Protheroe v Protheroe (No. 2)

[2023] NSWSC 751

Supreme Court

New South Wales

Medium Neutral Citation:

Protheroe v Protheroe (No. 2) [2023] NSWSC 751

Hearing dates:

16 May 2023

Date of orders:

3 July 2023

Decision date:

03 July 2023

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Relief granted to give effect to the retirement representations. Parties directed to bring in draft short minutes of order to give effect to these reasons. Costs reserved.

Catchwords:

EQUITY – equitable estoppel – relief hearing – Court upholds claim for a constructive trust – the defendant/cross claimant, the son, farms two properties (and at times other associated properties) held in the name of his father, the plaintiff/cross-defendant – in the principal hearing the Court found that the father made representations to the son, or caused the son to assume, that the son would have the benefit of the properties upon the father’s retirement from farming the properties – the Court found that the son acted upon the representations to his detriment and that the father holds the properties on constructive trust for him to make good the representations relied upon or the assumptions made – the Court finds it would be inequitable if the father did not make good the representations relied upon or the assumptions made by the son – relief hearing – consideration of the appropriate remedy – the Court found that the father had indicated he wished to retire from the family farming property and conduct a small business – the Court requires the son to elect whether he will return to the family farming property as the basis for moulding of final relief and the son so elects - how should the Court provide equitable relief in the circumstances.

Legislation Cited:

Civil Procedure Act2005, s 98(4)(c)

Uniform Civil Procedure Rules 2005, r 31.46

Cases Cited:

Protheroe v Protheroe [2023] NSWSC 188

Category:

Consequential orders

Parties:

Plaintiff: Colin Henry Protheroe
Defendant: Brian William Protheroe

Representation:

Counsel:
Defendant: Mr J. Brown, Ms P. Muscat

Solicitors:
Plaintiff: in person
Defendant: Phillip Robert Williams, Dick & Williams Lawyers

File Number(s):

2019/257744

Publication restriction:

No

Judgment

1. This is the Court’s second judgment in these proceedings. In the Court’s first judgment the Court upheld the defendant/cross claimant’s claim against the plaintiff/cross-defendant for a constructive trust over two rural properties, Elmore and Shannon Vale: Protheroe v Protheroe [2023] NSWSC 188 (“the first judgment”).

2. The Court indicated in the first judgment that it would hold a further hearing to mould the relief to be granted. That relief hearing took place on 16 May 2023. This judgment defines the relief which the Court is prepared to grant to the defendant/cross claimant.

3. This judgment should be read with the Court’s first judgment and does not repeat the findings or background set out in the first judgment. Events matters and persons are referred to in both judgments in the same way.

4. The relief hearing took place on 11 May 2023. In the directions hearings leading up to the relief hearing Mr Crossland of Counsel and his instructing solicitors withdrew from appearing on behalf of the plaintiff/cross-defendant, Colin Protheroe. Colin thereafter appeared and presented his own case. But Mr Brown of Counsel continued to appear for the defendant/cross claimant, Brian Protheroe. Colin has given notice of his intention to appeal against the first judgment but some of the essential reasoning in the first judgment is repeated in this judgment in its relevant context.

5. The first judgment left the following issues to be considered the relief hearing:

1. Colin’s inferred retirement age,

2. moulding relief for Brian and assessing Colin’s capital requirements for a small rural hospitality business, and

3. the ownership and whereabouts of the plant and equipment.

6. These reasons now deal with each of these issues in turn below after first considering some ancillary issues raised during the relief hearing.

Colin’s Two Motions and the Scope of the Relief Hearing

7. Colin sought to argue two motions not directly related to relief issues. The Court declined to grant relief on either motion.

8. Colin’s first motion sought that I disqualify myself from further hearing of these proceedings. That was the effect of the motion, which sought a different independent judge to re-hear the whole case. In support of the motion Colin argued that his evidence had not been accepted and that he had been cut off from telling the full truth of his narrative of events.

9. The Court explained to Colin that the appropriate place to contest the Court’s findings in the first judgment was in the Court of Appeal and the Court saw no reason to arrange for another judge to hear the balance of the case. The Court did not accede to this motion.

10. Colin’s other motion made a complaint that Henriette’s funding under the NDIS had been cut off. Colin argued that cutting off that funding had been orchestrated by a combination of Ms Verity Williams, the solicitor for Brian, and Amanda Protheroe. As Colin explained in oral submissions, “there is very little doubt that Verity’s office and Amanda Protheroe would have had something to do with that”. Colin said he wanted that decision to be “looked into a bit more seriously and see why she is unable now to get any help whatsoever from NDIS”.

11. Colin’s contention was that Ms Verity Williams is not only the solicitor for Brian but that she has connections with the local member, the member for Farrar, Ms Sussan Ley, and has through that office taken steps to cause Henriette’s funding to be terminated. But in support of the motion there was nothing other than speculation advanced. Ms Nielsen sat at the Bar table with Colin. But nothing she said added to the Court’s conclusion that there was nothing here more than speculation that Ms Williams interfered with the financial stability of Colin’s family.

12. But the Court reminded Colin and Ms Nielsen it had not touched upon the subject of NDIS funding at all in the first judgment and that whatever NDIS decisions had been made about Ms Nielsen they should be dealt with independently of these proceedings and that the Court did not regard them as having any relevance to these proceedings. With that, the Court moved to the issues for determination on the relief hearing.

13. Brian’s evidence on the relief hearing included affidavits of himself, his wife Amanda, and Ms Verity Williams. Colin read affidavits of himself and his wife, Henriette Nielsen. Neither party cross-examined the witnesses of the other. Colin was aware of his rights to cross-examine but elected not to do so. Much of Colin’s evidence had the objective of disputing the findings in the first judgment. The Court pointed out that this was not the purpose of the relief hearing.

14. The Court pointed out to Colin that he had been competently represented by Mr Crossland of Counsel throughout the hearing leading to the first judgment and that he had rights of appeal to the Court of Appeal if he wished to challenge the Court’s conclusions.

15. Colin also contended that he had protested to the Court that he could not hear the proceedings and that the Court had directed him to sit down and answer “yes or no” to the questions asked. That is not what happened and the Court declined this motion.

16. Colin’s affidavit evidence indicated that “due to the cost of this case, $690,000, I am representing myself”. At the Court’s direction the parties put on affidavits as to their costs. Brian’s costs are a little more than $460,000.

(1) Colin’s Inferred Retirement Age

17. The Court did not determine the question of Colin’s retirement age in the first judgment. Instead, the Court gave a range of ages to which the Court directed the parties’ attention and call for further submissions. The Court did so with the following reasoning.

“258   Setting a Retirement Date. Several of the Court’s findings point to Colin’s retirement being the date from which Brian could be expected to enjoy the Protheroe farming properties. Brian and Colin discussed Colin’s retirement without setting a date. Colin never insisted that even if he became incapable of farm work, he would nevertheless stay on the farms until he died. Neither Brian nor Colin would have disagreed during the various discussions about the future of the farms with the idea that an able-bodied Brian should replace Colin once he was unable physically to manage the farms himself.

259   Setting Colin’s retirement date is a central integer in any calculations based upon the above framework for relief. But Colin now resists any notion of retirement. In addition to a general reluctance to retire, Colin long avoided making decisions to surrender or divide assets, inhibiting any discussion with Brian of the timing of his retirement.

260   The Court accepts the evidence of Brian, Henriette, and Amanda that from about 2008 Colin was talking about the possibility of retirement and his retirement options, including opening a motel or similar business. And before that he had spoken of retiring one day in general terms. At the time of trial Colin was 74. Although a resilient character, even Colin realised he must ultimately accommodate a need for a less demanding lifestyle as he ages.

261   Colin had ACL joint damage when he was young, but he professed in evidence that it did not affect him. He underwent a heart bypass surgery in 2018. He accepted that farming would one day become too physically taxing for him and conceded “I trust once I probably got in my 80s, I’d probably have trouble doing those sorts of things”. Henriette, although not Colin, accepts that they always seem to be “behind” in managing the farms, which is a struggle for them. She says getting help is not affordable.

262   And Colin had his own definition of retirement. He said that he never discussed with anyone the concept of “retiring”. Rather he explained, “I might change the avenue I am going down, but I have no intention of tiring”. He saw retirement as, “hanging around waiting to die”. He was quite definite, “I do not intend to do that”.

263   But he also firmly denied that his intention in life was to “stay on Elmore till the day you die”. He said that “when I got to the stage where I could not work it, I would liquidate Elmore and put the money to something else”. But if that meant totally liquidating Elmore that would directly conflict with what he must have understood were Brian’s beliefs about taking over Elmore. Colin had firm ideas that he would transition into another business and that he would have to use capital from Elmore to make that transition. The critical conflict here between father and son was the terms upon which that transition would occur.

264   Colin can only retire from farming and set up another business when he is young enough to manage the transition to another form of less demanding work. Realistically that date should be set in Colin’s case at an age when he is self-possessed and flexible enough to make that transition, having achieved all that he realistically can on the farming properties, and before he is incapable of establishing a new business.

265   In the Court’s view that age for Colin would probably be somewhere between the ages of 76 and 78. Colin presently has sufficient energy to transition to another business. But it can reasonably be expected that at some time between 76 and 78 both managing Elmore and Shannon Vale and establishing a new business would become too difficult for him.

266   Based on this reasoning, the parties should put submissions about the retirement age that should be used for calculations.”

18. The parties responded to the Court’s invitation by putting further submissions which the Court has considered.

19. Mr Brown submits on behalf of Brian that Colin has already reached the age of 75 at the date of the relief hearing. Brian submits that Colin would have retired by the age of 75 from full-time farm work if he had fulfilled the representations that he had made about retirement to Brian. Those representations were to the effect that Colin would retire and run a small rural hospitality business and that would have been separate and away from Elmore and Shannon Vale. Had Colin fulfilled that expectation that he created, Brian submits that Colin would probably have retired from Elmore and Shannon Vale in his late 50s or his 60s, at an age when he was young enough to start a hospitality business. Brian submits therefore that for the Court properly now to fulfill the expectation created there should be a finding that the retirement date has passed.

20. But accepting the Court’s range of ages between 75 and 78, Mr Brown submitted that the date that should be selected for Colin’s inferred retirement and when Brian should take over possession of the farms should be set at 31 January 2024. Brian’s submission notes that Colin turns 75 in March of this year, 2023. Therefore, in late January 2024 he will be approaching his 76^th birthday. But Mr Brown submits that the end of January is a convenient handover date for cropping and agricultural purposes.

21. Colin’s submissions resisted this conclusion. Colin submitted that his father had worked until he was 85 and he explained that “you do not really retire on a farm”. As Colin said in his final submissions, “your son takes over and you help him on his way”. But Colin accepted during argument that such an arrangement was no longer possible in this case, given the relationship between himself and Brian.

22. Colin further submitted that he was “still quite active [and] I still run it [the farm] quite well”. He submitted that he would like to stay on the properties if he possibly could until he was 80. But he submitted that if the Court was only looking at the range of 75 and 78 that he would prefer the latest date that he could retire from Elmore and Shannon Vale.

23. For the following reasons the Court concludes that Mr Brown’s submissions are persuasive on this issue.

24. The Court’s findings in the first judgment (at [255] (4), (5) and (6)) show the close connection between three aspects of the assumptions that Colin’s statements induced in Brian: first, that Colin would time his retirement when he was still capable of establishing a small rural hospitality business, second, that upon his retirement Brian would succeed to ownership of the Protheroe family farms, and third when Brian succeeded to ownership of the farms that his ownership would be exchanged for a sum reasonably calculated to provide Colin with the capacity to acquire and conduct a viable small rural hospitality business. Thus, the timing of Colin’s retirement is directly related in time to the ownership succession from Colin to Brian and Brian’s payment to Colin.

25. The Court’s reasons in the first judgment at ([263] and [264]) should be understood as not setting a hypothetical ideal retirement date for Colin. Rather, what matters for the purposes of equitable relief is what date Colin induced Brian to assume that Colin would retire to pursue the conduct of a small rural hospitality business.

26. In the Court’s view that date was 75. Although Brian submits that Colin should have retired in his 50s or 60s, the Court put the range at 75 to 78 in Colin’s case because he is in the Court’s assessment a resilient and resourceful person who would always have tried to stay on Elmore and Shannon Vale for as long as he could before changing to a new business off the farms. Brian would have understood this characteristic of his father at the same time as he was processing the statements made by his father. Brian did not assume that Colin would retire in his 60s for this reason. Indeed, Colin’s present submission to the Court that he should stay on Elmore and Shannon Vale until his 80s is some direct evidence of this attitude on Colin’s part, that Brian would no doubt have absorbed.

27. Colin now submits that he is not able to run a hands-on small rural hospitality business. That may be right. But the equitable belief here is being moulded based on the assumption created in Brian. Looked at objectively and not based on the assumptions that Colin induced in Brian, if Colin had set about planning a suitable time for him to retire from Elmore and Shannon Vale, that probably would have been somewhere no later than his 60s, when it would have been more likely that he would have retained the vigour to start such a business.

28. Indeed, Colin stated from the Bar table the advantages of making a transition from farming to something else in his 60s rather than his 70s. He explained during his preliminary submissions that, “I can continue farming for quite a period of time because you do it at your own time”. He explained this is to be contrasted with taking on another commercial business where you are a “9 to 5 or a 9 to 7 worker”. He concluded that “the main reason we talked about motels was I mentioned motels…that was something I could do perhaps in my late 50s or early 60s, certainly not in my late 70s”.

29. But Colin did not approach his retirement this way, despite what he had told his son. As the Court’s findings in the first judgment show, Colin in his later years failed to recognise that he had raised these expectations in Brian and therefore he did not organise himself to retire, consistently with the representations that he had made. He now submits that he may not be in a position to start a business at his age. But this is largely a situation of his own making and flows from his failure to acknowledge the representations that he had made and the assumptions that he had created in Brian.

30. Effectively the date for which Brian is now submitting that the retirement age should be set, and the handover of possession should take place is the next convenient date after the relief hearing. As Colin should have retired and handed over possession by now, the setting of the date in late January next year, shortly before Colin’s 76^th birth date is consistent with the assumptions that Colin created in Brian. To delay it any further in response to Colin’s submissions, would not be granting relief corresponding with the assumptions that Colin created.

31. The end of January 2024 is the practical time at which a handover should occur. The evidence supports the inference that this is consistent with good agricultural practice and is a time more convenient to the parties. At the time of the relief hearing Colin was planting crops, including barley and wheat, on the farms and he will need until the end of January 2024 to harvest those crops. Brian says in his evidence on the relief hearing that such crops are usually harvested before Christmas but there may be a rain event which means that that the harvest date gets pushed out to the end of January. But the crop will be generally off by then. In a practical sense setting a late January date means that Colin can take the fruits of the crops that he has planted or is planting before he leaves the property.

32. The Court will therefore order that Colin should give possession to Brian of Elmore and Shannon Vale on or before 31 January 2024.

(2) Moulding Relief for Brian and Colin’s Retirement Capital Requirements.

33. In the first judgment the Court made findings about how relief should be moulded to give effect to the representations that the Court has found were made to Brian. This also involves measuring Colin’s capital requirements to establish and maintain a small rural hospitality business.

34. The Court considered this in the first judgment in several parts. First the Court identified the assumptions that Brian had made based upon Colin’s representations and discussed the relevance of those matters to moulding final relief. The Court did so in the following passages in the first judgment:

“255   Based on Colin’s statements, commencing in the 1990s the Court infers that Brian acted upon assumptions that the Protheroe farms were his future, that he could make a life for himself on them and that his work for their expansion would benefit Protheroe family members included himself. Although these assumptions were somewhat indefinite in character, the Court’s findings about the surrounding circumstances provide a basis for the Court to identify the following essential matters that were either expressly addressed or were implied between the parties, and which now assist in profiling more detailed relief from those indefinite assumptions. These matters were as follows:

(1)   Brian would continue to work full time on the Protheroe family farms and apply his knowledge and expertise to their development until Colin’s retirement;

(2)   Colin would continue to hold the farms in his name or that he controlled through family trusts, at the time of his various promises and Brian’s corresponding assumptions;

(3)   The obligation in (2) is subject to such sales and exchanges of the property comprising the Protheroe family farms as were reasonably required for the orderly development of the farms or to meet development related external financial obligations;

(4)   Upon Colin’s retirement from full time farm work on the Protheroe farms, Brian would succeed to ownership of such of the Protheroe family farms that were held or controlled by Colin at the time of his retirement;

(5)   Colin would retire at a time that he was still capable of establishing a small rural hospitality business that would provide him with a retirement income;

(6)   Brian’s succession to ownership of the Protheroe farms would be in exchange for Brian paying to Colin upon the transfer of the Protheroe farms a sum reasonably calculated to provide Colin with the capacity to acquire and conduct a viable small rural hospitality business;

(7)   If Colin died before his retirement from active farming on the Protheroe farms, then Brian’s interest in the Protheroe farms arising from (1) to (6) would be maintainable against Colin’s estate, with his date of death being treated as his date of retirement.

256   This structure of these essential matters flows from the Court’s narrative of findings. Items (1), (2) and (3) of these essential matters are implied directly from the words used by Colin and Brian acting in reliance upon them. Items (4) and (5) follow from the Court’s findings that Colin spoke to Brian sufficiently about his retirement from the family farms in such a way that Brian was entitled to assume that Colin would retire one day, and that Colin was interested in establishing a small rural hospitality business after leaving the family farms. But these two items also reflect the fact that they both understood that decisions would be made together to acquire new farms and that some might have to be sold to meet external liabilities. Item (6) follows from (5) in that although it was unstated, it must have been mutually understood between Colin and Brian that to give effect to (5), Colin would need to take away sufficient capital from the family farms to establish such a business. Item (7) follows from the predominance of discussions between Colin and Brian about Colin’s retirement, rather than what would happen on Colin’s death and a lack of any discussion about what would be in Colin’s will.

257   The identification of these essential matters for a framework for moulding final relief, prompts the need to consider other issues which will require further submissions from the parties at a supplementary relief hearing. These other issues are dealt with below.”

35. The Court then considered what would be involved in moulding relief based upon these findings. The Court considered the parties’ rejection of the possibility of selling Elmore and Shannon Vale and dividing the proceeds. Neither party had pressed that option upon the Court and neither party pressed it upon the Court in the relief hearing. This brought into direct focus that the foundation for moulding final relief should be retaining Elmore and Shannon Vale but with only Colin or Brian operating them.

36. This in turn led to the question of whether Brian still wished to return to Elmore and Shannon Vale. The Court indicated (at [272]) that it did not “wish to dislodge Colin from Elmore and Shannon Vale unless Brian is committed to returning there and farming them”. But given the significant consequences to Colin of granting relief which involved Brian returning to Elmore and Shannon Vale, the Court foreshadowed in the first judgment (at [271]) that it would require Brian to make a binding election whether he wished to return to Elmore and Shannon Vale.

37. The Court indicated at the directions hearings before the relief hearing that it would conduct the balance of the proceedings based upon that election and that the election could not be withdrawn. Brian elected to return to Elmore and Shannon Vale. His election was recorded in the following terms in a notation made the Court’s record on 12 April 2023:

“2.   Note that Brian has made the election provided for in the last sentence of paragraph [271] of the Court’s reasons for decision published with the Court’s orders of 1 March 2023, to return to personally farm the Protheroe farms, Elmore and Shannon Vale, and that Brian has submitted that the Court should mould final relief in these proceedings on that basis and the Court will proceed to mould relief on that basis.”

38. Then the Court proceeded to identify some of the more directly relevant considerations that would need to be addressed in moulding relief on this basis as follows:

“276   How Should Fulfilment of Brian’s Expectation Be Calculated? The parties should put submissions in the final relief hearing about calculating the relief the Court should grant to intervene and fulfil Brian’s expectations. The primary approach to this issue should be attuned to Colin’s need for capital to establish a small rural hospitality business on his retirement. But Colin’s capital requirements must be balanced against the need to maintain, if possible, the viability of Elmore and Shannon Vale in Brian’s hands. If Colin had fulfilled Brian’s expectations without the Court’s intervention, they would both have had to face finding this balance. This issue has not yet been the subject of evidence or submissions and has only emerged from the Court’s findings. If Colin wishes to pursue it, the Court will afford him an opportunity to do so at the relief hearing.

277   One of the essential features of the expectation created in Brian was that on retirement Colin should be able to commence a motel business or other similar small rural hospitality business. That indicates that their financial arrangements on separation should have been for Colin to be left with reasonably sufficient capital to fund a viable venture of this type. Brian and Colin were aware of each other’s independent personalities, a factor which implies they both must have understood there would be a separation of their capital on Brian’s retirement, so they could pursue independent business lives.

278   But in the final competition for capital the guiding mutual expectation which can be inferred is that they would each have had the objective of conducting an independent viable business from which they could earn a living, Brian from Elmore and Shannon Vale and Colin from a small rural hospitality business. The parties’ submissions about relief should framed with this fundamental mutual expectation in mind.”

39. After hearing from the parties on 12 April 2023 the Court decided to appoint a Court expert pursuant to Uniform Civil Procedure Rules 2005 (“UCPR”), r 31.46 to determine the issue relevant to the moulding of final relief on the Cross Claim as to what capital sum would be required to establish Colin in a viable small rural hospitality business. To give effect to that objective on 12 April 2023 the Court set out the framework for a Court expert to be appointed to provide the Court with sufficient market information to determine this question. Orders (4) and (5) of the Orders made on that date provided as follows:

“4.   Note that the Court proposes to appoint pursuant to Uniform Civil Procedure Rule r 31.46 (“UCPR“) a Court expert to determine the following issue (“the expert issue”) relevant to the moulding of final relief on Brian’s cross-claim: what range of estimated capital sums, would presently be required for a person of Colin’s approximate age, present working capacity, and business experience to acquire and then conduct a viable small rural hospitality business in New South Wales producing a steady retirement income for Colin for the expected duration of his life after his retirement from Elmore and Shannon Vale.

5.   Note that determining the expert issue the Court expert:

(a)   should assume that a “viable” small rural hospitality business is one which after generating sufficient revenue to meet not only the recurrent expenditure of the business but also to meet the ongoing capital reinvestment requirements of the business to maintain its capital value, and after meeting those expense and capital requirements is a business likely to produce a sustainable net business income for Colin despite foreseeable changes in economic conditions;

(b)   should assume that a “sustainable net business income” from the small rural hospitality business in question is an income that is no less than current New South Wales average weekly earnings (AWE) and then above AWE will be in a range of incomes from smallest to largest, as will be specified by the Court after hearing from the parties on 17 April 2023;

(c)   may as the Court expert sees fit, assume a range of business and taxation structures for the conduct of the business, including for example conducting the business either in leased premises, or in premises owned by the business, and either through or without corporate or trust vehicles;

(d)   should seek directions from the Court UCPR r 31.48, where the Court expert is uncertain about any aspect of the task in determining the expert issue; and

(e)   should only otherwise make assumptions consistent with the Court’s reasons for decision, Protheroe v Protheroe [2023] NSWSC 188, and should assume that Colin’s retirement is to be at the date of the Court expert’s report (and the Court will then adjust take account of the Court’s finding about an actual projected retirement date for Colin, a matter which is still in issue).”

40. The Court gave directions for the parties to agree upon the identity of a Court expert and various nominations were made. The Court selected from the experts nominated by the parties, the Court expert who was ultimately engaged, Mr Ryan Luke Muntz of Muntz & Associates, accounting, tax and business advisory consultants. Pursuant to the Court’s directions Mr Muntz provided a report dated 3 May 2023 (Exhibit R1) and gave evidence and was cross-examined at the relief hearing on 16 May 2023.

41. Mr Muntz had been identified as the proposed Court expert by the time of the Court’s directions hearing on 19 April 2023. At that directions hearing he sought further information about the task on which he was being engaged and was given guidance that is set out in the assumptions Mr Muntz made in his report, which are detailed below. Those assumptions and the approach that the Court expert was directed to take in the Court’s orders of 12 April 2023, were designed to give substance to the approach that it should be inferred Colin would have taken to fulfil the representations that he had made to Brian by calculating the sum that it would have been contemplated by them to acquire a small rural hospitality business. In other words, the exercise was designed to quantify the terms upon which his representations had led Brian to assume that he, Colin, would be prepared to retire from the farms.

42. Some of the reasoning behind the instructions given to Mr Muntz should be elaborated. In the Court’s view it is unlikely that Colin ever intended to retire to a business that would produce less than average weekly earnings. Colin may well have wanted to acquire a business which would deliver multiples of average weekly earnings, and that was left open for submissions. But the Court used average weekly earnings as minimum income below which Colin was unlikely to accept in a quest for retirement business. Average weekly earnings were taken as at November 2022, the most recent reliable information available.

43. The Court gave greater definition to the conclusions reached in the first judgment by defining what Colin was representing that he was intending to acquire as a "viable small rural hospitality business". This includes the word "viable". The Court defined that as set out in notation 5(a) of the orders made on 12 April 2023. This was adopted on the basis that both Colin and Brian, it should be inferred from the evidence, had in mind that Colin would invest in such a viable business. Both recognise that Colin wanted to retire but wanted an asset which would maintain its value, which Colin in due course would pass on in his will to Ms Nielsen or his son John.

44. Finally, the Court expert was instructed to look at businesses which Colin was able to operate consistently with his age and working capacity and experience, which were sufficiently described in the first judgment. Running the Hydro Tavern, for example, was something that Colin may have been able to do in his 50s, but not in his 70s.

45. Mr Muntz asked where he should look for these businesses. The Court indicated he should look in concentric circles from Narrandera towards the New South Wales coastline and down as far as the New South Wales/Victorian border and larger regional centres could be included. There was no dissent from this approach by either party.

46. Mr Muntz then commenced his enquiries and ultimately identified some 26 businesses. The parties were given liberty to approach the expert to put before him potential candidate businesses for his consideration. Brian’s legal representatives put forward two café style businesses as potential enterprises that might be suitable. But Mr Muntz was of the view that in his professional experience, which included exposure to a significant number of Café restaurant and fast food businesses over many years that such rural businesses were not suitable, because they do not typically generate profits that would cover the minimum thresholds of average weekly earnings in Mr Muntz's instructions and since the COVID-19 pandemic such businesses have been subject to staff shortages, problems with transient employees and would be too physically demanding given Colin's age. So, Mr Muntz rejected them from consideration.

47. Mr Muntz only considered sales after 2020 as he was advised that the market has changed significantly since the COVID-19 pandemic. To satisfy the viability requirement, Mr Muntz assumed a 10% profit would be an appropriate provision for major capital works that would typically be required over an extended period to maintain the capital value of business assets.

48. Of the 26 motel accommodation businesses analysed Mr Muntz found that 24 generated sufficient average weekly profit to cover average male weekly earnings and 18 generated sufficient weekly average profit to cover average male weekly earnings and average weekly female earnings combined. Whether average male weekly earnings or average male and female weekly earnings combined should be the appropriate measure was debated in submissions. Mr Muntz explained that he used combined male and female average weekly earnings of $3,580 per week rather than average male weekly earnings of $1,894 per week on the basis that the Court might consider that Colin could be expected to invest in a business where Henriette would also be able to derive an income from the business.

49. In his conclusions Mr Muntz made clear that in relation to the motels he considered, the type of business was not specified (that is whether it was freehold going concern or leasehold) and he explained that most of the businesses within the area interest for him would be freehold going concern, rather than leasehold.

50. As a result of his analysis Mr Muntz eliminated motels that generated profits well in excess of the sums relevant to these proceedings, being many multiples of average weekly earnings. And he eliminated businesses that generated insufficient income to meet average weekly earnings or were anomalous. Then in respect of the remaining businesses, in clause 8.2 of his report Mr Muntz reached the following conclusions:

“(e)   The remaining motels had sale prices between $500,000 and $1,550,000.

(f)   In my opinion the work required in managing a motel such as the remaining motels is capable of being conducted by a person of Colin Protheroe’s age, provided they remain in good health.

(g)   I was instructed by His Honour in our teleconference of 19 April 2023 that the capital value of the viable small rural hospitality business should be preserved for the entirety of Colin Protheroe’s life (i.e. that capital value should not be diminished during Colin Protheroe’s life). Given the above, I do not believe that information provided in relation to Colin Protheroe’s life expectancy is relevant in responding to the question asked of me.

(h)   Given the above, it is my opinion that $500,000 to $1,550,000 is the range of estimated capital sums that would presently be required for a person of Colin Protheroe’s approximate age, present working capacity, and business experience to acquire and then conduct a viable small rural hospitality business in New South Wales producing a steady retirement income for Colin for the expected duration of his life after his retirement from Elmore and Shannon Vale.”

51. Mr Brown asked Mr Muntz what his range of capital requirements were to purchase a business generating male average weekly earnings of $1,894, as distinct from combined earnings of $3,580 would be. Mr Muntz indicated that the range was $500,000 to $1,550,000.

52. The parties debated what was the right figure to use for average weekly earnings. Mr Muntz had adopted a figure of average weekly earnings of $1,894 per week. Mr Brown submitted that this was an average figure across industries, which represented a range of businesses which were much wider in scope than accommodation and food service businesses under consideration here. The evidence supported his contention that for accommodation and food service businesses average weekly earnings were close to $1,323 per week. He also submitted that the average figure Mr Muntz had adopted included regional and city areas and was therefore inappropriate.

53. But the figures are at best only guides to the fundamental question the Court must decide, which is what is the capital sum which would represent the earnings that each of Colin and Brian would have assumed Colin would be able to earn in his retirement when he left Elmore and Shannon Vale.

54. In the Court’s view, given Colin’s way of life and his access to large amounts of capital over his lifetime, it is unrealistic to expect that Colin and Brian would have contemplated that he would only purchase a business which would have earned weekly earnings payable to a single individual in the food services and accommodation industries. And it is reasonable to assume that Colin wanted to provide at least some income to Henriette, given the labour she had invested for many years into Shannon Vale and Elmore. In the Court’s view the higher range that Mr Muntz referred to of $500,000 to $1,550,00 is more appropriate than the range contended for on Brian’s behalf of $500,000 to $1,050,000. Mr Brown submitted that the correct figure was in the range of $500,000 to $650,000.

55. The Court disagrees with this submission. The Court regards the mutual expectations of Colin and Brian of Colin’s situation on his retirement as higher. But the Court is also mindful that Brian will be paying out Colin and will assume an existing mortgage debt of $780,000 over the farms. It would also have been in contemplation between Colin and Brian that Brian would not have been left with oppressive debt that would have crushed the operation of the farms. Selecting an appropriate figure a judgment that is not capable of precise mathematical calculation. In the Court’s view a figure of $1,100,000 is appropriate to represent the sum that would have been mutually contemplated as sufficient for Colin to establish a small rural hospitality business, into provide him with an appropriate level of earnings in his retirement from Elmore and Shannon Vale.

51. The parties debated whether the Court should consider other assets of the parties in the present assessment. The Court has not done that for two reasons. First, the evidence of such assets is incomplete, and the parties were not required to put it on before the relief hearing as the issue was not clearly articulated. Also, the appropriate measure here is the mutual expectations of Brian and Colin generated over many years. Considerations such as their other assets would have brought great uncertainty into Colin and Brian’s mutual dealings in a manner which does not seem realistic. Afterall, given the sacrifices that Brian had undoubtedly made, he would still deserve to have Colin’s promises fulfilled even if he, Brian, had for example, won the lottery or had other accidental good financial fortune. The Court has rejected this approach.

52. It is necessary though to work out what credit needs to be given for assets, if any, which Colin has already taken into his own possession from Elmore and Shannon Vale in the necessary calculation to take place upon the transfer of Elmore and Shannon Vale to Brian.

(3) The Ownership and Whereabouts of the Plant and Equipment

58. The Court did not determine the question of the ownership and current whereabouts of various items of plant and equipment referred to in the evidence that had been on Elmore and Shannon Vale. The determination of these questions was important in settling upon an appropriate financial payment to Colin as the terms upon which the Court would give relief to Brian to fulfil the representation that Colin had made to him. The Court did so with the following reasoning:

“287   Dealing with the plant and equipment. The amended cross claim seeks the declaration of trust with respect to the farm machinery and stock. The first issue is whether the plant equipment and stock should be the subject of constructive trust found by the Court. The second issue is about the value of that equipment, and its whereabouts, both of which are disputed.

288   The Court has not yet dealt with the first issue of whether Brian has a constructive trust over the plant equipment and stock. This is because it may not be necessary to do so. What is more important is to identify that plant stock and equipment and ascertain its value.

289   The expectation created in Brian would have led to the result that the plant equipment and stock would have been cooperatively divided and distributed to make the necessary capital adjustments for each party upon Colin leaving the joint enterprise of the Protheroe farms and Brian taking over. Whoever now owns the stock plant and equipment may not matter: they are assets that are available and will need to be brought to account to satisfy the future capital requirements of each of Brian and Colin in setting up a separate viable business for himself upon fulfilment of Brian’s expectations.

290   One way or another they will need to be brought to account. Brian submits that an adjustment can be made to the relief granted to alleviate any concerns about Colin’s financial future. He submits that the Court might for example refuse to impose a constructive trust over plant and equipment and stock. The submission is based on a contention that the plant and equipment that Colin has in his possession or control have a value exceeding $750,000. Brian submits that this adjustment would ultimately be equivalent or comparable to the sum which would be required to be paid if the Court were to take the approach adopted in Q v E Co, with the additional buffer that Colin has also received the livestock. Brian submits that the combination of all items of plant equipment and stock will leave Colin with not less than a capital sum of approximately $1,000,000, which should be sufficient for his future.

291   The Court can act upon the existing evidence in relation to the valuation of plant, equipment, and stock and if the parties submit that it is the most efficient way to deal with issues of those moveable items, the Court will do so. The assumptions mutually made between Colin and Brian must have been that such details could be worked out when the bigger issues of the timing of the transfer of the Protheroe family farms were resolved.

292   At least two choices arise before the Court in dealing with the stock plant and equipment. First, the Court can attempt to determine the value of these assets and their whereabouts on the existing disputed evidence. This brings with it the potential unfairness arising from the Court acting on the, at times, sketchy evidence about questions of value and the possession of chattels.

293 Second, the Court could appoint a Court expert under Uniform Civil Procedure Rules 2005, r 31.46 to do an up-to-date audit and valuation of all movable property in contest, with a view to ascertaining its present value, with a view to it being brought to account in the final reckoning between these parties. This course has the advantage of providing the Court and the parties with up-to-date value and possession information about these movable items. It has a disadvantage of adding to the parties’ costs. But that disadvantage can be alleviated by the Court expert having recourse to the existing evidence as to value and only undertaking such additional work as is necessary.”

59. Of the two ways forward that the Court offered, neither party showed any enthusiasm for the appointment of a Court expert to undertake an up-to-date audit and valuation of the movable property in contest. Costs in the proceedings are already high. Colin has complained about the legal costs that have already been incurred in the proceedings. It seems therefore more efficient to take the other approach and deal with the issue of the movable property on the existing evidence. And that is the course taken here.

60. Brian seeks a declaration of trust in relation to the stock, plant and equipment on Elmore and Shannon Vale. This is a logical conclusion from the Court’s reasoning. The nature of the representations made by Colin, and the assumptions made by Brian, were to the effect that Brian would be taking over an operating farm rather than one stripped bare of plant, equipment, and stock. It is difficult to conceive of either party interpreting their discussions in any other way.

61. Mr Brown of Counsel provided a convenient current balance sheet to the tangible assets of the Elmore and Shannon Vale enterprise. It did not purport to deal with any goodwill or other intangible assets. The Court is satisfied it represents realistic values of the current assets of the enterprise. The balance sheet is set out below:

Summary of Assets & Liabilities	Current Values	Net Position
Assets
Combined Value Shannon Vale ($2.37 million) & Elmore ($2.54 million) (Values agreed in Joint Expert Conclave on 1 October 2022)	$4,910,000.00
Plant & Equipment on Elmore & Shannon Vale (Preston Rowe Paterson Valuation)	$134,500.00
Plant & Equipment on Elmore & Shannon Vale (Colin’s List of Equipment dated 1 January 2022) Plant and Equipment on Elmore & Shannon Vale	$737,000.00
Stock on Elmore & Shannon Vale (Valuation of Matthew Pitzen)	$96,720.00	$5,878,220
Liabilities
CBA Mortgage registered over Shannon Vale & Elmore (Agreed Fact taken from the financial documents of Colin)	$780,000.00
Rural Assistance Authority loan - secured by caveat over Shannon Vale & Elmore	$30,000.00
$810,000
Net Assets $5,068,220

62. But the difficulty here is that much of the stock has been removed from the property and there are contests about who owns it. Fortunately, there is no real contest about its value. The Court accepts the evidence of the livestock valuer, Mr Mattew Pitzen, that the livestock was worth $96,720. Mr Pitzen did his valuation on 21 October 2021 pursuant to a Court ordered valuation process. But there is some evidence that Henriette has provided valuable consideration to acquire some of this stock, which therefore could not be made the subject of a trust. The stock was later removed from the property. Brian accepts that the stock is no longer there but seeks to be credited for the value of the stock as a set off to his obligations to pay Colin upon the transfer of the farms. But he should not have credit for the whole of this stock. Doing the best the Court can on the limited evidence available, the Court is only prepared to infer that the stock that Henriette did not pay for is to the value of $48,360 or 50% of the total value of the stock of the Elmore and Shannon Vale farming enterprise.

63. The evidence of the plant and equipment valuer was that the plant and equipment on Elmore and Shannon Vale as at 15 October 2021 had a value of $134,500. The Court does not accept that this plant and equipment was legitimately sold to any third party, such as Henriette. It should be brought to account as part of the Elmore and Shannon Vale farming enterprise and included in the relief granted to the plaintiff. This valuation was also conducted pursuant to a Court ordered valuation process. But Colin instructed the valuer to only value a subset of the plant and equipment that was on Elmore and Shannon Vale that Colin admitted to owning. That meant that the valuation process miscarried. But the figure of $134,500 was a figure that should be included within the farming enterprise as representing plant and equipment available to Colin.

64. But the plant and equipment that Colin had removed and kept separately, Colin was prepared to accept in an interlocutory hearing before the Chief Judge was worth a total of $737,000, being $621,000 for farm equipment and $116,000 for vehicles and trailers. This removed equipment was part of the Elmore and Shannon Vale farming enterprise. Colin argues that much of this equipment was sold to Nielsen Constructions in 2015. But in the Court’s view that transaction was a sham. Even Henriette herself has distanced herself from it.

65. Should it now be located and identified it would be the subject to a declaration of trust in Brian’s favour. The Court will bring the value of this plant and equipment into account in its final calculation and it will be credited against any amounts that Brian is liable to pay to Colin upon the transfer of the farms.

66. This should give the parties sufficient guidance to undertake final calculations before the Court proceeds to hear argument on costs. If any issue is still unresolved after these reasons, then the parties should bring it to the Court's attention, and it can be determined together with the cost issues.

Conclusions and Orders

67. Costs issues have not yet been determined. It would greatly assist the parties to have the quantum of those costs determined with certainty in the near term. The Court will consider making a Civil Procedure Act2005, s 98(4)(c) order for the award of a specified gross sum instead of assessed costs, so the parties can have near term certainty about costs for their fundraising and capital management.

68. But there are other incidental issues about costs that still need to be resolved. For example, Colin submits that the sum which should be awarded to him from this relief hearing, should be awarded net of his costs. In other words, he wants his costs fully met before he can take the benefit of a sum that would have been sufficient to enable him to retire to conduct a small rural hospitality business. It will be necessary to consider this submission with the costs hearing.

69. The Court indicated to Colin during submissions that the orthodox position would be that the Court would consider the making of costs orders and the fixing of amounts in relation to costs after determining the terms upon which relief would be granted and that relief would not be granted on in effect an “inclusive of costs” basis to give Colin a net figure to take away in his retirement after his costs were paid. This is a reasonable result because the legal costs were incurred because of Colin’s resistance to Brian’s claim for relief and had Colin recognised the claim, which has been upheld by the Court, these legal costs would not have been incurred. To accept Colin’s submission would require Brian to pay Colin’s costs of Brian’s success over Colin. This is an issue that Colin will need to confront when he deals with this issue in the costs hearing.

70. The Court will direct the parties to bring in draft Short Minutes of Order. Those draft Short Minutes should provide for the date by which Colin is required to effect transfer of Elmore and Shannon Vale to Brian, as Wednesday, 31 January 2024. The draft orders should provide for an enforcement mechanism for the Registrar in Equity to sign the transfer if Colin has not provided a signed transfer to Brian by Thursday, 25 January 2024 at 4pm. The Court will make further orders as to the precise sums to be paid at the time of the transfer of the two properties, when the Court has completed the fixing of a specified gross sum instead of assessed costs: Civil Procedure Act, s 98(4)(c), which the Court anticipates will happen in September.

71. Mr Brown foreshadowed on behalf of Brian at the relief hearing that should Colin’s present appeal proceed that it would be desirable for the Court to make findings relevant to and mould the relief that would have been granted on the alternative case that Brian advanced based upon the inheritance representations. The Court has found that the inheritance representations had were made out. But the Court has given preference to the consideration of the principal expectation that Colin created in Brian, that Colin would retire from farming Elmore and Shannon Vale and wanted sufficient capital to do so to be able to conduct a small rural hospitality business in his retirement. This might conveniently be referred to as the “retirement representations case”.

72. The grant of relief to Brian on the retirement representations case displaced any need to mould the relief that would have been granted on the alternative inheritance representations. So, it is strictly not necessary to consider the inheritance representations, as they have become theoretical other than for the purposes of providing a groundwork of findings should Colin’s appeal proceed. But the Court has yet to deal with issues of costs, consequent upon this judgment and the first judgment. If when the costs issues are being resolved, the parties indicate to the Court that it would assist the consideration of an appeal for the Court to indicate the relief that it would have granted on the inheritance representations, then the Court will do so at the time it gives judgment on costs issues.

73. For these reasons the Court makes the following orders and directions:

1. Direct the parties to bring in draft short minutes of order to give effect to these reasons;

2. Adjourn the proceedings for further directions to Wednesday 30 August 2023 at 9.30am, or such other date as may be convenient to the parties and arranged with the Associate to Slattery J;

3. Reserve costs;

4. Grant liberty to apply.

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Decision last updated: 03 July 2023