Steiner v Strang

[2016] NSWSC 395

Supreme Court

New South Wales

Medium Neutral Citation:

Steiner v Strang [2016] NSWSC 395

Hearing dates:

19, 20, 21 November & 15 December 2014; 12 March 2015, 15 & 16 April 2015, 19 May 2015 (directions in chambers)

Date of orders:

12 April 2016

Decision date:

12 April 2016

Jurisdiction:

Equity

Before:

Slattery J

Decision:

The $1.2 million cheque the deceased wrote in April 2009 was a gift to her daughter and son-in-law. The deceased’s estate has no entitlement to long service leave from the deceased’s former employer under the Long Service Leave Act 1955. The estate owes the deceased’s daughter and son-in-law $15,000.

Catchwords:

SUCCESSION – action by residuary beneficiary on behalf of estate for the recovery of monies claimed to be owed to an estate – executors unwilling to bring action – deceased worked in a bridal couturier business for approximately 25 years before her death.

 

GIFTS – two and a half years before she died, the deceased wrote a cheque in favour of her son-in-law for approximately $1.2 million – whether the deceased gifted the cheque monies to her son-in-law and daughter, or whether the cheque monies were a loan to them from the deceased.

 

EMPLOYMENT - beneficiaries claim the deceased was entitled under the Long Service Leave Act 1955 to long service leave in respect of her employment with a corporate entity controlling this business in which entity she held a substantial shareholding interest - whether the deceased was a ‘worker” within the Act – whether the deceased worked continuously for the corporate entity – whether the deceased was entitled to long service leave.

RESTITUTION – the deceased requests her son-in-law to pay $15,000 to her son on account of the son’s then anticipated medical expenses – whether the sum of $15,000 is recoverable by the son in restitution from the deceased’s estate.

Legislation Cited:

Evidence Act 2005, s 78
Limitation Act 1969
Long Service Leave Act 1955, ss 3, 4(1), 4(2), 4(5) 4(9), 4(11), 7, 8, 12
Succession Act 2006, s 59
Uniform Civil Procedure Rules 2005, rr 6.20, 6.25 and 7.11(1)

Cases Cited:

Apand Pty Limited v Kettle Chip Co Pty Limited (1994) 52 FCR 474
A J Mills & Sons Proprietary Limited v Transport Workers’ Union of New South Wales (2009) 187 IR 56
David Securities Pty Limited and Others v Commonwealth Bank of Australia (1992) 175 CLR 353
Dilosa v Latec Finance Pty Limited (1966) 84 WN (Pt 1) (NSW) 557; [1966] 1 NSWLR 259
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Fabre v Arenalis (1992) 27 NSWLR 437
Fried v NAB (2001) 111FCR 322
Heydon v The Perpetual Executors Trustee and Agency Company (W.A.) Ltd (1930) 45 CLR 111
Bouts v Ellis (1853) 17 Beav. 121, 51 ER 978
George v Howard (1819) 146 ER
1089
Ho v Powell (2001) 51 NSWLR 572
Jones v Dunkel (1959) 101 CLR 298
McCausland v Surfing Hardware International Holdings Pty Ltd [2013] NSWSC 902
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
O’Donnell v Reichard [1975] VR 916
Payne v Parker (1976) 1 NSWLR 191
Pink v Pink [1912] 2 Ch. 528
Schellenberg v Tunnel Holdings Pty Limited (2000) 200 CLR 121
Schmierer vTaouk [2004] NSWSC 345
Scott v Pauly (1917) 24 CLR 274
Shum Yip Properties Development Pty Ltd v Chatswood Investment and Development Co Pty Ltd (2002) 40 ACSR 619; [2002] NSWSC 13
Steele v Mirror Newspapers [1974] 2 NSWLR 348
Steiner v Strang [2014] NSWSC 1250
Voce v Deloraine [2012] NSWSC 1187
West v GIO (NSW) (1981) 148 CLR 62

Category:

Principal judgment

Parties:

Plaintiff: John Steiner
First Defendant: Kenneth Ross Strang
Second Defendant: Jason Tang
Third Defendant: Steiner Wilson & Webster Pty Ltd (ACN 003 140 823)
Fourth Defendant: Wayne Porter Webster (Junior)
Fifth Defendant: Lesley Margaret Webster
Sixth Defendant: Kelly Lee Midgley
Seventh Defendant: Robyn Gai Webster

Representation:

Counsel:
Plaintiff: P.H. Blackburn-Hart SC; R. Jefferis
Third to Sixth Defendants: M.K. Meek SC; R. Potter

  Solicitors:
Plaintiff: Gells Lawyers
First & Second Defendants: Jeremy Neil Glass, Glass Goodwin
Third to Sixth Defendants: DLA Piper Australia
Seventh Defendant: Gregory Hilliard Smith, GHS Legal

File Number(s):

2014/10747

Publication restriction:

No

Judgment

1. When she died at the age of 88 in October 2011, Dorothy Steiner was still a creative and dynamic bridal couturier. Her personal touch inspired a decades-long expansion of the “Abbey Bridal” and “Maggie Sottero” businesses in the Australian and US bridal fashion markets. She worked a six day week until just two years before her death and only slowed down a little at the age of 86, when she decided to attend the Abbey Bridal showrooms in Sydney on Mondays to Fridays.

2. Dorothy’s bridal fashion genius also brought her financial success. At her death she left a substantial estate. But she also left a number of family disputes among her three children, her son John and her daughters Robyn and Lesley. These proceedings resolve just three of those disputes: one, an issue about a cheque she wrote two and a half years before her death; the second, an issue about her entitlements to long service leave for 25 years of employment with the Australian company through which the Abbey Bridal business was operated; and the third, a small but unresolved issue about whether or not Dorothy’s estate should reimburse her son-in-law, Wayne Webster, in the sum of $15,000 for his expenditure at her request. A number of other issues in the proceedings have resolved.

3. The first issue arises out of events that took place on 2 April 2009. That day Dorothy signed a cheque for $1,227,941 made out in favour of her son-in-law, Wayne Webster, as payee, and she gave it to him. He banked it on 9 April 2009 and it cleared shortly thereafter. Mr Webster and his wife Lesley, one of Dorothy’s daughters, contend in these proceedings that Dorothy gifted that sum to them. But Dorothy’s son John, the plaintiff and a residuary beneficiary of her estate contends that the amount was a loan to Wayne and Lesley, which is still owing to the estate and should now be repaid to it.

4. The second issue concerns whether Dorothy was entitled to long service leave. From 1986 she worked for the Australian corporate entity that owned “Abbey Bridal”, Steiner, Wilson & Webster Pty Limited (“SWW”), a company in which Dorothy herself held a substantial shareholding interest. The residuary beneficiaries contend on this second issue that SWW owes Dorothy’s estate monies that accrued from 1986 for Dorothy’s benefit during her lifetime on account of long service leave entitlements under the Long Service Leave Act 1955 for her service to SWW as an employee. But SWW says Dorothy did not qualify as a “worker” within the Long Service Leave Act and in any event had not worked continuously for SWW since 1986 and as a result SWW never incurred any obligation to pay her any entitlements under the Long Service Leave Act.

5. The third issue relates to a sum of $15,000 that Wayne says that he advanced to John at Dorothy’s request shortly before her death. Wayne says that he is entitled either to restitution from Dorothy’s estate for this sum paid on her behalf, or to reimbursement of the sum from John. But John disputes that Wayne should be reimbursed this sum either from the estate or by him.

6. Dorothy’s two executors, Kenneth Ross Strang and Jason Tang, were unwilling to pursue these various claims on behalf of her estate. So Dorothy’s son, John, one of the estate’s two residuary beneficiaries commenced these proceedings as sole plaintiff to have the issues determined. Ordinarily claims on behalf of an estate against third parties should be maintained by executors, not beneficiaries. But the plaintiff relies on the principle restated in Fried v NAB (2001) 111 FCR 322 at [189] (Fried) that a beneficiary may initiate proceedings, which will be properly constituted if the executors are joined, as indeed they are here. The same structure for the proceedings would also appear to be authorised by the combined effect of Uniform Civil Procedure Rules (UCPR) rr 6.20, 6.25 and 7.11(1).

7. Mr P. Blackburn-Hart SC and Mr R. Jefferis, instructed by Gells Lawyers, represented the plaintiffs. Mr M.K. Meek SC and Mr R. Potter instructed by DLA Piper represented the third to sixth defendants. Despite the intensity of this family conflict the lawyers on all sides efficiently conducted the proceedings to minimise unnecessary disputes.

8. Many of the parties and witnesses in these proceedings come from the one family. They referred to one another by their first names. Throughout these reasons, without intending any disrespect to them the Court will do the same and will usually refer to them by their first names. The deceased was known as “Dot” to her family. She is referred to as “Dorothy” in these reasons.

Some Further Procedural Background

9. The plaintiff, John Steiner, commenced these proceedings by Summons on 13 January 2014. He now maintains the proceedings against seven defendants (collectively referred to in these reasons as “the defendants”): the executors (the first and second defendants), Wayne Porter Webster and Lesley Margaret Webster (the third and fourth defendants), SWW trading as “Abbey Bridal” (the fifth defendant), Kelly Lee Midgley, Lesley’s daughter, (the sixth defendant), and Robyn Gai Webster (the seventh defendant).

10. The executors filed a submitting appearance. All the other defendants were represented and contested the plaintiff’s claims. One side issue about the role of the executors can be dismissed. Citing Fried the plaintiff sought to explain his commencement of the proceedings as a result of the executors delay in the administration of the estate thereby forcing his hand. The four active defendants denied there had been any delay on the part of the executors. Based on the statements of principle in Fried, Mr Meek SC did not ultimately submit that if the executors were not guilty of any delay that the plaintiff was somehow disentitled from bringing the proceedings. It was accepted that the proceedings were properly constituted.

11. The proceedings were not the subject of pleadings. The issues for decision would have been clearer with pleadings. On the other hand, the co-operative approach of the lawyers on both sides overcame the lack of pleadings.

12. The present proceedings are one of three sets of current proceedings involving aspects of Dorothy’s estate. John commenced other proceedings in April 2012 the Equity Division of the Court seeking orders for family provision under Succession Act 2006, s 59. John’s sister Robyn, the seventh defendant, commenced similar proceedings shortly afterwards. The hearing of those proceedings has been deferred, pending determination of the issues in these proceedings, which will determine the extent of Dorothy’s estate.

13. In the family provision proceedings the executors cross-claimed against John, contending that he was indebted to the estate in the sum of $881,000 in respect of a loan the deceased allegedly made to him prior to her death. Sackar J determined that cross-claim in favour of the executors in September 2014: Steiner v Strang [2014] NSWSC 1250.

14. John and Robyn have also been active litigants in the United States. They have commenced two sets of proceedings in Utah. In the first US proceedings John and Robyn seek the appointment of an independent personal representative to investigate potential claims in relation to certain of Dorothy’s assets in the USA. In the second US proceedings John and Robyn seek to challenge a July 2008 transaction in which by two share sale agreements Dorothy sold her shareholding interests in the corporate entity holding her US business, Maggie Sottero Designs LLC (“MSD”) to family members. In those proceedings John and Robyn claim that this sale transaction was entered into at an undervalue.

15. Throughout these reasons the two corporate entities that own the Australian and US businesses will be distinguished from the businesses and business names themselves. The Australian corporate entity will be referred to as “SWW” and its business as “Abbey Bridal”. The US corporate entity will be referred to as “MSD” and its business as “Maggie Sottero”.

16. The terms of the July 2008 transaction in MSD’s shares also feature in these reasons as part of the background to the payment of the $1,227,941 cheque made out and given to Wayne on 2 April 2009. The July 2008 share sale transaction was Dorothy’s final transaction concerning the ownership of the US businesses before her death. The two July 2008 share sale agreements reflect a decision on her part to exit and be paid over time for her ownership of shares in MSD and therefore her control of the Maggie Sottero business in the US but nevertheless to retain her shareholding in SWW and her involvement with Abbey Bridal in Australia. The terms of the July 2008 agreements are examined in more detail later in these reasons.

17. The wider history of Dorothy’s family and her role in the Abbey Bridal and Maggie Sottero businesses closely informs the issues presented for decision.

Dorothy, her Family, Abbey Bridal and Maggie Sottero – 1986 to 2013

18. This section of the Court’s reasons contains a detailed narrative of the Court’s findings. This narrative represents the Court’s complete findings as to what happened, recording uncontested facts and deciding all relevant contested matters. It does not always refer to all the evidence that the Court considered and rejected.

Dorothy Steiner Establishes Abbey Bridal

19. Dorothy established Abbey Bridal in 1986. From the first she did everything in the business. And she played an active role as a director and shareholder, working closely with the board of SWW, the company that owned the business.

20. She managed and built the business at an operational level. After her husband’s death in 1982, Dorothy went to live with her daughter Lesley and son-in-law, Wayne Webster in the US state of Utah. It was clear from the way Wayne gave evidence that he admired his mother-in-law and that he welcomed Dorothy living with Lesley and him.

21. Dorothy was living with Lesley and Wayne when Abbey Bridal was established. But in 1987 Dorothy decided to move back to Sydney from Salt Lake City, Utah. She was Sydney-based by the time Abbey Bridal opened its first retail shop in Sydney. Eventually Wayne and Lesley followed her to Sydney at the end of 1990. They too commenced work in January 1991 with the expanding SWW.

22. By the time Lesley and Wayne returned to Australia, Abbey Bridal had started to open its own stores across the country. Wayne helped this expansion. He established retail stores in Melbourne, Perth and Brisbane, negotiated for leases, decided on shop fit outs, and engaged and trained store managers.

23. But during the late 1990s, Lesley, Dorothy and Wayne redirected their focus away from retail outlets to wholesaling Maggie Sottero branded bridal dresses to third party retail bridal outlets. From the late 1990s wholesaling bridal dresses in Australia, and expanding the US Maggie Sottero sales outlets was the core of Dorothy and her family’s business activity. Most of Abbey Bridal’s own retail stores had closed by the end of May 2001. The Melbourne store closed in June 2005.

24. After these Australian store closures Abbey Bridal was left with only one retail outlet, the Sydney store in the Dymocks Building in George Street. At the time of the hearing Abbey Bridal was selling wholesale to approximately 22 other retail shops around Australia.

Corporate Structure – Abbey Bridal, Maggie Sottero and Maggie Designs

25. Dorothy incorporated her Australian business, SWW in 1986 and her US business in 1997. Dorothy and her husband had three children, a son John and two daughters, Robyn and Lesley. When Dorothy established Abbey Bridal, her principal entrepreneurial collaborators were her daughter Robyn and Robyn’s husband Larry and another US-based couple, Scott and Kristine Wilson.

26. Lesley and Wayne joined the board of SWW in 1992 and acquired the Wilson’s shares. They became increasingly close to Dorothy and to the heart of the business’ operations.

27. In 1997 together Dorothy, Wayne, Lesley, Robyn and Larry decided to establish Maggie Sottero Designs LLC, which was based in Utah. Each of the five of them held a 20 per cent interest in this US company, MSD. Both SWW in Australia and MSD in Utah were involved both in the wholesaling and retailing of wedding dresses.

28. During the period 1998 to 2005 Robyn and her husband Larry gradually withdrew from SWW. In 1998 Robyn sold her shares in SWW to Lesley, Wayne and Dorothy and she ceased to be a director in July of that year. Larry ceased his directorship in March 2005 and is no longer a shareholder. From 2005 Dorothy, Wayne and Lesley were the principal shareholders in SWW. Dorothy then held 92 of its total issued share capital, Wayne held 66 shares and Lesley 67 shares.

29. In 2002 a separate purely design focussed entity, Maggie Designs Pty Limited (“Maggie Designs”) evolved from the operations of Abbey Bridal. Abbey Bridal’s retail and wholesale businesses principally operate from level 2 in the Dymocks building in George Street, Sydney, where it conducts a shop. Maggie Designs operates from level 5 in the same building. Prior to 2002 Abbey Bridal primarily sold wedding dresses created by other designers. Maggie Designs was established after Abbey Bridal decided to create its own designs in its own design department. To implement this plan Ms Kym Bournes, a manager with Abbey Bridal, moved from her existing role with Abbey Bridal and became the Chief Executive of Maggie Designs.

30. Both Maggie Designs in Sydney and Maggie Sottero in Utah produce bridal dress designs. Maggie Designs collaborates on the final form of these designs and co-ordinates their manufacture under the direction of Kelly Midgley, Lesley’s daughter, together with Lesley and Kym Bournes. The dresses are now manufactured by independent contractors in China in accordance with Maggie Designs specifications.

31. Abbey Bridal is a substantial business. By the time of the trial the evidence was that it would have on average 700 to 800 dresses available at any one time in its Sydney store, where the business can accommodate both walk-in casual customers and brides who wish to make advance appointments.

32. Kelly Midgley, Dorothy’s granddaughter, Lesley’s daughter, became the driving force behind Maggie Sottero in Utah and the distribution of Maggie Sottero designed bridal dresses in the United States. Once the family’s enterprise had developed its corporate dual structure in Australia (SWW) and in the US (MSD), it was necessary for Dorothy, Wayne and Lesley to divide their time between the two continents. Whatever the marketing reasons for this pattern may have been, the family tended to work and do business by following the summer, living in the northern hemisphere mid-year and the southern hemisphere at the turn of the year.

Dorothy Thrives in the Business

33. But even when she was living in Utah, Dorothy was closely involved in the Abbey Bridal business in Sydney. Kym Bournes says, and I accept, that Dorothy often spoke to her and gave her directions about the operation of the business from the US. Only two days before she died Dorothy was telling Ms Bournes that she and Kelly had been “picking dress styles together over the past few days”.

34. Dorothy was devoted to the people of the business. She remembered the names of the children and grandchildren of her staff. She knew all the code numbers of the dresses that Abbey Bridal sold. She thrived on her personal interaction with customers in the show room.

35. Twice a year in Sydney in February and August, Abbey Bridal conducted showings for Australian wholesalers. Dorothy never missed a February showing in Australia. Dorothy was usually not present for the August showings, as she was then attending similar shows for Maggie Sottero in Utah. But despite her absence from Australia, she required daily detailed reports from Ms Bournes about the showings and all the styles that were selling in Sydney.

33. Dorothy, Lesley and Wayne talked constantly about their business. I accept Wayne’s evidence that they discussed it to and from work in the car, at lunchtime, and at home. Dorothy wanted to know everything about business operations and Wayne says, and I accept, that he made sure that she did. Wayne worked closely with Dorothy for almost 30 years. I accept his evidence that she never even hinted at retiring.

34. Dorothy’s enthusiasm for the success of Abbey Bridal ensured she kept long working hours. In the early developing years of the business Dorothy, Wayne and Lesley worked six days a week from 8am to 4pm and on Thursday nights until 9pm. They were always at the store from opening to closing. But as more senior staff were able to take over aspects of the business, Lesley and Wayne began to reduce their working hours. But as Wayne concedes, and Ms Kym Bournes confirms, Dorothy would still go into Abbey Bridal’s shop and offices even without Lesley and Wayne. She was still working six days a week until two years before her death.

35. I accept Wayne’s evidence about Dorothy’s close personal oversight over all the financial aspects of the business, “My mother-in-law knew where every penny she had was, what it was doing, who was doing what with it and she had control. She decided what was to be done.” I accept this not just because it was a compelling and clear part of Wayne’s evidence, but it also accords with evidence of other highly credible witnesses such as Ms Bourne and Ms Dorita Trostel, the Abbey Bridal accounting manager. Acceptance of this part of Dorothy’s character is an important factor in assessing the reliability of Wayne’s evidence in relation to the April 2009 cheque issue. At first blush some of Wayne’s evidence about the April 2009 cheque seemed improbable and his account was troubling to the Court in the ways that are identified below. Indeed some of these aspects of his narrative remain a puzzle. But the Court ultimately finds the main structure of what Wayne says to be an acceptable account of events, partly because of Dorothy’s single-minded personal control over her financial affairs and partly because the overall course of the events and the testimony of other credible witnesses, does favour Wayne’s version.

36. These reasons now turn to the three questions for decision, the April 2009 cheque claim, the long service leave claim and the dispute about the $15,000 payment to Wayne.

Question 1 -The April 2009 Cheque Claim

40. The plaintiff, John, did not participate in any of the events concerning Dorothy’s drawing of the April 2009 cheque to Wayne in the sum of $1,227,941 and its subsequent delivery to Wayne. This was entirely a transaction between Dorothy, Wayne and Lesley, and principally between Dorothy and Wayne.

41. John says that the April 2009 cheque was a loan from Dorothy. Wayne contests this. But John’s lack of involvement in the events meant that the evidentiary contest was confined to John accepting certain uncontested facts and testing Wayne’s version of events that the cheque was a gift. John submits that Wayne’s evidence that the cheque was a gift should not be accepted. He asks the Court to infer that the value represented by the cheque must have been a loan and must now be restored to the estate.

42. But as the Court’s analysis below shows, it is John, the plaintiff, not Wayne, who always bears the onus of proof that the cheque payment was a loan by Dorothy to Wayne and Lesley. And in my view, he has failed to establish that the cheque was a loan.

Wayne’s Version

43. Wayne’s version of the events surrounding the drawing of the April 2009 cheque is that it arose out of Dorothy’s July 2008 sale of Dorothy’s share capital in MSD to Lesley and Kelly Midgley. Wayne says the cheque was Dorothy’s gift to reimburse Lesley and him for deposits they had caused to be paid to her on that sale. I accept his evidence that this transaction was a gift, not a loan.

44. In July 2008 Dorothy, who was then a shareholder in MSD (holding 200 voting units and 1800 non-voting units in MSD) agreed to sell all these units, described in the sale agreements as Dorothy’s “membership interest “ in MSD. She agreed to sell half her membership interest (100 voting units and 900 non-voting units) to a trust Lesley controlled, “The LM Webster Irrevocable Trust”. She agreed to sell the other half of her membership interest (100 voting units and 900 non-voting units) to a trust Kelly Midgley controlled, “The KL Midgley Irrevocable Trust.” Before 2 April 2009 these trusts had each paid an amount of US$417,500 as the initial payment, or deposit, on this July 2008 purchase of all Dorothy’s membership interest in MSD. These deposit payments had each been made to Dorothy on 30 October 2008.

45. Wayne says that on 2 April 2009 Dorothy told him in conversation that she wanted to reimburse him for these payments, variously called in the evidence “deposit” monies or “down payments” and that Dorothy asked him what the total amount of that deposit payment was in Australian dollars, so that she could write a cheque to him in Australian dollars to reimburse him for the full amount of the deposit. His affidavit account of the conversation gave some of its surrounding circumstances. More detail emerged later in his cross-examination.

46. Wayne said in his principal affidavit on this issue that Dorothy said to him on 2 April 2009 shortly before this cheque was written words to the effect “I want to write you a cheque to reimburse you”. He says that he responded to her saying “Part of it is mine and Lesley’s share, so if you reimburse me it should only be for Kelly’s share”. By this he meant that he and Lesley had funded the share of their daughter, Kelly Midgley, in the acquisition of her half of Dorothy’s share capital of MSD and were happy to be reimbursed for that but that they were resisting reimbursement so far as the acquisition of their own share in MSD was concerned. His recollection is that Dorothy responded to this saying “I want to pay it all. I need to know how much it is. I am going to reimburse the total figure”.

47. Wayne says that after this conversation with Dorothy, he instructed Mr Jason Tang, SWW’s accountant, to obtain that day’s A$/US$ Australian exchange rates, so that the reimbursement Dorothy wanted to make could take place in Australian dollars. The A$ equivalent of US$835,000 at foreign exchange rates current at 2 April 2009 was A$1,227,941. Mr Tang confirms that Wayne asked him to obtain the A$/US$ exchange rate for that day from their bank, Westpac, which he did. Wayne says that on that day after the figure was calculated Dorothy “issued a cheque to myself and Lesley for this amount”. He explained in more detail in cross examination how Dorothy actually issued this cheque.

48. Wayne also indicated in his principal affidavit that Dorothy’s executors had not pursued him for the recovery of this amount, nor had they sought to assert against him or Lesley that the sum of A$1,227,941 should form part of Dorothy’s estate.

49. For the reasons which follow I accept Wayne’s account of these conversations with Dorothy. Some of the issues between the parties require a preliminary analysis of Dorothy’s sale of her membership interest in MSD to Lesley’s trust interests and Kelly’s trust interests.

The Two July 2008 MSD Membership Interest Purchase Agreements

50. As indicated, on 25 July 2008 Dorothy personally entered as seller into two agreements for the sale of her membership interests in Maggie Sottero Designs LLC, or MSD. These agreements were each entitled “Maggie Sottero Designs LLC Membership Interest Purchase Agreement”. Each agreement recited, as was the fact, that MSD operates from Salt Lake City Utah as a Utah Limited Company and that at the time of the sale, Dorothy held 200 voting units and 1,800 non-voting units in MSD. Under each of the two July 2008 sale agreements Dorothy sold 100 of her voting units and 900 of her non-voting units to one or other of the two identified trusts. One trust was controlled by Lesley “The LM Webster Irrevocable Trust” (Lesley and Mr Harlan Schmitt, a consultant accountant in Utah, were its trustees). Kelly controlled the other trust “The KL Midgley Irrevocable Trust” (Kelly and Mr Harlan Schmitt were its trustees).

51. Both the Membership Interest Purchase Agreement with Lesley’s trust and the Membership Interest Purchase Agreement with Kelly’s trust were in identical terms. Each agreement provided for Dorothy’s complete withdrawal from membership of MSD and for a market appraisal of Dorothy’s membership interest in MSD. The agreements provided that: Dorothy as seller would retain no ownership interest in MSD (clause 1); the purchaser would acquire all rights and obligations previously enjoyed by Dorothy as a member (clause 6); MSD had engaged an independent appraiser to value Dorothy’s membership interest as at 31 December 2006 and the appraiser had determined that Dorothy’s membership interest to be sold under each agreement had a market value at the appraisal date of US$3,795,500 with the appraisals to be adjusted if necessary for changes of market value closer to the sale date; and the parties accepted the risk of fluctuations in the market value of the MSD membership interest after settlement (clause 5);

52. Clause 6 of the Membership Interest Purchase Agreements dealt with the Sale and purchase. The purchase involved each purchasing trust making instalment payments plus interest to the seller, Dorothy, for a term of seven years and six months but subject to a condition that the seller must be “alive on the scheduled payment date and if the seller dies before any scheduled payment purchaser’s obligation to make such payment shall not come into existence” (clause 6.1). Although the fair market value of Dorothy’s membership interest being sold under each contract was agreed at $3,795,500 the purchase price under each contract was the greater sum of US$4,175,000 because (it was declared) the seller bears some risk of the obligation terminating, due to Dorothy’s death, prior to full payment. These figures were subject to certain adjustments for ascertaining the fair market value of the business, as at 31 December 2006, at the time of settlement (clause 6.1).

53. Thus, a central feature of both agreements was that each purchaser trust’s obligation would disappear on Dorothy’s death. In submissions it has been suggested that this transaction structure was to minimise death duties on Dorothy’s estate in the US.

54. The purchase price under each agreement was to be paid in two parts: a 10% deposit and the balance secured with a promissory note. The purchaser “shall make an additional down payment of US$417,500 to seller and shall execute a separate note for the balance of the purchase price”. Indeed a Self-Cancelling Instalment Note for US$3,757,500 (being $4,175,000 less US$417,500) was issued the same day, 25 July 2008. As each agreement provided (clause 6.2) the note for each agreement bore interest of 3.5 per cent per annum, calculated quarterly and provided that on the 15th day of the first month of each quarter (April 15, July 15, October 15 and January 15) for a period of 30 quarters, beginning with October 2008 and ending with April 15, 2016, that the purchaser shall pay the seller US$140,773.22; the obligation being subject, as was the agreement, to the vendor being alive at each of those payment dates.

55. Finally, settlement of the agreements was to take place on 25 July 2008 (clause 9); following the settlement of each agreement the seller entered into various covenants for the seller, Dorothy to be retained as an independent contractor with MSD (clause 7) and for the seller not to compete with MSD (clause 8).

56. Both agreements were signed before a notary public. Dorothy’s voting and non-voting units being transferred for the benefit of Kelly were assigned to Kelly Midgley and Harlan P. Schmitt, as trustees for the K.L. Midgley Irrevocable Trust. The other voting and non-voting units were assigned to Lesley M Webster and Harlan P. Schmitt, as the trustees of the LM Webster Irrevocable Trust.

57. Each agreement contained a schedule showing how much was payable on completion and on each of the quarterly periodic payment days of 15 October, 15 January, 15 April and 15 July thereafter. The table identified the early payments due for the first year and up to 15 July 2009, as follows:

(a)    25 July 2008 – US$417,500

(b)   15 October 2008 – US$120,000

(c)   15 January 2009 – US$20,000

(d)   15 April 2009 – US$20,000

58. The agreement (in paragraph 6.2) describes the first payment of US$417,500 as an “initial down payment”, as it was described by some of the witnesses in their evidence.

Wayne Expands His Version

59. A more detailed account of the circumstances of Dorothy’s alleged gift emerged in Wayne’s oral evidence. But in chief and in cross-examination, his narrative raised some puzzling questions. But the Court concludes it can rely upon his evidence. Wayne came across to the Court as a well-controlled, intelligent man who put considerable thought into answering the questions put to him and who was a witness of substantial truth. I accept his account as reliable, despite some of its unusual features.

60. The circumstances in which Wayne says that Dorothy announced the gift to him and Lesley of the money and then gave the April 2009 cheque to him were unusual. Wayne says that on 2 April 2009 he and Dorothy (and no one else) were walking together from the Abbey Bridal’s shop in the Dymocks building down George Street Sydney to purchase lunch at the Myer Food Court. He says that the whole of their relevant conversation about why the April 2009 cheque was being offered, took place on their journey to collect lunch on foot. They walked out of the building together to buy lunch and bring it back to the office.

61. The whole lunch journey took about 15 to 20 minutes. The only topics of conversation he could remember from the journey were this gift and what they were going to have for lunch. That is probably understandable as it was a routine journey for him and Dorothy. The conversation about the gift did not take more than 5 minutes. Of this subject the only conversation Wayne could recall is Dorothy saying to him that she wanted to make the gift and him saying back to her that he could understand if she wanted to reimburse Lesley and himself for Kelly’s share but not for Lesley’s share, to which Dorothy replied “I am going to pay you back all, the total figure” without giving any further reasons.

62. I accept that Dorothy was a self-reliant and determined woman, who was very energetic for her age. But announcing to her son-in-law, rather than her daughter Lesley with whom she was also very close, the gift of $1.22 million whilst walking down George Street seems somewhat odd. This was by far the largest gift that Dorothy had ever made to Lesley and Wayne. Dorothy’s other gifts to Wayne or Lesley had only been small amounts of money that had been given with Christmas cards. Why a remarkably business-like 85 year old woman (as she then was) would decide to broach such a topic for the first time on a bustling Sydney lunchtime pavement is difficult to fathom. But I accept that this is just what Dorothy did.

63. Wayne understandably says, given the size of the gift, that he was “stunned by it”. He recalls, and I accept, that he tried to talk Dorothy out of it. That would be the natural reaction. Wayne described George Street at lunchtime as “pretty hair raising”.

64. Wayne says that when he arrived back at the Abbey Bridal office that he and Dorothy went their separate ways. Wayne says, and I accept, that he went straight to see his wife Lesley and told her about the gift. Meanwhile Dorothy went back up to her own office on the second floor to have her lunch with other staff members, as she often did. Wayne says he spoke to Lesley on the fifth floor. Lesley was apparently also stunned on hearing the news about the cheque that Wayne conveyed to her, with him reaffirming how emphatic her mother was about the gift, I accept that Lesley said back to Wayne “if that’s what mum wants, do it”. Dorothy had already conveyed her decision in the matter to Wayne. There seemed little point in arguing. Wayne cannot recall Lesley immediately going down to speak to her mother to share this news with her and thank her for such a large gift. Maybe she did. I accept Wayne’s evidence that he cannot remember her doing so.

65. Wayne said that without Dorothy’s emphatic insistence he was resistant to the idea of this gift, and especially in respect of the membership units in MSD being sold to Lesley, as distinct from those being sold to Kelly.

66. When asked about Lesley’s reaction to this news, Wayne explained that Lesley had the same initial resistance to her mother’s gift. But Lesley seems to be resigned, saying to Wayne “well, you know mum, if that’s what she wants, do it”. Wayne cannot recall Lesley having an immediate interest in ascertaining: how insistent her mother was; whether this is what she really wanted; or to ensure that her mother had been warmly thanked. Wayne disclaimed knowledge of whether Lesley actually went and discussed the gift with Dorothy. He says that he went downstairs to arrange the cheque, which I accept he did.

67. But Wayne’s limited recall of what Lesley did that afternoon is not improbable. Wayne was keen to have the cheque drawn to follow Dorothy’s instructions, which took a little time. He probably did not notice what Lesley was doing. And at the time of hearing he was a witness in his 70s trying to recall detail of events five years earlier. Some imperfections in his memory are to be expected.

68. A puzzling part of Wayne’s evidence was his lack of memory of any other later reaction from Lesley about this news. Lesley, Wayne and Dorothy all lived at the Killara house together. They travelled to work daily together in the same car. When they were in Utah they lived in a single household together. Moreover, they saw a great deal of each other at work. The very day the cheque was written, 2 April 2009, the three of them went home together in the car. Wayne could not recall any conversation about the gift on that journey or at home that night. Nor could he recall any later expressions of gratitude on Lesley’s part about the generosity of the gift. When he was asked about why he had not recalled such expressions of gratitude, he said:

“I haven’t said anything like that because I honestly do not remember very well, and I can make an assumption and feel I was quite right that something was said, but I don’t know what else to tell the Court other than – I assume yes, that something was said.  Do I remember what was said?  I do not.”

69. In my view he was a careful witness and as he did not remember he was not prepared to speculate.

70. There was a contest about the exact terms of Dorothy’s gift. When Wayne gave oral evidence in chief on the subject of what Dorothy had said to him as they walked along George Street, his account was that Dorothy said, “I want to reimburse you and Lesley for the monies you paid”. His oral version was that she then clearly commanded him what to do, saying “it needs to be converted into Australian dollars so I can write you a cheque”. He then recalls responding “Well Dot, half of that was – one of those cheques was Lesley and I. I don’t see that you can reimburse us as far as I am concerned. You don’t need to reimburse us for anything but if you do, it would be just Kelly’s portion of it, which we took care of because she didn’t have the money”. He then said that Dorothy concluded the issue “very firmly, which she had a way of doing” by saying to him “I want to pay for the whole thing. Find out what it converts to in Australian dollars as of today, so I can write you a cheque”. He said that he responded, “Okay, I will”.

71. Wayne’s version of the conversation, with Dorothy saying that she wanted “to pay for the whole thing”, rather suggests that Dorothy wanted to fully reimburse Lesley and Wayne for all the payments they had made up to that time under the July 2008 sale agreements. Indeed when clarification was sought from Wayne during his evidence in chief he seemed to think, erroneously as it turned out, that the two US$417,500 deposits (for each agreement) were the only payments that had been made by 2 April 2009. But two more contractual instalments under each of the July 2008 agreements had in fact been paid by the 2 April 2009: $120,000 on 15 October 2008 and $20,000 on 15 January 2009.

69. By the time Wayne came to be cross-examined about this issue his evidence was clearer, corresponding more closely to what he had originally said in his affidavit: that Dorothy “wanted to reimburse the deposit monies”. But by then he had been cross-examined about the extra payments and was aware of the importance of the distinction and the need to have clarity about exactly what amount was being reimbursed. Unless Dorothy had clearly explained that it was only the deposits that were to reimbursed, his oral version of her instructions was open to the construction that she was intending to reimburse Lesley and Wayne for all the payments that had by then made under the July 2008 agreements.

70. Wayne’s final account clarified what Dorothy meant in conformity with his affidavit: she wanted to reimburse Lesley and him only for the deposits that had by then been paid. John submits that it is difficult to see why she would wish to do that and not also reimburse them for other payments that were to be made during the life of the agreement. But in my view, there is a good explanation as the more detailed analysis later in these reasons of wider aspects of these transactions shows. Every account of Dorothy in her last years was that she was an intelligent, perceptive woman, well in control of events and having good reasons for everything that she did. She seems never to have been asked or to have volunteered why it was only the deposits that she was going to fund by way of gift in this way. If Dorothy was saying “I just want to pay you back” the deposits in full, she never explained her reasoning and it never subsequently seems to have come up in discussion. But I accept Wayne’s evidence that is what she wanted to happen.

71. Wayne appeared to the Court to be essentially respectful and courteous. In my view, he did not wish to be impertinent in the face of his mother-in-law’s generosity. Questioning Dorothy was not something that people did. This gift was made in April 2009. Dorothy lived until October 2011. Further payments were made under the July 2008 agreements right up until the time of her death. Dorothy never raised the subject of reimbursement of these other amounts during the remaining two and a half years of her life. I accept that for her own reasons she decided to reimburse Lesley, Wayne and Kelly just for the deposits and not for the other payments that would fall due before her death.

72. And it can be accepted that on 2 April 2009 Dorothy proposed to fund only the deposits paid under the July 2008 agreements. This is the reasonable inference to be drawn from the fact that she did give instructions for the drawing of a cheque for the Australian dollar equivalent of US$835,000 (being 2 x US$417,500) that day. Both the cheque that was drawn, the evidence of Mr Jason Tang who did the calculation, and Wayne’s evidence all show that a calculation was done that day converting US$835,000 into A$1,227,941 at the then current exchange rates. Wayne says, and I accept, that he looked at a copy of the July 2008 agreements, and worked out the US dollar amount that needed to be converted into Australian dollars. He then says, and I accept, that he spoke to Jason Tang who in turn spoke to the commercial manager at Westpac to give him the exchange rate for that day. Once Wayne had the figure I accept that he must have gone down to Dorothy’s office and spoken to her about this subject. Some such conversation must have taken place in order for the cheque to have been written that day, as I accept that it was. Wayne says that within about an hour or so after Jason came back to him with the correct figure he went to see Dorothy. He says that he gave her the calculation and then Dorothy said “fine” and took out her cheque book from the right hand drawer of her desk.

73. Dorothy undoubtedly signed the 2 April 2009 cheque. No one disputes that it bears her signature. The rest of the cheque, apart from Dorothy’s signature, is written in Wayne’s handwriting: the date, the amount in words, the amount in figures and the payee. The payee is simply identified as “W.Webster jr”. The cheque butt is also filled out in Wayne’s handwriting with the date and the amount. But the addressee is described on the cheque butt slightly differently, as “W & LESLEY”. The cheque butt contains no other notation as to the purpose of the payment and does not describe it as either a gift or a loan.

74. How did the cheque come to be in Wayne’s handwriting? Wayne’s explanation for this was that Dorothy had said to him that because the numbers were so big and she had trouble making sure she wrote the big numbers out accurately that she asked him to go ahead and fill out the cheque. I accept that this is what happened. Even for Dorothy this was a large cheque. She was 85. She wanted to make sure that it was exactly the right amount. And as a result of her long family association with Wayne she completely trusted him to get the figures right.

75. The evidence traversed at some length Dorothy’s cheque writing habits. I accept Wayne’s evidence that in the six months prior to April 2009 Dorothy was in the habit of writing her own personal cheques and that she did so subsequent to that day. Wayne regarded this 2 April 2009 cheque as a “personal cheque”. He said that he was not in the habit of writing out cheques for her on her personal account. But over a period of 30 years or so she “may have done it a dozen of times or so”. In my view this was one of those occasions.

76. Wayne’s evidence as to Dorothy’s cheque writing habits is somewhat in tension with another reliable witness. But the differences do not ultimately matter. Wayne said that Dorothy did not write out business cheques. Yet Kym Bournes, the general manager at Abbey Bridal said that Maggie had an interest in running the whole business, not only the design side but the financial side, and that when she spoke to Ms Bournes from anywhere in the world, as “she’d [Dorothy] wanted to know everything”.

77. Kym Bournes was an excellent witness. I accept all her evidence. Ms Bournes joined Abbey Bridal as a shop floor junior at the age of 15 in 1994. She worked her way up from there, consulting with brides, assisting with bridal dress fittings and then taking on more responsibility until she assumed the role of general manager in 2006. Dorothy had clearly inspired Ms Bournes, who took great personal pride in working closely with Dorothy. She says, and I accept that, she saw Dorothy write cheques for both business and personal purposes. Ms Bournes was insistent that Dorothy “would write the cheques out and she would also have the address, have the actual envelope that would have her writing on the outside of the envelope as well”. And Dorothy would write on the cheque before she signed it. She was less clear about Dorothy’s habit in relation to cheque butts.

78. I prefer Kym Bournes’ evidence to that of Wayne Webster on the subject of whether Dorothy wrote out business cheques. Kym Bournes’ capacity to observe Dorothy’s daily business habits is beyond question. I accept Ms Bournes’ evidence that she and Dorothy “were extremely close” and that she spent “every lunch break with her” and that even when they weren’t working side by side, there was a great deal of interaction between them.

79. But there is room for both versions. Ms Bournes’ evidence does not go so far as to say that Dorothy would be unlikely to ask Wayne to write a substantial personal cheque for her.

80. It was not in contest that the cheque butt was in Wayne’s handwriting. Neither side put the original book of cheque butts into evidence. So it is not possible to ascertain from that source any pattern in the way that Dorothy filled out cheque butts.

81. Wayne gives an account, which I accept, of his filling out the cheque butt. Wayne described Dorothy as having “a very poor habit” of writing cheques and not making any notation on her cheque butt. He says that he felt that this transaction was sufficiently important that “it should be written down”, so he says “I wrote it down” on the cheque butt. He says he said to Dorothy “here Dot, you need to write this down in the cheque book, I’ll write it down for you so that it’s there” and he just entered something that he “judged was appropriate”.

82. But he did not record the transaction as he fully understood it, which was as a reimbursement of the deposits for the July 2008 sale agreements as a gift from Dorothy. He was in charge of recording this transaction on the cheque butt without clear instructions from Dorothy. Yet he did not take the opportunity to record it the way he now says that it worked: as a gift from her. The record he made of the transaction is equally consistent with it being a loan, which he and Lesley were obliged to repay to Dorothy in due course. But to criticise him for failure to enter this in the butt as a gift is, in my view, to misuse the benefit of hindsight. He did not expect this issue would arise years later. What he entered then is still consistent with his present case.

83. The cheque is made out only to Wayne. He explains this as consistent with the way that the household account was operated for their jointly occupied East Killara home. He explained that Dorothy’s habit with the household account was for her to write out a cheque addressed to him. That is understandable for petty expenditure. But the April 2009 cheque was not paid into the household account. It was actually paid into Wayne and Lesley’s interest bearing account with the Commonwealth Bank of Australia. It is difficult to see why the April 2009 cheque should follow a habit for an account into which no-one expected it would be paid but that is what Dorothy authorised.

84. I accept that from April 2009 until Dorothy’s death she did not ask Wayne (or Lesley in Wayne’s presence) for the return of the funds paid in this cheque.

After Dorothy’s Death

88. There the matter rested until after Dorothy died. Within 12 months of Dorothy’s death John and his sister Robyn began to ask questions about a number of transactions in Dorothy’s estate, including this cheque. Mr Blackburn-Hart SC for John, challenged the veracity of Wayne’s version, partly because of the alleged halting way in which he submits Wayne’s version of events emerged. Mr Blackburn-Hart SC’s submission is: that if Wayne were telling the truth he is unlikely to have forgotten (as he appears to have done for a period) the single largest gift that Wayne and Lesley would have ever received from Dorothy; and that, as soon as John and Robyn raised the issue, Wayne should have been in a position to explain the cheque in the terms that he has now sought to explain its provenance to the Court. Instead he says Wayne did not declare what the cheque was for, when it must have been obvious to him, given the circumstances of the gift that Wayne describes. Mr Blackburn-Hart SC’s submission about Wayne’s delay in responding to John and Robyn’s enquiries about this transaction is, he contends, far more consistent with Wayne realising that the cheque was not a gift, and that Wayne was reluctant to explain its true purpose as recording a loan.

89. There was some delay in Wayne’s final explanation emerging. But such delay as there was and the reasons for it quite explicable and is corroborated by Ms Bournes’ evidence.

90. Before June 2014, when Wayne filed his affidavit with his explanation of the April 2009 cheque, John’s solicitors, Gells, were pressing Messrs Glass, Goodwin solicitors, who acting for the estate, for an explanation of this payment by cheque. Wayne’s explanation for the payment did not emerge quickly. Inquiries about the April 2009 cheque had been taking place since June 2013. On 27 June 2013 Glass, Goodwin sought information from DLA Piper about the cheque. On 15 August 2013 DLA Piper responded, saying they were instructed that Mr Jason Tang and Mr Schmitt were conducting investigations into the matter. A Gells letter of 2 August 2013 asked about the amount of $1,227,914 “Does Wayne Webster owe this amount to the estate?” Mr Glass then followed up his request for information about the April 2009 cheque on behalf of the estate on 8 August 2013, enquiries that were continued on 26 August. In September 2013 Mr Jeremy Glass asked Wayne and Lesley’s solicitors, Messrs DLA Piper Australia for an explanation for the cheque: Mr Glass said on this subject to DLA Piper “is your client unable to provide any explanation at all?”

91. DLA Piper responded on instructions on 9 October stating the then declared limit of Wayne’s recollection as follows:

“Mr Webster is unable to recall the circumstances in which the cheque for the sum of $1,227,941 was issued in April 2009. We are instructed that it was not unusual for our clients to pay expenses on behalf of the Deceased and for the Deceased to reimburse our clients at a later date. Given the precise nature of the amount of the cheque, Mr Webster believes the payment would have related to the reimbursement of an expense paid by our clients’ on behalf of the Deceased. Our clients are continuing with their investigations, however, some of our clients’ records are maintained here in Sydney. Our clients will be returning to Sydney on 30 December 2013 and will review these records upon their return. We will revert to you as soon as we have any additional information”.

92. The DLA Piper response was helpful and reasonable. But it did not reveal that Wayne was either able, or prepared, to share any of his recollections of the payment of the cheque with his solicitors.

93. But when this inquiry came in, Wayne was in the United States. He says that he needed to find the banking records to ascertain the amount and date of the cheque and to discover its purpose. Wayne says, and I accept, that he had an assumption in his own mind as to what it was probably for and that he asked Ms Bournes to see if she could find the cheque or perhaps a copy of it in the house in Killara whilst he was away in the United States. But he says that she could not find what she wanted. Wayne says that his object was to try and get hold of the cheque itself and to “figure out what it was”, believing that that might “spike the memory”.

94. Wayne already had much information about the cheque. Mr Glass by then had a copy of the cheque butt and had forwarded it to DLA Piper on 25 September. The cheque butt is informative. It at least it identifies Wayne and Lesley as the recipients of the cheque, which according to Wayne was a more accurate description of the real transaction than the form of the cheque itself, which was just addressed to him.

95. It is indeed somewhat strange that the cheque butt alone did not jog Wayne’s memory. But Wayne says, and I accept, that when he finally saw the cheque “I visualised myself standing at [Dorothy’s] desk”. I accept that Wayne did not appreciate what this cheque was for, when he saw the cheque butt. But once Wayne had seen the cheque, which seems to have been when he got back from the United States in January 2014, he was not very quick to share until his June 2014 affidavit what he now says is the true explanation of the payment. But there was already deep family distrust by this time and it is perhaps not surprising that Wayne and his legal advisers decided to keep their powder dry on this issue until his first affidavit was filed.

96. Ms Bournes confirmed Wayne’s story that she had gone to the Killara house in January 2014 when Wayne was in the US to look for what she thought was a particular cheque number but was unable to find it. The Bank of course would probably have had the original cheque. Glass, Goodwin already had the cheque butt which had been shown to Wayne and Lesley through their own lawyers. Although Ms Bournes was uncertain as to when she undertook this search for Wayne, the evidence is generally consistent with his account of asking her to look for the cheque butt in January 2014. And Exhibit C contains a series of emails that show that Wayne still seemed genuinely unsure in January 2014 of what the cheque was for and wanted a search for it to be undertaken.

97. Once Wayne was in possession of the cheque, probably by late January this year, I accept his memory was jogged. He would by then have had all that he needed to declare what had happened on 2 April 2009. I do not think he is to be criticised because his version does not go into evidence in these proceedings until June.

Lesley Webster fails to give Evidence – the Jones v Dunkel Inferences

98. Wayne Webster’s wife Lesley did not give evidence. Her failure to do so was important in assessing some of the evidence in relation to the April 2009 cheque claim.

99. Wayne professed to justify her absence on the basis that Lesley “has been severely affected by these proceedings” and that she had “found the entire proceedings [both in New South Wales and in Utah] highly stressful and emotional” and that this in turn “had negative impacts on her health”. But this contention was not supported by any medical evidence to justify Wayne’s opinions. Such lay opinions are admissible under the Evidence Act 2005: Evidence Act, s 78. They have long been admissible at common law.

100. Over objection the Court admitted evidence from Wayne about Lesley’s mental state and general health, on the basis that he could offer direct observations about his perceptions of his wife’s state of health. Although not medically qualified, he did just that. But such lay opinions alone are of minor persuasive value in determining whether Lesley was unable for good medical reasons to come to Court to give evidence.

101. Wayne Webster’s evidence was that in addition to “being extremely mentally and emotionally affected” by this litigation that his wife Lesley had been “admitted to hospital on occasions and has been diagnosed with various conditions, including a now persistent high blood pressure”. He professed that his overall concern had been to protect Lesley’s health and wellbeing and he concluded that for these reasons “it is the position of both Lesley and myself that it is our desire for Lesley not to give evidence in these proceedings”. His affidavit concluded with a single sentence “Lesley will not attend the hearing”. The trial commenced on Wednesday, 19 November 2014. The affidavit containing this information was sworn in the proceedings on 20 November 2014.

102. The Court cannot infer on the basis of such evidence that Lesley has any medical condition sufficiently debilitating that it would prevent her from attending Court to give evidence. Medical evidence would be required to justify that conclusion. Statements that Lesley has high blood pressure and suffers stress are an insufficient basis for determining that she cannot come to court. These stated conditions are all treatable by modern medicine. The Court will offer many facilities to accommodate witnesses who have difficult medical conditions. No application for a special hearing to accommodate Lesley was made. No affidavits from her were proffered.

103. And Lesley had access to medical advice. She saw her usual general practitioner, Dr Raymond Choy, twice in the fortnight before Wayne gave evidence. Dr Choy had been her medical practitioner for nearly 30 years. But despite being contacted for the purpose he did not provide either an affidavit or medical certificate as to her unfitness to give evidence.

104. On Wayne’s own account of the events relating to the writing of the April 2009 cheque, Lesley was a party to an important conversation when he says he told Lesley of Dorothy’s gift on the afternoon of 2 April.

105. The plaintiffs contended that the defendants’ failure without explanation to call Lesley to give evidence should found a Jones v Dunkel inference against them.

106. The law as to the inferences the Court may draw from the failure by a party to call a witness is clear. The unexplained failure by a party to call a witness may in appropriate circumstances lead to the inference that the uncalled evidence would not have assisted that party’s case: Jones v Dunkel (1959) 101 CLR 298 at 308, 312 and 320-1 (“Jones v Dunkel”), and see Dilosa v Latec Finance Pty Limited (1966) 84 WN (Pt 1) (NSW) 557; [1966] 1 NSWLR 259, at 582 (“Dilosa”). The appropriate circumstances exist where it was within the power of the party to tender the evidence which is not tendered. The “significance to be attributed to the fact that a witness did not give evidence in the end will depend upon whether, in the circumstances, it is to be inferred the reason why the witness was not called was because the party expected to call him feared to do so”: Fabre v Arenalis (1992) 27 NSWLR 437 at 449-450. But there are circumstances in which it has been recognised that a Jones inference is not available, or if available, it is of little significance, because for example, a party is not in a position to call a witness, a party is not sufficiently aware of what the witness would say, or the witness has a reason for not telling the truth or refusing to assist: Fabre v Arenalis (1992) 27 NSWLR 437.

191. In conclusion on this issue, Wayne’s payment of the $15,000 of his own and Lesley’s money to John was at Dorothy’s request and the fact that Wayne was making this payment was confirmed back to Dorothy, so she could be assured that her instructions had been carried out. I accept the payment was made. In these circumstances Wayne is entitled to restitution from Dorothy’s estate for monies paid at her request: David Securities Pty Limited and Others v Commonwealth Bank of Australia (1992) 175 CLR 353. Wayne and Lesley, the third and fourth defendants, should therefore have either judgment against the estate in the sum of $15,000 or a declaration that they are entitled to that sum. It may be that is all that is now required in this case, as the estate has the funds and there is no dispute that any sum found due will be paid in accordance with the Court’s findings.

192. According to Wayne, Lesley was herself involved in some of the events that resulted in Wayne’s payment of the $15,000 to John at Dorothy’s request. Although Lesley did not give evidence and could be expected to do so on behalf of herself and to support her husband’s case, she did not. I infer that her evidence would not have assisted Wayne’s and her case on this issue. But I am nevertheless prepared to accept Wayne’s version over John’s version for the reasons already stated.

193. John does not actively contest Wayne’s contention that he paid the two amounts of $15,000 and $10,000 to John. Wayne and Lesley submitted that whether or not the Court accepts that any of these sums are due from the estate to Wayne and Lesley that, in the interests of bringing finality to all the disputes among these parties, the Court at least should order as part of final relief that John pay Wayne the sum of $10,000.

194. In the result of the Court’s findings the dispute between the parties about the payment of the $10,000 that Wayne made to John should also be resolved but it settled in the course of the proceedings and a ruling upon it should not be required. But if the parties wish the Court to make specific orders in relation to the resolution of that or any of the other disputes about the estate’s liabilities that were originally the subject of these proceedings then the Court reserves liberty to apply so the proceedings may be relisted for that purpose.

Conclusions and orders

209. In summary the Court concludes as follows in relation to the three issues for decision. The plaintiff has failed to establish that the April 2009 cheque was a loan from Dorothy to the third and fourth defendants, Wayne and Lesley Webster. The plaintiff has also failed to establish that any long service leave entitlements were due from the fifth defendant SWW trading as “Abbey Bridal” to the late Dorothy Steiner under the Long Service Leave Act at the time of her death. And finally the Court has found that the estate is liable to reimburse Wayne Webster in the sum of $15,000 arising out of the payments he made to John at Dorothy’s request, just before Dorothy’s death. Declarations will be made to this effect. If a judgment for Wayne for the $15,000 against the estate is required the matter can be relisted under the Court’s grant of liberty to apply.

210. Questions of the calculation of interest may arise in relation to the $15,000 that the Court has found the estate owes Wayne. If there is any issue about the calculation of this interest that will be covered by the liberty to apply that the Court has granted.

211. A number of the items originally in dispute were abandoned in the course of the proceedings. It is unclear whether their abandonment has any cost consequences that are not adequately covered by the costs orders which the Court is making, or whether their abandonment requires a special costs order. But should a special costs order be required with respect to these items or for any other reason, the opportunity to argue for such an order will be available as part of the Court’s general grant of leave to the parties to advance submissions about special costs orders.

212. In the result therefore the orders of the Court will be:

1. Declare that the late Dorothy Steiner gave a cheque in the sum of A$1,227,941.00 to the third defendant Wayne Webster on 2 April 2009 as a gift to himself and the fourth defendant Lesley Webster, and not as a loan;

2. Declare that nothing is due under the Long Service Leave Act by the fifth defendant, SWW to the first and second defendants as the executors of the estate of the late Dorothy Steiner;

3. Declare that the first and second defendants are liable as the executors of the estate of the late Dorothy Steiner to pay to the third defendant the sum of $15,000 (together with interest as agreed or assessed) by way of restitution to the third defendant for the third defendant’s payment of that sum to the plaintiff at the request of the late Dorothy Steiner in October 2011;

4. Summons otherwise dismissed;

5. The plaintiff shall pay the third, fourth, fifth and sixth defendants’ costs of the proceedings;

6. Any party seeking a special costs order should apply by motion for such order within 7 days and the Court will make any such motion returnable before the Court at 9.30am on Wednesday 20 April 2016 in Court 8B or such other time as is mutually convenient to the parties and acceptable to the Court; and

7. Grant liberty to apply.

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Decision last updated: 12 April 2016