Mrs Hurt walk back from promises made by her in earlier years about the heritage of Bruce and Robert and her grandchildren;

(c) Robert is critical of Mrs Hurt because she has adhered to her promises to the Defendant to transfer to him 32 Lucretia Avenue but she has not kept her promise to Robert made at Christmas that she would trust Robert and sign the Will he had prepared and sent to her on 17 January 1983 in connection with which Robert had undertaken to implement Mrs Hurt’s wishes about the Defendant and No. 32 “no matter how much they hurt”.

63 On 16 February 1983 Mrs Hurt prepared a letter to Robert (responding to the letter from Robert dated 12 February 1983) (PX1 at 243). The letter was not sent until 10 September 1983 (see below). Mrs Hurt’s letter recorded:

(b) Mrs Hurt was “so sad” that Robert could accuse her of letting him and Bruce down and she found it hard to believe Robert could think so little of her;

(c) she wishes that Robert could think as highly of the Defendant as the Defendant does of Robert – the Defendant wants Robert to be able to talk things over with him and to be friends for all time;

(d) with Mrs Hurt the completeness of love with the Defendant came too late and she is so truly grateful for the wonderful spiritual harmony which does exist – 50 years too late;

(e) that Mrs Hurt came across this letter (unsent) on 10 September 1983 and she was sending it to Robert for his perusal to help him realise “how worried I get”.

64 On 17 February 1983 Mrs Hurt wrote to Robert which letter (PX1 at 247) recorded:

(b) Mrs Hurt’s assurance that nothing has changed regarding the arrangements for material possessions at No. 32 and the arrangements relating to the contents of the garage are “well understood”;

(c) that the arrangements Mrs Hurt is putting in place in relation to No. 32 have been to try and protect Robert from unnecessary worry and responsibility after her death as he would not be in a position to drop everything and occupy the dwelling immediately which someone has to do;

(d) that the Defendant has tremendous regard and admiration for Robert as a person and offers his hand in friendship to be the basis of the Defendant and Robert getting together to sort out what Robert’s wishes are in regard to the furniture and furnishings and their distribution;

(e) that the Defendant can be trusted and Mrs Hurt has absolute faith in his promises and he has proven his worth to her through all the years they have been acquainted;

(f) that Mrs Hurt and the Defendant’s communication is purely spiritual harmony and this has been of such tremendous value to Mrs Hurt that anything she could do for the Defendant would never be enough to repay him; and

(g) as between Mrs Hurt and the Defendant – “we understand each other”.

65 There is then a gap until a letter of 24 May1983 from Mrs Hurt to Robert which is not relevant and a further gap in the correspondence until 20 June 1983 when Mrs Hurt wrote to Robert. The 20 June 1983 letter (PX1 at 255) records:

(b) the quality of the “makeup” of the Defendant is the very highest calibre, dependable, faithful, hardworking – doesn’t drink or smoke;

(c) if it had not been for such a discrepancy in years Mrs Hurt would have hoped the Defendant would ask her to marry him;

(d) that it is therefore no wonder that Mrs Hurt must be sure that the necessary provision be made to ensure that the Defendant is the person she wishes to live in 32 Lucretia;

(e) Mrs Hurt has promised the Defendant 32 Lucretia to live in when she passes on;

(f) the only way Mrs Hurt can repay the Defendant for all he has meant to her is a reduction in the price by one third of its value when it is sold to him at the reigning price at the right time;

(g) 32 Lucretia cannot be left unoccupied for even one day with all the unemployed, below par youths in the neighbourhood and Mrs Hurt’s suggestion is that Ray be invited to be caretaker on the day of her death and live at No. 32 until such time as sale to him has been arranged;

(h) Mrs Hurt is sad to have to drag Robert through all this – he has been so wonderfully considerate and generous to her always;

(i) that Robert should accept this letter with all that has not been written but still lives forever in Mrs Hurt’s heart – her love for her two sons and their families.

66 There is then a letter from Marshall Landers & Co to Mrs Hurt dated 21 June 1983 (PX1 at 259) which refers to a new Will.

67 A signed version of the Will referred to in the letter of 21 June 1983 from Marshall Landers & Co has not been located. However, the terms of such Will as it stood at that time can be inferred from a letter from Marshall Landers & Co to Mrs Hurt dated 1 July 1983 which attaches an amended version of the Will but also discloses the original terms.

68 The Will referred to in the 21 June 1983 letter:

(b) provided that in the event of the Defendant exercising the option to purchase, the Defendant be gifted an amount equivalent to one third of the value of the property as determined with intent that the Defendant only be required to pay as purchase price two thirds of such value.

69 The amended Will forwarded under cover of the 1 July 1983 letter (PX1 at 261) provided:

(b) gifted the Defendant a sum of $50,000 making the amount payable on purchase by the Defendant $100,000.

70 The draft Will forming part of exhibit RSF12 to the Defendant’s affidavit, apparently sent to Mrs Hurt under cover of letter from Marshall Landers & Co dated 13 July 1983 is in the same terms as the amended draft Will attached to the letter from Marshall Landers & Co to Mrs Hurt dated 1 July 1983.

71 The Plaintiffs do not know whether this Will in its original or amended form was ever signed by Mrs Hurt.

The September 1993 contract for sale

72 There is then a gap in the correspondence until September 1983. It appears, from a letter dated 5 September 1983 (PX1 at 272) from Marshall Landers to Mrs Hurt, that Mr O’Reilly had sent to Mrs Hurt a draft contract for sale of 32 Lucretia Avenue to the Defendant on 18 August 1983. The draft contract had also been sent to the Defendant. The letter of 5 September 1983 from Marshall Landers encloses a new Will for Mrs Hurt to sign which omits all reference to 32 Lucretia Avenue. The Will provides for any remaining assets of Mrs Hurt (after disposal of 32 Lucretia Avenue) to go to Robert and Bruce Hurt equally with the proviso that if either of them should pre-decease Mrs Hurt then their children should take the share of their father.

73 The Plaintiffs believe that the Will enclosed with the letter from Marshall Landers of 5 September 1983 was signed by Mrs Hurt in September 1983: (R Hurt 9 June 2000, para 18).

74 Within three days, (by 8 September 1983), the Defendant had handed to Marshall Landers the contract signed by him (see below) together with the deposit of $100 referred to in the contract: (see letter from Marshall Landers to Mrs Hurt dated 8 September 1983).

75 The signed contract for sale of 32 Lucretia Avenue between Mrs Hurt (who had also signed) and the Defendant dated 12 September 1983 (PX1 at 281):

(b) provided that completion would take place three months after the first to occur of:

(ii) the death of Mrs Hurt (see special condition 2A);

(d) did not contain any mechanism for an increase in the purchase price to reflect any increasing property values prior to completion.

76 Accordingly, during the period February 1983 - September 1983 the legal mechanism by which Mrs Hurt’s promise to the Defendant to live at 32 Lucretia Avenue was effected changed from an option to purchase under her Will (with two different formulae for calculation of the purchase price being proposed) to a contract for sale.

Late 1983

77 By early November 1983, the Plaintiffs contend that Mrs Hurt’s health had declined to the point where Mr O’Reilly of Marshall Landers wrote to her suggesting that it may be of advantage to her if she were to give a power of attorney to him to sign documents: (letter Marshall Landers to Mrs Hurt 2 November 1983, (PX1 at 293)). A general power of attorney was signed by Mrs Hurt in favour of Mr O’Reilly on 7 November 1983 (PX1 at 298).

Events of 1984

78 Subsequently, on 11 January 1984, a general power of attorney was signed by Mrs Hurt in favour of Bruce (PX2 at 314).

79 On or about 7 February 1984 Bruce obtained a written letter of valuation of 32 Lucretia Avenue from Mackeddie Real Estate Pty Limited (PX2 at 320). The valuation was $240,000 as at 7 February 1984 and $230,000 as at September 1983. At the time of the valuation Mackeddie Real Estate was a member of the Real Estate Institute of NSW and a real estate agency operating in Longueville. The valuation refers to a site inspection of 32 Lucretia Avenue being conducted in order to determine the value.

80 On 6 February 1984 Bruce wrote to the Defendant informing him inter alia that Mrs Hurt, who was then in Concord Hospital was too sick to return to No. 32 (PX2 at 319).

81 On 11 February 1984, when Bruce visited his mother at Concord Hospital, she gave him a copy of his 6 February 1984 letter to the Defendant which also contained a handwritten statement from Mrs Hurt to the effect that she intended to return home to No. 32.

82 On 14 February 1984, Bruce again wrote to the Defendant informing him of his visit to Mrs Hurt on 11 February and his receipt of the copied letter dated 6 February 1984 (PX2 at 321). Bruce informed the Defendant that there was an arrangement for Mrs Hurt to be transferred to Greenwich Hospital the following day and that Bruce would assess her wishes further.

83 On 26 February 1984 Mrs Hurt wrote to the Defendant which letter (PX2 at 322) recorded:

(b) Mrs Hurt’s statement that she realised she was not thinking clearly when she signed the contract for sale in September 1983 and that she had been in a stress area ever since and now wished to bring about a better solution.

84 On 15 March 1984 (PX2 at 328) Marshall Landers sent a letter to Mrs Hurt at the Greenwich Hospital. The letter records:

(b) that both the Defendant and Bruce had spoken with Mr O’Reilly in relation to the contract for sale of No. 32;

(c) that the Defendant had told Mr O’Reilly he does not consider he is able to give any thought to re-negotiation of the terms of the contract and that Mrs Hurt does not wish to see him placed in a position where he could not acquire the home;

(d) that Mrs Hurt had indicated to Mr O’Reilly that she wished there to be discussions with the Defendant as to a possible basis on which the Defendant might be able to still acquire No. 32 but at a more realistic price, having in mind at the present value that if this were done it could produce a final result where the value of the home might be shared equally between the Defendant and each of Bruce and Robert;

(e) that Mr O’Reilly thought Mrs Hurt’s proposal would be a proper arrangement to be made in all the circumstances; one which might leave Mrs Hurt feeling she had been fair to all concerned; and

(f) an arrangement proposed by Mr O’Reilly involving deferral of the purchase price on the security of the mortgage on generous terms to the Defendant.

85 On 21 March 1984 Bruce sent a letter (PX2 at 349) to the Defendant. The letter records:

(b) that the Mackeddie real estate valuation of the property as at September 1983 and February 1984 had been obtained and the valuation figures as at these periods, noting these amounts were far above the $100,000 purchase price in the September 1983 contract for sale;

(c) a question for the Defendant –

“Do you wonder why I must continue to see if I can put Mrs Hurt’s finances into better shape and that you are central to her problems.”

86 On 23 March 1984 Bruce sent a letter to the Defendant which letter (PX2 at 351) records:

(b) Bruce’s surprise and concern at the Defendant’s decision in view of Mrs Hurt’s repeated recent wishes that he re-negotiate; and

(c) a threat of legal action against the Defendant by Bruce.

87 On 25 March 1984 Mrs Hurt wrote a letter to Bruce from Greenwich Hospital which letter (PX2 at 354) records:

(b) that Mrs Hurt is fully aware of the contract for sale now and has no regrets;

(c) that the Defendant offers fortnightly payments to supply her everyday needs.

88 There is also a letter of 24 March 1984 to Mr O’Reilly from Mrs Hurt in which Mrs Hurt requests him to revoke the power of attorney she gave to Bruce (PX2 at 353).

89 Notwithstanding the letter of 25 March 1984 from Mrs Hurt to Bruce, approximately one week later on 3 April 1984, Mrs Hurt sent a letter to the Defendant which records that it would relieve Mrs Hurt’s distress and give her greater peace of mind if the Defendant would reconsider and renegotiate the terms of the contract for sale of No. 32 (PX2 at 369).

90 Some three days later, on 6 April 1984, Mrs Hurt wrote to Bruce (PX2 at 372), stating:

(b) she wished to cancel her letter to the Defendant of 3 April 1984 to renegotiate the contract;

(c) her decision was final and she would not accept Bruce deciding for her as to what was right.

91 On 9 April 1984 Bruce sent a letter to Mrs Hurt which letter (PX2 at 373) records:

(b) that the terms of that letter were completely different to Mrs Hurt’s words and actions when Bruce was by her side and that she seemed to be two people;

(c) that Mrs Hurt has gone completely over to the Defendant allowing him to do anything with her, even hurting her two sons, her sister Dorothy (“Aunty Doff”), Bruce and Robert’s families and all her true friends.

92 On 16 April 1984 Bruce visited Mrs Hurt at 32 Lucretia Avenue after she had been discharged from Greenwich Hospital. They had a long conversation in which Mrs Hurt said that the contract for sale provided inter alia that when the Defendant no longer wished to live at No. 32 he would sell the house and distribute the proceeds to Mrs Hurt’s grandchildren and that the Defendant had promised her this: (Bruce Hurt, para 11).

93 During the same conversation, Bruce informed Mrs Hurt that was not what the contract said and that it did not contain such a condition. Mrs Hurt’s response was that this was not true and that she knew what the Defendant had promised her and trusted him completely.

94 Exhibit RSF14 is a copy of a Will the Defendant says was signed by Mrs Hurt on 30 April 1984. This Will:

(b) purports to cancel any money owing by the Defendant on the property;

(c) provides that the balance of Mrs Hurt’s estate should be divided equally between the Defendant and each of Robert and Bruce; and

(d) appoints Mr O’Reilly as executor.

95 The Plaintiffs had no knowledge of the alleged Will referred to in exhibit RSF14 prior to receipt of the Defendant’s affidavit. The Plaintiffs contend that the Defendant’s role in the creation of such an extraordinary document calls for explanation.

96 On or about 29 May1984 Bruce had a further conversation with Mrs Hurt dealing with inter alia the sale of No. 32 to the Defendant during the course of which Mrs Hurt said she had done the right thing about the house, the Defendant was to be merely a caretaker and that when he finished with the house and sold it the proceeds would go to Bruce’s and Robert’s children. When Bruce asked Mrs Hurt what proof she had of this, Mrs Hurt replied “Ray has promised me this” (Bruce Hurt, para 13).

97 On or about 24 August1984 Mrs Hurt vacated 32 Lucretia Avenue and moved to the Caroline Chisholm Nursing Home in Lane Cove: (Bruce Hurt, para 14).

98 There is then a gap in relevant communications until October 1994.

99 The Plaintiffs contend that on 10 and 12 October 1984 the Defendant telephoned Robert Hurt and represented that if No. 32 were ever sold, the net proceeds (net of the Defendant’s costs of acquisition and any capital improvements by him) would be returned to the children of Robert and Bruce. Robert made contemporaneous handwritten notes of each conversation: (Robert Hurt, paras 21 and 22) (PX2 at 427-32).

100 The Defendant denies making the representations to Robert Hurt referred to in para 94 above: (Defendant, para 72).

101 On 15 October 1984 Mrs Hurt made her final Will witnessed inter alia by the Defendant (exhibit RSF16 to the affidavit of the Defendant). Mrs Hurt’s final Will in respect of which probate was granted on 1 December 1988:

(b) left all the possessions then owed by her in equal shares to Robert and Bruce.

102 This Will removed the extraordinary provisions of the 30 April 1994 Will (see 94 above).

103 On 19 October 1984 Robert wrote to the Defendant following his receipt of Mrs Hurt’s last Will dated 15 October 1984 (PX2 at 438). Attached to that letter was a letter drafted by Robert Hurt purporting to be from the Defendant to Robert which contained the following statement:

“If at any time following the completion of the contract for sale to me, the property is no longer my sole or principal residence, I (or my estate if I die) will pay in equal shares to you and Bruce, or if either of you are no longer living to your surviving children, a sum of money being the greater of the reasonable market price at that time, and the sale price, if the property is sold at that time, reduced by $150,000 and by proven accumulated expenditure by me on capital improvements costs to the property but not including maintenance costs”.

104 The Defendant refused to sign the letter.

105 On 24 October 1984 there was a telephone conversation between Robert Hurt and the Defendant. The Plaintiffs’ version of the conversation is set out in para 24 of Robert Hurt’s affidavit. In particular, Robert says the Defendant admitted he had a moral obligation to honour the conditions, but he would not sign a commitment. The Defendant admits a conversation occurred but denies much of Robert’s version. In particular, the Defendant denies discussing the conditions “referred to in the letters from Robert” and making any reference to the representations the Plaintiffs contend were made to Robert by the Defendant on 10 and 12 October 1984. Robert made a contemporaneous note of the telephone conversation with the Defendant: (Robert Hurt, para 24) (PX2 at 462).

106 There was a further telephone conversation between the Defendant and Robert on 25 October 1984. The Plaintiffs’ version of the effect of the conversation (cross-referenced to his contemporary notes referred to below) is set out in para 25 of Robert Hurt’s affidavit.

“Neither your mother nor I want the conditions in the letter which you sent me [referring to the letter dated 19 October 1984]. I want to be totally free of conditions. I want you to forget what I promised your mother regarding the conditions. Told you those things on 10 October in confidence. For the children’s sake - one day there will be a surprise for the children - I have that moral obligation. You have my word. But I don’t want to go into the detail of the conditions.”

“Everything will be done according to what is set down by your mother but there will be no formal agreement as to conditions. I don’t want to have the future without some surprise for the children.”

107 On or around 16 November 1984 the Defendant moved into and commenced occupation of No. 32 without paying or being required to pay rent or an occupation fee (Robert Hurt, para 27).

108 On 7 January 1985 Robert Hurt visited Mrs Hurt at the Caroline Chisholm Nursing Home. The Plaintiffs contend that during the visit Mrs Hurt said to Robert words to the effect:

(b) that irrespective of other interpretations Mrs Hurt retained her faith in the Defendant that he would ensure that his promise to her was met and that No. 32 would ultimately be for the benefit of her grandchildren once the Defendant no longer wished to live there no matter how far into the future that might be.

109 The statements by Mrs Hurt referred to above are set out in para 28 of Robert Hurt’s affidavit. Robert Hurt made a contemporaneous note of Mrs Hurt’s statement: (see Robert Hurt, para 28 and PX2 at 547 paras 7 and 8).

Completion of contract for sale

110 On or about 25 June 1985, the contract for sale of the property was completed by the transfer of the property to the Defendant. On completion, the Defendant paid the then outstanding balance of the purchase price of $99,000 to Mrs Hurt’s solicitors for deposit. A trust account was then opened by Bruce and Robert Hurt as trustees principally to ensure that Mrs Hurt’s medical and financial needs were taken care of properly (Robert Hurt, para 29).

111 The Defendant contends that he:

(b) paid out the mortgage secured on the title to Redfern and used the balance of the sale proceeds to assist with the purchase of No. 32: (Defendant, para 64).

112 The transfer of the Chalmers property is dated 7 June 1986 and refers to a contract dated 20 May1986. The Plaintiffs contend the discrepancy between the Defendant’s evidence as to the time of sale of Chalmers Street and the dates appearing on the transfer requires explanation by the Defendant.

113 The Defendant alleges he spent approximately $110,000 undertaking repairs, maintenance and renovations at No. 32 over a period of 4-5 years after he first took possession: (Defendant, para 65). No verifying documents were produced.

114 The Defendant contends that he moved out of No. 32 in 1989 and did not live there again until July 1997 prior to its sale on 31 October 1997. From 1999 the Defendant lived firstly in New York and then by 1992 in Vierques in Puerto Rico (Defendant, para 67).

The Defendant sells the property without accounting for the proceeds to the Plaintiffs

115 On 31 October 1997 the Defendant sold 32 Lucretia Avenue for $1.625 million. The Defendant purchased a property at 26 George Street, Paddington from part of the sale proceeds for $500,000. The Defendant invested the balance of approximately $920,000 (net of expenses and other alleged payments) in an investment fund with National Australian Financial Management Ltd, a subsidiary of the National Australia Bank Limited: (Defendant, para 69). The investment fund was described as a flexible income plan policy. The initial investment was $925,834.03 commencing 12 November 1997. The policy number was L0291356.

116 The sale of 32 Lucretia Avenue was conducted by the Defendant without reference to Robert or Bruce. Robert only found out about the sale by accident on 2 July 1998 when this information was obtained from an acquaintance who lived in Lucretia Avenue.

117 The Defendant has not paid the proceeds of sale or any part thereof to Robert, Bruce or any other member of the Hurt family. Neither Bruce nor Robert have had direct communication with the Defendant since Mrs Hurt died on 6 August1986 (Robert Hurt, para 31).

118 On or about 24 June 1999 Bruce Hurt caused to be registered against the title to the George Street, Paddington property a caveat registered No. 5923939.

119 I should refer at this point to an aspect of the Plaintiffs’ pleaded case in their Statement of Claim. Paragraph 23 of the Statement of Claim provides that:

“The Plaintiffs charge and the facts are that the Contract was grossly improvident in that Mr Freeman was granted indefinite rights to occupy the Property free of any liability to pay rent or other occupation fee, and to purchase the property for a fixed price that at the time of the Contract and at all times thereafter was, or was likely to be, substantially less than its true market value.”

120 The term “the Contract” is defined in the Statement of Claim as the written contract of September 1983. Whereas, it is “the collateral contract” which constitutes the agreement alleged between Mrs Hurt and Mr Freeman derived from alleged representations made by Mr Freeman that he would ultimately return the Longueville property to the Hurt family, or sell it and return to the First and Second Plaintiffs the proceeds of its sale (subject to deductions made for his purchase price and any capital expenditure incurred by him).

121 However, although paragraph [23] of the Statement of Claim states that “the Contract was grossly improvident” it also refers to what it terms the Defendant’s “indefinite rights to occupy the property”. But the terms of the written contract (special condition 2A) provide that the Defendant was free to occupy the Property only after Mrs Hurt ceased to reside there, or after her death, both events then triggering a requirement in the contract itself that completion take place within three months following the relevant event. Thus it is only accurate to describe the contract as conferring “indefinite rights to occupy the property” if understood as referring to an owner’s right to do so. The contract provides for completion at what was a substantial undervalue, thereby conferring that right of indefinite occupation as owner, so paying no “rent or occupation fee”.

122 Thus as I understand the Plaintiffs’ argument, based upon its pleaded case, it is this. Ignoring the collateral contract whereby either the property or the net profit from its sale, would be returned to the Hurt family, after the Defendant no longer wished to live in it, the contract was “grossly improvident”. This is because it conferred the incidents of ownership, including rent-free occupation following completion, at a price that was a gross undervalue. That pleading does not say that with the collateral contract, the contract ceased to be “grossly improvident”, nor indeed does it say the opposite. It simply pleads the position as I have described it.

123 It is on the basis of the pleadings as stated that I approach the claims of the Plaintiffs.

124 I turn now to the issues requiring resolution, both factual and legal, as follows.

Question 1

Did the Defendant represent to Mrs Hurt (or otherwise induce her to assume) that if he acquired the property, he would return it (or the net proceeds of sale) to the Hurt family when he no longer needed it

Question 2 - Assumption operative at time of contract: If yes to 1, was this assumption operative on the mind of Mrs Hurt at the time she executed the contract for sale to the Defendant (12 September 1983)?

Question 3 - Enforceability by Defendant of rights under Contract of Sale: Were the rights obtained by the Defendant under the contract for sale either unenforceable or of doubtful validity by reason of:

(a) the improvidence of the transaction and/or

(b) the Defendant’s conduct in procuring Mrs Hurt’s assent to it?

Question 4 - Assumption operative at time of completion of contract: At the time Mrs Hurt completed the contract for sale (25 June 1985) did the representations of the Defendant and her assumption based on those representations continue to operate on her mind?

Question 5 - Unconscionability: Did the Defendant act unconscionably in departing from the representations in October 1997 (i.e. selling the property without accounting for any of the proceeds to the Hurt family)?

Question 6 - Minimum equity to remedy: What is the minimum equity necessary to remedy the alleged unconscionable conduct by the Defendant?

Question 7 - Constructive Trust and Tracing: Are the Plaintiffs entitled to a constructive trust aided by tracing into:

(a) the property at George Street, Paddington;

(b) the flexible income plan policy No. L0291356 held by the Defendant with National Australia Financial Management Ltd?

Question 8 - Limitations: Are the Plaintiffs’ claims barred by the Limitation Act 1969 (NSW)?

Question 9 - Laches: Further or alternatively, is it inequitable and unjust to grant to the Plaintiffs any of the relief they claim by reason of their alleged laches?

Question 1 - Representations

125 I turn now to consider whether the Defendant made the alleged representations to Mrs Hurt and set out below in greater detail the significance of the correspondence relied upon by the Plaintiffs and their oral evidence bearing upon that.

126 Before turning to the evidence of the alleged representations in their minutiae it is necessary to test the plausibility of the representations having been made, by reference to their context. Clearly, by early to mid 1980, Mrs Hurt had decided that she would like the Defendant to live in the Longueville property after she died or no longer needed it (see letters from Mrs Hurt to Robert 15 April 1980 (PX1 at 79-80); 7 May 1980 (PX1 at 92); 27 July 1980 (PX1 at 98); 22 June 1980 (PX1 at 110); 15 April 1980 (PX1 at 81)). She sought to make an arrangement which would facilitate the Defendant’s acquisition of the property at a price that he could afford. Nonetheless, Mrs Hurt was conscious as at July 1980 that her sons opposed offers to purchase the house made by the Defendant of $50,000 and some six weeks later of $60,000 on the basis that such prices were too cheap (T, 176.40-.50; 177.25-.30) being well below the true value of the property. Thus, as of the second half of 1980 both the Defendant and Mrs Hurt were aware that the Valuer General had placed a value of $90,000 on the house (T, 178.5-.10). However, both knew that the Defendant could not afford more than $60,000. There is no reason to doubt that Mrs Hurt wanted to reconcile what she wanted for the Defendant with what she felt was fair for her sons and their families.

127 Thus Mrs Hurt’s letters of this period to Robert disclose her dilemma:

“And of course my own situation – why I can’t do what I want with what is mine – I could break loose and go ahead but I’m very unwilling to do anything to hurt you and Bruce – somehow there surely must be a compromise.” [6 May1980 – PX1 at 88]

“Underneath all of this of course is my own mental conflict – I haven’t so far got an assurance from Bruce that he will understand and accept any decisions I finally make to manage my own affairs in my own way…” [26 May1980 – PX1 at 95]

I have just learned that I cannot do as I like with what I thought was mine but I am reminded of heritage – family – rites and the law – and forbidden to sign anything that I had hoped would give me pleasure…” [22 June 1980 PX1 at 110]

at a price

128 The Defendant confirmed that at this time Mrs Hurt had told him that she was very unwilling to do anything to hurt Robert and Bruce (T, 169.53). See also for example letters from Mrs Hurt to Robert dated 15 April 1980 (PX1 at 79); 23 January 1983 (PX1 at 225)), but that “Mrs Hurt only ever mentioned that the family were well taken care of, that the children had been given gifts that had increased in value over their lifetime…” (T, 179.23-.6). Nonetheless, the Defendant expressed the view that “(t)here was no consideration of me [the Defendant] benefiting over the family” (T, 179.29-.30). Accordingly, the Defendant conceded that he understood Mrs Hurt hoped to come to some sort of arrangement that was one intended not to disadvantage her family (T, 170.18-.21). However, it should be noted that Mrs Hurt had previously expressed her hope that her husband’s Will could be worked out to her sons’ advantage which “will make up for any deficiency in 32 – when the time comes and the money free for distribution even if Doff was the only survivor…” (Letter from Mrs Hurt to Robert (PX1 at 103)).

129 In the light of such correspondence, it appears that Mrs Hurt recognised that there must be at least some disadvantage that would arise from any division of her estate or sale to the Defendant of the Longueville property.

130 It is against this background that I consider the Plaintiffs’ claims that the representations were made by the Defendant and were relied upon by Mrs Hurt in entering into and completing the contract of sale. In the absence of Mrs Hurt’s own testimony the Plaintiffs proffer four sources of evidence said to support that the alleged representations were made. I refer to each of these in turn.

131 On the Plaintiffs’ case the first and principal evidence of the Defendant’s promises are four letters written by Mrs Hurt to the Second Plaintiff, Robert Hurt and in particular the four letters earlier cited; see letters of 22 October 1980 (para 35(c)), 13 January 1981 (para 40(e), 3 March 1981 (para 44(c)) and 23 January 1983 (para 59(a)). The promises are said to be revealed in those letters as follows.

132 Mrs Hurt’s letter of 22 October 1980 to Robert which records that (PX1 at 123):

“Ray is a very fine person and does not want to do anything to upset anyone – as a matter of fact he has said he would rather lose the house than for me to have any worries about it – he has also said that when he no longer requires to live here he will want to arrange his affairs so that the house can go back into the Hurt family.”

133 Mrs Hurt’s letter to Robert dated 13 January 1981 which records that (PX1 at 139-140)

By the way, Ray says he would make provision for 32 to go back to the Hurt family when he no longer requires to live here.”

134 Mrs Hurt’s letter to Robert of 3 March 1981 which records that (PX1 at 165)

“There is only one way to do this [for Mrs Hurt to keep her promise to the Defendant that when she no longer requires to live at 32 Lucretia Avenue he could live there – see PX1 at 164-165] and that is to make it his home, when I leave here, undertaking to keep it up to saleable value, carry out necessary repairs or alterations, to make it more comfortable living…and maintain it to the highest possible condition so that when it is finally vacated by him, you and family, Bruce and family have it back as heritage-there is only one area that troubles me, if he spends a lot of money on increasing the value of the property, he would be reimbursed, as he has a mother to whom he is most devoted and a sister with two children whom I know he would wish to continue assisting.”

135 Mrs Hurt’s letter to Robert of 23 January 1983 records in unequivocal terms of promise - not mere intention - that (PX1 at 222):

“I have given 32 to Ray to occupy after my death for as long as he requires to live here at the end of which time – for any reason – he will honour a promise made to me that you and Bruce (if still living) will share equally the proceeds of the house if it is sold and in due course your children will benefit.”

136 Mrs Hurt’s letter to Robert of 17 February 1983 which records that (PX1 at 248):

“I have absolute faith in his [the Defendant’s] promises and has proven his worth to me through all the years we have been acquainted…”

137 Standing alone these letters provide a not insubstantial evidentiary basis for the Plaintiffs’ claim that Mrs Hurt entered the contract of sale in reliance on the Defendant’s representations, though subject to what follows. First, the series of letters identifying the promises conclude in February 1983. This is some seven months prior to Mrs Hurt’s entry into the contract of sale for the Longueville property rather than being contemporaneous and is dated some 28 months prior to the contract’s later completion. Nonetheless, if one accepts the veracity of Mrs Hurt’s letter of 22 October 1980 (as extracted above) it is significant that the Defendant had made such a promise which presupposed his purchase of that same property. That the promise was not embodied in the contract is a factor tending against the promise, but that factor needs to be weighed against others pointing to the promises as having been made, and the later letters contain no record of revocation of the promises earlier cited.

138 Second, there is some dispute as to the accuracy and reliability of the content of Mrs Hurt’s letters. The Defendant contends that the Deceased’s letters to the Second Plaintiff are wholly consistent with her wishing only to alleviate any concerns that he or his brother may have had and “for whatever reason to make him [Robert] feel better about something that was going to happen in the future with the house…” (T, 176.1 - .5). However, the Defendant admitted that except in respect to their recording of his alleged promises to Mrs Hurt, Mrs Hurt’s letters to Robert were an accurate and reliable record of other aspects of the Defendant’s relationship with Mrs Hurt. In particular, except in relation to the alleged promises, the Defendant made specific admissions as to the accuracy of the content of the letters from Mrs Hurt to Robert of 6 May1980 (PX1 at 86); T, 169-70), 7 May1980 (PX1 at 89); T, 170-2) and 22 October 1980 (PX1 at 121); T, 183-4). She contemplated that transfer of the Longueville property by way of sale or will where, in the letter of 22 October 1980 Mrs Hurt writes: “he has also said that when he no longer requires to live here he will want to arrange his affairs so that the house go back into the Hurt family”. Everything in the letter is said by the Defendant to be true save only for the promise, which he denies (T, 184.30-.34) with an emphatic “never”. That strains credulity.

139 Moreover, the Defendant admitted that Mrs Hurt paid great attention to detail (T, 141.50; T, 175.39), and was truthful and honourable (T, 175.30-.38). That is hardly consistent with the suggestion that she set out actively to mislead her sons on this important matter. Moreover, from her correspondence it is clear that her “honour” and adherence to her word were of the utmost importance to her (for example, ”(A)ll the money in the world cannot mend a broken promise”: PX1 at 193; she said she was concerned about a lack of moral values PX1 at 138. See also letters of 22 June 1980 (PX1 at 109-110); and of 27 June 1980 (PX1 at 112-113).

140 Nevertheless, although Mrs Hurt and Robert had a very close relationship it is clear that she was not beyond misleading him unintentionally as a consequence of memory lapses, or, though I am included to think more likely only when confronted with something she did not want to debate, even possibly deliberate untruths. In his letter to Bruce dated 10 June 1984 (PX2 at 386) Robert wrote that when confronted, Mrs Hurt had flatly denied making any will or amending any will in 1984, or entering into any financial arrangement with the effect of reducing the $100,000 owed by the Defendant on the Longueville property under the contract of sale. In fact, Mrs Hurt had assured Robert that her long-standing intention remained firm that there should be a 3-way split. Robert even went to the length of showing Mrs Hurt this particular letter before he sent it to Bruce in order to confirm that its contents properly described what she believed and said (PX2 at 388). Nonetheless, it is clear from the chronology that this assurance followed Mrs Hurt’s revision of her Will dated April 1984 (she was then in her 91st year) wherein she purported to cancel any money owing by the Defendant on the property. An example of one other possible untruth is to be found in the information passed on by Mrs Hurt to the Defendant that her sons had never contacted her for many years (Letter from Bruce to Robert 12 October 1984 (PX2 at 433)). Such examples leave open the possibility that Mrs Hurt’s recollection of the representations were mere fibs made to appease her children. The alternative hypothesis is that there was some vacillation but from which she recovered, with her intention remaining as the Plaintiffs’ contend. The latter is more consistent with Mrs Hurt being truthful and honourable, though pulled in competing directions.

210 Accordingly, I turn to consider whether the elements of a claim in equitable estoppel have been made out.

211 In Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Brennan J (as he then was) laid down the six matters (or probanda) which must be established:

“In my opinion, to establish an equitable estoppel, it is necessary for the plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the Defendant or expected that a particular legal relationship would exist between them and, in the latter case, the Defendant would not be free to withdraw from the expected legal relationship; (2) the Defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the Defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the Defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise…”

212 The first of these probanda, in referring to an assumption by Mrs Hurt that a particular legal relationship then existed between her and the Defendant, should not be read narrowly. Indeed, there is no necessity that there be the creation or encouragement by the Defendant in Mrs Hurt of an assumption that a contract will come into existence if, as here, there be at least encouragement that a promise will be performed: per Priestley JA in Ausotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 610. However, it is an essential element of the principle of estoppel, that the conduct of the parties sought to be estopped must properly be characterised as “unconscionable”: Murray’s Meats Pty Ltd v Bevillesta Pty Ltd (McLelland CJ in Eq, SC(NSW) 28 October 1993 unreported).

213 Applying those principles to the present case, I am satisfied that the shared assumption between Mrs Hurt and the Defendant was that the Defendant would enjoy ownership (including residence) of the Longueville property until such time as he no longer needed it at which time he would either return the property (or the net proceeds of any sale, being the sale price reduced by the purchase price and the cost of any improvements) to the Hurt family.

214 It is clear that Mrs Hurt relied on that assumption in entering into the contract for sale dated 12 September 1993. That contract upon completion (absent such promises) granted the Defendant indefinite rights to occupy the property free of any liability to pay rent or other occupation fee, simply by completing for a fixed price (a net $100,000). It was a price, furthermore, fixed at the time of entry into the contract, with only a requirement to pay a nominal $100 deposit, that was substantially less than its true market value (being as I have earlier found $215,000). This discrepancy favouring the Defendant was likely to, and in fact did, increase, given that by the time of settlement (June 1985) the value of the property was (as earlier determined) $250,000. Accordingly, in reliance upon the Defendant’s promise Mrs Hurt suffered the detriment of refraining from selling the property to an alternative arm’s length purchaser and hence from receiving a significantly higher purchase price than that paid by the Defendant. The promise also led Mrs Hurt to refrain from leaving the property (or the proceeds from its sale) by will to Robert and Bruce and/or her grandchildren. Given Mrs Hurt’s “mental conflict” (to coin her own phrase) I am prepared to find that but for the Defendant’s promises, Mrs Hurt would not have so acted and that she acted in reliance on them to her detriment, so satisfying the fifth probanda. The Defendant’s departure from that shared assumption was unconscionable. It does not cease to be a shared assumption, or unconscionable, because the Plaintiffs had justified suspicions which they waited for subsequent events either to confirm or dispel.

Conclusion

215 The Defendant’s action in failing to account for the proceeds of the sale, so failing to fulfil the assumption and expectation of Mrs Hurt derived from his representations, constitutes unconscionable behaviour sufficient to ground a claim of equitable estoppel. Each of the six matters requiring to be established for equitable estoppel have been satisfied.

216 Accordingly, I am satisfied that a remedial constructive trust should be imposed over the proceeds (or that into which traceable) on that basis also.

Common intention

217 In the alternative, the Plaintiffs claim a constructive trust on the ground of a common intention between Mrs Hurt and the Defendant in terms of the Defendant’s promise.

218 In Hohol v Hohol [1981] VR 221 O’Bryan J identified three essential elements of a common intention constructive trust. In that case his Honour said (at 225):

“From the cases I have referred to it can be said that the essential elements of the trust are, first, that the parties formed a common intention as to the ownership of the beneficial interest. This will usually be formed at the time of the transaction and may be inferred as a matter of fact from the words or conduct of the parties. Secondly, that the party claiming a beneficial interest must show that he, or she, has acted to his, or her, detriment. Thirdly, that it would be a fraud on the claimant for the other party to assert that the claimant had no beneficial interest in the property…”

219 In determining whether there is a common intention that a claimant was to have a beneficial interest in the property the court will look firstly for direct evidence of any express communications between the parties or the making of admissions by them: Rasmussen v Rasmussen [1995] 1 VR 613 per Coldrey J (at 615). Clearly, the representations made to Mrs Hurt by the Defendant, the subject of the estoppel, in respect of the beneficial interest of the Longueville property, and articulated by Mrs Hurt in her letters to her sons manifest a common intention. In so far as Mrs Hurt entered into the contract for sale on the faith of the belief or expectation that the Defendant would return the Longueville property (or its net proceeds after sale) to the Hurt family when he no longer needed it, his failure to do so meant that Mrs Hurt “would suffer so substantially as to make it unconscionable for the other party to disappoint [her]…”: Thwaites v Ryan [1984] VR 65 per Fullagar J at 95.

Conclusion

220 I am satisfied that a constructive trust may be imposed, derived from a common intention between Mrs Hurt and the Defendant.

Tracing

221 Do the Plaintiffs have a right to trace into the Defendant’s assets in aid of a constructive trust?

222 The constructive trust as a proprietary remedy arises where it is possible to trace particular property, still identifiable and remaining in the Defendant’s possession: see for example, El Anjou v Dollar Land Holdings P/c [1993] Ch 717; [1994] 1 BCLC 464 (CA). However, as the High Court recognised in Brady v Stapleton (1952) 88 CLR 322 at 337 (recalling the words of Lord Ellenbrough CJ in Taylor v Plumer (1815) 3 M & S 562 at 575) that:

“It makes no difference in reason or in law into what other form, different from the original, the change may have been made…for the product of or substitute for the original thing still follows the nature of the thing itself, as long as it can be ascertained to be such, and the right only ceases when the means of ascertainment fail…”

223 By the Defendant’s own admission the proceeds of the Longueville sale were used to purchase the property at 26 George Street, Paddington and the balance invested in the flexible income plan policy no. L0291356 held by the Defendant with National Australia Financial Management Ltd: Defendant’s affidavit, para [69]. Given that there is no difficulty in ascertaining the transmogrified property over which the Plaintiffs claim a constructive trust they have a right to trace into the aforementioned assets. I would only add that:

Optus Productions Pty Ltd v Popwing Pty Limited

Muschinski v Dodds

(b) a particular advantage of a proprietary claim is that if the property claimed has risen in value, the beneficiary obtains the benefit of that rise in value: Ford & Lee, “Principles of the Law of Trusts”, [17200]

224 Having determined that a constructive trust is the appropriate remedy and that the Plaintiffs are entitled to trace into the Defendants assets it is unnecessary for me to consider the Plaintiffs’ claim that the representations gave rise to a personal obligation on the Defendant enforceable in equity by an order for compensation.

Question 8 - Limitations

225 The Defendant contends that the Plaintiffs’ claim is barred by the Limitation Act 1969 (NSW).

226 Before turning to determine the availability or otherwise of this defence I need to consider why the Plaintiffs did not bring an action earlier than the Statement of Claim filed 28 September 1999 if they were of the view as early as 1983, whether pleaded or not, that the contract of sale was improvident.

227 The tendered correspondence between the First and Second Plaintiffs suggest a number of reasons why the Plaintiffs did not commence legal proceedings against the Defendant, despite their numerous threats.

228 First, there is some suggestion that the Plaintiffs themselves considered that the evidence was not strong enough to successfully support the actions that they had contemplated, namely, a case under the Mental Health Act, and a case under the undue influence provisions of the law of contract: Bruce Hurt’s letters to Robert, 5 November 1984 (PX2 at 477); 22 November 1984 (PX2 at 527). However, it is to be noted that by March 27 1985 Bruce Hurt had received advice from a Geriatric/Neuro-Specialist that Mrs Hurt was incapable of understanding her financial affairs.

229 Second, the Plaintiffs were concerned that their mother’s presence in court would not assist any legal proceedings: T, 120 (wherein the Second Plaintiff affirmed the proposition put to him that he was worried evidence given by his mother might not help his case). Indeed, Bruce Hurt’s letter to Robert on 29 May1984 (PX2 at 385) states that,

“I doubt if I can bring myself to drag her into court ! She is adamant that I won’t and I guess she is right. I will persist with the barristers opinion – but I really can’t see any joy in court action. She is too smart – and Ray is too clever to believe a court would understand our position…”

230 However, this should not be read out of context, for earlier in the same letter (PX2 at 384) Bruce Hurt says,

“She is convinced she has done the right thing about the house – and believes Ray is to be merely a caretaker and when he finishes with the house and sells it, the proceeds will go to our children.

I asked what proof we have – and she said he has made her his promise!”

231 In any event, Robert was aware that Mrs Hurt, a frail elderly woman, was concerned about appearing as a witness in any such proceedings, as evidenced in her letter to him dated 1 April 1984 (PX2 at 364).

232 Moreover, it is evident that the Plaintiffs feared that the Defendant’s ascendancy had only increased during the period following entry into the contract of sale. This is evidenced by Bruce Hurt’s letter to Robert of the 30 November 1983 in which he indicated that he was reluctant to send the particular contents of a letter to the Defendant because of “the possibility that Mrs Hurt might be persuaded by him to change her will to move everything in his direction” and “It is probably her right to do so” (PX1 at 311). This said, there were clearly a number of possible reasons that the Plaintiffs did not in fact bring an action against the Defendant prior to that brought in 1998.

233 Nonetheless, the action that was brought in 1998 beginning these proceedings was not in fact a claim for the contract to be set aside on the grounds of undue influence or mental unsoundness, as may have been agitated in the early to mid-1980s, but rather a claim for a constructive trust framed in terms of a failure to honour representations made to Mrs Hurt at the time of entering and completing the contract for sale and the equity to which that gave rise.

234 Given that the terms of the representations themselves were that the Defendant would return the property (or the net proceeds arising from its sale) when he no longer had any need for it, the Plaintiffs’ cause of action arose at the earliest in October 1997 when the Defendant refused to honour and fulfil his promises to Mrs Hurt by selling the Longueville property without accounting for the net proceeds to the Hurt family. To that end, although the Defendant did not live at the Longueville property between 1989 and July 1997 (Defendant’s affidavit, paragraph 67), he did live in the property again in July 1997 (Defendant’s affidavit, paragraph 67) and rented it out to tenants whilst he was abroad. Clearly, there may have been some question as to whether the Defendant needed the property (in the terms of Mrs Hurt’s and his shared understanding) after 1989 when he left to go overseas. However, the First Plaintiff claims that he did not realise that the Defendant was in fact overseas in the period between 1989-1997, although he was aware that it was being rented out: T, 20.3-18. Moreover, as the First Plaintiff himself recognised, while the promise existed in an undefined time period,

“there was one definition that would stand up and that was when the property was to be sold either Mr Freeman would or would not honour his promise”. (T, 21.55 - 22.1)

235 Given that the Plaintiffs first became aware of the sale of the property accidentally in July 1998, having received no notice from the Defendant (affidavit of Robert Hurt, 9 June 2000 para [31]), July 1998 was the first date that the Plaintiffs could have reasonably discovered the facts giving rise to their cause of action. Admittedly they did not caveat, which however might be justified because the act of caveating might have been unreasonable, when it was in advance of knowing whether the Defendant would fulfil the representations he had made. When the Plaintiffs found out about the sale, was the first point in time at which it could be said that the Defendant had indicated to the Plaintiffs in no uncertain terms that he no longer had any need for the property and did not intend to honour the representations he had made.

236 Given that the Plaintiffs’ cause of action is one to recover trust property it is significant that ss47 and 48 of the Limitation Act 1969 (NSW) provide that:

Section 47

(1) An action on a cause of action:

(b) for a remedy of the conversion to a person's own use of trust property received by the person while a trustee, against that person or against the person's successor,

(c) to recover trust property, or property into which trust property can be traced, against a trustee or against any other person, or

(d) to recover money on account of a wrongful distribution of trust property, against the person to whom the property is distributed or against the person's successor,

(e) a limitation period of twelve years running from the date on which the plaintiff or a person through whom the plaintiff claims first discovers or may with reasonable diligence discover the facts giving rise to the cause of action and that the cause of action has accrued, and

(f) the limitation period for the cause of action fixed by or under any provision of this Act other than this section.

(2) Except in the case of fraud or a fraudulent breach of trust, and except so far as concerns income converted by a trustee to his or her own use or income retained and still held by the trustee or his or her successor at the time when the action is brought, this section does not apply to an action on a cause of action to recover arrears of income. [emphasis added]

48. Breach of trust

An action on a cause of action in respect of a breach of trust is not maintainable if brought after the expiration of the only or later to expire of such of the following periods of limitation as are applicable:

(a) a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims, and

(b) the limitation period for the cause of action fixed by or under any provision of this Act other than this section.

Conclusion

237 Accordingly, for a proprietary trust claim like the present, the limitation period runs from the date the Plaintiff first discovers or with reasonable diligence could have discovered, the facts giving rise to the cause of action. On that basis, the action having accrued in 1997, the Plaintiffs were clearly in time. In any event, even if contrary to my finding the cause of action accrued in 1989 when the Defendant left the property to go overseas, the Plaintiffs are still within time under s47 if one treats the Property as trust property. However, I do not need to reach a concluded view on the latter proposition, given my earlier conclusion.

Question 9 - Laches

238 Having found that the Plaintiffs’ cause of action arose in July 1998 it is strictly unnecessary for me to consider the Defendant’s claim that it is inequitable and unjust to grant to the Plaintiffs any of the relief they claim by reason of their alleged laches. Nonetheless, in the event that the Plaintiffs’ cause of action accrued earlier than July 1998 I will consider the issue briefly.

239 Laches is established when two conditions are fulfilled. There must first be unreasonable delay in the commencement of proceedings; second, in all the circumstances the consequences of delay must render the grant of relief unjust.

240 In respect of the first limb, the point of time as from which the reasonableness of delay is determined is, prima facie, the time at which the plaintiff came to know of the facts that had given rise to the ground of equitable intervention in question: Stafford v Stafford (1857) 44 ER 697 at p.701; Hourigan v Trustees Executors and Agency Co. Ltd (1934) 51 CLR 619 at p.651. This was not a case where the Defendant had, before July 1998, clearly indicated an intention to repudiate his representations to Mrs Hurt and no longer to be bound by them. Nor could it be said that a reasonably assiduous person would have proceeded with substantially greater speed or diligence. Indeed, the Plaintiffs sought to monitor the Defendant’s use of the property and did not consider that the mere fact that he had tenanted the property meant that he no longer needed it or wished to reside there in the future: T, 20.10-17; affidavit of Robert Hurt 22 August 2001 paras 6-11.

241 Nonetheless, the Defendant contends that the Plaintiffs were unreasonable in failing to contact him between 1986 and the commencement of these proceedings to communicate that they would take legal steps if he failed to adhere to his undertaking. However, a number of factors militate against this finding. First, the Defendant conceded that he had been alerted by Robert’s letter of 19 October 1984, that the Plaintiffs believed that he had made undertakings to Mrs Hurt to return the Longueville property: T, 242.12. Second, the Defendant was also aware that the Plaintiffs had written evidence from Mrs Hurt recording the Defendant’s promises, and that they had sought to have him sign a written confirmation of his promises (Annexure to Robert Hurt’s letter – PX2 at 458). Third, on the basis of my earlier findings, the Second Plaintiff was told by the Defendant in the telephone conversation of 24 October 1984 that the Defendant would adhere to his undertakings to Mrs Hurt. Fourth, given that the Defendant cleared out and sorted through Mrs Hurt’s possessions from the Longueville property it is arguably significant that the Defendant retained Mrs Hurt’s July 1983 and April 1984 Wills (Exhibits RSF12 and 14 to his affidavit). Given my findings in relation to the conversations of October 1984 between Robert and the Defendant it is open to me to infer and I do infer that the Defendant is likely to have believed that such documents could assist him to defend a future claim by the Plaintiffs. For all these reasons the Defendant was on notice that the Plaintiffs might well seek to enforce his promises to Mrs Hurt from as early as 1984. Moreover, despite both the First and Second Plaintiffs lack of faith in the Defendant’s trustworthiness it was reasonable for the Plaintiffs to take the view that they could not safely determine in advance whether the Defendant would or would not adhere to his promise in the future, whatever their suspicions. This was particularly so given that the Plaintiffs recognised that the promise itself had an end point by which that adherence could be assessed: T, 86.18-21; T, 103.1-5.

242 In respect of the second limb of the laches claim, it is necessary that the Defendant be prejudiced by the delay. One such prejudice said to be occasioned by the bringing of these proceedings is the absence of key witnesses. The first of these is Mr O’Reilly, Mrs Hurt’s solicitor, now retired. According to the First Plaintiff attempts were made to contact him at the beginning of proceedings and he was unable to recall who Mrs Hurt was: T, 70.6-10. Nonetheless, the First Plaintiff was satisfied that the Mr O’Reilly he spoke to had been his mother’s former solicitor: T, 70.25-26. In any event there was considerable evidence of Mr O’Reilly’s role in relation to the proposed dealings concerning the Longueville property, both Wills and the September 1983 contract of sale: PX1 at 187, 190, 259, 261, 264, 272, 277, 286, 293, 294, 297, 309; PX2 at 238, 353. On that basis, I do not consider that there was any prejudice to the Defendant arising out of Mr O’Reilly not being called to give oral evidence. The Defendant also contends that prejudice arose from the Plaintiffs failing to call, among others, Mr Healey (who witnessed Mrs Hurt’s signature on the transfer), Reverend Glassock (the Pastor at the Caroline Chisholm Nursing Home), and Matron Pell (of the Caroline Chisholm Nursing Home) and even the respective wives of the Plaintiffs. Although the onus for proving the existence of the representations alleged to have been made by the Defendant to Mrs Hurt rests on the Plaintiffs, and the Plaintiffs called no other witnesses, I conclude they did satisfy that onus. Moreover, the Defendant did not demonstrate that Mr O’Reilly or any other person could have given evidence relevant to the Defendant’s representations and promises and I do not need to consider undue influence as a separate basis. But even if he could have given useful evidence, Mr O’Reilly could have been called by the Defendant and his recollection tested; Mr O’Reilly was not in the Plaintiffs’ “camp”. Nor did the Defendant file any evidence detailing steps take by him to obtain further witnesses to give evidence and/or the unavailability of such witnesses.

243 Moreover, the fact that Mrs Hurt herself was unavailable to give evidence could not be said to prejudice the Defendant’s case when prior to her death (on 6 August1986) it was a hypothetical question whether the very promises upon which these proceedings have been brought would be fulfilled.

Conclusion

244 The defence of laches is not available to the Defendant in the circumstances.

Incidental Questions

245 Although not operating to refute the Plaintiffs’ case, the Defendant’s Counsel raised several questions that I consider incidental to the issue of the Defendant’s representations. It is to those that I now turn.

(a) If the Defendant had made the promise, why would he have sold the property in 1997 or not have hidden the proceeds?

246 Counsel for the Defendant contends that the Defendant’s behaviour in selling the Longueville property in 1997 and purchasing another property in Paddington with the proceeds (the balance of which were invested in an Australian account) “does not bespeak conduct by a person waiting for the plaintiffs to turn up and demand their due” (Defendant’s written submissions, p30). It is said that this is particularly the case given that the Defendant had chosen for part of the time to live overseas. Accordingly, it is put that it would be strange indeed for the Defendant to sell a property if he knew or anticipated that the proceeds of sale would then belong to others.

247 However, such a submission fails to recognise that the representations made by the Defendant to Mrs Hurt provided that at whatever time the Defendant chose to sell the property he would only ever receive $100,000 plus the expenses he had incurred on improvements. Given that he clearly had no desire or intention to live in the Longueville property in the long term after his return to Sydney the only benefit the Defendant could hope to gain from retaining the property was the rent. Accordingly, the fact is that the Defendant himself gave evidence that, from the sale proceeds of the Longueville property:

“I repaid debts to friends from whom I borrowed money. I also used some funds to pay medical bills of about $35,000. I used some of the funds for living expenses” (Defendant’s affidavit, para [69])

248 This leaves open the possible (and not improbable) explanation that the Defendant required the funds for more pressing commitments at the time of the sale. Moreover, after ten years absence, and at the distance of 1997 the Defendant may have thought that he could get away with a sale of the property more especially if he did not alert the Plaintiffs. Certainly once his breach of the promises was discovered a caveat was lodged on the George Street, Paddington property by the Plaintiffs in order to prevent its sale.

(b) The representations do not make sense and clearly were not in the self-interest of the Defendant.

249 The Defendant’s counsel contends that the alleged representations not only fail to make sense but would be an ”extraordinary obligation” that would “paralyse his [the Defendant’s] capital” and would be “obviously uncommercial”: Defendant’s written submissions, pp6-7.

250 Taking as the starting point the contention that the Defendant’s promises were nonsensical, it is important to recognise that the Defendant’s promise facilitated a resolution of Mrs Hurt’s “mental conflict”. It reconciled her promise to the Defendant that he could live in the property for as long as he needed to do so (see letters from Mrs Hurt to Robert of 7 May1980 at TB, 1-93; 27 May1980 at TB, 1-98; 22 June 1980 at TB, 1-109; 27 June 1980 at TB, 1-112 and 113; 9 December 1980 at TB, 1-136; 3 March 1981 at TB, 1-164-165; 8 February 1982 at TB, 1-177; 20 June 1983 at TB, 1-257) with her intention not to occasion detriment to, or hurt, her children and grandchildren (see letters from Mrs Hurt to Robert of 6 May1980 TB, 1-88; 25 January 1981 at TB, 1-155; 23 January 1983 at TB, 1-224; 16 February 1983 at TB, 1-243; 17 February 1983 at TB, 1-247; 20 June 1983 at TB, 1-258). As the Defendant himself conceded, “(t)here was no consideration of me benefiting over the family” (T, 179.29-30). At no time during the period of negotiations about the Longueville property did the Defendant have the financial capacity to acquire the property at a fair market value. Indeed, the Defendant admitted (at T, 224) that he told Mrs Hurt’s solicitor, Mr O’Reilly, in early 1984 that he could not give any thought to re-negotiating the terms of the contract of sale following requests from Mrs Hurt that he do so (see letter from Marshall Landers to Mrs Hurt dated 15 March 1984 – TB, 2-330) because he could not afford a cent more than $100,000 as purchase price (T224.50-57). Accordingly, his only means to the property was to accept a large element of gift from Mrs Hurt. On that basis, the arrangement was generous to him because he acquired a property he could not otherwise afford, he obtained long term use at no further payment and he would recover his original capital plus improvements at the time of sale. All he was foregoing was the ultimate interest or return on use of his capital.

251 The Plaintiffs, having discharged the onus of proving the existence of the representations alleged to have been made by the Defendant to Mrs Hurt in order to induce her to enter and complete the contract of sale of 12 September 1983, are entitled to recover the sum of $1,420,500 plus interest thereon from the time the sale proceeds were derived, by way of equitable relief in consequence of the unconscionability that would attend his not honouring his promises or representations, or failing to fulfil the assumption he had thereby induced. A similar result would follow by way of equitable compensation. Accordingly, the Plaintiffs are entitled to a remedial constructive trust over the proceeds of the sale of 32 Lucretia Avenue. They are also entitled to trace in respect of the sum of $1,420,500, plus interest thereon from the time the sale proceeds were first derived, against

(b) the funds in the National Australia Financial Management Policy in the name of the Defendant being investment of part of the proceeds of the Longueville sale.

252 The earliest point in time at which it could be said that the Defendant had indicated unequivocally, by the actions he took, that he no longer had any need for the property, was at the time of sale on 31 October 1997. Alternatively the point of time is when, with reasonable diligence, the facts giving rise to the cause of action could have been discovered by the Plaintiffs (July 1998). Accordingly, on either basis, the Plaintiffs’ cause of action instituted 28 September 1999 to recover trust or traceable property is not barred by the Limitation Act 1969 (NSW) nor a claim of laches.

ORDERS AND COSTS

253 I direct the parties to submit orders giving effect to this judgment within ten days. Prima facie costs should follow the event, but the parties may address me on costs if they wish.

**********

Last Modified: 04/12/2002

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Citations

Hurt v Freeman [2002] NSWSC 264

Most Recent Citation

Mazzuchelli v Mazzuchelli [2006] WASC 124

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RnD Funding Pty Ltd v Roncane Pty Ltd [2023] FCAFC 28

Mazzuchelli v Mazzuchelli [2006] WASC 124

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CITATION:	Hurt v Freeman [2002] NSWSC 264 revised - 09/04/2002
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 4126/99
HEARING DATE(S):	21/08/01-23/08/01, 07/09/01, 20/09/01
JUDGMENT DATE:	4 April 2002
PARTIES :	Bruce Raymond Mostyn HURT (First Plaintiff) Robert Charles Mostyn HURT (Second Plaintiff) Sally Mostyn WHITE (nee Hurt) (Third Plaintiff) Gina Mostyn SUTTON (nee Hurt) (Fourth Plaintiff) Andrew Bruce Mostyn HURT (Fifth Plaintiff) Eric Kenneth Mostyn HURT (Sixth Plaintiff) Robert Thomas Mostyn HURT (Seventh Plaintiff) Raymond Sydney FREEMAN (First Defendant)
JUDGMENT OF:	Santow J

COUNSEL :	J T Gleeson, SC/ R A Dick (Plaintiffs) I G Harrison, SC (Defendant)
SOLICITORS:	Kanjian & Company (Plaintiffs) Makinson & d'Apice (Defendant)
CATCHWORDS:	EQUITY - Unconscionability - Alleged representations preceding contract later departed from by purchaser who had earlier acquired house property at gross under-value - Vendor much older woman of whom purchaser a close friend despite 44 year age difference - Family of the vendor apply in equity for remedial constructive trust assisted by tracing into proceeds of sale of property (as reinvested) - Estoppel - Limitation period - Laches.
LEGISLATION CITED:	Limitation Act 1969 (NSW) ss47 and 48
CASES CITED:	Ausotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 Baumgartner v Baumgartner (1987) 164 CLR 137 Brady v Stapleton (1952) 88 CLR 322 Commonwealth v Verwayen 170 CLR 394 El Anjou v Dollar Land Holdings P/c [1993] Ch 717; [1994] 1 BCLC 464 (CA) Fairey v Fairey (Santow J, 14 September 1998 unreported) Guimelli v Guimelli (1999) 196 CLR 101 Hohol v Hohol [1981] VR 221 Hospital Products v United States Surgical Corporation (1984) 156 CLR 41 Hourigan v Trustees Executors and Agency Co. Ltd (1934) 51 CLR 619 Murray's Meats Pty Ltd v Bevillesta Pty Ltd (McLelland CJ in Eq, SC(NSW) 28 October 1993 unreported) Muschinski v Dodds (1986) 160 CLR 683 Optus Productions Pty Ltd v Popwing Pty Limited (Santow J, 28 February 1995, unreported) Rasmussen v Rasmussen [1995] 1 VR 613 Stafford v Stafford (1857) 44 ER 697 Taylor v Plumer (1815) 3 M & S 562 Thwaites v Ryan [1984] VR 65 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
DECISION:	paras 251 to 253