Skiba and Westworth v Exton
[2011] VCC 1349
•29 September 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST - GENERAL DIVISION
Case No. CI-10-04000
| MARLENE ELIZABETH SKIBA and CAROL | Plaintiffs |
| EUNICE WESTWORTH (as executors of the estate of DOROTHY EUNICE EXTON deceased) | |
| v | |
| CHARLES EXTON | Defendant |
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| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 21 & 22 September 2011 |
| DATE OF JUDGMENT: | 29 September 2011 |
| CASE MAY BE CITED AS: | Skiba & Westworth v Exton |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1349 |
REASONS FOR JUDGMENT
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| Catchwords: | Advance of monies – Whether as a loan or gift – Onus of proof upon the plaintiff to establish loan – Presumption of advancement displaced by the evidence. |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C D Johnson | BTE Flynn Murone & Co |
| For the Defendant | Mr T J Sowden | Conlan Lawyers |
| HIS HONOUR: |
1 Dorothy Exton, who commenced the proceeding, died on 13 November 2010. She had three children. Her two daughters, Marlene Skiba and Carol Westworth, as her executors, took over the carriage of the action. Their brother, Charles Exton, is the defendant in the proceeding.
2 In early 2006, Mrs Exton sold her unit at Dolphin Heads Resort, Blacks Beach, Mackay, Queensland for $163,000. From the settlement monies, the sum of $151,540.69 was paid to Kinglake Produce Pty Ltd, the trustee of her son Charles’s family trust.
3 In the proceeding, the estate claims that the money was a loan by Mrs Exton to her son and must be repaid. Mr Exton denies that he received the money as a loan. He said that his mother intended he should have the money as a gift. Alternatively, he says in his Defence that, if the money was advanced as a loan, it was paid to
Kinglake Produce Pty Ltd and he has no personal responsibility to repay the money to his mother’s estate.
4 Two witnesses gave evidence at the trial, Charles Exton and Mr Gerard Conlan, the solicitor who acted on behalf of Mrs Exton and Mr Exton in a series of transactions in late 2005 and in 2006. Later, from 2009, when demands were made on behalf of Mrs Exton for repayment of the alleged loan, Mr Conlan and his firm have acted for Mr
Exton.
Onus of proof
5 It has long been settled law in Australia that where a plaintiff “sues for money lent and
money received by the defendant as trustee … the burden of proving the facts in
support of either one or other cause of action lies on the plaintiff” and the fact that
“the defendant denied these allegations and said the money was given to her as a gift
[does not mean] that the onus of proving there had been a gift lay on the defendant”
(Heydon v Perpetual Executors Trustees and Agency Co. (WA) Limited (1930) 45
CLR 111 at 113 per Gavan Duffy CJ with whom Rich, Starke and Dixon JJ agreed). A
later decision to the contrary of the English Court of Appeal in Seldon v Davidson
[1968] 1 WLR 1083 to the effect that, “the burden of proof lay upon the defendant of
proving that the money was given and not lent”, does not represent the law in
Australia.6 As Jenkinson J said in Joaquin v Hall [1976] VR 788 at 789, the decision in Seldon v Davidson “is contradicted by the decision of the High Court in Heydon v Perpetual
Executors Trustees and Agency Co. (WA) Limited (1930) 45 CLR 111; [1931] ALR 65. The authorities to which the [English] Court of Appeal were referred had been considered by the High Court but other authorities to which reference was made in the High Court do not appear to have been cited in the Court of Appeal. Nor does it
appear that recourse was had in the Court of Appeal to the principles of pleading
which the High Court applied in resolution of another question of onus of proof in
Young v Queensland Trustees Limited (1956) 99 CLR 560; [1956] ALR 939”.
Evidence
7 The farming property at Pheasant Creek near Kinglake has been in the Exton family for at least four generations. Dorothy Exton’s husband, Mr Arnold Exton farmed the property before his death in 1996. The farming operations were conducted by a
partnership of High Mountain Pty Ltd (the company of Mr Arnold Exton and later Mrs family trust.
8 By his will dated 3 July 1994, Mr Arnold Exton left a life interest in the farming property to his son, Charles Exton, provided that he continued to farm the property. Otherwise the property was to be sold and divided equally between his two daughters and his son. By the terms of the will, his wife, Dorothy Exton, was to be permitted to continue occupying the house and its surrounds on the farm property.
9 The will transferred Mr Arnold Exton’s shares in High Mountain Pty Ltd to his wife and expressed the deceased’s “expectation” that “the agricultural pursuits will continue in
partnership between this company and the company controlled by my son Charles Exton as it does at the time of making of this will until the death of the said Dorothy
Eunice Exton”. This was stated in the will to be so that the deceased’s wife “receives half the income from the farm activities during her lifetime”.
10 The will also referred to a “Queensland unit” which the deceased said was “owned by me with Charles”. After his death, the deceased’s share was to pass to his daughters. After the deceased’s death, the unit was sold.
11 Mr Charles Exton said in evidence that the unit in Queensland had been used for family holidays. In about 2004, he and his mother had discussed purchasing another property in Queensland. Mr Exton found a unit at Blacks Beach, near Mackay and his mother had purchased the unit for $80,000.
12 Mr Charles Exton was married with four children. His marriage ended in divorce and his former wife sought a property settlement. In 2005, Mr Exton agreed to pay her $250,000. He had a small sum from the sale of a property. He wrote to his sisters asking for a loan (to be secured by his interest in the farm property). They refused and Mr Exton said that his mother agreed to “give me the money”.
13 A number of transactions followed:
a. the Mackay unit was put up for sale; b.
in anticipation of the property being sold, the property was mortgaged to Mr Griffiths and Mr and Mrs Dohrmann to secure an advance of $160,000;
c.
the $160,000 was disbursed by Mr Conlan, primarily by the payment of $157,012.80 to Mr Charles Exton’s former wife to finalise the divorce settlement;
d.
the Mackay unit was sold with settlement anticipated to take place on 28 April 2006;
e.
Mr Charles Exton and his three adult children entered into an agreement with Mr Griffith and Mr and Mrs Dohrmann which effectively substituted as security for the $160,000 loan, Mr Exton’s (and his children’s) interest in the Pheasant Creek farming property for the mortgage over the Mackay property. This
allowed the discharge of the mortgage over the Mackay property, so that
settlement of the sale of the unit could proceed.
f. the sale of the Mackay unit settled and the net proceeds of sale (the sum of $151,540.69) was paid to Kinglake Produce Pty Ltd. g. Mr Exton said that he used the sum of $151,540.69 in the partnership business with his mother’s company, High Mountain Pty Ltd, to develop and commercially exploit water rights held by High Mountain Pty Ltd in respect of the faming property. 14 As a result of these transactions:
a.
Mr Exton received $157,012.80 of the mortgage advance from Griffith and the Dohrmanns in December 2005, which was paid to his former wife to complete his obligations under the divorce settlement;
b.
Mr Exton received $151,540.69 from the proceeds of the sale of the Mackay unit in May 2006. This sum was paid to Kinglake Produce Pty Ltd and, according to Mr Exton, was used for purposes associated with the farming property and the water rights pertaining to that property;
c.
Mrs Exton agreed that the proceeds of the sale of the unit should be paid to her son’s company;
d.
Presumably, Mr Exton (and his children) continued to be responsible for the repayment of the monies advanced by Griffiths and the Dohrmanns, initially upon the security of a mortgage over the Mackay unit but later replaced with the security of the interests of Charles Exton and his children in the farming property.
15 There was a degree of confusion about these transactions in the pre-action correspondence between the solicitors, in the pleadings filed in the proceeding and in the evidence of Mr Exton. Mr Conlan’s understanding was better although he said that he had refreshed his memory from his file before giving his evidence.
16 I am not sure that this confusion has any great significance. The events happened some years ago and, over a relatively short period, there were a number of related transactions. In my view, the determination of the issues in dispute will depend upon
an examination of the following matters:
a.
the general relationship between Mrs Exton and her son, particularly in the period from 2005 until she died and the evidence given by Mr Exton of conversations with his mother at the time of the transactions in late 2005 and early 2006;
b.
the documentary evidence of the transactions and the evidence of Mr Conlan of instructions received by Mrs Exton in relation to the transactions;
c.
evidence of other instances when money was received by Mr Exton from his mother;
d.
entries in the financial reports of the C A Exton Family Trust for the financial years 2006-7, 2007-8, 2008-9 and 2009-10 showing, as a liability to Mrs Exton, the sum of $151,040.69;
e.
dealings between Mrs Exton and Centrelink in relation to her application for a pension;
f.
correspondence between Mrs Exton’s solicitors, BTE Flynn Murone & Co, and Mr Conlan as solicitor for Mr Exton between April 2009 and June 2010;
g.
the articulation of the claim and the defences taken by Mr Exton in the various versions of the pleadings.
17 General relationship and conversations between mother and son – Mr Exton said the relevant conversations with his mother occurred over a number of months.
18 Mr Exton said that his mother told him that he “deserved a part of the unit” because his sisters had been left their father’s interest in the Noosa unit by his will. Because of Mr Exton’s matrimonial problems, he could not have the property in his name. Mr Exton said that his mother told him, “I will purchase the property and we will split the money later on if there is a need”.
19 Mr Exton said that his sisters had refused to allow him to borrow money secured by his interest in the farm so that he could pay out his former wife. His mother wanted to clear the matter up and had, “offered to sell the unit and give me the money”. Later, Mr Exton said in evidence that, “Mother gave me the money to pay out the debt to my former wife”. She offered to sell the Mackay unit so that he would get the money.
20 no discussion of a loanmany occasions
mother had said that she “wanted to help me and my children”. Mr Exton said that the
second loan was taken out to purchase equipment and to carry out investigations intoMr Exton said that there was “” and on “” his company, High Mountain Pty Ltd. Mr Exton said that he had discussed the transaction with his mother as an opportunity to borrow money to develop the business. Mr Exton was unable to say when the money was spent.
21 In relation to the payment of $151,540.69 to Kinglake Produce Pty Ltd, Mr Exton said that he could not recall the discussions he had with his mother. Mr Exton later said that, when the settlement moneys from the sale of the Mackay unit were paid to Kinglake Produce, his mother had instructed that this be done as otherwise it would have “put her over the threshold” and she would not have received a pension.
22 Mr Exton said that the family property was affected by the Black Saturday bushfires on 9 February 2009. His daughter’s house burnt down although Mrs Exton’s house was saved. Mrs Exton stayed with her elder daughter until power was restored to the
property. Mr Exton and members of his family stayed with Mrs Exton. During this
time, she told her son that she wanted him to talk to his sisters and said, “They have
more control than what you think”.23 Relations between Mr Exton and his mother and sisters deteriorated after June 2010. He said he only spoke to his mother on a few occasions and his sisters had threatened to sell him up, alleging that selling water was not “farming” but was a “mining” operation. Mr Exton had not been informed of the nature of the illness from which his mother had suffered until her death in November 2010.
24 Mrs Exton’s last will was made on 15 June 2009. Her estate was to be split between her daughters, and Mr Exton was required to repay $170,000. The will also stated that no provision was made in the will for Mr Exton “for a number of reasons including
the fact that he has received many financial benefits from me during his lifetime and
in particular my recent transfer to him of my shares, rights, title and interest in thecompany called High Mountain Pty Ltd which owns extremely valuable water rights ”. between the children and no mention was made of money owing by Mr Exton.
25 Documentary evidence of transactions and Mr Conlan’s instructions from Mrs Exton - Mr Exton said that the Mackay unit went on the market in June 2005. The settlement with his former wife was on 2 December 2005 and his mother mortgaged the property
so that he could pay out his former wife. Mr Exton said that Mr Conlan was aware that
the money “was a gift”.26 On 31 October 2005, Mr Conlan wrote to Mr Exton confirming “your advice that you
are seeking to obtain a loan of $150,000 for a relatively short period of time on the
security of the Queensland property”. Mr Conlan was unsure whether the unit was in
joint names or in the sole name of Mrs Exton.27 Mr Conlan said in evidence that the proposed lenders were clients of his although, in the transaction, he was acting for Mr Exton and his mother. Documents in November 2005 include a statutory declaration by Mrs Exton and a certificate by Mr Conlan
which indicate that the proposed mortgage loan was explained by Mr Conlan to Mrs Exton. Mrs Exton also signed a document confirming that the solicitors [Mr Conlan’s firm] “have offered me no advice either financial or legal in relation to my decision to
direct the mortgage proceeds to the benefit of my son Charles Alfred Exton and I
have decided I do not wish to obtain any independent advice in relation to thatdecision”. Mr Exton was a party to the mortgage, as a guarantor.
28 The mortgage was executed on 23 November 2005 to secure an advance of $160,000. This sum was due for repayment on 2 June 2006 with interest to be paid monthly in arrears. The interest payments on the mortgage were apparently made by Kinglake Produce Pty Ltd. The sum of $157,012.80 (the $160,000 advance less legal costs) was paid to Mr Exton’s former wife as part of her $250,000 property settlement.
29 In about March 2006, the Mackay unit was sold with settlement due on 28 April 2006. Mr Conlan wrote to Mrs Exton on 20 March 2006. The letter included this passage:
“The proceeds of sale will be paid to our Trust account and the sum secured by the mortgage is to be taken up as the loan by Mr Charles Exton. We therefore require a written authority from you to use the proceeds of the sale to fund the loan, which is being made to Charles. It would be appreciated if as soon as is reasonably
convenient you could forward to us an authority directing us to pay the proceeds of
sale of the Queensland property to your son, Charles Exton”.30 Settlement of the sale of the unit took place on 2 May 2006. The sale price was $163,000. After adjustments and certain payments, the balance of $154,502.54 was paid into Mr Conlan’s trust account. A file note recorded Mr Exton phoning the solicitors on 3 May to advise the bank account details of “Kinglake Produce” and a phone call to Mrs Exton on 6 May in which she “confirms payment to Kinglake Produce”.
31 When the Mackay unit was sold, Mr Conlan said he received “clear” instructions from Mrs Exton to pay the net proceeds to her son. Mr Conlan said that Mrs Exton had told him, “It is Charles’s money, he has borrowed it from those people”. She said the
money was to be used in the water business partnership.
32 Mr Conlan’s trust account statement recorded the transfer of the sum of $151,540.69 to Kinglake Produce on 4 May 2006. Mr Conlan confirmed the payment to Kinglake Produce in a letter to Mrs Exton on 5 May. The payment represented the balance at settlement of $154,502.54 less $2,246.20 (representing “tax invoice 3736 dated 3 May 2006 to Charles Exton for new loan documentation and expenses”).
33 Contemporaneously, a document was prepared by Mr Conlan recording a loan of $160,000 to Mr Exton from Griffiths and the Dohrmanns advanced on 3 May 2006 for a period of three years “for business related purposes”. Mr Exton’s three adult children were parties to the document as the security for the loan was the interest of Mr Exton and his children in the farming property.
34 Mr Conlan said that the intent of the document was to effect an exchange of security from Mrs Exton to her son and to discharge Mrs Exton’s liability under the mortgage over the property. If Mr Exton had not taken out the further loan, upon the sale of the Mackay unit, all the proceeds would have gone to pay back the mortgage loan taken out by Mrs Exton.
35 Other money transfers – On 4 January 2007, Mrs Exton gave her son a personal cheque for $5,000 payable to “Kinglake Produce”. Mr Exton said that the money was given to him at his request so that he could pay fuel costs. On 13 October 2008, Mrs Exton gave her son a personal cheque payable to “cash” for $10,000.
36 The amounts were repaid with interest on 22 June 2009 following correspondence between the solicitors - $6,208.33 by a cheque from Kinglake Produce Pty Ltd and $10,666.67 by a cheque from High Mountain Pty Ltd. By this stage, Mr Exton had
acquired his mother’s shares in that company.
37 Mr Exton said that, in relation to the $5,000, his mother had said, “Pay me back when you can”. He said that this was a business transaction of the sort that had occurred a number of times including during his father’s lifetime, where money was taken from
one account and put into another and then later repaid.
38 Financial reports of the C A Exton Family Trust – The balance sheet included in the financial report of the company for the year ended 30 June 2007 shows under the heading “Current liabilities”, the entry “D E Exton $151,040.69”. There was a similar
entry the following year.
39 Notes to the financial statements ($6,208.33), $144,832.36
for the year”, there is an entry under the heading “Trade and other payables” as aIn the report for the year ended 30 June 2009, in “”. In the following year, the entry simply reads, “D E Exton, Opening balance $144,832.36”.
40 Mr Exton could not say how or why this matter was recorded in the accounts. He said he did not know if his mother told the accountant that the money was a gift. In relation to the entries in the financial reports of the Family Trust, Mr Exton said, “I can’t
answer, you will have to ask the accountant”. Mr Exton gave a similar answer in
relation to the allowance of $6,208.33 as drawings in the 2008-09 accounts. He also
could not explain why the loan of $5,000 was not recorded in the Trust’s financial
report.
41 Dealings between Mrs Exton and Centrelink - Mr Exton said that in 2006 his mother. wanted to obtain a pension and be independent of the business. To obtain a pension, she could not be a director of a company, so in mid-2007, Mrs Exton assigned her interest in High Mountain Pty Ltd to Mr Exton.
42 Mrs Exton wrote an (undated) letter to Centrelink in response to a letter dated 1 November 2006. In the letter, Mrs Exton wrote, “I do not own or have any interest in
any real estate in Australia. I have enclosed a copy of the Settlement Statement of a
property that I owned jointly with my son. The property was purchased in my name asat the time my son was going through a divorce”. Mr Exton said that he did not know his mother was writing the letter to Centrelink although apparently his daughter typed the letter for Mrs Exton.
43 On 12 January 2007, Centrelink wrote to Mrs Exton noting, “You have provided
settlement documents regarding Unit 221 Dolphin Heads Resort [the Mackay unit] showing that you sold your share of this property for the amount of $163,000 on 2
May 2006. Please advise what you have done with the money”. Mr Exton said that $163,000 was the sale price of the unit and not her “share”. Mr Exton said that he had assisted his mother in her efforts to obtain a pension and in September 2006 had been nominated as an alternative contact for Centrelink.
44 Pre-action correspondence – On 24 April 2009, Mr Murone wrote to Mr Conlan on behalf of Mrs Exton. The letter contained the following passage:
“I am instructed that my client lent her son the total sum of $170,000.oo as follows:
(i) 2nd May 2006 the sum of $155,000.00 for the settlement of Charles divorce with his wife, (ii) 4th January 2007 the sum of $5,000.00 for fuel, (iii) 13th October 2008 the sum of $10,000.00”. 45 The letter asked for “repayment of at least $15,000.00” and a charge over Mr Exton’s interest in the farming property to “better secure this debt”. No response to the letter was received from Mr Conlan. Mr Murone sent a follow-up letter on 22 May 2009.
46 On 4 June 2009, Mr Conlan wrote as follows:
“We refer to your letter of 22 May 2009 and advise that Charles Exton is arranging to pay $15,000 to his mother as requested. He does wish to also pay interest and he is presently establishing the length of the loan for that purpose. Charles acknowledges the other debt and will deal with that, including interest, in due course”.
47 In responding on 4 June 2009, Mr Conlan said that he had instructions from Mr Exton to write in those terms (not denying the assertion that the money was advanced to Mr Exton by way of loan) even though he also had instructions from Mr Exton that “no
money was owing”. Mr Conlan said that consistently his instructions from Mr Exton were, to the effect that, “I don’t owe the debt but as my mother is not well, I will pay her if she wants the money and I would like you to get time for me to do so”. Mr Exton
also volunteered to pay interest.
48 On 18 June 2009, Mr Murone responded, advising that Mrs Exton was pleased that Mr Exton would be paying $15,000. The letter continued:
“Whilst it is accepted that your client is acknowledging the debt I note that you have not addressed the request for a charge which was contained in my letter of the 24th April, 2009”.
49 On 22 June 2009, Mr Conlan wrote disputing the necessity for a charge, but not disputing the debt to Mrs Exton. On 1 July 2009, Mr Murone responded indicating that the security was necessary because Mr Exton may incur third party liabilities. The letter continued:
If it was his intention to repay the loan it may not be necessary to lodge a caveat. in relation to entering into a time frame for the payment of the loan including any interest that he would propose to repay “”.
50 Mr Conlan did not respond to the letter. On 19 January 2010, Mr Murone wrote demanding “full payment of the loan immediately”, and threatening that otherwise he was “instructed to issue proceedings to recover the amount of the loan and interest”.
51 On 22 January 2010, Mr Conlan replied. The letter included the following passages:
“Repayment of Debt
Your client’s son is not able to comply with the request for settlement of the loan forthwith. Our client does not have the capacity to settle the debt nor to raise the money as he lacks the necessary security for a loan of this magnitude…
Our client instructs us that the debt arose from the sale of Mackay Queensland unit and he arranged for the capital gains tax of some $15,000 associated with the sale to be paid. He is not seeking any compensation in relation to the payment of that tax, however he believes that he is entitled to some consideration given the circumstances.
Our client is also prepared to pay interest on the debt which could be paid on a monthly basis at the ruling bank rate if that would assist your client”.
52 On 10 March 2010, Mr Conlan sent a further letter which read as follows: financial impasse he experiences with his sisters. Charles Exton is attempting to resolve the impasse and we enclose a copy of letter to the solicitors for his sisters.
Your client is asked to refrain from any action until such time as this offer is considered by his sisters. If the matter does proceed presumably the finance will also include the funds necessary to dispose of our client’s debt to his mother”.
53 Mr Conlan said that although Mr Exton insisted he did not owe the money, Mr Conlan did not review the circumstances of the payment made some years earlier, but relied on what Mr Exton told him and did not examine his file until later. Mr Conlan said that Mr Exton’s instructions were for him to deal with the matter in the way he did in the
response, referring to the debt and to Mr Exton’s inability to pay.
54 Mr Exton said that Mr Conlan’s letters were written according to his instructions as he did not want to have any ongoing disagreement with his mother and wanted to “keep the peace”. He said that there never was a debt. There was a “verbal agreement that I would provide for her when she needed anything”. Mr Exton said that he had paid
his mother’s phone and power bills and delivered firewood to her each day and up
until June 2009 had cared for her when she needed help through her illness.55 Pleading of the claim and defences – In the Statement of Claim filed with the writ, it was alleged that, “in or about May 2006 the Plaintiff agreed to lend to the Defendant the sum of $160,000.00”. The particulars of the allegation referred to discussions between mother and son in or about September 2005 “to the effect that the Defendant needed to borrow the money from the Plaintiff in order to payout his wife as a result of his marriage breaking down”.
56 The Statement of Claim referred to the plaintiff executing a mortgage and, on or way of a Mortgagor’s Authority”. The Statement of Claim also referred to the separate loans of $5,000 on about 4 January 2007 and of $10,000 on about 13 October 2008.
57 $160,000, denied “that the parties ever characterised the transfer as a loan” or that it
In his Defence dated 19 October 2010, Mr Exton admitted the transfer to him of Defence made similar allegations in relation to the further payments to him of $5,000 and $10,000. Mr Conlan said that he was “comfortable” with the defence.
58 The Statement of Claim was amended in April 2011 following Mrs Exton’s death to substitute her daughters as the plaintiffs. A Further Amended Statement of Claim was filed in July 2011. The pleading alleged that the sum of $160,000 had been borrowed by the defendant from the deceased “under a mortgaged backed loan taken out by her on the security of her [Mackay unit] property”, but said that the “Financial Report
63 Conlan had “offered me no advice either financial or legal in relation to my direction to
of the C A Exton Family Trust for the year ended 30 June 2007 [recorded] that there
was a current liability to D E Exton in the sum of $151,040.69”.
59 In his defence to the further amended claim, Mr Exton alleged that he had “made all interest payments in respect of” the mortgage loan taken out by his mother and that he had “raised the sum of $160,000 by a further loan” between himself and Griffiths and the Dohrmanns and that the funds from that second loan “were used to discharge
all moneys owing under” the mortgage loan taken out by his mother. The defendant
denied “ever receiving the sum of $151,040.69 or any part thereof”.60 A Third Amended Statement of Claim filed on 19 September 2011, deleted references to the payment to the defendant of $160,000 pursuant to the “Mortgage Authority”. It alleged that the defendant received the sum of “$151,040.69 from the proceeds of the sale of the deceased’s property” at Mackay. No defence was filed to this pleading. In his opening submissions, defence counsel, Mr Sowden said that the defendant’s defence was that the payment to him of $160,000 “was a gift”, or alternatively, that Kinglake Produce Pty Ltd had received the money and not the defendant.
Credibility
61 Mr Conlan acted for Mr Exton from prior to the events in 2005 and 2006. He, or his firm, has represented Mr Exton throughout the proceeding. Mr Conlan said that he had refreshed his memory from his file before giving evidence. His evidence was
essentially led by plaintiff’s counsel, Mr Johnson, taking him through selected
documents from his file.62 Mr Conlan confirmed Mr Exton’s evidence that Mr Exton had instructed him to write the letters, in response to Mr Murone’s, in the way he had. Mr Conlan said he was aware that Mr Exton denied any indebtedness to his mother. In relation to the critical issue of whether the payments made to Mr Exton were intended to be a gift or a loan, Mr Conlan’s evidence was inconclusive. Mr Conlan had been careful, at the time, to ensure that Mrs Exton’s instructions were appropriately recorded in documents, including confirmatory letters or file notes.
Mr Conlan had Mrs Exton sign an acknowledgment on 25 November 2005 that Mr Conlan took in this respect, there was apparently no contemporaneous record made by Mr Conlan as to whether Mrs Exton intended the payment of the mortgage proceeds for the benefit of Mr Exton’s former wife or the payment to Kinglake Produce Pty Ltd of the settlement monies from the sale of the Mackay unit were to be repaid or were to be treated as a gift.
64 Mr Exton gave evidence of conversations with his mother. He said that these conversations took place over an extended period. The evidence however was in general terms and the conversations were not detailed separately or with any identifying features, for example, when or where they occurred and whether any other person was present. No other witness was called (for example other members of his family) to support this evidence. Much of Mr Exton’s evidence appeared to conflict with contemporaneous documents including the financial reports of his family trust and the correspondence between solicitors. Mr Exton’s evidence of the various transactions was initially quite confused although when taken through the documents, he appeared to accept the chronology.
65 In his final submissions, Mr Sowden submitted that unfavourable inferences should be drawn as a result of the plaintiffs’ failure to call the solicitor, Mr Murone, to give evidence of his client’s instructions. This submission was misconceived. The correspondence written by Mr Murone set out his client’s instructions. The essential matters contained in those letters was not disputed by Mr Exton through his solicitors at the time. In fact, in a number of separate responses over a period of months, the solicitors’ responses accepted each of the critical assertions made by Mr Murone on his client’s behalf.
Presumption of advancement
66 The presumption of advancement is a legal presumption that “will operate to place
the burden of proof, if there be a paucity of evidence bearing upon such a relevant matter as the intention of the party who provided the funds… The operation of the presumption of advancement may be rebutted by evidence of the actual intention, at
the time … of the parent or other person who provided the … money. Evidence also
may be given to support the presumption of advancement” (Nelson v Nelson (1995)
1984 CLR 538 at 547 per Deane and Gummow JJ).67 This statement was made in a case where a mother paid the purchase price for a house transferred into the names of her adult children. It was held in the case that the presumption was rebutted by evidence of the mother’s intention to hold the beneficial interest herself.
68 The applicable legal principles in the present case are:
a.
the presumption of advancement applies in relation to gifts by a mother to her adult son although the gift “might be disadvantageous” to her (Mitchell v 700 Young Street Pty Ltd [2003] VSCA 32 per Ormiston JA at paragraph 2).
b. the presumption may be rebutted by evidence of the mother’s intention.
Conclusion
69 In this case, Mrs Exton unfortunately died before her case could be brought to trial. On her behalf, her executors seek to recover the payment of moneys made to Mr Exton on 4 May 2006 “from the proceeds of the sale of the deceased’s property” at Mackay. The third amended statement of claim identifies this payment as the money “lent by the deceased to the defendant”.
70 In December 2005, Mrs Exton mortgaged the Mackay property and provided the funds advanced ($157,012.80check) to enable her son to finalise the divorce settlement with his former wife. This mortgage advance was necessary because the Mackay property could not be sold quickly enough for the divorce settlement to be met from the proceeds of sale. The obligations of the mortgage loan was taken over by Mr Exton when he (and his children) entered into an agreement with the mortgagees to substitute their interest in the farm property as the security for the earlier advance.
71 When the sale of the Mackay unit was settled, Mr Conlan sought Mrs Exton’s instructions concerning the disbursement of the net proceeds. Mrs Exton agreed that the money should be paid, as her son had requested, into the bank account of Kinglake Produce Pty Ltd. Mr Conlan gave evidence that Mrs Exton told him that, “It is Charlie’s money, he has borrowed it from those people” and that the money was to be used in the water business conducted by the partnership between Kinglake Produce Pty Ltd and High Mountain Pty Ltd.
72 Mr Exton was confused in his evidence about the various transactions. He initially gave evidence that the money to be used for the water business had come from the loan he had arranged using the interests of himself and his adult children in the farm property as security.
73 Mr Exton’s confusion is understandable. It is likely that Mrs Exton had initially offered to assist him with his divorce settlement from the proceeds of the sale of the Mackay unit. The sale did not take place soon enough to payout Mr Exton’s former wife. Mrs Exton therefore obtained the mortgage advance. This was apparently arranged by
her son through Mr Conlan. The mortgage loan was for a short term and ordinarily
would have been paid out from the proceeds of the sale of the unit.74 In the meantime, Mr Exton determined that he needed further funds for the water business. He arranged the new mortgage agreement involving himself and his children. He received no money directly from that arrangement but instead received the net proceeds of the sale of the Mackay unit.
75 In the circumstances, the critical question is whether in respect of the money received by Mr Exton from the proceeds of sale of the Mackay unit, (offered by Mrs Exton to assist her son to pay the divorce settlement), the presumption of advancement in Mr Exton’s favour is rebutted by evidence that her intention in making the payment was to loan the money to her son rather than make a gift to him.
76 It is necessary to look at the context in which the money was advanced to Mr Exton, including the following matters:
a.
Mr Exton and his father had operated the farm at Kinglake for many years before Mr Arnold Exton’s death. After his death, Mr Exton and his mother operated the farm in partnership between Kinglake Produce Pty Ltd and High
Mountain Pty Ltd;
b. Over many years, the family members, when the need arose, were used to taking money from one account and putting it into another, and paying it back when they were able to; c. The advances of $5,000 made on 4 January 2007 and $10,000 made on 13 October 2008 were examples of the “business” arrangements. In relation to the loan of $5,000, Mr Exton said that his mother had told him, “Pay me back when you can”;
d.
Mr Exton continued to farm the Kinglake property and his mother lived in the homestead;
e.
Both Mr Arnold Exton and Mrs Dorothy Exton had, by their wills, expressed a general intention to pass on the family assets in equal shares to their children;
f.
Mrs Exton had relied upon Mr Exton for support and assistance concerning financial matters.
77 In relation to the payment of money to Mr Exton’s former wife and the payment of the balance of the sale proceeds of the Mackay unit to Mr Exton, it is clear that Mrs Exton wanted those monies to be transferred as her son directed. However, there is no
credible evidence that she intended that the payments would be gifts or that her son would not have an obligation to repay her so that she or her daughters would retain the benefit of those monies.
78 A gift, particularly of such a substantial sum and for a purpose personal to Mr Exton (to pay his former wife’s divorce settlement) would seem to be inconsistent with the relationship they had with the farming business being conducted through separate companies and trusts in a formal partnership with proper accounting.
79 In the absence of any evidence of specific identifiable conversations in which Mrs Exton expressed an intention to make a gift of monies to her son, or any written note or recollection by Mr Conlan that this was what she intended, there is a “paucity of evidence” bearing on the matter.
80 Subsequently, Mr Exton’s conduct was consistent with the monies having been advanced by way of a loan –
a.
over a number of years, the financial reports of Mr Exton’s family trust treated the payment as a loan from Mrs Exton. It is likely that this would not have happened if the nature of the transaction had been different or Mr Exton had been unaware of the treatment of the money in the accounts. In the absence of any corroborating or independent evidence, I do not accept Mr Exton’s statement that it was simply the accountant’s responsibility that the entries appeared in the financial reports.
b.
the pre-action correspondence between Mr Murone and Mr Conlan occurred over a period of many months. During this period, Mr Exton said that his relationship with his mother had broken down and he was, until her death, kept in ignorance of her serious health concerns. In the responses to Mr Murone’s demands for repayment of a “loan” and “debt”, Mr Conlan (who had been Mrs Exton’s and Mr Exton’s solicitor throughout the transactions) not only did not deny the allegations, but specifically admitted the debt on a number of occasions.
81 Both Mr Conlan and Mr Exton gave evidence that the responses were deliberate, but did not reflect the true position which was that Mr Exton never believed he owed money to his mother. He said that he did not wish to upset his mother and he told Mr Conlan to agree to whatever she demanded by promising to pay the “debt” and interest although he would need time to do so.
82 Without independent evidence supporting Mr Exton and Mr Conlan’s statements, I do not consider that I should act upon this evidence. Mr Conlan, in his responses, could have very easily reserved Mr Exton’s position, that he had no legal obligation to repay
the money, without “upsetting” Mrs Exton. Mr Conlan did not reply at all to two of Mr
Murone’s letters.83 On occasions, Mr Conlan responded to certain issues but not others raised by Mr Murone, and in some responses made gratuitous comments about Mr Exton’s conduct (for example, that he had paid capital gains tax in respect of the Mackay unit) which might easily have been omitted if Mr Exton was simply concerned to agree with what his mother said through her solicitor. Mrs Exton was alive when the proceeding was commenced. Mr Exton in his Defence disputed his mother’s claim in a way he said he felt constrained from doing earlier, in response to Mr Murone’s letters.
84 In the circumstances, I am satisfied that the presumption of advancement has been rebutted and that Mrs Exton’s intention was not that the money paid to her son should be treated as a gift but rather that it was a loan which would need to be repaid when she made a demand.
85 The money was paid to the bank account of the trustee of Mr Exton’s family trust. This was done at Mr Exton’s request and direction. I do not see that this alters in any way Mr Exton’s obligation to repay the money. His evidence was that his mother made a gift to him personally to enable him to meet his obligations to his former wife. I have rejected the conclusion that the payment of money should be regarded as a gift and have accepted that when Mr Exton received the money, he was aware that he had an obligation to repay the money when demanded.
Order 86
In the circumstances there will be judgment for the plaintiffs against the defendant for $151,540.69. I will hear further from the parties in respect of issues of interest and costs.
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Certificate
I certify that these 18 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 29 September 2011.
Dated: 29 September 2011
Caroline Dawes
Associate to His Honour Judge Anderson
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