Sweeney v Glenmore Meat Co. P/L and Ors

[2004] NSWSC 845

CITATION:	Sweeney v Glenmore Meat Co. P/L & Ors [2004] NSWSC 845
HEARING DATE(S):	02/09/04, 03/09/04, 07/09/04
JUDGMENT DATE:	8 September 2004
JUDGMENT OF:	White J
DECISION:	1. Amended cross-claim dismissed; 2. Cross-claimant to pay the cross-defendant's costs of the cross-claim; 3. Exhibits to be returned after 28 days unless a notice of appeal or applicaiton for leave to appeal has been filed in the meantime.
CATCHWORDS:	Cross-claim heard as separate issue - Claim to enforce alleged oral agreement for transfer of shares after death of shareholder - Issues of credit - No question of principle.
CASES CITED:	Plunkett v Bull (1915) 19 CLR 544 Watson v Foxman (1999) NSWLR 351
PARTIES :	Isabel Hendry Sweeney v Glenmore Meat Co. Pty Ltd & Ors
FILE NUMBER(S):	SC 3054/03; 3055/03; 3056/03
COUNSEL:	Cross-Defendant: A McInerney & N Owens Cross-Claimant: R D Marshall
SOLICITORS:	Cross-Defendant: Glasheen & Quilty Solicitors Cross-Claimant: John Walsh & Partners

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Wednesday, 8 September 2004

3054/03 ISABEL HENDRY SWEENEY v GLENMORE MEAT CO PTY LTD & Ors
3055/03 ISABEL HENDRY SWEENEY v GLENMORE MEAT CO PTY LTD & Ors
3056/03 ISABEL HENDRY SWEENEY v GLENMORE MEAT CO PTY LTD & Ors

JUDGMENT

1 HIS HONOUR: This is the trial of a cross-claim brought in an oppression suit which was commenced by the cross-defendant as plaintiff in respect of the affairs of two companies called Glenmore Meat Co Pty Ltd and Glenmore Meat Co (Wholesalers) Pty Ltd.

2 The plaintiff is the widow of the late John Grant Sweeney who died on 20 April 2003. She is the Executrix and sole beneficiary of his will.

3 At his death, Mr Sweeney held 47 and a half per cent of the issued shares in each company. The cross-claimants, Mr Frederick George Newton and Fred Newton (Holdings) Pty Ltd, own 47 and a half per cent of the issued shares in those companies.

4 The cross-claimant, Mr Fred Newton, claims that he is entitled to have the shares owned by the deceased transferred to him.

5 On 21 June 2004, Austin J ordered that the cross-claim be heard as a separate issue.

6 During his life, Mr Sweeney was the Managing Director of the Glenmore Meat group of companies. Glenmore Meat Co Pty Ltd carried on and carries on business as a wholesaler and retail butcher and distributor of meat and allied products. It carries on its business from a factory in Glebe which is owned by Glenmore Meat Co (Wholesalers) Pty Ltd.

7 The remaining shareholder in the two companies is Mr George Newton who holds the remaining five per cent of the shares. Mr George Newton is Mr Fred Newton's cousin and an accountant for the companies. He is also a director and company secretary of them.

8 Mr Fred Newton and Mr Sweeney were business partners, in the colloquial sense, for 30 years until Mr Sweeney's death.

9 On 27 May 1992 Mr Sweeney, Mr Fred Newton and Fred Newton (Holdings) Pty Ltd entered into a deed described as a Deed of Pre-Emption to deal with their respective shareholdings in the event of their deaths. The deed is complex. At the risk of over-simplification, it can be summarised by saying that each of Mr Newton and Mr Sweeney agreed to take out and maintain policies of life insurance over the lives of the other. At the time the Deed was made such policies were in place, having been taken out in 1991 with the Prudential Assurance Co Limited.

10 By the Deed, they each agreed not to encumber or dispose of their shares. They each gave an option to the other that in the event of one of them dying before what was defined as the "Benefit Expiry Period" the survivor should have the option to purchase the shares of the deceased, (or Mr Newton and Fred Newton (Holdings) if Mr Newton died first), for a price which equalled the benefits which the survivor received on the life policy. Each of them also made an irrevocable offer to purchase the other's shares which the legal personal representatives of the deceased could accept.

11 The Benefit Expiry Period was defined as:

“The date of termination of entitlement to any assured benefit under the Newton Life Policy, namely, the date being the anniversary of the "Policy Commencement Date" as that expression is defined in the Newton Life Policy immediately preceding the attainment by Newton of the age of 75 years".

12 Mr Newton was five years older than Mr Sweeney. He was 56 at the date of the Deed, Mr Sweeney was 51. The policies were renewed annually until December 1994.

13 In February 1995 new policies were issued with Prudential.

14 In 1996 the policies with Prudential were replaced with life insurances with Legal & General Life of Australia Limited, but the structure remained the same. Mr Sweeney owned the policy over the life of Mr Newton and vice versa.

15 In 1997, Mr Sweeney was diagnosed with cancer.

16 In 1998 he told Mr Newton that it was a terminal condition, and that he wished to arrange his affairs before he died.

17 Mr Newton gave evidence that Mr Sweeney asked him that Mr Newton and Fred Newton (Holdings) assign to him the benefit of the insurance policy taken out on his life. I think probably that words or words to that effect were said at this time.

18 Mr Sweeney spoke with an insurance consultant, a Mr Lockitch, who had acted for both gentlemen when the policies were taken out and later renewed and replaced. Mr Sweeney told Mr Lockitch that there was or would be a new agreement calling for self-ownership of the policies. Mr Lockitch advised that an assignment might have GST implications and that a better course would be to have the policies reissued. This was done. Replacement policies were issued by Colonial so that Mr Sweeney owned the policy on his life and Mr Newton owned the policy on his life. Those policies were renewed in 1999.

19 On 23 January 2001 Mr Newton allowed his policy to lapse.

20 Mr Sweeney's policy remained current until he died.

21 On 14 November 2002, when Mr Sweeney was seriously ill, Mr Lockitch advised him that he should assign his policy to his wife, the cross-defendant, so that the proceeds would go straight to her after his death, without having to go through his Estate. That was done.

22 On 22 November, Mr Sweeney signed a Memorandum of Transfer of the policy in favour of the cross-defendant.

23 If the matter rested there, the implication from these events would be that the parties had abandoned the Deed of Pre-Emption. By mutual assent they had not kept up policies on the lives of each other.

24 The promises to keep up policies on the lives of each other were fundamental to the operation of the Deed. There would be no way of ascertaining the purchase price for the shares under the Deed if that were not done, because there would no longer be any policies under which the survivor was entitled to benefits to be used to pay for the purchase price of the shares.

25 Indeed, the better view is that the Benefit Expiry Date had expired on the lapse of Mr Newton's policy and therefore the options were not exercisable in any event.

26 That would be the position unless the Deed were varied or it was replaced by a new agreement.

27 Mr Newton contends that he made an oral agreement with Mr Sweeney to the effect that in consideration of Mr Newton agreeing to the change to the insurance arrangements, Mr Newton would be entitled to a transfer of Mr Sweeney's shares after he died.

28 The claim has been put in various ways.

29 On 11 June 2003, in a letter from John Walsh & Partners to Messrs Harrington, Maguire and O'Brien, Messrs John Walsh & Partners said,

“… we are instructed that the benefit of the life policy on the deceased's life was transferred about 3 years ago. Fred Newton agreed with the deceased to the transfer of the benefit of the policy on his life to the deceased himself as satisfaction of the condition precedent required for the transfer of the shares pursuant to the 1992 Deed".

30 By the cross-claim filed on 16 October 2003, the cross-claimants, Mr Fred Newton and Fred Newton (Holdings) Pty Ltd seek a declaration that the Deed was varied whereby:

(a) the consideration for the exercise of the option ... was given by the transfer or relinquishment of the benefit of the life policy on the deceased's life from [Mr Newton] to the deceased or upon the reissue of it to the deceased with the agreement of [Mr Newton]; and

(b) the formal requirement that the Cross-Claimants or either of them give notice of exercise of the option ... would be waived in the event that the deceased died prior to [Mr Newton].”

31 A few days before this cross-claim was filed, that is to say on 10 October 2003, Mr Fred Newton for himself and Fred Newton (Holdings) Pty Ltd purported to exercise the option over the shares in the Glenmore company by reference to the Deed of 27 May 1992.

32 The Notice stated that the purchase price for the Sweeney shares should be in the amount of the benefit, “to which I would have been entitled under the Sweeney life policy” less stamp duty.

33 The purported exercise of the option in those terms is consistent with the claim that the Deed was varied in the way contended for in the cross-claim filed on 16 October 2003.

34 By amendments made to the cross-claim on the first day of the hearing, it was claimed in the alternative, inter alia, that in about November 1998 the cross-claimants and Mr Sweeney entered into a contract whereby the Deed of 27 May 1992 was to be terminated, that Mr Newton would assign to Mr Sweeney the benefit of the insurance policy on Mr Sweeney's life which Mr Newton owned, that Mr Sweeney would assign to Mr Newton the benefit of the insurance policy on Mr Newton's life which Mr Sweeney owned, and that Mr Sweeney's shares in the companies would be transferred to Mr Newton or his nominee on the deceased's death.

35 Another claim was put in the alternative that the cross-defendant was estopped from denying the continuance of the obligations of the cross-defendant as the legal personal representative of the deceased to the cross-claimants, and from requiring that the cross-claimants comply with the special provisions of the Deed in regard to the exercise of the option, including the need to provide any further notice of any matter.

36 Essential to all of the ways in which the cross-claimants put their case is a finding in the cross-claimants’ favour that, in the conversation with Mr Newton in 1998, Mr Sweeney told Mr Newton that Mr Newton could have his shares after his death. There were no witnesses to that discussion.

37 Mr Fred Newton deposes as follows:

“12. In 1998 Mr Sweeney spoke to me,
He said: ‘I have been diagnosed as having a cancer called multiple myaloma. It is a terminal condition. I want to arrange all my affairs before I die. Can you assign the benefit of the Insurance Policy taken out on my life from you and Fred Newton (Holdings) Pty Ltd. To me now, instead of waiting until I die?’
I said: ‘I will speak to George about that and let you know.’
I then separately spoke to George.
13. About 2 or 3 days later Mr Sweeney and I met again. We had a conversation:
He said: ‘Well have you made up your mind about what I asked you to do about the insurance policy?’
I said: ‘Well George has advised me to do it. I know that if the position was reversed you would not do it for me. However, under the circumstances I will do it providing this does not affect the transfer of your shares to me after you die’.
He said: ‘Well I don’t expect you to give me all that money for nothing. Of course you still get the shares’.”

38 Mr Sweeney, of course, cannot affirm or deny the matters there set out. There were no witnesses. The agreement was not reduced to writing, although Mr Newton said in cross-examination that Mr Sweeney told him that he would see his solicitor to put it in writing and that he asked Mr Sweeney on a number of occasions about documenting the arrangements but was told by Mr Sweeney that his solicitor was slow.

39 I will return to this later in these reasons.

40 The authorities support the common sense view that I should scrutinise very carefully a claim based on an alleged oral agreement with a person who has since died and who cannot answer the claim, particularly where the only other party to the agreement is someone who is interested in a finding as to whether the alleged agreement was, in fact, made. See Plunkett v Bull (1915) 19 CLR 544 at 548-549.

41 To a large extent, the acceptance or rejection of the cross-claimant's claim turns upon the credit of Mr Fred Newton. I did not consider him to be a reliable witness. My primary reason for not accepting him as a reliable witness is that, for reasons which will appear later, both before and after Mr Sweeney's death he acted in ways which are inconsistent with his having had the conversation as deposed to in paragraph 13 of his affidavit.

42 Part of my reasons for not accepting him as a reliable witness is due to how he went about answering questions. Partly it is because I do not think his memory is reliable. One example will suffice. In cross-examination he was asked about a letter from Mr Walsh, Solicitor, to Mr Sweeney dated 8 October 2001. He was asked,

“Q. "Have you seen that document before?
A. I presume I have".

43 In re-examination, it was elicited that the only time he had seen the document was in counsel's chambers in the previous week or so. He gave evidence that when answering questions asked by Mr McInerney in cross-examination he did not recall having seen the document only a week ago. This may partly be due to an unfamiliarity with documents, but it does give me occasion to consider the reliability of his memory generally.

44 Mr Marshall, of counsel, who appeared for the cross-claimants submitted that many of the answers which Mr Fred Newton gave in cross-examination, and his conduct after Mr Sweeney's death, was explicable by his inability to grasp legal concepts. Thus Mr Newton maintained in cross-examination that for months after Mr Sweeney's death he did not believe that the Deed of Pre-Emption had at any time been varied or terminated. He maintained in cross-examination, and this was borne out by his conduct, that after Mr Sweeney's death he believed he was entitled to the proceeds of the policy over Mr Sweeney's life.

45 Counsel submitted that the concepts involved in the matter were beyond him. I was reminded that by trade he was a butcher. This may be so, but it only emphasises the point made by McLelland CJ in Eq in Watson v Foxman (1999) NSWLR 351 at 318 to 319 where His Honour said:

“Where, in civil proceedings a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act ), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the Court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

...

Considerations of the above kind can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a cause of action based on s 52 of the Trade Practices Act 1974 or s 42 of the Fair Trading Act in the absence of some reliable contemporaneous record or other satisfactory corroboration.

...

What I have said above as to the cause of action based on s 52 or the Trade Practices Act 1974 (Cth) or s 42 of the Fair Trading Act is equally applicable, mutatis mutandis , to the causes of action based on contract and on equitable estoppel (with the added requirements, in the case of contract that any consensus reached was capable of forming a binding contract and was intended by the parties to be legal binding ...".

46 There are three matters upon which the cross-claimants rely as providing objective support for or corroboration of their case.

47 First, it would have been an act of generosity or charity for Mr Newton to have given up his rights to Mr Sweeney's shares under the Deed of Pre-Emption in the circumstances which he obtained in 1998. At that time, it was regarded as highly probable that Mr Sweeney would die first. The cost of future premiums on Mr Sweeney's policy, which Mr Newton had to bear either directly or indirectly, were, I think it can be inferred, likely to be substantially less than the value of his shares. Having said that, there is no direct evidence of the value of the shares of the two companies in 1998, at least none to which I have been taken.

48 The second matter, being a matter of corroboration, was evidence given by Mr George Newton that Mr Sweeney had said to him the following:

“…..
He said also:
‘Because I only have a limited time to live, I wish to organise my affairs whilst I am still alive.’
He then said:
‘Can you speak to Fred Newton about getting him to transfer his insurance policy over my live to me or my nominee now? I have already broached the subject with him’.
I said to Mr. Sweeney:
‘I’ll speak to Fred, provided Fred’s pre-emptive rights over the Glenmore shares remain in place.’
Mr. Sweeney replied:
‘Yes, the pre-emptive rights still apply, and the day I die Fred gets the shares and Fred doesn’t have to deal with my family and my relatives will receive the insurance proceeds immediately after my death.’
I said:
‘So long as the shares go to Fred.’
Mr Sweeney replied:
‘I don’t want Fred to have any problems with my family. That’s the reason I went to Fred about the insurance policy.’”

49 The third matter, and another matter of corroboration, was evidence given by Ms Nadia Fowler, an office manager and internal accountant for the businesses. She said in her affidavit of 11 December 2003:

“2. In 1998, Mr. Sweeney had a further conversation with me.
He said to me in words to the effect of:
‘I have talked to Fred about him signing the policy over to me, but the agreement between us still stands.’
‘Fred was not happy about it, so I’m going to talk to George so he can convince Fred to sign the policy over because it’s the right thing to do.’
‘The reason I want to get the policy signed over is so I can put my affairs in order. Fred will still get the shares.’”

50 I shall return to these matters.

51 Against them can be put the following considerations:

52 First, the arrangement was not documented, although it dealt with an important matter involving the shares. On other occasions, when it was proposed that there be an agreement between Mr Newton and Mr Sweeney relating to the shares, namely in 1992 and 2001, the arrangements were documented.

53 Secondly, on the cross-claimant's case, the commercial outcome was unchanged. There is, I think, no satisfactory explanation as to why the parties should have thought the transaction to be necessary in 1998 if it were as deposed to by Mr Newton.

54 Mr George Newton, in the paragraph which I have quoted from his affidavit, gave as the reason for the proposed change that Mr Fred Newton would not have to deal with his family. I do not see how that could be brought about unless the position were that, as a result of the change, Mr Fred Newton would no longer be entitled to receive Mr Sweeney's shares. If he were entitled to receive the shares, he would necessarily have to deal with Mr Sweeney's family after his death.

55 That makes the absence of documentation of the agreement all the more puzzling. It is one thing to say, as was said by Mr Newton and on his behalf, that he and Mr Sweeney were longstanding business partners who trusted each other's word, but the agreement which Mr Newton asserts was made was one which he would have to enforce not against Mr Sweeney himself, but against his Estate. There was no such relationship of trust and confidence between Mrs Sweeney and Mr Newton.

56 Thirdly, the parties did not deal with what would happen to Mr Newton's shares if Mr Newton died first. It was submitted for Mr Newton, and Mr Newton gave evidence to this effect, that if that were to happen, Mr Sweeney would be entitled to Mr Newton's shares. However, that was not a matter which was expressly dealt with, but is a matter left to implication or assumption. That, I think, is an indication that the parties were not in 1998 intending to enter into binding legal arrangements in relation to the shares of each other, so as to give one the right to acquire the shares of the other in the event of the other's death without further consideration.

57 Fourthly, in October 2001 the parties consulted Mr Walsh, a solicitor, who prepared a Draft Option Agreement over Mr Sweeney's shares in Glenmore Meat Wholesalers Pty Ltd. It is unnecessary to go into the circumstances which led to the discussions about the grant of such an option, or about the grant of an option which was later entered into whereby Mr Newton was entitled, in certain events, to acquire property of Glenmore Meat Co (Wholesalers) Pty Ltd.

58 What is important, for present purposes, is that I infer from Mr Walsh's evidence that neither person told Mr Walsh that there was an existing agreement which gave Mr Newton the right to acquire Mr Sweeney's shares on Mr Sweeney's death. That would have been a material matter to have told Mr Walsh, if it were the fact, at a time when he was preparing an option agreement over the shares which, on exercise, would have required Mr Newton to pay a substantial sum to acquire the shares.

59 Fifthly, is the matter to which I have referred earlier, that Mr Newton's evidence was that Mr Sweeney told him that he had seen his solicitor to document the arrangements which had been discussed orally between them and that his solicitor was slow in preparing the documentation.

60 The evidence of Mr Maguire, which I accept, was that in fact Mr Sweeney did not consult him to document the arrangement. If the arrangement had been made, and the promise by Mr Sweeney to Mr Newton to have it documented had been made, there is no plausible reason why he should not have done so. Nor was the matter pursued over the course of five years by Mr Newton. That is so, even though in 2001 and 2002, Mr Newton and Mr Sweeney consulted Mr Walsh with a view to giving Mr Newton an option to purchase the shares in the wholesalers company. That proposal was replaced by the grant of an option to purchase the assets of the company, but one asks why, if the arrangements had been made, and if it had been intended to document them and they had not been documented, the matter was not raised then?

61 Sixthly, after Mr Sweeney's death, Mr Newton asserted that he was entitled to the benefits of the insurance policy over Mr Sweeney's life. He threatened to restrain the insurer from paying the benefits to Mrs Sweeney. This conduct was inconsistent with his then recalling the conversation which he deposed to in paragraph 13.

62 Seventhly, Mr Newton had consulted a Mr Todd of Dennis & Co about the matter. He had done so by at least early May 2003.

63 On 20 May 2003 Mr Todd had a meeting with a Mr Hoffman and also with Mr Lockitch. Mr Lockitch made a file note of that meeting in which he recorded the following:

“I gave them a run down of the history of the insurance. Also discussed that new policies were issued on instruction from John Sweeney i.e. I was told their new agreement called for self ownership of policies and at my suggestion [illegible] Newton policies to avoid C G T situation. Grant informed that their (sic) apparently was no second agreement and in his mind the first agreement was still valid. Told me that Fred had said that he lapsed his policy when he heard John was so ill as he was sure that John would die before him and therefore he did not have need for the cover as he had no family or heirs. Grant said he had no objection of (sic) me relaying any of our discussions to John Maguire or Liz Sweeney".

64 I interpolate here that if the Deed was still valid, as Mr Newton said in cross-examination before me he believed it was, the effect of his allowing his own policy to lapse was that he lost the right to exercise the option.

65 Eighthly, on 21 May 2003 Mr Maguire, the solicitor for Mrs Sweeney, asserted to Mr Walsh that his instructions were that the Deed and the arrangements provided for by it were terminated by mutual agreement between Mr Newton and the late Mr Sweeney during the latter's lifetime.

66 He said that his client could not deal with the late Mr Sweeney's shares until such time as they were transmitted to her. I pause here to say Probate had not been granted to Mrs Sweeney at this stage. He went on to say that this was not to be taken as any admission that as and when the shares were transmitted to her, Mrs Sweeney would have any obligation to transfer the shares to Mr Newton.

67 Two days later, the directors of the two companies, Mr Fred Newton and Mr George Newton, resolved to make a pro rata rights issue to members to raise up to $250,000 for the working capital requirements of each company.

68 The notice was sent to the solicitors for Mrs Sweeney. It required or purported to require that if Mrs Sweeney wished to exercise her rights she should do so by Friday, 30 May 2003 by 10.00 am. It also recorded that the directors had resolved that if any member did not take up his entitlement, or took up only part of it, the shortfall would be offered to the other members pro rata to their present shareholding.

69 To take up the shares, Mrs Sweeney was told it would be necessary for her to complete not only the application forms for the shares, but also to provide cheques made payable to each company, that is to say, two cheques, one for $118,738 and one for $118,750.

70 If Mr Newton regarded himself as beneficially entitled to the shares held by Mrs Sweeney, or held by the Estate, it is remarkable that the rights issue would have been made at all, and more remarkable that he would not have discussed with Mrs Sweeney how he wished her to respond to the rights issue, and to have her put in funds if he wished her to take up the rights so that he would be entitled to the beneficial ownership of the new shares.

71 For the plaintiff and cross-defendant, it was submitted that the rights issue was simply designed to put pressure on Mrs Sweeney. Counsel submitted that if Mr Fred Newton believed he had a genuine legal right to Mr Sweeney's shares, he would have had no need to apply pressure to Mrs Sweeney in that way. He could, and should, have gone to Court to obtain a declaration that he was entitled to those shares.

72 In this respect, Mr George Newton admitted in cross-examination that he knew that the notice which was sent would have no legal effect. He said that he believed it was null and void. He said that the purpose of its being sent was to apply pressure to Mrs Sweeney to offer the shares in the two companies to Mr Fred Newton. He agreed with counsel's description of the matter as a "scare tactic".

73 Having regard to the pending oppression action, it is undesirable that I make any finding in relation to the purpose of the purported rights issue beyond that which is necessary to deal with the issues on the cross-claim.

74 Mr Newton, contended that the share issue was made for the proper purpose of raising capital urgently needed by the company. Nonetheless, however the matter is looked at, by putting in train the purported rights issue, Mr Fred Newton acted inconsistently with the case which he now puts.

75 Ninthly, on 29 May 2003 Bryson J granted the plaintiff an injunction restraining the companies from taking steps to issue distributable share capital. It was not until 11 June 2003 that a version of the claim now made was made on behalf of Mr Newton.

76 Tenthly, there was evidence from Mrs Sweeney and also from Mr Maguire and from Mr Perry that before his death Mr Sweeney told them, in substance, that Mrs Sweeney would receive, after he died, both the proceeds of the life policy and the shares in the two companies.

77 I treat the evidence given by Mrs Sweeney with caution. She was unshaken in cross-examination and I have no reason to doubt her honesty. Nonetheless, like Mr Newton, she has an interest in the suit.

78 However, I have no reason to doubt the evidence of Mr Maguire or Mr Perry who gave their evidence straightforwardly, and who do not have an interest in the suit. I accept their evidence. It indicates that at that time, that is to say, shortly before his death, Mr Sweeney did not believe that he had agreed that Mr Newton would receive the shares after his death. There is no suggestion that Mr Sweeney had lost his intellectual capacities.

79 I return then to the three points raised in support of the claim.

80 I accept that Mr Newton's conduct after Mr Sweeney's death did not display a spirit of generosity towards Mrs Sweeney. I might infer from that that he would be unlikely to have displayed a spirit of generosity in 1998. However, as Mr McInerney, who appeared with Mr Owens for the cross-defendant submitted, there are indications in the evidence that in 1998 Mr Newton regarded himself as acting generously.

81 He said in cross-examination,

“The arrangements that were made in 1998 was he asked me to assign his policy to him. I did so. As I repeat, I just thought I was doing the right thing. We had been together a long time. He was going to die. I did the right thing".

82 In his affidavit, Mr Newton says that he told Mr Sweeney,

“I know that if the position was reversed you would not do it for me. However, under the circumstances I will do it provided this does not affect the transfer of the shares to me after you die".

83 As I have said, if the arrangement did not "affect the transfer of your shares to me after you die", there was no substantial change to the rights of Mr Newton or of Mr Sweeney's Estate.

84 I do not accept Mr Newton's evidence in relation to the non-affectation of his rights to shares. But I do draw from the affidavit that Mr Newton considered that he was doing something for Mr Sweeney which, if the position were reversed, he did not think Mr Sweeney would do for him.

85 Next, it is apparent that it took some time to secure Mr Newton's assent to the arrangements. All of that, I think, is consistent with Mr Newton intending in 1998 to act in a generous way towards his business partner.

86 I should perhaps explain further why, on Mr Newton's case, the arrangements which were made in 1998 would have had no substantial change to the party's commercial rights. Under the Deed of Pre-Emption, Mr Newton would have been entitled to receive Mr Sweeney's shares and Mr Sweeney's Estate would have got the benefit of the policies over Mr Sweeney's life. They would have got those benefits as the purchase price for the shares.

87 On the case which the cross-claimants now put, Mr Sweeney's Estate or his widow, as assignee, receives the benefit of the policy and Mr Newton and/or Fred Newton (Holdings) are entitled to the shares.

88 For reasons I have already given, I do not think that the arrangements can be explained as a means of avoiding the need for Mr Fred Newton to deal with Mr Sweeney's family.

89 It was put by counsel for the cross-claimants that one effect of the arrangements was that the put option, which the Estate had to compel Mr Newton to acquire the shares after Mr Sweeney's death, fell away as a result of the proposed arrangements and, in that sense, there was a reduced need for Mr Fred Newton to have dealings with Mr Sweeney's family.

90 However, none of the evidence points to this as being a consideration in the mind of any of the persons involved at the time.

91 With respect to the evidence of Mr George Newton and Ms Nadia Fowler, I remind myself of what was said by McLelland CJ in Eq in Watson v Foxman which I have quoted above.

92 Both people gave their evidence honestly. Mr George Newton however, acquiesced in conduct on 23 May 2003 in support of his cousin which is little to his credit. It shows a strength of family attachment which I cannot ignore in assessing the weight to be given to his evidence. I do not by that mean that Mr George Newton has fabricated the conversation with Mr Sweeney to which he has deposed in order to support his cousin's case. But as McLelland CJ in Eq said in Watson v Foxman,

“human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

93 The same observation can be made with respect to the evidence of Miss Fowler. She was asked to recall a conversation which occurred more than five years previously and about which she had made no notes.

94 In any event, the conversation to which she deposed apparently took place before Mr Sweeney had spoken to Mr George Newton and hence before the conversation which Mr Fred Newton has deposed to.

95 Even if I were confident that a conversation in the terms to which she deposed to in 1998 was held between her and Mr Sweeney, I would not be confident that the proposal Mr Sweeney described to her was one which was discussed and agreed with Mr Fred Newton.

96 When I consider those three matters of objective support and corroboration, and weigh them against my impression of the unreliability of Mr Newton as a witness, and against the ten countervailing considerations which I have outlined, I think the case against there having been a conversation as deposed to by Mr Newton is overwhelming.

97 I do not accept his version of his conversation with Mr Sweeney.

98 I do not accept that Mr Sweeney promised or represented that after his death Mr Fred Newton or Fred Newton (Holdings) would still get his shares.

99 That being so, each of the bases upon which the cross-claimants have propounded their case falls away.

100 The position is as I have outlined earlier in my judgment, that from 1998 after the arrangements for the ownership of the insurance policy were changed, the parties, by their mutual conduct abandoned the Deed of Preemption.

101 For these reasons the Amended Cross-claim is dismissed.

102 I order the cross-claimant to pay the cross-defendant’s costs of the cross-claim.

103 Exhibits to be returned after 28 days unless a notice of appeal or application for leave to appeal has been filed in the meantime.

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Last Modified: 09/20/2004