Nadilo v Souris

[2019] NSWSC 108

Supreme Court

New South Wales

Medium Neutral Citation:

Nadilo v Souris [2019] NSWSC 108

Hearing dates:

11, 12 and 13 February

Decision date:

13 February 2019

Jurisdiction:

Equity

Before:

Leeming JA

Decision:

1. Direct the parties within 21 days of today to bring in final orders disposing of this litigation in accordance with these reasons, or, in default of agreement, such final orders for which each contends and short submissions in support of those orders, with a view to any dispute being resolved on the papers.

 

2. Note that order 1 above extends to submissions as to whether, and if so how much, pre-judgment interest is to be allowed in respect of the plaintiffs’ entitlements to a share of the proceeds of sale of Kariong.

 

3. The orders referred to in 1 will also include such orders as to costs which are either agreed or contended for by the parties.

 4. Exhibits to be returned.

Catchwords:

CONTRACT – plaintiffs alleged oral contract between family members as to contributions to acquisition of home in 1978 – whether amounts of cash provided – whether sufficient specificity of recall of precise terms of conversation – whether intention to create legal relations – even if agreement reached, not sufficient to give rise to contractually enforceable rights and liabilities

 

STATUTE OF FRAUDS – plaintiffs alleged oral contract to execute and not revoke will concerning home – whether Conveyancing Act 1919 (NSW) ss 23C or 54A applicable – s 23C inapplicable – s 54A applicable and fatal to contract claim – Horton v Jones applied

  TRUSTS – presumed resulting trust – plaintiffs’ claimed contribution to purchase price of home – whether cash provided – whether cash provided by way of gift, loan or contribution – whether home held on resulting trust reflecting plaintiffs’ contributions – home sold and part of proceeds used to purchase smaller home – quantification of proportion of proceeds of sale which contributed to second purchase

Legislation Cited:

Conveyancing Act 1919 (NSW), ss 23C, 54A
Family Provision Act 1982 (NSW)
Limitation Act 1969 (NSW)
Succession Act 2007 (NSW)

Cases Cited:

Ashton v Pratt (No 2) [2012] NSWSC 3
Atilgan v Atilgan [1999] NSWSC 324
Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1306; 7 ASTLR 480
Brown v NSW Trustee and Guardian [2012] NSWCA 431
Celermaher Holdings Pty Ltd v Kopas [2011] NSWSC 40
Cohen v Cohen (1929) 42 CLR 91 at 96; [1929] HCA 15
Elias George Wakim v Karime Wakim [2017] NSWSC 1283
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252
Horton v Jones (1935) 53 CLR 475; [1935] HCA 7
Jenyns v Public Curator (Qld) (1953) 90 CLR 113; [1953] HCA 2
Legal Services Commission v Bridges [2014] NSWCATOD 89
Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674
Primeau v Granfield 180 F 847 (1910)
Primeau v Granfield 184 F 480 (1911)
Re Hallett’s Estate (1880) 13 Ch D 696
Re Oatway [1903] 2 Ch 356
Seanez v McLaughlin [1999] NSWSC 9
Scott v Scott (1963) 109 CLR 649; [1963] HCA 65
The Federal Republic of Brazil v Durant International Corporation [2016] AC 297; [2015] UKPC 35
Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:

D Ong, Trusts Law in Australia (5th edition, Federation Press, 2018)

Category:

Principal judgment

Parties:

Matthew Paul Nadilo (First Plaintiff)
Deborah Nadilo (Second Plaintiff)
Gloria Lakaev (Third Plaintiff)
Ilia Lakaev (Fourth Plaintiff)
Lorraine Souris (Defendant)

Representation:

Counsel:

 

L Ellison SC (Plaintiffs)
P Menadue (Defendant)

 

Solicitors:

  Heckenberg Lawyers (Plaintiffs)
Brennan Tipple Partners (Defendant)

File Number(s):

2017/270570

Publication restriction:

None

ex tempore Judgment

1. HIS HONOUR: Three of the five parties to this litigation are the two daughters, Gloria and Lorraine, and the only son, Matthew Paul, of the late Ms Katie Nadilo, who died in 2016, aged 95. Without intending or conveying any disrespect, I shall refer to them by their given names. Lorraine is the sole defendant. She is also the executrix of her mother’s will which was admitted to probate in 2017 and, save for three rings bequeathed to Gloria, is the sole beneficiary of her estate. The only substantial asset of the estate was a house at Kariong near Gosford in which Katie lived until shortly before her death. The house (to which I shall refer for concision as “Kariong”) has been sold. This litigation concerns whether the four plaintiffs, Matthew Paul and Gloria and their spouses, Deborah and Ilia (known as Ike), are entitled to any of those proceeds. However, there is no claim under the Succession Act 2007 (NSW). Nor is there any challenge to the will. Rather, the plaintiffs advance in their statement of claim entitlements to relief based on: (a) a resulting trust, derived from contributions said to have been made by them to the purchase price of a house at Bilgola Plateau (which I shall abbreviate to “Bilgola”) in 1978 and (b) a constructive trust based on a contract by which, speaking generally, Katie is said to have promised to prepare, execute and not revoke a will leaving her estate in equal shares to her three children after repayment of the contributions.

2. At the commencement of his closing address yesterday afternoon, I declined to permit Mr Ellison of Senior Counsel, who appeared for the plaintiffs, to argue a claim based on estoppel, on the basis that no such claim had been pleaded or opened upon and that the case had expressly been conducted on the basis of the issues joined on the pleadings (see transcript 3.37).

3. In addition to a defence denying the claims based on a resulting trust and breach of contract leading to a constructive trust, Mr Menadue of counsel, who appeared for Lorraine, raised specific defences based on the Limitation Act1969 (NSW) and laches, denied that there was any intention to create legal relations or any consideration for the contract between members of the Nadilo family and relied on the requirements for writing in ss 23C and 54A of the Conveyancing Act 1919 (NSW). By their reply, the plaintiffs say that their cause of action only arose upon Katie’s death, that their claim is in trust which is an exception to the requirements for writing in the Conveyancing Act and that the agreement was “Not in relation to real property but for the execution of a will containing particular provisions” (see reply para 44).

4. In order to identify the way in which the issues arising from the pleadings fall to be determined, I need to say something about the factual background. What follows is intended to be uncontroversial.

Factual background

5. Katie was born in Korčula, also known as Corcyra Melaina, on the Dalmatian Coast close to Split in what was then a newly created country of Yugoslavia in 1921. She immigrated to Australia with her parents in around 1937. She married Peter Nadilo and lived with him in Broken Hill, where he was employed as a barman. Gloria and Lorraine were the two children of that marriage, born in 1940 and 1944. Peter served in the Australian army in Papua New Guinea, but separated from his wife after his discharge in 1945 and died in tragic circumstances in 1946.

6. Katie and her two young daughters returned to her parents in Sydney and married Peter’s brother, Matthew, in 1948. They returned to Broken Hill to live with him where he was employed as a miner. The first plaintiff, Matthew Paul, was born of that marriage in 1952. In 1954, the family returned to Sydney where they operated fish shops including in Randwick, Manly and the Wynyard Arcade. Gloria and Lorraine left high school after around two or three years. Gloria married Ike in 1959. Matthew Paul completed his higher school certificate and worked first as an insurance clerk and later as a clerk in the Department of Social Security. He married Deborah in 1974.

7. Katie separated from Matthew in around 1964 and thereafter lived in rented accommodation in Brookvale, Harbord, Narraweena and Collaroy. The fish shop businesses were sold and Katie was employed in a variety of jobs, including as a cleaner. Matthew Paul lived with her while he was a student and until he married Deborah. He gave evidence that his mother “found it hard to make ends meet and on one occasion was convicted of shoplifting”. Lorraine’s evidence in response was that her mother had worked numerous jobs and always had money to provide for her children. Lorraine did not deny the shoplifting conviction nor say that she was unaware of it (which in substance was her response to many other factual matters put forward by the plaintiffs). It will not be necessary to make findings on most of the specifics of Katie’s life at this time. It does not seem seriously to be in controversy that after her separation from Matthew she was in relatively straitened financial circumstances.

8. In around 1974 Katie commenced a relationship with a widower, James George Best, known as George. He was a barman at the Harbord Diggers Club. In December 1975 the pair lived together in rented premises in Stuart Street, Collaroy. The critical events occurred in 1977 and 1978, and I shall address them and the evidence to them in some detail below. From 1978 until 1999, Katie and George lived in Bilgola, a property in their joint names. In 1989 the mortgage granted by them to the St George Building Society was discharged and their title became unencumbered by any other registered interest.

9. George died, suddenly, in the early 1990s. The parties are agreed that this took place in March 1992. However, the historical title search of Bilgola appears to show that a notice of death was registered on 17 April 1991, which suggests that he died a year earlier. Nothing turns on the discrepancy. George’s will appointed Matthew Paul as his executor. However, the latter’s unchallenged evidence is that George’s bank accounts were joint accounts with Katie and the Bilgola property was jointly held with her. Both accordingly passed by survivorship to Katie. Matthew Paul gave evidence that he obtained advice that probate was not required. George’s will was not in evidence, nor was there indirect evidence of its contents. It would have been open to Matthew Paul to adduce evidence of it and, depending on what it said, it might have provided powerful corroboration of the 1978 transaction at the heart of this litigation. However, it would also have been open to Lorraine to have required production of it by notice to produce of the document referred to in paragraph 75 of Matthew Paul’s affidavit of 4 September 2017 at any time after it had been served.

10. Katie’s second husband Matthew died in 1992. There was evidence that each of Gloria, Lorraine and Matthew Paul made a claim on Katie’s second husband Matthew’s estate after his death in October 1992. The claim was based on evidence that Matthew had provided instructions to change his will to leave part of the land at Seaforth to each of the three siblings but that the will had not been executed before his death. It is not clear from the evidence whether their claim extended to one under the (then) Family Provision Act 1982 (NSW). There was no evidence of what assets each of the siblings claimed they had at this time, if indeed such a claim was made. It was equally open to the plaintiffs and the defendant to adduce evidence, if any was available, of those matters; none was adduced.

11. In November 1982 Katie took out a “reverse mortgage” on Bilgola. Leading questions which proceeded on the basis that the reverse mortgage was for $50,000 were asked in Lorraine’s cross examination (see transcript 102.45 and 103.16), but I did not understand the evidence to establish to what extent she drew down on the equity in Bilgola of which she was by then sole registered proprietor; at any rate, I was not provided with any such reference when I inquired (see transcript 187). This mortgage was only discharged upon the sale of Bilgola in 1999.

12. Bilgola was sold by Katie in 1999. The memorandum of transfer is dated 5 July 1999 and records a price of $558,000. Katie was then a widow aged 78. She lived for some months in 1999 in the home of Matthew Paul and Deborah. There is no dispute that there was a serious falling out between Katie and the couple. Both of them gave evidence of hateful things Katie said to Deborah, whose own family life had not been free from tragedy. Lorraine gave, in para 49 of her affidavit of 25 January 2018, a different context for those statements having been made, based on conversations between her and her mother. In any event, Katie left and stayed with her sister for some weeks or perhaps months and purchased Kariong where she lived alone, as I understand it, until nearly the end of her life.

13. Katie purchased Kariong at the end of 1999. The memorandum of transfer was dated 22 October 1999 and the purchase price was $270,000.

14. Two wills made by Katie are in evidence. The first is dated 2 November 1999. It appears to have been professionally drawn, and is witnessed by a person who has also stamped the name of the firm retained by Lorraine in the proceedings and its address in Gosford underneath her signature. The will provides for all of Katie’s property, save for any motor vehicle owned by her at the time of her death and all her silverware, to pass to Lorraine (I am simplifying slightly). The will provides an explanation for the limited provision to Katie’s two other children as follows:

“I have not provided further for my children Matthew Paul Nadilo and Gloria Mary Lakaev in this my Will, except as provided for in cl 4 hereof because I have not had a proper relationship of mother and daughter and mother and son with those children for some time and they have not assisted me at all, nor have I spoken with them for some time. Further, both those children do not have any need for financial assistance and both are financially secure.”

15. That statement is very difficult to reconcile with the unchallenged evidence before me that Katie had been living earlier that year with Matthew Paul and Deborah. I shall return to this below when dealing with the evidence of Lorraine.

16. Further, this will was made at approximately the time for what appears to have been the first time in the last three or four decades of her life when Katie moved away from the Northern Beaches to the vicinity of Gosford. The timing follows what, on any view, was a serious falling out between mother and son and daughter in law. On one view, it is consistent with a perceived need to alter the existing testamentary documents which she had executed. On the other hand, it is also consistent with her not having executed any earlier will and being concerned to avoid the consequences of intestate succession.

17. The second will, which is the will that has been admitted to probate, is dated 13 January 2011. It, like the earlier will, leaves the substance of the estate to Lorraine. Under this will Matthew Paul receives no bequests or devises at all, while Gloria receives “my three rings”. It includes an explanation for the failure to provide provision for Matthew Paul (although, slightly curiously, no counterpart explanation for the seemingly very limited provision to Gloria) as follows:

“I have not made any provision for my son Matthew Paul Nadilo as he has for some time been estranged from me. He has not assisted me, kept up a proper mother/son relationship with me, nor had any contact with me for a lengthy period of time.”

Evidence relating to the acquisition of Bilgola

18. Aside from documents obtained from the Registrar General, there are no contemporaneous documents in evidence supporting the plaintiffs’ causes of action. There are no contemporaneous notes of what is alleged to have occurred in 1978 and 1999. If wills were made in accordance with what the plaintiffs were promised to them by Katie and George, they were not in evidence. In fact the only documentary evidence supportive or indeed bearing upon the plaintiffs’ claims is a letter from Matthew Paul to Lorraine dated 19 October 2016 which, among other things, refers to “my portion” of Kariong which, according to a proposal which he was making to his sister, would be, “noted on the deeds”. That letter was written decades after the events giving rise to the plaintiffs’ claimed entitlement in these proceedings and is of limited weight, save perhaps for one thing. Exhibit 4, tendered by Lorraine, is a short letter from the plaintiffs’ solicitor dated 27 January 2017, requesting a copy of the deceased’s last will and stating that his “clients intend to make a claim upon the estate for further provision under their late mother’s will”. To the extent that something was sought to be made in cross examination of the failure in that letter to claim any entitlement by way of resulting trust or contract, the fact that it post-dates the letter dated 19 October 2016 tends to detract from that submission. Of course, that of itself (that is to say the qualification upon what might be implied from what was not said in exhibit 4) does not of itself serve to advantage the plaintiffs’ case.

19. Each of the four plaintiffs swore affidavits which included elaborate recitations of the conversations which they said they either participated in or were present at, in (principally) 1978 and 1999. In some cases, the recitation of conversations, expressed in direct speech, although the deponent invariably stated that words “to the following effect” had been employed, occupied up to three pages. The subject matters of the most important conversations were as follows:

1. Conversations in around early 1978 in which Katie and George advised the plaintiffs of their desire to buy Bilgola and their need for money. In those conversations amounts of $8,000 (in the case of Matthew Paul and Deborah), and $5,000 (in the case of Gloria and Ike) were mentioned.

2. Conversations between Matthew Paul and Deborah and the latter’s parents about obtaining a loan from them for $8,000 and dealings between Gloria and Ike and two friends of theirs to borrow $4,500 of the $5,000 settled upon.

3. A long important meeting involving all of Katie, George, Matthew Paul, Deborah, Gloria and (and there was some divergent evidence about this) Ike in the Collaroy milk bar then operated by Gloria and Ike at which the essence of the transaction was agreed upon. That conversation, as disclosed in the affidavits, invariably identified a purchase price for Bilgola of “$64,000 or $65,000,” an amount that could be borrowed from a financial institution, which invariably was $34,000, a statement that George had $17,000, and references to the $8,000 and $5,000 to be contributed by two of Katie’s children and their spouses.

4. After the transaction had proceeded, Matthew Paul and Deborah gave evidence of the need to repay Deborah’s parents in early 1980 because her parents were in financial distress, and the inability on the part of Katie and George to do so. The result, according to Matthew Paul and Deborah, was their need to sell their own home at Mona Vale and purchase a property at Wyoming. Both said that the Mona Vale property was sold for $96,000 and the Wyoming property purchased at $70,000, and gave evidence, to which I shall return, that it was from the difference that an amount of $8,900, being the $8,000 lent plus $900 by way of interest, was repaid to Deborah’s parents.

5. In 1999, at the time that Bilgola was agreed to be sold, but, before settlement, there was evidence of conversations that the shares to which the plaintiffs were entitled would be preserved in the event that Katie purchased a further property for herself.

20. By way of example, Matthew Paul gave evidence of the last mentioned conversation as follows:

“Following the sale of the Bilgola Plateau Property and prior to the Deceased moving from that property and in the presence of both Gloria and Lorraine, I had a conversation with the Deceased in words to the following effect:

M. Paul: Mum, now that you have sold Bilgola, are you proposing to pay Gloria and me our share in the property?

Deceased: I would rather keep that money and put it into the next house that I buy. If I can do that, it will leave the extra money for me to live off.

M. Paul: Mum, that’s okay with me as long as you understand that Gloria’s and my share in the Bilgola Plateau Property will be going into the next house that you buy.

Deceased: Yes, I agree with that.

M. Paul: We won’t be able to get our share until that property is sold or you die.

Deceased: Yes, that’s fair. Because you and Gloria will be paid out first, there probably won’t be much left over from the sale of that house when I die to share between the three of you. That’s why I want to leave all my beautiful furniture to Lorraine.

M. Paul: Gloria, is that okay with you, as it is okay with me.

Gloria: Yes that’s okay with me.”

21. It will be seen that Matthew Paul stated that Lorraine was present during that conversation. Lorraine denied that the conversation had occurred, in para 46 of her affidavit, and in his affidavit in reply, Matthew Paul gave further evidence of a conversation around that time, in para 9(c), which is as follows:

“In 1999, after the Deceased had exchanged contracts for sale for the Bilgola Plateau property, Deborah Nadilo and I attended the Bilgola Plateau Property to visit the Deceased. Both Lorraine and Gloria were present during this visit as they were helping the Deceased pack her belongings. During this visit, in the presence of Gloria and Lorraine, Deborah and I had a conversation with the Deceased in words to the following effect:

M. Paul: Mum, the house has been sold. How do you plan to pay Gloria and I our share of the property?

Deceased: I think it would be better if I can keep all the money from the sale and use it to buy a better house and can live off what’s leftover.

Deborah: Yes, you mentioned this before. Matthew and I agree to our share being transferred to your next house on the same basis that when you sell it or pass on, we will get paid our share from the sale.

M. Paul: Gloria, do you agree?

Gloria: Yes, I am happy for Ike’s and my share to be transferred to the new property as well. As long as we get our share in the end.

Deceased: I’ve told you that you will get your shares from the proceeds of sale of the house first. I will divide what’s leftover equally in my will to you three children. Lorraine, I know there won’t be much leftover so you can have my beautiful furniture. That’s fair.

Loraine did not respond or make any comments during the conversation.”

22. Matthew Paul’s affidavit in reply was dated 20 February 2018. So too was Deborah’s first affidavit, which also addressed the same conversation, as follows:

“Matthew Paul and I attended at the Bilgola Plateau Property to visit the Deceased following the exchange of contracts for its sale but before completion. The Deceased was packing up her belongings with the help of her daughters, Gloria and Lorraine, a conversation occurred in the presence of Lorraine and Gloria in words to the following effect:

M. Paul: Mum, now that the house at Bilgola Plateau has been sold, Gloria, and I want to talk to you about our share of this property.

Deceased: You know that I want to keep all the money from the sale so I can buy another house. I want to have left over money to live on. Your shares can be paid from the next house, the same as we agreed before.

M. Paul: Gloria are you happy if both our shares are transferred to the next house mum buys on the same conditions as before? That is, when Mum dies the house will be sold and we will then be paid our shares first and the rest is divided equally between all of us.

Gloria: That’s fine with me. We will do it as we have done it this time and Mum puts it in her will.

Deceased: Yes, we will do the same thing as now. I will leave you both your share each in my will. The rest is then to be divided equally between you three children. But I want Lorraine to have my beautiful furniture because there won’t be as much left over for her.

Lorraine although present, did not speak or make any comments during this conversation.”

23. Lorraine was not said to have been involved in any of the conversations in 1978 pursuant to which contributions have said to have been made to the purchase of Bilgola. However, the plaintiffs did contend that Lorraine was present on a number of occasions when their contribution to the purchase price of Bilgola was discussed. Examples of this are found in paragraphs 9(a) and 9(b) of Matthew Paul’s affidavit of 20 February 2018:

“a. In 1978 and before the Deceased purchased the Bilgola Plateau Property, I had a telephone conversation with Lorraine in words to the following effect:

M. Paul: Mum and George are short of the money they need to buy Bilgola Plateau. Deb and I are going to contribute $8,000 to help them purchase it. We’ve had to ask Deb’s parents to loan the $8,000 to us to give to mum. Gloria and Ike are also contributing $5,000 to make up the purchase price of $64,000.

Lorraine: It’s great that mum can buy a house and it’s really good that you and Gloria are helping mum.

b. In late 1980, I had a conversation with Lorraine when she visited me at our home at Mona Vale where I said words to the following effect:

Lorraine: You have a beautiful house here Matthew.

M. Paul: Yes, we have. Deb really loves it. Unfortunately, we will have to sell as Deb’s parents are really strapped for cash. We have to repay the money to them which they lent us so mum could buy Bilgola Plateau.

Lorraine: That’s awful!

M. Paul: Unfortunately it is, but that’s what we have to do.”

Cross examination of the parties

24. The five parties were cross examined over almost two full days. It was squarely put to each plaintiff that his or her memories of conversations in 1978 and 1999 were faulty, and indeed that they had “collaborated” in preparing their evidence, and that in fact no contribution had been made by any of them towards the purchase of Bilgola.

25. It is convenient to deal with each married couple’s evidence together, principally because of the different sources of funds to which they depose their contributions of $8,000 and $5,000 were derived, even though it will be apparent from above. The testimonial evidence of the plaintiffs was served in two tranches: first, in September 2017, affidavits in broadly similar form from Gloria and Matthew Paul, followed in February the following year by affidavits in reply from them and fresh affidavits from the siblings’ spouses.

(a) Matthew Paul and Deborah

26. Matthew Paul was cross examined quite extensively over around half a day on his two substantive affidavits which necessarily dealt with the undocumented conversations between him and Deborah and his mother and George in 1978, and between him, his wife, Gloria, Lorraine and his mother in 1999, as to the proceeds of sale of Bilgola being used to acquire Kariong. He maintains steadfastly that he had not consulted either with his wife or his sister as to any of the events in the affidavit prior to executing it. A great deal of his cross examination involved a careful comparison of the same conversation as deposed to by him and other plaintiffs, with the suggestion that, contrary to his evidence, he had spoken with other plaintiffs prior to making his affidavit.

27. Matthew Paul resisted any suggestion that he had spoken with his wife about the matters in his affidavit. He was also resistant to the cross examination in other respects. One example is the focus of the cross examiner upon a conversation when his mother and George first requested some assistance from Matthew Paul and Deborah (the first conversation summarised above). In his first affidavit Matthew Paul gave evidence that the conversation was to the following effect:

“Deceased: As you have now moved to Mona Vale, George and I want to buy a property near you. We have found a property on Bilgola Plateau that we would like to buy. George has $17,000. As you know, I don’t have any money. George has been to the bank, but because of our age, they will only lend him about $34,000.

M. Paul: Where is this property, and how much will it cost.

Deceased: It is located in Daly Street, Bilgola Plateau. We think we can purchase it for about $64,000 or $65,000.

M. Paul: How much extra do you need.

Deceased: At present, the only way that George and I can buy this property is if you and Deborah give me about $8,000 to $10,000. I have spoken to Gloria and Ike and although they don’t have the money now, they are going to save up the money they usually give to me and contribute $5,000. If you and Deborah could give us $8,000 to $10,000, with the money we can get from the bank, we could purchase the home.”

28. Exhibited to his affidavit were both the memorandum of transfer (which disclosed a consideration of $64,000) and the memorandum of mortgage (which disclosed a loan from the St George Building Society in the amount of $34,000). It was put to Matthew Paul that he had those dollar amounts from the 1978 contemporaneous documents in mind and used them to refresh his memory as to the dollar amounts which had been mentioned in the 1978 conversation. Matthew Paul denied reading either document. The gravamen of his denial was that he claimed to have a clear recollection of his mother mentioning the amounts of $34,000 and “$64,000 or $65,000”, unaffected by those documents:

“Q. And you had that in front of you when you were swearing your affidavit?

A. No.

Q. It’s attached to your affidavit; isn’t it?

A. Well, it might have been but I didn’t read it.

Q. I put it to you that you did read it when you composed paragraph 48 of your affidavit?

A. I did not.

Q. And that is a reason why $34,000 is mentioned in that paragraph?

A. I hadn’t read it. I didn’t read it at that time. I’m reading it now.

Q. You also had the purchase price of the property at $64,000 in front of you when you composed

A. No.

Q. –paragraph–

A. No, I did not, sir.

Q. –48 of your affidavit?

A. No, I did not, sir.

Q. Could you please look at Court book 70?

A. Yes.

Q. You see it refers there to a memorandum of transfer?

A. Yes.

Q. And that’s the memorandum of transfer of the Bilgola Plateau property; isn’t it?

A. That’s correct.

Q. And that says that the purchase price was $64,000; doesn’t it?

A. It does.

Q. And you had that document in front of you when you were creating paragraph 48 of your affidavit?

A. No, I did not.

Q. You sound very sure about that, are you completely sure that you did not have, see that document before you swore your affidavit?

A. I am.

Q. But it’s attached to your affidavit?

A. It may be attached to it, but I didn’t read it.

Q. I put it to you–

A. That attachment.

Q.  I put it to you what you did was; that after using those two figures which can be found at Court book 70 and Court book 72, you went back from there to create the other two figures which is–

A.  Sir, I did not.”

29. Similar questions were asked of other witnesses, but it is convenient to say immediately that I do not think that I can ignore the reality that any competent solicitor advising the plaintiffs when framing their affidavit evidence would direct his or her client to the $34,000 figure and the $64,000 figure mentioned in the contemporaneous documents, in the event that their recollection of the conversation was materially different from those figures. Further, the copies of the memorandum of transfer and the memorandum of mortgage exhibited to Matthew Paul’s affidavit were both dated 2 June 2017 (see their headers) approximately two months before the affidavit was finalised. This inference is that they were obtained by the plaintiffs’ solicitors when preparing their clients’ case.

30. Returning in particular to Matthew Paul, there is nothing of particular significance from his perspective of either of the amounts of $34,000 or $64,000, but especially the former. (It may be acknowledged the total consideration paid might have been of significance to him because, as it happens, on his case he and his wife contributed exactly one eighth of the purchase price. However, nothing is made of that fact in his affidavit.)

31. I think it is more likely, by far, that either directly or indirectly (through his solicitor) Matthew Paul became aware of the total price paid for the Bilgola property as shown in the 1978 document and the amount lent by the building society, as shown on the mortgage, and used those two amounts to confirm his recollection of the terms of the conversation with his mother and George. I find it very difficult to accept his evidence that he did not read the mortgage exhibited to his affidavit, in the sense that he did not read the figure of $34,000 on the mortgage (I would readily accept that he did not read the detail of the covenants in the mortgage document). But I have difficulty in accepting that he has a distinct recollection of what he was told in 1978 as to the amount the building society would lend to his mother and George as opposed to what appears on the 1978 document.

32. Next, although it was put to Matthew Paul that if funds were borrowed from Deborah’s parents, it was for the purpose of permitting them to acquire their Mona Vale property, and that it would be unusual to ask one’s wife’s parents for a loan for one’s own mother’s property, and not for the couple’s property, it does not strike me as in any way remarkable that the couple might approach her parents for the purpose of assisting Katie and not do so for their own financial advantage.

33. Ms Deborah Nadilo gave her evidence in a careful and persuasive fashion. She made some appropriate concessions. For example, unlike her husband, she conceded that the pair had discussed the significant matters concerning the acquisition of Bilgola and Kariong prior to preparing her affidavit. These matters, after all, were highly significant matters in their lives (to be fair, it is quite possible that there was an ambiguity in the counterpart question when asked of Matthew Paul which he may not have understood to have extended to the years and indeed decades prior to the commencement of these proceedings).

34. Deborah readily accepted that there were divergences between her and her husband’s recollection of some conversations and differences in expression between the two of them. She corroborated her husband’s testimony that around half of the $8,900 repaid to her parents came from the sale of her husband’s car (a Honda Civic) with the balance coming from the sale of their home. Matthew Paul conceded in cross examination that in this respect there was an error in his affidavit. Deborah’s affidavit, unlike her husband’s, does not, as I read it, contain the same error, because, although like his, it was silent as to the sale proceeds of the car, it did not assert that the whole of the $8,900 was derived from the proceeds of sale of the Mona Vale home (see para 30 of her affidavit).

35. Deborah also gave what to my mind seemed to be convincing responses to the questions of why the financial arrangements between Matthew Paul and Gloria and their spouses lending to their mother and George had not been documented more formally. She also gave an explanation for why Lorraine, alone of the deceased’s three children, did not contribute to the purchase of Bilgola.

36. Deborah maintained that she too had a clear recollection of the $34,000 being mentioned as opposed to deriving that figure from the contemporaneous documents:

“Q. You’ve also mentioned a figure of $34,000, during that conversation, haven’t you?

A. Yes.

Q. Where does that figure come from?

A. Because that was the figure, the $34,000 is the mortgage. And that was the figure that was talked about.

Q. Are you saying, that without reference to any documents whatsoever, you can remember a figure of $34,000, being mentioned during that discussion?

A. When I was, sat down to write my affidavit, and I had to think about it, yes.

Q. You in fact had a copy of the mortgage in front of you, didn’t you?

A. I have seen a copy of the mortgage document, yes.

Q. That is why you put $34,000 in that conversation?

A. No, it’s not because I’ve seen the mortgage document, it’s because I can remember those figures quite clearly.

Q. Even though they were only mentioned by George in a conversation?

A. They were mentioned in several conversations with Katie. In several conversations with Matthew and I. Because when I asked how were they going to afford this, how much money. Because we’d been through similar processes in buying the unit, in buying Mona Vale. We had to work out how much money you could borrow. What your various costs were, and then, what property could I afford to buy.”

37. It was put to Deborah that conversations concerning the contributions of $8,000 and $5,000 in the presence of Lorraine some 25 or more years ago could not possibly be recollected. I must say that that submission or contention is not one that I find accords with everyday experience. In my view, it is a somewhat remarkable thing in a case like this where it is said that only two of the three children provided financial assistance to their mother. In such circumstances, the fact that the mother expressed gratitude in the presence of the third child is something which is sufficiently remarkable which could be remembered after many, many years.

(b) Gloria and Ilia (Ike) Lakaev

38. Ms Gloria Lakaev was cross examined for about two hours, including on the impossibility of her having a clear recollection of the words said many decades ago and of the textual similarity with parallel conversations in Matthew Paul’s affidavit, especially his and her first affidavit which were executed only a day apart. At times she was quite emotional in responding to the questions, including when it was put to her that she in fact did not borrow $5,000 in order to provide to her mother.

39. In light of the submission which I shall call the “urtext” submission made by the defendant, it is worth noting now the following seemingly small points in her affidavits. Gloria has a particular use of the first person pronoun. For example, she referred to “the deceased continually requested both Matthew Paul and I to provide her with money”, (para 51, emphasis added); “the deceased continued to request and received from Ike and I money on a weekly basis”, (para 69, emphasis added) and, significantly, in describing the conversation in July 1999 following the sale of Bilgola, she recounted a conversation as follows:

“Matthew Paul: Mum, as you’ve now sold the Bilgola Plateau property can you pay Gloria and I our share of the purchase price?” (para 81, emphasis added).

40. Exhibit 3 was one of four helpful exhibits supplied by the defendant and provided to the plaintiffs during cross examination comparing the most similar portions of the conversations to which they deposed with each other. Exhibit 3 compared the July 1999 conversation to which Gloria deposed to Matthew Paul’s account of the same conversation. In his affidavit he said the conversation was: “Matthew Paul: Mum, now that you have sold Bilgola, are you proposing to pay Gloria and me our share in the property?” (para 87, emphasis added). This was one of the conversations which was said to have occurred in the presence of Lorraine.

41. Both affidavits were witnessed by the same solicitor and were executed on consecutive days. On any view there is a substantial similarity between many of the conversations to which both deposed, although the accounts are also replete with minor differences. It is to be recalled that both deponents were seeking to recall identical conversations in most respects, although there are occasions when they are attempting to recall the words used by Katie to describe the same thing separately to each of the siblings.

42. I was taken in submissions to decisions dealing with “cut and paste” affidavits, with which courts, sadly, are from time to time familiar. It is of course a very serious thing for affidavits of separate witnesses deposing to controversial topics to be prepared in a cut and paste manner, and the consequence is a very serious attack upon the credibility of at least some of the witnesses concerned: see, for example, what was said by Palmer J in Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674 at [90], and Ward J (as her Honour then was) in Celermaher Holdings Pty Ltd v Kopas [2011] NSWSC 40 at [183]–[186]. Perhaps the most detailed account is that given by Sperling J in Seanez v McLaughlin [1999] NSWSC 9 at [38]–[40]. However, enough has already been said by me and reproduced above to make it plain that this is no, or at least no ordinary, case of “cutting and pasting” of affidavits. In particular, the (in itself utterly insignificant differential) use of the first person pronoun when Matthew Paul and Gloria deposed of the same conversation with their mother in July 1999 makes it plain at the very least that individualised attention has been given at the level of the particular words used such that the seriously adverse inferences to which Palmer J, Ward J and Sperling J referred, are not, or at least not directly, available here.

40. The fact that Gloria’s affidavit consistently makes the same grammatical error in relation to the (otherwise of miniscule importance) use of the first person pronoun, is, to my mind, a factor which powerfully tells against the accusation that they had “collaborated” prior to executing their affidavits, at least at the level of detail of the individual conversations to which they deposed. Of course, it does not stand in the way of a more generalised collective agreement by the plaintiffs as to the times, places and gravamen of what was said. Nor, of itself, does it preclude there having been a single original version of the conversation, which was altered in relatively minor respects when the plaintiffs’ affidavits were prepared.

41. If there were no differences at all between the separate accounts of conversations which occurred roughly two and four decades ago, that of itself would be a strong indication that no independent attention had been given by each deponent to their recollection, with the result that the value of both would be considerably diminished. There were differences, some of them material.

42. All of that said, and without intending to convey any criticism, but also despite the protests of both Gloria and Matthew Paul when confronted with this fact, the preparation of their affidavits is likely to have occurred not wholly independently, but with the assistance of a lawyer, who had first familiarised himself or herself with the contemporaneous documents, in this case the memorandum of transfer and the memorandum of mortgage which were exhibited to each affidavit.

43. Mr Ilia Lakaev, who is known as Ike, was born in 1936 in Yugoslavia and I understood him to say (more quickly than the transcript was able to capture), that he had lived through the war in Europe and refugee camps and immigrated to Australia without a word of English. His English was imperfect but fluent. He was cross examined forcefully and rejected the submission that he had no recollection of the events of many decades ago. However, the gravamen of his evidence, as I understood it, was that he did make concessions of an inability to recall details.

44. One matter which has troubled me was that both Matthew Paul and Deborah maintained that the $8,000 in cash borrowed from Deborah’s parents was not counted. Possibly, the questions were framed so that they were confined to the money not having been counted in the presence either of Deborah’s parents or of Katie and George. It does seem very strange that at no time would Matthew Paul and Deborah check that they had in fact been handed $8,000 and that they were in fact handing that $8,000 to Katie. If either Deborah’s parents, or Katie and George detected an error, then they would be placed in a difficult position if, as was their clear evidence before me, the amounts had not been counted by them at any time.

(c) Lorraine

48. Lorraine sat through the entirety of the cross examination of all four plaintiffs, as was her right. I mean no disrespect but to my observation she found it difficult to answer even relatively straightforward questions asked of her. The following is representative:

“Q. In your affidavits, your brother and sister give evidence of quite a number of conversations?

A. I used to keep Matthew informed about everything to do with my—

Q. Right. And you deny most of these conversations, do you remember that in your affidavit? You just deny the conversations took place?

A. With whom? I don’t--

Q. Matthew, Gloria and your mother?

A. No, when mum was in Kariong, mum didn’t contact Matthew at all.

Q. No, but I’m talking about back in 1978, back in 1992?

A. Well they probably did. They probably had their - look, I didn’t say, “When did you speak to Gloria? When did you speak to Matthew?” They probably did. They probably had little chats on the phone, whatever they did.

Q. Would it be like this, you--

A. And I was far away, don’t forget. I lived on the other side of the harbour. I lived a long way away, and I wasn’t there all the time. They lived close by.

…

Q. Would this be a fair description of your family, and if you disagree I’m sure you’ll say so?

A. Yep.

Q. You had your relationship with your mother?

A. Yep.

Q. Matthew had his relationship with his mother and Gloria had her relationship with her mother. There was a bit of crossover, but really three

children living their own lives?

A. Exactly. Exactly.”

49. I had made it clear that in a case such as this where the litigants were at issue as to whether a large number of conversations to which they deposed had occurred and if so their terms, and had exchanged responsive affidavits (in the case of Lorraine) and affidavits in reply (in the case of the plaintiffs) that the witnesses did not need to be confronted with every contradiction (see transcript 64.20–35). Counsel acquiesced to that course. My understanding of what Mr Ellison was seeking to do in the cross examination reproduced above was to confront Lorraine with those discrepancies in an (appropriately) rolled-up fashion.

50. I bear in mind that Lorraine’s evidence was that she had a close relationship with her mother at least in the last 15 or so years of her mother’s life. She gave evidence that her mother denied that her other children had done anything for her, which is consistent with what appears in the passages in the wills which I have referred to above. An evaluation of Lorraine’s denial that she had heard some 20 years earlier a conversation in which the plaintiffs and Katie had spoken of the children’s contributions to the purchase price of Bilgola, or the entitlements being preserved when Kariong was bought, needs to bear in mind the fact that for the last 15 or so years, there is no reason to doubt that Lorraine had been told by her mother, repeatedly, that no such contribution had been made.

Resolution of central facts

51. I turn to the resolution of the central facts in this litigation. I indicated during closing submissions that I proposed to proceed on the basis of considering (a) whether in fact cash had been provided in 1978 by the plaintiffs to their mother, (b) if so, what was the legal character of that contribution and (c) my evaluation of the evidence going to the conversations in 1978 and 1999 summarised above. The reason for doing so is that there are qualitative differences between evidence of conduct which is said to have occurred and evidence of conversations which are said to have occurred. For one thing, there is a difference in the applicable legal principles (the familiar principles stated by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 apply to conversations):

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

52. Secondly, as is clear from the plaintiffs’ resulting trust and contract cases, the evidence applies differently in each cause of action.

53. In taking this approach I am by no means attempting in some piecemeal fashion to evaluate parts of the evidence separate from the others. Rather, it is necessary to start somewhere, and the simplest contested fact is whether or not amounts of $8,000 and $5,000 in banknotes were provided some 40 years ago by two of the deceased’s children to her.

54. In resolving whether this occurred, I need to and do bear in mind two related matters. First, as Campbell JA, said in Brown v NSW Trustee and Guardian [2012] NSWCA 431 at [52]:

“The onus would be on the Appellant to satisfy the court on the balance of probabilities that John received the sale proceeds on the basis that he would hold the house purchased with those proceeds on trust for Ian. To satisfy an onus of proof on the balance of probabilities is not simply a matter of asking whether the evidence supporting that conclusion has greater weight than any opposing evidence. As well, both under the common law and also under s 140 Evidence Act 1995, the evidence must be enough to enable the court to feel actual persuasion that a particular fact is so: Helton v Allen (1940) 63 CLR 691 at 712; Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262 at [136]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v ACCC [2007] FCAFC 132; (2007) 162 FCR 466 at [31]; R v Galli [2001] NSWCCA 504; (2001) 127 A Crim R 493 at [55]; Nguyen v Cosmopolitan Homes [2008] NSWCA 246, McDougall J at [55], McColl and Bell JJA agreeing. I respectfully agree with the observation in Cross on Evidence, 8th Australian edition (2010) LexisNexis [9130] and footnote 184 that “according to ALRC 26 [998], the provision does not require actual belief; but that is not what the language says”. What s 140(1) says is:

‘In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.’ (emphasis added).

It is perfectly possible for there to be a scrap of evidence that favours one contention, and no countervailing evidence, but for the judge to not regard the scrap of evidence as enough to persuade him or her that the contention is correct.”

55. Secondly, in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 789, McLelland CJ in Eq referred to the proposition that:

“where, as here, a claim is based on communications with the deceased person, the Court will treat uncorroborated evidence to such communications with considerable caution.”

56. True it is, as Mr Ellison emphasised, that in a sense there is corroboration between all four plaintiffs of the conversations they had with Katie and George, but either that principle or an analogous principle applies in a case such as this, and it extends not merely to communications, but also to conduct such as providing $13,000 in banknotes.

57. I understood it to be common ground that in the years prior to 1978 Katie had been living in rented accommodation. The conveyancing documents established that Katie and her partner George became registered proprietors of Bilgola in 1978. The purchase price was stated on the memorandum of transfer to be $64,000. There is no doubt that the St George Building Society lent $34,000 towards that purchase, secured by a registered mortgage on the property and that that loan was a return of 15 years. One document in evidence suggests that registration took place on 20 July 1978. It is therefore incontrovertibly true that from some source, Katie and George procured slightly more than $30,000 (the balance of the purchase price, plus other expenses of the conveyance such as stamp duty) either prior to or shortly after settlement which appears to have been on 21 April 1978 (the date of the memorandum of transfer).

58. The conveyancing file was not in evidence (it appears that the lodging party was JEA Florance & Florance, Solicitors, at Manly). Mr Ellison suggested that that firm had run into professional difficulties, and his suggestion is supported by what is said in Legal Services Commissioner v Bridges [2014] NSWCATOD 89 at [15], but there is no evidence before me of that.

59. It is by no means inherently improbable that (a) St George Building Society in the significantly more regulated regime that applied in 1978 was unwilling to lend more than $34,000, and (b) Katie and George were unable to obtain the balance from their own funds. The sworn evidence of each of the four plaintiffs is that they supplied $8,000 and $5,000 respectively in banknotes to contribute to that purchase price. In each case their evidence is that they borrowed from friends or relatives in order to do so. In each case their evidence is that the funds were provided in cash – principally $20 notes.

60. For the following reasons, I accept the evidence of the four plaintiffs that they did provide cash to Katie and George in early 1978 in the amounts of $8,000 and $5,000.

61. First, while I am highly conscious of the fallibility of the impressions given by a witness giving evidence and the limitations of a judicial officer in seeking to distinguish truth from falsehood, I was impressed with the genuineness of the four plaintiffs’ evidence. I was especially impressed by their differentially emotional responses when they were fairly and squarely confronted with the defendant’s case, which was that this transaction did not take place. The cross examination was vigorous, and their responses were differentiated. It is possible that their responses did not reflect their truthful recollection, but in their varied ways they had a powerful effect.

62. The witnesses who gave evidence before me over the better part of yesterday and Monday were four people in their 60s and 70s with quite different backgrounds. Each told his or her story in his or her own way. It is true that Gloria and Matthew Paul, and to a somewhat lesser extent Deborah and Ike, clung to aspects of their affidavit in a way that I regard as implausible. In particular I mean by that the reference to their having today a clear recollection of the actual words used in conversations two and four decades ago. However there are at most three possibilities in respect of the evidence as to the cash payments in 1978. The first is that what the plaintiffs say is true as to the handing over of the $8,000 and the $5,000. The second is that those banknotes were not handed over, but that through the passage of the years all four witnesses have come genuinely to believe what in fact is a badly distorted recollection of what occurred. The third is that all four ladies and gentlemen are perjuring themselves.

63. I regard the second, intermediate alternative, although theoretically available, as most unlikely. The amounts of money concerned back in 1978 are very, very large. The financial circumstances, so far as disclosed by the evidence as I could see, of all four plaintiffs were relatively straitened. It seems most difficult to accept that all four witnesses could genuinely believe what they were telling me but that not to be the truth.

64. Secondly, in the case of Matthew Paul and Deborah, there was put to them the possibility that while they had borrowed an amount of money from Deborah’s parents, that was not for the purpose of contributing to Katie and George’s acquisition of Bilgola, but rather to assist their own acquisition of their home at Mona Vale. It is true that the two properties were each acquired at approximately the same time, Mona Vale being a year or two earlier than Bilgola. But the difficulty with accepting that explanation is that both Matthew Paul and Deborah gave evidence not only of the (highly memorable) event of borrowing money from Deborah’s parents which, in the case of a (relatively new) son in law, was apt to be a very memorable occasion, not to mention perhaps somewhat embarrassing, but also they gave evidence of the on provision of that money to Katie and George. In other words, telling against this second, intermediate explanation of the evidence of Matthew Paul and Deborah is the fact that there was not one occasion in 1978 when $8,000 was in their hands but two separate occasions in two separate places.

65. Thirdly, there were textual errors in the affidavit evidence about this and some of substance including difference in the witnesses’ recollections of whether Ike was present at the most important meeting at the Collaroy milk bar in 1978. The fact that there were those differences in my view tells against the very serious conclusion that those four witnesses were perjuring themselves.

66. Fourthly, it does not seem inherently improbable that in circumstances where all Katie’s children from time to time provided money to their mother, but when an opportunity presented itself for her for the first time in decades to leave rental accommodation and acquire a house of her own with her relatively newly found partner George, the children would, if they could, seek to assist.

67. Fifthly, I do not regard the absence of any contemporaneous documentation as fatally telling against acceptance of their evidence that cash was transferred in early 1978. In part, that is a consequence of my understanding of the cultural background of the family. In part, it reflects the fact that the transaction was not a commercial transaction done out of a desire to make profit, but done in order to seek to achieve what all regarded as something which is very much in the best interests of a mother whose life to date had been harsh and full of vicissitudes.

68. Sixthly, I have regard to the relative modesty of the claim. If no money was in fact provided in 1978 and, as the defendant submits, this is a fabrication by all four plaintiffs in order to obtain a financial advantage to which they are not entitled, why then confine their claim to the relatively modest amount of $13,000 when plainly at least $30,000 was required in early 1978 to supplement the funds established to be leant by the Building Society?

69. Seventhly, as I have mentioned above, the fact that Lorraine denied ever learning of any of this until service of the affidavits does not, in the circumstances of this case, stand in the way of my acceptance of the plaintiffs’ evidence. I repeat that Lorraine’s evidence is to be assessed in circumstances where for the last 15 years she was, according to her own evidence which I accept, told by her mother that no such contribution by the other children and their spouses had been made, when Katie was 79 years old, had seriously fallen out with her son and his wife and had made an inaccurate statement in her 1999 will about the assistance she had received from them.

70. Accordingly, I accept that the plaintiffs have established to the civil standard that in early 1978 they did provide respectively $8,000 and $5,000 in cash shortly before Katie and George completed the purchase of Bilgola.

The legal character of the payment of $13,000

71. As Mr Menadue correctly submitted, the finding I have just made is not sufficient to make out the plaintiffs’ case. It is next necessary to evaluate the legal character of the banknotes handed over to Katie and George in 1978.

72. First, if they were by way of gift, the plaintiffs’ case will fail. I do not accept that this was a gift. $13,000 in 1978 was an immense amount of money, particularly given the financial circumstances of each of the plaintiffs. It would be absurd for the plaintiffs, with all the goodwill in the world that they may have owed their mother, to have made a gift of that size, to be used for whatever purpose Katie desired. The size and timing of the provision of the banknotes powerfully suggests it was for the purpose of acquiring Bilgola.

73. Secondly, if the $13,000 was provided by way of loan, then, no differently from the loan provided by St George Building Society to Katie and George, there can be no resulting trust in favour of the lender. But in my view the inherent probabilities very much tell against characterisation of the $13,000 as a loan.

74. In early 1978, Katie was 57. George’s age was not established on the evidence but I proceed on the basis that he was approximately the same age or older (it is known that he was a widower and that he predeceased Katie by more than two decades). Both Katie and George had relatively poorly paid jobs and no other obvious source of income. They took out a mortgage with a term of 15 years and were obliged to repay principal and interest over that period of time. As it happens, the pair were able to repay that mortgage in only 11 years. But in 1978, there can have been no real expectation that the mortgage to St George Building Society would have been repaid in less than a decade. It follows that in 1978 there was every possibility that both Katie and George would have retired from employment before the Building Society was repaid.

71. All of this very much tells against the $13,000 being a loan. If it were to be characterised as a loan one needed to address when and how it was to be repaid. The fact that it seems most impracticable that any of the amount could be repaid in the next decade is, in my view, a powerful consideration telling against that being the correct legal characterisation of the cash handed over in 1978.

72. All four plaintiffs give evidence that there was talk between them and Katie and George about the latter each creating a will. To be clear, in dealing with this aspect of the conversation, I am referring merely to the mention of a will, quite distinctly from language sufficient to create contractual rights and obligations to prepare, execute and not revoke a will. In my view, tending to corroborate the conclusion that there was talk of a will in 1978 is the fact that in 1999, shortly after moving away from the Northern Beaches of Sydney to the outskirts of Gosford and, I would infer in the absence of any other evidence on this point, meeting with a brand new solicitor in Gosford at the time, Katie was concerned to execute another will.

73. I find that there was mention of a will at the time it was agreed to provide the $13,000 to Katie and George. The will was to deal with the real property or its proceeds that was the subject of the provision of the $13,000. Although not decisive, that further confirms to my mind that the context of the provision of this cash was by way of contribution to the purchase price of a property, rather than by way of loan or gift.

74. I have in the foregoing referred to three possible characterisations, namely, gift, loan, and contribution to purchase price. No other possible characterisation was propounded by any of the parties.

Was there a contract to make a will?

79. It is one thing to find, as I have found, that there was discussion at the time the $13,000 was provided to Katie and George of a will. It is entirely another to find that there was an agreement to make a will, and a third thing again for, in the circumstances of an inter-familial transaction, for such “agreement” to be one which gives rise to contractual rights and obligations – to put it bluntly, including the right to sue for damages if the promise is not kept. It is for that reason that courts have repeatedly said that not readily in family arrangements, particularly informal family arrangements, will be there discerned the requisite intention to enter in to contractual relations. It is also at this point when it is necessary to observe closely what McLelland CJ in Eq said in Watson v Foxman.

80. If there were evidence before me which I accepted that, say, one of the plaintiffs said to Katie and George, “Just to be clear, what we’re doing now binds us all contractually and if anyone doesn’t comply with their obligations they can be sued in a court of law and sued for damages or specific performance,” and all of the other participants to the conversation had said yes, then that would be powerful evidence that binding contractual relations had been entered in to. It is, of course, quite possible that less severely legal testimonial evidence of an oral conversation might suffice to give rise to contractual rights and obligations. But even taken at its highest, the relative informality of the conversations deposed to do not tend to have the legal character to sustain the contractual rights pleaded in the plaintiffs’ statement of claim.

81. There is, as stated in the joint judgment of Gaudron, McHugh, Hayne and Callinan JJ in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [26]–[27], no “presumption” against “family arrangements” giving rise to contractual legal obligations. Rather, the position is as stated by Sackar J in Elias GeorgeWakim v Karime Wakim [2017] NSWSC 1283 at [58]–[59]:

“While there is no presumption ‘family arrangements’ are generally not intended to give rise to legal obligations (Ermogenous at [26]-[27]), the relationship of the parties and the circumstances in which the arrangement was entered into form part of the surrounding circumstances from which it will be determined whether or not a contract came into existence; Ashton v Pratt [2015] NSWCA 12 at [73] per Bathurst CJ (with whom McColl JA and Meagher JA agreed).

Further, the vaguer the conversation purportedly regarding the legal obligation, the less likely the conversation comprised of language of a contract; Ashton at [73]; Sion v NSW Trustee & Guardian [2013] NSWCA 337 at [40]-[41] per Emmett JA (with whom Basten and Barrett JJA agreed).”

82. In Ashton v Pratt (No 2) [2012] NSWSC 3 at [30], Brereton J said:

“In the absence of express statement that their arrangements were or were not intended to be legally binding, intention to create legal relations is an inference of fact, determined objectively; accordingly, Ms Ashton’s subjective intentions in that respect are not relevant [Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, 105-7, [24]-[28]; Darmanin v Cowan [2010] NSWSC 1118, [204]-[215]].

Family, social, and domestic arrangements do not normally give rise to binding contracts, because the parties lack the necessary intention [Teen Ranch Pty Ltd v Brown (1995) 87 IR 308, 310 (Handley JA, referring to Balfour v Balfour [1919] 2 KB 571)]. In Balfour, a husband’s promise to pay his wife an allowance of 30 per month until she could rejoin him in Ceylon was held not binding for lack of intent that it be legally enforceable.”

83. Regularly, the position will be as described by Dixon J in Cohen v Cohen (1929) 42 CLR 91 at 96; [1929] HCA 15:

“The parties did no more, in my view, than discuss and concur in the proposal for the [in that case] regular allowance to the wife of a sum which they considered appropriate to their circumstances at the time of marriage.”

84. I turn to consideration of the inherent likelihood of what was occurring in 1978. If there were no falling out, then it would not matter if this was merely an unenforceable family arrangement, as opposed to a legally binding contract. There is a difficulty in enforcing the contractual obligation for which the plaintiffs contend in the event that there was some falling out between the parties. No provision is made for the plaintiffs obtaining access, from time to time, to Katie’s and George’s wills. As the defendant submitted, the absence of writing and the concomitant difficulties of enforcement for that reason tend very much to tell against an intention being imputed to the parties that there was the entering into of contractual rights and obligations.

85. For the reasons that I have just given, I do not accept that what occurred in 1978 when $13,000 worth of banknotes were provided to Katie and George gave rise to a binding contract as alleged in the pleading. While some consensus was reached, it is not shown to have given rise to a binding contract.

Any contract would be unenforceable

86. I am conscious that in reaching that conclusion I have not descended to the detail of making individual findings of fact about what was said and what was not said at the various contested occasions significant to the transactions to fund and acquire Bilgola and Kariong. The reason for that in part is that there is an entirely separate basis on which I have concluded that the plaintiffs’ claim insofar as it turns on contract must be rejected. That separate basis is the prohibition in s 54A(1) of the Conveyancing Act which is as follows:

“54A Contracts for sale etc of land to be in writing

No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.”

87. Horton v Jones (1935) 53 CLR 475; [1935] HCA 7 is a case squarely on point and dispositive of the contract claim, as well as (obviously) being binding upon me. The oral promise in that case was construed so as to amount to a promise to leave a will which left the defendant’s assets to the plaintiff, those assets comprising interests in the unadministered estates of four of seven children who had pre-deceased him, and included interests in real property. The question for the High Court was whether such a (relatively peripheral) interest in real property was nonetheless a contract for the sale or other disposition of land or any interest in land within the meaning of s 54A. A majority of the High Court held that s 54A applied. In the present case, the plaintiffs say that there was a contractually binding promise to make a will which dealt in terms with a particular piece of property, namely, Bilgola, which is a fortiori what was held in Horton v Jones.

88. No submissions were made that, in the event that s 54A was applicable, it was dispositive of the contractual case propounded by the plaintiffs. Rather, reliance was placed on the distinction in para 44 of the reply mentioned above. That distinction is one which is inconsistent with what was held by Rich, Dixon and Starke JJ in Horton v Jones. Rich and Dixon JJ observed at 486 that Mr Jones “had more than a mere equity. He had an equitable interest and it related to assets which included interests in lands”. They continued, speaking of his oral promise to leave his “fortune”, at 487:

“The contract is to leave property by will whatever form it may be in. At the time of contracting, it involved an interest in land. It is therefore a contract to leave that interest or the proceeds thereof if thereafter called in and invested in some other form of security or distributed. It appears to us that this is a contract which relates to an identifiable asset or assets which have the character of an interest in land, although consistently with the contract and before its performance is complete, they may have lost that character. Such a contract at its inception relates to an interest in land and promises a disposition of that interest or its proceeds”.

Starke J reasoned to similar effect at 489–490.

89. Accordingly, on that separate basis, the contract claim will fail. Were I not of that view, I would go on to make individual findings, to the extent I was able to do so, in relation to what was said at the various meetings.

Legal consequences of findings

90. In a case where many, many matters are in issue, I did not understand there to be any dispute that if I concluded that part of the purchase price of Bilgola was the $13,000 provided by the plaintiffs, and that cash had the legal character of a contribution to the purchase price, as opposed to gift or loan, then the applicable principle of law is that there is a presumed resulting trust that the legal owners; namely, Katie and George as joint tenants, held that property on resulting trust in proportion to the contributions made by the plaintiffs on the one hand and themselves. Their own contributions were the amounts borrowed from St George Building Society and the amount contributed by George.

91. There was debate this morning as to whether in determining that proportion, one should have regard to the $64,000 purchase price for the real property alone, or also the additional and unavoidable transactions costs, including stamp duty, loan security duty and fees paid by the conveyancers. Constructively, the parties advised me after the adjournment that they were agreed that the additional costs would be $2,000. Given that the $2,000 was a necessarily and inevitably incurred cost at the same time, to which the $13,000 provided by the plaintiffs was to contribute, to enable Katie and George to discharge their obligations to pay it, I am of the view that the appropriate application of the principle as to a presumed resulting trust is that Katie and George became joint tenants of the legal title of Bilgola, but held that legal title on resulting trust as to 8/66ths in favour of Matthew Paul and Deborah, 5/66ths in favour of Gloria and Ike and 53/66ths in favour of themselves.

92. No party suggested that any presumption of advancement was available to displace the presumed resulting trust. The findings I have made as to the circumstances in which the $13,000 was provided likewise provide no basis to displace that outcome.

93. Bilgola was sold in 1999. Thus the real property was converted into money (the precise form in which that money was held is not established on the evidence). However, tracing remains available in equity. I understood it to be agreed, on the basis that various additional expenses should apply both when your property was acquired and when it was sold, that the net sale proceeds on Bilgola, the memorandum of transfer which records a sale price of $558,000, were $538,000. The proprietary interests by way of resulting trust which the plaintiffs enjoyed when the survivor, Katie, owned Bilgola, are preserved when Katie became entitled to those net proceeds of sale of $538,000. See Scott v Scott (1963) 109 CLR 649 at 662; [1963] HCA 65.

94. Kariong was acquired for a purchase price of $270,000, substantially less than the sale price of Bilgola. As noted above, there was a deal of evidence as to what was said, including in the presence of Lorraine, in 1999 before the falling out between Katie and Matthew Paul and Deborah, which led to Katie leaving the home of her son and his wife, and it was pleaded that a separate contract was entered into at this time. However, in the alternative and rather more simply Mr Ellison submitted that all of the monies held on resulting trust by Katie in favour of the plaintiffs following the sale of Bilgola should be taken to have contributed to the purchase price of Kariong, rather than otherwise dissipated. That submission accords with what was said in Re Oatway [1903] 2 Ch 356, by way of qualification to the “rule” in Re Hallett’s Estate (1880) 13 Ch D 696. The essential position is that when a trustee of a mixed fund acquires a non-wasting asset, and the balance of the fund is dissipated, equity treats the non-wasting asset as having been acquired, so far as is possible, from trust funds, irrespective of the timing of the withdrawals from the mixed fund. As Joyce J put it at 361, the order of the various withdrawals and investments is “wholly immaterial”.

95. The position was considered at some length by Learned Hand J in Primeau v Granfield 184 F 480 (1911), a decision on an aspect of a traditional equity suit (exceptions to accounts taken by a Master – see also 180 F 847 (1910)) under the procedure before the fusion effected by the Federal Rules of Civil Procedure. There has long been acknowledged to be an incongruity with the so-called “rules” in Re Hallett’s Estate and Re Oatway, which point in different directions. Professor Ong has said that the reasoning of the latter should be “carefully re-examined judicially”: D Ong, Trusts Law in Australia (5th ed, Federation Press, 2018), 695-697. That is not to say that the position is indefensible. On one view, the result is to vindicate the basal principle that a trustee cannot conscientiously retain a profit from a breach of trust. On another view, the approach of allocating or attributing trust funds to non-wasting assets with the advantage of hindsight where the trustee has drawn upon a mixed fund may be seen as an example of equity’s approach in looking at all the circumstances in accordance with what was said in Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118-119; [1953] HCA 2 rather than the application of strict rules and exceptions to rules. Such an understanding of what is occurring is consistent with what more recently has been said in The FederalRepublic of Brazil v Durant International Corporation [2016] AC 297; [2015] UKPC 35 at [38], where reference is made to the more robust approach, sometimes described as “backwards tracing”, which is difficult to reconcile with being able to identify the beneficial ownership of all property at all periods of time following the original breach of trust.

96. But the present proceedings provide no occasion for the resolution of these issues, as to which there was no argument nor, as I understood it, any dispute between the parties. That may be for the good reason that the principle in Re Oatway, whereby the entirety of the proportion of the proceeds of sale of Bilgola is attributed to the purchase price of Kariong, has regularly been cited with approval in this Court (see, without being exhaustive, Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1306; 7 ASTLR 480 at [145] – [147] (Ward J) and Atilgan v Atilgan [1999] NSWSC 324 at [108] (Austin J)). More significantly for present purposes, in Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 at [115], Allsop P, with the approval of Campbell JA and Handley AJA, referred to with evident approval the statement of principle by Joyce J in Re Oatway.

97. Accordingly, whatever the precise juristic nature of the principle be, it should be applied in the resolution of these proceedings. Its application in the present facts is that on my findings 13/66ths of the net receipts from the sale of Bilgola is taken to have contributed to the purchase price of Kariong. Another way of saying that is that none of the amounts reflecting the entitlements of the plaintiffs under the resulting trust when Bilgola was sold go other than to the acquisition of Kariong. That conclusion operates as a matter of law and does not turn upon any finding as to an agreement in 1999.

Remaining defences

98. I mentioned the specific defences relied upon by Lorraine. In addition to what I have said about s 54A, Lorraine relied upon the Limitation Act in relation to the claim in contract. I have already resolved that claim, both on the facts, and by reference to s 54A, but for completion I should say that I do not accept the plaintiffs’ characterisation that their contractual claim is not statute barred because it was open to Katie until her death to revoke the 1999 and 2011 wills and put in place one in accordance with the contract. The alleged contract on which they have joined issue is one by which she is said to have promised to “prepare, execute and not revoke” a will. That contract was breached more than six years before these proceedings were commenced. No other submissions were advanced by the plaintiffs in answer to the Limitation Act defence.

99. However, I do not accept that either ss 23C or 54A is any answer to the claim based on resulting trust. Section 23C expressly does not apply to resulting trusts (as Mr Menadue readily accepted at T228.20), and such a claim is not a claim which answers the description of “action or proceedings brought upon any contract” (as Mr Menadue ultimately accepted at T229.20). I do not accept that in the circumstances of this case a defence of laches is available to the defendant, nor was any submission advanced orally in support of such a defence.

Orders

100. The consequence of those reasons is an entitlement by way of resulting trust in the way that I have indicated above, but which I have not quantified (for the reason that there were slightly different calculations in the parties’ submissions than I have held above). It ought however be a matter of no great difficulty when the parties have the benefit of the written form of these reasons for them to compute the proportion of the sale of Kariong to which the plaintiffs are entitled, noting as I do that the parties have agreed the net proceeds of the sale of Kariong to be $673,193.

101. [Discussion as to form of orders and the availability of pre-judgment interest.]

102. I make the following orders:

1. Direct the parties within 21 days of today to bring in final orders disposing of this litigation in accordance with these reasons, or, in default of agreement, such final orders for which each contends and short submissions in support of those orders, with a view to any dispute being resolved on the papers.

1. Note that order 1 above extends to submissions as to whether, and if so how much, pre-judgment interest is to be allowed in respect of the plaintiffs’ entitlements to a share of the proceeds of sale of Kariong.

2. The orders referred to in 1 will also include such orders as to costs which are either agreed or contended for by the parties.

3. Exhibits to be returned.

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Decision last updated: 19 February 2019