Thynne v Jevny Pty Ltd (No 2)

[2023] NSWSC 1465

Supreme Court

New South Wales

Medium Neutral Citation:

Thynne v Jevny Pty Ltd (No 2) [2023] NSWSC 1465

Hearing dates:

6 November 2023

Date of orders:

30 November 2023

Decision date:

30 November 2023

Jurisdiction:

Equity

Before:

Robb J

Decision:

See [66]

Catchwords:

CIVIL PROCEDURE – originating process – amendment – where plaintiff seeks leave to amend statement of claim – where substantive proceedings concern claim by plaintiff that second defendant used real property she inherited in a manner inconsistent with a memorandum of wishes she signed with the deceased testator – where the Court of Appeal has determined that plaintiff does not have a present beneficial interest in the real property – where plaintiff seeks to amend statement of claim in order to accommodate the effect of the reasons of the Court of Appeal – whether plaintiff’s draft amended statement of claim cures the deficiencies in the existing statement of claim – held that the proposed amendments do not cure the substantive deficiencies in the plaintiff’s claim to have an existing beneficial interest in the real property – leave to amend statement of claim to be refused

CIVIL PROCEDURE – pleadings – particulars – summary dismissal – striking out – where second defendant seeks orders for the summary dismissal and striking out of the plaintiff’s prayers for relief and associated pleadings and particulars concerning her ownership and use of the real property – where said prayers for relief and associated pleadings and particulars depend on the existence of a present trust interest in favour of the plaintiff over part of the real property – held that such a trust interest does not automatically arise in equity – held that there is no basis for imposing such a trust interest – orders to be made summarily dismissing prayers for relief in the plaintiff’s statement of claim which depend on the existence of a present trust interest in favour of the plaintiff over the real property – orders to be made striking out allegations by the plaintiff regarding the real property and the plaintiff’s restatement of his entitlement to the relief claimed – leave to amend the pleadings and particulars struck out or summarily dismissed to be refused

CIVIL PROCEDURE – subpoenas – application to set aside – where second defendant seeks orders to set aside and ‘undo’ the effect of a subpoena issued to a bank at the instance of the plaintiff – application to set aside subpoena ultimately not pressed as the Court will make the summary dismissal order sought by the second defendant

Legislation Cited:

Real Property Act 1900 (NSW), s 74J

Trustee Act 1925 (NSW), ss 5, 70

Uniform Civil Procedure Rules 2005 (NSW), rr 13.4, 14.28, 33.4

Cases Cited:

Birmingham v Renfrew (1937) 57 CLR 666; [1937] HCA 52

Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10

Harry Bernard Thynne v Jevny Pty Limited [2022] NSWSC 1774

The Ampthill Peerage [1977] AC 547

Thynne v Sheringham [2023] NSWCA 181

Voges v Monaghan (1954) 94 CLR 231; [1954] HCA 63

Texts Cited:

JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths)

Category:

Procedural rulings

Parties:

Harry Bernard Thynne (Plaintiff)
Jevny Pty Ltd (First Defendant)
Victoria Diane Sheringham (Second Defendant)

Representation:

Counsel:
SV Shepherd (Plaintiff)
P Knowles SC (Defendants)

Solicitors:
ID Haege (Plaintiff)
O’Neill McDonald Lawyers (Defendants)

File Number(s):

2022/00220085

Publication restriction:

Nil

JUDGMENT

1. The plaintiff, Harry Bernard Thynne, commenced these proceedings by summons filed on 27 July 2022. Mr Thynne filed a statement of claim on 1 November 2022.

2. The first defendant is Jevny Pty Ltd (Jevny), which is the trustee of the Thynne Family Trust. Mr Thynne’s claim against Jevny is not relevant to the applications that are now before the Court, and will not be considered further. The relevant claims are those made by Mr Thynne against the second defendant, Victoria Diane Sheringham. Ms Sheringham is Mr Thynne’s stepmother. Mr Thynne’s father was James Bernard Thynne (the deceased). The deceased and Mr Thynne’s mother were divorced in about 1990. The deceased married Ms Sheringham in 1996. In the same year, their son, Patrick Lachlan Thynne, was born. The deceased died on 22 June 2011 while married to Ms Sheringham.

Memorandum of Wishes

3. The dispute that is the subject of the applications that are before the Court arises out of the circumstances in which the deceased and Ms Sheringham made mutual wills on 25 March 2011, which is the same date as that upon which both the deceased and Ms Sheringham signed a Memorandum of Wishes, which contained a statement of the basis upon which the deceased had devised the matrimonial home, which I will call “the Property”, to Ms Sheringham.

4. Paragraph 5 of the Memorandum of Wishes, which relates to the devise of the Property, provided:

5. [The Property]

I have left the [Property] … and its contents to Victoria. Victoria hereby agrees to leave the [Property] or any other property that she has bought to replace the [Property] or the proceeds of sale of any such property to both Harry and Patrick in equal shares (as reflected in her will dated on or about the date of this Memorandum) at the time of her death, having taken into account any advances (including the $100,000 bequeathed to Harry under my last will and testament or gifted to Harry by Victoria after my death using funds derived from my Superannuation) made to either Patrick or Harry in anticipation of the payment of their share. I acknowledge that Victoria may need to use the proceeds of the sale or rental of the [Property] for her maintenance and upkeep, the maintenance and education of Patrick and the maintenance of the [property] and of the Farm.

5. In essence, Mr Thynne alleges that Ms Sheringham has used the Property in ways that are inconsistent with this provision in the Memorandum of Wishes, and he has sought certain relief consequently on the basis that Ms Sheringham was bound by fiduciary duties that were imposed upon her registered ownership of the Property following its devise to her under the deceased’s will.

Introduction

6. By way of introduction, this dispute raises difficult conceptual issues that arise out of the principles considered by the High Court in Birmingham v Renfrew (1937) 57 CLR 666; [1937] HCA 52, particularly in relation to the consideration by Dixon J of the restrictions that may be imposed upon a party to a mutual wills agreement, whereby that party (the survivor) receives property (the inherited property) under the will of the first to die (the testator), on the basis that the survivor will maintain the terms of that party’s mutual will, given the events that may occur in the remainder of the survivor’s life in respect of the ownership of the inherited property, and the restrictions that may have been agreed between the parties concerning the manner of use of the inherited property.

7. In particular, it will be seen from an examination of par 5 of the Memorandum of Wishes that the title to the Property was to be vested in Ms Sheringham absolutely, subject to whatever restrictions on her use of that property were imposed by her agreement to the terms of the Memorandum of Wishes. Ms Sheringham agreed to leave the Property or any other property that she bought to replace it, or the proceeds of sale of any such property, to both Mr Thynne and Patrick Thynne in equal shares. That was expressed to be in accordance with the terms of Ms Sheringham’s will. Certain advances were to be taken into account in determining equality between the two children. Then came the acknowledgement: “I acknowledge that Victoria may need to use the proceeds of the sale or rental of the Property for her maintenance and upkeep, the maintenance and education of Patrick and the maintenance of the Property and of the Farm”. It is sufficient to note at this point that the effect of the acknowledgement is, in a somewhat indefinite way, to allow Ms Sheringham to benefit personally from her ownership of the Property in a manner that would derogate from her capacity to devise that property, a substitute property, or the proceeds of sale of those properties, to Mr Thynne and Patrick Thynne.

8. I will introduce the issues by noting that Ms Sheringham has granted a mortgage over the Property to secure a debt that she has used to fund the farming business that was devised to her under the will of the deceased that is conducted on the property referred to in par 5 of the Memorandum of Wishes as “the Farm”. By way of background, the Farm (being the physical property) was apparently owned by the deceased’s parents, and was transferred to Jevny as trustee of the Thynne Family Trust on the basis that it would be leased to the deceased on commercial terms for the purpose of him conducting a farming business. The Farm itself remains in the ownership of Jevny, and it is only the farming business under the lease that was devised to Ms Sheringham under the will of the deceased.

9. One aspect of Mr Thynne’s claim is that the transactions that are authorised by par 5 of the Memorandum of Wishes do not include – in express terms – the authority to grant mortgages over the Property. Mr Thynne also claims that the reference to the Farm is limited to the physical property and not the farming business. He says that Ms Sheringham was only authorised to use money raised on the basis of her ownership of the Property for the maintenance of the physical property and not her farming business. While the validity of that claim will depend upon the proper construction of the Memorandum of Wishes, it may be observed that it would be strange for the deceased to have intended to confine Ms Sheringham’s use of funds to the maintenance of the Farm (limited to the physical property), which Ms Sheringham would not own, while restricting her from using the funds to maintain the farming business, which she would own. In any event, the concept of maintaining a Farm in a way that is entirely separate from the maintenance of the farming business conducted upon it is – at best – elusive.

10. As will be explained below, Mr Thynne has recently discovered that Ms Sheringham has applied part of the money borrowed from Westpac Banking Corporation to purchase in her name a farm located in the north of this State from her parents. Mr Thynne now propounds a case that, whatever right Ms Sheringham may have had to mortgage the Property, par 5 of the Memorandum of Wishes did not authorise her to apply the money borrowed for the purchase of a different farming property, in particular from her parents. Mr Thynne makes this claim in the context that her title to the new farming property will not under the terms of her will be devised in accordance with the Memorandum of Wishes.

Caveat application

11. The immediate issue in these proceedings has arisen because Mr Thynne took the stance that the effect of the mutual wills and Ms Sheringham’s agreement to the terms of the Memorandum of Wishes was that, upon the title to the Property being registered in Ms Sheringham’s name, she became a trustee of the property for Mr Thynne and Patrick Thynne equally. Mr Thynne sought to protect his alleged equitable interest in the Property by lodging a caveat against the title to the Property. Ms Sheringham caused a lapsing notice under s 74J of the Real Property Act 1900 (NSW) to be issued and served on 15 November 2022. By notice of motion filed in these proceedings on 17 November 2022, Mr Thynne sought an order extending the operation of the caveat. By judgment published on 22 December 2022, Hammerschlag CJ in Eq ordered Mr Thynne to withdraw the caveat: see Harry Bernard Thynne v Jevny Pty Limited [2022] NSWSC 1774.

12. As his Honour’s judgment was interlocutory in nature, it was necessary for Mr Thynne to seek leave to appeal if he wanted to maintain the caveat. Mr Thynne filed a summons seeking leave to appeal on 15 March 2023. The Court of Appeal made an order granting Mr Thynne leave to appeal from the judgment of Hammerschlag CJ in Eq and then an order dismissing the appeal: Thynne v Sheringham [2023] NSWCA 181.

13. By par 27 of the summary of Mr Thynne’s argument in support of his application for leave to appeal, Mr Thynne gave the following reason for leave being given:

His Honour’s determination is final as between the parties and his Honour’s findings are determinative of the issue of the applicant having a vested interest in [the Property] which is the subject of continuing existing proceedings between the parties. [Emphasis added].

14. Ms Sheringham responded to this argument in par 45 of her response, by saying:

Victoria submits to the orders of the Court on the question of leave, save for the issue of costs. She accepts that, whilst the application determined by the primary judge concerned the extension or removal of the Caveat only, it has the effect of finally determining Harry’s substantive application that he holds an interest in [the Property]. Victoria nevertheless maintains that such a contention is flawed for the reasons stated above. [Emphasis added].

15. It is also relevant to Ms Sheringham’s argument that in the Court of Appeal, Basten AJA made the following observation:

[19] On the other hand, the problem with formulating the possible terms of a legitimate caveat raises a larger question as to whether, as a matter of principle, the applicant enjoys any legal or equitable interest capable of being protected by a caveat over the property. For the Court to fail to resolve that issue would leave the parties uncertain as to their rights and would invite further litigation. On that view, there should be a grant of leave to appeal to allow the Court to dispose of the substantive issue. For the reasons explained below, the appropriate course is to grant leave to appeal and determine whether the applicant has an interest capable of supporting a caveat over the title to the Darling Point property. [Emphasis added].

16. Ward ACJ and Kirk JA agreed, at [1], with the conclusion of Basten AJA that leave to appeal should be granted. These observations by the Court of Appeal support the conclusion that leave to appeal was granted, in part, on the understanding that the decision in the appeal would resolve the issue of whether Mr Thynne had a beneficial interest in the Property, because Ms Sheringham held her title to the property on trust for him and Patrick Thynne.

17. Ms Sheringham made a submission at the hearing that these submissions had a special significance for the outcome of the present applications. That was that Mr Thynne obtained leave to appeal on the basis of a submission that the determination of the question of whether he had an equitable interest in the Property sufficient to support his caveat would determine that issue as between the parties, and Ms Sheringham consented to leave being granted on that basis. To the extent that Mr Thynne maintains his claim that Ms Sheringham holds the title to the Property on an existing trust in favour of Mr Thynne and Patrick Thynne, and to the extent that he seeks leave to amend his statement of claim to seek relief or make allegations of fact in support of his claim that Ms Sheringham holds the property on trust, Mr Thynne will not only be engaging in an abuse of process by maintaining a claim that has already been found to be invalid, but he will be doing so in conflict with the basis upon which leave to appeal was granted to him, being that the determination by the Court of Appeal would finally determine the issue.

18. Ms Sheringham made this submission in support of an argument that, even though aspects of the applications now before the Court are interlocutory or procedural in nature, and the Court might usually be inclined to defer the final determination of issues to the hearing of the proceedings on the merits, the Court should be more ready in this case to determine questions of law and to make an order for summary dismissal, insofar as Mr Thynne may be shown to be pursuing a claim that has already been determined against him, even though only on an interlocutory hearing.

19. While I do not accept Ms Sheringham’s submission as being determinative, I do agree that the cardinal principle that requires the Court to strive to ensure finality of litigation justifies the Court in being more ready than it otherwise may have been to accept, at this stage of the proceedings, arguments on Ms Sheringham’s part that reasonably sustain the summary dismissal of the contested aspect of the proceedings (see The Ampthill Peerage [1977] AC 547 at 569 per Lord Wilberforce).

Notices of motion

20. Following the publication of the judgment of the Court of Appeal, the parties have filed three notices of motion that are now before the Court for determination, as follows:

1. On 12 October 2023, Mr Thynne filed a notice of motion in which he sought leave to file an amended statement of claim in the form annexed to the notice of motion. Subsequently, Mr Thynne revised the draft amended statement of claim.

2. On 16 October 2023, Ms Sheringham filed a notice of motion in which he sought summary dismissal pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 13.4 of the prayers for relief and the associated pleadings and particulars concerning Ms Sheringham’s ownership and use of the Property, as found in both the statement of claim and the draft amended statement of claim. Ms Sheringham also sought relief under UCPR r 14.28 that the same parts of the pleadings be struck out. The hearing was conducted on the basis that the order for summary dismissal was the order primarily sought by Ms Sheringham.

3. On 25 October 2023, Ms Sheringham filed a notice of motion for an order under UCPR r 33.4 setting aside a subpoena issued by the Court to Westpac Banking Corporation at the instance of Mr Thynne. As the subpoena had already been answered, and as Mr Thynne evidently had been given leave to inspect the documents produced, Ms Sheringham also sought orders that would, so to speak, ‘undo’ the effect of the subpoena. Apparently, the documents produced shed light on how Ms Sheringham had expended the money borrowed from Westpac Banking Corporation on the security of the mortgage over the Property.

21. At the beginning of the hearing, senior counsel for Ms Sheringham advised the Court that Ms Sheringham’s application would be confined to prosecuting her claim for an order summarily dismissing the relevant parts of Mr Thynne’s pleadings. That was not only on the basis that the Court of Appeal has already determined that Ms Sheringham does not hold the Property on trust for Mr Thynne and Patrick Thynne. That was the principal basis of Ms Sheringham’s claim, but she also submitted that a number of individual claims pleaded by Mr Thynne were so clearly bad in law or doomed to fail that they should be dismissed at this stage of the proceedings. Senior counsel said that, if the summary dismissal application succeeded, then the need for the Court to deal with Mr Thynne’s application for leave to amend would abate. If the Court declined to make the summary dismissal order, then Ms Sheringham would not dispute the application for leave to amend on the basis of the adequacy of the proposed pleading, in a way that would require the Court to descend into a consideration of the adequacy of the formulation of the pleading. Ms Sheringham did not separately pursue the application for an order to set aside the subpoena. I understand that that was on the basis that, if the Court made the summary dismissal order sought by Ms Sheringham, the fact that Westpac Banking Corporation has produced documents in response to the subpoena would cease to be of concern to her. On the other hand, if the Court declined to make the summary dismissal order and granted Mr Thynne the leave to amend that he sought, then the documents produced on the subpoena would be of relevance to the proceedings.

21. It is plain that the Court of Appeal dismissed Mr Thynne’s appeal on the basis that it found that, on the facts and as a matter of law, the circumstances did not have the result that Mr Thynne had the present beneficial interest in the Property that he claimed in the caveat that he had lodged. On the current application, the parties made submissions concerning the significance of aspects of the reasoning in the judgments in the Court of Appeal. I will consider those reasons below, after I have explained the relevant parts of the draft amended statement of claim that Mr Thynne seeks the leave of the Court to file.

22. I set out below the relevant parts of the final version of Mr Thynne’s draft amended statement of claim, as contained in Exhibit P1. In the conventional way, words intended to be deleted are struck through and added words are underlined. The original exhibit displays revised parts of the draft pleading by double underlining, but it has not been necessary to repeat that in these reasons.

23. Ms Sheringham has applied for an order that the Court summarily dismiss the following prayers for relief in Mr Thynne’s current statement of claim, and that it accordingly dismisses his application to amend those prayers in the manner indicated. As I understand Mr Thynne’s position, he has sought leave to amend his statement of claim in order to accommodate the effect of the reasons of the Court of Appeal in the caveat application. Consequently, he accepts that the amendments that he seeks leave to make are necessary, so that, in practical terms, the question is whether the draft amended statement of claim cures the deficiencies in the existing one.

Prayers in draft amended statement of claim

25. The draft amended statement of claim relevantly contains the following prayers for relief:

[The Property]

20.   A declaration that the second defendant holds her title and interest in [the Property] being the whole of the land in Folio Identifier [redacted] on constructive trust for the plaintiff and Patrick Thynne in equal shares as tenants in common.

21.   A declaration that the terms of that trust are that the second defendant:

a.   Holds the title of [the Property], or any interest acquired from the proceeds of the sale therefrom, during her lifetime on trust for the plaintiff and Patrick Thynne as tenants in common in equal shares.

b.   Is entitled to live at or rent out [the Property], or such other property as is acquired with the proceeds of sale therefrom.

c.   Is entitled to an account of expenditure for the maintenance of herself, Patrick Thynne, [the Property] (or the second defendant’s principal place of residence) and [the Farm].

22.   A declaration that the second defendant breached her obligations as trustee of [the Property] by:

a.   refusing to provide the plaintiff with a copy of her will thereby demonstrating her non-compliance with the terms of the trust agreement pursuant to which under which [the Property] was devised to her by the will of the late Jim Thynne;

b.   By granting Westpac Banking Corporation a mortgage security over [the Property] which was registered on or about 25 May 2020 number [redacted]

bb    By expending the proceeds of loan secured by mortgage security [redacted] over [the Property] which was registered on or about 25 May 2020 on Victoria’s Farming Business or other than in accordance with and as permitted under the Memorandum of Wishes made 25 March 2011.

c.   Refusing to provide details of the mortgage by which the second defendant encumbered [the Property]; and

d.   Denying that she holds [the Property]on trust for the plaintiff.

23.   Order that Victoria Sheringham as trustee of the [the Property] Trust, render accounts of her dealings with [the Property] to Harry Thynne and Patrick Thynne.

24.   Order that the second defendant pay the plaintiff’s costs of these proceedings in so far as they concern [the Property] on an indemnity basis as from 28 September 2021 with no right to indemnification from the [the Property] Trust’s assets.

25.   Such further orders as the court sees fit.

26. The features of these prayers for relief that are relevant for the purposes of the present application are:

1. Mr Thynne seeks leave to maintain his claim that he and Patrick Thynne are presently entitled to a beneficial interest in the Property, and the only change proposed is to add an identification of the alleged trust as being a constructive trust.

2. Mr Thynne continues to seek a declaration that Ms Sheringham holds the title to the Property on trust for him and Patrick Thynne as if the trust presently exists, rather than that the alleged trust be created by some order of the Court.

3. Mr Thynne apparently sees some benefit in substituting “the terms of the agreement” for “the terms of the trust”.

4. By adding prayer 22(bb), Mr Thynne would seek a declaration that Ms Sheringham breached her obligations as trustee, by expending the proceeds of the loan secured by the mortgage on her “Farming Business or other than in accordance with and as permitted under the Memorandum of Wishes made 25 March 2011”. This additional prayer would make explicit a claim already raised by Mr Thynne in these proceedings, insofar as it refers to expenditure on Ms Sheringham’s Farming Business. A separate issue arises in relation to the general assertion contained in the words “or other than in accordance with and as permitted”, as it became apparent at the hearing that Mr Thynne has identified the particular expenditure of which he complains, but the circumstances of that expenditure are not specifically pleaded in the draft amended statement of claim.

27. For the purposes of determining Ms Sheringham’s application, the observations made above concerning the effect of the proposed amendments to Mr Thynne’s prayers for relief distil into the proposition that Mr Thynne contends that the deficiency in the existing statement of claim exposed by the Court of Appeal’s reasons in the caveat application is cured by making an amendment that does no more than to identify the presently existing trust that Mr Thynne alleges is imposed upon Ms Sheringham’s ownership of the Property as a constructive trust. If this Court is satisfied that the Court of Appeal has determined that no form of presently existing trust is imposed upon Ms Sheringham’s ownership of the property, then it will follow that the Court should reject Mr Thynne’s application to amend prayer 20, and that it should then summarily dismiss that prayer for relief. As prayers 21 to 23 are predicated on the present existence of a trust, it would consequently be necessary for the Court to dismiss those prayers. In relation to prayer 4, Ms Sheringham would be entitled to an order for the costs of this aspect of the application.

28. I have observed that summary dismissal of the prayers for relief would be appropriate, because Mr Thynne did not foreshadow at the hearing that he would revise his application to seek different relief, if the Court gave him leave to amend his pleadings and particulars in a manner that would support some alternative prayers for relief.

29. I should foreshadow an issue concerning the significance of Mr Thynne’s application to amend his claim to allege the existence of a constructive trust that will require further consideration below. I have always understood a trust, whatever be its description, as being an equitable relationship between the owner of property and some other person for the benefit of whom the owner holds the property (see JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths) (Jacobs’ Law of Trusts) at [1-01]). It became apparent during the hearing that Mr Thynne’s use of the expression “constructive trust” may raise an issue based upon the notion that there can be a presently existing constructive trust that imposes fiduciary duties on the trustee in circumstances that do not give the beneficiary of those duties a presently existing interest in property that is the subject of the trust. I gleaned from the submissions made on behalf of Mr Thynne that he claims that his allegation that a constructive trust exists is not inconsistent with the Court of Appeal’s ruling that Mr Thynne did not have a presently existing interest in the Property that was capable of being protected by the caveat that he had lodged. The obvious difficulty in an argument of this nature is that prayer 20 – in terms that are as clear as possible – is a claim that Ms Sheringham holds her interest in the Property on trust for Mr Thynne and Patrick Thynne, whatever description of trust may be sought to be attached to the trust.

Pleadings and particulars in draft amended statement of claim

30. I will now set out the pleadings and particulars in the draft amended statement of claim that are directly relevant to the prayers for relief that are the subject of the application for summary dismissal, and in respect of which Ms Sheringham asks the Court to be struck out of the existing statement of claim, with leave to make the relevant amendments being refused. Those pleadings and particulars are:

[The Property]

Agreement to be bound by Trust Regarding [the Property]

68.   The plaintiff refers to the will of Jim Thynne dated 25 March 2011 and the Memorandum of Wishes of the same date signed by Victoria Sheringham.

69.   On 1 March 2012 probate of the late Jim Thynne’s estate was granted, and his will was duly administered.

70.   Subsequently all of the late Jim Thynne’s interest in [the Property] the land comprised in Folio Identifier [redacted] was transmitted to Victoria Sheringham pursuant to the terms of Jim Thynne’s will and she became the registered proprietor of that property.

71.   During his lifetime, the late Jim Thynne communicated to Victoria Sheringham that he proposed to devise his interest in [the Property] to her on trust for his sons Patrick and Harry Thynne terms as set out in his Memorandum of Wishes.

Particulars

Memorandum of Wishes of 25 March 2011.

72.   Under the terms of that Memorandum of Wishes Victoria Sheringham acknowledged and agreed to that trust and to leave by will all of her remaining interest in [the Property] to Patrick Thynne and Harry Thynne in equal shares after taking into account any advances made to either of them in anticipation of their share.

73.   In the premises the testator, Jim Thynne:

a.   before his death, informed Victoria Sheringham as legatee of [the Property], that the devise under his will for was for certain purposes and not for her own absolute benefit.

b.   By his death provided consideration for Victoria Sheringham’s promise and agreement under the Memorandum of Wishes.

74.   In the premises and by signing the Memorandum of Wishes Victoria Sheringham agreed to accept and acknowledged that trust was bound by the terms of the Memorandum of Wishes.

75.   In the premises Victoria Sheringham holds [the Property] on trust for Patrick and Harry Thynne in equal shares as tenants in common have an equitable interest in Victoria Sheringham complying with the terms of the agreement on which she holds title to [the Property].

75A    Further and/or in the alternative Victoria Sheringham holds the title to [the Property] on constructive trust for Patrick and Harry Thynne.

Particulars

The terms of the constructive trust are that Victoria Sheringham has personal obligations attaching to [the Property] preventing her from abusing or subverting the intention which underlay her acquisition of [the Property] as expressed in the agreement under the Memorandum of Wishes from which the constructive trust arose.

Terms of the [the Property] Trust Agreement and Fiduciary Duties Arising

76.   The terms of trust agreement on which Victoria Sheringham holds [the Property] or the proceeds of the sale or rental thereof (including any asset acquired with those proceeds) for the benefit of Patrick Thynne and Harry Thynne include that the trustee Victoria Sheringham is entitled to an account for:

a.   the expenditure required for the maintenance of Victoria Sheringham and Patrick Thynne (which includes his education);

b.   the maintenance of [the Property];

c.   the maintenance of Elanora; and

d.   advances made to Patrick Thynne or Harry Thynne (including the $100,000 bequeathed to Harry Thynne under the will of the late Jim Thynne).

Particulars

Will of the late Jim Thynne dated 25 March 2011 and Memorandum of Wishes of same date.

76A    By reason of Victoria Sheringham’s acquisition of title to [the Property] on the terms of her agreement under the Memorandum of Wishes for the benefit of Patrick and Harry Thynne:

a.    Victoria Sheringham stands in fiduciary relationship to Patrick and Harry Thynne as to the extent of their interest in [the Property];

b.    is under a fiduciary duty to Patrick and Harry Thynne fettering her rights of enjoyment of [the Property];

c.    the agreement under which Victoria Sheringham holds [the Property] is a contract of the utmost good faith; and

d.    Victoria Sheringham’s conscience is bound by the terms of the agreement under the Memorandum of Wishes.

Breaches of Agreement and Fiduciary Duty

77.   By Mortgage registered on or about 25 May 2020 number [redacted] Victoria Sheringham mortgaged [the Property] to Westpac Bank.

77A    At the time these proceedings were commenced Victoria Sheringham had failed to answer requests for details of loan secured by the mortgage granted on 25 May 2020.

Particulars

Letter from ID Haege of 20 May 2022 requesting information regarding the amount borrowed, purpose of loan, current amount owed, and basis on which loan would be repaid.

77AB    Since 25 May 2020 Victoria Sheringham has used loan proceeds secured by the mortgage over [the Property] for the purposes of her farming business conducted at Elanora (Victoria’s Farming Business) or other than in accordance with and as permitted under the Memorandum of Wishes.

78.   There is no provision in the will of the late Jim Thynne or the Memorandum of Wishes for Victoria Sheringham to:

a.   mortgage [[the Property]; or

b.   use the proceeds of sale for the purposes of Victoria’s Farming Business or other than in accordance with and as permitted under the Memorandum of Wishes.

78A    Victoria Sheringham has breached the terms of her agreement under the Memorandum of Wishes by:

a.   Granting a mortgage over [the Property] to secure a loan; and

b.   Using the proceeds of that loan for the purposes Victoria’s Farm Business or other than in accordance with and as permitted under the Memorandum of Wishes.

78AB    By using the proceeds of a loan secured by mortgage over [[the Property] for the purposes of Victoria’s Farm Business or other than in accordance with and as permitted under the Memorandum of wishes, Victoria Sheringham has:

a.   obtained an unauthorised benefit for herself in breach of fiduciary duty; and

b.   not complied with her agreement under the terms of the Memorandum of Wishes

79.   Victoria Sheringham has not complied with requests from Harry Thynne for information regarding that any mortgage over [the Property].

Particulars

Correspondence between solicitors for Victoria Sheringham and Harry Thynne.

79A    Under the terms of agreement contained in the Memorandum of Wishes, Victoria Sheringham agreed with the late Jim Thynne that at or about the date of that agreement she had or would make a will leaving [the Property] or the proceeds of the sale thereof (including any asset acquired with those proceeds) to Patrick and Harry Thynne in equal shares.

Breaches of Trust and Fiduciary Duty

80.   Victoria Sheringham has failed to respond to requests from Harry Thynne for a copy of her will evidencing compliance with the trust agreement upon which Jim Thynne devised [the Property] to Victoria Sheringham.

Particulars

Correspondence between solicitors for Victoria Sheringham and Harry Thynne from 28 September 2021 to 4 October 2022.

81.   In the premises of the matters pleaded at paragraphs 77 to 80 above Victoria Sheringham is in breach of:

a.    her obligations under the trust agreement on which she holds [the Property] for Patrick Thynne and Harry Thynne; and/or

b.    in breach of her fiduciary obligations arising out of the agreement; and/or

c.   in breach of her obligation of good faith arising out of the agreement.

81A    In the premises Victoria Sheringham has acted in a manner that defeats the intention of the agreement under the terms of the Memorandum of Wishes.

81AB    In the premises Victoria Sheringham’s obligations arising from her agreement under the Memorandum of Wishes have crystallised into a trust over [the Property] for the benefit of Patrick and Harry Thynne.

81AC    Further and/or in the alternative Victoria Sheringham holds title in [the Property] subject to a constructive trust arising on the death of Jim Thynne, on terms as set out in the Memorandum of Wishes, in favour of Patrick and Harry Thynne.

82.   Victoria Sheringham denies that she holds [the Property] on subject to a trust for Harry and Patrick Thynne.

Particulars

Letters from her solicitors of 22 September 2022 and 12 September 2023.

83.   In denying that she holds [the Property] on trust for Harry and Patrick Thynne, Victoria Sheringham:

a.   has demonstrated an intention not to be bound by the trust; and

b.   in so doing is acting in breach of trust.

84.   In denying the existence of the trust on which she holds [the Property] for Patrick Thynne and Harry Thynne, Victoria Sheringham is in breach of fiduciary duty to:

a.   avoid a conflict between interest and duty; and

b.   not to advantage herself or a third party to the disadvantage of the trust.

Relief Claimed

85.   In the premises the plaintiff is entitled to the Relied [sic] claimed at the commencement of this Statement of Claim.

85A    By reason of the matters pleaded at paragraphs 72 to 84 above, Victoria Sheringham is not fit to act as trustee of [the Property].

85AB In the premises this court should replace Victoria Sheringham as trustee of [the Property] pursuant to s.70 of the Trustee Act 1925 or pursuant to this court’s inherent power.

31. The following matters arising out of these pleadings and particulars are relevant to the determination of Ms Sheringham’s summary dismissal application:

1. I understand that the proposed amendments to pars 71 to 74, 76, 80 and 82 are not contentious, insofar as they seek to place the basis of Ms Sheringham’s alleged obligations upon the Memorandum of Wishes and the circumstances in which the deceased made his will in favour of Ms Sheringham. The same is true for the proposed allegation in par 79A.

2. I interpret the proposed amendment to par 75 as having the effect that, by reason of Ms Sheringham owing personal fiduciary duties to Mr Thynne and Patrick Thynne arising out of the circumstances, they have personal standing to enforce those duties. The use of the term “have an equitable interest” in this context may be unconventional, but I understand the interest to consist of the right to enforce fiduciary duties, not an interest in property. If that is the correct understanding of the effect of the proposed amended par 75, I think it is uncontroversial.

3. The proposed additional par 75A is an allegation that Ms Sheringham holds the title to the Property on constructive trust for Mr Thynne and Patrick Thynne. If that allegation is understood in the conventional sense that the consequence is that Mr Thynne and Patrick Thynne are the beneficial owners of the Property, because the property is held on trust for them, that would conflict with the determination of the Court of Appeal that Mr Thynne does not currently have a present beneficial interest in the Property as the beneficiary of a trust. However, the particulars to the paragraph suggest that something different is intended by the allegation in par 75A. This is the issue to which reference has been made above, whereby it appears to be suggested that a person who is a constructive trustee may at a particular time only have personal obligations. The obligation identified in the particulars is an obligation not to abuse or subvert the agreement expressed in the Memorandum of Wishes and the circumstances in which Ms Sheringham accepted the devise of the Property under the deceased’s will. I will return to this issue below.

1. Paragraph 76A appears to be intended to elaborate the terms of the fiduciary duty suggested by the particulars to par 75A. This allegation might support claims for relief against Ms Sheringham that were limited to the consequences of the alleged breaches of her fiduciary duty. If claims of that nature were made, they would not be directly inconsistent with the determination of the Court of Appeal.

2. Paragraph 77A is a complaint that Ms Sheringham had failed to answer requests for details of a loan secured by a mortgage that she granted over the Property. That appears to be more than a background allegation, as prayer 22(c) seeks a declaration that Ms Sheringham was in breach because she refused to provide details of the mortgage which she had granted over the Property. It must be noticed that prayer 22 seeks a declaration that Ms Sheringham “breached her obligations as trustee” [emphasis added] by that conduct. As I have observed above, that prayer will not survive a determination that Mr Thynne is not entitled to claim relief on the basis of Ms Sheringham being a trustee of the Property, if that is inconsistent with the determination of the Court of Appeal. As a matter of pleading, prayer 22(c) might be sustainable, if it sought a declaration that the relevant conduct was a breach of a personal fiduciary duty owed by Ms Sheringham. The outcome would depend upon the ultimate determination by the Court of whether the content of the particular fiduciary duty included an obligation upon Ms Sheringham to provide the information sought by Mr Thynne.

3. Paragraphs 77AB to 78AB, 81 and 81A are allegations of fact and breach based upon two propositions: first, that the terms of the Memorandum of Wishes did not permit Ms Sheringham to grant a mortgage over the Property; and secondly, in any event, it did not permit Ms Sheringham to use the money borrowed for the purposes of her farming business, or in any other way that was not in accordance with the Memorandum of Wishes. As explained at the hearing, Mr Thynne’s case is that the Memorandum of Wishes did not contain any authorisation for Ms Sheringham to mortgage the Property, and it permitted Ms Sheringham to spend money on the Farm (meaning the physical property), but not on the farming business that she conducted on the Farm. These allegations may have been proper allegations of fact and particulars to support prayer 22, if that had sought a declaration that the relevant conduct was a breach of the alleged fiduciary duties owed by Ms Sheringham, but, as I have explained above, prayer 22 is drawn in terms that the alleged conduct “breached her obligations as trustee” of the Property.

4. As a separate observation on the terms of pars 78(b) and 78A(b), the Court was told during the hearing that the expression “or other than in accordance with and as permitted under the Memorandum of Wishes” was adopted because Mr Thynne was not aware of any expenditures other than on the farming business, and he wanted to catch unknown expenditures that were not permitted. As a result of the inspection of the documents produced by Westpac Banking Corporation in answer to the subpoena served upon it, Mr Thynne learned that Ms Sheringham had used part of the borrowed money to purchase a different farming property in the north of this State from her parents. Mr Thynne asserts that the use of the money for that purpose was not permitted by the Memorandum of Wishes. When asked why the purchase of the different farming property was not the subject of a specific allegation in the draft amended statement of claim, counsel for Mr Thynne explained that the fact had only been learned from an inspection of the documents that were produced, and it was not known when the draft amended statement of claim was prepared. That may be so, but I consider that the allegation is sufficiently material that it should be specifically pleaded, and not disclosed by particulars. If an order is made that permits Mr Thynne to amend his statement of claim to include the allegations in pars 78(b) and 78A(b), the leave should be subject to a requirement that the draft amended statement of claim be further revised to include appropriate specific allegations of fact. This new allegation has relevance to the issue that will be addressed below concerning the nature of the equitable proprietary relief that may be available where a survivor who owes the fiduciary duties alleged against Ms Sheringham breaches those duties, by the application of inherited property under the will of the testator, by conduct that prevents or jeopardises the survivor’s capacity to comply with the terms of the relevant agreement. It may be significant that Mr Thynne was not aware of this conduct at the time of the hearing before Hammerschlag CJ in Eq, although there may be issues as to whether he ought to have ascertained the fact by means of the issue of an earlier subpoena.

5. The effect of pars 81AB and 81AC is to allege that the effect of Ms Sheringham having breached her fiduciary duties in a manner that defeated the intention of the agreement under the terms of the Memorandum of Wishes was that her obligations “have crystallised into a trust over the Property for the benefit of Patrick and Harry Thynne”, so that she holds the title to the Property “subject to a constructive trust arising on the death of Jim Thynne, on terms as set out in the Memorandum of Wishes, in favour of Patrick and Harry Thynne”. This is the ultimate allegation that supports the claims in the prayers for relief for declarations based upon Ms Sheringham holding the Property on trust for Mr Thynne and Patrick Thynne. The claim is that Ms Sheringham holds the Property itself on trust, and not that she holds property allegedly acquired in breach of fiduciary duty on trust. The draft amended statement of claim puts the existence of the trust on two bases. The first is that, on the occurrence of a breach of the fiduciary duty that defeats the intention of the agreement, the fiduciary’s obligations ‘crystallise’ in a trust of the property devised to the fiduciary. The second appears to be inconsistent, in that the trust is said to arise on the death of the deceased. I will return to this issue below, but the second alternative appears to be directly inconsistent with the determination of the Court of Appeal. As at least some of the events that are alleged to have caused the ‘crystallisation’ of the trust occurred before the hearing before Hammerschlag CJ in Eq, the first of the alternatives also appears to be inconsistent with the Court of Appeal’s determination.

6. Paragraphs 85A and 85AB seek additional relief that has not been added to the prayers for relief, being an order that the Court should replace Ms Sheringham as trustee of the Property pursuant to s 70 of the Trustee Act 1925 (NSW), or the Court’s inherent power. This claim will not survive if the Court dismisses the claims for relief made by Mr Thynne that require a finding that Ms Sheringham holds the Property on trust. As the definition of “trust” in s 5 of the Trustee Act includes “constructive trusts”, and as “trustee” is defined accordingly, s 70 would apply to Ms Sheringham if she were found to be a constructive trustee of the Property: see Jacobs’ Law of Trusts at [13-01]. This application is not a proper occasion to consider this issue, but it may be observed that, given that the Property was devised to Ms Sheringham, and she is the registered proprietor of the property with an entitlement to the benefit of it for life, subject to whatever restrictions are imposed by the Memorandum of Wishes, it is extraordinary to think that the Court might replace her as a trustee, rather than – if warranted – to make appropriate orders that restricted her use of the property.

32. In summary, Mr Thynne's prayers for relief persist in the claim that Ms Sheringham holds the Property on a presently existing trust for Mr Thynne and Patrick Thynne. Apart from declarations to give effect to that claim, Mr Thynne seeks an account for breaches of Ms Sheringham's duties as trustee, and an order that she be replaced as trustee. Mr Thynne does not seek relief in the nature of orders to restrain Ms Sheringham from acting inconsistently with the Memorandum of Wishes or orders restoring the position if it is established that she has committed breaches. Mr Thynne does not seek orders in relation to the beneficial ownership of any property that may have been acquired by Ms Sheringham in breach of the Memorandum of Wishes. As for the pleadings and particulars, many allegations, including proposed amendments, relate to a possible claim based upon the existence and alleged breaches of fiduciary duties owed by Ms Sheringham to Mr Thynne and Patrick Thynne from the date of the death of the deceased. These allegations are not all directly relevant to the relief actually claimed, based as it is upon the present existence of a trust over the Property. The following allegations directly assert or depend upon the existence of a presently existing trust, and not just fiduciary duties owed by Ms Sheringham: pars 75A, 81A, 81AC, 83, 84, 85A and 85AB.

Court of Appeal judgment in the caveat application

33. The submissions made by the parties substantially depended on the reasoning of the Court of Appeal. Accordingly, it will be appropriate to set out that reasoning relatively extensively, before I explain the parties’ submissions in this Court.

34. Relevantly, Ward ACJ and Kirk JA in their joint judgment relevantly said (aspects of the judgment that have particular significance to my following reasons will be emphasised by underlining):

…

[2] The tension between the parties’ submissions, as elaborated on by Basten AJA, is that the applicant contends that he has an equitable interest in the property through the operation of a trust which automatically arose on the death of his father (the testator), whereas, on the respondent’s contention, the applicant has no trust interest in the property until her death (or perhaps earlier if the respondent were to repudiate the Memorandum of Wishes, amounting to a fraud on the testator)…

…

[3] The parties’ competing positions reflect the difficulty arising out of the concept of a floating obligation that was introduced by Dixon J, as his Honour then was, in Birmingham v Renfrew (1937) 57 CLR 666; [1937] HCA 52 (Birmingham v Renfrew) at 689:

The purpose of an arrangement for corresponding wills must often be, as in this case, to enable the survivor during his life to deal as absolute owner with the property passing under the will of the party first dying. That is to say, the object of the transaction is to put the survivor in a position to enjoy for his own benefit the full ownership so that, for instance, he may convert it and expend the proceeds if he choose. But when he dies he is to bequeath what is left in the manner agreed upon. It is only by the special doctrines of equity that such a floating obligation, suspended, so to speak, during the lifetime of the survivor can descend upon the assets at his death and crystallise into a trust.

[4] Dixon J had earlier (at 683) explained that a contract to make corresponding wills gave rise to equitable obligations that were specifically enforceable when one of the parties acted on the faith of such an agreement and died leaving his or her will unrevoked so that the other took property under its dispositions. His Honour further explained the relevant obligations at 689–690:

No doubt gifts and settlements, inter vivos, if calculated to defeat the intention of the compact, could not be made by the survivor and his right of disposition, inter vivos, is, therefore, not unqualified. But, substantially, the purpose of the arrangement will often be to allow full enjoyment for the survivor’s own benefit and advantage upon condition that at his death the residue shall pass as arranged.

…

But I do not see any difficulty in modern equity in attaching to the assets a constructive trust which allowed the survivor to enjoy the property subject to a fiduciary duty which, so to speak, crystallised on his death and disabled him only from voluntary dispositions inter vivos. On the contrary, as I have said, it seems rather to provide a reason for the intervention of equity.

[5] The applicant gave particular emphasis to Dixon J’s reference to the survivor having a “floating obligation”, which could in some circumstances be enforced prior to the survivor’s death, pursuant to a “constructive trust”. These characteristics were said to give rise to a proprietary interest in the land in question. Properly understood, they do not do so.

[6] The existence of a “floating obligation” which later “crystallise[s] into a trust” suggests that a trust in the ordinary sense does not yet exist regarding the assets of the deceased, as the primary judge held in the present case (Thynne v Jevny Pty Ltd [2022] NSWSC 1774 at [38]). That is contrary to the proposition that a trust arose automatically on the death of the testator, as suggested by the applicant, in reliance on Jacobs’ Law of Trusts in Australia, 8th ed at [13–42].

[7] The answer to the tension between a constructive trust arising at the time of the first testator’s death and the concept of a floating obligation suspended during the lifetime of the survivor and then crystallising into a trust on the survivor’s death may be found in the notion of constructive trust as recognised by Deane J in Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 (Muschinski v Dodds) at 613 (with whom Mason J agreed). His Honour said that such a trust is imposed as “a personal obligation attaching to property, to enforce the equitable principle that a legal owner should not be permitted to use his common law rights as owner to abuse or subvert the intention which underlay his acquisition and possession of those rights”. Its flexibility as an equitable remedy ensures that it “may be moulded and adjusted to give effect to the application and interplay of equitable principles in the circumstances of the particular case” (Muschinski v Dodds at 615 per Deane J).

[8] Consistently with that understanding, in Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [4], Gleeson CJ, McHugh, Gummow and Callinan JJ observed that:

[S]ome constructive trusts create or recognise no proprietary interest. Rather there is the imposition of a personal liability to account in the same manner as that of an express trustee. An example of a constructive trust in this sense is the imposition of personal liability upon one “who dishonestly procures or assists in a breach of trust or fiduciary obligation” by a trustee or other fiduciary.

[9] Equity’s intervention in cases such as the present “is by the imposition of a trust of a particular character” (Barns v Barns (2003) 214 CLR 169; [2003] HCA 9 at [85] per Gummow and Hayne JJ). That trust does not involve the ultimate beneficiary obtaining beneficial ownership of the property at the time of the first testator’s death, nor any other proprietary interest. Creation of such an interest in the ultimate beneficiary would be inconsistent with Dixon J’s indication that the survivor is able “to deal as absolute owner with the property”. In this type of case, “[s]uch rights of full enjoyment preclude the operation of fiduciary duties of self-abnegation” (Daniel Reynolds, “What are the Duties of Constructive Trustees?” (2018) 41 UNSW Law Journal 1297 at 1326). Here, the respondent is entitled to use the proceeds of sale or rental of the Darling Point property for her own maintenance and upkeep, amongst other things. The survivor might, consistently with her obligations, “use, and indeed even ultimately use up in their entirety the assets passing under the first will” (Barns v Barns at [152] per Callinan J). That entitlement is inconsistent with the argument that the applicant and his half-brother obtained a proprietary interest immediately upon the death of their father.

[10] This characterisation does not preclude the ultimate beneficiaries from having some “interest” in the property prior to the survivor’s death. This “interest” is enforced through the obligations imposed onto the survivor by the agreement, effectively fettering the “absolute ownership” that the survivor is otherwise vested with (as recognised in Jacobs’ at [13–42], when dealing with this paragraph). Barwick CJ in Palmer v Bank of New South Wales (1975) 133 CLR 150; [1975] HCA 51 at 162 elaborates on this point:

When in [Birmingham v Renfrew] Dixon J spoke of “gifts and settlements, inter vivos… calculated to defeat the intention of the compact” he no doubt had in mind gifts and settlements which were either testamentary in nature or which were in contravention of the terms of the particular contract, spelled out of the expressions actually used, bearing in mind the circumstances in which it was made.

[11] The “floating obligation” referred to by Dixon J is a characterisation of the obligations imposed on the survivor (ie, here, the respondent) through the “trust” which arises from the moment the first testator has irrevocably performed his part in the agreement (ie, by dying with the will unrevoked), consistent with Dixon J’s recognition of a fiduciary duty fettering the survivor’s right to enjoyment of property; see further Barns v Barns at [29] per Gleeson CJ, [85] per Gummow and Hayne JJ, and [152] per Callinan J. Through this particular type of trust, the ultimate beneficiary acquires in personam rights against the survivor to ensure that the survivor complies with his or her obligations under the agreement (see C E F Rickett, “Mutual Wills and the Law of Restitution” (1989) 105 Law Quarterly Review 534 at 538–539). Rickett characterises (in the “very loose sense”) these rights as the “interests” the ultimate beneficiaries have in the property from the date of the first testator’s death.

[12] The interest of the applicant, in this analysis, is better characterised as a mere equity (see eg Bryson J, as his Honour then was, in Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 423 –5, referring to Westminster Bank Ltd v Lee [1956] 1 Ch 7 and the High Court’s observations in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1965] HCA 17 ). This characterisation of the ultimate beneficiary’s interest neatly captures the qualities of the “floating obligation” and “trust” which arises upon the death of the first testator. As a “claim to have an equitable interest”, the mere equity may, depending on all the circumstances, “crystallise” into an equitable interest once the beneficiary can establish a claim for equitable relief arising out of a fraud by the survivor or to enforce the underlying agreement between the survivor and the testator. The obligations will crystallise into a trust over the impugned assets the subject of the obligations once those obligations are breached, which may not be until the death of the survivor if the survivor does not leave a will consistent with (here) the Memorandum of Wishes. This explains the “floating” nature of the obligations referred to by Dixon J.

[13] Hence, the ultimate beneficiary or beneficiaries may have an equitable claim, allowing them to complain about particular transactions which diverge from the survivor’s obligations under the agreement with the first testator, but not a specific equitable, proprietary interest in particular assets (see Rosalind Croucher, “Mutual Wills: Contemporary Reflections on an Old Doctrine” (2005) 29 Melbourne University Law Review 390 at 407).

…

[15] On this analysis, the applicant does not presently have a caveatable interest in the Darling Point property and the primary judge did not err in so concluding.

35. It seems clear that their Honours decided that, even in the context where the right of the survivor to deal with the inherited property in the survivor’s lifetime was restricted by the terms on which the survivor and the testator had made mutual wills, a trust binding the survivor of the inherited property does not arise upon the death of the testator in favour of the ultimate intended beneficiary under the mutual wills: see [3]-[9]. Ordinarily, a trust in favour of the ultimate beneficiary may arise on the death of the survivor, if the survivor has altered the survivor’s will, or presumably the survivor has breached any restriction agreed with the testator that has the effect that the survivor’s will cannot operate as expected by the testator, based upon the testator’s knowledge of the terms of the survivor’s will. Their Honours noted that the survivor may be subject to obligations that restrict the survivor’s dealings with the inherited property during the survivor’s lifetime, which their Honours characterised at [12] as a ‘mere equity’. I interpret their Honours’ reasons as extending to any agreed limitation, and not just transactions that are ‘calculated’ in a subjective sense to defeat the agreement between the survivor and the testator. The beneficiary acquires in personam rights against the survivor to enforce limitations agreed between the survivor and the testator. I confess to finding difficulty in resolving the tension that appears to exist between the statement at [12] that the mere equity may crystallise into an equitable interest, once the beneficiary can establish a claim for equitable relief arising out of the fraud by the survivor or to enforce the underlying agreement between the survivor and the testator, such that the “obligations will crystallise into a trust over the impugned assets the subject of the obligations once those obligations are breached” (emphasis added) on the one hand, and the statement at [13] that the equitable entitlement of the beneficiary to complain about particular transactions which diverge from the survivor’ obligations does not give the beneficiary “a specific equitable, proprietary interest in particular assets”. I will return to this issue below.

35. The reasons given by Basten AJA for reaching the same conclusion as the plurality were more extensive than those in the joint judgment of Ward ACJ and Kirk JA. I will confine myself to the aspects of his Honour’s judgment in which he considered the situation where mutual wills are made in conjunction with some agreement that restricts the right of the survivor to deal with the inherited property, rather than the case where there are mutual wills without any restrictions on the right of the survivor to deal with the property.

36. His Honour said (footnotes omitted):

[45] The possible difficulties inherent in this aspect of Birmingham were adverted to by McMillan J in Flocas in the following terms:

“192 Finally, there is to my mind an aspect of this doctrine that remains unsatisfactorily unsettled, but need not be resolved for the purposes of this case. It concerns the ‘floating obligation’ suggested by Dixon J that is said to crystallise on the death of the survivor. It is plain that the property the subject of the promise is not held on trust during the survivor’s lifetime, and the survivor is entitled to retain the income and dispose of the capital if they so choose. The extent, and nature of an obligation not to dispose of the property inter vivos by a gift ‘calculated to defeat the intention of the compact’ seems to me to be difficult to articulate. Although it may be readily ascertainable in circumstances where the survivor deliberately disposes of the property in their lifetime in order to avoid the terms of the agreement, it may be more difficult where the disposition is outside the survivor’s control due to bankruptcy or mental incapacity. The only comment I would venture is that such an obligation is more readily accommodated if, as I consider, the mutual wills agreement is a contract, and the floating obligation is an obligation that must be determined by reference to the express and implied terms of that contract. A court can confidently apply established principles concerning the incorporation, implication and interpretation of contractual terms in deciding the extent of that floating obligation and whether it has been breached in the circumstances of the case. If, on the other hand, the mutual wills agreement is a unique equitable beast, the nature of Dixon J’s floating obligation will be far more difficult to discern.”

[46] This passage assumes that the trust would not crystallise in circumstances where there was an inter vivos disposition by the survivor inconsistent with his or her equitable obligations. Indeed, that the trust does not crystallise in such circumstances may be inferred from the fact that Dixon J raised the possibility of such a breach of an equitable obligation not to act inconsistently with the agreement only after identifying the time at which a constructive trust would crystallise. Further, Dixon J did not suggest that the trust crystallised at the moment the husband altered his will inconsistently with the agreement, as had in fact occurred in Birmingham.

38. In these passages, Basten AJA acknowledged that there may be circumstances where the survivor is restrained in his or her dealings with the inherited property, and that an issue arises where the survivor enters into a transaction “calculated to defeat the intention of the compact”. His Honour appears to reach the conclusion that a disposition by the survivor in his or her lifetime that is inconsistent with the survivor’s equitable obligations will not crystallise a trust over the devised property.

39. Later in his reasons, his Honour continued as follows:

[53] Before leaving Birmingham, it is convenient to deal with the applicant’s attempt to distinguish it. The applicant’s proposition was that, because the mutual wills in that case left each party with an unfettered right to absolute ownership of the property during the lifetime of the survivor, there was no occasion for the trust to crystallise before the death of the survivor. By contrast, it was submitted, the agreement between the testator and the respondent involved constraints on her use of the Darling Point property she inherited from her husband, which could be enforced during her lifetime.

[54] The assumption that the “full ownership” referred to in Birmingham at 689 was unqualified did not fully reflect the reasoning of Dixon J who, after the later passage set out above, continued:

“No doubt gifts and settlements, inter vivos, if calculated to defeat the intention of the compact, could not be made by the survivor and his right of disposition, inter vivos, is, therefore, not unqualified.”

[55] This passage recognises that there may be an implied qualification, and therefore accommodates the possibility of an express qualification. The point of distinction relies upon the fact that where the right of full ownership is qualified in some way, Birmingham simply did not address the consequence of the need to enforce the qualification during the life of the survivor. That submission should not be accepted.

[56] For the purposes of this discussion it is assumed that there has been no breach of the respondent’s obligations with respect to the Darling Point property; certainly none was relied on for the purposes of the present application. The possibility that the applicant had a reasonably arguable case that the respondent was in breach of those obligations by mortgaging the property, or by using it as security for the raising of funds which in turn were expended in breach of the constraints imposed by the agreement, will be addressed later.

40. Basten AJA recognised that there is an issue as to whether constraints arising out of the agreement between the testator and the survivor concerning the use of the inherited property may be enforced against the survivor during his or her lifetime. His Honour appears to suggest that the question of whether Ms Sheringham had relevantly breached such constraints had not been raised at the hearing in the Court of Appeal, in the context of the question of whether a presently existing trust had become imposed on Ms Sheringham’s ownership of the Property. Instead, his Honour dealt with the issue of there being potential breaches by treating the possibility in terms of whether there was an arguable claim of breach for the purpose of determining the balance of convenience in the context of deciding whether an order should be made for the continuation of the caveat. I will set out his Honour’s reasons on that issue, in part because, at the hearing, Ms Sheringham asked the Court to agree with the conclusions expressed by Basten AJA when considering the balance of convenience, for the purpose of this Court deciding that aspects of Mr Thynne’s case are hopeless of success. His Honour said (footnotes omitted):

[60] In the pending proceedings in the Equity Division, the applicant contends for two breaches of fiduciary obligation on the part the respondent. One asserts that the power of sale acknowledged in the agreement does not extend to a power to use the Darling Point property as security for a loan: execution of the current bank mortgage was, on that view, a breach of the respondent’s fiduciary obligations. The second breach asserts that if the Darling Point property is sold, the uses of the proceeds of sale permitted by the agreement do not extend to investment in the farming business at Valla. (As the property has not been sold, any breach must depend on use of moneys secured by the mortgage for that purpose.) The applicant did not seek to prove in this Court that such breaches of the agreement had been established but rather that he had a reasonably arguable case and that a caveat should be available on an interlocutory basis to protect the property pending resolution of his claims.

[61] The primary judge dealt with these submissions in three stages. The first, discussed above, was the rejection of the proposition that the applicant had any trust interest at the present time. The second was a finding that there was “no suggestion” (that is, it was no part of the applicant’s pending proceedings) that the respondent was acting in a manner “calculated to defeat the intention of the compact”, to adopt the language of Dixon J in Birmingham at 689.

[62] Thirdly, the judge held that, on the basis that the corpus of the trust cannot be ascertained until the respondent dies, the trust does not crystallise until the corpus of the property (if any) is capable of identification, so that the proposed caveat cannot be supported. While the applicant might have a basis for injunctive relief against a breach of fiduciary obligations, merely by establishing a breach of those obligations he did not acquire a proprietary interest in the Darling Point property. It was therefore unnecessary to determine the further issues.

[63] The judge nevertheless rejected the basis of the further claims. The rejections were stated succinctly. With respect to the submission that the respondent could sell the Darling Point property, but not mortgage it, he reasoned that as the agreement expressly recognised a right to dispose of the property by sale, it must, at least by implication, have recognised a right to a lesser disposition than selling.

[64] With respect to use of the funds for maintenance of the farm, the judge said that the distinction sought to be drawn “between the land and the business operations on it, is artificial”. The distinction thus rejected relied on reading the opening sentence of par 3 of the agreement, expressing the testator’s wish for the respondent to assume the sole management of the testator’s farming business conducted at a particular address, and described as “the Farm”, so that the defined term referred only to the address and not to the farming business. However, par 3 of the agreement also stated:

“I wish for Victoria to use her reasonable endeavours to ensure that the Farm is operated on a financially stable and profitable basis from year to year and not to sell the farm unless financially obliged to do so.”

That “wish” is clearly not a constraint, nor a specific grant of power to a person otherwise unable to use her financial resources for such a purpose. The contention that the testator intended that the land, as opposed to the farming business, was to be operated on a financially stable and profitable basis, verges on incoherence. Thus, to read “the Farm” as limited to the land is barely tenable, when considered in context.

[65] Whether upon full argument a different view may emerge need not be determined. At the interlocutory stage, the judge’s observations were entirely plausible. They fed into a further contingent finding that, if otherwise of the view that a caveat was available, the balance of convenience supported its lapsing. That reasoning should be accepted.

41. These passages suggest that, at the hearing before Hammerschlag CJ in Eq, Mr Thynne raised the possibility that Ms Sheringham had breached the agreement with the deceased encompassed in the Memorandum of Wishes by mortgaging the Property and by using the funds borrowed to maintain her farming business, in the manner explained above. His Honour ruled that there could be no trust until the property that could be the subject of the trust became ascertained on the death of Ms Sheringham. It is not clear from Basten AJA’s description of the second stage whether Hammerschlag CJ in Eq distinguished between simple breaches of Ms Sheringham’s obligations and conduct “calculated to defeat the intention of the compact”. His Honour considered the strength of Mr Thynne’s claims that Ms Sheringham had acted inconsistently with her obligations under the Memorandum of Wishes, and concluded that they were so weak as to not justify the continuation of the caveat.

42. Unsurprisingly, this demonstrates that, notwithstanding the determination by both Hammerschlag CJ in Eq and the Court of Appeal that Mr Thynne had not established that he was entitled to an existing beneficial interest in the Property that would support the continuation of the caveat, there were aspects of the reasoning in both judgments that were influenced by the interlocutory nature of the application.

Ms Sheringham’s submissions

43. As I understand Ms Sheringham’s position at the hearing, it was that, however one viewed Mr Thynne’s prayers for relief concerning Ms Sheringham’s use of the Property, the essence of the claim was that Mr Thynne had a present equitable interest in the property because it was held by Ms Sheringham on trust for Mr Thynne and Patrick Thynne. On the principles of law outlined by Hammerschlag CJ in Eq and by the Court of Appeal, Mr Thynne did not acquire an equitable interest in the property at the time of the death of the deceased, and no event had occurred up to the date of the hearing of the caveat application that gave rise to the creation of such an interest. In any event, Mr Thynne was given the opportunity of satisfying the Court of Appeal that Ms Sheringham held the property on trust for him and Patrick Thynne at the date of the hearing, and that claim was dismissed both at first instance and by the Court of Appeal. Ms Sheringham’s submission was in effect that the proposed amendments to the claims for relief missed the point, and did not recognise or correct the deficiency in Mr Thynne’s claim.

Mr Thynne’s submissions

44. In his submissions, Mr Thynne relied upon the extract from the judgment of the plurality in Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [4] that was set out by Ward ACJ and Kirk JA: see above at [34]. The point relied upon was that their Honours had recognised the possibility that some constructive trusts create or recognise no proprietary interest, and instead, that the existence of the trust imposes a personal liability to account in the same manner as that of an express trustee. Accepting what the plurality said, that seems to be a statement to the effect that such a ‘constructive trust’ may impose a personal obligation on the trustee, as a fiduciary, to account to the person in the position of the beneficiary. It is not necessary to examine the suggested possibility of a trust existing without trust obligations relating to property: cf Jacobs’ Law of Trusts at [1-01]-[1-02], which explains the relationship between the existence of trusts and property. The observations made by the plurality do not assist Mr Thynne in this case, because the complaint is that he seeks a declaration that the Property is presently held on trust for him and Patrick Thynne. That is not a claim to enforce a personal obligation of Ms Sheringham as a fiduciary to account to him for her conduct.

45. Mr Thynne relied upon a passage from the judgment of Dixon J in Birmingham v Renfrew, where his Honour said at 687-688, concerning a judgment of Lord Parker:

… But the point he actually makes is that the equitable obligation to fulfil the contract attaches to the property the subject of the contract and converts the party into a trustee for the objects to be benefited. …

46. Mr Thynne relied upon a further passage in the judgment of Dixon J at 690, which in its full context at 689-690 is (footnotes omitted):

There is a third element which appears to me to be inherent in the nature of such a contract or agreement, although I do not think it has been expressly considered. The purpose of an arrangement for corresponding wills must often be, as in this case, to enable the survivor during his life to deal as absolute owner with the property passing under the will of the party first dying. That is to say, the object of the transaction is to put the survivor in a position to enjoy for his own benefit the full ownership so that, for instance, he may convert it and expend the proceeds if he choose. But when he dies he is to bequeath what is left in the manner agreed upon. It is only by the special doctrines of equity that such a floating obligation, suspended, so to speak, during the lifetime of the survivor can descend upon the assets at his death and crystallize into a trust. No doubt gifts and settlements, inter vivos, if calculated to defeat the intention of the compact, could not be made by the survivor and his right of disposition, inter vivos, is, therefore, not unqualified. But, substantially, the purpose of the arrangement will often be to allow full enjoyment for the survivor's own benefit and advantage upon condition that at his death the residue shall pass as arranged.

…

… But I do not see any difficulty in modern equity in attaching to the assets a constructive trust which allowed the survivor to enjoy the property subject to a fiduciary duty which, so to speak, crystallized on his death and disabled him only from voluntary dispositions inter vivos. On the contrary, as I have said, it seems rather to provide a reason for the intervention of equity. The objection that the intended beneficiaries could not enforce a contract is met by the fact that a constructive trust arises from the contract and the fact that testamentary dispositions made upon the faith of it have taken effect. It is the constructive trust and not the contract that they are entitled to enforce.

[Emphasis added].

47. Dixon J’s observations concerned a case of mutual wills without a specific compact between the testators that restricted the way that the survivor could deal with the inherited property during the survivor’s lifetime. Nonetheless, his Honour addressed the possibility that the survivor could defeat the compact by alienating the inherited property during the survivor’s lifetime. His Honour appears to say that the survivor’s acceptance of the compact contained in the execution of mutual wills imposes a duty on the survivor on the testator’s death which his Honour described as a constructive trust, but one that floated on the inherited property during the survivor’s lifetime and only crystallised on the survivor’s death. At that time, the agreed beneficiaries would acquire an equitable proprietary interest in the survivor’s estate. Pending the survivor’s death, the beneficiaries do not have a proprietary interest in the inherited property. However, because of the fiduciary duty owed by the survivor to the beneficiaries from the date of the testator’s death, which Dixon J categorised as arising out of a constructive trust that did not attach to the inherited property until the death of the survivor, the beneficiaries will be entitled to equitable remedies during the survivor’s lifetime in respect of transactions undertaken by the survivor to defeat the object of the constructive trust. In a case such as the present, where the compact contains specific restrictions on the use of the inherited property by the survivor during his or her lifetime, the entitlement to equitable relief may arise when the survivor contravenes the restrictions.

48. The relevant point for present purposes is that, even if Dixon J’s judgment supports the concept of a constructive trust being imposed upon the survivor at the time of the testator’s death, that is a special sort of constructive trust that consists of duties that are enforceable by the beneficiaries during the life of the survivor, but they do not attach to the inherited property in a way that gives the beneficiaries a proprietary interest as beneficiaries of a trust over the inherited property. The constructive trust only crystallises into a proprietary beneficial interest on the death of the survivor. It is therefore necessary to be precise in the identification of the characteristics of the so-called constructive trust imposed upon the survivor at different times after the death of the testator.

49. Dixon J’s judgment allows for the availability of equitable remedies for the beneficiaries during the life of the survivor where the survivor acts in breach of the compact with the testator, but those remedies do not arise out of the existence of a trust that attaches to the inherited property.

50. Mr Thynne also relied upon the judgment of Fullagar and Kitto JJ in Voges v Monaghan (1954) 94 CLR 231; [1954] HCA 63 at 240-241, where their Honours said (footnotes omitted):

…A passage in the judgment of Lord Davey in French v. French contains probably as clear an exposition of the principle as is to be found in the books. “It is now well established,” his Lordship said, “and has been settled since the time of Lord Hardwicke, that if a testator communicates in his lifetime to a proposed devisee or legatee that he has left him his property, and expresses a wish that the property should be disposed of in a particular manner, and the legatee or devisee by acquiescence, or even by silence, accepts that communication, and the testator dies without any repudiation, a trust is fastened upon his conscience, as it is said, and he cannot afterwards either appropriate the property to his own use or dispose of it otherwise than in accordance with the wishes which were thus communicated to him, and which he has accepted. My Lords, it is said that this jurisdiction is based upon fraud, and so it is, because if you once get to this, that it is a trust which is imposed upon the conscience of the legatee, then if the legatee betrays the confidence in reliance upon which the bequest was made to him, then it is what I should think everybody would consider a fraud, though I take the liberty to say that the moral turpitude of any particular case must vary infinitely according to the circumstances of the particular case. My Lords, the basis of it is of course that the testator has died, leaving the property by his will in a particular manner on the faith and in reliance upon an express or implied promise by the legatee to fulfil his wishes, and your Lordships will at once see that it makes no difference whatever whether the will be made before the communication to the legatee or afterwards, because, as was said, I think, by Turner V.C. in one of the cases which were cited, the presumption is that the testator would have revoked his will and made another disposition if he had not relied upon the promise, express or implied, made by the legatee to fulfil his wishes”.

51. That was a case where the beneficiary under a will had accepted an instruction from the testator that she would apply part of the inherited property for the benefit of other persons specified by the testator. It was not a mutual wills case and the beneficiary was not given the inherited property on the basis that she could enjoy it as she wished during her lifetime, provided that she gave a benefit to the other persons in her will. There was no issue of the existence of any floating obligation. It was for that reason that the trust arose on the death of the testator, as the beneficiary’s conscience was impressed with the obligation to comply with the condition upon which the testator left her the inherited property as from the date of his death. The observations made by their Honours concerning the incidence of the creation of the trust are not material to the present case, where the issue is whether, in the context of mutual wills, a survivor who breaches the compact with the testator during her lifetime becomes the trustee of the inherited property for the beneficiary before her own death.

Consideration

52. I have explained above that I am concerned that the amendments that Mr Thynne proposes to make to the prayers for relief in his statement of claim, which primarily take the form of identifying the trust as a constructive trust, do not cure the substantive deficiency in his claim that he has an existing beneficial interest in the Property, and really involve an ineffective change in language. Mr Thynne seems to assert that because Ms Sheringham accepted the inherited property on the basis of the restrictions in the Memorandum of Wishes as to what she could do with the property, her conscience became impressed with the obligation to comply with the Memorandum of Wishes upon the death of the deceased, and, from that time, she became a constructive trustee owing a personal obligation to account to Mr Thynne that was not attached to the property. The step that I cannot accept, even though I accept that fiduciary obligations may have been imposed upon Ms Sheringham at the date of the deceased’s death, is that any event has happened that has converted those obligations into those of a trustee, of whatever nature, of the Property in favour of Mr Thynne. The submissions simply do not address the reality that the authorities establish that, in the absence of an order of the Court imposing a trust on the survivor, a trust does not crystallise until the survivor’s death.

53. I acknowledge the restrictions that apply to the Court in respect of the final determination of contested issues of law on an application for summary dismissal of the plaintiff’s case. However, I think it is necessary for me to state the legal position, as I understand it, in order to explain the course that I will follow on this application. I put aside cases where the obligations of parties to mutual wills are not subject to any restrictions on the survivor’s use of the inherited property during the survivor’s lifetime. In cases of that type, the metaphor of the ultimate beneficiary’s interest in the inherited property being a floating one that crystallises on the death of the survivor is intelligible. Upon the survivor’s death, there is nothing further to be done and the survivor has either maintained the survivor’s will in accordance with the compact with the other testator, or the survivor has not. Upon the survivor’s death, a trust may spring up that is imposed upon the assets in the survivor’s estate together with an entitlement in the beneficiary to additional equitable relief binding the estate to restore the effect of the original compact between the makers of the mutual wills. In cases such as the present, where the original compact imposes restrictions on the manner in which the survivor is entitled to use the inherited property, the floating nature of the beneficiary’s interest is constrained by the terms of the compact. The nature of that constraint will depend upon the terms of the compact, which may not readily be determinable where the compact is expressed in vague or contradictory terms. Nonetheless, it will fall to the Court to determine by a process equivalent to the construction of contracts what the precise nature of the restrictions are that have been imposed on the use of the inherited property by the survivor. As the testator has died having provided consideration for the compact in the form of the testator’s own will, equity imposes on the conscience of the survivor the duty to comply with the compact. Equity recognises the standing of the ultimate beneficiary to enforce the compact, notwithstanding that the beneficiary was not a party to it. That may be in recognition that the testator’s right to the enforcement of the compact may only be exercised by the intended beneficiary. Equity may make its usual remedies available to the beneficiary to correct the survivor’s breaches of the compact during the life of the survivor. Equity may declare the terms of the compact. It may issue an injunction to restrain further breaches, or make a mandatory order that obliges the survivor to correct existing breaches. The availability of those remedies will not give the beneficiary an equitable interest in the inherited property. The question is: may there be circumstances where conduct of the survivor in breach of the compact does give the beneficiary a trust interest in property?

54. On an application such as this, it would be wrong for the Court to give a definite answer to this question. The authorities clearly establish that the beneficiary does not have a trust interest in the inherited property from the date of the death of the testator. In my view, during the life of the survivor, before the crystallisation of a trust on the survivor’s death, no breach of the compact by the survivor will have the automatic effect in equity that the remaining inherited property is impressed with a trust in favour of the beneficiary. Although a breach will give rise to an entitlement in the beneficiary to appropriate equitable remedies, those remedies do not extend automatically to a trust interest in the whole of the remaining inherited property. It is wrong in this context to use the word “crystallisation” in relation to the beneficiary’s equitable rights. The automatic creation of a trust in equity would destroy the residual effect of the compact, and have a punitive effect on the survivor, contrary to the principles of equity. Equity will prevent further breaches and correct the effect of existing ones, but it will not impose what is sometimes called an institutional constructive trust against the survivor over the remaining inherited property.

55. In my view, that conclusion is not inconsistent with the properly understood intent of the plurality in the Court of Appeal on the caveat application, where they said at [12]: “… As a “claim to have an equitable interest”, the mere equity may, depending on all the circumstances, “crystallise” into an equitable interest once the beneficiary can establish a claim for equitable relief arising out of a fraud by the survivor or to enforce the underlying agreement between the survivor and the testator. The obligations will crystallise into a trust over the impugned assets the subject of the obligations once those obligations are breached, which may not be until the death of the survivor if the survivor does not leave a will consistent with (here) the Memorandum of Wishes…” As noted above, the plurality stated at [13] that the beneficiary would not have “a specific equitable, proprietary interest in particular assets”. The conclusion reached by the plurality as stated at [15] is plainly inconsistent with their Honours accepting that, in equity, a breach of the compact by the survivor would crystallise a trust in favour of the beneficiary over the remaining inherited assets.

56. The possibility should not be excluded that, in a relatively extreme case, equity might impose a remedial constructive trust on the survivor, perhaps in cases where the breach of the compact by the survivor can truly be characterised as a repudiation of the compact that puts the rights of the beneficiary inheriting at the date of the survivor’s death in substantial jeopardy. On no view does the present case justify the imposition by the Court of a constructive trust over the whole of the remaining inherited property. It is not necessary to consider this possibility further. Were it available, Mr Thynne would not be entitled to seek a declaration that a constructive trust existed, but he would be required to apply for an order imposing the trust. Until that order was made, Mr Thynne would not have a trust interest in the property.

57. On that basis, the Court will make an order summarily dismissing prayers 20 to 25 of the prayers for relief in the statement of claim, because all of those prayers depend upon there being in existence a present trust interest in favour of Mr Thynne over the Property. The Court will also dismiss Mr Thynne’s application for leave to amend those prayers. Consequently, the Court will also dismiss Mr Thynne’s application for leave to add the additional claims for relief in pars 85A and 85AB of the draft amended statement of claim.

58. Strictly, as the effect will be that all of Mr Thynne’s prayers for relief concerning the Property will be dismissed, all of his allegations in pars 63 to 64 and the restatement of the entitlement to the relief claimed in the prayers in par 85 should be struck out, as they will no longer allege material facts relevant to a claim for relief in the proceedings. Mr Thynne’s application for leave to amend those paragraphs should also consequently be dismissed.

59. I am reinforced in my view that the orders that I have just foreshadowed are appropriate on this application by the circumstance explained above that Mr Thynne obtained leave to appeal in the caveat application by informing the Court of Appeal that its determination of the appeal would settle the question of whether Mr Thynne had an equitable proprietary interest in the Property, and further, that Ms Sheringham consented to leave being granted on that basis. Subject only to the possibility that it should not be held against Mr Thynne that he was not aware that part of the money borrowed by Ms Sheringham had been used to buy the farm from her parents, all of the breaches of the Memorandum of Wishes upon which Mr Thynne has relied in this case were known and were before the Court, both at first instance and in the Court of Appeal. It is not appropriate that Mr Thynne should be permitted to claim that he has a present beneficial interest in the Property on a different conceptual basis than he apparently relied upon for the purposes of the caveat application.

60. The flaw in Mr Thynne’s forensic position is that he has bound himself to the remedy of a declaration of the existence of a constructive trust over the Property, and has now sought to extend that claim by seeking an order that Ms Sheringham be replaced as trustee. He has not merely sought declarations concerning the true effect of the restrictions imposed upon Ms Sheringham by the Memorandum of Wishes. He has not sought injunctive relief to prohibit further alleged breaches or to correct the effect of existing breaches. In relation to the purchase by Ms Sheringham of her parents’ farm, that claim has not yet been properly pleaded. It may be that, if the purchase of that farm was a breach of the obligations imposed by the Memorandum of Wishes, and the effect was to place the value of that farm outside the intended effect of the will executed by Ms Sheringham at the time the mutual wills were made, equity would impose a constructive trust over that property, or make some other appropriate order that would be effective to make good Ms Sheringham’s obligations. I say nothing about Mr Thynne’s entitlement to any such relief. The only point to be made is that he has not sought it.

61. It is neither necessary nor appropriate for the Court to decide Ms Sheringham’s submissions that Mr Thynne’s claim that the Memorandum of Wishes excluded Ms Sheringham’s right to grant a mortgage over the Property and that Ms Sheringham was only entitled to expend money on the Farm, limited to its physical property, and not the farming business that she inherited from the deceased are hopeless and doomed to fail. The views of Hammerschlag CJ in Eq and Basten AJA may be noted. Neither judge purported to finally decide these questions in the interlocutory proceedings that were before them. The same is true for me, and I have foreshadowed orders that would summarily dismiss the claims for relief that require the questions to be determined.

Orders

62. Given the conceptual complexity of these reasons, I will repeat the essence of the conclusions that I have reached, in order to explain the orders that I will make. Mr Thynne has persisted with his claim that Ms Sheringham holds the Property on an existing trust for Mr Thynne and Patrick Thynne. The relief claimed is based upon the validity of that claim. Mr Thynne has contended that it is proper to describe Ms Sheringham as trustee under an existing constructive trust even though that only imposes fiduciary duties upon her. Mr Thynne's difficulty is that it is inescapable that some of the relief that he seeks and some of the allegations of fact that he makes are inconsistent with the proposition that Mr Thynne is only seeking to enforce fiduciary duties and that he does not claim a present equitable interest in the Property. Mr Thynne does not seek relief limited to requiring Ms Sheringham to conform with fiduciary duties arising out of the Memorandum of Wishes, or to restore the consequences of any breach. He seeks an account from Ms Sheringham before her death. As I have explained above, many of the allegations of fact, including proposed amended allegations, would be relevant to a claim for relief against breaches of fiduciary duty, but that relief is not sought. Some of the allegations of fact are out and out allegations dependent upon Ms Sheringham at present being a trustee of the Property.

63. In these circumstances, I have not found it easy to decide what orders should be made. I have decided that the appropriate course is to dismiss the prayers for relief that on a fair reading are based upon the claim that Ms Sheringham holds the Property on a presently existing trust. I will then strike out the allegations of fact that are also dependent on the existence of a present trust. I will decline leave to make amendments to those prayers and allegations of fact. I will grant leave to make the balance of the amendments sought by Mr Thynne. I acknowledge that, arguably, the result may be that there will be allegations of fact that are not relevant to a claim for relief. I will take this course because the Court has not received detailed submissions concerning what allegations of fact should be permitted, having regard to the prayers for relief that will survive. Realistically, it is also probable that the contest about the pleading of Mr Thynne's claim will not be completely resolved by this judgment.

64. I consider that the costs of the notices of motion should be dealt with on the basis that Ms Sheringham has substantially succeeded in resisting Mr Thynne's notice of motion seeking leave to amend his statement of claim, and has succeeded on her notice of motion seeking the dismissal of Mr Thynne's claim for relief based upon Ms Sheringham holding the Property on trust. Ms Sheringham is entitled to an order that Mr Thynne pay her costs of those notices of motion.

65. As to Ms Sheringham's notice of motion concerning the subpoena that was served on Westpac Banking Corporation, she should be ordered to pay Mr Thynne's costs as she elected not to proceed with the notice of motion.

66. The Court's orders are:

1. Order that the claims for relief in prayers 20 to 24 of the plaintiff's statement of claim be dismissed.

2. Order that the plaintiff's notice of motion filed on 12 October 2023 be dismissed insofar as it seeks leave to amend prayers 20 and 22 of the plaintiff's statement of claim.

3. Order that the plaintiff's notice of motion filed on 12 October 2023 be dismissed insofar as it seeks leave to amend the plaintiff's statement of claim by adding pars 75A, 81A, 81AB, 81AC, 85A and 85AB.

4. Order that pars 82 and 83 be struck out of the plaintiff's statement of claim.

5. Otherwise grant leave to the plaintiff to amend the plaintiff's statement of claim in accordance with the leave sought by the plaintiff in his notice of motion filed on 12 October 2023.

6. Otherwise dismiss the defendant's notice of motion filed on 16 October. 2023.

7. Dismiss the defendant's notice of motion filed on 25 October 2023.

8. Order the plaintiff to pay the defendant's costs of the plaintiff's notice of motion filed on 12 October 2023 and the defendant's notice of motion filed on 16 October 2023.

9. Order the plaintiff to pay the defendant’s costs thrown away by the grant of leave to amend the plaintiff’s statement of claim.

10. Order the defendant to pay the plaintiff's costs of the defendant's notice of motion filed on 25 October 2023.

11. Stand the proceedings into the Registrar's list on 6 December 2023 for directions.

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Decision last updated: 30 November 2023