Ruth v Craig & Craig - [2014] SADC 172

District Court of South Australia
(Civil)
RUTH v CRAIG & CRAIG
[2014] SADC 172
Judgment of His Honour Judge Slattery (ex tempore)
24 September 2014
EQUITY - EQUITABLE REMEDIES - EQUITABLE COMPENSATION - BREACH OF FIDUCIARY OBLIGATIONS
The plaintiff claims that she holds an equitable interest in a property at Norton Summit in South Australia, and the registered proprietors thereof, the defendants, hold any legal interest in the property subject to her equitable interest. The extent of the interest of the plaintiff is asserted to be 50 per cent. The plaintiff also claims that she is entitled to various forms of reparatory relief including that the defendants as trustees and beneficiaries of the Partnerz Trust hold the property on trust for her, or alternatively under a remedial constructive trust in her favour. The plaintiff also seeks other consequential relief including for equitable damages and an order setting aside an agreement with the plaintiff made following a mediation. This agreement was almost fully executed by the defendants. One term of that agreement was for the sale of the property to an arms length purchasor for value which occurred after the plaintiff voluntarily removed a caveat from the property to facilitate settlement.
Whether there was any equitable interest in any property (formerly) held by the defendants on behalf of the plaintiffs; Whether the defendants discharged any equitable obligation that may have arisen through agreeing to the Heads of Agreement; Whether the failure by the defendants to perform one clause of an agreement which existed for the benefit of the defendants could constitute a repudiatory conduct of the agreement that was otherwise fully executed by the defendants on their part.
Held:
1. That the plaintiff's action be dismissed.
2. That the defendants be awarded the costs of these proceedings.
Evidence Act 1929 (SA) s 67C, referred to.
Koompahtoo Council v Sanpine Pty Ltd [2007] 233 CLR 115; Gartside v Inland Revenue Commissioners [1968] AC 553; Muschinski v Dodds (1985) 160 CLR 583; Baumgartner v Baumgartner (1987) 164 CLR 137; Jones v Dunkel (1959) 101 CLR 298, considered.

RUTH v CRAIG & CRAIG
[2014] SADC 172
Introduction

In the plaintiff’s amended statement of claim dated 11 February 2014 the plaintiff seeks a number of remedies. They include: a declaration that the plaintiff has an equitable interest in a property at Lot 3 Colonial Drive, Norton Summit to the extent of 50%; a declaration that the defendants hold their interests in that property as beneficiaries of the Partnerz Trust subject to the plaintiff’s equitable interest; a declaration the defendant holds property on a constructive trust in favour of the plaintiff; a declaration that the defendants are indebted to the plaintiff for the balance of 50% of the proceeds of the profit of the sale (presumably of the property).
The plaintiff seeks other declarations in relation to what is alleged to be life tenancies of the property for herself and for persons identified as Jason and Taj; I will identify these persons in detail later in these reasons.
She also seeks declarations that the defendants owe her a fiduciary duty, and that there has been a breach of that fiduciary duty.
The plaintiff also seeks orders that the defendants pay her the replacement value for injuncted property and the plaintiff’s personal belongings which they removed from the land. She also seeks a declaration that clause 15 of a Heads of Agreement be set aside for both parties to enable ongoing proceedings to be conducted between them. She seeks an equitable compensation judgment in the sum of $110,000 damages, interests and costs.
For the reasons which I now deliver I am not satisfied that the plaintiff is entitled to any of the remedies she seeks. I am satisfied that the only appropriate order is that the plaintiff’s claim should be dismissed with costs.
The Parties
The plaintiff is the mother of Julian Craig, who is the first defendant, and she is the mother-in-law of Rebecca Craig, the second defendant.
The plaintiff, who was born Ruth Arndell and who adopted the married name of Ruth Craig but now is called only Ruth, has two surviving children, namely Julian Craig and another son, Brett.
The plaintiff had a daughter, Jancy, who is now deceased. Jancy passed away in 1988. Taj Arndell and Jason Barltrop are the children of Jancy (deceased), and they are the grandsons of the plaintiff. The plaintiff whom I will now call ‘Ruth’ was appointed the guardian for both Taj and Jason at the time of their mother’s decease. Taj is now 29 years of age and Jason is now 31 years of age.
Keith Arndell is Ruth’s brother.
Nest Egg Nominees Pty Ltd which was incorporated as EJT Nominees Pty Ltd acted as the trustee of a trust called the Fuzzies Investment Trust. Eric John Trojan and Ruth were the co-directors of Nest Egg Nominees Pty Ltd and were the beneficiaries of the Fuzzies Investment Trust. Mr Eric Trojan has on occasion been called ‘Fuzzy Trojan’.
In 1981 EJT Nominees Pty Ltd in its capacity as trustee of the Fuzzies Investment Trust purchased a property at lot 3 Colonial Drive, Norton Summit, which I will herein after call ‘the property’.
The property is comprised of some 45 acres of land and is situated 1.5 km from the Norton Summit township. At various times throughout its history various improvements have been constructed on the property. These include a bunkhouse, cottages, a workshop, some form of shop or coffee shop and other accommodation premises.
The Deed of Settlement which regulated the affairs of the Fuzzies Investment Trust is Exhibit D36. Under that Deed of Settlement, which was a settlement of a family discretionary trust, the range of beneficiaries were as follows[1]:
[1] Exhibit D36, pages 13-14.
C. Beneficiaries:
(i)ERIC JOHN TROJAN of 181 Fullarton Road, Dulwich;
(ii)Any child of the said ERIC JOHN TROJAN;
(iii)Any son-in-law or daughter-in-law of the said ERIC JOHN TROJAN;
(iv)Any grandchild of the said ERIC JOHN TROJAN;
(v)Any spouse of any grandchild of the said ERIC JOHN TROJAN;
(vi)Any Trustee (in its capacity as such) of any Trust or Settlement under which any one of the beneficiaries hereinbefore referred to in paragraphs (i) to (v) inclusive of Item C hereof is a beneficiary whether present or contingent PROVIDED HOWEVER that the Settlor is not a beneficiary of such Trust or Settlement;
(vii)Any corporation at least one share in which is owned by any of the beneficiaries hereinbefore referred to or by the Trustee of any Trust referred to in the preceding clause PROVIDED HOWEVER that the Settlor is not a shareholder of such corporation.
(viii)Any charitable institution person or persons body corporate or incorporate or howsoever constituted whom the Trustee in the Trustee’s absolute discretion considers worthy of receipt of funds either for charitable or educational purposes or for the relief of poverty or for religious scientific or public educational purposes in Australia including a public hospital or any hospital which is carried on by a society or association otherwise than for the purposes of profit or gain to the individual members of that society or association.
D. Beneficiaries in default determination:
(Clauses 2 and 4)
SUCH OF THEM the child or children of the said ERIC JOHN TROJAN as shall then be living and if more than one in equal shares per capita as Tenants in Common absolutely PROVIDED THAT if any child of the said ERIC JOHN TROJAN shall not then be living but his her or their child or children shall then be living such last mentioned child or children shall take the share or interest which his her or their parent would have taken had such parent then been living and if more than one in equal shares as Tenants in Common absolutely.
As appears, the family of Mr Eric Trojan were the substantial potential beneficiaries of that trust. Ruth informs me in evidence that she had a de facto relationship with Mr Trojan for a period of some eight years, and after the breakdown of that de facto relationship was in a business arrangement with him for a longer period after that.
This business arrangement was concerned with what may be loosely described as a commercialisation of the asset of the property. The property controlled by that trust included a residential accommodation called Morialta Cottage which was situate across the other side of Colonial Drive at Norton Summit from the property.
The evidence discloses that the business on the property was conducted through the trustee, ‘Nest Egg Nominees Pty Ltd’ which I will call ‘Nest Egg’, for a period of 17 years, including the Morialta Cottage.
On a date which is not clear on the evidence there was a breakdown of the relationship between Ruth and Eric Trojan. My understanding of the evidence, although it is not completely clear, is that the personal relationship had already broken down and by sometime in 2004 the business relationship between them under which the trustee operated also was breaking down.
Following the breakdown of that personal and business relationship there was an attempt at resolution of the differences between Ruth and Eric Trojan.
The parties were able to reach some form of accommodation in relation to the breakdown of their relationship and they executed a document called ‘Deed of Release On Settlement’ dated 23 December 2004.[2] The document in its recitals discloses that Ruth and Eric Trojan were shareholders and sole directors of the trustee Nest Egg and that that company was the registered proprietor of the land. The company also held the lease of interest for the Morialta Cottage and also owned plant and equipment on the land including stock and plant and equipment referred to in depreciation schedules of the trust, including items held at the land and previously included in trust depreciation schedules which now have a depreciable value of nil.
[2] Exhibit P8.
In addition Ruth was entitled to receive all crockery, cutlery, bedding, audio equipment, kitchenware and like items held at various locations on the land and in the leasehold properties in addition to any other items specifically identified in the accounting or other records of the trusts.
Also recorded within the recitals is that Ruth asserts legal and beneficial ownership of certain personal property, that she has commenced other proceedings in the Supreme Court of South Australia in action No.610/2002, as has Mr Trojan in No.307/2002 and the parties intend to resolve all issues arising in these proceedings by the terms of the deed.
Under the settlement Ruth agreed to purchase from Nest Egg Trojan and the trusts for the sum of $368,000, to be paid on or before 4 February 2005, the land and the leasehold (Morialta Cottage), the equipment and the intellectual property. Trojan agreed to provide vacant possession of the land and the leasehold upon payment of the settlement sum.
Ruth agreed to resign as a director and officer of Nest Egg on the exchange date and to transfer her shares in Nest Egg to Trojan and/or his nominee. The intent was that Ruth would have no further claim or interest upon the deed or trust.
For their part, Trojan on behalf of Nest Egg and the trusts agreed to transfer and to deliver to Ruth all the property held on behalf of the trusts, including property not limited to keys, photographs and negatives of the land and the leasehold property.
Ruth agreed not to operate any bank account in the name of Nest Egg and to withdraw as a signatory of the accounts. Trojan and Nest Egg agreed to transfer to Ruth the leasehold and all contents therein and assist in obtaining all necessary consents in respect of the sublease.
There were also other terms in the agreement in relation to parties not taking access to the land which are not presently relevant. One example is that a person called Simon Trojan, whom I would assume is related to Eric Trojan, had some rights to certain personal property upon the land. For the purposes of the dutiable transactions contemplated in the agreement Ruth was to pay all conveyancing and stamp duty costs. She also warranted that the only debt owing by the trustee Nest Egg was a mortgage over the land of about $8,000 and a very small claim from the owner of Morialta Cottage. There were to be no other adjustments.
There was also an undertaking that Eric Trojan was entitled to remove some personal property from the land (clause 3.18, 3.19) and that Ruth would not be authorised to act on behalf of the trustee following that time.
Mutual releases are set out in clause 4 of the Agreement as follows[3]:
4. RELEASE
Subject to compliance with Clause 3:
4.1 Trojan, Nest Egg and the Trusts hereby absolutely release and discharge Ruth and Nest Egg from any claim action demand or liability whatsoever whether actual or alleged pending or contemplated which Trojan, Nest Egg or the Trusts have or but for this Deed might have had howsoever arising whether out of or in relation to the land, the Trust, the equipment, the leasehold or otherwise in relation to the assets of Trojan, Nest Egg or the Trusts.
4.2 Trojan, Nest Egg and Nest Egg in its capacity as trustee of the Trusts hereby indemnifies and covenants to keep Ruth indemnified from and against any claim action demand or liability whatsoever whether actual or alleged pending or contemplated which Trojan has in his own right or by a family member or which Nest Egg or the Trusts may have or but for this Deed might have had howsoever arsing whether out of or in relation to the land, the Trusts, the leasehold, the equipment, the intellectual property or otherwise.
4.3 Ruth hereby absolutely releases and discharges Trojan, Nest Egg and the Trusts from any claim action demand or liability whatsoever whether actual or alleged pending or contemplated which Ruth has or but for this Deed might have had howsoever arising whether out of or in relation to the land, the Trusts or otherwise.
4.4 Ruth hereby indemnifies and covenants to keep indemnified Trojan, Nest Egg and the Trusts from and against any claim action demand or liability whatsoever whether actual or alleged pending or contemplated by Ruth which Ruth has or but for this Deed might have had howsoever arising out of or in relation to the land, the Trusts or otherwise.
[3] Exhibit P8, pages 5-6.
The parties agreed under clause 5 to discontinue the proceedings and clause 6 dealt with any failure by Ruth to settle upon the contract. They read as follows[4]:
[4] Exhibit P8, page 6.
5. COURT PROCEEDINGS
Upon payment as set out in paragraph 3.1 herein Ruth shall discontinue Ruth’s claim and Trojan shall discontinue Trojan’s claim with no order as to costs.
6. FAILURE TO SETTLE BY RUTH
Should Ruth fail to obtain funds for settlement the parties agree that the land shall be sold forthwith by a method to be agreed by the parties and the net proceeds of settlement shall be divided as follows:
6.1 In payment of fees associated with the sale of the property;
6.2 In payment of the sum of $368,000.00 to Trojan;
6.3 In payment of any additional legal fees (on a solicitor own client basis) incurred by Trojan and/or Nest Egg as a result of Ruth’s failure to settle on or by the 4^th February 2005;
6.4 In payment of interest to Trojan at the rate of ten percent (10%) per annum calculated on a daily basis from the settlement date on the remaining balance until the sum of $368,000.00 is paid in full;
6.5 The balance payable to Ruth;
6.6 The remaining terms of the Deed including the other transfers are to remain in effect and take place upon settlement.
The terms of the deed operated so that in the event Ruth could not raise the sufficient funds to pay out Mr Trojan, then the land should be sold and that after the payment to Mr Trojan of the sum of $368,000 together with all outgoings in relation to the sale and further legal fees on an indemnity basis, Ruth was entitled to the balance thereafter remaining.
Under clause 10 of the agreement, the document was entitled to be pleaded as a bar in any court action to be commenced by any party inconsistent or contrary to the Deed of Release and Settlement.
As at the date of the execution of this document, namely 23 December 2004, the defendants were living in or residing in Perth. The defendant, Rebecca Craig, formerly known as Rebecca Fathers, was residing in Perth with her then husband and her three children. Sometime prior to 23 December 2004 she formed a relationship with the defendant, Julian Craig. Although the evidence is not completely clear, sometime in or about late 2004 the defendants decided that they would move to Adelaide to live. Rebecca Craig gave evidence that she wanted to live in the Adelaide Hills and was certainly happy to live on the property. Not surprisingly she experienced difficulties in relation to moving with her three children after the breakdown of her marriage. She was eventually divorced from her former husband.
The defendants moved to Adelaide sometime in about January 2005 for a number of purposes. One was to conduct the business that existed on the property which had been sold to Ruth under the terms of the first settlement deed of December 2004 being Exhibit P8. Another purpose was to live on the property.
The commercial arrangements made by the defendants for the carriage of their ongoing management of the business on the property was to arrange for the settlement of the Partnerz Trust. The deed of settlement of the Trust forms Exhibit D37. The date of settlement of the Partnerz Trust is 10 January 2005. The trustees of the Partnerz Trust were the defendants. Those two persons were the specified beneficiaries of the trust which was a family discretionary trust. There were also general beneficiaries described in clause 1(2) of the Deed of Settlement and they included the specified beneficiaries and the brothers, sisters, spouses, widows, widower’s children and grandchildren of the specified beneficiaries or the greater issue of those persons. The relevant term concerning beneficiaries reads as follows:
1.   In this Deed the following expressions shall unless there is something repugnant to or inconsistent with the subject matter have the meanings hereunder set out:
…
(2) “General Beneficiaries” shall mean and include:-
(a) the Specified Beneficiary or the Specified Beneficiaries (as the case may be);
(b) the brothers sisters spouses widows widowers children and grandchildren of the Specified Beneficiary or Specified Beneficiaries and the spouses widows widowers children and grandchildren of such brothers sisters spouses children and grandchildren;
(c) any of the following entities whether formed in Australia or elsewhere namely –
(i)     the trustees (in their capacity as such) of any eligible trust;
(ii)   any eligible corporation;
(iii) any other legal person at least one share or other interest in which is beneficially owned or held by any beneficiary (including the trustees of an eligible trust and an eligible corporation);
(iv) any charity;
(d) such other persons corporations and trusts (if any) as may be named described or defined in the Schedule as additional numbers of the class of General Beneficiaries;
PROVIDED HOWEVER that every member of the excluded class shall be excluded from the class of General Beneficiaries notwithstanding that he may otherwise be o be qualified to be included in the class of General Beneficiaries;
AND PROVIDED FURTHER that subject to clause 10 hereof the Trustees may at any time and from time to time declare in writing that any person shall be excluded from the class of General Beneficiaries notwithstanding that but for such exclusion he is or would by reason of one or more of the matters or circumstances hereinbefore referred to have been a General Beneficiary and the class of General Beneficiaries shall as and from the date of the making of any such declaration be modified accordingly but so that this power shall not be capable of being exercised so as to derogate from any interest to which such General Beneficiary has previously become indefeasibly entitled whether in possession or in reversion or otherwise[5]
[5] Exhibit D37, pages 1-2.

At the time of the settlement of the Partnerz Trust and thereafter, it became apparent that Ruth could not raise the finance or procure finance to complete the purchase obligations that she had under Exhibit P8, being her agreement with Mr Trojan. Ruth did not seriously put in contest her inability to raise sufficient money to pay out Eric Trojan, and take the land under the Deed. This is an important fact as will become relevant later in these reasons. Ruth seems to have tried and failed to raise this money over quite a long period of time. Ultimately, and because of Ruth’s failure and after Mr Trojan allowed an extension of time, a new arrangement was entered into. That new arrangement is Exhibit P9.
That document is a Deed of Release and Settlement between Nest Eggs Nominees Pty Ltd and Ruth (called Professor Ruth), Eric John Trojan and the defendants (for the sake of convenience it will be called ‘the second deed’). The recitals of the second deed are largely similar to, if not the same as Exhibit P8, down to recital H. In recital I, it records that Ruth had appointed the defendants as her nominees pursuant to the 2004 deed. It also records in recital J that settlement pursuant to the 2004 deed was not achieved for various reasons and there was a dispute about the responsibility for that. It appears that such dispute was unresolved.
The content of the dispute is referred to in recital K, but in the end recital L says that the parties have determined to resolve the issues between them by the settlement deed.
Under clause 3 of the second deed the defendants, as the nominees of Ruth, on the settlement day agree to pay $355,500 to Nest Egg for the purchase of the land and $2,875 with respect to the leasehold premises, namely Morialta Cottage. Nest Egg agrees to transfer the land to the Craigs. Trojan agrees to transfer to Ruth a cemetery plot at Norton Summit cemetery in which Jancy is buried. The parties agree to pay outstanding accounts. Ruth and the defendants are entitled to retain all the plant and equipment in their possession which was transferred under the terms of Exhibit P8 and not otherwise. There is to be a discontinuance of the Supreme Court proceedings mentioned in P8 and the parties agree to release each other under clause 4 of the second deed.
Clause 4 of the second deed reads as follows:
4. RELEASE
Subject to compliance with Clause 3:
4.1 Trojan, Nest Egg and the Trusts hereby absolutely release and discharge Ruth and Craig from any claim action demand or liability whatsoever whether actual or alleged pending or contemplated which Trojan, Nest Egg or the Trusts have or but for this Deed might have had howsoever arising whether out of or in relation to Trojan’s claim, the land, the Trust, the equipment, the AGL debt, the leasehold or otherwise in relation to the assets of Trojan, Nest Egg or the Trusts.
4.2 Trojan, Nest Egg and Nest Egg in its capacity as trustee of the Trusts hereby indemnifies and covenants to keep Ruth and Craig indemnified from and against any claim action demand or liability whatsoever whether actual or alleged pending or contemplated which Trojan has in his own right or by a family member or which Nest Egg or the Trusts may have or but for this Deed might have had howsoever arising whether out of or in relation to Trojan’s claim, the land, the Trusts, the AGL debt, the leasehold, the equipment, the intellectual property or otherwise.
4.3 Ruth and Craig hereby absolutely releases and discharges Trojan, Nest Egg and the Trusts from any claim action demand or liability whatsoever whether actual or alleged pending or contemplated which Ruth has or but for this Deed might have had howsoever arising whether out of or in relation to Ruth’s claim, the land, leasehold with the Department of Environment and Heritage, the Trusts or otherwise.
4.4 Ruth and Craig hereby indemnifies and covenants to keep indemnified Trojan, Nest Egg and the Trusts from and against any claim action demand or liability whatsoever whether actual or alleged pending or contemplated by Ruth which Ruth has or but for this Deed might have had howsoever arising whether out of or in relation to Ruth’s claim the land, the Trusts or otherwise.
Clause 6 of the second deed reads as follows:
6. FAILURE TO SETTLE
6.1 Should Ruth or Craig fail to obtain funds for settlement or otherwise default in settling by the 30^th May 2006 except due to any delay by Trojan or Nest Egg they shall deliver up vacant possession of the land to Nest Egg and Trojan within 60 days of signing this Deed and the parties agree that Trojan, on behalf of Nest Egg, shall appoint an agent to sell the land forthwith by public auction and the net proceeds of settlement shall be divided as follows:
6.1.1 In payment of fees associated with the sale of the property;
6.1.2 In payment of the sum of $358,375.00 to Trojan;
6.1.3 In payment of any additional legal fees (on a solicitor own client basis) incurred by Trojan and/or Nest Egg as a result of the failure to settle from the settlement date;
6.1.4 In payment of interest to Trojan at the rate of ten percent (10%) per annum calculated on a daily basis from the settlement date on the remaining balance until paid in full;
6.1.5 The balance payable to Ruth;
6.1.6 The remaining terms of the Deed including the other transfers are to remain in effect and take place upon settlement.
6.2 Should settlement be delayed beyond the settlement date, but be concluded on or before the 30^th May 2006, except due to any delay by Trojan or Nest Egg, Ruth or Craig will make payment of interest to Nest Egg at the rate of 10% per annum on the outstanding balance from the proposed settlement date to the actual date of settlement.
In the event that the defendants or Ruth fail to obtain funds for settlement and the land is (as under Exhibit P8) to be sold by public auction and the proceeds divided similarly to as that described in P8. An exception is that under the second deed the amount of $358,375 is to be paid to Trojan and after payment of all expenses, including legal expenses and interest at the rate of 10% per annum, any balance remaining is to be paid to Ruth.
Similar provisions are included that operate upon the completion of the agreement, but there is also a new clause 16 in relation to tax in the second deed.
The effect of clause 16 is that the vendor is responsible for capital gains tax (CGT) as the vendor. (See clause 16.4). This is not surprising as CGT would be payable upon the transfer of the business asset, it being a CGT event.
The second deed, Exhibit P9, is dated 5 May 2006. The land was transferred into the names of the defendants. They became legal owners as trustees of the Partnerz Trust as the beneficial owner. They secured a loan for the purposes of this purchase by the trustee trough private lending sources. Those private lenders were secured by First Registered Mortgage. Later in 2010, there was a refinance with the Commonwealth Bank and upon refinance of that mortgage, there was also a further credit line created and it was similarly secured over the property. This credit line was used as a source of working capital for the business of the Partnerz Trust conducted on the property.
As at 5 May 2006 and thereafter, there is no evidence, documentary or otherwise, of any interest held by the plaintiff in the land. In fact, the contrary is the case. Nothing is disclosed on the public record showing any such interest or any caveat claiming such interest: see Coles KMA Ltd v Sword Nominees Pty Ltd (1986) 44 SASR 120.
Under the second deed, Ruth appoints the defendants as her nominees pursuant to the 2004 deed. On 17 January 2005, a Deed of Assignment was executed between Ruth and the defendants. Ruth is named as the assignor and the defendants are named as the assignee. Under the terms of that agreement, Exhibit P10, Ruth is named as the purchaser under the contract, Exhibit P8, for the sale to her by Nest Egg Nominees of the property. It recites that she has not paid a deposit and that she has agreed to assign her interest in the contract to the defendants in consideration of the payment to them by the assignee of the sum of $1.00.
The terms of the assignment are as follows[6]:
[6] Exhibit P10.
RECITALS
A.     The Assignor is the Purchaser under and by virtue of a Contract note for the sale and purchase of land made on the 23^rd day of December 2004 for the sale to it by NEST EGG NOMINEES PTY LTD (“the Vendor”) of an estate in fee simple in the whole of the land comprised in Certificate of Title Register Book Volume 5774 Folio 704 a copy of which contract note is annexed hereto (“the Contract”).
B.     The Assignor has not paid a deposit.
C.     The Assignor has agreed to assign their interest in the Contract to the Assignee in consideration of the payment to them by the Assignee of the sum of One Dollar ($1.00)
NOW THIS DEED WITNESSES as follows:
ACCURACY OF RECITALS
1.   The Recitals are accurate in every material particular and are deemed by the parties to form part of this Deed.
ASSIGNMENT
2.   In consideration of the payment of the Price by the Assignee to the Assignor (as the Assignor hereby acknowledges) the Assignor hereby transfers and assigns to the Assignee their estate and interest in the Contract and the Assignee accepts the assignment and agrees to observe and perform duly and punctually the obligations of the Assignor under and by virtue of the Contract the Assignee agrees to indemnify and keep indemnified the Assignor against all costs claims demands damages and expenses incurred or sustained by the Assignor as a result of any breach by the Assignee of their obligations under and by virtue of this Deed.
LEGAL EXPENSES
3.   The legal fees of an incidental to the instructions for the preparation execution and stamping of this Deed and all stamp duty and other out-of-pocket expenses in connection with this Deed shall be paid by the Assignee.
In consideration of the payment of $1 by the assignee to the assignor, the assignor (Ruth) transfers and assigns the defendants her estate and interest in the contract and the assignee accepts the assignment and agrees to accept and perform duly and punctually of the assignor under and by virtue of the contract (and) the assignee agrees to indemnify against all costs, claims, demands and damages incurred or sustained by the assignor as a result of any breach by the assignee of their obligations under and by virtue of this deed.
Therefore, the second deed, Exhibit P9 must be read with Exhibit P10 in order to properly understand recital I of Exhibit P10. This recital concerns the appointment by Ruth of the defendants as her nominees pursuant to the 2004 deed, the whole of the benefit of which have already been assigned by her to the defendants.
A perusal of the certificate of title in respect of the property discloses no registered interest claimed by any person other than the registered mortgagee over the property. No caveat is lodged at that time, namely May 2005, up to or including 2010 in which any claim to an estate or interest in the property is claimed. On the evidence there is no documented or other claim of any interest in the property (of Ruth) as between the plaintiff and any representative of the defendants or the defendants.
In the period between 2006 and 2008, the defendants, in their capacity as trustees, operated the businesses upon the property. Sometime in that period, consideration was given to the commercialisation of the property. In particular, there was a view afoot that it may be possible to subdivide the property and there were extensive discussions held between Ruth and the defendants concerning that possibility. Ruth had failed to inform the defendants that she had signed a registered Land Management Agreement, Exhibit D42, in about 1987 which would prevent subdivision of the land and which would require, if there was to be subdivision, for there to be a registration of a new land management agreement. All of that would take time and money as well as the agreement of the Local Council. This was not assured by any means.
Be that as it may, Ruth remained involved in the commercial operations on the property. I am satisfied on the whole of the evidence that she leant her aid to the defendants in the carrying on of the businesses on the property. In particular, she did the book-keeping; she was accustomed to doing this and had done it previously with Mr Trojan. She prepared financial reports and I am satisfied that she prepared the first drafts, at least, of some of the tax returns of the trust.
I am also satisfied that the substantial business upon the property in that period was conducted by the trust, although I am also satisfied that there were a number of businesses which were treated as standalone businesses which were also conducted on the property. One or both of the defendants was or were the proprietors of these businesses. My understanding is that the proprietors conducted these businesses in their own right and not beneficially for the trust. Quite why these businesses may have operated in this way and what arrangements were made with the trustee about, for example, rent is not disclosed in the evidence. Nothing turns on this point for these reasons. These businesses like the trust business completely failed and the trust is in a state of penury and is being wound up. Various numbers of businesses were given to me and these usually ranged between three and four other businesses. Quite why that occurred is not clear, but it does not require resolution from me.
In 2008, Julian Craig’s brother, Brett, first became aware of the fact that his brother and sister-in-law were the registered proprietors of the property. Presumably he also became aware that they held the property in their names as trustees for a trust.
A family dispute followed. It is not clear to me why Brett would claim any interest in the property (which he did claim), or that he thought that he had been put out of, for example, a form of inheritance. It is not necessary that I resolve that matter. What did occur is that correspondence was entered into between Julian, Craig, Ruth, Taj, and Jason as well as Brett: see Exhibit P4.
One reading of that document and correspondence would indicate that Julian Craig, the defendant, was trying to justify how it could be that he was the registered proprietor of the property which had previously been only associated with his mother. That of course is technically wrong because the property was previously associated with the interest of his mother and another, namely Eric Trojan. It is also obvious from a reading of Exhibits P8 and P9, that Eric Trojan took the majority if not the whole of the benefit of the value of the property under the terms of the agreement which ultimately was fulfilled. Any interest of Ruth’s was at best, minor. There is no evidence that Ruth had or obtained any substantial proprietary interest in the property. The clear inference from the limited evidence received is that Eric Trojan held (at least beneficially) the major interest in the property. This is reflected in the settlement deeds.
It is also not clear to me how it may be said that there could be any equity left in the property after discharge of the mortgages upon it. Be that as it may it is quite clear that, in the exchanges which are in Exhibit P4, Julian Craig would have created in the mind of his siblings and relations that there was some obligation to pay an amount of $250,000. However, the evidence on that topic is so vague as to be almost incomprehensible. There is no evidence that Julian Craig undertook for any valuable consideration any obligation to pay $250,000 to anybody. There is no evidence that, for example, he made any agreement for valuable consideration or by deed under seal with the Ruth, to pay her $250,000, or that he in some way bound himself and the defendant, Rebecca Craig, at some stage upon the death of the plaintiff, to make any payments to his siblings and other relations.
In relation to the creation of those documents Rebecca Craig gave evidence that nothing that was said in Exhibit P4 could be construed as being any more than a statement of intent. I am not prepared to accept that evidence because it purports to give evidence of the background of the document and if it is a contract its meaning should be first ascertained from the terms of the document.
However Ms Craig also gave evidence that at the relevant time there were many discussions amongst the family members about the possibility of the commercialisation of the property and the sharing of the benefits of the commercialisation amongst the members of the family.
That is logical enough and quite easy to comprehend. However any benefit to be derived is dependent entirely upon a successful commercialisation of the property and does not give rise to any personal obligations on the defendants in their personal capacities to make any payment to anybody. The property was beneficially owned by the trust. If it was to be commercialised by sub-division and sale, then the entity which enjoys the benefit and which is required to pay capital gains tax, is the trust through its trustee. No obligation would be accepted by the trustees except for the due obligation of the family discretionary trust in relation to the commercialisation and it must be understood that Brett, Jason and Taj made no real contributions to the property. It appears by inference from the evidence of Ruth that they were incapable of making a financial contribution to the property. There is no evidence that any of them made some other form of contribution, such as labour or services, that directly or indirectly provided a benefit to the property.
The evidence of the plaintiff in respect of this matter was entirely unsatisfactory and quite inconsistent. Her first version of events in evidence was that the obligation, if any, arose under Exhibit P4 and which she otherwise understood was an obligation of the trust. When she learned that the trust was insolvent and was being wound up, she then put a version of events that it was a personal obligation of the defendants. However, when confronted with other documents concerning the benefits accruing to the trust from the property, she again gave another version of events saying that it was a trust liability and the trust should pay what was required to be paid under the so-called agreement, Exhibit P4. Later she changed her evidence again and said it was a personal obligation of the defendants themselves.
I am satisfied that there was no personal obligation upon the defendants to make any payments. I am also satisfied that there was no obligation upon the trust to make any payments as asserted by the plaintiff. However, I sympathise with the position of the plaintiff in relation to, for example Exhibit P4, and I also mention Exhibits P5 and 6. There is no doubt that Exhibit P11, which is the trust tax return for the Partnerz Trust, dated 2006, stated in the balance sheet a liability over and above secured creditors of some $250,000. When the plaintiff identified that this was the case she changed her story, in relation to this obligation from a personal obligation on the defendants to a trust obligation. She justified her position by saying that the question of any remedy should await the fortunes of the trust. The evidence of the defendants, which I accept, was that the trust is being wound up in insolvency.
I will deal with both possibilities later, but in my opinion even if I accepted the version of events put forward by the plaintiff in relation to this so-called liability and because I am satisfied that there was never a personal liability upon the defendants, any liability which existed could only be a liability of the trust.
As things turned out the plans in relation to the commercialisation of the property went completely awry. I am satisfied that there was a family breakdown in the period between 2008 and 2009. The position became untenable. In that period the plaintiff Ruth, Taj, and Taj’s brother Jason, had continued to live on the property. At least some of them were required to pay rent but by the end of 2009 they were not paying rent. I am satisfied that there was an obligation only upon Taj and Jason to pay rent. I am satisfied that an agreement was made that the plaintiff have an entitlement to remain on the property rent-free. I will deal with that matter later, but it needs to be stated immediately that I do not agree and do not accept that as a result the plaintiff, Ruth, was entitled to remain on the property and not contribute to the costs such as utilities and other bills.

The catalyst for the final breakdown of the family arrangements was that on 9 November 2009, the defendant Julian Craig suffered his first cardiac arrest. He is significantly ill and suffers continuing heart problems. These heart problems are brought on by stress and I have received from his treating practitioner, Dr Emma Manifold, a letter of 18 September 2014, which I will refer to later.
As a result of his heart problems, Julian Craig was unable to work efficiently. At the same time there was a significant falling-out amongst family members. I am satisfied that Taj approached the defendants and produced a will and demanded that it be executed. He also made claims upon the defendants for payment of what he described as his share which was the sum of $62,500, being one fourth of $250,000. All such demands were rebuffed and in any event the demands were impossible to fulfil even if there was such an obligation (and I find that there was not). The defendants were in a state of penury.
Things deteriorated to such an extent that on 3 April 2010, the defendants issued to Ruth, Taj and Jason an eviction notice. The basis of the eviction notice was that they didn’t pay rent, including other outgoings. There was a hearing before the Residential Tenancy Tribunal, that was initiated by the defendants. It was unsuccessful. The Residential Tenancies Tribunal formed the view that it did not have jurisdiction to hear the matter. This was because Ruth claimed a legal or equitable interest in the property. I am satisfied that she had no legal or equitable interest in the property.
However the failure of the Residential Tenancies Tribunal to resolve the matter was of no moment, because Ruth, Jason and Taj eventually left the property and went to live elsewhere. However, the plaintiff returned on many occasions.
I have mentioned previously the plaintiff’s entitlement to live on the property. I am satisfied that an agreement was made between Ruth, and the defendants to allow Ruth to stay on the property and to give assistance to the defendants in their capacities as trustees to operate the businesses of the trust and any other businesses on the property that they maintained. However, I am also satisfied that this entitlement was not an interest that runs with the land. It was therefore not a registrable covenant and from what I am able to ascertain from the evidence it was a mere defeasible interest. It was not protected by any caveat, and there was no notice given to any subsequent purchaser of any interest in law or in equity belonging to Ruth in the property as a result of that arrangement.
Proof of that fact is simple enough to explain. Ruth no longer lives on the property. It is owned by different registered proprietors under arrangements reached in 2012. At the time that those arrangements were made Ruth had claimed a caveatable interest in the land which I will deal with later. At the time that thiese arrangements (reached in 2012) were performed, Ruth had lifted the caveat voluntarily under the terms and requirements of the arrangement.
Therefore, it follows that whatever interest Ruth had in remaining on the property was an interest that terminated no later than and did not survive, the sale of the property by the trust to the new registered proprietor. Hence it was merely a defeasible interest.
A second matter arises on the evidence concerning the relationship between Ruth and the defendants and the businesses that were conducted on the property. Ruth made significant submissions and gave evidence that she claimed to be in partnership with the defendants. I reject that contention. The first reason is that a large portion of the business conducted on the property was a trust business. It was operated on a stand-alone basis. The other businesses were also stand-alone businesses. There was no indicia within the documents which have been tendered before the court and there is certainly no evidence before me, for example, through tax returns, partnership returns, or other such material, which would indicate that a partnership existed. None of the material shows that the plaintiff and the defendants were in any form of partnership. To the contrary, the relationship between the plaintiff and the defendants broke down no later than about 2007 to 2009. In my opinion that breakdown developed over that period at least and may have commenced earlier, but it seems that by the end of 2009 the relationship was completely at an end.
If I am wrong about the question of the partnership then I am also satisfied that by no later than 9 November 2009, which was the date that Julian Craig suffered his heart attack, the relationship had so broken down that there could be no suggestion of any ongoing partnership between the parties. However I am satisfied that there is no satisfactory evidence of any partnership business operating. All that exists before the court is a bare assertion by Ruth of some form of partnership. I am not prepared to accept that assertion and in my opinion it is wholly without support. Also a court is loathe to impose a partnership and all of the legal and equitable obligations that it entails upon parties who have never indicated that they were partners in operating a partnership, have not returned their income as partnership returns, and have not proclaimed to the world generally, that they are in partnership.
In my opinion in order to make good this claim the plaintiff was required to bring before the court some proof of the conduct of the partnership business. None exists and I am not prepared to accept that contention.
I am satisfied that between 21 April and 28 May 2010 Taj, Jason and Ruth had left the property. I am also satisfied that on 7 October 2010 Ruth caveated the property: see Exhibit D41. Under the caveat Ruth claimed the following[7]:
..an equitable estate in fee simple in the land above described being entitled to an, at present, indefinable share in the land pursuant to a constructive trust between the caveator and caveatee.
[7] Exhibit D41.
The caveat was permissive, and it may be seen that the form of caveat asserts that the defendants as trustees have so acted to the detriment of Ruth knowing of that interest of Ruth claimed in the land or having stood by and allowed Ruth to act to her detriment that a remedial constructive trust would be imposed upon them. There is no evidence before me which would justify any assertion of the existence of any form of constructive trust.
On 23 September 2011 the firm of solicitors Wallmans acting for the plaintiff sent a letter of demand to the defendants in relation to the alleged interest of the plaintiff Ruth. Nothing was resolved out of that letter of demand and in or about December 2011 these proceedings issued.
Six months later, in June 2012, the defendants sought and obtained an Intervention Order against the plaintiff. About three months later, by agreement between the parties, there was a mediation with Mr John Keene, barrister, acting as the mediator.
The background to the mediation, according to the evidence of both Ruth and Rebecca Craig, is that the mediation was intended to resolve all issues of every nature between the parties who attended the mediation. It is therefore necessary to identify that the parties at the mediation who entered into a heads of agreement at the close of the mediation were the plaintiff Ruth, the defendants and the plaintiff’s grandchildren Jason Barltrop and Taj Arndell.
Ruth was represented at the mediation by Mr Felix Hoelscher, solicitor, and Mr Graham Dart, barrister; now Judge Dart, Master of the Supreme Court. The defendants were represented by Mr Siegmann, solicitor from the firm von Doussas.
At the close of the mediation a Heads of Agreement document was executed. It is in evidence. I have considered the admissibility of the Heads of Agreement document with regard to section 67C of the Evidence Act1929 (SA). I am satisfied that the Heads of Agreement is admissible into evidence as it is neither a communication made in connection with an attempt to negotiate the settlement of a civil dispute, nor a document prepared in connection with such an attempt. It is rather a document produced at the conclusion of a settlement.
In her closing address to me Ruth alleged that she was bullied into the agreement by virtue of the conduct of the mediator, Mr Keene, and implicitly by the conduct of Mr Hoelscher and Mr Dart. I completely reject that evidence. It is not necessary for me to decide whether it was given dishonestly. However, I am completely dissatisfied about the evidence of the plaintiff in that respect because it has no realiability and is implausible.
Prior to the mediation an order with injuction had been issued by a judge of this court. It is dated 15 May 2012. It relevantly reads as follows[8]:
ON NOTING the plaintiff’s usual undertaking as to damages:
THE COURT ORDERS that:
1. The defendants are hereby injuncted from dealing with the property described in paragraph D(ii) of the settlement deed dated 23 December 2004, namely:
(ii) plant and equipment on the land including stock and the plant and equipment referred to in depreciation schedules of the Trust including items held at the land and previously included in trust depreciation schedules which now have a depreciable value of nil, in addition to all crockery, cutlery, bedding, audio equipment, kitchenware and like items held at various locations on the land and in the leasehold properties and in addition to any other items specifically identified in the accounting or other records of the trusts (“equipment”).
[8] Order of His Honour Judge Tilmouth, dated 15 May 2012.
For reasons which are not clear to me that order was not mentioned under the Heads of Agreement, albeit that it had been made only some four months before the mediation. For the avoidance of doubt I will make orders for the discharge of that injunction at the end of these reasons.
The terms of the Heads of Agreement read as follows[9]:
[9] Exhibit P24.
1.   Ruth agrees to pay $585,000.00 for the land subject of Action DCCIV 2907 of 2011 (“the Action”) being the land comprised and described in Certificate of Title Volume 5574 Folio 704 (“the land”) pursuant to a Law Society Standard Land Contract with a settlement date of 31 October 2012 or earlier and subject to finance on or before 14 September 2012 (“the Contract”).
2.   If Ruth and/or the nominees do not settle on the Contract on or before 31 October 2012, the Contract shall automatically be terminated with no recourse against Ruth and/or the nominees and the land shall be placed on the market with Elders Real Estate for public auction and the surplus proceeds of sale after discharge of the mortgage and the line of credit secured against the land (and the costs associated with the sale of the land) shall be apportioned as to $43,500.00 to Craigs and the balance to Ruth.
3.   On or before 31 October 2012, the Craigs shall cause to be delivered up to Ruth the white and gold ring with two square cut diamonds known as “Bec’s wedding ring”.
4.   Taj releases the Craigs from any claims the subject of his ELCCI 11-15626 Magistrates Court Action and agrees to discontinue the action with 14 days.
5.   Ruth releases Rebecca Craig from all claims by her against Rebecca Craig in HHCLI 12-228 and agrees to discontinue the action within 14 days.
6.   Ruth releases the Craigs from any claim over the subject land and any claim of a loan as stated in paragraph 43 of the Action or otherwise relating to the Action.
7.   Jason and Taj release and waive any claims against the Craigs in relation to the land or their role as trustees or personally or otherwise however so arising whether now known or not (other than a breach of these Heads of Agreement).
8.   The Craigs release Ruth, Taj and Jason from any claim in relation to the Action, the land and otherwise.
9.   The parties to the Action agree to adjourn the Action for 2 months pending settlement of the land contract.
10. Ruth agrees not to attend, occupy or interfere with the land until after settlement pursuant to the Contract and no party to these Heads of Agreement shall attend at the land prior to an inspection of the land by Jason and Rebecca Craig in the company of a police officer, currently scheduled for Sunday 9 September 2012.
11. The Craigs agree to execute such documents as may be required to cause the transfer of the cemetery plot at Norton Summit Cemetery in which Ruth’s daughter Jancy is buried to Ruth at the expense of Ruth of all things but at no other cost with such transfer to be effected on or before 31 October 2012.
12. If the Contract settles, Ruth will discontinue the Action on the basis that all parties will bear their own costs.
13. The parties agree to execute a more formal Deed of Release within 7 days and to sign the Contract by no later than close of business on 11 September 2012.
14. The Craigs shall use their best endeavours to obtain a discharge of the intervention order in place against Ruth.
15. For the avoidance of doubt, the parties to these Heads of Agreement intend to resolve now and forever any disputes which they may have against one another howsoever arising whether now known or not with the intention that the releases herein are read in the widest possible sense.
As will be seen it was possible for Ruth to nominate another person to purchase the property. Ruth’s evidence was that her brother, Keith Arndell, was to act as her nominee. In the event that Ruth or her nominee did not settle on the contract on or before 31 October 2012, and this obliged Ruth or her nominee to purchase the property for $585,000, then the property was to be placed on the market with Elders and $42,500 was to be paid to the defendants after the discharge of the mortgages and the costs of sale. The balance was to be paid to Ruth.
There were other obligations.
On or before 31 October 2012 the defendants should cause to be delivered to Ruth the white gold ring known as Bec’s wedding ring.
It was necessary for Taj Arndell to release the Craigs from claims that he had made in the Magistrates Court proceeding which was a claim for personal injury damages.
Ruth was required to release Rebecca Craig from a Magistrates Court proceeding in relation to an alleged assault, and under paragraph 6 Ruth was required to release the Craigs from any claim over the subject land and any claim of a loan as stated in paragraph 43 of the action. The action is the within action.
The agreement also goes on to provide that Ruth was required to ‘release the defendants from the claims under paragraph 43 of the action or otherwise relating to the action’.
Jason and Taj are required to release and waive any claims against the defendants in relation to the land or their role as trustee or personally or in any way arising and there was to be mutual releases by the defendants.
Ruth agreed not to attend, occupy or interfere with the land until settlement and all parties were to agree not to attend the land.
It was necessary for the Craigs to execute any documents that may be required to cause the transfer of a cemetery plot in which Jancy was buried.
Ruth was required to discontinue this action on the basis that all parties bear their own costs and there was to be a more formal Deed of Release prepared within seven days.
Under clause 14 the Craigs were required to use their best endeavours to obtain a discharge of the Intervention Order. Clause 15, which may be described as a wrap-up clause to avoid any doubt, was included to ensure that all of the parties settle all of the disputes that they may ever have against each other.
Ruth or her nominee was not able to settle upon the property on or before 31 October 2012. There were a number of reasons for this. I am satisfied that none of those reasons may be laid at the feet of the defendants. I reject Ruth’s contentions to the contrary. The whole of the evidence that is before the court is to the contrary and I refer to exhibits D28, D29, D30, D31 and D32. I am satisfied that the reasons for the delay in the settlement of the contract was the existence of the Land Management Agreement which the plaintiff did not declare existed (see Exhibit D42) and which was registered over the land.
However, even having regard to those matters Ruth and her nominee were given extensions throughout late 2012 and early 2013 to complete the purchase. I am satisfied that whatever problems stood in the way of a settlement by Ruth or her nominee for the purchase of the property were cleared away by no later than the end of January 2013. For reasons which have never been explained, Ruth or her nominee, Keith Arndell, did not settle upon the purchase of the property.
Keith Arndell was not called to give evidence. On the evidence given by Ruth, Keith Arndell is in good health and available to be called but he was not called to give evidence.
Under clause 2 of the Heads of Agreement, in the event that the property did not settle under clause 1, which was the clause providing the option to Ruth or her nominee to purchase the property, then the property was to be sold at public auction.
The property was sold at public auction, a contract was entered into in June 2013 (see Exhibit D40) and settlement took place on 22 August 2013. The purchase price of the property was $704,000.
Exhibit D40 is the amended final vendors settlement statement produced by North East Conveyancers (Sophie Telianidis) dated 22 August 2013. That settlement statement discloses the sale price of $704,000 deductions for commissions, marketing costs, disbursements, conveyancing costs, government charges, including lands titles fees, outstanding council rates and other fees. The largest debit is the discharge of mortgage to the Commonwealth Bank of $578,860.04.
Under Exhibit P24 the division of money left over was to the defendants $43,500, and to the plaintiff Ruth $48,162.28. These amounts have now been paid. They were paid on or about 22 August 2013.
I am satisfied, subject to what I have to say about clause 14, that all of the obligations of the defendants under Exhibit P24 have now been satisfied by them. I am satisfied that the plaintiff Ruth and Taj and Jason did not fulfil the terms of their obligations under the agreement: Taj failed to release the defendants from the claim in the Magistrates Court but as a result of the existence and content of the Heads of Agreement that claim was dismissed; Ruth failed to release Rebecca Craig from the claim under the other Magistrates Court proceedings, but also under the Heads of Agreement it was dismissed. In both actions there were orders for summary dismissal made by Magistrates based upon the terms of the Heads of Agreement.
I am also satisfied that the defendants failed to deliver the white gold ring or the documents in relation to the transfer of the cemetery plot until such time as the plaintiff Ruth and the other parties to the document performed their obligations under it. After dismissal of the Magistrates Court proceedings the ring and the document were delivered to Ruth and she has affirmed the receipt of those matters.
Ruth has failed to discontinue these proceedings.
Clause 14 required the defendants to use their best endeavours to obtain a discharge of the Intervention Order in place against Ruth. Quite why this forms a term of the agreement is not clear to me. It is clear to me that this term does not exist for the benefit of the plaintiff Ruth. It is not a term about which the whole agreement revolves. It is also a term that requires the defendants to use their best endeavours.
The evidence of the defendants is that they approached the police seeking a discharge of the Intervention Order in accordance with their obligations under clause 14. The police firmly advised the defendants that they should not discharge the Intervention Order. The evidence discloses numerous altercations between the parties which led to the reporting of matters to the police. Ruth gave evidence that she was charged with trespass and spent eight days in custody. That matter was not proceeded with because the police could not be satisfied that she was a trespasser. There have been many other police interventions between these parties. It is not necessary for me to recite them all here.

I am satisfied that the police were completely familiar with the issues that were arising between the parties and the danger to the defendants in the event that the intervention order was discharged. On one view it might be said that the police may well have been wanted the orders to remain so as to maintain some distance between these parties. That would be understandable. In my opinion, it would be unreasonable for me to form the view that the police would allow such an attitude to affect the advice that they gave to the defendants. The evidence satisfies me that the advice was genuinely given to the defendants and it was accepted by them. I accept the evidence of the defendants given on this issue.
The obligation to use best endeavours, in my opinion, is an obligation which is to be objectively assessed. If objectively it may be said that a person in the position of the defendants approached the police and requested a discharge of the Intervention Order but the police prevailed against them, on the basis of their very strong advice to the defendants that they should not do so, then in my opinion, it is quite arguable that the defendants have discharged their obligations to use best endeavours.
I say this for a number of reasons, but the predominate reason is that at the time that the approach was made to the police, the male defendant, Julian Craig, continued to suffer from significant heart disease and other heart conditions. The letter from Dr Manifold, Exhibit D43, says amongst other things, that the stress of appearing at the trial may lead to a life threatening cardiac event. In my opinion, if an Intervention Order in place against the plaintiff was discharged, then objectively, it is reasonable to presume based upon the long, bitter and very difficult history of these parties that such a life threatening event could well occur. However, if I am wrong about that, I will consider the matter on the basis of the established law of Australia concerning termination of contracts.
It is necessary to identify again that the defendants have fulfilled all of the other terms of the agreement. Any delay that has occurred, in my opinion, has occurred because of the plaintiff’s delay and there was no other basis in fact to criticise the defendants.
There was no notice of termination issued by the plaintiff, Ruth, and there was no notice to complete issued by Ruth as a forerunner to a termination of the agreement. Ruth claims that she is entitled to treat the agreement as an end and this claim is now contained within the prayer for relief.
The settled law of Australia is to be derived from the decision of the High Court of Australia in Koompahtoo Council v Sanpine Pty Ltd [2007] 233 CLR 115, the High Court said at [44] as follows:
In its letter of termination, Koompahtoo claimed that the conduct of Sanpine amounted to repudiatory breach of contract. The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. (In this case, we are not concerned with the issues that arise where the alleged repudiation takes the form of asserting an erroneous interpretation of the contract. Nor are we concerned with questions of inability as distinct from unwillingness.) Secondly, it may refer to any breach of contract which justifies termination by the other party. It will be necessary to return to the matter of classifying such breaches. Campbell J said this was the sense in which he would use the word “repudiation” in his reasons. There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words.
In order for Ruth to be in a position to terminate the agreement, it would be necessary for Ruth to identify repudiatory conduct and that conduct is to be assessed objectively. It would be necessary for Ruth to satisfy me that the conduct of the defendants has been such as to convey to a reasonable person in the situation that she is in, that the defendants renounce the contract as a whole or at least a fundamental obligation under it.
In the classification of breaches and after addressing the question of repudiation, it is not necessary for Ruth to have identified a breach of an essential term in order to justify termination, but it would have been necessary for Ruth to have identified conduct on the part of the defendants which manifests an unwillingness or inability to perform their side of the contract in such circumstances that she would be entitled to conclude that the contract would not be performed substantially according to its requirements.
In my opinion, if I am wrong about the question of the use of best endeavours, then I am satisfied under the authority of the High Court in Koompahtoo that a failure to comply with clause 14 of the agreement in the relevant circumstances as they subsist and in particular, in the background situation of the health of Julian Craig, is not the manifestation of an unwillingness or inability on the defendants sufficient for Ruth to conclude that the contract would not be performed substantially according to its requirements.
In my opinion that proposition may be easily tested. The property has been sold. Ruth was not able to take up the possibility available to her under clause 1 of the agreement and therefore, by default, clause 2, operated. In particular, it is necessary to identify that under clause 2, if Ruth was not able to perform her obligations under clause 1, then that obligation automatically is terminated. However, the strict compliance with that requirement was waived by the defendants who allowed Ruth extensions of time through until the early part of 2013 when, after some eight months of delay, the defendants put the property on the market for sale, the settlement of which finally took place on 22 August 2014. This was reasonable and appropriate conduct on the part of the defendants as the contract did not make time of the essence. But the result was still that the rights and the obligations under clause 1 then terminated.
I am also satisfied that the whole of the other obligations of the defendants under the Heads of Agreement have been satisfied, albeit late, but in circumstances where no notice of termination was issued by Ruth and no requirement to comply was issued by her. At no time prior to the settlement of the sale of the property, prior to the receipt of the ring, or prior to the receipt of the documents concerning the cemetery plot, did Ruth give any notice to the defendants that she did not treat herself as bound by the agreement, that the agreement was at an end and that she was treating the contract as being repudiated by the conduct of the defendants because they had not been in a position to perform the contract substantially in accordance with its requirements.
In my opinion the Heads of Agreement document is extant. It binds the parties and it binds, the plaintiff.
In my opinion, all of the actions of the defendants in favour of Ruth under the terms of the Heads of Agreement discharge the whole of any obligations between Ruth and the defendants.
That proposition may also be easily tested by an indirect way. Exhibit D39 are the trust tax returns for the Partnerz Trust for the period 30 June 2011, 30 June 2012 and 30 June 2013. The tax return for the period ending 30 June 2013 shows that the Partnerz Trust enjoyed a capital gain of $164,883 derived from the sale of one of its assets, the property (under the Heads of Agreement). It is therefore a CGT event and therefore CGT is payable on half of the capital gain, namely $82,442 at the usual corporate marginal rate.
Ruth has received $48,165 under the heads of agreement tax free. The whole of the burden of paying CGT upon capital gain derived from the sale of the property for $704,000 fell upon the defendants as trustees. Therefore Ruth has received two benefits, namely, a tax-free payment and a tax indemnity from the trust under the arrangement which is the Heads of Agreement, Exhibit P24. Whether or not that was the intended result is irrelevant to my considerations, but it is a fact.
If I am wrong on the question of the view that I have taken in relation to the alleged obligation upon the defendants to pay $250,000 under some form of arrangement with Ruth, then I am of the opinion that the result is no different.
I am satisfied that the promise to pay was never a personal liability upon the defendants. I am so satisfied because the obligation, if it exists, was always associated with the property and therefore with the trust.
There is no doubt that on the pleadings the defendants have admitted that the property was transferred to them as the trustees of the trust. There is no other asset that has ever been in consideration between the parties or controlled by the parties which could be the source of any obligation to pay any money to anybody.
The whole of the issue and dispute arose in 2008 because of an assertion by members of the family that because the defendants owned the legal title of the property, they had been allegedly put out of an inheritance which may have devolved upon their mother, Jancy (deceased). That is the background of the matter.
I have already identified that in Exhibit P11 the obligation, if it existed, was taken up in the balance sheet of the trust as a trust liability. However, I have also identified through Exhibit D39 that this trust liability was not carried forward in the trust financial returns. I am satisfied that Exhibit P11 was prepared by Ruth in her position as bookkeeper. It was not read closely by the defendants, but was signed by them. I am also satisfied on the evidence that on if the defendants had known that Ruth had inserted an obligation to pay a further $250,000 as a liability of the trust over and above secured liabilities, they would never have signed those documents.
A relationship of trust and confidence existed between Ruth and the defendants in relation to the preparation of those financial returns and tax documents. In my opinion, the insertion of that amount was likely a breach of trust and confidence by Ruth, but I do not need to decide that matter.
The most important evidence on the facts is that the trust liability was, not carried forward in the trust financial returns. However, even if I’m wrong about that, the evidence discloses that the Partnerz Trust is now to be wound up in insolvency. The insolvency includes tax debts and this is evident in Exhibit D39, the tax return for 30 June 2013. Nothing can be gained from the trust. There is no evidence of any wrongdoing by the defendants as trustees.
And three of the beneficiaries of the claim for this amount namely Ruth, Jason, and Taj have, by Exhibit P24, disclaimed any entitlement that they may have and Ruth has also foreclosed any benefit or entitlement that she would contend exists. Whatever claim each of them thought they may have had against the trust property or against the defendants personally or as trustees, such claims are effectively merged in the Heads of Agreement and are extinguished under it.
Therefore under the Heads of Agreement the obligation ends and Brett as the other beneficiary, if he has any rights, has it against Ruth as she will have compromised his entitlement by the Heads of Agreement. If I am wrong about that then I am satisfied that Brett’s interest, if it exists, is claimable only against the trust estate and that interest is worthless because the trust estate is being wound up in solvency.
At the commencement of these reasons I identified the remedies that have been sought by the plaintiff Ruth. They are set out in paragraph 2 of the Statement of Claim. That Statement of Claim is dated 11 February 2014. It was drawn by Mr Brohier of counsel on instructions of Ruth. Paragraph 2 of that pleading pleads claims against the defendants as natural persons. However it is necessary to identify that the property was transferred to the defendants in their capacity as trustees of the Partnerz Trust: see paragraph 28 of the Statement of Claim and paragraph 1 of the Defence.
In my opinion no claim in respect of the property, or any obligations arising out of the property, or any alleged obligations extant between Ruth and the defendants, arise apart from the trust relationship between the defendants as trustees and the settlement which is the Partnerz Trust. I reject any possibility of there being a personal claim against the defendants. Part 2 of the pleading in the Statement of Claim in paragraphs 50 - 65 read as follows[10]:
[10] Amended Statement of Claim, dated 11 February 2014.
Part 2:
The remedies sought are
50.A declaration that the plaintiff had an equitable interest in the Property to the value of 50%.
51.A declaration that the defendants held their interest in the Property as beneficiaries of the Partnerz Trust subject to the plaintiff’s equitable interest.
52.Further or in the alternative to the above prayers for relief, a declaration that the defendants held the Property on constructive trust in favour of the plaintiff.
53.A declaration that the Craigs are indebted to the plaintiff for the balance of 50% of proceeds of sale (after sale costs), estimated at around $277,000. This was the intention behind para 47.3 in the original Claim.
54.A declaration that Ruth, Jason and Taj had life tenancies and that the Craigs had no right to force them from their home, and that they are liable for the expenses incurred as a result.
55.A declaration that the defendants owed a fiduciary duty to the plaintiff.
56.A declaration that the defendants breached the fiduciary duty they owed to the plaintiff.
57.An order that the Craigs pay replacement value for the injuncted property and the plaintiffs personal belongings which they removed from the land.
58.A declaration that clause 15 of the HoA be set aside for both parties to enable ongoing proceedings as identified in 49.8 above.
59.Equitable compensation.
60.Judgment in the sum of $110,000.00.
61.Damages in the nature of Hungerfords v Walker damages.
62.Interest.
63.Costs.
64.Such further or other orders as to this Honourable court seem necessary.
65.The plaintiff seeks leave to serve a Notice to Admit on the defendants.
The plaintiff has never had any equitable interest in the property. She has disclosed no factual basis to allege an equitable interest, whether to the extent of 50% or any amount.
It follows that the defendants have never held any interests in the property as trustees subject to such equitable interest. Under the usual law of trust as beneficiaries of the Partnerz Trust the defendants hold no legal interest in the trust estate apart from an expectation that the trust would be properly administered.[11] They own an equitable interest in the fund but that is subject to the terms of the trust settlement and the exercise of trustee discretion.
[11] Gartside v Inland Revenue Commissioners [1968] AC 553.
The defendants have never held the property on a constructive trust in favour of the plaintiff. There are two reasons. There is no factual basis to justify the imposition of a remedial constructive trust. Second, the assertion of a constructive trust is inconsistent with the actual trust relationship that existed under which the property was transferred to the Partnerz trust.
The plaintiff claims, and sought orders to the effect, that the defendants held the property on constructive trust in favour of the plaintiff. In Muschinski v Dodds[12] Deane J summarised the concept of a constructive trust as:
Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.
[12] (1985) 160 CLR 583.
Mason CJ, Wilson J and Deane J affirmed the remedial nature of a constructive trust in Baumgartner v Baumgartner[13] when they stated:
…the statement so understood is that it asserts the foundation for the imposition of a constructive trust in situations of the kind mentioned is that a refusal to recognize the existence of the equitable interest amounts to unconscionable conduct and that the trust is imposed as a remedy to circumvent that unconscionable conduct.
[13] (1987) 164 CLR 137 at [47].
In order to find that a constructive trust existed, it must be proved that there has been a beneficial interest in the property enjoyed by the defendants. It must further be proved that this beneficial interest exists at the expense of the plaintiff’s interest in the same property. Therefore a constructive trust would be imposed with the purpose of preventing the defendants from enjoying a beneficial interest of the property at the expense of the plaintiff’s own claimed interest. There is no weight given as to whether it was the intention of the parties’ actions to create a constructive trust.
The defendants bought the property after being granted a Deed of Assignment to become Ruth’s nominees, pursuant to the 2004 Deed of Settlement[14] between Ruth, Eric Trojan and Nest Egg nominees Pty Ltd. The assignment to the nominees acted to defeat any equitable interest that Ruth had in the property. This was affirmed in the 2006 Deed of Settlement[15], which stated that the Craigs had been appointed as Ruth’s nominees to take her interest in purchasing the property.[16] This assignation was for $1.00 consideration. There were no further conditions required to compensate Ruth for the appointment of the Craigs as Ruth’s nominees. Therefore following this Ruth had no equitable interest in the property.
[14] Exhibit P8.
[15] Exhibit P9.
[16] Exhibit P9, page1.
Despite the plaintiff having assigned her interest in purchasing the property to the Craigs, Ruth has sought a remedy of constructive trust against the defendants personally. The defendants did hold a legal interest in the property as the registered owners but only in their capacity as trustees of the Partnerz Trust which was the owner of the beneficial interest. They did not own any personal entitlement to the land. A constructive trust therefore cannot be claimed against Julian and Rebecca Craig as natural persons.
Even if I am wrong and a constructive trust did exist, the property has since been sold to an independent third party. This sale occurred by agreement between the plaintiff and the defendants under clause 2 of the Heads of Agreement[17]. In particular, the plaintiff Ruth had to withdraw a caveat held over the property in order for the sale to be finalised. The sale of the property to new registered owners under the active agreement of the plaintiff therefore removes any burden on the defendants as trustees of the property or any trust benefit that may be claimable by Ruth. The action of the plaintiff to facilitate this sale further acts to prevent any notion of proprietary estoppel that may have arisen.
[17] Exhibit P24.

Paragraph 53 of the Statement of Claim is a non sequitur. The plaintiff Ruth has been paid the balance that she was entitled to under the Heads of Agreement. There is no other way that the receipts arising out of the sale of the property in 2013 were used substantially to discharge the almost $600,000 debt owed to the secured creditor. That debt arose as a result of the arrangements under Exhibit P9, which were the successor of the arrangements between Ruth and Trojan under P8. There would have been no secured creditor apart from the fact that Ruth was prepared to enter into an agreement with Mr Trojan to pay him a very large amount of money under Exhibits P8 and 9. There is no basis therefore to make any declaration.
Clause 54 of part 2 is a nonsense. Ruth, Jason and Taj had no life tenancies because as Ruth plainly admitted in evidence, her right or entitlement to live on the property lasted only so long as the defendants remained the owners of that property in their capacities as trustees.
Paragraph 55 is also a non sequitur because there is no basis for a fiduciary relationship and paragraph 56 fails for the same reason. There is no basis to make any order under paragraph 52 because there is no legal requirement to require the defendants as trustees to pay anything for the injunctive right or for permanent loans.
I pause to address the question of personal belongings. Exhibit P27 is a document produced by the plaintiff entitled ‘Possessions Missing’. It comprises six pages and is dated August 2013. It was first seen by the defendants on or about that date. It had never been raised previously. It asserts that there are a host of belongings of mixed nature on the property which belong to Ruth and should be returned to her. I am satisfied on the evidence, with which Ruth readily agreed, that in so far as she claimed any material items, possessions, plant, equipment, personalty or anything of hers that existed on the property she was continually invited to come to the property, regain her possessions and take them from the property. Her evidence was that she refused each such invitation. Her reasoning was that she had an entitlement to live on the property come what may and therefore she would not (as her choice) come on to the property and retrieve her possessions.
Whether the possessions actually existed is not necessary for me to decide, albeit that I do not accept the document as identifying matters which would ground a claim by Ruth. However I am satisfied on all of the evidence that if possessions did exist then Ruth had sufficient time and opportunity to come and collect them. The evidence was that many trailer-loads of goods were taken away from the property by Jason, and Jason and Taj on behalf of Ruth, and I am also satisfied that there is no basis to make any such claim.
I have previously identified clause 15 of the Heads of Agreement. I refuse to make any declaration that clause 15 of the Heads of Agreement is set aside. There is no basis to do so. It has been substantially if not completely performed.
I reject paragraph 58 of part 2 of the pleading. I also find that there is no basis to make any order for equitable compensation, nor is there any basis to enter any judgment, or make an interest on damages award as claimed under paragraph 61. There is therefore no basis to make any order for interest under clause 63.
In my opinion the plaintiff has failed on all of her claims. The formal orders are:
1. The plaintiff’s action be dismissed
2. The defendant shall have her costs of the proceedings
3. I discharge the order for injunction made by Judge Tilmouth on 15 May 2012.
For the sake of completeness I identify that the defendant Julian Craig did not give evidence in these proceedings. Exhibit D43 of the proceedings is a letter from Dr Emma Manifold from the Stirling Central Health Clinic dated 17 September 2014 concerning Julian Craig. She informs in the letter that Julian Craig has a serious cardiac condition. He should not attend or be a witness at the trial and he had a cardiac arrest in November 2009 and he now has an implantable cardiac defibrillator. She informs that Julian Craig has had complications despite being implanted with the device which has led to further arrest episodes and hospitalisation. She then reports as follows[18]:
‘In addition Julian has had major depression and anxiety diagnosed during this time. The combination of anxiety and a court case I feel would be detrimental to both his physical and his mental health. It is possible that the stress of appearing at the trial may lead to a life threatening cardiac event.’
[18] Exhibit D43.
Albeit that Dr Manifold expresses her last view as a possibility, it is a very serious situation for a doctor to report to the court that such stress might lead to a life-threatening event.
In those circumstances I am not prepared to draw any Jones v Dunkel[19] presumption by the failure of Julian Craig to attend to the court and give evidence. Much was made by Ruth about the fact of the non-attendance of Julian Craig. I reject those criticisms. Having regard to the evidence before me, I am satisfied that little assistance would have been obtained from that evidence because I have relied substantially upon the documents which is the objectively available evidence on which I think the greatest reliance can be placed. This case involved a bitter family breakdown. Such cases are usually attended by intense emotions. This case is no exception. That position renders the objectively available evidence even more probative.
[19] (1959) 101 CLR 298.