Woodhouse v Woodhouse

[2022] NSWSC 204

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Woodhouse v Woodhouse [2022] NSWSC 204

Hearing dates:

28 June to 2 July 2021

Date of orders:

4 March 2022

Decision date:

04 March 2022

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1.   Dismiss the statement of claim.

2.   Judgment for the cross-claimant on the cross-claim against the first cross-defendant in the sum of $119,737.13 by way of equitable compensation for breach of fiduciary duty plus interest thereon as claimed.

3.   Judgment to the cross-claimant on the cross-claim against the second cross-defendant for repayment of all moneys paid pursuant to the agreement for transfer of the 215 Acres (as defined), plus interest thereon as claimed, but dismiss claim for specific performance.

Catchwords:

EQUITY – Fiduciary duties – Breach – Whether fiduciary authorised to withdraw sums in question

CONTRACT – Existence of agreement – Authorisation by agent – Whether agreement enforceable per s 54A of the Conveyancing Act 1919 (NSW) – Breach – Termination – Whether specific performance available as a remedy

CONTRACT – Oral agreements – Existence of agreement – Terms of the agreement – Whether the loan under the alleged agreement repayable on demand

LIMITATION OF ACTIONS – Whether payments made as interest or in repayment of the loan per s 54(2)(a)(ii) of the Limitations Act 1969 (NSW)

Legislation Cited:

Conveyancing Act 1919 (NSW), s 54A

Limitation Act 1969 (NSW), ss 14(a), 24(2), 54(1), 54(2)(a), 54(2)(b)

Cases Cited:

Asset Risk Management v Hyndes [1999] NSWCA 201

Australia and New Zealand Banking Group Limited v Widin (1990) 102 ALR 289

Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651

Barkley v Barley Brown [2009] NSWSC 76

Cameron (as Executrix of the Will of Alexander Donald Robert Gordon Cameron (Dec)) v Murdoch (as Administratrix of the Estate of James Cameron (Dec)) [2003] WASC 264

Chethams v Remington & Co [1999] 3 VR 258; [1999] VSC 150

Chidiac v Maatouk [2010] NSWSC 386

De Leuil v Jeremy (1964) 65 SR (NSW) 137

DTR Nominees Pty Limited v Mona Homes Pty Limited (1978) 138 CLR 423

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423

Faraday v Rappaport [2007] NSWSC 34

George v Webb [2011] NSWSC 1608

Good v Parry [1963] 2 QB 418

Grimaldi v Chameleon Mining NL (No.2) (2012) 200 FCR 296

Haller v Ayre [2005] 2 Qd R 410

Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266

Heppingstone v Stewart (1910) 12 CLR 126

Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41

Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68

In re Coomber [1911] 1 Ch 723

King v Poggioli (1923) 32 CLR 222

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61

Lord Chedworth v Edwards (1802) 8 Ves Jr 46; 32 ER 268

Maddison v Alderson (1883) 8 App Cas 467

McBride v Sandland (1918) 25 CLR 69

Mehmet v Benson (1965) 113 CLR 295

Morphett v Jones (1 Sw 181)

O’Young v Walter Reid and Co (1932) 47 CLR 497

Ogilvie v Adams [1981] VR 1041

Pearse v Green (1819) 1 Jac & W 135 at 140; 37 ER 327

Peninsular and Oriental Steam Navigation Company v Johnson [1937-1938] 60 CLR 189

Pipikos v Trayans [2016] SASCFC 138; 126 SASR 436

Pipikos v Trayans [2018] HCA 39

Public Trustee (NSW) v Gavel (1927) 40 CLR 169

Radoman Pty Limited v Vexapu Ply Limited (2008) 13 BPR 24,903; [2008] NSWSC 8

Re Earth Civil Australia Australia Pty Ltd (in liq) [2021] NSWSC 966

Regent v Millett (1976) 133 CLR 679

Reuss v Picksley (1866) LR 1 Exch 342

Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149

Stage Club Ltd v Miller Hotels Pty Ltd (1981) 150 CLR 535; [1981] HCA 71

Surrendra Overseas Ltd v Government of Sri Lanka (The Apjakash) [1977] 2 All ER 481

Thompson v Mcinnes (1911) 12 CLR 562

Timmins v Moreland Street Property Co Limited [1958] Ch 110

Torok v Becker [2020] NSWSC 1570

Tramways Advertising Pty Limited v Luna Park (NSW) Limited (1938) 38 SR (NSW) 632

Tropeano v Riboni [2005] VSC 229

Tweddell v Henderson [1975] 1 WLR 1496; 2 All ER 1096

VL Finance Pty Ltd v Legudi [2003] VSC 57; (2003) 54 ATR 221

Warman International Limited v Dwyer (1995) 182 CLR 544 at 559; [1995] HCA 18

Watson v Foxman (1995) 49 NSWLR 315

Woden Squash Coutts Ply Limited v Zero Builders Ply Limited [1976] 2 NSWLR 212

Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Ltd [1995] QB 174

Young v Queensland Trustees Ltd (1956) 99 CLR 560

Texts Cited:

Carter and Harland, Contract Law in Australia (3rd ed, Lexis Nexis)

Fry, Specific Performance (6th ed)

Graw S, An Introduction to the Law of Contract (2nd ed)

Meagher Gummow & Lehane, Equity: Doctrines and Remedies (5th ed, 2015, Lexis Nexis)

Snells, Principles of Equity (28th ed)

Category:

Principal judgment

Parties:

Nicolas Mary Woodhouse (Plaintiff/Cross-Defendant)
Philip George Woodhouse (Defendant/Cross-Claimant)
Lincoln James Kennedy and David Andrew Woodhouse as Executors of the estate of the late Catherine Woodhouse (Second Cross-Defendant)

Representation:

Counsel:
J Mack (Plaintiff)
A Crossland and A Djukanovic (Defendant/Cross-Claimant)
SV Shepherd (2nd Cross-Defendant)

Solicitors:
Walsh & Blair Lawyers (Plaintiff)
JDC Lawyers (Defendant/Cross-Claimant)
Pikes & Verekers Lawyers (2nd Cross-Defendant)

File Number(s):

2018/00268002

Publication restriction:

Nil

Judgment

1. HER HONOUR: This proceeding arises out of disputes between members of the Woodhouse family. Without intending any disrespect, I refer to the family members by their first names. The plaintiff (Nicola) and her deceased husband, Garry, had three children: Philip (the defendant), Andrew and Jennifer. Philip is married to Jane; Andrew was married to Catherine (who is now deceased and whose executors – Andrew and her solicitor, Mr Kennedy, are representing her estate and have been joined as the second defendant in this proceeding); and Jennifer (who plays no part in the present proceeding) who is married to Simon.

2. The proceeding was initially commenced in the District Court by a statement of claim filed by Nicola on 31 August 2018 in which Nicola sought repayment of the sum of $250,000 which was said to be the principal outstanding on 1 July 2015 under a loan allegedly made to Philip pursuant to an alleged oral agreement made in June 2010. Nicola claimed interest at 8% per annum on the principal from 1 October 2014.

3. Philip denies the alleged loan agreement but in the alternative raises a limitation defence (on the basis that the loan was repayable on demand and hence the limitation period would run from the time of the alleged loan). Against this defence, Nicola relies on payments allegedly made as interest or in repayment of the loan (relying on s 54(2)(a)(ii) of the Limitation Act 1969 (NSW) (Limitation Act), albeit that those payments were for the most part made by her using Philip’s cheque book with which she had been entrusted.

4. Philip has filed a cross-claim against Nicola, in which he alleges breach of fiduciary duty, fraud and deceit against Nicola relating to her use of his cheque book to transfer sums to or for her own benefit (seeking to recover – and raising as a claim for equitable compensation – the amount of about $147,482.97). Nicola denies the claim made against her and contends that she was authorised to withdraw the sums in question (a number of which she maintains were for Philip’s benefit).

5. Philip has joined, as the second defendant to his cross-claim, his sister-in-law, Catherine (and now her estate), alleging that in 2015 he and Catherine reached agreement for Catherine to sell him some 215 acres of land (to which I will refer in more detail shortly) (the 215 Acres) and seeking specific performance of that agreement. At this stage, suffice it to note that the agreement allegedly reached between Philip and Catherine was to the effect that Philip would pay the sum of $250,000 (plus other smaller amounts and expenses) into the trust account of the firm of solicitors then acting (albeit with different solicitors involved for each) for both Nicola and Catherine (Walsh & Blair Lawyers, to whom I refer as Walsh & Blair), which sum would then be paid to Nicola and treated by Nicola as being in discharge of the loan alleged by Nicola (but which Philip denied). In other words this was an inter-family arrangement which was seemingly intended to satisfy Nicola’s claim (without admission of liability on Philip’s part) in exchange for which Catherine would effect what was called a “boundary adjustment” or realignment, by transferring land to Philip. That transfer of land required the subdivision of land held in Catherine’s name (hence some of the proposed expenses which Philip was to bear as part of the arrangement).

6. The relief sought against the second cross-defendant is specific performance of the alleged contract or, in the alternative, repayment of money paid under that contract.

7. The co-executors of Catherine’s estate are her widower, Andrew, and her solicitor (Mr Kennedy, a partner at Walsh & Blair). The executors deny the claim made against the estate, alleging that any contract between Philip and Catherine is not enforceable by reason of s 54A of the Conveyancing Act 1919 (NSW) (Conveyancing Act); and that, if there was such a contract, it was validly terminated by Catherine in correspondence dated 16 May 2016 and/or 28 June 2016 from Walsh & Blair. Notwithstanding the executors’ denial (and in the alternative termination) of the alleged contract for the transfer of the 215 Acres to Philip, they have refused to repay to Philip the amounts paid by him pursuant to the arrangement (to use a neutral term) with Catherine; instead arguing that the money was received by them as repayment of the loan alleged by Nicola and that it would be in breach of trust for them to do so. Philip has refused to give instructions for the release of funds to Nicola (other than on the provision of a registrable certificate of title in respect of the 215 Acres). Hence, the current (unfortunate) impasse within the Woodhouse family.

8. After the filing of Philip’s cross-claim, the proceeding was transferred to this Court on 18 July 2019.

9. For Nicola, it is said that the interaction between the respective claims (depending on whether Nicola succeeds in establishing that there was a loan agreement) is as follows.

10. First, that if Nicola succeeds in establishing that the sum of $250,000 is principal owing on a loan, then Philip’s cross-claim in contract against Catherine’s estate fails and the only residual claim is Philip’s fraud claim against Nicola. I am by no means persuaded that this necessarily follows; it seems conceptually possible both for there to be a loan agreement enforceable by Nicola against Philip and a contract between Philip and Catherine for the transfer of the land in question. I accept that difficulty might arise with the latter if Nicola were to insist on repayment of the loan direct from Philip (despite his payment of that sum to Catherine) since in that event the agreement with Catherine might arguably be frustrated (as the money intended to be on-paid to Nicola could not then be applied to that purpose). In other words, Nicola’s acceptance of the moneys presently held in Walsh & Blair’s trust account as a discharge of the alleged loan seems to be essential to the efficacy of the arrangement between Philip and Catherine (and it seems abundantly clear that Nicola’s co-operation is unlikely to be forthcoming even though it is not clear that there would be any detriment to Nicola occasioned by the arrangement between Philip and Catherine proceeding). Thus, the practical effect of Nicola succeeding on her loan claim may indeed be that the contractual claim against Catherine’s estate serves no purpose even though conceptually maintainable.

11. Second, that if Philip is successful in contending that any loan is statute barred, then it is said that Philip’s cross-claim against Catherine’s estate again fails and the only residual claim is Philip’s fraud claim against Nicola. Again, I am not certain that this necessarily follows. That is because, even if the loan agreement is statute barred, I see nothing to stop Philip (as indeed the agreement with Catherine contemplated) from simply directing the release of the funds in the trust account to Nicola (i.e., if the agreement with Catherine were to be enforced) for the payment to Nicola of the amount that would have been payable under the alleged loan agreement, were it not to be statute barred. In that regard, I note that Philip himself maintains that he is ready, willing and able to perform his side of that arrangement. Again, however, the efficacy of this would arguably depend on Nicola’s acceptance of the $250,000 (although if the loan is otherwise statute-barred it is hard to see that, other than sheer obstinacy, there would be any reason not to accept that sum).

12. Third, that if Philip is successful in his primary defence of Nicola’s claim (and it is held that there is no loan), then it is said that this would leave for determination both Philip’s cross-claim in contract against Catherine’s estate and Philip’s cross-claim against Nicola for fraud. With that proposition there can be no dispute.

Chronology of Events

13. Nicola and Garry were married in 1960 and carried on a family pastoral business on land in the Wagga Wagga area. They had three children (Philip, Andrew and Jennifer). The family grazing business was carried on over three contiguous parcels of land (known as Lorraine, Colongolong and Cotterills); and the couple’s three children grew up on the land (although at least Philip went to Sydney for much of his schooling.

14. Garry was (for most of his life) the registered owner of Lorraine and Colongolong; Nicola owned Cotterills. It appears that at some stage Garry also owned another parcel of land (of 201 acres), known as Gregadoo, which was transferred from Garry to Catherine in 2005 for consideration of $1.00; but this land has nothing to do with the present dispute.

15. The pastoral business was run through a company, Lorraine Company Pty Ltd (Lorraine Company), which was the trustee of the Lorraine Trading Trust (which was established in July 1981).

16. Philip, whose evidence is that he has suffered from learning difficulties since he was a child and who it is apparent continues to have difficulty in reading and comprehension of documents (not only from the evidence of Dr Finnigan relied upon in this proceeding, to which I will refer in due course, but also to my observation from the giving of his evidence in the (virtual) witness box), was sent to a “special school” in Sydney that catered for children with learning difficulties, from the age of about seven.

17. In the early 1990s, Philip worked on the family farm and lived in a cottage on Lorraine (see Philip’s affidavit affirmed on 26 July 2020 at [19]). In around 1999, Philip moved into Wagga Wagga and subsequently he lived and worked for a time in Tumut (see Philip’s 26 July 2020 affidavit at [24]).

18. In July 1999, Garry and Nicola (and Lorraine Company) became clients of Mr Hayden Drummond an accountant (now retired) who gave evidence in the proceeding (see Mr Drummond’s affidavit sworn on 24 May 2021 at [1]).

19. In July 2001, Lorraine Company was removed as trustee of the Lorraine Trading Trust; and Garry and Nicola were appointed as trustees in its place.

20. In 2003, Garry and Nicola moved into town in Wagga Wagga (to a house in Dalkeith Avenue). At around this time it seems that Jennifer and her husband Simon were carrying on (with Garry and Nicola) the farming operations on one or more of the properties; and on 1 September 2004, Jennifer and Simon were added as trustees of the Lorraine Trading Trust.

21. In around 2005 or 2006, Garry (then aged 75) suffered a serious injury in a farming accident. Nicola’s evidence is that, after this, she and Garry started having “serious discussions” about succession planning, during which they discussed the need to transfer the farms and the business away from Nicola and Garry (Nicola’s first affidavit at [11]-[12]).

22. Philip’s evidence is that in early 2009 Garry invited him back to work on the farm (see Philip’s 26 July 2020 affidavit at [28]). It does not seem to be disputed that Garry was unhappy with the management of the farming business by Jennifer and Simon by this stage.

23. Nicola’s evidence is that, in June 2009, there was a conversation to the effect that if Philip were to “take on” Lorraine and the trading trust then Philip would also have to take on the liabilities; and that Garry told Philip that he would get five years of the lease on Colongolong and Cotterills rent free (this is apparently suggested as something that would off-set the taking on of responsibility for the liabilities associated with Lorraine; i.e., an existing overdraft) (T 312). Nicola contends that this conversation was the basis of the agreement to transfer Lorraine to Philip and for the rent free lease for five years of the other two properties; i.e., that Philip had to take on the debt as reflected in Lorraine Company’s “S1” account with ANZ. Nicola says at [33] of her first affidavit that the conversation took place to the following effect:

Garry:   If you take on Lorraine and the trading trust you have to take on the liabilities including the overdraft.

Philip:   What about Andrew?

Garry:   You are getting five years worth of the lease. you would have the use of the whole three farms because you have taken on the overdraft and any other liabilities of the trading trust.

Philip:   The overdraft is so large because of Jenny and Simon haven’t been managing the place properly.

Garry:   Stop going on about it, look here, we are giving you the run of the place for five years you can do what you want with it and you are getting a bloody good deal, and you can take it or leave it. Andrew would be very pleased to get what you are getting. Andrew and Cate will be taking possession of their property.

Philip:   Ok.

24. Philip says that the conversation at [33] of Nicola’s affidavit is not only implausible but also, given the context and the timing, it makes little sense in its terms. In particular, Philip says the following. First, that Garry is alleged to have said “If you take on Lorraine and the trading trust.” but that, in fact, Philip never “took on” the trading trust and it is said that there is no evidence other than this alleged conversation that it was ever intended that he do so (noting that the trustees were at all relevant times Garry and Nicola). Second, that Philip is alleged by Nicola to have said “the overdraft is so large because Jenny and Simon haven’t been managing the place properly” but that there is no evidence of Nicola and Garry ever having communicated the amount of the overdraft to Philip (and that Philip’s denial of knowing how large the overdraft was, or even knowing what an overdraft is, is plausible).

25. On 30 July 2009 (as recorded in an invoice dated 3 June 2010, i.e., issued some one year later by Mr Drummond’s firm ASB & Associates), there was a meeting (apparently with one or more members of the Woodhouse family) “to discuss succession issues, super etc”. It is not clear who attended this meeting or what was the content of the discussion at the meeting other than insofar as can be gleaned from the narrative on the invoice.

26. On 18 August 2009, a sum of $10,000 was paid by cheque to Landmark (the ANZ) into an account of Philip (Ex C pp 1-2). This is one of a series of sums that appears to have been gifted by Garry to Philip (relevant only insofar as it is submitted for Philip that these payments formed a large part of the overdraft and that it would be unlikely for Garry to have made a gift of the sums on the one hand and then sought to burden Philip with the overdraft and hence require him effectively to repay them).

27. Philip’s evidence is that in September 2009 Garry told Jennifer and Simon to leave Lorraine (as noted earlier, Garry apparently being unhappy at their farming of the property) and Philip commenced working on Lorraine (see Philip’s 26 July 2020 affidavit at [30]; [33]). Nicola’s evidence, which is broadly consistent with this, is that in December 2009, Jennifer and Simon left the Lorraine homestead and Philip moved in (Nicola’s first affidavit at [17]).

24. On 9 December 2009, Commins Hendricks, solicitors, wrote to Garry and Nicola, saying:

We note that you are making arrangements to meet with Hayden Drummond to discuss the trading entity in which Philip is to trade.

29. Significantly, the letter is written to Garry and Nicola (not to Philip), which seems to me to be consistent with Philip’s parents being involved in organising his affairs for him (which would not be surprising given their probable knowledge - as his parents - of his learning difficulties).

30. On 10 December 2009 (again by reference to an invoice from Mr Drummond, this invoice being dated 3 June 2010), there was a meeting by Mr Drummond with Philip “re tax structures” Ex D p 15; Ex 6.

31. Nicola has deposed (see at [33]) that at around this time (but after discussions with Commins Hendricks solicitors had commenced) there was a discussion at the home in Dalkeith Avenue concerning Philip “taking on” the company overdraft (as extracted above).

32. On 18 December 2009, Garry and Nicola executed a Deed removing Jennifer and Simon as trustees of the Lorraine Trading Trust (such that Garry and Nicola were then the only trustees again of the Lorraine Trading Trust) (see Ex C pp 29-31).

33. On 5 January 2010, a valuation report was prepared by Frogley Egan, valuers, in respect of the three properties (Cotterills, Colongolong and Lorraine) (see Nicola’s affidavit Ex C pp 55-58). It seems likely that the purpose of the valuation was in the context of the later transfers of those properties to Philip and Catherine respectively; most likely, to enable stamp duty on the transfers to be calculated. (On 5 March 2010, a cheque was drawn by Nicola on Philip’s account for $2,800 for the Frogley Egan valuation of Lorraine and Cotterills – see tax invoice addressed to “Advance Trading Australi G&N Woodhouse”.) If the valuations were indeed for stamp duty purposes in contemplation of the latter transfers it is not clear why Philip should have borne the cost – or at least the whole of the cost – of the valuations.

34. On 20 January 2010, John Deere Credit wrote to Jennifer, Simon, Garry and Nicola “as trustee for the Lorraine Trading Trust”, advising that “your contract with John Deere Credit is due for completion very shortly” and that the final payment on the contract was due on 19 February 2010 (the amount required to finalise the account being $23,735.84). (It is relevant to note that a cheque in precisely this sum was drawn on Philip’s account by Nicola on 5 February 2010 made payable to “John Deere Credit Tractor” (see Ex 12 p 33). This is an expense that Nicola claims was for Philip’s benefit as he obtained the benefit of the tractor. There is, however, no evidence that Philip understood or agreed to payout the residual for the tractor when the liability was that of the trustee of the trading trust.)

35. In early 2010, Philip started his own farming business (see T 214.1-18). Commencing from 22 January 2010, there were various payments by cheque drawn on Philip’s account by Nicola. The first of those payments is one of the payments here impugned. It was drawn for $1,236.65 for “Mastercard – repairs, maintenance and fuel”. Philip’s evidence is that he has not ever held a Mastercard (see Philip’s 26 July 2020 affidavit at [41]).

36. There were also various transfers from January 2010 from the Lorraine Company S1 account with Landmark, ANZ, to an account ending in #49S2 (Philip’s account – the S2 account) (see Ex C pp 64-68).

37. From 1 March 2010 (according to Nicola’s chronology of events) Philip’s rent free lease of Cotterills and Colongolong commenced. Philip’s chronology places this at a later time (from June 2010) – see below – but nothing turns on the precise date it commenced.

38. On or around 1 April 2010, the bulk of the family land was divided up as between Philip and (at Andrew’s direction) Catherine. In particular, on 1 April 2010, Colongolong (then in Garry’s name) was transferred to Catherine (for consideration noted as $1.5 million) and Lorraine (also in Garry’s name) was transferred to Philip (for consideration noted as $2.65 million). It is not disputed that the purchase price in each case was forgiven. Subsequently, in 2015, Nicola transferred Cotterills to Catherine. (It seems that Jennifer received no land.)

39. Nicola’s evidence is that at some time before 19 May 2010, she, Garry and Philip had a conversation in relation to alternative arrangements for the (Lorraine Company) overdraft (see Nicola’s first affidavit at [44]). Nicola deposed in her affidavit that she and Philip (here making no mention of Garry) went to ANZ on 19 May 2010 ([44]) but, in cross-examination, Nicola said for the first time that Garry went with her to ANZ with Philip (T 108.10). Philip accepts that he went to ANZ with Nicola (at [33]) but denies that Garry came with them. Philip says that Nicola’s oral evidence in this regard should be rejected as untruthful (and, moreover, as evidence of her lack of credibility in this case generally).

40. Nicola’s evidence is that at this stage she had access to a term deposit that was going to expire; that she was going to get interest of 6.25% if the term deposit was renewed; and that she offered to lend Philip the money so he would not have to borrow from ANZ Bank. (The necessity for any borrowing by Philip from ANZ Bank presumably arose due to the commencement of his own family farming operations – including, on Nicola’s case, the “taking on” of the Lorraine Company overdraft.) Nicola nevertheless said that Garry had taken the steps with the ANZ loan (T 111.15).

41. Nicola accepted in cross-examination that no documents were shown to Philip at the ANZ bank (T 108.23) (which was consistent with Philip’s evidence that he was never shown any documents) and that she already had facilities and accounts, through Lorraine Company, with ANZ (T 108.50-109.05). Nicola accepted that she was informed by ANZ that the bank would only lend $250,000 to Philip if Nicola gave Cotterills as collateral (T 109.38). (It is not clear from Nicola’s account that this occurred at the meeting at which Philip was present at the bank.) Nicola also gave evidence (seemingly inconsistently within her earlier evidence that Philip was not shown the ANZ documents) that the ANZ loan document was explained to Philip (T 110.28).

42. On 1 June 2010, according to Philip’s chronology and the contemporaneous documents, Philip entered into a five year (rent free) lease over Colongolong (by then owned by Catherine) and Cotterills (still in Nicola’s name) (see Ex C pp 77-85).

43. In June 2010, the five year term deposit in Nicola’s name to which I have referred above (in the amount of $267,000) matured (see Nicola’s first affidavit at [7]).

44. On 9 June 2010, ANZ sent a letter of offer to Philip for an “ANZ Revolving Agri Line” loan in the sum of $250,000 to be secured by mortgage over Cotterills (Nicola’s property) at an interest rate of 9.12% with the term being until a “Review Event or an Event of Default” (see Ex C pp 86-98). Philip gave evidence (which he maintained in cross-examination) that, prior to this proceeding, he had never seen the ANZ loan document. It is said for Philip that Nicola’s evidence about that document and the circumstances of its preparation are consistent with Nicola: taking the view (independently of Garry, who was at that time “very frail” (T 73.25) and whom she thought it quite likely would die soon (T 73.23)) that Philip should discharge the overdraft and thereby relieve her of any obligation to do so; and making arrangements with ANZ (independently of Garry and, it is submitted, probably without his knowledge) to make a loan offer to Philip in a sum sufficient to cover the Lorraine Company overdraft.

45. Nicola’s evidence is that some time between 9 June 2010 and 28 June 2010, she, Garry and Philip travelled to Mr Drummond’s office at Walwa to meet Mr Drummond to discuss arrangements for the overdraft. Nicola says that she and Philip agreed that (instead of Philip accepting the ANZ loan facility) Philip would take a loan of the amount in Nicola’s then term deposit for a term of five years.

46. Mr Drummond’s evidence is that Philip showed Mr Drummond the ANZ loan document shortly after 9 June 2010. Mr Drummond also says that a meeting took place at his office between 9 June 2010 and 28 June 2010, during which a discussion took place to the following effect:

Nicola:   I have funds in the Rural Bank. I am prepared to lend the money to you [Philip] for the rate of 8% fixed. I would not require any security. This is cheaper money than that being offered by the ANZ Bank and it will help me, as I get more interest than I am currently getting on my investment. I don’t want to mortgage my farm to the ANZ Bank.

Mr Drummond:   Well we need to get the overdraft paid out prior to 30 June so that we can transfer all the assets over to Philip so that he can operate on his own and effectively wind up the trading trust.

Philip:   I am happy with that arrangement. It is easier for me to borrow money from you rather than the bank.

Garry:   Philip will take over all the livestock and the plant and equipment. Can all of this be organised by the end of the financial year so that Philip can take over on 1 July?

Mr Drummond:   Yes, I’ll attend to that. After I’ve transferred the assets of Lorraine Trading Trust I will wind it up.

47. (There is nothing independently to corroborate Nicola’s assertion as to the alleged term of the loan and only Mr Drummond’s evidence as to the specification of the alleged interest rate). On 28 June 2010, Nicola (she says pursuant to the loan agreement with Philip) transferred the sum of $267,237.02 from her Rural Bank #369 account to the S1 account (i.e., the Lorraine Company account) and closed the Rural Bank account.

48. On 29 June 2010, the transfer of money to the S1 account increased the balance in that account from -$267,237.02 to $43,085.92 (i.e., discharging the overdraft and leaving a positive balance in the account).

49. On 30 June 2011, Philip’s balance sheet records a loan to Nicola for $$267,237.02 as a liability (Ex A p 4). Pausing here, considerable caution needs to be exercised in placing weight on Philip’s financial and taxation records in that they were not prepared by him (but by Mr Drummond with assistance from one or both of Nicola or the bookkeeper, Mrs Neil) and Philip’s knowledge of their contents (other than if explained carefully to him) would be moot.

50. On 14 July 2010, Commins Hendricks wrote to Garry and Nicola, stating that:

… all assets of LTT [Lorraine Trading Trust] such as plant, equipment & livestock, have now been transferred to Phillip’s trust and are now in the sole control of the trust which Phillip controls. [It is not clear to what trust the solicitors were there referring.]

We also note that you did not advise that you wished for any security to be held in relation to the transfer of the plant, equipment and livestock into Phillip’s control. [It is not clear to what the reference to security was there being made]

We note that you had initially instructed us to prepare a draft Contract for the transfer of the property known as “Cotterills” to Jennifer Woodhouse.

…

51. On 14 July 2010, the sum of $40,855.32 was transferred from the S1 account (Lorraine Company’s account) to account #49S2 (i.e., the S2 account, which was Philip’s account). (For Philip, it is noted that this is the only amount from Nicola’s term deposit that can be traced directly into Philip’s account and it is said that it is not clear by whom the transfer was effected or what it necessarily represented.)

52. On 14 August 2010, Philip closed the S2 account and commenced using an ANZ “Business Classic” account.

53. On 17 February 2011, Garry died. On the same day, Philip was recorded as a director of Lorraine Company and of Colongolong Pty Ltd (see Ex D p 3). On 9 June 2011, Philip ceased to be registered as a director of Lorraine Company and Colonogolong Pty Ltd (see Ex D p 3). (It is not clear how or why these directorship changes occurred but it seems most unlikely that this was at Philip’s behest.)

54. On 30 June 2011, Philip’s income tax return (prepared by Mr Drummond and signed by Philip) claimed $16,665 as interest expenses; and Philip’s balance sheet recorded a $267,237.02 loan to Nicola as a liability. Nicola’s income tax return of that date disclosed $16,020 as interest income from Philip. Similar entries were recorded on the corresponding documents for each of the financial years ending 30 June 2012, 30 June 2013 and 30 June 2014 as follows.

55. For the year ended 30 June 2012: Philip’s income tax return claimed $21,066 as interest expenses; Philip’s balance sheet recorded the same amount as a loan to Nicola; and Nicola’s income tax return recorded income of $20,360 as interest from Philip.

56. For the year ended 30 June 2013: Philip’s income tax return claimed $15,020 as interest expenses; Philip’s balance sheet recorded a $250,000 loan to Nicola as a liability; and Nicola’s income tax return recorded income of $15,020 as interest from Philip.

57. For the year ended 30 June 2014: Philip’s income tax return claimed $35,658 as interest expenses; Philip’s balance sheet recorded the same $250,000 loan liability to Nicola; and Nicola’s income tax return recorded income of $35,000 as interest from Philip.

58. On 28 September 2012, Philip married Jane.

59. On 23 June 2014, Jane drew a cheque for $15,000 on Philip’s bank account payable to Nicola. There is a dispute as to the circumstances in which this occurred. Jane’s evidence is that Nicola came to the house and demanded payment of interest on the loan. Nicola’s evidence is that Jane came to her house on 24 June 2014 and proffered the cheque (see Nicola’s second affidavit at [4]). What seems not to be in dispute is that, after this event, there was ongoing animosity between Nicola and Philip (and that Nicola did not subsequently meet with Philip and Jane).

60. Sometime in 2014, (Jane’s evidence is that the meeting was in September 2014 -see [10] of Jane’s affidavit dated 25 October 2020) Philip and Jane had a meeting with Mr Drummond in Wagga Wagga at the ASB offices (Mr Drummond’s affidavit at [48]).

61. On 14 April 2015, solicitors acting for Philip (JDC) wrote to Walsh & Blair (Nicola’s solicitors) stating that:

We understand that Colongolong was transferred to Catherine … from our client’s father Garry in or about 2010 prior to his passing in 2012. At that time (2010) our client received (from his father) the property known as Lorraine which also included the debt associated with the Lorraine Pastoral Co Trading Trust of some $220,000.

62. In the witness box, Philip’s evidence was that he believed that the letter reflected what he had told his lawyers (T 251.15-38). Nicola places emphasis on this letter: first, insofar as it relates to the property “Lorraine” and, second, to debt associated with the Lorraine trading trust. Thus, it is contended that Philip must have had some communication with his solicitor about a very specific figure (and involving the concept of debt and financing of the property). As to the concept of “the debt associated with” the Trading Trust, it is not clear to me that this would necessarily have been Philip’s understanding of financing concepts – it could equally be his lawyers’ characterization of the arrangements. However, I accept that the $220,000 figure is reasonably specific. (The figure of $220,000 is presumably the term deposit moneys less the amount of around $40,000 that was paid to Philip’s own account.)

63. In that letter, JDC confirmed instructions that the withdrawal of caveats (that had apparently been lodged over the properties owned by Catherine) was subject to confirmation that there would be a “land swap”.

64. Nicola maintains that it was the understanding of the parties (i.e., Nicola and Philip) from the end of 2009 up until April 2015 that, when Philip “took over” Lorraine, Philip also took over the debt of Lorraine Pastoral Co associated with it. Nicola says that there is no compelling reason why the figure of $250,000 would emerge suddenly in 2015 other than it being for a loan. (The above correspondence, however, does not suggest a loan of $250,000. That figure seems to derive from the tax returns and financial documents and it seems to represent the amount of Nicola’s term deposit – of just over $263,000 less an alleged payment of principal of around $17,000.)

65. On 29 April 2015, Mr Drummond wrote to Philip, stating that:

I am aware that you have mentioned in the past you would like to get this refinanced as soon as you can as the current borrowing rates is probably cheaper.

66. Mr Drummond was not able in cross-examination to shed light on this. Mr Drummond did recall, however, that around the time the letter was drafted, he had a conversation with Nicola in which she complained that Philip was refusing to pay back the loan (T 156.3-5). Hence, there is force to Philip’s submission that Mr Drummonds’ memory of events is likely to have been influenced by Nicola’s assertions.

67. On 1 June 2015, Philip’s lease of Cotterills and Colongolong came to an end but Philip remained in possession of the land, with Catherine’s apparent consent.

68. On 11 June 2015, JDC wrote a letter proposing an informal settlement with exchange of a bank cheque for the transfer (i.e., it seems the “land swap” is that referred to in the 14 April 2015 correspondence).

69. On 7 July 2015, Mr Timothy Abbott (of Walsh & Blair) wrote to the plaintiff’s solicitor advising that he had instructions from Nicola that, in exchange for Philip repaying the principal and interest due on the loan, Catherine would sign and execute her documents to effect the transfer of her land (a 251 acre strip) to Philip. The executors say that the letter proposed a tripartite agreement – the execution of all documents required to effect the transfer on simultaneous repayment of loan principal and interest. The latter does not in terms necessarily provide for a simultaneous transaction; rather it sets out what is to be done in exchange for the signing and execution of documents to effect the proposed land transfer.

70. Pausing here, Mr Abbott has clearly advised in this letter that he is acting for Nicola (Mr Kennedy later was identified as acting for Catherine) but nevertheless appears to have been conveying to Philip’s solicitors Catherine’s position (albeit as said to have been instructed by Nicola). Hence, the one solicitor is communicating instructions from both Nicola and Catherine (and implicitly representing he is authoriting to do so).

71. On 21 July 2015, Walsh & Blair sent a letter following up the 7 July 2015 letter.

72. On 28 July 2015, Mr Abbott (i.e., Nicola’s solicitor) wrote to Philip’s solicitors advising them that Catherine was agreeable to the proposal. Again, this seems to be implicitly representing he had instructions to do so.

73. On 29 July 2015, JDC on behalf of Philip wrote to Mr Abbott, denying the existence of a loan between Philip and Nicola but accepting “in principle” what Walsh & Blair had proposed. The letter offered a bank cheque in exchange for a transfer in registrable form. (Pausing here, it is clear at this point that what both Nicola’s solicitor and Philip’s solicitor were contemplating was a simultaneous exchange – a bank cheque for the transfer, as would be the case in a conventional conveyancing transaction; i.e., not the payment of the money to Nicola up front or in advance in exchange for the mere promise that Catherine would, in the future, transfer the land. Moreover, it is clear that Philip’s solicitor was here denying the existence of a loan.)

74. On 20 August 2015, Walsh & Blair wrote to Philip’s solicitors making an offer in similar terms to the 7 July 2015 letter and stating that the “Offer is completely non-negotiable” (presumably there seeking to employ tautology as a device in order to emphasise the “non-negotiable” status of the offer) and that the offer was open for 7 days. The offer was for: (a) Philip to repay to Nicola the loan of $250,000 with interest from 1 October 2014 at a rate of 8%; (b) “our clients” (which must in context have meant Nicola and Catherine) would arrange the transfer to Philip by way of a boundary adjustment on the land coloured green in a map attached to the letter, being an area of approximately 215 acres; (c) Philip to “pay half of all the costs including legal costs and disbursements associated with the boundary adjustments such as surveys, council fees, land office title fees; and (d) rates on the land to be transferred to Philip from Catherine (the 215 Acres) to be adjusted.

66. On 31 August 2015 (i.e., after the offer had, in its “non-negotiable” terms, already expired), JDC (Philip’s solicitors) sent a letter querying the costs, interest rate and value of the land.

67. On 1 September 2015, Walsh & Blair made available to Philip’s solicitor the proposed plan of subdivision (necessary to effect the boundary adjustment). On the same day, a JDC file note recorded “agree in principle”. It is not clear if that is a note of what was conveyed to Walsh & Blair or a note of the instructions received at the time from Philip. However, it is relevant that the parties appear from then to have proceeded on the basis that there was an agreement at least in principle in relation to these matters (i.e., on the terms of the supposedly “completely non-negotiable” offer).

68. On 2 September 2015, Mr Abbott of Walsh & Blair wrote to Philip’s solicitor with an estimate of the cost for lawyers’ fees, surveyor fees, council fees regarding the application for boundary realignment in respect of the property, and costs of registration, those fees totalling $7,568.

69. On 11 September 2015, Walsh & Blair provided copies of invoices for conveyancing and services in the sums estimated.

70. On 14 September 2015, Philip’s solicitors forwarded two cheques to Walsh & Blair, advising that the “funds are not to be released without written confirmation”. On 15 September 2015, the sum of $250,000 was paid into Walsh & Blair’s trust account. Also on that day, Walsh & Blair sent an email about interest; Walsh & Blair sent a letter of receipt of the sum of $250,000 with the description “repayment of loan”; and Walsh & Blair sent an email asking when interest would be paid. (The executors point to the fact that there was no demur from Philip to the characterisation of the sum of $250,000 on the receipt issued by Walsh & Blair, as being a payment for “repayment of loan”. However, the 29 July 2015 correspondence had earlier made it very clear that Philip denied there was a loan – and it was not for Nicola and Catherine’s solicitors unilaterally to ascribe this purpose to the payment.)

71. Also on 15 September 2015, JDC sent an email saying that their client (Philip) would speak to the bank about the extra for paying interest and an email about cheque dates.

72. On 16 September 2015, Walsh & Blair sent an email as to the interest calculation date.

73. On 21 September 2015, Walsh & Blair queried the interest payment. A further query as to the interest payment was made by Walsh & Blair on 28 September 2015.

74. On 2 October 2015, JDC sent an email in relation to the interest period.

75. On 16 October 2015, Mr Abbott of Walsh & Blair wrote to JDC, saying that the loan was a “separate matter” to the “potential gift” of land to Philip; and that, if interest was not received by 16 October 2015, “this matter is at an end and there will be no transfer”. The letter went on to state that “Costs and fees need to be met before land is transferred” (emphasis added). The letter stated that Philip had 24 hours to transfer the interest payment and attached a tax invoice for farming works to “K & P Woodhouse” (presumably meant to refer to Catherine and Philip) in the sum of $7,079 incl GST. Pausing here, it is difficult to see how it could seriously be contended that the payment of $250,000 – be that for repayment of the loan, as Nicola contends, or a payment in exchange for the transfer of land, as Philip contends, was a “separate matter” from the “potential gift” of land to Philip since the two were clearly linked in Walsh & Blair’s own correspondence (see the letter of 28 August 2015 above).

76. On 19 October 2015, Walsh & Blair sent a letter saying that “we are now instructed to accept the interest offered … totalling $13,379.45”. The letter advised that “[p]rovided [Philip] pays the interest by 5.00pm on Friday, 23 October 2015” into the Walsh & Blair trust account, the transfer of the land on the previous conditions that we understand are agreed to will proceed”. Pausing here, this letter seems to be acknowledging, at the very least, that there was a dispute as to whether interest was payable (there being instructions to accept the offered sum); and there is nothing here that suggests that the sum paid into Walsh & Blair’s trust account was to be released to Nicola before the transfer of the land (as Nicola’s solicitors later seem to have asserted).

77. On 21 October 2015, Philip paid the agreed further sum of $13,379.45, under cover of a letter from JDC attaching a cheque for payment of claimed interest.

78. On 21 October 2015, Philip’s solicitors wrote Walsh & Blair saying that “we need to look to having a transfer prepared and signed. I will prepare that document and forward to you at the earliest”.

79. On 24 November 2015, Mr Kennedy (of Walsh & Blair) wrote to Philip’s solicitors saying that “Tim [Abbott] has given the file back to me to proceed with the subdivision/boundary adjustment and transfer of land from Cate to Philip”. The letter attached a plan of subdivision and administration sheet for execution by Philip; a subdivision application to the council for execution by Philip; and a transfer for execution by Philip and application for stamp duty exemption (“in anticipation of registration immediately following registration of the plan of subdivision”). The letter also advised that the costs of survey, town planning and fencing had already been paid ($15,713.94); and advised at to the further costs for council application, fees for registration of subdivision plan and city agents’ fees ($2,125.70). The letter requested that Philip provide a cheque for $8,919.37 for his half share of incurred and anticipated expenses, and sought confirmation that Philip would pay half costs and expenses re subdivision and transfer; and Philip’s pro rata for portion re land to be transferred to Philip with a 1 April 2015 adjustment date noting that “your client has had possession and use of land”. The Walsh & Blair letter, enclosing the documents for transfer and costs, also requested the release of the funds in trust i.e., the release of the sum of $263,379.45 that had been paid into Walsh & Blair’s trust account.

80. On 3 December 2015, Walsh & Blair sent an email as to progress. On the same day, JDC responded, saying “I will have instructions shortly and will respond”.

81. There were further emails from Walsh & Blair on 7 December 2015; 14 December 2015; 17 December 2015; 18 December 2015; and 21 December 2015 pressing for an update.

82. On 22 December 2015, Philip’s solicitor informed Mr Kennedy of Walsh & Blair that Philip was prepared to pay half of all costs and disbursements noted in the 24 November 2015 letter but Philip was investigating further the fencing costs; and Philip would pay the costs and rates as proposed in that letter; but that Philip would not authorise the release of moneys held on trust until the subdivision had been registered (see record of that conversation Ex 8 p 58; Walsh & Blair email).

83. By email on 22 December 2015, Mr Kennedy informed Philip’s solicitor that Catherine required that, by 15 January 2016, Philip: return the executed subdivision certificate and executed transfer in registrable form; produce the certificate of title there identified; pay the $8,919.37; undertake to pay half of Walsh & Blair’s costs in acting in the subdivision and transfer and the pro rata proportion of rates as per the 24 November 2015 letter. The letter stated that “in the event that [this is] not attended to by 15 January 2016 [Catherine] may withdraw her offer to proceed with the boundary realignment and subdivision without further notice”. (Of course, whether it was open to “withdraw” the offer depends on whether it had been accepted by then.)

84. On 15 January 2016, there was a telephone attendance between Mr Kennedy and Philip’s solicitor in which the latter said that all requisite documents would be returned on 18 January 2016 (Ex 8 p 60).

85. Walsh & Blair sent further emails in relation to the progress of the matter on 20 January 2016, 29 January 2016, 2 February 2016 and 4 February 2016. On 9 February 2016, Walsh & Blair sent a further email in relation to progress and stating that unless there was authority to release funds in the trust account the “offer” to transfer land would be withdrawn. The deadline for this was extended to 12 February 2016 (Ex 8 p 64).

86. On 12 February 2016, JDC sent two emails, advising as to difficulties coordinating with the surveyor and saying that the solicitor would discuss with the client that night; and an email that there was confusion over the plans and client needs to consider plans that have been prepared. The (perhaps justifiably frustrated) response on 15 February 2016 from Walsh & Blair was “just get on with it”. On 17 February 2016, there was a further email from Walsh & Blair in relation to progress.

87. On 18 February 2016, JDC sent an email saying that the client (i.e., Philip) had signed the plans and would send a letter “tomorrow advising further”.

88. On 22 February 2016, JDC asked for Walsh & Blair’s costs in acting on the subdivision and conveyance; asked for the rates and notices (I pause here to note that for Philip it is said that, to that point, these had not been seen by him or his solicitors) and stated that the certificate of title would be provided once subdivision plans had been approved by Council and were ready to be sent to the LPI for registration.

89. On 23 February 2016, Mr Kennedy responded, advising that the estimated costs of acting in the subdivision would “be in the range of $2,500 to $3,500”; noting the comments concerning production of the certificate of title; and asking that Philip deliver by 5pm on 26 February 2016: the executed subdivision certificate and executed transfer in registrable form; payment of $8,919.37; Philip’s undertaking to pay half of Walsh & Blair’s costs and his share of the rates on a pro rata basis; and Philip’s authority to release to Nicola the funds ($267,239.45) paid into the Walsh & Blair trust account. The letter stated that, upon receipt of the requested items, Catherine undertook to do all necessary to lodge the application for subdivision, plan for boundary adjustment and execution and lodgement of transfer for registration. It is said that the letter emphasised that authority to release the funds in trust was essential to the transfer proceeding.

90. On 2 March 2016, Walsh & Blair sent an email advising that, if all the documents requested and payment and authority to release the funds in trust were not received by 4 March 2016, the “offer to gift the land” would be withdrawn.

91. On 4 March 2016, JDC sent a letter delivering the agreed plans and the agreed half costs. The letter stated that it was not possible to deliver a transfer in registrable form “right now” as it needed stamping with the appropriate documents. The letter stated that “I have the valuation you provided but that may not be enough to satisfy OSR”. The letter also stated that the funds could not be released (i.e., from the Walsh Blair trust fund) until the plan is registered.

92. On 7 March 2016, JDC sent a letter with the signed subdivision certificate.

93. On 19 April 2016, Walsh & Blair sought a report as to progress. On 20 April 2016, JDC responded that they would follow up. On 27 April 2016, Walsh & Blair sought a further progress report. The response on 28 April 2016 from JDC was that they were waiting to hear from Philip and Jane that evening. On 4 May 2016, Walsh & Blair sought a further progress report. On 5 May 2016, JDC responded (again) that the funds would not be released until the new certificates of title issued. That same day Walsh & Blair sent an email asking when the transfer and the $8,919.37 could be provided.

94. It appears that, by 16 May 2016, Catherine (or perhaps Nicola, in the background) had lost patience. On 16 May 2016, Walsh & Blair sent a letter “withdrawing” the offer of transfer of the land by gift and advising that Philip was prohibited from going onto the land that was to be transferred (the 215 Acres). The letter directed Philip to remove his cattle.

95. On 28 June 2016, Walsh & Blair sent a letter advising that the subdivision and transfer would no longer proceed and requiring repayment of the loan or that proceedings would be instituted. (This demand seems inconsistent with the earlier suggestion that the funds held by them were paid as repayment of the loan.)

96. On 13 July 2016, JDC wrote stating that their client (Philip) maintained that funds were not to be released until new certificates of title were issued by the LPI. On 27 July 2016, Walsh & Blair responded, rejecting the contents of that letter.

97. On 19 August 2016, Walsh & Blair wrote to JDC asking if JDC had instructions to accept service of claim for repayment of the loan.

98. On 21 November 2017, JDC sent a letter terminating the contract (Ex 8 at p 101). The letter noted that Walsh & Blair held the amount of $263,379.45 in trust; the money had been transferred to a controlled money account; and Walsh & Blair had Philip’s tax file number for that purpose. The letter also conveyed that JDC were instructed by Philip to advise Walsh & Blair to close the controlled money account, remit the funds to the Walsh & Blair trust account, and pay to Philip by trust cheque the sum of $263,379.45 plus the interest accrued. It is noted that these instructions were given “[n]otwithstanding the amount of correspondence which passed between the parties in an effort to try and resolve the “land transfer”, (which ultimately did not proceed)”.

99. On 8 December 2017, Walsh & Blair sent a letter seeking the release of the funds to the client (Ex 8 p 102).

100. On 23 January 2018, JDC wrote seeking a refund of the money that had been paid “while details were being finalised” (Ex 8 at p 103).

101. On 30 January 2018, Walsh & Blair responded that the money was to repay a loan (Ex 8 at p 104). (Again, to my mind, this is an extraordinary assertion, presumably made on their client(s)’ instructions, since it had been made very clear at the outset (see the 29 July 2015 letter) that Philip denied that there was a loan and was paying the money into the trust fund as part of the arrangements with Catherine.)

102. On 5 February 2018, JDC responded that there was a clear dispute and again stated that there was no authorisation to release the money (Ex 8 p 105).

103. Philip says that it was in mid-September 2018 (i.e., after Nicola had commenced the District Court proceeding) that he realised for the first time that Nicola had used his cheque books to pay for her fuel and other expenses (see Philip’s first affidavit at [105]).

Issues

113. As adverted to earlier, there are three claims that here arise for determination: first, Nicola’s claim for recovery of amounts said to be due under the alleged loan agreement; second, Philip’s claim for recovery of moneys allegedly withdrawn by Nicola from his bank account in breach of fiduciary duties allegedly owed to him (which breach is alleged to have been fraudulent); and Philip’s claim against Catherine’s estate for specific performance of an alleged agreement for sale to him of 215 acres of land forming part of the Colongolong property (the 215 Acres).

114. In summary, as to those claims, I have concluded that: Nicola’s claim fails on the basis that any loan agreement is now statute barred; Philip’s claim against Nicola for breach of fiduciary duty has broadly succeeded; and Philip’s claim against Catherine succeeds only for repayment of the moneys paid (not for specific performance).

Pleaded claims

Nicola’s claim against Philip

115. Nicola claims that Philip owes her $250,000 (as outstanding principal) plus interest at 8% per annum calculated from 1 October 2014 to the present.

116. At [1](a) of the statement of claim, Nicola alleges that, on 30 June 2010, she and Philip agreed that she would “loan” him $267,237 (defined as the Principal Sum”) and at [1](b) Nicola alleges that Philip agreed he would repay the Principal Sum. The loan agreement is alleged to have been oral.

117. At [2] of the statement of claim, Nicola alleges that, in performance of that contract, she paid to Philip the Principal Sum on 1 July 2010 and Nicola also alleges (at [2]) that Philip made nine “interest” payments (totalling $76,400) to Nicola and part-paid the Principal Sum in the amount of $17,000. Hence, the principal outstanding is claimed as $250,000. As noted, interest is claimed from 1 October 2014.

118. Philip denies the loan agreement; denies that Nicola paid him the amount alleged (it being paid to the bank account of Nicola’s company, Lorraine Company); and says that, in any event, it is not established that there was an agreed repayment date (so that any principal and interest was repayable on demand and the cause of action became statute barred before the proceeding was commenced by Nicola).

Philip’s claim against Nicola

119. Philip alleges that Nicola owed him a fiduciary duty which was breached by Nicola on some 60 occasions between 2010 and 2014 (second further amended cross-claim at [9B], [10], [12]); that there was a trust relationship (implied or constructive) in relation to 9 payments, which was breached upon payment of the said amounts (second further amended cross-claim at [11D], [13], [13A]); and that the breaches of the fiduciary duty and trust were fraudulent (second further amended cross-claim at [13B]).

120. The particulars of the alleged fraud are that: Nicola knew that she did not have authority to make the payments or convert the money she had paid into her account (particular A to [13B] of the second further amended cross-claim); and that Nicola did not disclose the payments or the conversion of funds to Philip (particular B to [13B] of the second further amended cross-claim).

121. Philip claims that, without his consent, Nicola used his cheque book to transfer to herself or to use for her own benefit, some $147,482.97, and that she is liable to pay equitable compensation, or give an account of profits, for these amounts.

122. Nicola maintains that she did have authority to make the payments. However, it is submitted that (even if Nicola did not have that authority) the claims for breach for breach of fiduciary duty fail because Nicola believed that she did have that authority; and the claim in deceit fails because there is no evidence that Nicola had knowledge of the falsity of the alleged representation (and it is said that the allegation at second further amended cross-claim [13I] cannot be sustained).

123. The substance of Nicola’s response to these allegations (at [10] of her defence) is broadly that: (a) ten of the payments to herself (some $93,400) comprised the alleged “interest” payments and part-payment of the Principal Sum set out at [2] of her statement of claim; (b) a payment of $23,735.84 (being the final payment for a John Deere tractor) was for Philip’s benefit; (c) about thirty-six payments were to pay her own vehicle and fuel expenses but this was pursuant to an agreement that she and Garry had reached with Philip; and (d) the balance of the payments were made for sundry expenses benefiting Philip (including accounting-related expenses).

Philip’s claim against Catherine’s estate

124. Philip pleads that he entered into an agreement with Catherine between 20 August 2016 and 7 March 2016, the terms of which were as follows: (i) Philip would pay Nicola $250,000 and a sum calculated at 8% per annum on $250,000 as from 1 October 2014; (ii) In exchange for Philip paying Nicola $250,000 plus the additional sum, Catherine would affect a boundary adjustment of Colongolong so that certain parts of the land would be in effect transferred to Philip; (iii) Philip would pay the rates for the transferred land, adjusted on a pro rata basis; and (iv) Philip would pay half of the costs of the boundary adjustment.

125. Philip pleads that Catherine has failed to perform her obligations under the agreement and that the agreement remains on foot, such that Catherine is obliged to perform the agreement. In the alternative that the agreement is no longer on foot, Philip pleads that Catherine is obliged to repay him the sum of $250,000 and the additional sum of $13,379.45, in addition to any interest actually accrued.

124. The executors deny that there was a contract for the sale of land between Catherine and Philip.

125. By [4AJ] of the defence, the executors plead that, if there was an agreement between Philip and Catherine, there is a want of writing in contravention of s 54A of the Conveyancing Act 1919 (NSW) and therefore the agreement is unenforceable. (Philip disputes this but in any event relies on the doctrine of past performance.)

126. The executors also contend that the contract was validly terminated by letters dated 16 May 2016 and 28 June 2016 (see [4AK] of the estate’s defence). In this regard, it is contended that Philip was in breach of two essential terms of the contract at the time of termination: namely, that Philip “release the funds in trust in the amount of $263,379.45” to Nicola before Catherine transfer the land to Philip” and that Philip pay “half of the costs of the transfer of the land”. The executors further say that, if, there was an enforceable contract that was not terminated then it was abandoned or abrogated.

127. Finally, the executors say that there was no part performance enlivening specific performance, and that there are no reasons for exercising the discretionary relief to order specific performance.

Evidence

130. Each of Nicola, Philip, and Philip’s wife, Jane, gave evidence and was cross-examined, as was Mr Drummond. Evidence was also adduced from Mr Finnigan as to Philip’s learning difficulties.

131. As to Nicola, it is said by Philip that in cross examination Nicola clung to the allegation that she was out of pocket, but otherwise was forced to make a series of concessions that undermined that central contention; and that Nicola’s evidence as a whole suggests a woman willing to use the funds of others for her own purposes whenever she sees fit (in Philip’s case without giving him notice or seeking his consent) (see the cross-claim, but also T 116.25-120.15).

132. It is said that the evidence suggests that, since 2010, Nicola has been gripped by the conviction that Philip received from her husband (or pursuant to his wishes) more than was his due. Reference is made to a note, handwritten by Nicola, that purports to record property valuations, and in which Nicola set out her calculation of the alleged advantage that Philip had over Andrew when it came to gifts of land – the sum of $262,398. It is said that Nicola volunteered that the similarity between that sum and the amount of her claim was far from a coincidence (“That’s my loan”, “That is the amount of my loan”, “That is the value of the loan I lent him”, “That is the value of the loan” (T 105.10-45)). Further, it is noted that Nicola’s evidence was that she did not even have to write down what the amount of that alleged advantage was because “I knew what [the amount of the advantage] was. I did not need to work it out” (T 105.10), suggesting (it is submitted) that she always knew that that was the sum needed to “even the ledger”.

133. It is said that while Nicola denied that Philip’s “advantage” upset her, her demeanour and some of her answers (T 103.35; 104.5) suggested differently. (I consider there is force to this submission). It is also noted that the case advanced in cross-examination of Philip was along the lines that he had received so much; surely he expected to pay something for it. It is said that, in her cross-examination Nicola emphasised, unprompted, the importance for herself of having the Lorraine Company’s overdraft paid out, saying “I had to get out of the Lorraine thingy” (T 112.8).

134. I found Nicola to be forthright and at times argumentative and confrontational in cross-examination. Nicola was adamant as to her recollection of events and not prepared to concede matters against her interest. Nicola had a forceful personality and it is quite plausible to me that she would have taken control of Philip’s financial affairs on the basis that she knew best for him or his family.

135. Philip, in contrast, struck me as a genuine witness who attempted honestly to answer the questions put to him. He did not exaggerate his learning issues but it was evident that he was not able to read and understand a number of matters in the documents. Jane, too, struck me as a genuine witness.

136. While Mr Drummond also struck me as a witness genuinely trying to give his recollection of events, it is clear that his recollection was limited and that Nicola had consistently pressed Mr Drummond in relation to the alleged loan which I consider is likely to have had an effect on his memory. His correspondence to Philip (in relation to the alleged loan being repayable), as extracted above, was quite cautiously worded.

Nicola’s Loan Claim

137. Logically, the first issue to be determined is Nicola’s claim under the alleged loan agreement.

Nicola’s submissions as to loan claim

138. As adverted to earlier, Nicola alleges (at [48]) that she said to Philip at a meeting in Walwa that “I agree to lend you the money that I have in a term deposit which is about to mature”; Nicola emphasises the evidence of Mr Drummond as to the loan, and the financial documents in which it is recorded.

Philip’s submissions as to loan claim

139. Philip denies that he entered into a loan agreement with Nicola. It is submitted that the circumstances, in and since 2010, weigh against a finding that Philip and Nicola entered into a loan agreement in about June 2010.

140. Philip maintains that there is no evidence that Nicola in fact paid Philip the sum of $267,237 (said to be fatal to Nicola’s claim at [2] that she performed the loan agreement by paying the alleged sum to Phillip); and that the only evidence of Nicola having paid $267,237 in June 2010, is a record of a transfer from her “Rural Bank” #369 account to the ANZ (Landmark) (S1) account in the name of Lorraine Company, (which was a company of which Nicola and Garry were the directors and of which she owned the majority of shares). It is said that there is no evidence that she and Philip agreed that she could perform her alleged obligation by, as in fact occurred, payment of the contents of her term deposit into the “S1” account of the company of which she was a director and shareholder, Lorraine Company. It is noted that the only portion of the sum of $267,237 actually paid to Philip was the sum of $40,855.32 transferred from Lorraine Company’s account to Philip’s account on 14 July 2010 (but it is said that that sum was not Nicola’s nor was it a payment from her). Further, it is noted that Nicola does not give any evidence that she (as opposed to, say, Garry) effected the transfer of that sum to Philip. (Philip notes that the only evidence Nicola gives is at [50]) and it is noted that there is no claim by the company.)

141. Philip points out that Nicola does not contradict Phillip’s evidence that it was she (not Philip), that made the alleged “interest” payments and alleged part-payment of “principal” (see [2] of the statement of claim); and Philip says that she made those payments by signing cheques from Philip’s cheque-book all without his knowledge or direction (it is said that the making of such secretive payments is inconsistent with Nicola and Philip having reached the alleged loan agreement).

142. Philip says that a key difficulty with the assertion that Philip was obliged to discharge the Lorraine Company overdraft, is that, taking the evidence as a whole, it is unlikely that this would have been Garry’s view. It is said that the allegation that Garry did feel that need is critical to Nicola’s case because, according to her, it was the trigger for her alleged loan. According to Nicola, Garry said “take it or leave it” ([33]) (i.e., take the obligation or forget the land). Philip says that that proposition is far-fetched, noting the following matters.

143. First, that Nicola accepted early in her cross-examination that the “only consideration of substance” that mattered to Garry (in making the succession arrangements that attended the last part of his life), was making sure that Philip and Andrew were “set up” (T 78.32). Second, that Nicola accepted that in this context “setting up” meant putting Philip and Andrew in a position where they would succeed as farmers and graziers on his land (T 76.45-50). It is said that Nicola’s insistence that the “setting up” extended only to Garry’s land (and not hers) might reflect the truth of the matter, but in any case it underscored that Nicola always understood herself to have her own separate interests and assets (and was, it follows, entitled to her own view about what should happen to it). It is said that Garry might have had a view about what happened, but it was not necessarily her view, noting her evidence that she and Garry did not always see eye-to-eye (T 69.34).

144. Third, it is said that, in deciding how he might best set Philip up, Garry knew of, and would likely have taken into consideration, the risks that Philip faced in farming the land on his own account. It is noted that Nicola accepted that farming is a tough and financially risky business, especially for someone who did not have much experience in it (T 70.25); and that Nicola accepted that in 2010 the area was still in drought and that drought brings added risk. It is submitted that it is very likely that Garry would have expressed similar sentiments (saying “It stands to reason” (see T 70.25)) and would have taken those matters into consideration when deciding how to set up Philip to farm the land.

145. Fourth, it is said that Garry had a positive attitude towards Philip inconsistent with the “take it or leave it” position Nicola alleges. It is noted that Nicola refused to accept that Garry expressed any pride in Philip’s ability to take on the farm (though it is said that Garry probably did feel that natural emotion), but Nicola did accept that in 2009-2010, Garry and Philip were getting along well and that one of the reasons for that was that Philip had proved himself to be a good farmer and manager (T77.17). It is said that this was particularly so (T77.24) after (what Garry considered to be) the disastrous tenure of Jennifer and Simon on Lorraine in 2005-2009 (T 74.25-40).

146. Fifth, it is noted that Garry was 79 years old in 2010; that in 2005, he had been given 5 years to live after a serious farming accident; and that he was “very frail” (T 73.25). It is said that, even after he divested himself of his assets, Garry was a wealthy man (T 94.30-95.10) (or seeing the response to that from Nicola at T 114.32, that he had more than enough to look after his needs). Rhetorically, the question posed is whether it is really likely that a wealthy man at the end of his life, whose sole concern was setting his sons up to succeed, would have demanded payment out of his company’s overdraft.

147. For Philip, it is said that there are other circumstances that make Nicola’s allegations about Garry’s attitude implausible.

148. First, that Nicola and Garry engaged solicitors to give them advice about “setting the boys” up (T 78.44) but the letter which summarised their instructions and what the solicitors had done (including specific reference to the transfer of non-land assets to Philip, which was not in writing) makes no reference to Philip having an obligation to discharge the overdraft of the Lorraine Company (it being said that this was apparently never discussed with the lawyers).

149. Second, that the amount of the Lorraine Company overdraft on about 30 June 2010 ($224,151.10) was in large part the product of a series of advances totalling $78,322.45 that had been made from the Lorraine Company account to Phillip in August 2009-May 2010 (see [37]-[38]). Nicola’s evidence was that “the overdraft had to be increased” ([36]) because of those advances and the evidence shows that that increase (from $150,449.31 to $171,365.80) occurred in December 2009. Third, there is no evidence that the sums (at [37]-[38]) were loans, which Philip says must mean that, starting with the express gratuity of $10,000 in August 2009 ([15]), they were in the nature of gifts from Garry, or they were gifts to which Garry consented or which he had proposed.

150. Fourth, that in giving evidence of those transfers, Nicola said that “there was quite a lot of money Garry transferred to Philip” (T 85.2). Philip says that the evidence that Nicola then gave to change the effect of her evidence at T 84.50 is not to be believed: Nicola said that all the payments in August 2009-May 2010 were “for the sale of cattle” (T 85.13), but Philip says that that was plainly not true, especially given the answers at T 84.43, 85.32. Nicola then said that she was the one transferring the money (T 85.48), which it is said is inconsistent with Philip’s unchallenged evidence (at [15]). Nicola also gave evidence that Garry’s transfers came from another account (T 86.0), but Philip says that there is no evidence of that happening; and that Nicola finally reverted to her original evidence (T 87.10). Philip says that, in general, this evidence was evasive and unsatisfactory, suggesting that Nicola’s rejection that the loans were gifts (T 87.1) is not to be believed or, alternatively, she had no explanation for them.

151. As noted above, Philip says that it would make little sense for Garry to increase the overdraft to give gifts or unexplained advances to Philip, only to demand that he pay out the overdraft. It is said that it is notable that the alleged conversation (at [33]) makes no mention of the role of those advances or gifts in building up the overdraft, which (if that conversation happened at all) one might reasonably expect.

152. It is noted that Nicola accepted that in between 2005 and 2010 she and Garry used the Lorraine Company account, which was generally in overdraft, to pay their personal expenses (T 97.20, 98.7-15 and 99.10-15). Philip says that it is not consistent with Garry seeking to set Philip up for Garry to demand that Philip pay out an overdraft where that overdraft was apparently partly the product of Garry and Nicola’s personal (not business) expenses. It is said that Gary obliging Philip to cover a business liability makes some sense at a conceptual level; but that Gary obliging him to cover personal expenses, does not.

153. At T 112.13 it was put to Nicola that the rationalisation of the alleged loan in her own mind did not reflect any conversations that she had with Philip about it. Nicola’s answer was that “He was there”. For Philip it is said that, even if that were true, it is not the basis for the existence of a loan agreement and is inconsistent with Nicola’s evidence that Philip actively participate in the relevant conversations and agreed to what was proposed.

154. Further, Philip argues that, even if there were evidence that Nicola paid the sum of $267,237 to him, or that the sum or any part of it was borrowed from Nicola, it cannot be established that Philip agreed to repay that sum on 30 June 2015.

155. It is said that the only evidence of the alleged oral loan appears in versions of conversations that appear in the evidence of Nicola (at [48]) and Mr Drummond (at [25]). Nicola gives evidence that she and Phillip agreed for a time for repayment of the principal (30 June 2015), but Mr Drummond gave evidence that they did not. It is contended that, even if it is accepted that the conversation occurred, there is nevertheless no basis for preferring one version of the conversation in this respect over another. It is thus submitted that Nicola has not proved on the basis of probabilities what she pleads at [1](c). It is submitted that Nicola’s problem was compounded by evidence Mr Drummond gave in cross-examination (see at T156.10-15). It is said that the proposition that Mr Drummond did not have his own recollection or knowledge of any loan repayment date is supported by the letter dated 29 April 2015 he sent to Philip (CB 620). It is noted that Mr Drummond, who said he was careful in his correspondence, writes no more than “I understand that the loan from your mother is due to expire on 29 June this year.”

156. Philip invokes the authorities to the effect that where there is no express term for repayment, any principal sum owing was therefore repayable on demand (Ogilvie v Adams [1981] VR 1041 at 1043) (Ogilvie v Adams), and that any cause of action to recover such principal arose when the funds, if any, were advanced (Young v Queensland Trustees Ltd (1956) 99 CLR 560 (Young v Queensland Trustees) at 566). Thus, it is submitted that Nicola’s claims both for principal and interest became time-barred on 1 July 2016 (pursuant to s14(a) and, by extension, s 24(2) of the Limitation Act 1969 (NSW)), some 23 months before Nicola commenced the proceeding.

157. Insofar as Nicola seeks to rely on s 54(2)(a)(ii) of the Limitation Act 1969 (NSW), which provides that confirmation of a debt by payment of interest or principal has the effect of time commencing to run again (see her reply), it is noted that Philip’s uncontradicted evidence is that he did not direct, and did not have knowledge of, the alleged interest payments listed at [2] of the statement of claim. Philip’s evidence is that he did not give Nicola permission or authority to pay herself, or to be paid, the so-called “interest” payments by cheque (those payments are dealt with in various paragraphs of his evidence at [40]-[100]). It is noted that Nicola’s affidavit made no allegation that she had sought or received Philip’s authority to use his cheques to make any of the payments, either in globo or in particular. Nicola denied in cross-examination that she had not sought his authority or given him notice that she was taking the money, but it is said that Nicola has given no particulars of how or when that authority was sought and her denial should not be believed. It is notable that Nicola did not effect the payments to herself as per her version of the alleged agreement (quarterly in arrears) but at irregular times in somewhat odd amounts. Thus, it is said that Philip did not “make” the alleged payments (they were made by Nicola).

Determination

158. Ordinarily, I place greater weight on contemporaneous documents than witnesses’ accounts of oral conversations (particularly when those conversations were many years ago) (noting the difficulties acknowledged in Watson v Foxman (1995) 49 NSWLR 315 at 319-320 by McLelland CJ). Here, however, the written documents that most clearly support the existence of a loan agreement (the income tax returns and financial statements) are not documents that I can be confident that Philip understood (albeit that he signed the documents and his taxation position is thus consistent with there being a loan liability). That said, Philip has had the benefit in his taxation affairs that reflect the existence of a loan.

159. The payments attributed by Nicola to interest (or, for that matter, principal) in relation to the alleged loan do not assist because there is nothing to suggest that Philip understood either that these were being made at the time or what it was that they are said to have reflected.

160. There may well have been a discussion back at the time that Philip took over the conduct of the farming business on Lorraine as to him taking on liability for the (or an) overdraft, although without explanation to Philip of what an overdraft was or how it operated (of which there is no evidence) it is unlikely in my opinion that he would have understood it.

161. Mr Drummond’s correspondence as to the loan is couched in terms that suggest that this was at Nicola’s behest and reliant on what Nicola had said to him about the loan. Moreover, references to Philip having previously expressed an understanding as to a loan and a wish to refinance (vague in content as they are) may well also be likely to have been the product of things said to Philip by Nicola rather than as to his actual understanding that he was a party to a loan agreement.

162. The most telling evidence in this regard seems to me to be the reaction by Philip in 2014, when Nicola demanded that Jane pay interest on the alleged loan; he was adamant that there was no loan.

217. As to the uncertainty of subject matter, the executors note that the Walsh & Blair letter of 20 August 2015 refers to land coloured green on the map attached (Ex 8 p 11), which map shows a curlicue line shaped as an inverse L. The executors say that the land under that curlicue was Crown Land and not something which Catherine Woodhouse could transfer, as it did not belong to her. It is said that Philip’s written outline of opening submissions (at [34(b)]) erroneously identifies the land to be transferred as being “that part of Lot 2 in DP 2/1091036 that had previously been contained in 2/953428, 4/942145 and 2/1091036”. The executors say that the draft plan of subdivision (Ex 8 p 41) has not been registered and does not have a DP number.

218. The executors say that the whole of the notional block to the right of Tumbarumba Rd on the plan of subdivision attached to the letter of 24 November 2015 (Ex 8 p 41) does not have a DP number; and that it is not registered. It is said that, additionally, that road marked in the middle of notional Lot 2 on the map (Ex 8 p 41) is not part of the land to be transferred; it was a Crown Road and is now part of Lot 1 in DP 1237022 which now belongs to Catherine’s estate (Ex 10).

219. As to the uncertainty as to terms, it is said that there is uncertainty from the outset of the correspondence alleged to constitute a contract. It is said that the letter makes it plain that Philip is to “repay” the $250,000 plus interest (the term “repay” being said to be unambiguous in that money cannot be said to be repaid until the creditor in question has possession of the money) and then says that “our clients will arrange a transfer”. The executors say that the phrase “will arrange” is unambiguous (i.e., that it refers to something which is incomplete and will be completed in the future).

220. The executors say that the correspondence as a whole provides a factual matrix for the alleged contract, from which it can be seen that the letter (Ex 8 at p 10) proposing that Catherine “will arrange” a transfer to your client by way of boundary adjustment is informed by the background of the letter from JDC Lawyers (Ex 8 at p 6) which proposes agreement that, as soon as the money is paid to Nicola there be a simultaneous settlement, at Nicola’s solicitors’ office and that the plan of the land (ownership) will need to be amended prior to that occurring. It is noted that the letter says that “[m]y client can provide me with a bank cheque payable to Mrs N Woodhouse for $250,000. I can receive from you a signed transfer, in registrable from”. At Ex 8 pp 37 and 38 are copies of a letter and cheque being the final part of repayment (as described in the Walsh & Blair letter at Ex 8 p 10).

221. It is noted that the letter (at Ex 8 p 39) is a letter from Walsh & Blair of 24 November 2015 providing all of the documents relevant for the boundary adjustment; that additionally, it sets out costs to date and anticipated costs; and, finally, it asks for release to Nicola of money paid into trust by Philip. It is said that this is entirely consistent with the letter of 20 August 2015 (Ex 8 p 10) whereas JDC Lawyers’ correspondence (Ex 8 pp 82 and 92) makes it clear that money will not be released until the plan is registered and new certificates of title are issued.

222. Finally, as to the question of intention, it is said that there was not established to be an objective mutual intention on the parties to enter into an enforceable legally binding agreement.

223. Reliance is placed on the fact that, on 21 November 2017, JDC Lawyers wrote to Walsh & Blair terminating the contract (Ex 8 p 101). It is said that, objectively (from Philip’s solicitor’s correspondence), Philip did not regard himself as bound by an enforceable contract and he wanted his money back. It is said that this is evident from his solicitor’s statement that “[n]otwithstanding the amount of correspondence which passed between the parties [i.e., the same correspondence on which Philip relies as a written contract] in an effort to try and resolve the “land transfer” [which it is noted ultimately did not proceed] my client [Philip] has instructed me to advise you: 3. Pay to my client, by trust cheque, the sum of $263,379.45, plus interest accrued”.

224. It is noted that Philip’s solicitor wrote another letter on 23 January 2018 (Ex 8 p 103) stating that “he wants his money back, given it was only ever paid into trust in the first instance whilst the details of that proposed transaction were being finalised. As it never proceeded my client is entitled to have his money returned.” The letter requested a trust cheque payable to Philip as a matter of urgency and in the alternative asked if Walsh & Blair had instructions to accept service.

225. The executors say that the following are readily apparent from this correspondence. First, that the “land swap” was the subject matter of the contract now alleged, this being first referred to in JDC Lawyers’ letter of 14 April 2015; that Philip did not want to reopen discussion about that “land swap”; and that the discussions about the “land swap” were closed.

226. Second, that the money paid was in trust while details of that transaction, being the land swap, were being finalised (from which it is said to be clear that the money was paid subject to the finalisation of details – not in consideration for finalised details or a binding contract).

227. Third, that that transaction never proceeded, and Philip wanted his money back, from which it is said to be clear that the contingent basis on which the money was paid had not materialised.

228. Fourth, that if Philip was not repaid, he would sue to recover the money paid into trust, noting that he then did sue to recover that money paid into Walsh & Blair’s trust account (referring to the defence filed on 26 October 2018, demanding at [25] the return of the moneys held by the plaintiff’s lawyers and claiming the sum of $263,379.45; and on the same day filing a cross-claim seeking $263,379.45 for damages for breach of contract against Nicola at [12]) of that Cross Claim; as well as to the amended cross-claim filed on 20 June 2019 alleging (at [4A]) an agreement by correspondence dated between 7 July 2015 and 7 March 2016 and (at [7B]) alleging that agreement had been terminated by Philip’s solicitors’ letter of 21 November 2017. It is said that, from this it is clear that any contract said to arise from this correspondence is not still on foot. It is said that, irrespective of whatever agreement or basis on which Philip had paid the money, he regarded that as at an end and he wanted his money back.

229. The executors refer to Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78 where Griffith CJ said (on the question whether the parties had in fact concluded an agreement evidenced by written document) that any statements or conduct on their part, after the date of alleged formation inconsistent with the existence of a concluded contract, were relevant (and the executors also refer generally to Carter and Harland, Contract Law in Australia (3^rd ed, Lexis Nexis) at [712]ff). Reference is also made to what was said by Giles JA as to subsequent communications in Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 at [99]-[106].

230. The executors say that correspondence and conduct of Philip’s solicitor shows an intention to pay for the property on the issuance of new certificates of title; whereas it is said that Catherine’s solicitors’ correspondence and conduct evinces an intention that, on payment of the money, Catherine would then do all things necessary to transfer the land in question to Philip.

231. The executors also say that the correspondence and conduct objectively demonstrates two fundamentally inconsistent positions: Philip’s version involved simultaneous performance of steps and Catherine’s version involved sequential performance of steps.

232. Thus it is said that Philip’s affidavit material does not establish a contract at all, or, if it does, it is a different contract from that which is pleaded. It is said that, from the material relied upon it is not possible to identify the terms of the contract with necessary precision in order to determine the obligations sought to be enforced.

233. In the alternative, if there was a contract as pleaded and particularised, the executors say that Philip was in breach of essential terms of the contract and that it was terminated for breach on 17 May 2016. As such, it is said that it has effectively been placed outside the plaintiffs’ power to perform the contract in the future (reference being made to MGL at [20-115]. It is noted that where a contract has been discharged by failure to perform and or repudiation and has been validly terminated it cannot be specifically performed.

234. The executors contend that Philip was in breach of two essential terms of the contract pleaded: the first, being that he make a payment to Nicola before Catherine arrange to transfer the land to him; and the second being that he pay half of the costs associated with the transfer.

235. In relation to the payment to Nicola, it is said that Philip’s version of the contract changes in the course of correspondence particularised at [4A] (A) and (K) of the second further amended cross-claim from payment in exchange for Catherine then arranging to effect a transfer of the land, to payment to Nicola after the issue of new certificates of title. It is said to be clear from the course of correspondence in Ex 8 that Walsh & Blair from the outset required that the loan be repaid before there would be any transfer of land.

236. It is submitted that this was a breach of an essential term of the contract as pleaded at [4A] of the second further amended cross-claim and particularised at: (A) Walsh & Blair letter dated 20 August 2015; (H) Walsh & Blair letter dated 24 November 2015; and (J) Walsh & Blair email of 23 February 2016.

237. Second, it is said that an additional essential term of the contract was that Philip pay half of the costs associated with the transfer of the land (second further amended cross-claim at [4A] particular (A)).

238. It is said that the fact that it is an essential term is implicitly recognised by the late filing of an affidavit on 23 June 2021 going to his ability to pay those costs. It is noted that Philip admitted at [4AI] (b) of the second further amended cross-claim on 25 February 2021 that he had not performed his obligations under the Agreement to pay a half share of the costs of the boundary adjustment. It is said that on the face of email correspondence from his solicitor on 15 September 2015 Philip did not then have funds available pay that money and there is no evidence before the court of his current ability to pay that money. It is said that Philip’s affidavit of 23 June 2021 does not prove his ability to pay those costs as it is based on a non-current bank statement which demonstrates that at the time of the statement, he was overdrawn but had an overdraft facility. It is noted that the affidavit says nothing of his current circumstance (i.e., the current balance of the account, other liabilities which would not show up on the bank statement, or the term of the overdraft facility and whether it still exists).

239. The executors say that Philip’s repudiation of this condition is apparent from the solicitors’ correspondence showing that by 4 March 2016 (second further amended cross-claim [4A] particular (K)) Philip had still not paid costs that had been incurred on or before 24 November 2015 (second further amended cross-claim [4A] particular (H)).

240. It is contended that Philip has shown, by his own conduct, that he was not ready willing and able to perform his own obligations (citing Public Trustee (NSW) v Gavel (1927) 40 CLR 169). The executors say that in the present case it is objectively clear that Catherine was not driven by normal commercial imperatives: first, the consideration for the transfer was payable to a third party; second, that the consideration was by no measure commensurate with the commercial value of the land in question. It is submitted that, from this and the solicitors’ correspondence, the inference can properly be drawn that Catherine’s primary concern (adopting the words of Barwick CJ in Mehmet v Benson (1965) 113 CLR 295, at 307-308, “the substantial thing which the defendant bargained for”) was prompt payment of a particular amount (together with interest) to Nicola. It is submitted that, unlike Mehmet, if specific performance were to be ordered in the present case, it is not possible for Catherine’s estate to obtain what she bargained for (if by decree her estate obtains her price with such ancillary or orders as recompense her for the delay in its receipt).

241. It is said that, with actual breach, the only question is whether the breach complained of is sufficient to allow the innocent party to treat the contract as discharged. It is said that the question, “would the innocent party have entered into the contract if strict or substantial performance of this term were not guaranteed” becomes important. The executors note that unless the breach deprives the innocent party of substantially the whole of the benefit that was to have been derived, it will not destroy the contract (citing Graw S, An Introduction to the Law of Contract (2^nd ed) p. 320).

242. Further, in the alternative, Catherine’s executors’ position is that, if there was a contract, it was unenforceable by virtue of s 54A of the Conveyancing Act.

243. It is submitted that s 54A of the Conveyancing Act is unambiguous and that there are no countervailing factors that warrant equity not following the law.

244. The executors say that the course of correspondence relied upon by Philip does not constitute a note or memorandum enabling precise identification of material terms including: parties, price, property and a summary of essential terms; and that his opening submissions at [33](d) as to identification of the parties and [35](c) as to previous correspondence of Mr Abbott do not fully include all the relevant correspondence in evidence.

245. The executors say that it is one thing to say that a number of different documents can together constitute a written memorandum for the purposes of s 54A, but another to say that when it cannot be certain what documents constitute the written memorandum for the purposes of s 54A.

246. Finally, the executors say that, from the correspondence between 17 May 2016 and 23 January 2018 (Ex 8 pp 94-103), it is clear that irrespective of any breaches or wrongful terminations both parties evinced an intention to abandon and abrogate any agreement between them (citing DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434 per Stephen, Mason and Jacobs JJ). This last argument was not pleaded in Catherine’s defence to the further amended statement of cross-claim.

247. It is noted that, by his defence dated 26 October 2018 (at [25]) Philip demanded repayment of the money in question and that, by cross claim of the same date, Philip sought damages for breach of contract.

248. It is noted that Philip verified by affidavit that on 21 November 2017 his solicitors terminated that contract ([7B] first amended cross-claim of 20 June 2019) and sought specific performance being payment of $263,379 or equitable compensation, or restitution.

249. If the above arguments are not accepted, the executors nevertheless say that, in light of JDC Lawyers letters of 21 November 201 and 23 January 201 (Ex 8 at pp 101 and 103), it cannot be the case that the alleged agreement remains on foot (see [4AD] further amended statement of cross-claim).

250. The executors note that the starting point is that generally, if the plaintiff’s breach formed the basis for a valid termination by the defendant, that equitable relief will not be given (Carter & Harland, Contract Law in Australia (3^rd ed) [2407]). Second, it is said that Philip has not established any prejudice arising from putative acts of part performance in reliance on an otherwise unenforceable agreement. Therefore, it is said that there is no circumstance enlivening the discretion to depart from following the law (to avoid imposing undue hardship on the claimant).

251. Third, it is noted that the ordinary rule is that reliance upon the Statute of Frauds in order to defeat a beneficial interest intended to be conveyed by oral agreement will constitute equitable fraud so as to fasten upon the legal owner the liability of a constructive trustee. The executors say that mere reliance upon the Statute of Frauds to defeat an oral agreement relating to land does not in itself give rise to a constructive trust; and that, prima facie the Statute of Frauds or its modern statutory equivalent must be given its legal effect.

252. It is noted that fraud in equity will arise only where, in all the circumstances, it will be dishonest for the legal owner to rely upon the statute, and that result will most commonly occur when “the legal owner has so conducted himself as to induce the other party to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land” (citing MGL [12-050]). The executors say that it is clear from the correspondence particularised at second further amended cross-claim [4A] that Catherine made no such inducement and, in fact, that Catherine’s solicitors made it clear that the money in question was to be paid to Nicola before proceeding.

253. Fourth, it is noted that the essential elements of part performance to raise the equity (for specific performance) are set out in McBride v Sandland (1918) 25 CLR 69 at 78 per Issacs and Rich JJ, being that: the act relied on must be such as could be done with no other view than to perform such an agreement as alleged; that some such agreement as alleged is some contract of the general nature of that alleged; that the proved circumstances in which the act was done must be considered in order to judge whether it refers unequivocally to such an agreement as alleged; that the act must be done by the party relying on the faith of the agreement and the other party must have permitted it to be done on that footing (otherwise there would not be fraud in refusing to carry out the agreement, and fraud, that is moral turpitude, is the ground of jurisdiction); that the act must be done by a party to the agreement.

254. It is noted that these requirements must be satisfied before evidence is permitted of the actual terms of the alleged agreement. Further, that when those terms are established, it still remains to be shown: That there was a completed agreement; and that the act was done under the terms of the agreement by force of the agreement.

255. It is noted that in King v Poggioli (1923) 32 CLR 222 at 247, Starke J quoting from Fry, Specific Performance (6^th ed) p. 435, said of the claimant for specific performance that it is “incumbent on him to show, first, that he has performed or been ready and willing to perform, the terms of the contract on his part to be then performed; and secondly, that he is ready and willing to do all matters and things on his part thereafter to be done; and a default on his part in either of these respects furnishes a ground upon which the action may be resisted”.

256. It is said that the correspondence of 23 January 2018 makes it abundantly clear the money in question was not paid in performance of the alleged contract.

257. The executors say that the correspondence and conduct pleaded by Philip at [4A] of the second further amended cross-claim demonstrates default which furnishes the grounds on which an action for specific performance may be resisted.

Determination

265. Finally, as to the agreement for the transfer of the 215 Acres, I accept that Philip has pleaded (and verified) that alleged agreement in various ways but all I draw from that is that there has been uncertainty on the part of his lawyers as to how the pleaded facts (about which the various versions of the pleading appear to be broadly consistent) should properly be characterised. The underlying thrust of the alleged inter-family arrangement seems to me to be the same – Nicola was to receive the sum of $250,000 plus an agreed amount to represent her claim for interest on that sum; Philip was to make that payment and was to receive a transfer of the 215 Acres (with an obligation to pay certain amounts for expenses and the like); and Catherine was, in effect, the conduit through which the transaction was to occur (and a necessary part of it since the 215 Acres were part of the land in her name). Moreover, the same firm of solicitors was acting (albeit with different solicitors involved) for both Nicola and Catherine and hence communications from “clients” expressed in the plural must have indicated that the instructions were from both clients even if conveyed by the solicitor for one and not the other; and, similarly, advice from one solicitor that the other solicitor’s client agreed to certain matters must have conveyed that those instructions had been conveyed to the solicitor sending the correspondence (either by the other solicitor or his client or perhaps through the first solicitor’s own client). It is not insignificant that, until the “withdrawal” of the “offer” in May 2016 there was no suggestion (as between Nicola and Catherine) that there was not an arrangement between them and Philip, as summarised above, even if they placed a different characterisation on the nature of the $250,000 payment. In any event, the alleged agreement is that which is pleaded in the last iteration of the pleading (the one which was taken to trial) and it is that which I here address.

265. I consider that there is no doubt but that there was an agreement reached between Catherine (I would infer acting in consultation with Nicola, since the first of the communications was from Nicola’s lawyer followed by the intimation that Catherine agreed with the proposal) and Philip that, if Philip paid the amount of $250,000 (plus additional amounts for claimed or notional interest and a share of expenses and the like), which sum would be paid to Nicola (and treated by Nicola as being in discharge of the loan that Nicola claimed was outstanding but that Philip denied), then Catherine would transfer the 215 Acres to Philip (for no further consideration). I consider that the primary way the agreement is pleaded (based on the identified letters coupled with acceptance by repayment into the trust fund) is made good. Although the offer in the first letter had expired in accordance with its “completely non-negotiable” terms; it was in effect revived by the second letter (with the amendment thereon) and accepted by payment of the funds by Philip. If that had not been the case I would have found that the alternative way the agreement was pleaded was made good for similar reasons.

266. I do not accept that there is uncertainty as to the parties to the agreement (they being Philip and Catherine – although I accept that there was a collateral arrangement with Nicola whereby she agreed to treat the payment of $250,000 as a discharge of the alleged principal amounts outstanding on the loan agreement for which she contended).

267. There was also sufficient certainty of the essential terms of the agreement including as to subject matter and price. The fact that there was a strip of Crown land which Catherine was not then capable of conveying is not to the point – it would simply have meant that Catherine was not able to convey to Philip all that she had agreed to transfer. (From a conveyancing point of view, under a standard contract for sale of land, there would be certain rights and entitlements and obligations on both vendor and purchaser if the vendor was unable to convey good title to the whole of the land the subject of the contract for sale of land but it is not necessary here to consider those (both because there was no standard form contract for sale of land in the present case and because Philip’s claim for specific performance of the contract fails for other reasons as I explain below).) The fact that there was not a fixed date for completion of the contract is not to my mind fatal to Philip’s claim, since one would surely infer that it was to be within a reasonable time of the relevant parcel of land becoming capable of transfer (i.e., when subdivision was effected and a separate certificate of title was issued).

268. The statute of frauds defence is not made good. The terms of the agreement were set out in writing signed (in the sense that electronic communications are signed) by the parties’ respective solicitors in the letters of 20 August 2015 and 19 October 2015 respectively; and there were acts of part performance clearly referable to the oral agreement. No evidence displaces the inference that Mr Abbott of Walsh & Blair was authorised to sign both letters on Catherine’s behalf. The letter of 19 October 2015 specifically provided that “the transfer of the land on the previous conditions that we understand are agreed to will proceed” (emphasis added). It is tolerably clear from the correspondence that the parties understood the terms of the agreement and their respective obligations pursuant to that agreement.

269. As regards acts of part performance, by 21 October 2015, Philip had paid the whole of the sum required pursuant to the agreement. Further, in light of the expiration of Philip’s lease of Colongolong on 1 June 2015, Philip’s continued possession of the land was an act indicative of a change in the respective positions of the parties in relation to that land. The letter of 17 May 2016, in which Catherine purported to withdraw her offer to transfer the land and simultaneously withdrew permission for Philip’s occupation of the land, supports the conclusion that Philip’s possession was necessarily correlated to the agreement. While a party’s act of putting another into possession might not of itself be a detriment to that other party, “there can be no doubt that it is a sufficient act of part performance” (Pipikos v Trayans at [61] by Kiefel CJ, Bell, Gageler and Keane JJ; see also Regent v Millett at 682).

270. Philip did not in my opinion repudiate the agreement for the transfer of the land. True it is that Philip did not meet various deadlines (unilaterally) set by Catherine’s lawyers. However, critically, he did pay the sum of $250,000 into the trust account (and in due course the agreed amount of interest) and he undertook to pay the share of expenses and pro rata contribution to rates and the like that was demanded of him. The nub of the complaint here is that he did not agree to the release of the funds in the account prior to the transfer of the land in question. I am not persuaded that there was ever any obligation for him to do so. That he did not so agree does not amount to repudiation by him. It should be remembered that there is a high threshold to be met in order to establish repudiation.

271. See, for example, Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 at [44] where Gleeson CJ, Gummow, Heydon and Crennan JJ said:

… The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. … Secondly, it may refer to any breach of contract which justifies termination by the other party. … There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words.

273. In the present case, payment of the expenses could not have been a term in respect of which time was of the essence because some of them were not known or quantifiable at the time. Nor could it seriously be said that Philip was manifesting a renunciation of the contract as a whole or of a fundamental obligation of it. The delay in responding to correspondence or the like may well have been frustrating but it was not such as in my opinion to manifest an unwillingness or inability to perform the contract substantially in accordance with its terms.

274. Thus I consider that the termination of the contract by Catherine was not valid (and amounted to a repudiation on her part). The difficulty for Philip is that he then (through his lawyers) terminated the contract himself. I do not place weight on his solicitor’s statement as to the payment having only been made while the details of the proposed transaction were being finalised (because if there was already an enforceable contract in existence a misunderstanding to that effect does not take the matter very far). However, there is no doubt that Philip’s solicitors formally terminated the contract and called for the return of the moneys that had been paid. Whether the letter was written out of desperation only for the purpose of getting the money back is immaterial. I do not accept the submission that such conduct does not “say anything about whether [Philip or his solicitors] considered objectively that this contract was at an end” (T 415.7-12). What is abundantly clear is that Philip through his lawyers was terminating the contract and demanding the money back. Hence the alternative claim for refund of the moneys paid pursuant to the contract.

275. Therefore, I consider that there is no contract on foot in respect of which an order for specific performance could be given (and it is not necessary to entertain the various reasons put forward by Catherine’s executors against the exercise of discretion to grant that relief). I do not accept the argument that there should not be a refund of the moneys paid by Philip because nothing was received by Catherine. The money was paid to Catherine’s solicitors trust fund. For her solicitors now to disclaim any obligation to refund would be a triumph of form over substane.

276. On the executors’ case the executors say that there was no enforceable agreement for the sale of land (and I have found that there was no loan agreement); so the moneys have been paid by Philip either under a mistake that there was in existence a binding agreement (which would suggest a restitutionary claim for recovery of the moneys) or for a consideration that has wholly failed (again suggesting a claim for restitutionary relief). As I have indicated above, it seems to me extraordinary that the executors have both denied an agreement in relation to the transfer of the land and refused to return the moneys that were clearly paid by Philip on the basis of that agreement. It is not for the executors to determine for themselves how the payment made by Philip should be treated. (Indeed, the case in my opinion comes close to a Quistclose trust – where moneys are paid for a special purpose which fails – see George v Webb [2011] NSWSC 1608.)

Conclusion

277. The upshot of the above is that Nicola has failed on her claim; Philip has succeeded on most of his claim against Nicola; and Philip has failed on his claim for specific performance of the contract for sale agreed with Catherine but Catherine’s estate is liable at the very least to refund the moneys that have been paid under or pursuant to the agreement (and arguably would have been liable for damages for breach of contract by reason of their wrongful repudiation and termination of that contract, though the case was not pleaded as such).

Orders

278. For the above reasons I make the following orders. As Philip sought to be heard on costs I will simply reserve costs and make directions for submissions to be filed with costs to be determined on the papers.

1. Dismiss the statement of claim.

2. Judgment for the cross-claimant on the cross-claim against the first cross-defendant in the sum of $119,737.13 by way of equitable compensation for breach of fiduciary duty plus interest thereon as claimed.

3. Judgment to the cross-claimant on the cross-claim against the second cross-defendant for repayment of all moneys paid pursuant to the agreement for transfer of the 215 Acres (as defined), plus interest thereon as claimed, but dismiss claim for specific performance.

4. Direct the parties to file brief written submissions as to costs within 14 days with a view to determining the issue of costs on the papers.

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Decision last updated: 04 March 2022