Pirrottina v Pirrottina

[2025] NSWCA 55

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Pirrottina v Pirrottina [2025] NSWCA 55

Hearing dates:

29 November 2024

Date of orders:

2 April 2025

Decision date:

02 April 2025

Before:

Gleeson JA at [1]
Payne JA at [225]
Adamson JA at [226]

Decision:

(1)   To the extent necessary, grant leave to appeal.

(2)   Appellant’s application to adduce further evidence granted.

(3)   Make no order as to the costs of the appellant’s notice of motion filed 31 October 2024.

(4)   Appeal dismissed, except as to ground 14 which is upheld.

(5)   Set aside orders (1), (2) and (3) made by the primary judge on 9 September 2024 and, in lieu, remit the proceedings to the primary judge for reconsideration of the question of costs of the trial at the conclusion of the proceedings.

(6)   Appellant to pay 95 per cent of the respondent’s costs in this Court.

Catchwords:

ESTOPPEL – proprietary estoppel – encouragement – nature of promise – where parents promised to build house for son on farming property 30 years ago – whether the promise included skirt of land surrounding the house (the Lot) – detrimental reliance – in reliance on the promise the son forewent the parents’ offer to buy him another block of land and father-in-law’s financial contribution to the son’s marriage in favour of expenditure on improvements on the Lot – whether it would have been unconscionable for the parents to resile from the promise

ESTOPPEL – Proprietary estoppel – encouragement – relief – where land jointly owned – where buy-out order made instead of appointing trustees for sale – whether sufficient evidence of value of land – where single joint expert appointed by the parties had valued the Farm and the Lot – whether procedural unfairness in ordering updated valuation after trial

LAND LAW – real property – indefeasible title – in personam exception – whether personal equity in respect of unregistered interest in part of farming property (the Lot) – Farm owned by parents – where parents made promise to older son to build house on the Lot and “it will be yours” – where parents later transferred the Farm to older son and his brother as tenants in common in equal shares for nil consideration – transfer of land subject to conditions that the two sons continue the farming business as partners, not sell the Farm and parents have right of management veto – whether assurances of conduct by the brother that would have preserved older son’s interest in the Lot – where assurances given in knowledge that parents were giving the Farm to both sons subject to older son’s existing rights and interests

COSTS – party / party – exceptions to general rule that costs follow the event – Calderbank offers – where split trial of partnership proceedings – where partnership accounts not yet finalised – whether premature to make special costs order – whether exercise of costs discretion miscarried

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98(1)

Conveyancing Act 1919 (NSW), s 66G

Partnership Act 1892 (NSW), ss 20, 21

Real Property Act 1900 (NSW), s 42

Supreme Court Act 1970 (NSW), s 75A

Uniform Civil Procedure Rules 2005 (NSW), rr 20.14, 28.2, 31.44, 36.16, 42.1, 51.36

Cases Cited:

Augusta Pool 1 UK Ltd v Williamson (2023) 111 NSWLR 378; [2023] NSWCA 93

Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16

Barnes v Addy (1874) LR 9 Ch App 244

Bassett v Cameron [2021] NSWSC 207

Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49

Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304

Brand v Christopher Building Co Pty Ltd [1957] VR 625

Breskvar v Wall (1971) 126 CLR 376; [1971] HCA 70

Calderbank v Calderbank [1975] 3 All ER 333

Browne v Browne [2019] WASCA 1

Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149; [2013] HCA 11

Cobbe v Yeoman’s Row Management Ltd [2008] 4 All ER 713; [2008] UKHL 55

Commonwealth Bank of Australia v Gretton [2008] NSWCA 117

Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33

Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84

DHJPM Pty Ltd v Blackthorn Resources Limited (2011) 83 NSWLR 728; [2011] NSWCA 348

Discount & Finance Ltd v Gehrig’s NSW Wines Ltd (1940) 40 SR NSW 598

Donis v Donis (2007) 19 VR 577; [2007] VSCA 89

Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219

Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22

Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20

Fifteenth Eestin Nominees Pty Ltd v Rosenberg (2009) 24 VR 155; [2009] VSCA 112

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Frazer v Walker [1967] 1 AC 569

Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10

GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 97 ALJR 857

Hamilton v Geraghty (1901) 2 SR (NSW) Eq 81

Heggies Bulk Haul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312; [2003] NSWSC 851

House v The King (1936) 55 CLR 499; [1936] HCA 40

Kramer v Stone (2023) 112 NSWLR 564; [2023] NSWCA 270

Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126

Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26

Lee v Lee (2019) 266 CLR 129; [2019] HCA 28

Lucas v Lucas [1962] Qd R 205

McNab & Anor (in their capacity as Executors and Trustees of the Will of Colin Wilbur Turner, deceased) v Graham (2017) 53 VR 311; [2017] VSCA 352

Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274

Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30

Morris v Morris [1982] 1 NSWLR 61

Narellan Franchise Pty Ltd v RBME Pty Ltd [2023] NSWCA 139

Ngatoa v Ford (1990) 19 NSWLR 72

O’Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33

Pirrottina v Pirrottina [2024] NSWSC 558

Pirrottina v Pirrottina (No 2) [2024] NSWSC 1053

Priestley v Priestley [2017] NSWCA 155

Q (a pseudonym) v E Co (a pseudonym) [2020] NSWCA 220; (2020) 383 ALR 469

Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068

Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6

Riches v Hogben [1985] 2 Qd R 292

Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19

Snowlong Pty Ltd v Choe (1991) 23 NSWLR 19

Soulos v Pagones [2023] NSWCA 243

The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; (2007) 64 ACSR 31

Turner v O’Bryan-Turner (2022) 107 NSWLR 171; [2022] NSWCA 23

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7

Warman International Ltd v Dwyer (1995) 182 CLR 544; [1985] HCA 18

Whisprun Pty Ltd v Dickson [2003] HCA 48; (2003) 77 ALJR 1598

Williams v Legg (1993) 29 NSWLR 687

Williams v Nicoski [2003] WASC 131

Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685

Category:

Principal judgment

Parties:

Rocco John Pirrottina (Applicant / Appellant)
Saverio Anthony Pirrottina (Respondent)

Representation:

Counsel:
C D Wood SC / J Hart (Applicant / Appellant)
M Ashhurst SC / K Dyon (Respondent)

Solicitors:
Williams The Law Firm (Applicant / Appellant)
Cara Marasco & Co (Respondent)

File Number(s):

2024/211189; 2024/336718

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity Division

Citation:

[2024] NSWSC 558; [2024] NSWSC 1053

Date of Decision:

14 May 2024; 9 September 2024

Before:

Rees J

File Number(s):

2022/358515

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellant (Rocco) and the respondent (Sam) are brothers. Their parents, Mr and Mrs Pirrottina Snr, acquired a 100-acre farm property at Mangrove Mountain (the Farm) in the 1960s and established citrus orchards and built a homestead. The brothers both commenced working in the family business from a young age; Sam from 1982 when aged 14, and Rocco from 1986 when aged 13.

In September 1994, the parents made a promise to Sam who had been working on the Farm for 12 years for no wages, that they would build a house for him on the Farm on an area of land indicated by Sam to his parents that was bordered by the driveway, a drainage passage and the main orchard, which the parents said “will be yours”. This area of land comprised about one acre and was referred to in the proceedings as the “Lot”. The parents paid for the construction of the house on the Lot. In November 1996, Mrs Pirrottina Snr gave Sam the keys to the house and told him to move into “your house” with his fiancé, Marisa Falvo. In reliance on the promise, Sam acted to his detriment: he turned down his parents’ offer in 1994 to buy him a block of land of his own, and forewent the possibility in 1996 of a financial contribution to his married life with Marisa from her father, Mr Falvo, in favour of Mr Falvo’s contribution to the construction of a driveway, a footpath, and landscaping on the Lot.

In 2002, Mr and Mrs Pirrottina Snr transferred their farming business and the Farm to Sam and Rocco as tenants in common in equal shares for nil consideration. The transfer was made on the express basis that Sam and Rocco agreed that they would run the family business as partners, they would not sell the Farm and the parents would maintain control over the land, its improvements and buildings. In 2022, after both parents had died, Rocco commenced proceedings relating to the dissolution of the farming partnership with Sam and sought relief including, in the alternative, an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) appointing a trustee for the sale of certain partnership property, which he claimed included the Farm. Sam brought a cross-claim asserting a proprietary estoppel against his parents and a personal equity against Rocco as a co-owner of the Farm, and sought (i) declaratory relief that he had an equitable interest in the Lot including the house, and (ii) a buyout order in respect of Rocco’s interest in the Farm.

The primary judge held that (1) the Farm was the separate property of Sam and Rocco, (2) Sam had established an equitable estoppel by encouragement against his parents in respect of the promised Lot prior to the 2002 transfer, (3) Sam had a personal equity against Rocco in respect of his unregistered interest in the Lot which operated as an in personam exception to the indefeasibility provision in s 42 of the Real Property Act 1900 (NSW), and (4) Sam was entitled to equitable relief in the form of a buyout order in respect of Rocco’s interest in the Farm, which her Honour found was 40 per cent.

Rocco’s appeal raised multiple issues, including:

1. whether the promise made to Sam by his parents was limited to an assurance that they would build a house for Sam on the Farm that would be his (which Rocco no longer disputed) or did the promise include an area of land surrounding the house;

2. whether Sam’s reliance on the 1994 and 1996 promises was reasonable or detrimental;

3. whether it would have been unconscionable for the parents to resile from the assurances given to Sam;

4. whether Sam had a personal equity against Rocco;

5. whether the primary judge’s discretion had miscarried in ordering the buyout relief, rather than the appointment of trustees for sale;

6. whether the Farm is the personal property of Sam and Rocco, or property of the partnership; and

7. whether the primary judge erred in making a special costs order in favour of Sam.

The Court held (Gleeson JA, Payne and Adamson JJA agreeing), appeal dismissed, except to the challenge to the special costs order, which is upheld:

1. Rocco’s claim that the 1994 promise did not include an area of land surrounding the house was a new point which could or might possibly have been met by rebutting evidence by Sam at trial. Sam’s objection to Rocco raising this new point on appeal should be upheld: at [48].

Whisprun Pty Ltd v Dickson (2003) 234 CLR 492; [2003] HCA 48; Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33, applied.

2. In any event, Rocco had failed to show that the finding that the 1994 promise included the land indicated by Sam to his parents bordered by the identified physical features was wrong by “incontrovertible facts or uncontested testimony”, or because it was “glaringly improbable” or “contrary to compelling inferences”. There was no error in the primary judge’s finding that the express promises or assurances by the parents were not too vague or lacked specificity: at [50]-[58].

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28, applied.

3. As to reliance, that the promised Lot was incapable of subdivision is immaterial in circumstances where (i) Sam never thought about the fact that there was no separate title, he just relied on his parents’ promise, and (ii) Sam and Rocco had accepted the 2002 transfer on the conditions that the conduct of the family business and the occupation of the land would continue as before, that is, the Farm would not be sold and Sam would remain on the Farm for his lifetime: at [83]-[84].

4. As to detriment, Sam’s detrimental reliance occurred well before 2002 and thus Sam’s interest in the promised Lot had arisen before the 2002 transfer, rendering it unconscionable for the parents to resile from the promise from the time of the detrimental reliance: at [85]-[87].

DHJPM Pty Ltd v Blackthorn Resources Limited (2011) 83 NSWLR 728; [2011] NSWCA 348; McNab & Anor (in their capacity as Executors and Trustees of the Will of Colin Wilbur Turner, deceased) v Graham (2017) 53 VR 311; [2017] VSCA 352, referred to.

5. As to unconscionability, it is not the promise itself that attracts the intervention of equity, but the expectation it creates. There was no suggestion that, by the 2002 transfer, the parents sought to interfere with Sam’s interest in the Lot or Sam’s house, nor did the fact of the 2002 transfer or the impossibility of a separate lot relieve the parents’ conscience: at [96]-[97], [100]-[102].

Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10; Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19; Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126, referred to.

6. As to Rocco’s defence of indefeasible title, the primary judge did not determine the personal equity on a “basis” that was not pleaded. The “basis” was that Rocco had agreed with his parents to accept the 2002 transfer on condition that his parents would maintain control over the land, its improvements and buildings, and that Sam and Rocco would not sell the land. To depart from the basis from which Rocco agreed to accept the transfer of title to the Farm amounted to an unconscionable attempt to deny the unregistered interest of Sam which Rocco undertook to subject his registered title. Sam had established a personal equity against Rocco which operates as an in personam exception outside the indefeasibility provision in s 42(1) of the Real Property Act: at [114]-[120].

Heggies Bulk Haul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312; [2003] NSWSC 851, Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16, The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; (2007) 64 ACSR 31, Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 applied.

7. In declining to appoint trustees for the sale of the Farm, the primary judge carefully weighed the interests of the parties. There was no error in finding that whereas an order for judicial sale would defeat the interest which the parents sought to convey to Sam, permitting Sam to buy Rocco’s interest at fair value did not prejudice Rocco’s rights: at [144].

Warman International Ltd v Dwyer (1995) 182 CLR 544; [1985] HCA 18, applied.

8. Nor did the buyout order overcompensate Sam. The detriment suffered by Sam is of a kind and extent that involved life-changing decisions since 1994 with irreversible consequences of a profoundly personal nature, and is beyond the measure of money. Making good the promise to Sam that the house and the Lot would be his, is the prima facie relief to which Sam is entitled. Permitting Sam to buy Rocco’s interest at fair value did not prejudice Rocco’s rights. Nor did such relief go beyond what was required for the conscientious conduct by Rocco. The preservation of Sam’s interest in the promised Lot is consistent with the basis upon which Rocco accepted the 2002 transfer, namely, that the Farm would remain in the family and would not be sold: at [151]-[152].

Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19; Donis v Donis (2017) 19 VR 577; [2017] VSCA 89; Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126, applied.

Bassett v Cameron [2021] NSWSC 207; Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84, referred to.

9. There was sufficient evidence for the primary judge to make a finding as to the market value of the Farm and the Lot for the purpose of the buyout order, and there was no procedural unfairness in ordering that an updated expert valuation be obtained after the trial from the single joint expert appointed by the parties, being an order sought by Sam in his closing submissions: at [164]-[172].

10. As to ownership of the Farm, that Sam and Rocco gave specific instructions to their accountant that the Farm should not be included in the partnership accounts was highly probative of their intention that the Farm remain their separate property. The Farm was not a partnership asset; it was the separate property of Sam and Rocco: at [184]-[186].

O’Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33; Lucas v Lucas [1962] Qd R 205; Bassett v Cameron [2021] NSWSC 207, applied.

11. As to the special costs order, the exercise of the primary judge’s discretion as to costs miscarried in that her Honour failed to take into account a relevant matter being Rocco’s submission that it was premature to determine the question of indemnity costs before the conclusion of the proceedings following the finalisation of the partnership accounts, or made a material error of fact in finding that the parties did not require her Honour to consider the result of the independent accountant’s report in the context of Sam’s prematurity submission: at [215]-[217].

Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274, referred to.

Judgment

1. GLEESON JA: This appeal concerns a claim of proprietary estoppel relating to a house and surrounding land comprising about one-acre, which is part of a 100-acre citrus farm at Mangrove Mountain in New South Wales (the “Farm”). The Farm was owned by Mr Saverio Pirrottina and Mrs Rosa Pirrottina until 2002 when they transferred their farming business and the Farm to their sons, Saverio (Sam) Pirrottina and Rocco Pirrottina, as tenants in common in equal shares for nil consideration. It is convenient to refer to the two brothers and certain other family members by their first names.

2. In the underlying proceedings commenced in 2022, Rocco sought a variety of relief concerning the dissolution of the farming partnership, including, in the alternative, an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) appointing a trustee for the sale of certain partnership property which he claimed included the Farm. Sam brought a cross-claim seeking declaratory relief based on a proprietary estoppel that (1) he had an equitable interest in the house and surrounding land (which the parties referred to as the “Lot”), and (2) Rocco held his title to the Farm on trust for Sam to the extent of Sam’s equitable interest in the Lot including the improvements thereon. Sam also sought an order that he acquire Rocco’s interest in the Lot.

3. Sam’s estoppel claim relied on a promise made by his parents in 1994 that they would build a house for him on the Farm and that the house and surrounding land would be his, and that this promise was confirmed by Mrs Pirrottina Snr in 1996 when she gave Sam the keys to the house which had been built on the Lot. Sam claimed that in reliance on the promise he stayed working on the Farm, forewent the opportunity of his parents purchasing another block of land for him, forewent other opportunities, and made substantial renovations and improvements to the Lot including to the house.

1. Alternatively, Sam’s estoppel claim relied on representations made by Rocco to the parents shortly before the transfer of the Farm in 2002, and also implied representations by silence in the face of Sam’s continued occupation and improvement of Sam’s house and the Lot, that Rocco would not seek to sell the Farm, the Lot belonged to Sam, and Sam was entitled to occupy the Lot for his lifetime. In reliance on those representations and Rocco’s silence, Sam claimed that he acted to his detriment by continuing to live in the house and carried out further improvements to the house and the Lot at his expense.

2. The primary judge found that the Farm was personal property of Sam and Rocco, that Sam had established his claim to a proprietary estoppel by encouragement against his parents which gave Sam an equitable interest in the Lot before the 2002 transfer, and that for Rocco to depart from the basis on which he agreed to accept the transfer of title to the Farm in 2002 amounted to an unconscionable attempt to deny an unregistered interest which Rocco undertook to subject his registered title: at J[178], [196], [197]. Accordingly, Sam had a personal equity against Rocco which operated as an in personam exception to the indefeasibility provision in s 42(1) of the Real Property Act 1900 (NSW).

3. In the event that the primary judge was wrong about Sam’s claim to an equitable interest in the Lot based on a personal equity against Rocco, the she made contingent findings that Sam had the benefit of an estoppel by encouragement and an estoppel by acquiescence against Rocco: at J[207], [208].

4. Addressing the question of relief, the primary judge assessed the value of Sam’s equitable interest in the Lot as 20 per cent of the value of the Farm: at J[240]. To satisfy that equity, her Honour directed Sam to obtain an updated valuation of the market value of the Farm within 28 days from the expert joint valuer retained by the parties in the proceedings and ordered Sam to acquire Rocco’s interest in the Farm for 40 per cent of the updated market value, thereby enabling Sam to enjoy his interest in the Lot in perpetuity. Directions were also made for the parties to agree on procedural orders in respect of the appointment of a referee to determine the remaining disputed issues in the winding up of the partnership, to take an account, and for the buyout of partnership assets in the possession of each party: Pirrottina v Pirrottina [2024] NSWSC 558. In a second judgment dealing with costs, the primary judge made a special costs order against Rocco: Pirrottina v Pirrottina (No 2) [2024] NSWSC 1053 (the costs judgment or J2). Rocco appeals from both decisions.

5. For the reasons which follow the appeal should be dismissed, save with respect to the challenge to the special costs order. That order should be set aside, and the proceedings should be remitted to the primary judge for reconsideration of the question of costs of the trial at the conclusion of the proceedings.

Outline of the facts

9. The following outline of the facts is based on the findings of the primary judge. Mr and Mrs Pirrottina Snr purchased the Farm at Mangrove Mountain in about 1960 and established citrus orchards and built a homestead on the Farm. The citrus produce was sold at Flemington Markets. In broad terms, Mr Pirrottina Snr did the physical work and Mrs Pirrottina Snr was in charge of the money. The two sons worked in the family business; Sam from 1982 when aged 14 and Rocco from 1986 when aged 13.

The first promise

10. In around September 1994, a promise was made by Mr and Mrs Pirrottina Snr to Sam, who was then aged 26 years and had been working fulltime on the Farm for 12 years for no wages, that they would build a house for him on the Farm on an area of land indicated by Sam to his parents which had old lemon trees on it about 80 metres from his parents’ house that was bordered by the driveway, a drainage passage and the main orchard. Mrs Pirrottina Snr said that the area of land indicated by Sam “where we will build your house … will be yours”. The promise was made in circumstances where Sam had declined his parents’ offer to buy another block of land for him to build a house on when he got married, having indicated to his parents that he preferred to live on the Farm.

11. The following day, Sam told Rocco of his conversation with his parents about the promised Lot and Rocco suggested to Sam that he buy another block. Sam responded that he wanted to build on the Farm, so he did not have to travel to work. Rocco said that he did not want to live on the Farm, and when Rocco asked where Sam wanted to build, Sam indicated the same area as he had pointed out to his parents, being the Lot: at J[31]. Rocco first gave evidence denying this conversation in his oral evidence in chief (at J[32]), albeit his senior counsel incorrectly put the date of the disputed conversation as 1996, not 1994.

12. Angelina Marando (Angelina), the younger sister of Sam and Rocco, gave evidence that in about 1994, at the family dinner table, Sam said that he wanted to build his family home on the Farm “because this is where my life is, and I want to continue to grow the family business”. The parents agreed that this made sense as Sam was going to continue to run the family business. Mr Pirrottina Snr said they had worked hard to build the business and wanted it to stay in the family. They were happy to give Sam the land and to build a house for him to make his home and property so that he could “continue to grow the business” and “hopefully, it [would] stay in the family for generations”. The primary judge noted that Rocco denied this portion of Angelina’s affidavit in his affidavit in reply, albeit his denial appeared to be confined to the words attributed to him, although in cross-examination Rocco also denied that the words attributed to others were said in his presence: at J[33], [35], [193]. The primary judge found that Angelina was a credible witness: at J[22].

13. In 1995, Ms Caterina Deidda visited her sister, Mrs Pirrottina Snr, at the Farm who told Ms Deidda that she and her husband had decided to build a house on the Farm for Sam, “We offered to buy him a house but he told us that he wanted to live on the Farm so, rather than buying a house, we are going to build a second house on the Farm for Sam. This will be where he will be able to raise his family when he eventually gets married”. Ms Deidda added, “She said she was going to build a house for him so that he would have something to leave for his kids, for his children”: at J[34]. Her Honour found that Ms Deidda was a credible witness and generally accepted her evidence, albeit some of the details of events long ago may not have been correct, such as evidence of Ms Deidda recalling that Mr Pirrottina Snr told her that he had bought another farm at Kulnura for both brothers: at J[22].

14. The primary judge noted that Rocco did not cavil in his many affidavits with Sam’s evidence of their conversation in September 1994 (referred to at [11] above), nor cavil with Angelina’s description of a similar conversation around the family dinner table, other than the words attributed to him: at J[35]. Her Honour inferred that Rocco agreed with Sam and Angelina’s description of conversations on this topic, and found at J[35]:

… It is inherently likely that the Pirrottina family discussed the construction of a second house on the Mangrove Mountain farm at length, from the inception of the idea until completion of construction, this being a substantial endeavour to be undertaken in plain sight of the homestead and for one only of the Pirrottina children. Precisely why this was being done, and for that particular child, was likely discussed on a number of occasions. Where Rocco lived in the homestead with his parents, it is likely that he participated in these conversations.

15. In resolving the competing evidence about the promise made to Sam by his parents, the primary judge attached little weight to Rocco’s late denials, generally preferred Sam’s evidence to that of Rocco in the event of a conflict between them and noted that Sam’s evidence was corroborated by Ms Deidda’s evidence of her conversations with Mrs Pirrottina Snr. Her Honour found that the 1994 conversation between Mr and Mrs Pirrottina Snr and Sam, and then between Sam and Rocco relaying the substance of that conversation, took place as described by Sam: at J[36].

Construction of Sam’s house on the Lot

16. In August 1995 Council approval was obtained for construction of a second dwelling on the Farm as a “workers cottage”, as the Council would not allow two houses on the property. Construction commenced in late 1995 and reached lockup stage in early 1996. Mr and Mrs Pirrottina Snr paid the builder, Meriden Classic Homes, an amount totalling $182,643. Mr Kent Wood, an expert valuer jointly retained by the parties, provided a report in July 2023 which described the cottage and curtilage as having an area of approximately 5,064 m² (being 1.251 acres), of which the cottage, entertaining area, gazebo and spa and four bay detached garage occupied 543 m² (being 0.134 acres).

17. In March 1996 Sam became engaged to Ms Marisa Falvo. Around this time, Marisa’s father, Mr Tommaso Falvo, a builder, visited the Farm and walked with Rocco and Mrs Pirrottina Snr near where the new house was being built. Mrs Pirrottina Snr pointed at the house and said, “[t]his is the house we give to Sam and Marisa. Once they get married, they will live in it as their home”: at J[41], [43]. Mrs Pirrottina Snr asked Mr Falvo to contribute towards the house by constructing a driveway from the existing road to the house, a footpath around the house, and landscape the area surrounding the house. Mr Falvo agreed and arranged for this work to be done at a cost of about $70,000. He gave evidence that, had he undertaken this work for a client, he would have charged $94,500. The primary judge accepted Mr Falvo’s evidence of this conversation in preference to Rocco’s denial, which was first made in cross-examination and not in his affidavit evidence: J[43].

The second promise

18. In October 1996 Sam and Marisa eloped. On their return to the Farm in November 1996, Mrs Pirrottina Snr gave Sam the keys to the house and told him to move into “your house” with Marisa. She apologised to Marisa that the house was not fully furnished and stated, “this is your house and you and Sam can finish it off however you like it”: at J[48].

19. Sam and Marisa began living in the house in November 1996. They were married in December 1996, holding their wedding reception in the yard of their house. They had obtained building and contents insurance on the house in October 1996 and paid the insurance premiums from that time. After his marriage, Sam began to receive a wage from his parents of $500 per week. A year later, after the birth of his first child, Sam’s wage increased to $1,000 per week and stayed at that amount for more than a decade: at J[51]. The house was known to all as Sam’s house, and the primary judge found that Rocco’s efforts to suggest otherwise damaged his credibility: at J[53].

Rocco’s farm

20. In September 1999 Rocco purchased at auction a farm in Kulnura for $600,000, which included a house and was planted with citrus trees (Rocco’s farm). The primary judge found, contrary to Rocco’s evidence, that Mr and Mrs Pirrottina Snr paid the deposit on Rocco’s farm: at J[60]. Her Honour also found that the running expenses for Rocco’s farm were paid by Mr and Mrs Pirrottina Snr, and Rocco’s farm and its orchards were effectively deployed in the family business: at J[55], [60].

21. Rocco earned rental income from the house on his farm which he used to make mortgage payments on a $500,000 loan from the National Australia Bank (NAB), as he continued to live in his parents’ home at Mangrove Mountain (until 2016): at J[54], [60]. The primary judge found that by these means, Mr and Mrs Pirrottina Snr provided Rocco with assistance, both directly and indirectly, to acquire Rocco’s farm: at J[60]. The judge did not accept Rocco’s submission that the parents’ only financial assistance provided to Rocco to buy his farm was the provision of a guarantee in respect of the NAB mortgage.

Transfer of business and Farm

22. In 2001 Mr and Mrs Pirrottina Snr decided to transfer the business and Farm to Sam and Rocco because they did not want the business and Farm to be broken up by their siblings. They did so on the express basis that (i) Sam and Rocco would run the family business as partners, (ii) they would not sell the Farm and would keep it running, and (iii) the parents would maintain control over the land, its improvements and buildings. Sam and Rocco agreed to these conditions: at J[61].

23. Mr and Mrs Pirrottina Snr transferred the Farm to Sam and Rocco as tenants in common in equal shares for nil consideration on 1 September 2002. A 50-year registered lease of the homestead, rent free, was granted to the parents until both parents passed away: at J[62].

24. In January 2003 the farming partnership between Sam and Rocco trading as “S & R Pirrottina” obtained an Australian Business Number: at J[63]. Both parents remained involved in the business, but to a lesser extent. Sam and Rocco refinanced their parents’ mortgage over the Farm by a loan from NAB of $495,000, secured by a mortgage over the Farm for which they were jointly liable: at J[62], [63], [64]. The primary judge found that the Farm is owned by Sam and Rocco in their personal capacity and not as partnership property: at J[154].

25. In May 2003, the parents executed mutual wills in which they acknowledged that they had already given the farming business and the Farm property equally to Sam and Rocco: at J[65].

Renovations and improvements to the house and the Lot

26. Commencing in 2004, Sam and Marisa, who by then had four children aged from 2 to 7 years, undertook various renovations to the house and improvements to the Lot, including (i) landscaping the area around the house in October 2004 costing about $28,000, (ii) replacing the kitchen in about 2005 costing about $20,000 to $25,000, (iii) installing air-conditioning in 2008 costing about $10,000, (iv) further extensions and renovations in 2015 to the side of the house to incorporate a games room/family room and a pergola (the primary judge did not make a finding as to the specific cost of renovations), (v) a shed for cars in 2018 costing about $32,000, (vi) renovating the laundry in 2019 costing about $11,000, (vii) repainting the house in 2018 costing about $4,000, and also the installation of stairs in the house costing $3,270 and wardrobes costing about $4,343. The cost of these renovations and improvements from 2004 were funded by Sam and Marisa, although Mrs Pirrottina Snr did make some cash payments to at least one tradesman: J[103].

Breakdown in relations

27. Mr Pirrottina Snr died on 26 December 2018. The working relationship between Sam and Rocco soured thereafter. Sam arranged a family meeting in September 2020 with Rocco, Mrs Pirrottina Snr, Mr Antonio Tisano, the family accountant, and long-time family friends, Mr Frank Lopresti and Mr Pasquale Macri, to discuss his concerns about Rocco’s use of partnership funds. That meeting was held in Mrs Pirrottina Snr’s dining room: at J[109]. Her Honour found that Mrs Pirrottina Snr made statements about “Sam’s house” and what Mr Pirrottina Snr intended:

[115]   These gentlemen [Mr Lopresti, Mr Macri, Mr Tisano] were unfamiliar with the precise ownership arrangements of the citrus farms. Their various suggestions as to how the brothers should part ways had the consequence that the brothers’ interest in both farms was elucidated. Initially, it was suggested – either by one of these gentlemen or by Sam – that Rocco’s farm should be valued as forming part of the partnership. This was firmly rejected by Rocco, and endorsed by Mrs Pirrottina Snr, who together made plain that that was Rocco’s farm. Apparently, by way of counter-attack, Rocco suggested that the Mangrove Mountain farm, including Sam’s house, should be valued or sold, which prompted Sam to seek clarification from Mrs Pirrottina Snr that his interest in Sam’s house was also protected. Mrs Pirrottina Snr readily confirmed that this was the case, and Rocco did not demur. I do not accept Rocco’s evidence that Sam did not raise the issue of his house at the meeting; it is likely that Sam did so, where Rocco suggested that Sam’s interest in the house should be ignored for the purposes of a buy-out.

[116]   Sam and his family were then living on the Mangrove Mountain farm. Rocco and his family were now living on Rocco’s farm. It likely suited both men to remain in their respective locations. Mrs Pirrottina Snr obviously wanted this too. As Mr Lopresti recalled it, Mrs Pirrottina Snr also made plain that that was what her husband had wanted, that is, that Sam’s house belonged to him. The brothers agreed that Sam would buy-out Rocco’s interest in the Mangrove Mountain farm and the family business but, in calculating a buy-out figure, Sam’s house would be deducted from the valuation of the Mangrove Mountain farm. Rocco’s farm would also be excluded. (Emphasis added.)

28. Mrs Pirrottina Snr died on 12 October 2020.

29. The primary judge found that the partnership was dissolved on 8 January 2022 and that both brothers contributed to the breakdown in the working relationship: at J[140]. There is no challenge to that finding.

Leave to appeal

30. In addition to his notice of appeal filed on 11 September 2024, Rocco earlier filed a summons seeking leave to appeal on 1 August 2024. The stated premise of the leave application was that “leave is likely required because the hearing had been split”, referring to Narellan Franchise Pty Ltd v RBME Pty Ltd [2023] NSWCA 139 at [16]-[18]. Narellan involved the determination of separate questions and leave to appeal was required because the decision in that case was held to be interlocutory in nature.

31. Orders were made in the proceedings on 11 March 2024 pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), rr 20.14 and 28.2 for the determination of certain questions separately from any other question, after the trial in the proceedings, by a referee. As her Honour recorded (at J[2]-[3]), the effect of those orders was that the hearing of the proceedings was expedited to determine essentially five issues, with a referee to be appointed to determine the remaining disputed items of partnership property. Sam did not oppose the grant of leave, although he took the position in relation to the challenge to the special costs order that the judgment below was final, not interlocutory. To the extent necessary, there should be a grant of leave to appeal.

The issues on appeal

32. The notice of appeal contains 15 grounds which raise the following issues:

1. promise: was the 1994 promise limited to an assurance that the parents would build a house for Sam on the Farm that would be his (which Rocco no longer disputes), or did the promise include an area of land surrounding the house (ground 1). There is a related issue as to whether the 1996 promise by Mrs Pirrottina Snr was binding on Mr Pirrottina Snr (ground 5);

2. reliance: whether Sam’s reliance on the promises was reasonable (ground 2). Related to this issue is a factual challenge to the finding that the parents paid the deposit on Rocco’s farm at Kulnura (ground 10);

3. unconscionability: whether it would have been unconscionable for Mr and Mrs Pirrottina Snr to resile from the promises made to Sam (grounds 3 and 4);

4. indefeasible title: whether Sam has a personal equity against Rocco which operated as an in personam exception to the indefeasibility provision in s 42 of the Real Property Act (grounds 12 and 13);

5. Sam’s alternative estoppel claim against Rocco: whether these findings are an independent basis for the relief granted. There is an anterior issue as to whether Rocco’s challenge to these findings is adequately raised by the notice of appeal;

1. the buyout relief: whether the primary judge’s discretion in ordering the buyout relief miscarried (grounds 6, 7 and 8);

2. partnership property: whether the Farm is personal property of Sam and Rocco or property of the partnership (ground 11);

3. access to privileged material: whether the primary judge erred in not granting access to certain subpoenaed material and in rejecting several identified pages of the Court Book (ground 9); and

4. special costs order: whether the primary judge’s discretion in making a special costs order in favour of Sam miscarried (grounds 14 and 15).

33. In addition, Rocco’s UCPR, r 51.36(2) statement challenges eight factual findings made by the primary judge. To the extent that these challenges are material to the outcome of the appeal, they are addressed below in the context of the issue to which they relate.

34. Before addressing the issues and factual challenges, brief reference to some basic principles concerning equitable proprietary estoppel is necessary.

Equitable proprietary estoppel

35. Estoppel by encouragement: In Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126 at [37]-[40]; Gageler CJ, Gordon, Edelman and Beech-Jones JJ refined the six requirements for an equitable estoppel set out by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429; [1988] HCA 7, which the plurality observed had been formulated at a level of generality to include an estoppel by encouragement and an estoppel by acquiescence, into four elements for an equitable estoppel which arises by reason of encouragement from a promise:

1. promise: there must be a “clear and unequivocal” promise made by the party estopped (the promisor) to the party who relies on the promise (the promisee);

2. expectation or intention: a reasonable person in the promisor's position must have expected or intended, or the promisor must have actually expected or intended, that the promisee would rely upon the promise by some action, omission or course of conduct;

3. reliance: the promisee must have relied upon the promise by acting or omitting to act in the general manner that would have been expected; and

4. detriment: the consequence of the promisee's reliance must be that the promisee will suffer detriment if the promise is not fulfilled.

36. The plurality held at [41]:

Once these elements are satisfied, it is commonly said that conscience requires that A redress the detriment suffered by B. As has been repeatedly emphasised by this Court, the description of circumstances as unconscionable "is to characterise the result rather than to identify the reasoning that leads to the application of that description".

citing Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 at [84]-[85], quoting Donis v Donis (2007) 19 VR 577; [2007] VSCA 89 at [34]. See also Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [50]-[51].

37. Importantly, the plurality held at [34] that no subsequent encouragement after the promise is required because estoppel by encouragement is established where, “a reasonable person in the promisor’s position would expect the promisee might rely upon the promise by some action or omission”.

38. Estoppel by acquiescence: The plurality in Kramer v Stone referred with approval at [54] to Discount & Finance Ltd v Gehrig’s NSW Wines Ltd (1940) 40 SR (NSW) 598 at 603, where Jordan CJ described estoppel by acquiescence as a doctrine “which prevents a person, who has knowingly permitted another to act, through mistake, to his own detriment and to the advantage of the former, from profiting by the other's mistake”, and said that when these elements are satisfied, an estoppel by acquiescence can be the source of new rights for the mistaken party, referring to Hamilton v Geraghty (1901) 2 SR (NSW) Eq 81.

39. The plurality referred at [55] to five elements which are required for party B to establish an estoppel by acquiescence against party A, citing Hudson J in Brand v Christopher Building Co Pty Ltd [1957] VR 625 at 628:

(1)   B must be mistaken as to his own legal rights; if he is aware that he is infringing the rights of another, he takes the risk of those rights being asserted;

(2)   B must expend money, or do some act, on the faith of his mistaken belief; otherwise, he does not suffer by A's subsequent assertion of his rights;

(3)   acquiescence is founded on contract with a knowledge of one's legal rights, and hence A must know of his own rights;

(4)   A must know of B's mistaken belief; with that knowledge it is inequitable for him to keep silence and allow B to proceed on his mistake;

(5)   A must encourage B in his expenditure of money or other act, either directly or by abstaining from asserting his legal right.

40. As to the fourth element, it should be observed that unlike an estoppel by encouragement, an estoppel by acquiescence requires actual knowledge of the other party’s mistaken belief.

41. As to the fifth element, the plurality in Kramer v Stone observed at [57], citing Brennan J in Waltons Stores at 429:

… In cases of estoppel by acquiescence, the defendant might not do anything to induce the plaintiff's action because the defendant's "encourage[ment]", in the language of Hudson J, might involve no more than abstaining, with knowledge, from asserting the defendant's legal rights. Therefore, Brennan J explained that in acquiescence cases although the defendant "has not actively induced the plaintiff to adopt an assumption or expectation", the defendant will "be held to have done so".

42. After noting the significant difference between a person whose promise causes another's detriment and a person who merely omits to act where action could spare the other party from detriment, the plurality said at [59]:

… Any responsibility in the latter case must require the omission to occur with knowledge of that person's rights and of the other's mistake so as to give rise to a duty to speak. By contrast, there is no justification for such a requirement in the former case. As Leeming JA said of estoppel by encouragement in his concurring reasons in the Court of Appeal in this case (with which Kirk JA also agreed):

Why should it be necessary not only to know that the defendant has encouraged the plaintiff to labour under a false belief, but also to know that the plaintiff has relied on the encouragement? The distinction is quite artificial. Further, I can see no reason why two landowners, both of whom make the same representation to their neighbours who act upon it, should be in different positions if one is thereafter absent from the country and has no means of knowing what steps have been taken by the neighbour.

Issue 1: The content of the 1994 promise (Ground 1), and was the 1996 promise by Mrs Pirrottina Snr binding on Mr Pirrottina Snr (Ground 5)

The primary judge’s reasons

43. The primary judge made the following findings as to the content of the promise made to Sam by his parents (at J[168]-[174]):

1. Mr and Mrs Pirrottina Snr made the 1994 representations and Mrs Pirrottina Snr made the 1996 representations, as to which there was no evidence suggesting that Mr Pirrottina Snr then held a different view to that expressed by his wife, and that the representations made by Mrs Pirrottina Snr in 1996 expressed the intentions of both parents;

2. the express representations were not too vague or lacked specificity. Mrs Pirrottina Snr said the area of land indicated by Sam, bounded by the driveway, a drainage passage and the main orchard, on which the parents would build a house, “will be yours”. The focus was on the tangible property which Sam expected to get, and the parties did not stop to reflect whether some further legal transaction was necessary to complete the promised title, referring to Cobbe v Yeoman’s Row Management Ltd [2008] 4 All ER 713; [2008] UKHL 55 at [68], followed in Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105 at [150];

3. the parents and Sam were not then aware that it was impossible to subdivide the Lot from the Farm. Rather, the family became aware, during the course of seeking development approval to construct Sam’s house, that it was not possible to build two houses on the property; but the evidence did not indicate the family enquired as to whether it was possible to subdivide the Farm, nor that they had any interest in doing so, where they intended that the Farm would stay in the Pirrottina family;

4. the fact that the parents made subsequent wills which made no mention of Sam’s equitable interest in the Farm was of no consequence given that the wills were made after the parents had divested their interest in the Farm and it was unnecessary for the parents to address that subject in their wills at all, where the Farm did not form part of their estates; and

5. the parents’ representations were not subject to conditions such as the continuation of the partnership and a harmonious relationship between the brothers, where the partnership had yet to be mooted.

Challenge to content of the 1994 promise

44. It is said that the promise was only for Sam to have a house, not the surrounding skirt of land identified by Sam to his parents, bordered by the driveway, a drainage passage, and the main orchard: at J[30], [36].

45. Sam objected to Rocco raising this point on appeal, arguing that it was not raised in terms at trial. For the reasons which follow, that objection should be upheld. However, against the possibility that others are of a different view, I will address the substance of factual challenge as to the content of the 1994 promise.

New point on appeal

46. It is no answer for Rocco to say, as his senior counsel submitted, that Sam’s evidence on the substance of the promise was tested. Importantly, it was not put to Sam in cross-examination that he was promised something less than the description of the promise that he had given in his evidence: see [10] above. The cross-examination only went so far as to put to Sam in general terms (which he denied) that “it’s possible” that his parents said to him something to the effect of “[t]here’s a place where you can live”, that he had not “remembered the detail of what your mother said”, and that he had “forgotten the finer points of the conversation”. The cross-examination did not squarely put to Sam that the promise did not include the surrounding land, referred to by Sam in his evidence.

47. Nor was Sam challenged on his evidence that he relayed the conversation with his parents in September 1994 to Rocco the following day, and that he indicated to Rocco the same area of land that he had pointed out to his parents, being the Lot: see [11] above. To the contrary, the cross-examiner put to Sam that the proposition that he knew at the time of the 2002 transfer that his parents had “overdelivered” on their promise of “a home, that was about an acre”. The cross-examiner’s reference to “about an acre” was plainly a reference to the dimensions of the Lot, not the footprint of the house. Sam denied that “overdelivered” proposition.

48. Senior counsel for Sam fairly acknowledged that Rocco had submitted in closing submissions that there was a “difficulty” with establishing the boundary of the Lot, and that “the evidence rises no higher than the identification of the vicinity of the proposed building works”. But, as Sam’s counsel also submitted, that is different to the point sought to be raised by Rocco on appeal that the parents’ promise was limited to Sam’s house and did not include the curtilage. If this point had been raised at trial, it could or might possibly have been met by rebutting evidence from Sam at trial: Whisprun Pty Ltd v Dickson [2003] HCA 48; (2003) 77 ALJR 1598 at [51]; Coulton v Holcombe (1986) 162 CLR 1 at 9; [1986] HCA 33.

The content of the 1994 promise

49. Rocco’s submissions challenging the finding as to the content of the 1994 promise can be grouped under five propositions.

50. It is said that there is no evidence that anything was said about the boundaries during the 1994 conversation, nor do the boundaries line up with the Lot 1 diagram annexed to Sam’s cross-summons. These submissions ignored several matters. One is that no objection was taken at trial to the form of Sam’s affidavit evidence that when he spoke with his parents in the kitchen, he indicated the area of land where the lemon trees were that was bordered by the driveway, a drainage passage and the main orchard, and that when he relayed the conversation with his parents to Rocco the following day he indicated the same area of land to Rocco.

51. Another is that, although the “old lemon trees” have been removed since the 1994 conversation, the photograph of the Lot reproduced at J[133] shows, consistent with Sam’s evidence, the driveway, drainage passage and main orchard referred to by Sam in the 1994 conversation. That the survey attached to Sam’s cross-summons was created for the purposes of the litigation is not to the point; Sam never suggested that this document was contemporaneous.

52. Given the favourable credit finding with respect to Sam’s evidence, no error has been shown in her Honour’s finding (at J[36]) that the promise was not too vague or lacked specificity:

I do not accept that the express representations were too vague or lacked specificity. Mrs Pirrottina Snr said the area of land indicated by Sam, bounded by the driveway, a drainage passage and the main orchard, on which the parents would build him a house, “will be yours”. …

53. It is said that there was no evidence that Mrs Pirrottina Snr could see out the window from where she stood in the kitchen at the time of the 1994 conversation, and Mr Pirrottina Snr “may” have had a different view of the window. This submission is not only speculative, but also inconsistent with the physical features of the Lot where Sam’s house was constructed between 1995 and 1996, without any complaint by his parents or Rocco, who all lived on the Farm at that time. That Mr and Mrs Pirrottina Snr understood that Sam had pointed out the area of land during the 1994 conversation where the lemon trees were that was bordered by the driveway, a drainage passage and the main orchard, is also consistent with subsequent events.

54. In 1996, Mrs Pirrottina Snr requested Mr Falvo (in Rocco’s presence) to landscape “all the areas surrounding the house” (at J[42]), and Mr Falvo proceeded to landscape the area that he described as forming part of “Sam and Marisa’s Property”, which was pointed out to him by Mr and Mrs Pirrottina Snr (at J[42], [156]). The photograph reproduced at J[133] shows the landscaping of trees along the driveway. In 2015, the footprint of Sam’s house was extended to incorporate a games/family room and a pergola/barbecue area, beyond the footprint of the existing dwelling: at J[77]. In around 2017, Sam built a shed to accommodate four cars on the Lot about 20 metres from his house: at J[97]. There is no evidence of any suggestion by the parents, Rocco or anyone else, that Mr Falvo was not entitled to landscape the Lot as requested by Mrs Pirrottina Snr, or that Sam was not entitled to extend his house or construct the shed on the Lot.

55. It is said that Sam’s evidence that his mother said “it will be yours” was uncorroborated, except for the September 2020 meeting. But this ignores that the primary judge found that Rocco agreed with Sam and Angelina’s descriptions of the conversation on this topic (at J[35]), and that Sam’s evidence was corroborated by Ms Deidda’s evidence of her conversations with Mrs Pirrottina Snr in 1995 (at J[36]). It must be accepted that insofar as this appeal is concerned with factual findings which are based on her Honour’s assessment of the reliability or credibility of the witnesses evidence, it is necessary for Rocco to show that the finding is wrong by “incontrovertible facts or uncontested testimony” or because it is “glaringly improbable” or “contrary to compelling inferences”: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[29]; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55]. The acceptance of Sam’s evidence that his mother said to him “it will be yours” was reliability and credit based. Rocco’s submissions did not attempt to surmount the Fox v Percy hurdle.

56. It is said that Sam’s version of the 1994 promise was inconsistent with the documentary record contained in (a) the lease in favour of the parents registered on title when the 2002 transfer occurred, and (b) the parents’ wills made in 2003 which make no mention of Sam’s interest in the Lot. As to (a), the registered lease is not inconsistent with the parents’ promise. The lease did not pertain to the area of land where Sam’s house was situated; rather, the lease gave the parents a right to occupy the premises on the Farm known as the “farmhouse”, being the main dwelling on the Farm, and to have complete and uninterrupted access to those premises at all times.

57. As to (b), there was no reason for the parents to refer to Sam’s interest in the Lot in their wills made in 2003. By that time, Sam was a legal owner of the Farm, and the family had been acting in accordance with Sam’s interest in the Lot since 1994. That there was no document which reflected the parents’ oral promise was unexceptional, given the familial circumstances in which the promise was made. As her Honour found at J[218], Sam did not think that he needed to have a legal document in respect of his house at the time of the 2002 transfer. That finding is not challenged.

58. Finally, it is said that Sam’s evidence that a weatherboard cottage that at one time existed on the Farm had already come down years before the conversation in which the 1994 promise was made was wrong; that notwithstanding her Honour’s favourable credit finding, there are problems with Sam’s credit; and, that this Court should be slow to accept Sam’s uncorroborated evidence about the Lot. These submissions ignore that the primary judge had the very considerable advantage of seeing the relevant witnesses give their oral evidence and was thus able to bring to bear aspects of oral judgment and appraisal that are simply unavailable to this Court: Fox v Percy at [23]. Her Honour took into account that Sam had overstated some matters, and was mistaken about other matters of detail, such as the weatherboard cottage: at J[17]. No sufficient reason has been shown for doubting her Honour’s acceptance of Sam’s evidence on the critical elements of his evidence, including where it conflicted with Rocco’s.

59. Ground 1 is not made out.

Challenge to the 1996 promise

60. Ground 5 contends that the primary judge erred in holding that any promise by Sam’s mother in 1996 was binding on Sam’s father. This ground challenges the finding (at J[168]) that the representations made by Mrs Pirrottina Snr in 1996 expressed the intentions of both parents:

As to suggested assurances in this case, I have found that the parents made the 1994 representations. I have found that Mrs Pirrottina Snr made the 1996 representations. There was no evidence suggesting that Mr Pirrottina Snr then held a different view to that expressed by his wife. I note also Mrs Pirrottina Snr’s comments in September 2020, as recalled by Mr Lopresti, that Mrs Pirrottina Snr said that the house “belongs to Sam … that’s what my husband wanted”: see [110]. As such, I find that the representations made by Mrs Pirrottina Snr in 1996 expressed the intentions of both parents.

61. In light of the conclusion on ground 1 and given that no subsequent encouragement after the 1994 promise is required (Kramer v Stone at [34]), this ground cannot impact the outcome of the appeal. Nevertheless, I will briefly indicate my view, noting that counsel for Rocco was content to rely on his written submissions.

62. It is said that the pleaded case in respect of the 1996 representations was one of agency, but there was no evidence that the father ever communicated anything about his intentions about the new home or the Lot. That the 1996 representation expressed the intentions of both parents is supported by her Honour’s findings accepting (1) Angelina’s evidence of Mr Pirrottina’s intentions stated at the family dinner table in 1994 that he was happy to give Sam the land and to build a house for him to make his home: at J[33], (2) Ms Deidda’s evidence that in about 1995, Mrs Pirrottina Snr told her that she and her husband had decided to build a house on the farm for Sam: at J[34], and (3) Mr Lopresti’s evidence of the family meeting in September 2020 during which Mrs Pirrottina Snr confirmed that the home that Sam and his family had built on the Farm belongs to Sam, and that this is what her husband wanted: at J[110]. Nor does Rocco challenge her Honour’s finding (at J[168]) that there was no evidence suggesting that Mr Pirrottina Snr ever held a different view to that expressed by his wife.

61. It is said that, even if the 1996 representation embodied the intention of both parents, that does not mean that the mother was capable of binding the father when that representation was made. This submission misunderstands the terms of the finding (at J[168]). Accepting, as her Honour found, that the parents made the 1994 promise in relation to Sam’s entitlement to the house and the Lot, the 1996 representation made by Mrs Pirrottina Snr was a confirmation of the pre-existing, established representation as to Sam’s ownership of the Lot.

62. It is said that her Honour should have given no weight to Mr Lopresti’s hearsay statement concerning what Mrs Pirrottina Snr had said at the family meeting in September 2020 about the husband’s desires that he wanted Sam to own the house, because the case was not pleaded on the basis of a prior agreement between the mother and the father. But this ignores the way the case was run at trial. There was no objection, based on a pleading point, to the admissibility of Mr Lopresti’s evidence concerning what Mrs Pirrottina Snr said at the September 2020 meeting. Nor was there any submission by Rocco in closing argument at trial challenging the weight to be given to Mr Lopresti’s evidence on this topic.

63. Ground 5 is not made out.

Issue 2: Reliance (ground 2)

The primary judge’s reasons

66. The primary judge made the following findings concerning Sam’s detrimental reliance on the promises made by his parents:

[175]   As to reliance, Sam said he assumed that the house and the Lot were his. Sam knew from when he moved into his house that there was no separate title or subdivision that gave him the right to the Lot but said “My mother and father’s word was good enough as a contract.” Sam never thought about the fact that there was no separate title; he just relied on his parents’ promise. I accept that Sam relied on his parents’ representations. Sam took his parents at their word and believed that the Lot and the house were his and that the Mangrove Mountain farm would stay in the family. Sam would have acted differently if the representations had not been made, specifically, he would have taken up his parents’ offer to buy him a block of land on which to build his own home.

[176]   As to detriment, this element falls to be considered in circumstances where the parents never sought to depart from their assurances. The parents’ professed motivation for transferring the Mangrove Mountain farm to Sam and Rocco was to keep the farm and the business in the Pirrottina family by entrusting these assets to those of their children who were prepared to continue the business and who had agreed not sell the farm. There is no suggestion that the parents thereby sought to interfere with Sam’s interest in the Lot or Sam’s house.

[177]   Considering detriment and unconscionability in this hypothetical context, Sam both benefited from, and suffered detriment, as a consequence of reliance on his parents’ assurances. Sam suffered a detriment as he forewent his parents’ offer to buy him a block of land on which he could build a house in favour of a house being constructed on the Lot. Sam and his wife also forewent the possibility of a financial contribution to their married life from Mr Falvo in favour of his contribution to the construction of a driveway, footpath and landscaping around the house. Sam ignored his father-in-law’s offer of a job in Sydney in property development, although there is no evidence that such a career would have been more financially advantageous than continuing to live and work on the Mangrove Mountain farm. Nor is there evidence that, when continuing to work in the family business, Sam was paid at a level of remuneration below the market rate. Against this, Sam received a benefit in the form of rent-free housing, with utilities paid by his parents.

[178]   Nonetheless, the detriment suffered by turning down his parents’ offer to buy him a block of land of his own, rather than accommodation attended with the uncertainties of living on someone else’s property, was a substantial detriment. In the circumstances, I consider that the elements of estoppel by encouragement are established such that Sam had an equitable interest in the Lot as a consequence of his parents’ representations, on which he relied to his detriment, making it unconscionable for the parents to go back on their word, if they had chosen to do so.

67. Ground 2 contends that the primary judge erred in holding that the reliance by Sam on the parents’ promises was “reasonable reliance”, however, in writing, Rocco went further and submitted that Sam (i) did not rely on the promises at all, and (ii) if there was reliance, it was neither detrimental nor reasonable.

68. Sam objects to Rocco expanding this ground through his submissions to attack the separate finding of detriment (at J[177]), which was not otherwise the subject of a ground of appeal. It is appropriate to deal with the substance of Rocco’s submissions given that no prejudice was identified by Sam.

69. It is of assistance first to say something further about the elements of reliance and detriment.

70. Reliance: To establish reliance as an element of estoppel, “it is ordinarily necessary for the promisee to show not merely that the promise was one factor taken into account in motivating the promisee’s action or omission, but that the promisee would not have acted or omitted to act in the absence of the promise”: Kramer v Stone at [39]. As Gageler CJ said in Sidhu v Van Dyke at [91]:

To establish that the belief to which she was induced by the appellant’s representations was a contributing cause to the course of action or inaction which she took, the respondent needed to establish more than that she had the belief and took the belief into account when she acted or refrained from acting. She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction: that she would not have so acted or refrained from acting if she did not have the belief.

71. Detriment: In Kramer v Stone at [40], the plurality said of the requirement of detriment:

… the consequence of the promisee's reliance must be that the promisee will suffer detriment if the promise is not fulfilled, in the sense that the promisee will be left in a worse position, as a consequence of reliance upon the promise, than if the promise had not been made … it is the existence of detriment arising from reasonable reliance upon an unfulfilled promise that completes the recognition of the estoppel and moulds the remedial response. …

72. The question of detriment is assessed as at the time a party seeks to depart from the assumption or expectation: DHJPM Pty Ltd v Blackthorn Resources Limited (2011) 83 NSWLR 728; [2011] NSWCA 348 at [72] (Meagher JA, Macfarlan JA agreeing). As Ward P (Leeming and Kirk JJA agreeing) said in Kramer v Stone (2023) 112 NSWLR 564; [2023] NSWCA 270 at [96]:

Detriment may be of a kind that involves “life-changing decisions with irreversible consequences of a profoundly personal nature” (Donis v Donis (2007) 19 VR 577 at [34]; cited approvingly in Sidhu v Van Dyke at [84] (French CJ, Kiefel, Bell and Keane JJ)).

73. To similar effect, in Q (a pseudonym) v E Co (a pseudonym) [2020] NSWCA 220; (2020) 383 ALR 469 at [125], Meagher JA (Leeming and Payne JJA agreeing) said:

Thus, detriment sufficient to support an estoppel by encouragement need not involve expenditure of money on the property the subject of the estoppel or otherwise, or be capable of financial quantification: Walsh v Walsh [2012] NSWCA 57 at [14]. It is well recognised that detriment in the relevant sense may flow from having significantly changed the course of one’s life: see Riches v Hogben [1985] 2 Qd R 292, …

Rocco’s argument that Sam did not rely on the promises

74. Rocco challenges the findings of reliance at J[175] and [177] that (1) Sam forewent his parents’ offer to buy him another block of land of his own on which to build a house, and (2) Sam and Marisa forewent the possibility of financial contribution to their married life from Mr Falvo in favour of Mr Falvo’s contribution to the construction of a driveway, footpath and landscaping on the Lot.

75. With respect to the first act of reliance, it is said that this Court should not accept Sam’s uncorroborated evidence that his mother offered him another house on a nearby block. As indicated, the acceptance of Sam’s evidence concerning the promised Lot is reliability and credit based. Sam was challenged in cross-examination that he got this “bit” of his evidence wrong, and he rejected that suggestion. It was well-open to her Honour to accept, as she did (at J[36]), that the conversation between Sam and his parents took place as described by Sam. Rocco’s challenge to the finding concerning the first act of reliance did not attempt to surmount the Fox v Percy hurdle.

76. Nor is it to the point, as Rocco submits, that Sam did not establish any “antecedent premise” that he was expecting a house on separate title. This first act of reliance in 1994 does not depend upon any “antecedent premise”; it depends on the 1994 promise which the parents made to Sam, and Sam’s evidence of his reliance on that promise when he turned down his parents’ offer to buy him a block of land of his own.

77. Nor is it relevant, as Rocco submits, that one of the siblings did not receive an alternative home, and Sam already had an interest in an investment property. As Sam explained in cross-examination, his parents had spent a significant amount of money on legal fees for Carmelo Pirrottina, another of their brothers (as to which there was evidence that these legal fees exceeded $1 million); and he gave unchallenged evidence that he himself had assisted Carmelo to buy a property. That the parents had purchased an investment property at Mannering Park jointly for Sam and Carmelo in 1982 is unrelated to the subject matter of the promised Lot, being a house on the Farm for Sam and his family when he was married.

78. With respect to the second act of reliance, the proposition that Sam and Marisa would have foregone the possibility of financial contribution to their married life from Mr Falvo, in favour of Mr Falvo’s contribution to the construction of a driveway, footpath and landscaping on the Lot, is entirely speculative. Nor was this proposition put to Sam in cross-examination.

Rocco’s argument that Sam’s reliance was not reasonable or detrimental

79. Rocco advanced a series of related submissions that the acts of reliance were not reasonable.

80. It is said that Sam could not have reasonably relied on the promise (if made) to give him the Lot because that was “impossible”, as her Honour found that the family knew, during the course of seeking development approval for the new house, that it was not possible to build two separate homes on the Farm.

81. It is said that the promise was “replaced” by a gift of half the Farm in 2002, and from that point Sam’s continued reliance on the original promise was “non-sensical”, and his belief that the Lot “was his” was a delusion because he knew that it would not happen; rather, Sam’s ongoing occupation of the Lot depended on the continuous relationship with Rocco.

82. It is also said that once it became clear there could be no subdivision, or at the latest from the 2002 transfer of the Farm, it was no longer reasonable for Sam to rely on his parents’ promise to the extent that it involved occupying the property forever.

83. The asserted impossibility of giving the Lot to Sam is immaterial given the unchallenged findings (at J[170]) that the parents and Sam did not know that subdivision was impossible, and that the evidence does not indicate that the family enquired as to whether it was possible to subdivide the Farm, or that they had any interest in doing so, where they intended the Farm would stay in the Pirrottina family. Nor is there any challenge to the finding (at J[175]) that Sam never thought about the fact that there was no separate title; he just relied on his parents’ promise. That finding was well-open, given the evidence of Sam in cross-examination:

Q.   You knew that there wasn't going to be a subdivision from the time construction started on your home, didn't you?

A.   I never thought of it.

Q.   You just relied on your parents' promise, didn't you?

A.   That's right.

84. In addition, whether the Lot was incapable of subdivision does not impact her Honour’s finding (at J[194]) that Rocco and Sam accepted the 2002 transfer on condition that the conduct of the family business and the occupation of the land would continue as before, that is, the Farm would not be sold and Sam would remain on the Farm for his lifetime.

85. Nor does the 2002 transfer negate Sam’s reliance on his parents’ promise made before the transfer. Here, what Sam wanted and expected to get in relation to the Lot was a gift of an interest in immovable property for long term occupation as a home. The parties had no intention of entering into a contract or formalising their expectation: DHJPM Pty Ltd v Blackthorn Resources at [105] (Handley AJA). Sam relied on his parents’ promise in the manner found by her Honour. That reliance did not change with the 2002 transfer. As her Honour found (at J[176]), there is no suggestion that the parents sought by the 2002 transfer to interfere with Sam’s interest in the Lot or Sam’s house.

Challenge to finding of detriment

86. It is said that if the promises had not been made, Sam would have acted in precisely the same way.

87. Again, this submission ignored that Sam’s detrimental reliance, as found by her Honour, occurred before the 2002 transfer. Thus, Sam’s interest in the promised Lot had already arisen before the 2002 transfer, rendering it unconscionable for the parents to resile from the promise from the time of the detrimental reliance: McNab & Anor (in their capacity as Executors and Trustees of the Will of Colin Wilbur Turner, deceased) v Graham (2017) 53 VR 311; [2017] VSCA 352 at [107] (Tate JA, Santamaria JA and Keogh AJA agreeing).

88. One further matter should be mentioned. Rocco challenged the finding (at J[177]) that Sam ignored his father-in-law’s offer of a job in Sydney in property development. It is said that irrespective of this job offer, Sam would have always stayed on the Farm. But the premise of this factual challenge – that her Honour found that this conduct of Sam was detrimental – is incorrect. Her Honour found (at J[177]) that there was no evidence that such a career would have been more financially advantageous than continuing to live and work on the Farm. It is not necessary to address this factual challenge as it cannot affect the outcome of the appeal.

89. Ground 2 is not made out.

Deposit for Rocco’s farm (ground 10)

90. The primary judge made the following findings (at J[60]) concerning Mr and Mrs Pirrottina Snr’s financial contributions to Rocco’s farm, including that they paid the deposit of $60,000 on Rocco’s farm:

Given the non-production of corroborative records by Rocco, together with the evidence of Ms Deidda, Angelina’s affidavit prepared in the family provision proceedings, and the evidence of Angelina and Sam in these proceedings, I find that Mr and Mrs Pirrottina Snr paid the deposit on Rocco’s farm. The running expenses for Rocco’s farm were also paid by Mr and Mrs Pirrottina Snr. Rocco earned rental income from the house on Rocco’s farm, which he was able to deploy to make mortgage payments, where he continued to live in his parents’ home at Mangrove Mountain. By these means, Mr and Mrs Pirrottina Snr provided Rocco with assistance, both directly and indirectly, to acquire Rocco’s farm. I do not accept that the parents’ only financial assistance provided to Rocco to buy his farm was the provision of a guarantee.

91. Rocco challenges the finding that the parents paid the deposit on Rocco’s farm at Kulnura: at J[60]. There is no challenge to the broader finding in relation to direct and indirect assistance provided by the parents to acquire Rocco’s farm.

92. Sam drew attention to the pleadings. The payment of the deposit for Rocco’s farm did not form part of either party’s pleaded case although, as the primary judge recorded (at J[58]), as she understood it, “the extent to which Mr and Mrs Pirrottina Snr paid for Rocco’s farm was relevant to whether Rocco would have agreed to the transfer of the family business and the Mangrove Mountain farm to himself and Sam on the terms proposed”. Nevertheless, her Honour did not rely on the deposit in finding that Rocco agreed to accept the transfer of the Farm in 2002 on condition that his parents would maintain control over the land, its improvements and buildings, and he would not sell it: at J[194]. That finding was consistent with concessions by Rocco in his evidence: at J[193]-[197].

93. It is said that the finding that the parents paid the deposit on Rocco’s farm is relevant to Sam’s reliance on the promise. That is not so. Whilst Sam gave evidence that his father told him that the parents had paid a $60,000 cheque for the deposit on the Kulnura farm (at J[57]), that hearsay evidence was not relied on by her Honour when finding that the parents paid the deposit (at J[60]).

94. In oral argument, counsel for Rocco acknowledged that this ground is only relevant if the Court is “persuaded to look for corroboration of Sam’s evidence” on reliance. But that is not necessary, given that Rocco’s challenge to the findings of detrimental reliance has failed. It is not necessary to address this ground since it cannot affect the outcome.

Issue 3: Unconscionability (Grounds 3 and 4)

95. Ground 3 contends that the primary judge erred in holding that it would have been unconscionable for Mr and Mrs Pirrottina Snr to resile from the promise. Ground 4 contends that the primary judge erred in finding that “Mum’s” promise affected Rocco’s conscience, in circumstances where Sam had been given half the Farm. It is convenient to address these grounds together, reflecting the way in which the parties’ submissions addressed these grounds.

96. It is of assistance first to say something further about equity’s remedial response to detrimental reliance on an unfulfilled promise. What distinguishes the equitable principle from the enforcement of contractual obligations is that there is no legally binding promise: Giumelli v Giumelli at [35], citing Riches v Hogben [1985] 2 Qd R 292 at 300-301. It is not the promise itself that attracts the intervention of equity, but the expectation it creates: Giumelli v Giumelli at [35]. Correspondingly, it is not the breach of promise, but the promisor’s responsibility for actual and detrimental reliance by the promisee that makes it unconscionable for the promisor to resile from the promise: Sidhu v Van Dyke at [58].

97. In Kramer v Stone at [40], the plurality summarised the approach to equity’s remedial response as follows:

Unlike the recognition of a gift, or the enforcement of a testamentary promise under a valid will, or the enforcement of a contractual promise, it is the existence of detriment arising from reasonable reliance upon an unfulfilled promise that completes the recognition of the estoppel and moulds the remedial response. As this Court has repeatedly held, "[i]t is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise". Hence, the relief is "moulded accordingly to prevent th[e] detriment". In cases where the detriment suffered by a plaintiff is "a relatively small, readily quantifiable monetary outlay on the faith of the [defendant's] assurances" then, apart from interest, the likely equitable relief ordered will be compensation in the amount of the monetary outlay. By contrast, where the detriment suffered "involves life-changing decisions with irreversible consequences of a profoundly personal nature", the likely equitable relief will be to require fulfilment of the assumption upon which the plaintiff acted, such as by a conveyance of rights, or an assessment of the monetary value of the assumption. (Citations omitted.)

Issue 9: Challenge to special costs order (Grounds 14 and 15)

194. The primary judge made orders on 9 September 2024 that Rocco pay Sam’s costs (1) on the ordinary basis up to and including 3 April 2023, and (2) on an indemnity basis from 4 April 2023, subject to two exclusions, one relating to the costs incurred in connection with separate questions to be determined by way of reference, and the other relating to the costs in connection with the account to be taken of the partnership.

195. Ground 14 contends that the discretion to make the costs order miscarried because her Honour failed to take into account the fact that Rocco may, when the proceedings are finally determined (upon the taking of the partnership account), be more successful than an offer he made (on 10 March 2023).

196. Ground 15 contends that the discretion miscarried because her Honour made a material error of fact in finding that Rocco acted unreasonably in failing to accept an offer by Sam that did not offer to pay Rocco’s costs.

197. Given the brevity of the parties’ written submissions on these grounds, it is necessary to refer to the background to the judgment on costs in some detail.

198. The primary judge dealt with the issue of costs on the papers following receipt of the parties’ written submissions in June and July 2024 which included evidence of two Calderbank offers (Calderbank v Calderbank [1975] 3 All ER 333). Rocco made an offer to Sam dated 10 March 2023, which Sam rejected. Sam made an offer to Rocco dated 3 April 2023, which Rocco rejected. Both offers followed a mediation on 6 March 2023 which had been unsuccessful.

Rocco’s offer

199. Rocco’s offer to settle the dispute was on the basis that (i) Sam pay Rocco $3,309,000 calculated as $3,100,000 plus certain cash at bank, (ii) Sam retain all plant and equipment of the partnership business, not including specified excluded equipment and stalls at Flemington Markets, and (iii) the parties enter into a deed of release.

200. The parties diverged below as to the significance of Rocco’s offer. Although unsuccessful on the issues determined at trial, Rocco relied on his Calderbank offer for the submission that his rejection of Sam’s offer was not unreasonable because depending on the outcome of matters yet to be determined in the proceedings, Rocco may beat the offer in his 10 March 2023 letter. Rocco submitted that for this reason the question of costs should be determined after the hearing has completed. Rocco said in writing, under the heading “Rejection of offer not unreasonable behaviour”, being a reference to Rocco’s rejection of Sam’s offer:

[15]   More importantly, the defendant’s submissions largely ignore the plaintiff’s offer of settlement. As set out from [20]-[23] of the Duong Affidavit, depending on the outcome of matters yet to be determined in the proceedings, Rocco may beat that offer. If he does, it would be an obtuse result if he had been the subject of an order for costs, let alone an order for indemnity costs, in a proceeding where it could be demonstrated that Sam was the one who unreasonably rejected an offer.

[16]   In those circumstances, all questions of costs in the proceedings, including questions of which party is entitled to costs on an indemnity basis and for what part of the hearing, should be determined after the hearing has completed. (Emphasis added)

201. Reference should also be made to pars [21]-[23] of the affidavit of Rocco’s solicitor, Mr Hien Duong of 12 July 2024:

[21]   Now that the cat is out of the bag, it is appropriate to address this offer in detail. The plaintiff's Calderbank offer of 10 March 2023 was a simple in global offer to finalise the entire proceedings between the parties for the amount of $3,309,000 on the basis the defendant retain all the plant and equipment of the partnership business not including the certain equipment and stalls as set out in the letter (as per the Deed of Dissolution), see pages 4, 5 LM-01.

[22]   The parties have provided their reference submissions to the Referee in respect of the disputed chattels on 3 July 2024. The value of the disputed chattels is not insignificant. The Referee's determination may affect the costs order in context of the plaintiffs Calderbank offer (in that, a favourable result to Rocco may mean that he beats the offer of $3,309,000).

[23]   I cannot calculate, at this point, whether my client will be more successful than Rocco's offer. Given the strength of Rocco's arguments of the reference, I believe that it is likely that he will be. The plaintiffs Calderbank offer was a global offer. The taking of accounts for the partnership is still to be performed. This may also affect the cost order in context of the plaintiff’s Calderbank offer.

202. Sam’s response to this submission was that Rocco’s offer was irrelevant, save for its disclosure of the fact that Rocco wished to have certain market stands excluded from the parties’ compromise.

Sam’s offer

203. Sam’s offer was more complicated. It contained three offers, which her Honour summarised at J2[11]-[13]:

[11]   On 3 April 2023, Sam made a Calderbank offer to Rocco, accompanied by the survey of the Lot and a valuation report from CBRE in respect of the Mangrove Mountain farm as at 27 February 2023. CBRE opined that market value was between $4.89 million and $5.09 million. The mid-point between these figures was $4,998,773.

[12]   The format of the Calderbank offer followed the prayers for relief in the Summons. Sam made three offers:

(a)   To buy-out Rocco’s interest in all of the suggested partnership assets listed in the Summons plus a new tractor acquired by Sam in October 2022 for $32,353 “at a value to be determined by the Court”.

(b)   To buy-out Rocco’s interest in the assets in (a) excluding three of the Flemington Markets stalls “at a value to be determined by the Court”. (These three stalls were later agreed by the brothers to be a partnership asset but leased to a third party.)

(c)   To buy-out Rocco’s interest in the assets in (b) for $2,788,243.50, based on the CBRE valuation and the Blue Gum Asset Advisory valuation with some extra thrown in. In short, $2,348,243.50 was attributed to Rocco’s 50% interest in the Mangrove Mountain farm (being the midpoint of the CBRE valuation, halved) less $303,513 for Sam’s house (from the earlier Colliers’ valuation) and thus making no allowance for the land value of the Lot. A further $440,000 was attributed to plant and equipment, being 50% of the Blue Gum Asset Advisory valuation plus $32,353 for the new tractor plus an additional $100,993.50 to bring the total to $440,000.

[13]   For each alternative, Sam also offered:

(a)   to pay such of Rocco’s costs of the proceedings “that the Court determines is appropriate in the circumstances”;

(b)   not to seek any payment on account of partnership assets on Rocco’s farm; and

(c)   a final accounting exercise in relation to the partnership to be carried out by Mr Tisano or, as proposed by Rocco, a forensic audit of the partnership accounts.

The primary judge’s reasons

204. Her Honour Honour referred to a number of background matters including the procedural orders which had been made by consent since delivery of the principal judgment, which it is convenient to set out in full:

[27]   On 30 May 2024, I also made orders by consent, jointly appointing a valuer to assess items agreed to be partnership property. Each party had the option to purchase any of the assets in their possession at the price assigned by the valuer. If not, the other brother had the option of purchasing the item at the assigned value or, failing this, the items were to be sold at auction, with the proceeds of the auction to be paid to the partnership. Orders were also made for a reference, with the referee’s report to be provided to the Court by 16 August 2024. In addition, an independent accountant was jointly appointed to prepare the final accounts of the partnership and report their findings by 30 August 2024. In the event that citrus trees on Rocco’s farm were determined to be assets of the partnership by the referee, then further orders were made for the taking of accounts in respect of this partnership asset.

[28]   On 3 June 2024, Mr Wood provided an updated valuation for the Mangrove Mountain farm in the amount of $6.9 million. On 29 June 2024, Grays Valuations provided a valuation of agricultural plant and equipment, totalling $607,900. On 22 July 2024, I made further consent orders, jointly appointing another valuer to value the partnership assets not valued by Grays Valuations.

[29]   On 6 August 2024, referee Anthony Lo Surdo SC provided his report as referee. The referee’s findings were largely in favour of Sam. The additional assets referred to the referee on 18 March 2024 were found not to be the subject of the proceedings and thus not able to be pursued in the reference but, in any event, were not partnership assets. The Iseki tractor and 140 cumquat trees on Rocco’s farm were found to be assets of the partnership. The balance of the assets referred to the referee were not assets of the partnership. The referee concluded that Rocco should bear the costs of the reference. The report of the independent accountant is awaited.

205. Her Honour then addressed Sam’s application for indemnity costs for proving the facts in his notice to admit facts and concluded (at J2[44]) that Rocco should pay Sam’s costs on an indemnity basis of proving these matters, being costs incurred in proving those facts on or after 3 October 2023. There is no challenge to that finding.

206. Turning to Sam’s Calderbank offer, her Honour said (at J2[48]) that “Rocco submitted that, depending on the reference and the taking of the account, Rocco may do better than the Calderbank offer but that it was too early to say”, which seems to be a reference to doing better than Sam’s offer, not Rocco’s offer, which was the submission made in writing by Rocco: see [200] above. That misunderstanding is also apparent from J2[50], where her Honour said:

… Mr Duong said that, even now, he cannot calculate whether Rocco will be more successful than Sam’s Calderbank offer, but expects that Rocco will likely argue that he has ‘beaten’ the offer. (Mr Duong’s affidavit was made before the adverse referee report.)

207. As is apparent from [201] above, that is not what Mr Duong said in his affidavit.

208. Her Honour found that costs should not be paid out of the partnership assets in circumstances where substantive disputes between the brothers required determination. After noting that (i) Sam had succeeded in the proceedings, and (ii) the result of the independent accountant’s report is of no moment for present purposes, where the parties did not require her to consider that matter, her Honour found that Sam is entitled to his costs of the proceedings, together with indemnity costs on and from 3 October 2023 in respect of the costs of proving the facts in the notice to admit facts: at J2[53].

209. Her Honour then addressed Sam’s Calderbank offer and identified two issues for determination. These were: (1) would acceptance of the Calderbank offer have achieved a better outcome for Rocco than has prevailed, and (2) whether Rocco’s non-acceptance of the Calderbank offer was unreasonable in all of the circumstances: at J2[57].

210. On the first issue, her Honour rejected Sam’s submission that his offers were made on the basis that he would pay Rocco’s costs of the proceedings: at J2[60]. Rather, her Honour proceeded on the basis that Sam’s offer to pay such of Rocco’s cost of the proceedings “that the Court determines is appropriate in the circumstances”, might have been nothing in circumstances where the Court had not determined the issues in dispute, referring to the observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625; [1997] HCA 6, and concluded (at J2[60]):

I have proceeded on the basis that Sam’s offer in respect of costs was the chance, but not the certainty, that Sam would be ordered to pay some of Rocco’s costs. I have treated this aspect of the offer as having no monetary value.

211. Her Honour put aside Sam’s offer (b) and offer (c) for reasons which it is not necessary to refer to: at J2[61] and [62]. Turning to Sam’s offer (a) – to buyout Rocco’s interest in the Farm, minus the Lot, and partnership assets at an amount to be determined by the Court – her Honour found that (i) so far as the Farm is concerned, what will now happen is what Sam offered (at J2[65]), (ii) Rocco would have fared better in respect of the Flemington Markets stalls if he had have accepted Sam’s offer (a) (at J2[66]), and (iii) overall, Sam’s offer in respect of plant and equipment is what will now happen (at J2[67]). Her Honour concluded (at J2[68]):

In addition, whilst Rocco would probably not have received any of his costs if he had accepted offer (a), Sam is now entitled to his costs of these proceedings on a party and party basis, together with indemnity costs in respect of the cost of proving the facts in the Notice to Admit from 3 October 2023 on. I have assumed for working purposes that Rocco will be obliged to pay some $560,000 in costs. On this component of the Calderbank letter, Rocco would have faired better if he had accepted any of the offers. Overall, I conclude that Rocco would have faired better if he had accepted offer (a). Rocco would also not have incurred further legal costs himself since April 2023, which he must now bear.

212. On the second issue, her Honour found that given the safeguards built into offer (a) – asset value being determined by the court plus an account – what Rocco was really giving up by accepting the offer was that he would have to concede Sam’s interest in the Lot, being a subject on which both brothers had intimate knowledge, and Rocco was personally aware of the facts relevant to Sam’s asserted interest in the Lot and did not dispute those facts: at J2[75]. Her Honour found that Rocco’s non-acceptance of Sam’s offer was unreasonable in the circumstances at the time when the offer was made and concluded that an indemnity costs order should be made from the date of the offer, giving the following reasons (at J2[76]):

… Sam’s offer was, essentially, to conclude the arrangement the brothers had agreed with their mother and at a figure which did not compromise Rocco’s right to receive fair value for his interest in the Mangrove Mountain farm or the partnership assets. With the assistance of senior counsel then briefed, I consider that Rocco was able to assess whether Sam’s offer should be accepted or whether he should press on in the hope of achieving a better result. Overall, I consider that Rocco’s non-acceptance of the offer was unreasonable in the circumstances at the time when the offer was made. As I noted in my primary judgment, Rocco ultimately appeared to have taken a particularly dogged stance vis a vis his brother, as Rocco considered that the way things had worked out was “not fair”: at [16]. It follows, that I am satisfied that an indemnity costs order should be made from the date of the offer. Sam’s entitlement to indemnity costs in respect of the Notice to Admit Facts is absorbed within such an order.

Ground 14

213. Rocco’s written submissions in chief and in reply relating to ground 14 were very brief. It is said that it was premature to determine the question of costs before the finalisation of the partnership accounts which is yet to occur, because it remains possible that Rocco might beat the offer he made on 10 March 2023. That possibility is relied upon by Rocco for the related contention that her Honour erred in the exercise of the discretion to order indemnity costs in not considering Rocco’s submission that it was premature to determine whether it was unreasonable of Rocco to have rejected Sam’s offer.

214. Although not conceding the relevance of Rocco’s offer, junior counsel for Sam, who addressed the Court on this issue, acknowledged that her Honour did not expressly deal with this matter. That concession was properly made. As is apparent from J2[48] and [50], which are referred to at [206] above, her Honour seems to have misunderstood Rocco’s submission as referring to doing better than Sam’s offer, when in fact Rocco’s submission was that he might do better than his own offer.

215. The inference is that her Honour failed to take into account a relevant consideration (at J2[48] and [50]) being the submission that Rocco’s rejection of Sam’s offer was not unreasonable because of the possibility that Rocco might beat his own offer and therefore it was premature to determine the question of costs, or made a material error of fact in finding (at J2[53]) that the parties, relevantly Rocco, did not require her Honour to consider the result of the independent accountant’s report, in the context of the prematurity submission.

216. Sam sought to avoid this conclusion by arguing that Rocco’s offer was not relevant to whether Rocco’s rejection of Sam’s offer was unreasonable. It is said that the need for taking of accounts as a result of dissolution of the partnership was and remains a matter not in issue between the parties. But that is no answer to Rocco’s complaint that her Honour failed to address his submission that it was premature to determine the issue of costs. Nor is this Court in a position to evaluate the financial consequences of the yet to be obtained independent accountant’s report for the finalisation of the partnership accounts.

217. For these reasons I am satisfied that Rocco has demonstrated that the exercise of the discretion as to costs miscarried (Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45]). Given that conclusion, it is not necessary to address ground 15. The proceedings should be remitted to the primary judge for reconsideration of the question of costs of the trial at the conclusion of the proceedings upon the finalisation of the partnership accounts. In this regard, two matters should be noted.

218. First, as indicated, there was no challenge on appeal to her Honour’s finding that Rocco should pay Sam’s costs on an indemnity basis of proving the matters in Sam’s notice to admit facts, being costs incurred in proving those facts on or after 3 October 2023. Second, the suggestion in Rocco’s reply submissions cautioning against remitting the matter to the primary judge is unfounded.

Costs in this Court

219. The Court has a broad discretionary power to award costs: Civil Procedure Act 2005 (NSW), s 98(1). The general rule is that costs should follow the “event”, unless it appears to the Court that some other order should be made as to the whole or any part of the costs: UCPR, r 42.1. Generally, the “event” refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15].

220. Underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the Court considers to be the responsibility of each party for the incurring of costs: Commonwealth Bank of Australia v Gretton [2008] NSWCA 117 at [121] (Hodgson JA, Mason P and Beazley JA agreeing).

221. Where the result of the litigation is mixed, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings (see Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]), such an exercise would generally be carried out on a relatively broadbrush basis, and largely as a matter of impression and evaluation by the Court: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22.

222. Rocco’s partial success on appeal concerns a separate and discrete issue to the other grounds of appeal on which he failed (or that were not necessary to determine as they did not affect the outcome of the appeal). Given the mixed outcome on appeal, it is appropriate to entertain the process of apportioning costs as between the different issues. Rocco’s limited success on appeal is substantially offset by his failure on all the other issues. In my view, the appropriate order is that Rocco should pay 95 per cent of Sam’s costs in this Court.

219. In the event that either party seeks a different order, they may exercise the rights afforded by the Rules to apply to set aside or seek a variation of the costs order that I propose, noting the time limit of 14 days in UCPR, r 36.16.

Orders

224. I propose the following orders:

1. To the extent necessary, grant leave to appeal.

2. Appellant’s application to adduce further evidence granted.

3. Make no order as to the costs of the appellant’s notice of motion filed 31 October 2024.

4. Appeal dismissed, except as to ground 14 which is upheld.

5. Set aside orders (1), (2) and (3) made by the primary judge on 9 September 2024 and, in lieu, remit the proceedings to the primary judge for reconsideration of the question of costs of the trial at the conclusion of the proceedings.

6. Appellant to pay 95 per cent of the respondent’s costs in this Court.

225. PAYNE JA: I agree with Gleeson JA.

226. ADAMSON JA: I agree with Gleeson JA.

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Decision last updated: 02 April 2025