Munro v Kelly
[2024] SADC 147
•14 November 2024
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
MUNRO v KELLY
[2024] SADC 147
Judgment of his Honour Judge Slattery
14 November 2024
DEBT RECOVERY
INTERFERENCE WITH PROPERTY - INTERFERENCE WITH GOODS - CONVERSION - REMEDIES - ACTION FOR CONVERSION - DAMAGES - GENERALLY
CONTRACTS - PARTICULAR PARTIES - RECOVERY OF MONEY AND PROPERTY
In 2016, the applicant Ms Munro, commenced a relationship with Mr Shane Kelly, the father of the respondent. At the time, Shane Kelly and the respondent were conducting a farming enterprise upon several properties situate in the area of Wallaroo in the northern Yorke Peninsula, South Australia. The respondent was largely in charge of the farming operation as Shane Kelly had taken a fulltime employment in Adelaide in order to supplement his farming income. The respondent was also employed part-time in a fire brigade in Wallaroo in order to supplement his farming income. It was necessary to supplement the farming income because the farms were in marginal country, they were not profitable and the farming enterprise was, by 2016-2017, very significantly undercapitalised for plant, machinery, farm fixtures and in the operation of the farm generally.
The applicant had previously been married to a farmer, she had been intensively involved in the operation of a multi-faceted broad acre farming enterprise and was very familiar with successful farming practices and the requirements of farming. In the period between 2016 and 2019, the matrimonial property proceedings between the applicant and her former husband were resolved and the applicant became entitled to receive a settlement totalling $4,200,000 payable in several tranches.
At the same time, discussions occurred between the applicant and the respondent about the lack of income generated by the respondent's whole farming enterprise, its shortage of capital and its inability or failure to maintain and where necessary to replace plant, equipment, and fixtures of that enterprise.
Following those discussions, the applicant agreed to provide loan funds to be used by the respondent to pay for farming expenses incurred from day to day including for fuel, machinery parts and other necessities in order to allow the farming enterprise to continue. Those discussions then progressed to a suggestion by the applicant that ‘bobby’ calves be purchased from dairy farmers to then be fed to maturity and sold. The loans made by the applicant in connection with this venture were to be repaid upon sale of the cattle at maturity. Any profit was to be shared equally with the applicant. The suggestion by the applicant to commence the bobby calves venture was agreed upon and during the course of that enterprise the applicant agreed to make a series of further loans to the respondent to purchase plant and machinery and to construct fixtures upon the farming land. The respondent requested the applicant to make these loans for those purposes.
At the same time, the respondent revived his hay contracting business by using a harvester and rake purchased by the applicant. He also operated a contract harvesting business using the same harvester, rake, header comb and transport trailers purchased by the applicant. That same harvester, header comb and rake were used by the respondent in his own farming business.
The applicant then loaned funds to the respondent to purchase field bins, chaser bins, a roller and other equipment in connection with his hay carting and contract harvesting business.
In 2020, the respondent borrowed funds from the applicant to construct machinery storage sheds and an accommodation shed for himself upon one of the farm properties. The applicant and the respondent agreed that the loans made by the applicant would attract an interest expense. The applicant contends that the agreed rate of interest was 4% and the respondent contends that the agreed rate of interest was 3.5%. Notwithstanding, the applicant has not been paid any interest by the respondent nor has the applicant ever been paid any hire fee for the use of the harvester, the header comb, the rake, the trailers and associated equipment.
The relationship between Shane Kelly and the applicant ended in 2020 and soon afterwards, the applicant returned to Victoria to live and she has lived there ever since. The applicant has not received repayment of any of the loans made to the respondent and has not received any of the plant and equipment owned by her. The respondent contends that the applicant is estopped from claiming repayment of the loans connected with the calves venture as she effectively waived the requirement for the loans and the profits to be paid to her. Waiver is not pleaded by the respondent but his evidence on that topic was led without objection.
The applicant contends that the loans made by her are all repayable at the latest within three years after the making of those loans and all of them are now repayable. The respondent contends that the machinery shed loans are repayable only after ten or more years from the time of those loans and that the loans in connection with the fixtures upon the land are repayable only by the owner of the land. The respondent admits that the harvester, the header comb, the rake, and the trailers belong to the applicant and that, at the latest, the applicant demanded the return of those items by a solicitor’s letter dated 22 September 2022. Those items were not returned by the respondent. No hiring fee or its equivalent has been paid by the respondent and the applicant claims that the respondent has converted those goods to the use of the applicant. The respondent contends that the preliminary loans for the farm expenses are not repayable before the expiration of ten years.
Held:
1.The original agreement for the applicant to provide loans to the respondent to purchase ‘bobby’ calves required the respondent to repay those loans at the point of sale of the calves and that any residual profit was to be equally shared. Although the calves were sold and generated some profit the applicant informed the respondent that she would not insist upon the fulfilment by him of her strict legal requirements under that agreement and the applicant has effectively waived the benefit of that contract.
2.All other loans made by the applicant to the respondent were personal to the respondent and the obligation to make repayment of those loans falls upon him.
3.The agreements on the loans did not include a ten-year repayment term or any term about repayment and those loans are repayable upon demand.
4.The applicant has demanded but has not received the repayment of her loans to the respondent in connection with the preliminary farm expenses, the farming plant and equipment, the sheds or any other expenses in respect of which loans were made by the applicant to the respondent.
5.The loans made by the applicant in connection with the construction of the machinery sheds and the accommodation shed was personal to the respondent and the obligation to make repayment of those loans falls upon the respondent.
6.The respondent has failed or refused to make repayment of the machinery shed and accommodation shed loans.
7.The respondent’s failure or refusal to return to the applicant the harvester, the header comb, the rake and the trailers belonging to the applicant constitute a conversion of those items by the respondent.
8.On the evidence, the court is not in a position where it may make an assessment of the value of each item of equipment converted by the respondent at the date of the wrong committed by the respondent.
9.The applicant is entitled to an order for the immediate return of each item converted by the respondent.
10.The applicant is entitled to an award of damages equivalent to the appropriate hiring fees payable in respect of the use of the converted items from the date of conversion to date.
11. The court will hear the parties further on the question of damages.
12.The respondent is required to pay interest to the applicant on damages assessed at the rate of 4 % per annum.
13.The court will hear the parties further in relation to the proper calculation of interest, damages, costs and other consequential orders.
Uniform Civil Rules 2020 (SA), referred to.
JW Carter: Contract law in Australia (6th Edition (LexisNexus Butterworths) paragraph 7-26; Laaratt v Bankers and Traders Insurance Co Ltd [1941] 41 SR (NSW) 215; Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87; Wade Sawmill v Colenden [2007] QCA 455; JE Hall Limited v Barclay [1937] 3 All ER 620; Strand Electric and Engineering Co Ltd v Brisford Entertainments Limited [1952] 2 QB 246, CA; Sadcas Pty Ltd v Business and Professional Finance Pty Ltd [2011] NSW CA 267; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd 149 FCR 395; Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305; Commonwealth v Verwayen (1990) 170 CLR 394; Freshmark Ltd v Mercantile Mutual Insurance (Aust) Ltd [1994] 2 Qd R 390; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; S P Hywood Pty Ltd v Standard Chartered Bank Ltd SCGRG 92/678, s3733, considered.
MUNRO v KELLY
[2024] SADC 147
The applicant’s claim in this action falls generally into two parts. The first part of the claim is for repayment of funds loaned to the respondent under agreements made between October 2017 and April 2020. The second part is for declarations in respect of the ownership of equipment purchased by the applicant, possession of which was given to the respondent and for damages for conversion. The applicant claims for immediate repayment of the loans made by her to the respondent and for the return of plant or equipment that she alleges that she purchased or for damages for conversion of that plant and equipment.
In relation to the first part of the claim, the loans made available by the applicant to the respondent fall into two main tranches. The first is connected with the investment in ‘bobby’ calves from dairy farmers mainly in the Barossa Valley, the feeding and raising of those calves and their intended sale at a profit once they reached sufficient maturity.
The second tranche concerns loans for expenditure upon plant and equipment and fixtures for use in the respondent’s farming business. In due course I will deal separately with these two tranches of this part of the claims of the applicant. The respondent contends that the calves venture was not profitable and that the applicant waived any right that she had to be repaid from the profits because she told the respondent that she did not need to be repaid. It is contended that, in effect, she elected not to be paid the debt owing to her. This, it is said, must be judged in the context of the intra familial nature of this relationship. At the time the applicant was in a defacto relationship with the respondent’s father, Shane (Shane).
The respondent denies that any of the loans made to him by the applicant (and therefore at least to that extent such loans are admitted) are currently repayable. He claims that no loans are due to be repaid and they only become payable not before the expiration of ten years from the date of the making of the loans. He contends that these are the terms of the loan agreements made with the applicant. The respondent also denies that he holds and is refusing to return any property owned by the applicant. He contends that the transactions were loans and that the applicant did not obtain any proprietary or other interest in any plant which he purchased using funds loaned by the applicant. He also contends that some of the funds provided by the applicant were used to construct fixtures upon land that did not belong to him, and there can be no claim for conversion of those assets at the suit of the applicant.
The applicant claims that the agreements made with the respondent evolved over a period of time. The availability of the funds of the applicant was connected with a substantial settlement in favour of the applicant with her former husband in the Family Court. That settlement was connected with a large rural holding in southeastern South Australia and then in the Wimmera region in Victoria. The applicant received a very significant amount of money from that settlement. This was the source of funds that she used in her dealings with the respondent.
In 2016-2017 the applicant commenced a relationship with Shane, the father of the respondent. There is some uncertainty about when that relationship commenced as there are a number of events, some extraordinarily tragic, that have tended to obscure and make crepuscular the facts as they have developed over time. Another aspect of this action about which there is some evidence is the nature of farming enterprise conducted on the farms operated by the Kelly family.
I am satisfied on the whole of the evidence that an inference clearly exists that the family farms at Wallaroo Plains have not been consistently profitable enterprises. They are situate in what is commonly described as marginal country. I am satisfied that the Court has before it sufficient evidence upon which a number of inferences may be drawn on the balance of probabilities. These farms are of limited acreage; they are situate in areas of fluctuating rainfall, they have not been completely financially successful (apart from in years of above average rainfall); and, as a result, they are under capitalised for the maintenance and in the usual course of a farming business, the replacement of farming machinery, implements and fixtures.
The farm property is disposed over a number of blocks. These are situated at 57 Kelly Road in the area commonly called Point Riley and at 10218 Spencer Highway in the area commonly known as Wallaroo Plains. There was originally a 100 acre block at the Wallaroo/Kadina Road near to the Wallaroo township. Much of this block has been sold and only about 12 acres, or about 5 hectares remains. This is not large enough for commercial use apart from, perhaps a feed lot or something similar. I am satisfied that the farming operation operated upon these properties had not been sufficiently profitable for some period of time apart from very good rainfall years such as 2016. The evidence discloses that the proprietors of the businesses conducted upon these properties both, separately, worked for salaries. Shane worked in the Department of Agriculture in Adelaide. His son, the respondent Ryan Kelly, worked part time in the local fire brigade and this occupation provided supplementary income. His principal occupation was as a farmer.
There are also a number of other obvious evidentiary inferences that arise on the balance of probabilities. The properties were not sufficiently large enough or productive enough to financially sustain a proprietor or the family of the proprietor. The second, which on the evidence I am satisfied follows the first with equal strength, is that such commercial farming enterprises suffer the usual consequences of a failure to generate sufficient income and so capital: there is a failure to either replace or renew (and usually both) plant, machinery and farm structures which reduces the efficiency of the enterprise. As a further result, these deteriorate at a significant rate over time. The direct evidence, and all of the inferences arising therefrom satisfy me that this was the position with the farms operated by the family of the respondent from and after 2017 and especially as of 2019. This finding may be made despite the very good year experienced because of the plentiful rainfall in 2016. It is necessary for this background to be understood in order to properly comprehend the description and the effect of the evidence which follows and the decision that I have made.
The applicant’s claim, in large part succeeds. I find that she is the owner of the harvester, header comb, rake, drop deck trailer and associated equipment all of which is in the possession of the respondent and which he has refused to return.
The loans made by the applicant were all private loans made to the respondent personally. These loans are immediately repayable and attract an interest rate of four percent per annum.
The applicant is not entitled to claim repayment of the loans and the expenses she paid in connection with the ‘bobby’ calves venture. She has elected not to claim repayment of those funds from trading profits connected with those calves and she is bound by that election.
I turn to the facts of this action. The applicant Ms Gai Munro (Ms Munro) is 67 years of age. Prior to meeting Shane, she had been married for 38 years and lived with her former husband in Tintinara and then in the Wimmera area in Victoria. These were grain and livestock properties, and Ms Munro was involved in many aspects of the operation of these properties. Ms Munro commenced living with Shane at the farm at 57 Kelly Road, Wallaroo Plains after September 2016. The respondent Ryan Kelly is the son of Shane and at the commencement of her relationship with Shane, Ryan Kelly was about 26 or 27 years old. Prior to that time Ryan Kelly had operated the farm with his grandfather and during this time, Shane was employed in Adelaide working for the Department of Agriculture. Some six years after Shane’s father died after an accident upon one of the farms, Shane moved back to live at the farm. Prior to that time, Ryan Kelly had operated the farm, but he was very badly affected by his grandfather’s death.
At the time that Shane returned to the property, he and Ms Munro had commenced a relationship. Shane and Ms Munro moved in to live together and at that time Ryan Kelly was living in a different home on a property called Alford Road, with his girlfriend. At the time Ms Munro commenced living at the property, it comprised about 1500 acres. At that time the usual routine was for Ryan Kelly to attend the Kelly Road property every morning to have breakfast and to feed his dogs.
Ms Munro was aware from the outset that Shane and Ryan Kelly were having financial difficulties in relation to the farm. There had been three years of drought which put significant pressure on the farming enterprise. Following the death of Shane’s father, the farm financier Rabobank reacted to the poor returns from the property by raising applicable interest rates on its loans and it restricted the loans it would make for working capital.
By the time that Ms Munro had commenced her relationship with Shane both of them had been separated from their respective spouses for about two years. When Shane separated from his wife Helen, the bank accounts of the couple had been frozen and, in their property settlement it was arranged that Ryan Kelly was to be given the whole farm.
It became clear to Ms Munro from very early times, that if the farm was to flourish, it was necessary to think of alternate ways to raise income. This reflected the early understanding that she gained about the marginal nature of the farm and its urgent need to generate income and so, further capital. In her life involved on the farms in Tintinara and in the Wimmera, she had some involvement with stock. She made a suggestion that the farm raise some ‘bobby’ calves which could be purchased from a dairy farmer and raised in a feed lot. She raised this idea first with Shane and then discussed it with Ryan Kelly. Shane did not give evidence to contradict this evidence. From the outset it would be necessary for her to fund the purchases of these calves. The intention was that they would be fed and raised to maturity and sold at a profit.
This required expenditure upon the purchase of calves, milk, stock feed, fences, gates, and other infrastructure necessary for raising cattle (which require much heavier gauge yarding and fences than sheep). All of this was, in the main, paid for by Ms Munro. I am satisfied that Ryan Kelly agreed to incur all of those costs with the intention that after Ms Munro was repaid her loans, he would share the profit from this venture. On occasion Ryan Kelly paid some expenses associated with this undertaking. Overall, this was an enterprise funded by Ms Munro.
The first lot of bobby calves were purchased in 2017, a week or so after the first discussion about the idea. These were paid for by Ms Munro as she was well aware of the poor financial situation of Shane and Ryan Kelly. This was exacerbated by Shane’s difficulties in his matrimonial settlement with his former wife.
Ms Munro proposed to Ryan Kelly that she lend him money to purchase the calves. He agreed to the proposition only on the basis that any money that she lent him would be repaid when the fight between he and Shane with Rabobank was resolved. She said that these discussions occurred daily but the impression I formed was that the agreement was made once and the regular discussions were about whether or not and if so when to purchase the ‘bobby’ calves. Ms Munro said she told Ryan Kelly that she would only incur the cost until such time as he could repay her loan. Her understanding from what she was told by Ryan Kelly, that was to be at the time when the Rabobank fight was over.[1] She also had ongoing discussions with Ryan Kelly about plant and equipment and machinery for the properties. For example, some of these occurred in October 2019 when she had a discussion with Ryan Kelly about buying a tip trailer and, later in 2020, there was a discussion about purchasing a 44-foot drop-deck trailer for the contracting business to be conducted using a harvester, header comb and rake purchased by Ms Munro.[2]
[1] T32.2-T32.30.
[2] T43.16.
Ms Munro also gave evidence that the property settlement from her matrimonial dispute with her former husband was to be paid over a period of time. The first payment she received was $150,000 sometime in or about November 2019.[3] It was at that time that she first had discussions with Ryan Kelly about lending money to him for the purposes of operating the farm until the Rabobank dispute was over and until the business got back on its feet. This was because she now commenced receiving capital payments from her former husband and that these would be ongoing over a period of time.
[3] T43.27; T44.8.
Ms Munro gave evidence that the person who came up with the proposal that she should lend money to the business was Ryan Kelly.[4] This was then discussed many times on different occasions between Ms Munro and Ryan Kelly. In her evidence, Ms Munro said that on her suggestion, an appointment was made for Ryan Kelly to see her bank, the Westpac bank in Adelaide to ascertain if Westpac would refinance the Rabobank debt. Ryan Kelly denied attending any meeting with the Westpac Bank in Adelaide. Ms Munro gave evidence that she attended such a meeting in King William Street with Shane and Ryan Kelly, and this occurred at about the same time as the final divorce for Shane’s marriage. Ms Munro had a clear memory that Westpac said that they would not lend any money to the business until Ryan Kelly had three years’ worth of farming records under his management. He said he did attend a meeting at the Westpac branch at Norwood. I will deal later with that evidence. The importance of this evidence is that it fits within the narrative of Ms Munro participating in the business of the farm. She was obviously very keen to immerse herself in that enterprise. And she was very experienced generally with farming enterprises.
[4] T44.38.
Ms Munro gave evidence that Exhibit A1 contains a number of entries at a number of pages connected with the bank statements that commence at page 32 of Exhibit A1. She was taken to particular pages and gave evidence in relation to a number of items on those pages. As some of this evidence became controversial, it is necessary that I summarise it in the form of a summary chart. That chart is set out below. My intention here is to identify the page number of Exhibit A1, the amount of the transaction and a summary of the evidence given by Ms Munro about that expenditure. Some of this evidence was not controversial and some was subject to challenge.
Transactions
Page # of A1 Amount Evidence 33 $501.20 Ms Munro gave evidence that this transaction, described as AW Vater & Co, Kadina, was for milk powder.
The milk powder is for the calves. The calves have to be raised on milk for the first few months and then they are fed grain (T26.31)33 $401.00 This payment would have likely been for the calves.
Ms Munro gave evidence that they often used to buy three to six calves at a time. They bought from the Nietschkes from up near Tanunda. (T27.6)
Usually they would pay cash for the calves. Ms Munro would go to the bank and get the money out and give it to Ryan Kelly or Shane, whoever was going to pick up the calves. (T28.15)35 $222.20 Ms Munro said she bought stock drench at Tintinara because they didn't have any at Kadina that week. She was visiting her mother at Tintinara and bought it from her friend there a Landmark agent.
The drench was for the calves. (T28.27)37 $467.50 This was a transaction for more milk and incidentals to do with calves. She bought teats and things to feed the milk to the calves. (T28.35) 37 $1,402.50 Transaction for milk and innoculations. (T29.1) 39 $500.00 ANZ Banking transfer to J.T. & A.M. Nietschke for the calves.
Occasionally Ms Munro made bank transfers, rather than cash. This was usually for larger amounts. (T29.12)41 $346.50 Transaction to AW Vater & Co for the calves (T29.15) 41 $705.80 Transaction to BP Wallaroo to fill the fuel trailer for the tractors and header on the farm. This transaction was likely for the header. (T29.24)
Ms Munro said that Ryan Kelly usually asked her to pay for the fuel and other farm costs. In the mornings he would bring her accounts to pay and ask her to pay for things; each morning was different matters connected to the farm. She often used to go and fill the fuel trailer herself. (T30.34)
This commenced about a month after she moved in. (T30.38)41 $70.00 The $70 for B & A Hines Ltd, Kadina would have been a personal purchase for Ryan Kelly. Ms Munro believes it was a sports store.
Ms Munro explained that she would give Ryan Kelly her card sometimes. Sometimes she paid for their groceries or rent. (T29.35)42 $397.50 Another milk payment to Vater & Co Kadina. (T32.38) 43 $209.00 Same as for number 42. (T33.10) 43 $313.50 Same as for number 42 and 43. (T33.13) 46 $557.00 Another calf payment to the Nietschkes. (T33.23) 47 $275.50 Milk or supply payment for the calves. (T33.34) 50 $199.15 Payment for farm fuel trailer. (T34.9) 50 $500.00 Payment to Vater & Co for milk. (T34.14) 50 $882.15 Payment for innoculations for the calves. (T34.19) 51 $231.00 Payment to AW Varter and Co for milk. (T34.23) 58 $495.00 Payment to AGL Eastwood; farm power for the workshop. (T34.27) 58 $600.00 Payment for the vets; some of the calves got sick and died and the vets did an autopsy on the calves. (T34.38) 59 $402.03 Payment for fuel for the farm trailer. (T35.8) 60 $104.29 Payment to AGL for the farm power bill. (35.17) 60 $259.00 Payment for Neptune blanket, South Hurstville. It is a special blanket for anxiety, PTSD. (T35.21) 61 $775.86 This is a payment to Diesel Exhaust Systems, Wingfield for part of the truck. Diesel Exhaust Systems are a specialist in commercial vehicles and diesel. (T35.33) 65 $978.17 Payment to Harry’s Station at Wallaroo for the fuel trailer. (T35.37) 65 $79.30 Payment to Emmetts, Kadina; for the purchase of tractor parts, probably fuel filters. (T36.5) 65 $275.00 Payment to Larwoods. Ms Munro said that she did not make this payment. Larwoods sell farm equipment and farm parts. (T37.7) 65 $247.59 Payment to Seaside Veterinary Wallaroo for the farm dogs. (T37.15) 66 $590.66 Fuel trailer payment. (37.21) 66 $115.50 Payment to AW Vater & Co for milk for calves. (T37.28) 68 $750.80 Payment for fuel. (T37.31) 70 $116.70 Payment to AGL for the power. (T37.33) 70 $306.60 Payment to NYPCC. Ms Munro said that this was a farm transaction but does not know what it would be for. She did not make the payment. (T38.7) 73 $126.50 Payment for calf milk. (T38.11) 75 $500.00 Internet banking transfer to Ryan Kelly. Ms Munro does not have any recollection of what that would be for. She said that she used to send Ryan Kelly money if he needed to pay for something. It is likely for farm items as he did not buy many personal items. (T38.22) 76 $250.00 Transfer for the calves. (T39.8) 77 $850.00 This payment to Ryan Kelly was farm related. (T39.17) 80 $101.53 This payment to CGU Insurance may have been for one of the farm trailers.
She paid for insurance for the farm trailers when asked by Ryan Kelly. (T42.20)80 $162.08 Payment to AGL or the power. (T42.32) 80 $231.50 Payment to AW Vater & Co for milk for calves. (T43.1) 80 $200.00 Payment to Ryan Kelly for the calves. (T43.4) 86 $115.50 Payment to AW Vater & Co for milk for calves. (T43.8) 156 $2,856 Payment to Ryan Kelly. Ms Munro made this payment. (T51.7) 260 $3,000 Payment to Ryan Kelly. Ms Munro cannot remember this payment. (T51.17) 261 $75,000 Payment for purchase of a header. (T51.10) 261 $34,568 This was a payment for a Landmark, account owed by Shane and Ryan Kelly. (T51.8)
Ryan Kelly gave Ms Munro the invoices and she went into the store and paid them with a card. (T67.23)160 $1000 Internet transfer to Ryan Kelly, possibly for the calves. (T55.9) 165 $5000 Internet transfer to Ryan Kelly, possibly for the sheds. (T55.22) Ms Munro was unsure exactly what the money was for. (T56.15) 165 $210.84 Payment for the game licensing unit, Orange. Ms Munro gave evidence that she is not sure what this would be but may possibly be a payment for Shane. (T55.37) 166 $5,000 Transfer to Ryan Kelly. This money must have been advanced after the agreement. (T59.6)
This was likely before Ms Munro went snow skiing at Swifts Creek, due to the other payments at around that time. (T59.18)
Ms Munro lives at Swifts Creek now. (T59.33)167 $1,899 Payment to Oricom International was for two CB radios for farm use and a baby monitor for Ryan Kelly to gift to his friends. (T60.20) 168 $5,000 Payments made to Ryan Kelly pursant to the loan arrangements. (T69.8) 169 $6,000 Payment to Ryan Kelly pursuant to the loan arrangement. (T70.10) 170 $9,474
Ms Munro gave evidence that Ryan Kelly asked her if she could purchase three sheds for the farm, one main big shed for housing the big machinery and the other one was for him to live in and there was another smaller shed. (T71.38)
The payment of $9,474 to Spanlift Australia Pty Ltd was for the shed. Only a portion was paid at a time for the sheds. (T72.19)170 $85,260 This payment was for a bulk tipper trailer to carry grain and tip it out. (T74.37) Ryan Kelly did the deal with the company, but Tabu Soro Farming, this was the farming business name of Ryan Kelly which was on the receipt. 170 $66,510 This payment was to Alan Wilson; Ms Munro said that Ryan Kelly asked her to pay for this amount. This was a payment to Alan on behalf of Ryan Kelly. (T75.2) 170 $29,160 This was a payment to Dohnt Contracting for contract harvesting. When the header was broken down, Phillip Dohnt did two harvests for them. This was the payment. (T76.9) 170 $2,000 This amount was paid to GJ East Kadina for an account, and Ryan Kelly asked that Ms Munro pay for this. (T76.38) 170 $4,500 Transfer to Ryan Kelly as part of the ongoing arrangement. (T77.11) 170 $3,438.45 Payment to Freightmaster for the registration of the trailer. (T77.14) 170 $9,674.20 Payment for fuel to Reliable Petroleum Pty Ltd. (T77.22) This is a slightly different vendor because Ryan Kelly went someone in Kadina to purchase fuel. It was fuel bought in bulk for cropping. (T78.16) 171 $500 Payment to Wallaroo Service Station for the fuel trailer. (T79.3) 171 $5,550 Payment for the Rota-Forma shed, the third shed. (T79.22) 171 $9,000 Payment to Ryan Kelly pursuant to the same arrangement. (T79.25) 171 $5000 Payment to Freight Master Trailers. (T79.33) 171 $400 Payment to Wallaroo service station for farm fuel, diesel fuel. (T80.14) 171 $39,000 This withdrawal from the Kadina branch is most likely for the sheds, but Ms Munro is not quite sure. (T80.26) 172 $10,000 Payment to Ryan Kelly. This seems to relate to the payment on page 337 of A1 is for a heavy roller to roll paddocks. Ryan Kelly asked Ms Munro for the money as part of the farming loan. (T81.13) This $10,000 payment to Ryan Kelly is most likely for that. (T81.17) 172 $50,000 This withdrawal from the Kadina branch is likely to be for field bins which were $25,000 each with a $10 fee for the bank cheque. (T81.29)
Ms Munro is directed to page 336 of Exhibit A1, she confirmed that the invoice relates to two field bins. It is a document that relates to the purchase of the second-hand bins for a total of $50,000. (T99.15) Ms Munro said that the $50,000 entry on page 172 of A1 is for the purchase of the bins and $10 for the bank cheque. (T99.29)172 $200.00 This payment to Ryan Kelly most likely for the calves. (T82.7) 173 $4,094 Payment to Spanlift. Ms Munro was initially unsure what this would be for until she was taken to the invoice at page 331 which matches that figure. This is a payment the shed. (T82.18) 176 $600.00 Ms Munro does not know what this payment is for but mentioned that it is farm related. (T83.5) 274 $2,895 Access Advantage Account payment made to Custom Consulting Pty Ltd. Ms Munro cannot recall what that payment would be for. (T84.4) 274 $7,636 Payment to AG Shilling. Ms Munro said that she does not know what the payment is, but it would be to do with the farm. (T84.17) 274 $1,043.48
$345.18
$1,023.00
$1,685.51Payments to Skinners was for the shed base. (T85.11)
Ms Munro clarified her evidence that Skinner is for the shed base and Shilling is for the feed stock. So, these payments were for the shed base. (T100.20)274 $28,000 Payment to Spanlift is also for the sheds. (T85.24) 274 $4060 Payment to Deft insurance is for the farm insurance. (T85.27) 274 $24,000 Payment to Ryan Kelly. Ms Munro cannot recall what it was for but it was a farm payment. (T86.2) 178 $1,090 Transaction of $1,090 for Square Adelaide Annexe at Torrensville. Ms Munro does not recall this payment. (T88.12) 274 $882.44 MA Skinner Contract Kadina. This would be for transport costs. (T89.14) 275 $877.04
MA Skinner Contract Kadina. This was another payment in respect of the shed base. (T90.13) 275 $345.18 Another payment for the same purpose. (T91.4) 278 $1,184.93
$2,372.26Payments to M.A Skinner for the shed base. (T100.36) 278 $2,995 Payment to Spitwater for pressure washing, cleaning down the header. This payment was for the contracting business. Ms Munro gave evidence that you need to clean down the header before and after reaping grain. (T101.8) 278 $278.43 Another payment to MA Skinner. (T101.10) 278 $976 Payment to AW Vater & Co for stock feed. (T101.19) 262 $47,374.24 Ms Munro said that it is a Spanlift payment for the shed. (T101.34) 282 $1,000 ATM card payment of $1000 taken during a period when Ryan Kelly had the credit card of Ms Munro and she does not know what the $1000 was spent on. (T105.14) 266 $5,665.98 Amount payable to MJ Roberts. Ms Munro gave evidence that she has no recollection of that payment. (T106.3) 266 $27,223.60 This is payment to GA Harding; she cannot remember this payment and that it was made in 2020 when she was not at the farm. (T105.37) 266 $6,000 Payment to Ryan Kelly Francis; this payment was actually for a floating device for her boat which raises her boat out of the water. (T106.15)
Ms Munro said “So we can withdraw that one”. (T106.19)Q 266
$2,970
Ms Munro gave evidence that this was a withdrawal made by Ryan Kelly. (T107.8)
294 $1,000 Ms Munro could not recall what that would be for. (T107.27)
In her evidence, Ms Munro said that the agreement with Ryan Kelly about the purchase of the ‘bobby’ calves was made orally and its terms were that she would fund the calf venture but that he would repay to her the money she provided. The timing agreed was after the settlement of the Rabobank debt. There were many of these discussions, but she only continued to provide funding to Ryan Kelly on a loan basis. Ryan Kelly rejected that version of events and said that, in the end, Ms Munro agreed that he should keep the proceeds of sale of these cattle. At transcript page 155.7-9, page 163.3-16, and page 168.31-32, Ms Munro gave the following evidence:-
QAnd you told Ryan he could keep the proceeds of sale.
AYes, he was to keep the proceeds anyway, that wasn't going to be for me.
…..
QI think there might be some confusion in that I was referencing the $1,000 withdrawal on 24 December, the last entry with a line through it. And I believe you are referencing the $1,000 deposit on 24 December that is two lines above it.
ARight, okay.
QAnd what I'm saying to you is that the withdrawal of $1,000 'ANZ ATM Card 1050' was not for Ryan's benefit.
AUnless it was to pay for calves or something for the farm.
QAnd the calves venture, the steers, was a failed joint-venture and you told Ryan he could keep the sale proceeds.
AYes.
…..
QYou told Ryan he could keep the proceeds of sale.
AYes. Yes, I did.
I understand this was intended to suggest that Ms Munro waived the requirement to repay his debt to Ms Munro. Waiver was not pleaded by Ryan Kelly.
At a number of levels there are significant problems with the position taken by Ryan Kelly. Ms Munro immersed herself in the life of the farm, but she never became a proprietor of the business. She was not the beneficiary of any transfer of a proprietary interest in the farm. She was in a relationship with Shane and was actively attempting to assist Ryan Kelly and his poor financial position. She could not become an investor because she was held at arm’s length to the business and the property. She was a provider of capital which had to be repaid. She was more a beneficent financier than a bank, but she was always financier.
As things developed, there were discussions about other matters. For example, from about October 2019, Ms Munro and Ryan Kelly had daily discussions about purchasing new farm machinery. Following these discussions, an agreement was made that she would finance the purchase by Ryan Kelly of a tip trailer in early 2020. Then, as the discussions progressed, there was an idea formulated between them that Ryan Kelly would involve himself in a contracting business for grain harvesting and hay carting. Following those discussions, Ms Munro agreed to finance the purchase of a 44-foot drop-deck trailer for that contracting business. A new harvester and header comb (for grain) and rake (for hay) would also need to be purchased.
Ryan Kelly was aware from what Ms Munro told him that she received a first tranche of payment from the matrimonial settlement. In or about November or December 2019, discussions between Ms Munro and Ryan Kelly started about loans being made to Ryan Kelly. It was he who first proposed a loan agreement and that proposal then developed over a number of discussions. In the course of those discussions Ms Munro suggested that an approach be made to Westpac to finance the Rabobank debt rather than having the continuing dispute with Rabobank. When asked what the terms of the proposal were, Ms Munro gave the following evidence:[5]
[5] T46-48.
QWell, what I'm trying to ascertain is - okay, perhaps we'll go to the proposal. What was the proposal that was put to you.
AHe wanted me to fund the running of the farm until he got - until he was able to get the Westpac loan. It was the interim between - because he had to - he had that appointment with Westpac and then he had to find finance to fill in the three years, which he eventually got from Win Securities, but it was - the loan was for 10% interest, and at that time, COVID had started and I was getting less than 1% on any investments that I had, so it was going to be a win/win situation for both of us because he offered me 4% interest on the money, which was a lot better than 10, and I had the money at the time and I couldn't make any interest on it. So, I was going to try and supplement my income with that, so I needed the interest payments to be made along the way.
QYes, all right, now, so that discussion - that was a discussion, was it, with Ryan Kelly.
AYes, yes.
QAnd where did that discussion take place.
AAt the kitchen table.
QAnd the discussion - perhaps if we take it piece-by- piece, the discussion about having to pay 10% if he went with I think you said Win Securities.
AYeah. They took over the - Win Securities took over the existing Rabobank loan and I was going to - the proposal was for me to continue funding the farm at 4% until he could borrow the money from Westpac later down the track.
QAll right, so you say the proposal was that you fund at 4% until Westpac -
AHe - he offered me -
QHold on, let's -
A- 4%.
Q- go ... until Westpac came into it, and you told us you had a meeting with Westpac. Was the meeting with Westpac before or after -
AI don't -
Q- you were told -
A- I don't remember -
HIS HONOUR
QJust a minute. For me to understand your answer, I’ve got to hear the full question. All right, just listen to the question, and then answer, all right.
AYep.
QSo what I wanted to ask you was whether your meeting with Westpac where they - you told us they talked about needing three years of records. Was that before or after it was put to you that you might fund something at 4% until Westpac stepped in.
AI can't remember.
QNo, all right. And the discussion about the 10% with Win Securities, was that at the same time as you discussed something about Westpac stepping in.
AWin Securities was found after Westpac - after the Westpac meeting, because he had a broker working on that. To find somebody.
Later at transcript pages 49-50 Ms Munro described the proposal made by Ryan Kelly in more detail:-
AHe wanted to know if I would loan him the money to keep running the - keep the farm running, until he was able to get finance from another bank, and he offered me 4% interest on - and it was after the divorce, and before the Rabobank was finished.
QYes, and was anything said about for how long.
AThree years, was the term.
QYes, who said that.
AI did.
QYes, and why did you select three years.
AWell, the - the Rabobank was going to take about three years anyway to - to get sorted.
QAnd how did you know that.
AWell, because Ryan Kelly had told me that, earlier.
QAnd was any - that was what was put to you, you talked - you told his Honour what you said - was anything said to conclude that. Did he say 'I agree', or you said 'I agree'. What happened.
AI said I'd be happy to have - to have the 4% interest, and that would be helpful to me to get through the COVID time, and - because I couldn't - I couldn't live on the money. I was getting 13 - 13,000 a year during the COVID - from my investment.
QAnd was anything said about documenting that arrangement.
AYes, I asked him if he would be able to get a contract drawn up, and he said up, and see if his accountant would be able to do it …
Ms Munro could not recall the precise date when these conversations took place; all she could remember is that they occurred when her divorce was happening, so she thought that was some time before the first payment of the divorce payment that was made to her in about November 2019. In the usual course Ms Munro needed to achieve a settlement with her former husband, for it to be registered at the Family Court and for it to be implemented. This all takes time. The settlement was significant and was paid in several tranches over a period of time commencing with the first payment of about $150,000. There were other very large payments made to Ms Munro, for example a sum of $2 million dollars was paid to her from the trust account of her solicitor, Scales and Partners directly into her own bank account.[6] Ms Munro confirmed that this was part of her property settlement.
[6] Exhibit A1, page 261.
Along the way she made payments for a number of other expenses. For example, she made a truck payment for a semi-trailer in the amount of $10,000.[7] The truck payment was for a Kenworth truck that was used around the farm, and which was essential for the farm operation. Another expense that Ryan Kelly discussed with her was for the purchase of a new header. The header on the farm had broken down and she had already paid $26,000 to a contractor for the crop on the farm to be ‘taken off’. There are two significant aspects here: the first, that the farm was then incapable of generating sufficient funds to repair the header or purchase a new one; and second, that there were none of the usually available sources of capital finance (such as a bank or finance companies) available to the farm to finance such expenditure. The farming enterprise was in a financially bleak position. In light of that expense, and at least inferentially, the inability of Ryan Kelly to take steps to solve those problems, Ms Munro made a suggestion to Ryan Kelly that they should start a contract harvesting business at the same time. Those discussions commenced in 2019.
[7] Exhibit A1, page 357; T39.23.
Prior to that time, and at least for a year since about 2018, payments were made to Ryan Kelly by Ms Munro without any specific request being made of her by Ryan Kelly for the provision of money, and where it would be spent. It was in about 2019 that discussions about the expenditure of money by Ms Munro under a loan agreement commenced. At around that time, Ryan Kelly lost the roof of his house as a result of a storm; the house was written off and insurance money was paid to him. He put the money from the insurance into the farm.
Ryan Kelly then approached Ms Munro asking for financial assistance to pay for panels, gates, a cattle crush and a loading ramp for calves which was to be used in the cattle business. Ms Munro agreed to lend Ryan Kelly this money and she went with Shane to Naracoorte and purchased these items. This was done at the request of Ryan Kelly. At the time, Ms Munro and Shane were holidaying towards eastern Australia. As part of their holiday plans, they detoured to Naracoorte and made these purchases. The invoice for these purchases was made out to Ryan Kelly.[8] I consider that the decision to arrange for the invoice to be made out to Ryan Kelly is of significant weight. It indicates an intention that Ryan Kelly would become an owner of the property using funds loaned to him by Ms Munro. In other transactions for purchase of farm machinery, invoices were made out to her personally. Ms Munro said that she paid this invoice and I accept her evidence. Shane was not called in evidence even though on the first day of trial he was present and responded to the order for witnesses by leaving the court.
[8] Exhibit A1, page 321.
At around the same time, Ms Munro paid for a harvester purchased from Vater Machinery. The purchase price was $132,000.[9] There was also a combine rake purchased for $12,000 to be used on the front of the header. The sales contract in relation to these items was made out to Point Riley Cattle Co and Ms Munro registered that business name under which she purchased the harvester. There was a GST advantage in doing so but these purchases only occurred after discussions between she and Ryan Kelly.[10] It is quite apparent and I find that Ms Munro had never had any intention to create, and the parties each had no intention to create, any proprietary or other interest in this machinery in favour of Ryan Kelly (or any other person or entity) inconsistent with the proprietary interest of Ms Munro.
[9] Exhibit A1, page 319.
[10] T61.37.
The background to this purchase was that Ryan Kelly told Ms Munro that he needed a new header because his old one had broken down and the contractor for reaping grain was very expensive. Then Ms Munro suggested to Ryan Kelly that they set up a contract harvesting business to complement his hay contracting business which would bring in more income. It was very soon after this conversation that the header was purchased. That was all organised by Ryan Kelly although Ms Munro made an appointment with the agent at Vater Machinery, Mr Nigel Phillips who was the agent at Vater & Co when the header and associated equipment was purchased. As best as Ms Munro can recall, she paid $120,000 for the header itself and around $12,000-$15,000 for the front rake.[11] A header comb was also purchased for the harvester under the same arrangements.
[11] T63.5.
Her expectation was that this machinery would be used in a contracting business to be operated by Ryan Kelly. This was her machinery. She had discussions with Ryan Kelly about how he would pay her for using her machinery. Part of those discussions was in relation to a method called ‘rotor hours’. This is a method of payment according to the period during which the machinery is being operated and grain is being reaped.[12] During the time that he used the header, Ryan Kelly did not make any form of payment on an ongoing basis to Ms Munro and it was only after Ms Munro and Shane separated, that Ryan Kelly approached her and asked to buy the machinery from her.[13] The purchase has not occurred.
[12] T63.30.
[13] T64.8.
Ms Munro gave evidence that part of the process of having a harvest contracting business is to have field bins in which the reaped grain is to be held or stored. They are called field bins and chaser bins. Also, it is necessary to have a tip trailer and a drop deck trailer for shifting the header and the front comb for the harvester and the rake. The machinery purchased from Vater & Co for this purpose needed to be renovated to be ready for use. It was not delivered until around October just before the commencement of harvest.[14] Ms Munro said that she also purchased the Honey Bee Flex Front comb for the header for $55,000.[15] She paid a number of deposits as part of that transaction and identified a tax invoice relative to the transaction.[16]
[14] T66.6.
[15] Exhibit A1, page 317; T66.18.
[16] Exhibit A1, page 358; T66.30; Exhibit A1, page 323; T67.1.
Ms Munro also made payments to the machinery business G & J East of Kadina.[17] Some payments were made over time as well to Vater Machinery and an example is a payment of $75,000 made in connection with the harvester.[18]
[17] Exhibit A1, page 261.
[18] Exhibit A1, page 360; T68.17.
Ms Munro said that she financed the purchase of the chaser bins that were used in the harvesting business, and she provided $27,500 for those bins. The purchase of the bins was organised by Ryan Kelly in his name, but he requested that Ms Munro pay for them.[19]
[19] Exhibit A1, page 324; T71.20.
In May 2020, Ms Munro and Shane went to stay at Swifts Creek in Victoria. At that time, the COVID virus hit, and they were unable to cross the border from Victoria back into South Australia for a period of about eight months. At that time, Ryan Kelly remained working at the farm and was doing other cartage work such as carting grain. Ms Munro left her visa debit card with Ryan Kelly to enable him to make purchases from time to time. He used the card, and she would top up the credit balance of the card from Swifts Creek. She made a payment of $50,000 to top up the account from her own personal account; she kept an eye on the account and would top it up from time to time as required.[20] For example, whilst she was away in Swifts Creek, Ryan Kelly made a payment on an invoice for $5,587.15. She did not make that payment but Ryan Kelly was authorised by her to draw funds to make the payment. The payment was to YP Hydraulics at Kadina. The invoice dated 31 May 2020 is made out to Tabu Soro Farming of Wallaroo, which is the business name of Ryan Kelly. The funds were all sourced from Ms Munro and not from the resources of Tabu Soro Farming.
[20] T87.36.
Ms Munro authorised the payment of the amount but was not in South Australia at the time because in May 2020, she was unable to cross back from Victoria into South Australia.[21] Ms Munro does not recall directly paying any farm accounts whilst she was away in Swifts Creek and any farm account payments were through the debit/credit card that she left with Ryan Kelly.[22]
[21] Exhibit A1, page 338; T89.38.
[22] T90.6.
Ms Munro said that she made a demand for the return of her equipment after the breakdown of the relationship between herself and Shane. She spoke to Ryan Kelly and demanded the return of the machinery. He responded that she should sell him the machinery and he was operating on the understanding that she would sell him the machinery and therefore she could not repossess it. There was then some discussions about selling the machinery to Ryan Kelly but these did not advance. She cannot recall whether the discussions were in person or over the phone. There were a number of discussions and they probably occurred personally and over the phone.[23]
[23] T108.2-T108.18.
In cross-examination Ms Munro confirmed her long familiarity with farm life. She was born and grew up in a farm in Tintinara, her father was a property manager and the farming was generally mixed farming of stock and crops with pasture renovation from time to time. She married Kevin Munro in 1978 and they farmed in the Tintinara area until 1988 when they moved to the Wimmera. A further family farm was purchased through the trustee of a family trust. And initially, a single trust was used and later this was divided into two separate trusts so that one of the farms was operated under a separate trust controlled by Ms Munro and Kevin Munro. It was called Beulah Farm. Eventually their sons came home from school and they took over the property. At commencement, the Beulah Farm property was about 2,680 acres but after leasing further property, and purchasing further property, it became a 15,000-acre farm.
Finance was obtained through Rabobank to develop the farm through an initial loan and other loans were added. The first loans from Rabobank were taken in 1988 and then later loans were taken at the time of the expansion of the property which took about 28 years. Ms Munro was the person most familiar with the finances of the Beulah Farm business. She controlled those finances whilst also operating her own hairdressing business in the town of Beulah. She operated her business three days per week but otherwise was involved in the control of the farm finances and in the operation of the farm business.
Drawing upon her farming experience, she took a loan from the Commonwealth Bank to purchase and operate a childcare centre. This was a long-term loan. Her daughter obtained a teaching degree and then did specialist early childhood training. Thus, Ms Munro left her daughter in charge of the finances and operation of the childcare centre.
In managing the farm, she controlled the finances, kept house, she fed up to thirteen workers at a time, and assisted in doing manual tasks such as moving field bins and header combs. Self-evidently, she did all of the work expected of her as a functioning ‘partner’ in a mixed farming business. She was an equal contributor, confirmed perhaps by the size of her property settlement in her matrimonial proceedings. Over time she found that the farm business was so demanding that she could not continue fulltime operation of the hairdressing business. Over time, she developed some health issues such as hearing problems and she admitted that she had also some issues with her memory concerning dates and times.
In 2015, Kevin Munro decided to leave the farm and went back to his brother’s farm in Tintinara. Ms Munro stayed on the farm and coopted her brother to run the farm for a year or so until Kevin Munro returned to operate the farm. Following his return, he lived away from the farm. At about that time, Ms Munro moved to Adelaide to live with her sister. This heralded the start of the finalisation of the property issues with Kevin Munro and eventually in the Family Court the parties achieved a property settlement. The first payment made to her of $150,000 was received on 21 November 2019 and then on 11 March 2020, she received a further payment of $2.344 million dollars. She received further payments of $550,000 per year for three years.
Ms Munro met Shane in 2016 and commenced living with him in Wallaroo after September 2016. That was an intermittent relationship because she was spending time at the Beulah property and also at Wallaroo. She was shifting between those two places but she did spend a lot of time at 57 Kelly Road Wallaroo. She developed a close relationship with Shane, she cared deeply for him and wanted to support him. Her agreements were made with Ryan Kelly who was the manager of the farm. She was aware that the farm was operated through a trust and that Brofern Pty Ltd was the trustee of the trust which was a family trust arrangement. She initially was not sure of the name of the trust whether it was called the Kelly Family Trust or perhaps the Riley Trust. In any event, the position from her point of view was that Ryan Kelly ran the farm and Shane lived in Adelaide whilst he worked for the Department of Agriculture. Ryan Kelly took over the farm completely from about October 2019. Ryan Kelly was also managing the finances and any meetings that she had with him prior to October 2019 did not involve Shane as he was in Adelaide working.
Her relationship lasted between September 2016 and about December 2020 when the relationship broke down. Prior to that time, she had purchased a property at Swifts Creek in Victoria on 10 March 2020.[24]
[24] Exhibit A1, page 347; T121.11.
From the time that Shane returned to the farm, she paid him a weekly allowance of $500 as she wanted to ensure that he would have his own money. He was not employed at the time and she was happy to support him.
In cross-examination Ms Munro was challenged about a number of payments that she said that she had made. The first, related to a withdrawal to pay for a Landcruiser vehicle. This was for Shane. In her bank statement, there is a withdrawal made on 22 July 2020 for an amount of $5,000. There is a handwritten note against the withdrawal:-
‘Shane’s Landcruiser deposit…’[25]
[25] Exhibit A1, page 263.
Ms Munro said that she purchased this vehicle for the farm, however, the entry refers to ‘Shane’s Landcruiser deposit’. The proposition was put to Ms Munro because that entry is there, the loan must be personal to Shane and cannot be connected to the farm. She in fact made a full payment of $27,223.60 on 4 August 2020 for the purchase of that vehicle. Therefore, she paid for the deposit and the vehicle from her own funding. There is no note accompanying that entry.[26] The proposition was put to Ms Munro that this can only mean that the purchase of the Landcruiser was connected to a personal arrangement made between herself and Shane. She denied that. She said that the Landcruiser was used in farm work, Shane was the principal driver of the vehicle and it was purchased for working the property. Shane was not called to give evidence to gainsay this evidence.
[26] Exhibit A1, page 266.
Another payment that is challenged is one made on 2 April 2020 in the amount of $10,000, directed to Shane. Ms Munro said that this amount is a loan to Shane for payment to assist in repayment of money that he had borrowed from her connected with his mother going into a nursing home. The evidence of Ms Munro was that she did not demand repayment of this money from Shane but left it as part of a settlement when she left the property.[27] In that case, I am unable to accept that the $10,000 is an amount claimable from Ryan Kelly but rather is an amount that arises under a separate chose between Ms Munro and Shane.
[27] T126.26-T126.7.
I have earlier described the amounts of money received by Ms Munro from the Family Court property settlement. Ms Munro agreed that she commenced spending significant amounts of money in late 2019 and her spending continued into early 2021. She agreed that from the family settlement, she transferred about $4.8 million dollars over a two-year period, and this included part of her superannuation funds. Part of these transfers included transfers between her own accounts. She was not receiving much, if any, interest at the time and her intention was to buy things that would grow in value and so would protect her capital. She agreed that in March 2020, she had purchased a 1998 Mustang 2600 Sportscruiser boat called a ‘Mercruiser’ as well as a floatation device and an AirBerth for the boat.[28] She spent money on herself for things that she wanted as well as on people very close to her. An example was a payment made to Chloe Huth a friend who had started a business and she provided about $60,000 in funds to her son Steve Munro, because she became aware that Kevin Munro, his father, had kicked him off the farm property. He did not have a job for a while and so she assisted him in purchasing a house in her name which she intended to be her retirement home.[29]
[28] T130.16.
[29] T32.22-132.14.
Ms Munro agreed that she saw Ryan Kelly at the Kelly Road farm almost every day. He called in for breakfast and conversations occurred every day and she felt particularly sorry for him because he had PTSD arising from the experience he had with his grandfather. She knew that he was struggling with that condition, and she knew that he had no money to run the farm and it was all very difficult. I have earlier canvassed the reasons why the farm was not profitable. Another difficulty was that Ryan Kelly’s mother, Helen, refused to contribute to the farm after the arrival of Ms Munro, so she took on the role of something as a step-mum and took care of Ryan Kelly.[30]
[30] T135.16-T136.21.
Ms Munro was also challenged about the nature of the loan that she alleges was made between herself and Ryan Kelly. She was taken to a letter from Swan Lawyers to Ryan Kelly dated 6 October 2021.[31] The relevant portions of that letter, on page 1 (exhibit A1, page 379) provide as follows:-
‘In October 2017 my client agreed to lend to you funds for the purpose of your farming enterprise carried on at Wallaroo Plains. The terms of that agreement were:
1. That amounts would be advanced from time to time as agreed;
2. That the amounts advanced would be repayable on demand;
3. That the balance outstanding from time to time would bear interest at the rate of 4 % per annum;
As acknowledged by you on 26 July this year, the total advanced by my client was $920,279.35.
My client hereby demands repayment of that sum within 14 days.
My client is also entitled to interest on the amount outstanding from time to time but will defer her claim for interest to allow that to be calculated to the date of repayment. Should you wish to make an offer in that respect please do so.
In addition to constituting a demand pursuant to the loan agreement this correspondence to you is a pre-action claim pursuant to Rule 61.7 of the Uniform Civil Rules 2020 (SA)…’
[31] Exhibit A1, page 379-381.
Ms Munro thought that the loan was only repayable upon demand after Ryan Kelly had rescinded the loan agreement by letter from his solicitors. However, that rescission letter is dated after the date of this letter of 6 October 2021.
The evidence of Ms Munro about the terms of the loan agreement were confused. Ms Munro continued to maintain that the loan was only repayable upon demand after the rescission, but she could not remember when it was rescinded. This letter of 6 October 2021 purports to reflect an agreement of October 2017. Ms Munro gave evidence that she wanted to demand repayment of the loan after she thought that the Kellys were out of her life.
In that context, she was not able to remember precisely the terms of the oral agreement about the loans reached with Ryan Kelly. In cross-examination she used different forms of expression about when the loan would be repayable.[32] Initially, she thought the loan was repayable once the Rabobank fight was over. Then it would be repayable once Ryan Kelly obtained finance from Westpac, and then, she said that it might be repayable over a period of three years. She said that the initial term was for three years but then the money was not repaid. The proposition was then put to her that in fact the loan term was over a period of ten years. She emphatically denied that proposition. It was then put to her that the loan was over a ten-year period because it was a long-term loan just like other farm loans. She denied that proposition and said that it had never been agreed to and she had never heard any suggestion of a ten-year term. She denied any suggestion that anything to do with the Beulah Farm investment which she made with Kevin Munro had any bearing upon anything she did with Ryan Kelly. She said that the three-year loan part of the agreement was connected with the fight that Kelly farming was having with Rabobank. She denied ever agreeing to a ten-year agreement.
[32] T139.34-T140.4.
I think on balance that there was confusion in the mind of Ms Munro about the connection between the repayment of the loans and the various disputes with banks. I accept that the Rabobank litigation with the Kellys was resolved by October 2019 following a mediation in November 2018. Winsec replaced Rabobank as the lender to Brofern Pty Ltd by October of 2019. However, the fact that the loans were not repaid is not inconsistent with the version of events given by Ms Munro. That is because her evidence is that the loans were intended to be repaid but were not repaid as had been agreed.[33] Also, Ms Munro refused to sign the loan agreement proffered to her by Ryan Kelly.[34] She refused to sign the agreement because it did not contain any of the terms as had been discussed with Ryan Kelly and she would never, for example, sign a loan agreement that was for eight or ten years. As an example, she referred to item 3 for repayment (of the machinery shed portion of the loan) over eight annual payments commencing on 28 February 2022 and each successive year. That had never been discussed with her and it was not something to which she would agree. The interest rate was also not agreeable at 3.5%. From her point of view, the suggestion of a ten-year loan period was made up by Ryan Kelly and it had never been discussed earlier.
[33] T123.11.
[34] Exhibit A1, page 349-356.
In cross-examination, Ms Munro was taken to a letter from Tabu Soro Farming to her solicitors dated 13 October 2021. The first full paragraph of that letter rescinds the loan agreement proffered because of the refusal of Ms Munro to sign it. A formal rescission would only be effective if there was an agreement which is reflected within the terms of some form of loan agreement and that separately, the parties had agreed to reduce their agreement to a form of writing that is reflected within the terms of the written loan agreement. I am satisfied that no such agreement existed. The only agreement which could be rescinded was an agreement to repay the money owed by Ryan Kelly to Ms Munro.
The second paragraph of the letter denies that the monies loaned were repayable on demand and Ryan Kelly did not have resources available to him to repay any loan on demand.
For the reasons which I have already set out, I place no significance upon this contention of Ryan Kelly. As I have explained, the farms suffered an endemic shortage of capital, they could not borrow funds to re-equip the farms and they needed to find a separate source of finance. Ms Munro was that source, but in return she was not given any interest as a proprietor of the business, any proprietary rights as an owner and was entirely dependant on the Kellys. She was a lender in the short term and her loans were unsecured. She did not commit herself to a long term loan arrangement and there was no prospect of this happening especially for someone as experienced in rural property matters as Ms Munro. She wanted Ryan Kelly to get back on his feet but that was a long term task for him.
The letter alleges that repayment was discussed to be over a ten-year period to allow the farm to become productive for Ryan Kelly to get back on his feet. This statement again reflects the actual position of the farm as I have summarised earlier in this judgment. The same position pertains in relation to the resources available to Ryan Kelly to repay such loans.
Ryan Kelly then suggests that he has a counterclaim against Ms Munro for breach of an agreement to provide him with the following:-
‘A With habitable accommodation, as she was living in the home on my property;
B The funding for a completed machinery shed;
C Fuel and other accommodation to enable off farm contracting; and
D Such other relief and damages as the Court deems fair and reasonable’.
It is apparent that this letter was written (or drafted) by a solicitor. It contains a number of significant peculiarities. If Ms Munro was living in a home on the property owned by Ryan Kelly, she could not owe him any obligation to provide him with habitable accommodation. Rather, the obligation would be upon Ryan Kelly to do so. The second alleged obligation in relation to the funding for a completed machinery shed appears similarly misconceived. It may well be that there was an arrangement between the parties for Ms Munro to finance the construction of the machinery shed. So much may be accepted. That does not mean that a failure to provide the complete funding is an example of a breach of an agreement said to require repayment of an amount over a period of ten years. To the contrary, it indicates that the parties are acting inconsistently with what is alleged to be a ten-year agreement because one party has walked away from it. The third falls into the same category; it alleges an obligation to provide the cost of fuel and the cost of accommodation to enable off farm contracting but that obligation is not anywhere contemplated within the parties’ arrangement. There was a willingness on the part of Ms Munro to provide funding for such a business to be commenced.
All of this was then confirmed by Ms Munro in her evidence.[35] She said that long term loans from her experience were only connected with the purchase of land. In her arrangements with Ryan Kelly, no land was being purchased. The funding was to enable him to generate income from the businesses that he was carrying on such as cropping, stock and his contracting businesses. And she was not a ‘charity’; she needed to invest her money wisely and obtain a return from her money. That could only have been obtained in the short term. Once Ryan Kelly became profitable, Ms Munro looked to him to pay interest on the money loaned to him until such time as it was repaid. As well, I accept the evidence of Ms Munro that the discussion about the loan evolved over a long period of time.
[35] T149.34 et seq.
The proposition was put to Ms Munro in cross-examination that the three-year loan terms was a recent invention.[36] She maintained that there were meetings with Westpac and that Ryan Kelly was present in that meeting; she denied that only Shane was present with her during that meeting. She did not know when the meeting was held and therefore could not gainsay the proposition that it occurred in 2018.
[36] T150 et seq.
In relation to the calves joint venture, Ms Munro said that in 2017 she knew that Ryan Kelly was struggling on the farm, he was not generating sufficient income and needed to do something differently in order for him to reestablish himself on the farm. It was for that reason that she made the suggestion that they raise cattle from the ‘bobby’ calves. She made an offer of loans for the purchase of the calves, for milk and inoculations. She said that Ryan Kelly was supposed to pay her back at the point of sale. He did not need to pay her any interest. She did most of the work in buying the calves and obtaining the milk and this business was conducted under the name of Point Riley Cattle Co which was a business she registered. She agreed that Ryan Kelly used the Tabu Soro Farming business on the sales invoice and that was not correct, it should have been on the invoices of Point Riley Cattle Co but that was not something she worried about as much as it was a joint venture. However, the agreement to buy calves and grow them to steers was a different agreement. In the calves agreement, Ryan Kelly provided the grain to feed the calves, but he ran out of grain. Ms Munro then paid for the purchase of truckloads of grain, and she made payments to Ryan Kelly in the amount of $10,000 for these purchases. Some of the calves died; she was aware of twelve calves dying at a particular point. She thinks many calves may have been lost to premature death whilst she was away in 2020.
Notwithstanding the propositions put to her, Ms Munro denied that the calves joint venture was not profitable even though she did agree that Ryan Kelly could keep the proceeds of sale of calves. She said that Ryan Kelly was asked to pay for the costs that she had incurred at point of sale. She denied the proposition put to her that she had told Ryan Kelly that he did not have to repay her the money involved in the calves joint venture. She expected to be paid at the point of sale and it was only out of the goodness of her heart that she allowed the joint venture to proceed to allow Ryan Kelly to make some money. She also denied that it was a joint venture in which she would purchase the calves, they would be agisted on Ryan Kelly’s property, he would pay for the milk and the grain and they would share in the proceeds of sale. She said only the 2016 year was a good rainfall year and the 2017, 2018 and 2019 years were not good on the farm.[37]
[37] T155.23-155.33.
Ms Munro was challenged about her evidence concerning the purchase of the plant and equipment. She said that the plant and equipment belongs to her and that the agreement with Ryan Kelly was to finance the purchase on her behalf rather than a loan to him to purchase the equipment. She denied the proposition that under the agreement made between them in the period between October 2019 and March/April 2020, the agreement was to loan funds for the expenses upon the farm and the purchase of plant and machinery. She said that no agreement had been made in relation to plant and machinery by that time. The loan agreement which was given to her by Ryan Kelly only included monies that she paid over to him. It did not include plant and equipment. She did discuss selling the plant and equipment to Ryan Kelly.[38] This conversation occurred after she had left Shane. Ryan Kelly approached her and asked if he could buy the equipment but there had been no discussion about price at that stage. She did say that she would be willing to sell the equipment to him but no further communication was had about the potential sale of the equipment; and she did not receive any documentation connected with the potential sale of the plant and equipment to him.[39]
[38] T179.9.
[39] T179.23-T180.12.
I have found that the evidence given by Ms Munro was generally credible. I also accept that a number of the criticisms about the accuracy of some of the evidence given by Ms Munro were properly made and that she suffered some memory deficits about particular things that may have happened. For example, I would not accept that the $10,000 loan made to Shane in connection with the money borrowed from his sister associated with his mother going into a nursing home has any connection with any claim made between Ms Munro and Ryan Kelly.
However, I am not prepared to accept assertions made in cross-examination that the only agreement made was for a ten-year loan. Nor am I prepared to accept that no separate agreement was made in relation to plant and equipment. The reasons are obvious. For there to have been a ten-year loan it would have been necessary for Ms Munro to turn her mind to a number of issues. The first was the expected longevity of her relationship with Shane and the connection between herself, Shane, Ryan Kelly and the farm. The second was whether or not she wished to be the principal financier of these aspects of the farm operation and if so, for how long; the third is that she did not have a separate source of income but relied upon the investment of her property settlement to obtain an income which was not being paid and so the longevity of the alleged ten-year loan arrangement in those circumstances was very problematic and highly unlikely; and fourth an assessment of the overall arrangement and whether, on any basis, it became clear that Ryan Kelly could ‘get himself back on his feet’, given any particular circumstance including, for example, whether (or not) there was a favourable year of rainfall. There are so many unknown and contradictory variables, even accepting, as I do, that there was an aspect of emotional attachment between Ms Munro, Shane, the farm and therefore Ryan Kelly.
There is no separately identifiable evidence, actual or arising by inference that any agreement (assessed objectively) was ever made for there to be a ten-year loan agreement. That is an issue which I will separately assess in light of the evidence of Ryan Kelly. I reiterate that Shane did not give evidence and therefore there was no clarification from the point of view of the respondent of a number of assertions made by Ms Munro and aspects of her evidence which involved Shane. I turn then to the evidence of Ryan Kelly.
Ryan Kelly
Ryan Kelly was the only witness called for the respondent. He is the son of Shane and Helen Kelly. He is a farmer but also a senior fireman with the Metropolitan Fire Service stationed at Kadina. He lives in Wallaroo.
His farming business is called Tabu Soro Farming, and it operates the farming enterprise. He based that business at 10218 Spencer Highway. He separately has a transport business under the Tabu Soro Farming Trust which was registered in September or October 2015. He also owned a Kenworth prime mover which he hired to his uncle in Shepparton who was involved in the orchard industry.
The farm at 57 Kelly Road was purchased in 1959 by his grandparents and in 1992 it was shifted into the entity known as Brofern Pty Ltd as the trustee of the Riley Trust. He said that the Riley Trust owns the shares of Brofern Pty Ltd.[40] As a trust does not have a legal existence and only exists beneficially for the benefit of the beneficiaries of the trust, it is not possible for the trust to own the shares. Rather, the issued shares of Brofern Pty Ltd must be owned by independent persons. Likely that is the members of the Kelly family.
[40] T187.28-T188.11.
This discussion must also be viewed in the background of the factual circumstances of the parties’ relationship. This was a farming enterprise in marginal country. It was an unsuccessful farm; it was undercapitalised and was not profitable. The intention of the applicant (both in her relationship with her partner Shane and with the respondent Ryan Kelly) was to give whatever assistance possible to bring the farming enterprise to profitability. I am satisfied that, in the context of all of the facts as they developed over a period of time, the applicant made a decision, relied upon by the respondent, not to insist upon her strict legal rights in relation to the calf venture. That was despite the fact that there is evidence of the profitability of that venture, as reflected in Exhibit R6. In the view that I have formed, that was a matter entirely for the applicant. On the evidence, I am satisfied that the respondent was aware that he had an obligation to make repayment to the applicant, Ms Munro, for the money that she had provided. I find that he did not do so but that was in the context of a decision by Ms Munro not to insist upon her strict legal rights under the terms of their arrangements and following her decision to communicate a decision to give up her strict legal rights.
This was a decision made by Ms Munro in the context of the farming enterprise as it existed, its deficiencies and lack of success and what by then was a failing relationship between Ms Munro and Shane. It was impossible to completely reconcile the legal position of Ms Munro and the emotional strain under which she was operating. There may have been many reasons for her decision, but its effect was that she decided not to insist upon her strict legal rights of the loans for calves out of the proceeds of sale of the cattle.
I therefore find that albeit arrangements between the parties required the repayment of the advances made by Ms Munro during the calf venture with Ryan Kelly, there is no legal obligation upon Ryan Kelly to make that payment. I therefore dismiss the claim of the applicant under paragraph 3B and 3C of the statement of claim.
Counsel then addressed the loan amounts for the sheds. His submission was that as the land in which the sheds were built, the Alford Road Farm, is owned by Brofern Pty Ltd and, as at the time Ryan Kelly was a director of Brofern Pty Ltd, those loans could only have been made for the benefit of Brofern Pty Ltd and therefore for the benefit of the trust. This submission was not put with particular force. That proposition was not put to Ms Munro in cross-examination, and I am unable to accept the submission. I am satisfied that the loan arrangements in relation to the building of the sheds were made between Ms Munro and Ryan Kelly. It was a matter for Ryan Kelly how he treated the obligation upon him to repay the debt to Ms Munro connected with the sheds. Any liability of Brofern Pty Ltd was in connection with the relationship between Ryan Kelly and Brofern Pty Ltd. I am satisfied on the evidence that at no time was there any discussion between Ryan Kelly and Ms Munro that any obligation to repay debts associated with the construction of the sheds rested with Brofern Pty Ltd as the owner of the property. As I have earlier recounted, the sheds are a fixture upon the land and are the property of Brofern Pty Ltd however, the liability in relation to the debt associated with the procuration of the construction of the sheds upon the land is an entirely different matter. I am satisfied that this debt was an obligation between Ryan Kelly and Ms Munro, and it was a matter for Ryan Kelly how he dealt with that capital contribution to the land of Brofern Pty Ltd in the accounts of that company, which he controlled. I am unable to accept submission of counsel.
Counsel then addressed the claim in conversion. He addressed that claim on two bases. The first was the necessity for Ms Munro to establish her claim for possession of the property which she contended had been converted. The second, following the refusal to return the property, was to establish a claim in loss and damage.
I have earlier recounted the evidence in relation to the purchase of the plant and equipment which comprises this claim. I have accepted the evidence of Ms Munro and have rejected the evidence of Ryan Kelly in relation to the arrangements between the parties. The evidence satisfies me that Ms Munro, did not, in her own right, purchase the ClipEx fencing stock yard for a cost of $16,607. The evidence of purchase discloses an invoice directed to Ryan Kelly as the purchaser. This is the best evidence of the actual arrangements made. The involvement of Ms Munro was as a lender. I am satisfied that Ms Munro purchased the Honey Bee 94C38G Front header serial number 3655103171 from Vater Machinery for the sum of $55,000 and permitted the respondent to use that machinery in the farming business. This machinery belongs to Ms Munro. I am satisfied in the evidence that Ms Munro purchased the New Holland CR9080\76C 9080 header machine for $120,000 from Vater Machinery. I am also satisfied that she permitted the respondent to employ that machine in his farming business and in his harvesting business. I am satisfied that the applicant Ms Munro purchased a New Holland 9080\76 combine/Rake up serial number YGB114510 from Vater Machinery for $132,000 and that she permitted Ryan Kelly to employ that part in the farming business and in his contracting business. This belongs to Ms Munro. I am satisfied on the evidence that in April 2020, Ms Munro purchased a TriAxle drop semi-trailer and a Freight Master 44-foot drop axle trailer for $135,382 and that she permitted Ryan Kelly to employ that plant in his farming business and in his harvest contracting business. This machinery all belongs to Ms Munro.
I am not satisfied on the evidence that in April 2020, Ms Munro purchased a 1985 Venning Chaser Bin or the two Moohna engineering field bins. I am satisfied on the evidence that these items were all purchased by Ryan Kelly using funds loaned to him by Ms Munro. In her evidence, Ms Munro admitted these arrangements. In the result, Ms Munro is confined to a debt claim against Ryan Kelly.
I am not satisfied on the evidence that on 21 April 2020, Ms Munro purchased a Trail Master Tip Trailer for $85,260. In her evidence Ms Munro agreed that she had loaned money to Ryan Kelly to purchase this trailer. Consistent with my earlier finding, I am satisfied that the purchaser of this trailer was Ryan Kelly, using loan funds provided by Ms Munro. In her evidence Ms Munro admitted these arrangements.
I am satisfied on the evidence that on or about 9 May 2020, Ryan Kelly purchased a Catford 30 Land Roller from Richardson Farming Pty Ltd for $10,000 using funds provided to him by Ms Munro. In her evidence Ms Munro agreed that this was the arrangement. I am satisfied that between 21 April 2020 and 15 January 2021, Ms Munro loaned to Ryan Kelly the sum of $196,666.77 for use by Ryan Kelly in and about the construction of machinery sheds upon the Alford Road property and that such loan is repayable upon demand.
I am satisfied on the evidence that on 13 September 2022, by letter from Swan Lawyers from Ryan Kelly C/- CCK Lawyers, Ryan Kelly’s then solicitors, Ms Munro demanded the return of the New Holland Header; the Honey Bee grain belt header front with trailer; the ClipEx portable sheep yards; the two Moohna Engineering chassis bins, the 1985 Venning chassis bins; the two 2020 Freight Master Tri Axle Drop Deck Semi Trailer; the Freight Master Tip Trailer; and the Catford 30’ Land Roller. For the reason stated Ms Munro had no right to demand the return of the Clipex Sheep yards, the Freight Master Tip Trailer or the Catford 30’ Land Roller. I am also satisfied that the other plant and equipment and property has not been returned to Ms Munro by the respondents. I am satisfied that no payment has ever been made by Ryan Kelly to Ms Munro in respect of this other plant and equipment.
I turn to my findings in relation to the allegation of Ms Munro that her plant and machinery namely the header, the header comb, the header rake and the drop deck trailer have been converted by Ryan Kelly. As I have found, Ms Munro has demanded the return of her chattels from Ryan Kelly and he has refused that request. I have also found that the chattels belong to Ms Munro and that she has always had an immediate right to possession of those chattels. There has not been any form of ongoing bailment of those chattels under an agreement between Ms Munro and Ryan Kelly.
The definition of conversion is that the party in the wrong, in this case Ryan Kelly, intentionally exercised control over chattels belonging to Ms Munro so that he interferes with the right of Ms Munro to control those chattels. In this case, the interference is complete and therefore it is a serious interference. I am satisfied the above-mentioned plant and equipment are in the possession of Ryan Kelly. Those chattels are capable of being converted by Ryan Kelly.[132]
[132] Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204.
Notwithstanding some discussion to the contrary,[133] I am satisfied that in order for the tort of conversion to be established, it is necessary to prove an intentional act on the part of the person who has interfered with the rights of the true owner. That may manifest by, for example, proof of an intention to deal with the chattels by exercising dominion over them. I am also satisfied that conversion does not arise, for example, through negligent loss or destruction of a chattel. In the case at bar, I am satisfied that Ryan Kelly intentionally maintained possession of the chattels belonging to Ms Munro and he therefore intentionally interfered with those chattels by exercising dominion or control over them for his own benefit.
[133] Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87 at [162].
At the time that he took possession of this plant and equipment, Ryan Kelly was lawfully in possession pursuant to an agreement made with Ms Munro. He had lawfully acquired possession of the chattels under the agreement that he made. Those circumstances changed at the time that Ms Munro moved out of the Kelly Road farm after the end of her relationship with Shane and after she left the area altogether. She moved to live at Swifts Creek in Victoria. In that situation, Ryan Kelly was not a bailee who held over for the benefit of Ms Munro because if he was a bailee holding over, he would not be manifesting some intention to retain possession of the chattels to the detriment of Ms Munro. I am satisfied that from no later than the letter of demand of the solicitors from Ms Munro,[134] Ryan Kelly was withholding possession of the chattels from Ms Munro. He was acting contrary to the possessory and proprietary rights of Ms Munro by refusing to return the chattels belonging to her after she demanded their return.
[134] Exhibit A1, page 383: letter Swan Family Lawyers to Mr Ryan Kelly dated 13 September 2022.
I am satisfied that no later than, say, within one month of the date of the solicitor’s letter, Ms Munro was entitled to immediate possession of the chattels. She held both a proprietary right by her ownership of the chattels and a possessory right because of her demand for the return of the chattels. She had a right to immediate possession as the owner.
I am satisfied that the chattels have not been returned. The reasons given are that Ryan Kelly (wrongly) claims a proprietary interest in the chattels notwithstanding his admission in evidence that the chattels belonged to Ms Munro. I have earlier made separate findings about those other farm items which were purchased by Ryan Kelly using funds loaned to him personally by Ms Munro. I have rejected any claim in tort connected with those items because I am satisfied that the proprietary right in them is vested in Ryan Kelly. Differently, here, there can be no doubt that the chattels belonged to Ms Munro which, despite requests, have not been returned. Subject to the question of damages, in relation to those chattels to which reference have earlier been made, I am satisfied that Ms Munro has proved on the balance of probabilities, each of the integers of the tort of conversion.
The assessment of damages under the tort of conversion requires an applicant to identify the full value of the chattel which is being converted. In order for a court to be in a position to provide a remedy, it is necessary for Ms Munro to prove the value of the chattels. It is also possible to claim consequential losses and in some cases exemplary damages. In this case, there is no claim for exemplary damages. The evidence before the court discloses the purchase price of the chattels. This purchase price is reflected in the invoices form Vater & Co, but that is only proof of the purchase price.
There appears to be some differences of opinion about the date of the calculation of the assessment of the damages. There seems to be two alternatives which are often discussed, namely: the date of the wrong; or the date of the judgment. There is a third alternative of making an assessment of damages at some other time. I will leave that matter to one side. I am satisfied that the appropriate date to measure damages in conversion is the date of the wrong.[135] That said, I think there is also, in more modern times, a significantly more flexible approach in relation to the loss actually suffered by a wronged applicant. If, for example, an applicant could show that a valuation of a chattel at a later time than the time of the wrong would properly compensate the wronged person for the loss, then that date could be relied upon. This discussion generally involves damages assessed in a rising market in the value of the goods and the influence of inflation. There is no evidence before me on these topics and I will leave them to one side. In the case at bar, there is no evidence of the value of the goods at the time of the wrong. As I have said, the only evidence is the costs of purchase of the goods at the date of purchase. It will be necessary to hear the parties further in relation to that matter.
[135] Wade Sawmill v Colenden [2007] QCA 455.
That is important because the principles in relation to damages for conversion also recognise that if no market value can be established, the court may award damages which are equivalent to the cost of the purchase of the goods in similar condition.[136] Also, the courts generally recognise the possibility of awarding damages for consequential loss. I am satisfied that the header, the comb, the rake and the trailer have been employed by Ryan Kelly both in his farming enterprise and in his contracting business. The evidence is that from as late as 2020, the contractor paid to harvest the crop on the Kelly land was paid in the order of $26,000 for that task. There is no evidence before the court about the profit earned by Ryan Kelly by the use of the converted chattels in his own business. An example of the broadening of the scope of damages assessments under this tort is the decision of the NSW Court of Appeal that the hire value to someone such as Ryan Kelly using these chattels is properly the basis for an award of damages.[137]
[136] JE Hall Limited v Barclay [1937] 3 All ER 620 at 624 per Greer LJ.
[137] Sadcas Pty Ltd v Business and Professional Finance Pty Ltd [2011] NSW CA 267 at [78] per Giles JA.
In Strand Electric and Engineering Co Ltd v Brisford Entertainments Limited,[138] Denning LJ said at page 254:-
‘If a wrongdoer has made use of goods for his own purposes, then he must pay a reasonable hire for them even though the owner has, in fact, suffered no loss. It may be that the owner would not have used the goods himself, or that he had a substitute readily available that he used without extra cost to himself. Nevertheless, the owner is entitled to a reasonable hire. If the wrongdoer had asked the owner for permission to use the goods the owner would be entitled to ask for a reasonable remuneration as the price of his permission. The wrongdoer cannot be better off because he did not ask permission. He cannot be better off by doing wrong than he would be by doing right. He must, therefore, pay a reasonable hire. This will cover, of course, the wear and tear which is ordinarily included in a hiring charge, but for any further damage, the wrongdoer must pay extra.’
[138] [1952] 2 QB 246, CA.
In this case, I have not been able to identify any evidence to support an assessment of consequential losses on this basis. The only evidence in relation to aspects of profit/costs in connection with these chattels is an amount in the order of $26,000 paid to the contract harvester on the Kelly property. It will be necessary to hear the parties further in relation to that matter.
Counsel for Ryan Kelly submitted that there is no evidence of any right to possession of this plant and equipment. I am unable to accept that submission. He correctly submitted that the tort of conversion requires first a right to possession of the plant and equipment
I am satisfied that at all material times, including now, Ms Munro owns the plant and equipment which I have specified above. It was in the possession of the respondent by the permission of Ms Munro. I reject the submission of Counsel that the obvious conclusion is that Ryan Kelly borrowed funds to buy the plant and equipment. I have earlier made findings in relation to all of these purchases.
Notwithstanding those findings, I am satisfied that the loans in relation to each of those items purchased by Ryan Kelly form part of the loan arrangements made between Ms Munro and Ryan Kelly and that those loans are immediately repayable.
Counsel then addressed the tender book at Exhibit A1 page 345 which is a document he described as the ‘Point Riley Invoice’. He asked me to prefer the evidence of Ryan Kelly that he provided this invoice at the request of Ms Munro. I am unable to accept that evidence because I have very significant doubts about this evidence of Ryan Kelly in relation to this document. I accept the evidence of Ms Munro that she had never seen the document before. In my opinion, it is a device created by Ryan Kelly to obviate the difficulties that he saw himself being in at the time of the separation of his father and Ms Munro.
I turn finally to the question of interest. The parties’ contention in relation to interest are that Ms Munro claims that there was an agreed interest rate of 4 % whereas Ryan Kelly contends that the agreed interest rate was 3.5 % per annum. There is a peculiarity about the position taken by Ryan Kelly. No interest has ever been paid on any aspect of any part of the loan, even that amount for which he contends was the loan. No explanation was ever given about why the interest amount was not paid. Conversely, there has been no evidence given by Ms Munro that at any time she made a claim upon Ryan Kelly for the payment of interest.
At a number of levels, this may not have been surprising. Counsel placed particular emphasis upon the evidence given by Ms Munro about what was described as (a particular amount) falling into the ‘farm loan’. I consider that this was really a shorthand expression which in a very limited way expresses the relationship between parties mutually involved in a farming enterprise. I think that Counsel is correct in his description that the relationship was ‘fluid’ in nature but as I put to him at the time, this does not assist Ryan Kelly. The success or otherwise of a farming enterprise is dependent upon many variables including the vagaries of weather. These variables, in the end, demand a fluidity of approach. That is largely dependent upon the continuation of relationships and in this instance, the relationship ended both as between Ms Munro and Shane and Ms Munro and Ryan Kelly. In those circumstances, there has been no proper explanation about why no amount of interest has been paid when such an obligation has been conceded, at least implicitly by Ryan Kelly who contends for a 3.5 % interest rate. All of that said, I have rejected the evidence given by Ryan Kelly in large part, because of his lack of credibility, because his evidence was largely unreliable and in part was not truthful. In the absence of any other evidence or any other indication of an agreed interest rate, it is difficult to do more than to say that, in my judgment, because of the reliability of the version given by Ms Munro, her version in relation to interest should be preferred. I find that the appropriate rate of interest applicable in relation to these loans is 4% per annum.
In the circumstances I make the following orders:-
1.I reject the claim made by the applicant in relation to the ‘calves agreement’ as reflected in paragraph 3B and 3C of the statement of claim.
2.I accept the claim of the applicant under paragraph 4 of the statement of claim except those items which I have set out above which I reject. The total amount payable in respect of those claims is due and payable forthwith.
3.I reject the applicant’s claim in conversion in relation to paragraph 4B. I am satisfied that the amount paid forms part of the loan arrangements between Ms Munro and Ryan Kelly. That amount is due and payable forthwith.
4.I am satisfied that the applicant is entitled to immediate possession of the items described in paragraph 4C of the statement of claim.
5.The applicant is entitled to immediate possession of the items described in paragraph 4D of the statement of claim.
6.I reject the applicant’s claim set out in paragraph 4E of the statement of claim.
7.I am satisfied that the amount of $48,000 forms part of the loan arrangements between Ms Munro and Ryan Kelly. That amount is payable forthwith.
8.I reject the claim of the applicant as set out in paragraph 4F. I am satisfied that the amount of $46,000 forms part of the loan arrangements made between Ms Munro and Ryan Kelly. I am satisfied that amount is payable forthwith.
9.I reject the claim of the applicant as set out in paragraph 4G of the statement of claim. I am satisfied that the sum of $85,260 therein forms part of the loan arrangements made between the applicant Ms Munro and Ryan Kelly and is payable forthwith.
10.I reject the claim of the applicant as described in paragraph 4H of the statement of claim. The amount of $10,000 referred to therein forms part of the loan arrangements between Ms Munro and Ryan Kelly. That amount is payable forthwith.
11.I accept the claim of the applicant as described in paragraph 4I of the statement of claim and that the amount of $196,666.77 is due and payable forthwith.
12.I will hear the parties further in relation to damages, the calculation of interest and costs.
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