Lallemand v Brown
[2014] ACTSC 235
•25 September 2014
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Lallemand & Anor v Brown & Anor |
Citation: | [2014] ACTSC 235 |
Hearing Date(s): | 17, 18 March 2014, 13 June 2014 |
DecisionDate: | 25 September 2014 |
Before: | Mossop M |
Decision: | Application to amend statement of claim dismissed Judgment for the defendants See [184] |
Category: | Principal Judgment |
Catchwords: | EQUITY - Equitable doctrines and presumptions – Barnes v Addy claim - equitable defences – laches – delay with prejudice – whether the defence of laches is available notwithstanding whether the statutory limitation period has expired PRACTICE AND PROCEDURE – Insufficient pleadings – application to amend statement of claim at the end of the trial |
Legislation Cited: | Limitation Act 1929 (UK) s 29 Limitation Act 1967 (NSW) s 9 |
Cases Cited: | Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Archbold v Scully (1861) 9 HLC 360 Williams v Hensman (1861) 1 J&H 546; 70 ER 862 |
Texts Cited: | Butt, Land Law (6th ed, Law Book Co, 2010) Halsbury’s Laws of England (3rd ed, Butterworth & Co.) Proposals for the Reform and Modernization of the Laws of Limitation in the Australian Capital Territory, Working Paper (Attorney General’s Department, April 1984) |
Parties: | Jacqueline Mara Lallemand ( First Plaintiff) David Philip Stevenson (Second Plaintiff) Russell Brown (First Defendant) William Nelson Joseph Swan (Second Defendant) |
Representation: | Counsel: Mr G Waugh (Plaintiffs) Mr L Ellison SC (Defendants) |
| Solicitors: J S O'Connor Harris & Co (Plaintiffs) Elringtons (Defendants) | |
File Number(s): | SC 306 of 2012 |
Introduction
The plaintiffs, Jacqueline Mara Lallemand and David Philip Stevenson, make a claim on the defendants arising out of the sale of property that they say was given to them by their mother prior to her death in 1978. The property was a house in Charlotte Street in Red Hill. The defendants, Russell Brown and William Swan, are the executors of the estate of Margaret Stevenson. Margaret Stevenson was the plaintiffs’ father’s second wife and step-mother to the plaintiffs. She died in 2011.
The plaintiffs say that in 1978 their father, Sir Hugh David Stevenson, gave an undertaking to their mother, Myra Stevenson, that the plaintiffs would have the proceeds of half of the Charlotte Street property when he died or sold it. As a consequence of this undertaking, the plaintiffs assert that the joint tenancy over the property was severed and a trust arose, whereby their mother’s interest in the house would be held by him on a trust that permitted him to use it until he died or sold the property and then to distribute the proceeds to the children. The house was, in fact, sold in 1985. No amount was paid to the plaintiffs by their father during his lifetime or by Margaret Stevenson during hers. The plaintiffs claim against the executors of Margaret Stevenson’s estate an order that they repay or restore the trust property with interest and costs.
Personalia
Without intending any disrespect to the people who gave evidence or who were referred to in the evidence I will refer to them by their first names to make the narrative easier to understand. I will refer to the plaintiffs’ father as David Stevenson and the second plaintiff as Pip Stevenson in order to clearly distinguish between them. The plaintiffs referred to their father as “the Admiral” while giving their evidence.
David Stevenson was the father of the two plaintiffs, Jacqueline (“Jackie”) Lallemand and Pip Stevenson. David Stevenson was married to Myra Stevenson up until her death in 1978.
David Stevenson then married Margaret Wright in 1979 who became Margaret Stevenson. Margaret had two children from a previous marriage who are now known as Tookie Capezio and Matthew Wright.
David Stevenson’s brother was William Stevenson and he was married to Patricia Stevenson who was also a friend of Margaret over many years.
Procedural history
It is worth noting at this stage that by the end of the hearing of the proceedings there was an unresolved issue about the pleadings and an application to amend those pleadings. In order to understand how this somewhat unsatisfactory position arose it is necessary to set out some of the procedural history of the case.
The originating claim was filed on 21 September 2012. The defence was filed on 29 November 2012. A certificate of readiness was filed on 7 August 2013 and the matter was set down for hearing on 17 March 2014. The evidence was heard on 17 and 18 March 2014.
The statement of claim referred in paragraphs 8 and 9 to the existence of an agreement made at a “family conference” in 1978 when the plaintiffs’ mother was terminally ill. It pleaded that “this agreement constituted a Trust whereupon half of the eventual proceeds of the sale of Charlotte Street were to be held for the benefit of the plaintiffs”. The only pleading of any breach of any obligation by Margaret (or indeed anyone else) was in paragraphs 47 and 48 which said:
47. Margaret left a Will dated 18 June 2010. Margaret’s Will left nothing to the plaintiffs.
48. The making of the said Will was in breach of the Trust the terms of which are set out in paragraphs 8 and 9 herein.
This was not a pleading which made much sense because it pleaded that the making of the will by Margaret constituted a breach of the trust alleged to have been established by what occurred at the family conference in 1978 at which she was not present. There is no articulation of facts which would make the making of the will a breach of trust.
Unsurprisingly, the defendants had put on a defence to the claim as pleaded rather than anticipating a more coherent claim that might have been pleaded. The defence did not admit the making of the agreement at the family conference and denied that the making of Margaret’s will constituted a breach of the trust alleged to have been established.
However the defence was not without its own suite of difficulties. In answer to the whole of the claim it pleaded a number of defences including what appears to be a pleading of laches (described in the pleading as delay with prejudice). However as a particular of that pleading, rather than a separate defence, was included a claim that, “[t]o the extent that the Plaintiffs plead their case in contract” the pleadings were statute barred by s 11 of the Limitation Act 1985 (ACT) (Limitation Act). Even accepting the problems with the plaintiffs’ claim, it is not clear why the Limitation Act point was limited to contract when paragraph 48 specifically pleaded a breach of trust or why it was not pleaded as a separate defence rather than as a particular of laches.
Prior to the commencement of the proceedings both parties had been directed to provide to the Court statements of the legal principles which would need to be applied in determining the case. The plaintiff’s statement had addressed the authorities relating to severance of a joint tenancy, the establishment of a trust, liability for breach of trust, accessorial liability of third parties pursuant to the rule in Barnes v Addy (1874) LR 9 Ch App 244. The defendants’ statement said that, “[w]hilst the Defendants accept generally the legal principles outlined by the Plaintiffs it will be submitted they are, for the most, irrelevant to the case before the Court”. It pointed out that the statement of claim did not plead severance of a joint tenancy or trust. It pointed out that the breach of trust pleaded in paragraph 48 was the making of Margaret’s will in June 2010 and that the making of a will could never of itself be a breach of trust.
The plaintiffs’ opening did not specifically articulate any departure from the pleaded case. Counsel for the defendants did foreshadow an intention to delete the qualification to the limitation defence by omitting the words “To the extent the plaintiffs plead the case in contract”. Counsel indicated that he did not want to be caught out by a claim that it was a trust case and not a contract case. Before the witnesses were made available for cross examination, counsel for the plaintiffs was asked whether the case was a trust case or a contract case or both and he confirmed that it was a trust case.
The position appears to be at this point that the plaintiffs, having commenced proceedings based on pleadings drafted by earlier counsel, had been reluctant to amend the pleadings to correspond to the case that new counsel considered it appropriate to run. The defendants, recognising the weakness of the pleaded case, were content to allow the deficiently pleaded case to run to trial because it gave them stronger grounds for defending the claim.
During the course of the hearing reference was made, in addressing an objection to some of the evidence, to the plaintiffs’ claim being based on the rule in Barnes v Addy. Counsel for the defendant did not raise any objection at that stage.
A formal application to amend the defence in the manner that had been earlier foreshadowed was made at the conclusion of the evidence on the second day of the hearing. Notwithstanding the objection by the plaintiffs, leave was granted to amend the defence. Following the amendment of the defence the plaintiffs indicated that they did not wish to change their pleadings.
During the course of the plaintiffs’ closing submissions, it became clear that the way the plaintiffs put their case was based on a Barnes v Addy claim and also a claim that there was a severance of Myra and David’s joint tenancy. These submissions departed significantly from the statement of claim which was pleaded in narrative form and did not clearly set out those claims.
The defendants maintained the position that they were meeting the pleaded claim and no more.
At the conclusion of closing submissions, I granted the plaintiff leave to file an application for leave to amend the pleadings within seven days. On 25 March 2014, the plaintiff filed an application for leave to file an amended statement of claim. The application was listed for hearing on 13 June 2014. The delay between the making of the application and its hearing was the result of the parties wishing to accommodate the availability of counsel that appeared at the trial.
The proposed amended claim closely corresponded to the claim as it was put in final submissions.
In their proposed amended statement of claim (ASOC), while the plaintiffs maintain the pleading of the facts, they seek to add significant new aspects to the pleaded claim. Those new aspects are that the plaintiffs:
(a)allege a severance of the joint tenancy of the Charlotte Street property (ASOC [9A.1]);
(b)plead a trust whereby Myra’s half share as a tenant in common would be held in trust by David to use until he died or sold the property but would otherwise hold on trust for the benefit of the plaintiffs (ASOC [9A.2]);
(c)claim that David, in breach of trust, failed to account to the plaintiffs for half of the proceeds of the sale of the property or alternative that he dishonestly and fraudulently converted the trust property for his own use (ASOC [14C]);
(d)make a Barnes v Addy claim against Margaret because she knew of the existence and terms of trust and:
(e)received and became chargeable with trust property either by obtaining it and spending the money or using it to purchase or repay debt on the jointly owned property at 135 Jefferson Lane which property was subsequently used in part to fund the acquisition of a storage business by Margaret; or alternatively;
(f)assisted David with knowledge in his dishonest and fraudulent design to dishonestly and fraudulently convert the trust property to his own use (ASOC [35]-[46]); and
(g)alleged that as a consequence Margaret was liable as a constructive trustee to repay or restore the trust property to the plaintiffs together with interest (ASOC [48]).
The plaintiffs also sought to file a reply to the defence (“Reply”) contending that, for the purposes of s 33 of the Limitation Act, David had given “repeated assurances” referred to in the pleadings and had thereby deliberately concealed from the plaintiffs his conversion of the trust property to his own use (Reply [1]). As a consequence the plaintiffs contended that time did not begin to run in relation to the plaintiffs’ cause of action for breach of trust against David until the plaintiffs discovered that he had actually converted the trust property to his own use and that his estate, or alternatively Margaret’s, would not restore the trust property to the plaintiffs (Reply [2]). Further, the plaintiffs contended that by giving “the repeated assurances” referred to in the ASOC Margaret had deliberately concealed that she had received trust property with notice of the trust and would not restore the trust property to the plaintiffs (Reply [3]). Alternatively they claim that the claim pleaded against Margaret was a cause of action based on fraud for the purposes of s 33 (Reply [4]). As a consequence, the plaintiffs plead that time did not begin to run until the plaintiffs had discovered that Margaret had received the trust property with notice of the trust or, alternatively, that she assisted David with knowledge of his dishonest and fraudulent design and that she did not make provision in her will for her estate to restore the trust property to the plaintiffs.
Although not specifically pleaded in the Reply, the plaintiffs’ contention that their cause of action attracted the operation of s 33 of the Limitation Act would mean that time did not begin to run against the plaintiffs in relation to the claim against Margaret’s estate until the plaintiffs became aware of the terms of Margaret’s will. Given that Margaret died in 2011, that would mean there would be no limitation defence available to the defendants.
The proposed amended pleadings obviously go substantially beyond the existing (defective) pleadings and make allegations of dishonesty and fraud directed at both David and Margaret.
The solicitor for the plaintiffs gave evidence on the application for leave to amend the statement of claim and explained the circumstances in which the original pleading was filed. He explained that he was admitted to practice in 2011, had practiced as a prosecutor at the ACT Director of Public Prosecutions for one year, worked in another job for three months and filed the statement of claim on the fifth day after commencing work with the plaintiffs’ solicitors. He took over the matter from a previous solicitor. He did not know who drafted the pleading or whether it was settled by the barrister who was then briefed in the matter. He was aware that the matter was “time critical” and was aware of earlier correspondence sent to the solicitors for the defendants which outlined the nature of the claim. He considered, incorrectly as it turned out, that the pleaded claim was materially the same as outlined in the earlier correspondence.
Mr Waugh, who appeared for the plaintiffs at the trial, was briefed at the end of 2013.
The grant of leave to amend was opposed by the defendants who understandably emphasised the fact that they were entitled to conduct the case on the basis of the pleadings, that those pleadings did not plead fraud or any claim based on Barnes v Addy and that there would be prejudice suffered by the defendants if the pleadings were allowed to be amended. On this latter point the defendants directed attention to the fact that they had put into evidence a document titled, “Lets get the facts straight”, which was now to be relied upon by the plaintiffs as an admission by Margaret for the purposes of their claim based on the second limb of Barnes v Addy. They also pointed to the fact that they had not undertaken further financial investigations in order to obtain evidence to meet the proposed Barnes v Addy claim. They placed emphasis on the decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [111]-[114].
The plaintiffs indicated that they sought the amendments relying on the existing evidence and did not seek to lead further evidence. Similarly, the defendants’ indicated that if leave was granted they did not wish to lead further evidence.
In my view whether or not leave should be granted depends upon whether or not the claim sought to be pleaded can be made out on the evidence. In most cases where amendment is sought the Court will not be in a position to do any more than a rough and ready assessment that the claim proposed to be pleaded is reasonably arguable. In the present case the position is different as each party has called all the evidence that it wishes to call not only on the pleaded case but also on the case proposed to be pleaded. It is therefore possible to assess whether the claim would succeed rather than merely whether it might succeed.
While the explanation for the delay in seeking the amendment was unsatisfactory, the necessity to do so appeared to arise out of the inadequacies of those responsible for the preparation and filing of the original pleadings rather than the plaintiffs personally. Parties must generally be held responsible for, and suffer the consequences of, the inadequacies of their lawyers’ conduct of their case. However, in the present case, the fact that all the evidence has been given already means that it is possible to assess the merits of the proposed claim on a final basis.
Summary and result
In my view the plaintiffs’ claim, either as pleaded or sought to be amended, must fail. The reasons for that conclusion are, in summary:
(a)the pleaded claim that, for reasons which are not clear, focuses on the making of Margaret’s will as a breach of trust must fail because the making of Margaret’s will did not (and could not) amount to a breach of trust; and
(b)the amended claim for which leave was sought would also fail because:
(i)the claim would be barred by the Limitation Act;
(ii)the plaintiffs would be disentitled from equitable relief because of their delay in bringing the proceedings which has prejudiced the defendants; and
(iii)I would not have been satisfied that, on the limited available evidence, Margaret’s estate was liable under either limb of the rule in Barnes v Addy.
As a consequence of (b), leave to amend the pleadings should be refused. It is therefore not necessary to decide whether leave to amend would be refused for other reasons.
Evidence given at the hearing
Evidence by affidavit was given by the following persons:
(a)Jackie Lallemand;
(b)Pip Stevenson;
(c)Patricia Stevenson;
(d)Russell Brown;
(e)William Swan; and
(f)Tookie Capezio.
Jackie, Pip, Tookie and William Swan were cross examined.
In relation to the witnesses that were cross examined, neither side made any submission that they were giving evidence other than honestly. The defendants submitted that particular care needed to be taken in relation to the assessment of the evidence of the plaintiffs about the terms of the conversation at the family conference in 1978 having regard to the passage of time and the fact that over the years what occurred at the family conference had been discussed between Jackie and Pip, as had the contents of their affidavits.
I formed the view that notwithstanding the difficult family history and obvious emotional unpleasantness involved in a claim of this nature, the evidence given was generally reliable. In making any findings of fact I have had particular regard to the erosion of memory over time and the capacity of memory to accommodate itself to a sense of justice or injustice on the part of the one remembering.
Facts
David and Myra Stevenson
David and Myra Stevenson were married in April 1944. They were born in 1918 and 1922 respectively. David was a naval officer who had commenced service in 1932 and in 1962 held the rank of Captain. Between 1973 and his retirement in 1976 he was a Vice Admiral and the Chief of Naval Staff.
In 1962, David and Myra Stevenson purchased a property in Red Hill in Canberra (the Charlotte Street property) as their family home. A mortgage was entered into for the purchase of the Crown lease. They were registered as joint tenants on the registration of transfer. They spent time away from Canberra when David was on various postings between 1966 and 1971.
In November 1976 Sir David, as he then was, retired. After retirement his income was a government pension.
In 1977 the mortgage over the Charlotte Street property was discharged.
Illness and death of Myra Stevenson
On 3 June 1977 Myra Stevenson made her last will and testament in which, apart for some minor gifts of property, she gave her entire estate to her children, Jackie and Pip. As a consequence of the joint tenancy, the Crown lease of Charlotte Street property would pass to David Stevenson upon Myra’s death.
In 1977 Jackie and Pip were not living at Charlotte Street. Jackie, was living in Paddington in Sydney and Pip was living in Northern New South Wales.
In late 1977 Myra Stevenson began to exhibit symptoms associated with what was later diagnosed as brain cancer. Jackie and Pip were told of the diagnosis in February 1978. Each travelled to Canberra at various times to assist with Myra’s care. Other members of the extended family, including Myra’s mother who was known as Bardie, her brother Arthur and his wife Nancy and her sister Viola also visited Myra.
On 17 March 1978, at a time when both Pip and Jackie were in Canberra, what was described in evidence as a family conference occurred at the Charlotte Street property. It is this family conference at which the plaintiffs allege that Myra spoke to them and their father and asked their father to give her interest in the house to them. This is the point at which the plaintiffs assert that a trust arose. I will refer to this as “the family conference” in these reasons.
Less than a month later, on 15 April 1978, without having revised her will, Myra Stevenson died. Jackie was aged 29 and Pip aged 26 when Myra died. They were not under any incapacity then or at any time since.
What happened at the family conference?
The first and second plaintiff had similar recollections of the family conference. Jackie’s recollection which she deposed to in her affidavit sworn 12 Setpember 2012 is set out below:
On or about 17 March 1978, while both Pip and I were visiting my mother and father at Charlotte Street, my mother said to Pip, the Admiral and I:
Myra: I would like to talk to you all, can you please join me for a minute.
Although my mother was quite frail at this stage, she remained mobile and lucid. Present at this time were my mother, Pip, the Admiral and I. We had a conversation to the following effect:
Myra: There is something important I would like to talk to you all about.
Me: What is the matter, mum?
Myra: Well, as you know, I am dying and haven’t long to live. I know it is highly likely that Dad ... will remarry, and I hope He does, but I want Jackie and Pip to have my half share of the family home, this house. I want Dad to be able to live in it until he either wants to sell it or he dies. Jackie and Pip, you aren’t to kick Dad out. I want undertakings from you, Dad and Pip. You are going to be executors of will and I want you to tell me that you will ensure that this happens.
Pip: Yes, mum.
Admiral: Yes, Myra. I will make sure that it happens.
Myra: Bardie has virtually paid for half of this house anyway so I want to dispose of my half share of it as I see fit. Anyway, that’s all I have to say. Thank you.
Pip’s recollection of the family conference as set out in his affidavit sworn 17 September 2012 is set out below:
Mum:I have something I want to talk to you all about. As you all know, I am very sick and will likely die soon. (To Admiral) David, when I die, I want Jackie and Pip to have my share of the house. As you well know, the house has been largely paid for by my family, and the contributions that Bardie [the plaintiffs’ maternal grandmother] has made towards payment for it. I think they should have it, I think that I have the right to ask from that much from you.
Admiral:Yes, Myra.
Mum:Pip and Jackie, I think it is probably likely that Dad will marry again, and I hope that he does. But, I would like to make this gift to you both. You aren’t to kick Dad out, he should give it to you when he either sells the place or dies.
Jackie: OK, Mum.
Myra:Do you all understand? David, and Pip, you are the executors of my will, I would like to make sure you do this for me. David, I trust you to do this for me.
(David and Admiral Nod in agreement)
Myra: Alright. That’s all I want to say about that.
Both the plaintiffs were cross-examined so as to test their memory of the date of the family conference and their apparent clear recollection of what was said given that it occurred 36 years ago. With respect to the family conference, both the plaintiffs gave evidence that, although they could not remember the exact words used, they could remember the conversation accurately. Both plaintiffs admitted to discussing the matter and using a process of elimination with reference to Pip’s diary to arrive at the date of the 17 March 1978.
The only other people who might have given evidence of what occurred at the family conference, David and Myra, are both dead. There is no contemporaneous document recording what happened at the family conference or in which Myra reduced her wish to writing.
On the evidence available I make the following findings:
(a)The family conference was convened at Myra’s request.
(b)She was at that stage frail but lucid.
(c)She requested that Jackie and Pip have her half of the family home or the proceeds thereof.
(d)She made that request in the light of her expectation that David would remarry and consequently the prospect that unless some arrangement was made there was a risk that her children would not gain any benefit from her joint tenancy in Charlotte Street.
(e)She considered herself entitled to make that request because of the contributions made by her mother (or family more generally) to the acquisition of the house.
(f)Jackie and Pip were requested to allow David to live in the house until he died or until the house was sold, whichever was the earlier.
(g)David, Jackie and Pip assented to Myra’s request.
Events following Myra’s death
On 11 May 1978 probate of Myra Stevenson’s last will was granted to David Stevenson.
In July 1978 David visited Pip at his farm at Crabbes Creek in northern New South Wales. Pip’s impression was that David was drinking more than usual and was depressed after Myra’s death.
Jackie continued to visit the Charlotte Street property and noticed that in December 1978, Margaret Wright and her two children, Tookie and Matthew, had moved in.
In December 1978 David was visiting Pip again and told Pip that he wanted Pip’s blessing to marry Margaret. He obtained Pip’s approval.
David Stevenson remarries
On 13 March 1979, David Stevenson married Margaret Wright, who became upon marriage Margaret Stevenson. Tookie was 16, Matthew was 14. They lived together at the Charlotte Street property between 1979 and 1984.
Jackie moved to Royalla, just south of Canberra, in 1980 and continued to visit her father regularly.
The move to Queensland and sale of the Charlotte Street property
On 30 April 1984, David and Margaret Stevenson purchased a property on the Gold Coast in Queensland as joint tenants. They became registered proprietors on 3 August 1984. The address was 135 Jefferson Lane, Palm Beach. The purchase price was $250,000. There is no direct evidence as to which of David or Margaret provided the funds for that acquisition.
The purchase of 135 Jefferson Lane reflected David and Margaret’s decision to move to Queensland. Jackie heard about these plans and spoke with Pip about the sale of the Charlotte Street property and what their mother had said to them.
Almost one year after the purchase of 135 Jefferson Lane, the Charlotte Street property was sold. A memorandum of transfer dated 14 March 1985 indicates that the sale price was $217,000.
Both Jackie and Pip deposed to conversations at about the time of the sale of the Charlotte Street property that they had with their father about the existence of a debt owed to them from the sale of the Charlotte Street property. Jackie said that the first such conversation that she had with her father was in or about March 1985 when she visited the Charlotte Street property. She found her father among boxes of household items.
Me: I see that the ‘sold’ sign is up at the front.
Admiral: Yes, we’ve sold the property. You might have seen the boxes on the way in.
Me: How much did you sell it for?
Admiral:I got $217,000 for it, which I thought was quite reasonable.
Me: That’s good. I’m very pleased for you.
Admiral:Thank you, Jackie.
Me:So, how about you give Pip and me our half-share of the money from the sale?
Admiral:Not just now, Margaret wants a waterfront house at Palm Beach, and we need all of the proceeds of the sale to purchase it.
Me:But... you promised Mum that you would give us half of Charlotte Street when it was sold.
Admiral:Well you aren’t getting it now, you can have it later.
An illustration of the unreliability of the apparent precision of the recollection of what occurred is the fact that David is unlikely to have referred to Margaret wanting a waterfront house at Palm Beach when in fact the house at 135 Jefferson Lane, a waterfront house, had been purchased nearly a year earlier.
Pip also deposed to a conversation in early 1985 with his father to the effect of:
Me: So Dad, now that you have sold the house [Charlotte Street], are you going to honour Mum’s request to give Jackie and I her share of the money?
Admiral: You will get the money when I die. Now, don’t ask me about it again.
Pip gave evidence that his father appeared angered by his request for the money from Charlotte Street. In cross-examination he said that with respect to his father:
I really believe that he was very a formidable man. When he told you to go away, that he’d give you the money when he died, that he meant that and that was the way it was going to be.
Life in Queensland
Patricia Stevenson, the wife of David’s brother, William Stevenson, deposed to a conversation occurring in 1986 when she was visiting David and Margaret Stevenson at their new home in Palm Beach. Margaret was recovering from surgery for breast cancer. Patricia recollected:
Margaret became agitated and the conversation turned to David’s children and money from the sale of the Charlotte Street house in Red Hill. ...
Margaret looked angry and began to raise her voice to a point where she was yelling. She said:
“David has given half of the money from the sale of the house in Charlotte Street, to Pip and Jackie. He didn’t talk to me about it. We could have used that money and I’ve had to draw on some of my investments to buy this place.”
...
David, who was only a few metres away, did not say anything in relation to Margaret’s outburst.
Patricia’s evidence was that she recalled the conversation particularly well because it was her first visit to Margaret in Queensland, she had just been discharged from hospital and she appeared so furious about what had happened.
This is significant evidence in that it does indicate:
(a)some knowledge on Margaret’s part of an arrangement in relation to the Charlotte Street money;
(b)that Margaret’s understanding was that the money had in fact already been paid; and
(c)that 135 Jefferson Lane was purchased, at least in part, with Margaret’s rather than David’s money.
Patricia Stevenson also deposed to approximately five meetings that she had with Margaret between 1986 and 1998 where Margaret told her that Jackie had spoken to her about payment of money that she felt she and Pip were owed. The recollection of Patricia was that on one or other of these visits (the evidence was not clear) the conversation with Margaret was:
[Margaret]: “That woman has been at me again about money from Charlotte Street.”
[Patricia]: “Why doesn’t she take it up with her father.”
[Margaret]: “You know David. If he doesn’t want to talk about something he won’t.”
Once again this evidence is consistent with some knowledge on Margaret’s part of an arrangement in relation to the proceeds of the Charlotte Street property but no more than that.
Although there was little evidence about the precise health conditions from which David suffered, Tookie observed that David found it increasingly difficult to get up and down the stairs at the 135 Jefferson Lane property. In early 1989 Margaret located another property just down the road that was under construction. While this was also a two storey property she arranged for the plans to be modified so that the living areas and bedrooms were on the ground floor making it easier for David. She purchased the property in March 1989 and on 17 July 1989 became the registered proprietor of a property known as 109 Jefferson Lane, Palm Beach. The purchase price was $795,000. She told Tookie that she had to borrow money to purchase 109 Jefferson Lane.
Despite visiting his father and Margaret many times in Queensland between 1984 and 1996 Pip did not raise the issue of money from the sale of Charlotte Street.
In December 1990, the property at 135 Jefferson Lane was sold. Jackie had a conversation with her father between Christmas and New Years Eve reminding him about his obligation to pay her and her brother half of the proceeds of the sale of the property. This occurred while she was staying with David and Margaret Stevenson at 109 Jefferson Lane. The conversation was to the following effect:
Me: So, Dad, I see that you have sold the other place [the first Gold Coast property] and moved into this place. How about you give Pip and I our money from the Charlotte Street sale now?
Admiral: Jackie, you aren’t to mention this anymore. You will have the money from the Charlotte Street house when I die, and not before!
In December 1990, the first Palm Beach property was sold. Margaret told Tookie that the sale of 135 Jefferson Lane had fallen through and that she had to run a court case which she lost. She told Tookie that she purchased a self-storage business in 1991 by transferring the property at 135 Jefferson Lane and taking out an additional bank loan of approximately $750,000 to purchase the self-storage business.
While the new self-storage business took Margaret out of semi-retirement, she also became a director of the Self Storage Association of Australia. Tookie observed that David was aging and becoming in need of care which it was difficult for Margaret to provide. David was losing mobility and becoming incontinent. He was unable to drive, making him more dependent upon Margaret. From about 1990 David obtained nursing assistance in his home through the Department of Veterans Affairs.
In 1994 David was placed in care at a nursing home known as Amaroo Nursing Home. Pip gave evidence that when this move was being contemplated he and his then partner offered to have David come and live with them but that David was not willing to do that. Jackie gave evidence to similar effect. The evidence of both Jackie and Pip was that they were not fully supportive of the need to move their father into care.
The same year Margaret purchased a third Gold Coast property, an apartment known as 95/2 Admiralty Drive, Palm Beach, and moved into that property.
On 30 September 1994 David made his last will, leaving everything to Margaret. There is no evidence about the terms of any previous wills.
Jackie continued to visit her father in his nursing home. She deposed to a conversation occurring in or about April 1998 when she visited her father at the Amaroo Nursing Home as follows:
Admiral:I really don’t want you to worry; you will get your inheritance when I die.
Me:Dad, I’m not visiting you because I want money; I’m visiting you because I love you.
Pip also gave evidence that his father appeared increasingly frail and that he was concerned that his father had not made appropriate arrangements with Margaret for the transfer of the funds due to Jackie and himself from the sale of the Charlotte Street house when he died. He had a further conversation in or about June 1998 while visiting his father at the Amaroo nursing home:
Me: Look, Dad. What’s happening with the proceeds from the sale of the Charlotte Street house? I haven’t spoken with you about it for a long time.
Admiral: Pip, you will get the money when I die.
In July 1998 David was moved to a nursing home at St James Park Care Centre, Helensvale in Queensland. Pip was upset by this move because it was made without prior notice to him and the nursing home was further away from Pip’s property, making it harder to visit his father. Jackie explained the move on the basis that Margaret had purchased a self-storage business in 1998 and the new nursing home was closer to that business and hence easier for her to visit. The state of mind of Jackie or Pip is not evidence of the actual motivations for the move and in the absence of evidence explaining the motivations for the move it is not possible to make any finding as to the reasons it occurred. It is clear that David’s health was deteriorating and the need to provide a higher degree of care may have been the sole motivation for the move. That is consistent with Tookie’s evidence as to what she was told by Margaret at the time.
Jackie recollected another conversation in or about late August 1998 while visiting her father at the nursing home to the following effect:
Admiral: Look Jackie, I don’t want you and Pip to worry, you will definitely get the money from the home in Charlotte Street when I die. I have organised it with Margaret.
Me:Thank you, Dad.
At his 80th birthday on 24 August 1998 Tookie’s evidence was that he was extremely frail and she was unable to have a lucid conversation with him.
On 26 October 1998 David Stevenson died. A state funeral was held in Duntroon on 6 November 1998.
By his last will dated 30 September 1994, David Stevenson left his entire estate to Margaret Stevenson. At the time of his death, David Stevenson was receiving a ComSuper pension and had no assets which meant that there was no probate sought in respect of his will.
There are suggestions in the affidavit of Pip that the care provided to David was inadequate or that Margaret dealt with David in a way that was inadequate. It is not possible to make findings on this impressionistic evidence. Clearly Pip was not satisfied with some of the things that Margaret did but the fact was that she was the one primarily responsible for looking after David.
Events after David’s death
After her father died, Jackie recounted conversations which she had with Margaret. Margaret spent significant periods in Canberra and moved into an apartment at Currie Crescent in Kingston. Jackie said that in or about December 1998 she went to see Margaret in her apartment at Kingston to discuss her father’s affairs. Her evidence was that she had the following conversation:
Me: Margaret, we need to sort out Dad’s will. Dad said he was going to leave Pip and I the money from the sale of Charlotte Street.
Margaret: Well, he’s left everything to me, and you’ll get the money for Charlotte Street out of the sale of the house at Palm Beach.
Me:I see
Margaret:I don’t have any spare money to give you at the moment unfortunately. The money from the Charlotte Street house is all tied up in the house in Palm Beach. I really can’t afford to sell the house now, because the housing market in Queensland is really bad. But, you will get it when the Palm Beach Property is sold.
Jackie:Well, could I see a copy of will.
Margaret:No, you can’t. My solicitor has advised me not to allow anyone to see it.
Jackie:Well, I will have to follow it up legally then. Who are the solicitors?
Margaret then checked her appointment book.
Margaret:The name of the firm is ‘Stephens and Tozer’. They have an office on the Gold Coast.
Jackie: I will contact them.
Margaret:Ok, no problem. Here is the address and phone number.
Tookie described this conversation differently. She was present at the unit because she was tidying up after a function that her mother had held. She described the interaction as an argument with Jackie yelling “You owe Pip and me money” and Margaret yelling “I owe you nothing”. After Jackie left she said she had a conversation with her mother as follows:
“What was that about?” My mother replied to the following effect: “David left whatever he had to me in his Will. He didn’t really have that much. There will be a part Naval pension and his Veteran’s Affairs Gold Card. Jackie and Pip got their inheritance when he retired from the navy”
After initially being refused a copy of the will by Margaret’s solicitors, Jackie was ultimately sent a copy of the will by Margaret Stevenson’s solicitors by letter dated 7 January 1999.
After Jackie received David Stevenson’s will in January 1999, she had a conversation with Pip to the following effect:
Jackie:I have been trying to sort out Dad’s will.
Me:Oh, yes. What’s the story with all of that?
Jackie:Well, I went to see Margaret the other day to get a copy of the will, but it was with her solicitors.
Me:Right, and what did it say?
Jackie:Well, it left everything to Margaret. I mean, I guess it’s OK because she knows about the arrangement we had with Dad, surely.
Me:Jackie, I think we should follow this up if we don’t do anything about this she might forget about the arrangements her and Dad made.
Jackie:Ok, well I’ll sort it out.
Pip then left pursuit of the money to Jackie.
The significant difference between the evidence of Jackie and the evidence of Tookie is that on Jackie’s version of events there is a statement that the money would be paid upon the sale of 109 Jefferson Lane whereas on Tookie’s version there is no such statement. I prefer Tookie’s evidence on this point because:
(a)Neither Jackie or Pip gave evidence of any subsequent reference to any such assurance by Margaret when Jackie spoke to Pip, notwithstanding that such an assurance would have been of considerable significance;
(b)Jackie does not give evidence of referring back to any such assurance in subsequent dealings with Margaret notwithstanding that it would have been in her interests to have done so;
(c)The evidence of Tookie as to Margaret’s position is consistent with the position adopted by Margaret in the document she prepared, admittedly many years later, described below; and
(d)The absence of any assurance is consistent with the Margaret’s attitude reflected in her refusal to provide Jackie with a copy of the will both at the meeting and, at least initially, when a request was made through Margaret’s solicitors.
In 1999, the property at 109 Jefferson Lane was sold.
Having obtained a copy of David’s will from Margaret’s solicitors, Jackie sought legal advice from a firm of solicitors, Bradley Allen. A letter dated 13 March 2000 was annexed to her affidavit which indicated that probate searches in New South Wales and Queensland had disclosed no grant of probate of her father’s will. The letter referred to advice given in a conference that if she wished to take the matter any further, the next step would be to ascertain whether David owned any property in NSW or Queensland either alone or jointly with Margaret. Jackie’s evidence as to the advice that she had received from Bradley Allen and the reason that she did not pursue any claim at that time is set out at [160]-[163] below.
In or about June 2000, Jackie discovered, via a conversation with David’s sister, Dottie, that Margaret Stevenson was taking her children, Tookie and Matthew, and their families to America. She organised to meet Margaret in a coffee shop and recollected a conversation to the following effect:
Me: I understand you have sold the house at Palm Beach, and Matthew has told Pip you are taking your children and grandchildren on holiday to Disneyland in California. Are you planning on taking my children and me?
Margaret: No, they aren’t really your children anyway.
Me:What about Pip and Mara?
Margaret: No, Mara is too young.
Me:Well she is 7 years old; it would be a perfect time for her to get to know her cousins. And if you take Pip, he and Matthew can keep each other company.
Margaret: No they’re not coming.
Me: Well, I really want the money from Charlotte Street now. And that house would be worth about $800,000, so you owe Pip and me $400,000.
Margaret: Not now Jackie, I’m buying another business and taking everyone to the States so I can’t pay you at the moment.
Me: Well I’m glad that the money is going to good use.
Margaret: What do you mean ‘the money’?
Me: I mean the money that was my mother’s, and that is supposed to be Pip’s and mine.
...
This was clearly an awkward if not positively unpleasant conversation. Jackie only saw Margaret on a couple of occasions after this up until 2005.
In 2007, Margaret sold the Admiralty Drive apartment as well as her storage business and returned to live in Canberra.
The memorial service in 2005
In 2005 there was a memorial service for David held at Jervis Bay. The memorial service was attended by Jackie and her husband, William (Billy) Stevenson (David’s brother) and his wife Patricia, Margaret, Tookie and her husband Joe. After the memorial service Billy and Patricia Stevenson hosted a lunch at their house nearby in Vincentia.
Jackie said she had a conversation with Margaret to the following effect:
Margaret: My storage business is going really well. I’ve just been appointed as President of a storage industry council.
Me:Well Margaret. I really don’t want to hear about it.
Margaret:Truthfully Jackie, it’s going really well. I’ve opened several new sites for the business.
Me: Margaret, I really don’t want to talk to you about your business. Can we change the subject please?
Margaret:Jackie, what’s wrong with you, why are you being like this?
Me:I don’t want to hear about it because, as far as I’m concerned, that’s mine and Pip’s money you’ve used to float your business.
Margaret:Oh, for goodness sake. Will you stop going on about that.
This evidence was corroborated by the evidence of Pip and Patricia Stevenson. Tookie’s evidence was that there was no mention of opening “several new sites” because there was only ever one site. However the substance of the conversation was not in dispute. This conversation upset the equilibrium of the event. Jackie left the room accompanied by her husband and Tookie. Both Margaret and Patricia were upset by the unpleasantness of the interaction. When Tookie returned to the room her mother said to her, “Jackie is still going on about how I owe her money from David’s estate, but I don’t owe her a cent.”
After this event Pip had little to do with Margaret and, while hoping that Margaret would give Jackie and himself the money, did not actively pursue it.
Contact between Jackie and Margaret after 2005
In about 2007, Margaret moved back to Canberra. She made her last will on 18 June 2010.
In early 2011 Pip was asked if he wanted to march in Anzac Day parade with the members of the HMAS Australia Association. He spoke to Jackie about it and she agreed to approach Margaret to see if she could get David’s medals. In March 2011 Jackie visited Margaret in her apartment in Barton. Margaret said that she was dying. Jackie described a civil conversation although Margaret became upset and was frail. She gave Jackie David’s medals, his dirk (a type of dagger) and his sword. There was no mention of the Charlotte Street money. Her evidence was that Margaret invited her to visit again.
After the meeting Jackie visited the apartment of Tookie and Joe Capezio. Tookie was not at home but her husband Joe was. Jackie explained that because of the money issue she was unlikely to visit again but indicated a willingness to help with caring for her or medical appointments. Joe said that there were plenty of other relatives able to look after her. Joe did not give evidence. This visit was then reported to Tookie as involving Jackie pursuing money. When that in turn was reported by Tookie back to Margaret she was upset that Jackie was still pursuing the money and appeared to Tookie to be anxious, tired and confused. It is not clear whether Margaret formed the view at the time of the visit that Jackie was visiting in relation to the Charlotte Street money or that this view was only formed after speaking to Tookie. However it is clear that she came to the view that obtaining the medals was not the true reason Jackie visited. Margaret resolved then to pack up all the “personal stuff” from David and send it to Jackie. Margaret proposed to send a letter with the boxes of personal items that she was sending to Jackie. That was a letter entitled “Lets get the facts straight” and it was put into evidence as an annexure to Tookie’s affidavit. Fortunately Tookie persuaded her mother not to send the letter but the boxes were returned to Jackie.
However the “Lets get the facts straight” document is useful in that it provides some insight into Margaret’s state of mind in 2011 in relation to any obligation that David may have had or that Margaret had in relation to the proceeds of the Charlotte Street property. It said:
Your mother left everything to your Father in her Will.
Twenty-one years later your Father left everything to me in his Will.
You are well aware that your father gave both you and Pip $100,000 each when he retired from the Navy – you knew this was your inheritance. Each of you bought a house in Paddington, Sydney (not hard to prove) this would be equivalent to about a $1 million each nowadays.
I OWE YOU AND PIP NOTHING!
You and Pip were both very happy that I was marrying David and remember we were married for 20 years!
It was all very convenient when he was alive – he was well cared for and very happy for the last 21 years of his life – you didn’t have to care for him – and you know a lot of that was not very pleasant (I am no nurse).
Ever since his death you have turned very sour and think I owe you some sort of compensation
When we were married you were already married to a very successful Osteopath and Pip was living with his partner on the farm. You were both grown up and standing on your own two feet.
In 1979 when I married David I had a sizeable Real Estate portfolio, which I had started in 1964.
David owned the house, furniture, a car and some shares in the Stock Market and half of Pip’s farm (& tractor) which he eventually gave to Pip.
As for Charlotte Street – When I was first married I told you that your Father hoped you and Pip would eventually inherit it We were assuming that we would continue to live there.
Well things changed and in 1985 we decided to go to Queenslands to live so the house was sold for about $200,000. Over the next 16 years, until David went into a nursing home, we spent this money on holidays, overseas trips, cruises and living.
I financed our homes in Queensland
You may be interested to know, not that it is any of your business, my Mother left me a number of unencumbered properties when she died in 1988.
I have continued to invest in real estate all my life. I ran the self-storage business (which I had to mortgage in order to buy it) for over 20 years. I worked until I was 74 – and now in “retirement” continue to administer my investments.
When David died he had nothing much in the bank – and a few shares.
This delivery of furniture and goods and chattels is EVERYTHING I have that belonged to your parents. You have both received many cartons of bits and pieces and furniture over the years
Whatever you might find missing has either been sold or given away by you Father, or given to you or Pip. Or broken, lost or stolen over the years.
I trust goods and chattels will give you closure over your Mother’s death and that you will be able to at last move on and start appreciating life.
There is nothing owing to you or Pip so doesn’t bother to try to contest my Will, as you will be wasting your money.
Please do not contact me, as I have nothing for you.
(emphasis in original)
At the time she also prepared another document which was also in evidence, outlining the history of her business and property dealings, the history of her relationship with David and her interactions with Jackie after David’s death. It is clear that at this point she was harbouring a lot of resentment for what she understood to be Jackie’s pursuit of the proceeds of Charlotte Street and that is reflected in the tone of both this document and the “Lets get the facts straight” document.
In April 2011 six cartons of crockery and some assorted furniture was delivered to Jackie. The items used to belong to Myra or David. Following the delivery of the items Jackie went to visit Margaret and thank her for the items. The Charlotte Street money was not discussed and the visit was without incident.
In June 2011, Patricia visited Margaret who was very ill. Margaret complained to her that Jackie was still attacking her about Charlotte Street. Margaret said: “I’ve told her I owe her nothing and that she had already received money from her father. She has said that if I don’t give the money to her, she will take Tookie to court and get it.” Patricia described Margaret as upset and crying.
The death of Margaret Stevenson
On 3 August 2011, Margaret Stevenson died. Probate of her will dated 18 June 2010 was granted to the defendants on 6 December 2011. The estimated gross value of the estate in the ACT is identified on the grant of probate at $3,985,307.06. In her will, Margaret Stevenson disposed of her entire estate upon various trusts to benefit to her children and grandchildren but not the plaintiffs.
On 4 December 2011 Pip telephoned Patricia seeking her help with documenting her recollections for the purposes of a claim against the estate. He followed it up with an email. Patricia was clearly upset about being asked to be involved and hostile to the notion of any claim on the estate but nevertheless set down her recollections in a statement which she provided to Pip. That statement was substantially consistent with the affidavit that she swore and which was filed by the defendants
On 30 December 2011 Jackie wrote to Tookie in relation to what she said was Jackie and Pip’s half entitlement to the proceeds of the sale of the Charlotte Street property and seeking agreement.
There was correspondence between solicitors acting for Jackie and Pip and solicitors acting for the estate which articulated the basis upon which the plaintiffs said they were entitled to claim on the estate. Ultimately the executors made it clear on 3 April 2012 that the estate would be administered without regard to the claim made by the plaintiffs.
These proceedings were commenced on 21 September 2012. That date is 27 years and six months after the sale of Charlotte Street, 13 years and 11 months after David’s death, 13 years and eight months after the terms of David’s will were disclosed to Jackie, and 12 years and six months after Jackie received the letter of advice from Bradley Allen.
Did Jackie and Pip get paid?
There was some evidence suggesting that Jackie and Pip had already been paid the amount which they claimed. That was, in particular, the evidence of Patricia Stevenson about Margaret’s outburst when Patricia was visiting in 1986. Patricia’s note to Pip dated 10 January 2012 records Margaret saying shortly before she died that “the money was already paid by David”. The “Lets get the facts straight” document asserts that Jackie and Pip each got $100,000 when David retired from the navy.
The evidence before me establishes that the amount that the plaintiffs said was due to them has not in fact been paid. Both Jackie and David gave that evidence. Each received payments of amounts from their father prior to their mother’s death but no amount from or in substitution for the proceeds of the sale of Charlotte Street was paid to either of them. That finding is inconsistent with the evidence of Patricia about what she was told in 1986 and in 2011. There are a number of possible reasons that might explain the difference in the evidence. However, on the basis of the limited evidence before me it is not possible determine why the evidence differs.
Margaret’s assets
The evidence is limited as to Margaret’s assets. The issue is relevant to the plaintiffs’ claim that Margaret is liable pursuant to the first limb of Barnes v Addy.
The grant of probate indicates that as at 2011 the assets forming Margaret’s estate are substantial. The evidence as to how these amounts were accumulated was not precise. Rather, it involved generalised evidence about the extent of Margaret’s business as a property investor and the evidence about her conduct of the self-storage business in Queensland.
There was some limited specific evidence about her purchase and sale of three particular houses in Canberra prior to her marriage to David. Prior to 1980 she had bought and sold three houses in Canberra, the last as a joint owner with a real estate agent. The documents do not disclose what money was made from these investments.
Tookie’s evidence was that when in Queensland she continued to remain active in real estate investments, buying and refurbishing properties then tenanting them and selling them. The evidence gave no detail of the extent of these activities or the net profit made from them during the years in Queensland.
Margaret’s accountant and one of two executors, Russell Brown, deposed to the fact that after Margaret’s marriage to David, Margaret remained active in buying and selling property on a regular basis including properties in Queensland. On the other hand, David’s tax affairs were very simple comprising his superannuation pension and benefits from the department of Veterans Affairs. Once again, the evidence in relation to Margaret’s business dealings did not descend to details.
The pleaded claim
The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities: Banque Commercial SA v Akhil Holdings Ltd (1990) 169 CLR 279 at 286-287 (Mason CJ and Gaudron J).
As indicated by the procedural history recited above, although there were indications that the plaintiffs wished to run a case that extended beyond the case pleaded in the statement of claim, the defendants were not expressly put on notice of that intention. The highest that it can be put is that the pleading was so obviously defective that the defendants must have suspected that if run competently there would be an attempt to run a different case based, substantially, on the facts already pleaded. To adapt the words used in Banque Commerciale, the defendants cannot be said to have deliberately chosen to meet a case other than the case pleaded by the plaintiffs. Therefore the claim is to be decided on the pleaded case.
If the proceedings are decided on the basis of the pleaded case they must fail. The pleaded case is that the making of Margaret’s will constituted a breach of the trust identified at paragraphs 8 and 9 of the pleading. There is a logical problem with the pleading in that Margaret was not a trustee of the trust or otherwise associated with it. Even if the making of Margaret’s will could be a breach of trust (which is not apparent), Margaret or her estate could not be held liable as Margaret was not a trustee.
The balance of these reasons deal with claim as sought to be amended.
Limitation Act
The Limitation Ordinance 1985 (ACT) came into force on 19 December 1985. The relevant provisions of the Limitation Act have undergone no changes of substance since then. The current defence raises a limitation defence although, as I have noted, the pleading is less than ideal. There is no doubt a limitation defence would be pleaded in response to the ASOC if it was permitted to be filed. The plaintiffs seek to rely upon the provisions of s 33 in their proposed Reply. The relevant sections of the Limitation Act are currently as follows:
6Acquiescence etc
Nothing in this Act affects any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise.
11General
(1)Subject to subsection (2), an action on any cause of action is not maintainable if brought after the end of a limitation period of 6 years running from the date when the cause of action first accrues to the plaintiff or to a person through whom he or she claims.
(2)Subsection (1) does not apply to a cause of action in relation to which another limitation period is provided by this Act.
27Fraud and conversion—trust property
(1)An action on a cause of action—
(a)in relation to fraud or a fraudulent breach of trust, against a person who is, while a trustee, a party or privy to the fraud or the breach of trust or against his or her successor; or
(b)for a remedy for the conversion to a person’s own use of trust property received by him or her while a trustee, against that person or against his or her successor; or
(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 his or her successor;
is not maintainable by a trustee of the trust or by a beneficiary under the trust or by a person claiming through a beneficiary under the trust if brought after the end of the only or later to end of such of the following limitation periods as is or are applicable:
(e)a limitation period of 12 years running from the date when the plaintiff, or a person through whom he or she 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;
(f)the limitation period for the cause of action fixed by or under any provision of this Act other than this section.
(2)...
33Fraud and concealment
(1)Subject to this section, if—
(a)there is a cause of action based on fraud or deceit; or
(b)a fact relevant to a cause of action or the identity of a person against whom a cause of action lies is deliberately concealed;
the time that elapses after a limitation period fixed by or under this Act for the cause of action begins to run and before the date when a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the fraud, deceit or concealment, as the case may be, does not count in the reckoning of the limitation period for an action on the cause of action by him or her or by a person claiming through him or her against a person answerable for the fraud, deceit or concealment.
(2)Subsection (1) has effect whether the limitation period for the cause of action would, apart from this section, end before or after the date mentioned in that subsection.
(3)Without limiting subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.
(4)...
(5)...
The plaintiffs’ case, as it was ultimately articulated, was that there was a severance of the joint tenancy and the establishment of a trust over half of the Charlotte Street property. Upon the sale of the Charlotte Street property the terms of the trust meant that David had a duty to account to the plaintiffs for half of the proceeds of sale of the Charlotte Street property at the time the sale was completed. The plaintiffs allege a breach of the trust by reason of David’s failure to account. It is then alleged that by failing to account to the plaintiffs for the trust property during his lifetime David dishonestly and fraudulently converted the Trust property to his own use.
The claim against Margaret is that she knew of the existence and terms of the trust and either received the trust property or alternatively assisted David with knowledge in his dishonest and fraudulent design.
Like the Full Court of the Federal Court did in Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (In Liq) [1999] FCA 1820 at [36] in relation the application of s 47 of the Limitation Act 1967 (NSW) to a Barnes v Addy claim, I am prepared to assume that the Barnes v Addy claim against Margaret is within the scope of s 27 of the Limitation Act.
The starting point is when did the Barnes v Addy claim arise?
In so far as the first limb is concerned, the plaintiffs submit that the money was used to purchase the property at 135 Jefferson Lane. According to her evidence Jackie was made aware of that prospect in her conversation with her father in or about March 1985 although, as I have pointed out, there must be some doubt about some aspects of her recollection. The plaintiff’s case was that the use of the money was illustrated by the discharge of a mortgage over the 135 Jefferson Lane property in August 1985. With reasonable diligence, either of the plaintiffs, wanting to know what had happened to the money they claimed was theirs, could have discovered that fact in 1985 or certainly by 1986. They could, for example, have asked their father. Hence, for the purposes of s 33 time ran from that time. Under s 27 of the Limitation Act the 12 year period would have expired in 1998 at the latest.
Alternatively, the plaintiffs’ case is that Margaret knowingly assisted David in breaching the trust by participating in the expenditure of trust monies on “holidays, overseas trips, cruises and living” as disclosed in the “Let’s get the facts straight” document. In relation to that cause of action, the plaintiffs could, with reasonable diligence, have discovered that that was how the money was being used if they asked their father or Margaret where the money from the Charlotte Street property had gone.
The fact that:
(a)David was a formidable man who was angered by inquiries about Charlotte Street and did not wish to talk about it; and
(b)Pip and Jackie did not want to push the issue because David was their father,
does not mean that it was not open with reasonable diligence to have discovered the alleged fraud. There is no evidence that there was in fact any attempt or intention on David’s part to hide what had happened to the money. Rather, he appears to have considered that he was entitled to keep the money for his own use until he chose to do otherwise and made no secret of that fact.
The real reason why there is now some doubt about precisely what happened to the money is not because of any concealment on the part of David or Margaret. Rather, it is because Jackie and Pip never asserted their entitlement while their father was alive or in any way that required the kind of considered response that court proceedings do or a solicitor’s letter might. Rather, the issue seems to have been dealt with occasionally, in passing, over many years and never the subject of any focused, diligent attempt to discover the facts. That the issue of what happened to the proceeds of the Charlotte Street property lurked as an intrafamilial injustice, just below the surface of dealings between family members, does not mean that the plaintiffs could not have, had they wished to, discovered all the facts that they needed.
I do not consider the statements by David that the plaintiffs would get their money when he died had the effect of delaying the running of time. That is because the payment of such money would not have avoided the accrual of a cause of action under the rule in Barnes v Addy. Rather, it might have had the effect of remedying the loss which was incurred. For the purposes of the Limitation Act time runs from when the cause of action is complete or when, for the purposes of s 33, a plaintiff may with reasonable diligence discover the facts. Discovering the fact that no provision was made in David’s will for the plaintiffs’ entitlement was not an ingredient in the cause of action. Nor did it mark the first time at which the plaintiffs, with reasonable diligence, may have discovered the facts. Therefore, it did not mark the time at which time began to run against the plaintiffs.
Even if, contrary to my findings above, it was open to say that the fraud could not be discovered until when it was disclosed that no provision was made in David’s will, that occurred sometime shortly after the will was sent by Margaret’s solicitors to Jackie in 1999, some 13 years and 8 months prior to proceedings being commenced. By March 2000 Jackie had obtained legal advice in relation to her situation. Even if that date is taken as when time began to run against the plaintiffs then the claim is still out of time, being 12 years and 6 months since the letter from her solicitors.
For these reasons I am satisfied that if leave was granted to amend the statement of claim and to file the reply asserting the operation of this 33 of the Limitation Act then the plaintiffs’ claim would nevertheless fail because of the operation of s 27 of the Limitation Act.
Laches
The current defence pleads in paragraph 30(e) that as a consequence of the delay in the plaintiffs bringing these proceedings the defendant is prejudiced by having no opportunity to investigate the matter at a time when recollections were clearer and when it may have been possible to obtain evidence to assist with the defence of the proceedings. The particulars pointed to:
(a)the plaintiffs’ knowledge at sometime in 1985 that the Charlotte Street property had been sold but that no monies had been distributed to them;
(b)that David died in 1998 and the plaintiffs did not receive any benefit under the will and did not bring proceedings; and
(c)that in 2005 Margaret indicated that the plaintiffs would receive no money.
The particulars assert that, as a consequence of the plaintiffs bringing no claim during the lifetimes of David or Margaret, the defendants have lost the opportunity to call oral evidence from either of those persons. The defence also includes as a particular of laches a reference to s 11 of the Limitation Act ‑ a peculiar pleading which I have referred to above. The defence also asserts as a particular of laches that that the delay has caused prejudice because the defendant is unable to ascertain any fair value of what would have been in 1985 a fund represented by half the sale price of the Charlotte Street property. There is no doubt that the defence of laches would be relied upon in answer to an amended statement of claim.
In my view the aspect of the defence upon which the defendant would be entitled to succeed is the delay causing prejudice by reason of not commencing proceedings until after Margaret’s death.
Availability of laches as a defence
The equitable defence of laches follows the maxim that the law assists those who are vigilant, not those who sleep on the rights. The defence provides a bar to the grant of relief where there has been an unreasonable delay in the commencement or prosecution of proceedings and where the delay renders it unjust in all the circumstances to grant the relief sought. The classic statement of the principle is that of Lord Selborne in Lindsay Petroleum Co v Hurd (1874) 5 LRPC 221 at 239-240 where he said:
Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.
Mere delay is not sufficient. That is all the more clear when a statute of limitation applies. In cases where a limitation period is applicable the defence of laches based on pure delay is not available. The statute determines the acceptable delay in the commencement of proceedings.
However, the position is different when, relevant to this case, delay is accompanied by prejudice. In P & O Nedlloyd BV v Arab Metals Co & Ors (No 2) [2007] 1 WLR 2288 at [61] Moore-Bick LJ (with whom the other members of the Court of Appeal agreed) said:
However, if and to the extent that a limitation period is applicable to the claim, it is difficult to see why mere delay should defeat the claim until the limitation period has expired.… Equally, however, I can see no reason in principle why, in a case where a limitation period does apply, unjustified delay coupled with an adverse effect of some kind on the defendant or a third party should not be capable of providing a defence in the form of laches even before the expiration of the limitation period.
I note that in Gerace v Auzhair Supplies Pty Ltd (2014) 310 ALR 85 at [27]-[29] Meagher JA (with whom Beazley P and Emmett JA agreed) said that this passage may not pay appropriate heed to the distinction between laches and acquiescence, only the latter being a defence where a statute of limitation is applicable.
In Archbold v Scully (1861) 9 HLC 360 at 383; 11 ER 769 at 778 Lord Wensleydale said:
I take it that where there is a Statute of Limitations, the objection of simple laches does not apply until the expiration of the time allowed by the statute. But acquiescence is a different thing; it means more than laches. If a party, who could object, lies by and knowingly permits another to incur an expense in doing an act under the belief that it would not be objected to, and so a kind of permission may be said to be given to another to alter his condition, he may be said to acquiesce; but the fact, of simply neglecting to enforce a claim for the period during which the law permits him to delay, without losing his right, I conceive cannot be any equitable bar.
Archbold has been accepted for the broad proposition that “[t]he defence of laches is, however, allowed only where there is no statutory bar. If there is a statutory bar operating either expressly or by way of analogy, the claimant is entitled to the full statutory period before his claim becomes unenforceable…”: Halsbury’s Laws of England (4th ed reissue) Volume 16(2) at [910] (Footnotes omitted).
In Gerace, Meagher JA (at [30]) queried whether this broad statement, applying as it did to circumstances where there was either express statutory provision or a provision applicable by analogy, should be accepted as correct. However, where there is express statutory provision the statement in Archbold would limit the availability of a defence to acquiescence in the sense of standing by when one’s rights are being violated.
As is pointed out in Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (4th ed) at [36-090] the term acquiescence is used confusingly in a number of different senses. “[The] word has a chameleon like quality which adds little besides confusion to an already vague area of equity doctrine”: Orr v Ford (1989) 167 CLR 316 at 337 per Deane J.
In the present case the sense in which there has been laches is that the plaintiffs have, while occasionally protesting their entitlement to payment, stood by and allowed both of the relevant actors who held evidence relevant to the claim to die before pursuing their claims in court. This would not be sufficient to amount to acquiescence in the sense of conduct by a person with knowledge of the acts of another person which encourages that other person reasonably to believe that his acts are accepted or not opposed (Deane J’s third category in Orr v Ford (1989) 167 CLR 316 at 338) but would certainly amount to delay with prejudice in the sense in Hughes v Schofield [1975] 1 NSWLR 8, Crago v McIntyre [1976] 1 NSWLR 729, and Orr v Ford (1989) 167 CLR 316 at 330.
The Limitation Act has a broader operation in relation to equitable claims than other Australian limitation statutes. Unlike, for example, the Limitation Act 1967 (NSW) (NSW Limitation Act), it contains no exclusions in relation to equitable claims. Unless other provisions of the Act, such as s 27, are engaged, the general limitation period in s 11 would apply because of the wide definition of “action” and “cause of action”: Paramavisam v Flynn (1998) 160 ALR 203 at 215. . However, s 6 of the Limitation Act specifically preserves the equitable jurisdiction to refuse relief “on the ground of acquiescence or otherwise”. Section 6 is in similar terms to s 9 of the New South Wales Limitation Act. That, in turn is based on s 29 of the Limitation Act 1929 (UK) (UK Limitation Act): New South Wales Law Reform Commission, First Report on the Limitation of Actions (LRC 3) (1967) at 101. However, it must be born in mind that the context of s 6 is different to that of both s 9 of the NSW Limitation Act and s 29 of the UK Limitation Act because the ACT Limitation Act covers all equitable claims, leaving no room for the doctrine of laches if the savings provision only applied to equitable claims or remedies where a limitation period was not provided for in the statute.
The statement from Halsbury’s Laws of England (3rd ed) vol 14 at [1181] discussed by Meagher JA in Gerace at [30] appears to be inconsistent with the statement in vol 24 at [332], which explains the operation of s 29 of the UK Limitation Act as follows:
The consequence of this saving is that in certain cases a claim to relief may be barred on the equitable grounds of acquiescence or laches, where time has not expired under any limitation enactment or where no such enactment is applicable. (footnotes omitted).
Justice Wilberforce’s statement in In re Pauling’s Settlement Trusts [1962] 1 WLR 86 at 115 that because there was an applicable statutory period of limitation “there is no room for the equitable doctrine of laches” was made without reference to the operation of s 29. Nor did the Court of Appeal in that case refer to s 29: [1964] 1 Ch 303, 353.
The fourth edition of Halsbury maintains the statement based on Archbold v Scully and Paulings Settlement Trusts (Volume 4 16(2) at [910]). The fifth edition entry in relation to limitation acts now appears to recognise that the savings provision in relation to the Limitation Act 1980 (UK), s 36(2), preserves a defence based on laches even where there is an applicable statutory limitation period but time has not expired under it, as well as in circumstances where no statutory limitation applies (vol 68 at [906]).
Having regard to the terms of s 6 of the Limitation Act, it would be an unusual outcome if the defence of laches was not available in circumstances where there was delay with prejudice but not acquiescence used in the sense referred to in the authorities. Why would the equitable principle be extinguished because the statute of limitation itself applies to all equitable claims but expressly provides that it does not affect the equitable principle? The apparent anomaly might have arisen from the very broad definition of “cause of action” in the Act which captures all equitable actions: Paramavisam at 215, when the working paper that preceded the enactment of the Limitation Ordinance 1985 contemplated an ordinance with only limited application to equitable claims: see Proposals for the Reform and Modernization of the Laws of Limitation in the Australian Capital Territory, Working Paper (Attorney-General’s Department, April 1984) at [11]-[13].
The potential for laches to be available where a limitation period exists but has not expired would be consistent, for example, with the application of laches in the circumstances illustrated by the line of cases following Clegg v Edmonson (1857) 8 De G M & G 787 at 808; 44 ER 593, where there was not acquiescence but a plaintiff had stood by while the defendant risked their assets on a risky venture: Lindsay Petroleum v Hurd (1874) 5 LRPC 221 at 240; Ernest v Vivian [1861-73] All ER Rep 1531 at 1533; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 679-680; Boyns v Lackey [1958] SR (NSW) 395 at 402-404; Re Jarvis (Deceased) Edge v Jarvis [1958] 2 All ER 336 at 341; Baburin v Baburin (No 2) [1991] 2 Qd R 240 at 258-260. That is because the injustice of permitting a defendant to conduct a risky venture and then making a claim for the benefits of that exertion after they have become apparent applies equally where there is a limitation period set by statute as where there is not.
In these circumstances there appears to me to be no reason in principle why the defence of laches would not be available notwithstanding the existence of a statute of limitation which might provide a longer period in which proceedings could be brought. Similarly, consistently with what Moore-Bick LJ said in P & O, it is a defence which should equally be available in circumstances where the delay has led to prejudice to the defendant even though the limitation statute may permit a longer period in cases of pure delay.
In those circumstances I proceed on the basis that the defence of laches is available notwithstanding the existence of a statutory limitation period if it is established that by reason of the delay in bringing proceedings the defendant has suffered prejudice which would make the granting of relief unjust.
For the purposes of the Barnes v Addy claim of knowing receipt or knowing assistance it would be essential to prove receipt of trust funds or participation in the joint disposal of those funds. Further, it would be essential to prove knowledge on the part of Margaret. For the purposes of the second limb of the rule in Barnes v Addy the knowledge requirement is that described in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [174]-[177].
Explanation for failure to bring proceedings
On the plaintiffs’ case David acted in breach of the trust created when he failed or refused to distribute half of the proceeds to the sale of Charlotte Street to the first and second plaintiff in 1985. On the plaintiffs’ case Margaret knowingly received trust property when money was paid from the proceeds of Charlotte Street in 1985 to assist in the acquisition of jointly owned property, namely 135 Jefferson Lane or alternatively knowingly assisted David in dissipating the trust fund though holidays, travel and living between 1985 and 1994.
In my view, in a Barnes v Addy claim, when considering a defence of laches it is relevant to take account not only of the period when a Barnes v Addy claim might have been brought but also of any additional period during which proceedings for the underlying breach of trust known to the plaintiffs might have been brought.
The plaintiffs were aware of the facts that would have entitled them to make a claim against their father in 1985 because they were told that the money made available by the sale of Charlotte Street would not be given to them as they were entitled under the alleged trust: see [61] and [63] above. So far as a Barnes v Addy claim against Margaret was concerned, no later than 2000 they were aware that the money had been received by Margaret through her ownership of joint assets or spent by David and Margaret, or both. In terms of knowledge they knew as much then as they did at the date of the trial. Any limitations on the knowledge were due to the failure to make enquiries as to what occurred during the lifetime of David or while on speaking terms with Margaret.
Jackie was asked in cross-examination why she did not bring this court case in 1985 when Charlotte Street was sold. After an answer which suggested that she did not bring the case because of lack of money, the transcript continues (T38-39):
Well, do you agree with me that you could have brought this court case back in 1985 when you learned Charlotte Street was sold?---No, I didn’t want to take a court case against my father and my stepmother.
...
And you could have brought it again at any time whilst your father was alive up to 1998, correct?---I chose not to.
Yes. You could have brought it again after Margaret inherited - or after Margaret survived your father. You could have brought the court case from 1998, correct?---Yes.
Right up until the time she died in 2011 you could have brought this court case, couldn’t you?---I could have.
In relation to the advice received from Bradley Allen as to whether there was any way she could get the money in the light of the fact that nothing was left to her in her father’s will, Jackie’s evidence was that she was told:
...it would be extremely costly and it would be extremely difficult, that Margaret would have it very well sewn up and that if I wanted money from Margaret, it would be better to approach her personally rather than try and do it legally because I would probably lose.
In re-examination Jackie further explained her decisions not to sue.
Why didn’t you sue after Charlotte Street had been sold?---My father at that stage was saying that he would definitely pay me at some stage. He was in a very new relationship with Margaret, which had a lot of social problems. The majority of his friends had stopped seeing him because he married so quickly after my mother died and his friends were their joint friends and I really didn’t want to make things more difficult for either of them.
At some later period whilst your father was alive before he died were there any other reasons why you didn’t sue him whilst he was alive?---Well dad was a very definite sort of person and when he said something usually he meant it, and he was very definite that he didn’t want us to talk about it and he would pay us and just like that. I mean he was our father so we took notice, even at that age.
And after your father had died why didn’t you [sue] Margaret?---Similarly, because of the names and being in Canberra and everyone being involved with that. And I also initially didn’t want to do anything again because I waited several months before – even after Margaret died – before I started (indistinct). I didn’t want to cause those disruptions in the family. There was also Matthew and Tookie who were good friends with my brother and me.
The reference to the names was later explained:
... because a lot of people in Canberra know both Margaret and my father. And it just seemed a very disrespectful thing to be doing.
Conclusions on laches
In the light of my conclusions as to the availability of the defence ([154] above), I am satisfied that the plaintiffs’ delay is capable of giving rise to a defence of laches if the delay has given rise to prejudice to the defendants. In the present case I am satisfied that there is very significant prejudice to the defendants in the conduct of the case arising out of the fact that the plaintiffs have chosen deliberately not to enforce what they now claim to be their entitlements during the lifetimes of David and Margaret. So far as the current defendants are concerned, namely, the executors representing the estate of Margaret, the relevant period of delay is the period since it is alleged Margaret either received the trust property or alternatively assisted David in what is alleged to be his “dishonest and fraudulent design of converting the trust property to his own use”. On the plaintiffs’ case that occurred through spending the proceeds on “holidays, overseas trips, cruises and living” or alternatively by using the trust property to purchase or repay the debt on the jointly owned property at 135 Jefferson Lane. Those actions occurred in 1985 or between 1985 and, at the latest, 1994 when David went into a nursing home.
If money was spent on “holidays, overseas trips, cruises and living” then it is in the period 1985 to 1994 that is of central importance, namely the period during which David was still able enough to participate in those activities as part of his and Margaret’s retirement. Thus, if there was a Barnes v Addy claim against Margaret it was available as a result of what occurred during this period. Both David and Margaret would have been in a position to explain what happened to the Charlotte Street money, David would have been in a position to explain what he had told Margaret about any arrangement (to use a neutral term) in relation to the proceeds of Charlotte Street and Margaret would have been in a position to explain what she understood to be the arrangement in relation to Charlotte Street and other financial dealings between David, Jackie and Pip.
If the money was invested in an asset jointly owned by David and Margaret in the form of 135 Jefferson Lane then that occurred in 1985. Both David and Margaret would have been in a position, prior to their deaths, to give evidence about whether in fact the money that paid for Jefferson Lane was money from Charlotte Street or whether that money was used elsewhere. Further, each would have been able to give evidence about the extent of knowledge of Margaret about the arrangement in relation to the proceeds of Charlotte Street.
So far as the position after David’s death is concerned, when there was no doubt that money had not been left in David’s will, the evidence of Margaret was still clearly available. That evidence would have been of very great significance to the defendants because of the scant documentary or other evidence available in relation to what actually occurred with the proceeds of the funds and Margaret’s state of knowledge as to the existence of a trust. Thus the prejudice to the defendants is greater than in a case where the involvement and knowledge of the defendant to a Barnes v Addy claim is clearly documented or otherwise demonstrated by the evidence.
In the present case the plaintiffs have at all times been adults legally capable of asserting their entitlements against their father and, if necessary, Margaret. I am not satisfied that the plaintiffs had more than a hope that their father had made provision for payment of the money in his will. Following his death they realised that they had little chance of achieving payment by court proceedings and chose instead to pursue payment personally with Margaret.
There may have been good social and personal reasons for not pursuing their father or Margaret during their lifetimes. The assertion of the plaintiffs’ claimed entitlements would have had significant consequences for their relationship with David and Margaret. They remained hopeful, at least while David was alive, that their father would comply with what they considered to be his obligation. However, none of these matters are a sufficient answer to a defence of laches. A party of full age and capacity that makes a conscious decision not to enforce his or her equitable entitlements must necessarily accept as part of that decision that there may be circumstances where their knowing delay may bar them from relief if, because of that delay, the other party suffers sufficient prejudice to make it inequitable to grant the relief sought. The death of the key players, whose evidence as to what occurred and whose state of mind is of central importance to the cause of action, is in my view sufficient to warrant refusal of relief, even if, on the truncated evidence available, it would now be otherwise justified.
Barnes v Addy claim
The requirements for the first and second limbs of what is referred to as the rule in Barnes v Addy are summarised by Croft J in Taverners J Pty Ltd v Saxo Bank A/S [2011] VSC 27 at [11]-[13] as follows:
11 In order to establish a claim based on “knowing receipt” within the first limb of Barnes v Addy, (1874) 9 Ch App 244. Taverners must prove that:
(a) the defendant was in receipt of “trust property”; and
(b) the defendant had “knowledge” that:
(i) the property received was “trust property”; and
(ii) circumstances attendant on the transfer of that property made the transfer a breach of trust or fiduciary duty.
(See Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285, [55]; Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41, [15]; cf [28]–[31] and Bell Group Ltd (in liq) v Westpac Banking Corporation (2008) 225 FLR 1, [4748], [8733].)
12 In Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, [177]. the High Court said that the species of knowledge required for a claim of “knowing assistance” (the second limb of Barnes v Addy (1874) 9 Ch App 244 at 251–2.) was any of the first four categories propounded in Baden v Société Générale pour Favoriser le Dévélopment du Commerce et de l’industrie en France SA [1993] 1 WLR 509 at 575–6, namely:
(i) actual knowledge;
(ii) wilfully shutting one’s eyes to the obvious;
(iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make;
(iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man.
13 The fifth category propounded in Baden was “knowledge of circumstances which would put an honest an reasonable man on inquiry”. It has, however, been reaffirmed that “knowledge” within the fifth category will not suffice: see Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 412 (Stephen J). This means that, as reaffirmed by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 163–164 [176]–[178] “all that is necessary is that the known facts would have communicated to a reasonable person a general understanding that fraud, breach of trust or fiduciary duty had occurred”: see Young, Croft and Smith, On Equity (Law Book Co, 2009) [6.910], at p 459. The prevailing view in Australia (both before and after Farah v Say-Dee) is that the same Baden four categories are required for a claim in “knowing receipt”: Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 at 85 and 105; Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191 at 209; Spangaro, [60]; Bell Group, [4748], [8733]; Imobilari v Opes, [27]; Chameleon Mining NL v Murchison Metals Ltd [2010] FCA 1129, [132]. (footnotes incorporated as text)
It is obviously an essential precondition for the availability of a Barnes v Addy claim that there is indeed trust property. In this case that is said to have arisen because the agreement reached at the family conference gave rise to a severance of the joint tenancy and constituted upon Myra’s death, a trust in favour of the plaintiffs. A joint tenancy may be severed in equity by agreement between all of the joint tenants: Butt, Land Law (6th ed, 2010) at [1478]; Williams v Hensman (1861) 1 J&H 546; 70 ER 862 at 868. It is sufficient that by agreement between the parties consider their interests to be distinct and hence inconsistent with a right of survivorship: Butt at [1479]. The critical issues are whether there was an intention to sever the joint tenancy and to create a trust. The alternative to severance and the establishment of a trust is that there was intended to be an understanding as to how David would deal with the property, either upon sale or in his will, but that there was no intention of the parties to make a legally enforceable arrangement.
This issue of intention is very sensitive to the subtleties of the facts. On the evidence before the Court I would have found there was a severance and the establishment of a trust. However, that finding only arises because the evidence is as limited as it is. The absence of evidence is affected by both the failure of the plaintiffs to prosecute their claim in a timely manner and the deaths of David and Margaret. The issue of delay is dealt with in relation to the defences based on the Limitation Act and laches.
For the purposes of addressing the Barnes v Addy claim I have assumed that the joint tenancy was severed and the trust alleged by the plaintiff was established.
Margaret’s knowledge
The plaintiffs claim under the first limb of Barnes v Addy – the knowing receipt claim ‑ relates to the proceeds of the Charlotte Street property sale. It is alleged that the monies from the Charlotte Street sale were used to acquire the property at 135 Jefferson Lane by being used to discharge the loan secured by the mortgage which was shown as being discharged in 1985. As will be seen from the extract above, for the purposes of the knowing receipt claim it would be necessary for the plaintiffs to prove that Margaret had knowledge that:
(a)the property received was “trust property”; and
(b)circumstances attendant on the transfer of that property made the transfer a breach of trust or fiduciary duty.
There is no direct evidence that the proceeds of the sale of the Charlotte Street property were used to acquire the property at 135 Jefferson Lane. While the inference that the plaintiffs asked to be drawn from the discharge of the mortgage in August 1985 is an inference that is open, it is not possible to say, based on the scant evidence that that is what occurred. The evidence of Patricia Stevenson as to what Margaret said to her in 1986 is not consistent with the use of the proceeds of Charlotte Street to fund the purchase of the property at 135 Jefferson Lane. Similarly, the “Lets get the facts straight document” indicates that it was expended not on real property but on “holidays, overseas trips, cruises and living”.
Even if the plaintiffs had proven that the proceeds were invested in 135 Jefferson Lane they have failed to prove that Margaret was aware at that time, or indeed subsequently, that the property was trust property and that it was transferred to an asset jointly owned by her in circumstances that amounted to a breach of trust.
The plaintiffs submitted that the Court should find that Margaret knew of the existence and terms of the trust because:
(a)according to Jackie, David told Jackie that he had discussed it with Margaret and “organised that” with her;
(b)according to Jackie, Margaret acknowledged to her that she would pay the money from the sale of the Charlotte Street property; and
(c)according to Patricia, by 1985 Margaret knew that the undertaking had been given.
The conversation giving rise to paragraph (a) was that in August 1998, shortly before David’s death, when he was extremely old and frail. It is not clear at all what David was meaning when he said he had “organised” it with Margaret. The objective evidence of his 1994 will certainly does not disclose that anything was organised and there is there no other evidence about what David discussed or organised with Margaret.
In relation to (b) above, I have indicated above that I do not accept that what is identified as Margaret’s acknowledgement of the existence and terms of the trust is sufficient to indicate knowledge of the existence and terms of the trust. I have not accepted Jackie’s evidence as to what occurred at the meeting in December 1998 in so far as it involved a statement that she would get paid out upon sale of the property at 109 Jefferson Lane, Palm Beach. Further, even if Jackie’s apparently precise recollection of what occurred at the cafe in Kingston is accepted, the only statement is, “I can’t pay you at the moment” rather than an acknowledgement of the existence and terms of the trust.
In relation to (c), the evidence of Patricia is consistent with Margaret knowing of some arrangement, but one which, much to her dissatisfaction, had been carried out by the payment of money to Jackie and Pip. It does not provide evidence of any particular knowledge of a trust or of its terms. There is no evidence that David considered that he held the proceeds of the Charlotte Street property subject to a trust as opposed to some less formal intrafamilial understanding. There is no evidence that David communicated the existence of any trust or binding obligation on his part to Margaret. It is likely, having regard to Patricia’s evidence, that by 1986 David did communicate that there was an expectation on the part of the plaintiffs that they would get the benefit of half the value of the Charlotte Street property but the evidence is not sufficient to establish that he communicated to Margaret that he was under a legally enforceable obligation to do so. Further, in so far as Margaret knew, the evidence given by Patricia of her knowledge is combined with knowledge that in fact both plaintiffs had been paid. It is not possible to divorce the evidence of knowledge of the arrangement with Myra from the understanding that the money had in fact been paid. It is more likely that it was explained to Margaret as a non-specific intrafamilial arrangement or expectation rather than a legally enforceable obligation. Therefore, I am not satisfied that Margaret was aware that the transfer of funds from the sale of Charlotte Street and their investment in an asset jointly owned by her was a transfer of trust property and a transfer that occurred in breach of trust. Nor am I satisfied that she wilfully shut her eyes to the obvious, wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make or had knowledge of circumstances which would indicate the facts to an honest and reasonable person.
The plaintiffs’ alternative claim is that the money was not in fact invested in 135 Jefferson Lane but instead was retained by David and spent, with the assistance of Margaret, on “holidays, overseas trips, cruises and living”. The knowledge of Margaret must be of David’s dishonest and fraudulent design, in this case alleged to be his dishonest appropriation of the trust fund created upon the sale of Charlotte Street for his own use. Specifically, the knowledge must be of the fact that the funds were subject to a trust for the plaintiffs, with the consequence that use of them for his own purposes was a breach of trust. I am not satisfied that Margaret had any one of the four categories of knowledge required. It has not been demonstrated that Margaret had actual knowledge that any money was held on trust. In relation to the three remaining categories I am not satisfied that they are made out. Margaret did know that the plaintiffs thought they should be paid some of the proceeds from the Charlotte Street property. The fact that they were David’s children and claimed to be entitled to the proceeds of a family home was not enough to demonstrate the existence of a trust, make it obvious to a person who was not wilfully blind, require her to make inquiries or give her knowledge of circumstances that would indicate the facts to an honest and reasonable person. It is more likely that she considered financial matters between David and his children as largely between him and them and, being intrafamilial arrangements, not giving rise to any legal obligation as opposed to expectations. It was legitimately open to her to consider that David’s relations to his children were matters for him.
Therefore in my view both of the claims based on the decision in Barnes v Addy identified in the ASOC should fail.
Orders
For the above reasons it is appropriate to refuse leave to the plaintiffs to amend their claim and to enter judgment for the defendant. The normal rule is that costs would follow the event. I will make that order subject to an entitlement for either party to be heard on costs if they wish.
Therefore, the orders of the Court are:
1. The application in proceedings dated 25 March 2014 is dismissed.
2. Judgment be entered for the defendants.
3. The plaintiffs are to pay the defendants’ costs.
4. Order 3 is stayed for a period of 14 days and does not take effect if within that period either party notifies my associate by email that it wishes to be heard in relation to costs.
| I certify that the preceding one-hundred-and-eighty-four [184] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Master Mossop. Associate: Date: 10 December 2014 |
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Amendments
10 December 2014 Replace “Sir Barnes Peacock” with “Lord Selborne” Paragraphs: [139]
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