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Supreme Court of Victoria - Court of Appeal |
Last Updated: 25 June 2009
COURT OF APPEAL
No 7433 of 2004
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Respondents
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WHERE HELD:
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DATE OF HEARING:
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DATE OF JUDGMENT:
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MEDIUM NEUTRAL CITATION:
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EQUITABLE OR PROMISSORY ESTOPPEL – Whether father estopped from removing trustee of discretionary trust and changing will because of alleged representations and promises to daughter and son-in-law – Whether judge erred in rejecting claims regarding representations – Whether judge erred in finding that no detriment was suffered in reliance on alleged representations or promises – Whether constructive trust of assets established – Whether judge erred in finding that appropriate order, if either claim was made out, would be for equitable compensation.
PRACTICE AND PROCEDURE – Father died shortly before appeal was heard – Son nominated as executor of will, but probate not yet granted – Application for order that son be made respondent to the appeal in substitution for father – Supreme Court (General Civil Procedure) Rules 2005 rr 9.09(2) and 16.03(1)(b).
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APPEARANCES:
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Counsel
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Solicitors
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For the appellants
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Mr G R Ritter QC with
Mr R Greenberger and Ms L M Powderly |
Kalus Kenny
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For the respondents
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Mr P B Murdoch QC with
Mr S H Parmenter |
B2B Lawyers
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F The attack on the credibility findings.............................................................48
MAXWELL P
NEAVE JA
REDLICH JA:
1 This is an appeal from the decision of a trial division judge, holding that the second and third appellants, Sabrina and Ian Berger, are not entitled to various interests in property.[1] Those interests were claimed on the basis of what was said to have been their detrimental reliance on representations made to them by Emanuel Rosenberg, Sabrina Berger’s father. The appellants also appeal from his Honour’s decision that Emanuel Rosenberg was entitled to exercise his power of appointment to remove the first appellant, Fifteenth Eestin Nominees Pty Ltd (‘Fifteenth Eestin’), as the trustee of the E Rosenberg Investment Trust (the ‘Investment Trust’) and to appoint Glen Oak Nominees Pty Ltd (‘Glen Oak’) in its stead.
2 Throughout these reasons, we generally use first names to refer to Emanuel Rosenberg, his late wife (Bloom), Ian and Sabrina Berger and Sabrina Berger’s brother, Barry Rosenberg. The trial judge did likewise. Like him, we intend no disrespect by so doing.
3 We are mindful of the fact that judgment in this appeal has been reserved for over a year. A delay of that length is much to be regretted. There were, however, 76 grounds of appeal, almost all of which raised questions of fact and evidence, rather than law. In the circumstances, as will be apparent from the reasons for judgment, consideration of the evidence and resolution of the grounds of appeal has been an unavoidably lengthy process.
II BACKGROUND TO THE PROCEEDINGS
4 These proceedings are the product of an unfortunate family dispute about the disposition of Emanuel Rosenberg’s fortune. Emanuel started work when he was 13 and became a successful businessman. He set up various companies and trusts to manage his businesses and investments for the benefit of himself and his family. The trial judge described in his reasons the complex network of trusts and companies established by Emanuel, and later by his children and their spouses, and the various changes which occurred to the company and trust structures over time.[2] We describe them only to the extent necessary for the disposition of this appeal.
5 Barry Rosenberg ran a family business known as Delf Brass Co (‘Delf Brass’) until 1990. Delf Brass was owned by Rosekay Holdings Pty Ltd (‘Rosekay’), one of the family companies.[3] Because Rosekay’s name was changed in April 1996 to Project Hardware Pty Ltd, we refer to it as ‘Project Hardware’ throughout these reasons.
6 From early 1991, Sabrina and Ian Berger took over management of the Delf Brass business, with some input from Emanuel. As directors of Fifteenth Eestin, the Bergers also managed the Investment Trust, along with Emanuel, whose active involvement in both the Investment Trust and the Delf Brass business diminished over time. The last time Emanuel signed a document as a director of Fifteenth Eestin was on 14 June 2000.[4] The Bergers had an amicable relationship with Emanuel for many years. Sadly, they later came into conflict.
7 According to Emanuel’s evidence, he was initially upset because he was not properly consulted by the Bergers about sales and purchases of apartments by the family in Surfers Paradise.[5] According to Ian, he had unintentionally upset his father-in-law by telling him he was ‘crazy’ not to attempt a reconciliation with his son, Barry. According to Emanuel, Ian had said to him, ‘all you Rosenbergs are mad’, and this was the culmination of matters which had led to his estrangement from the Bergers.[6] His Honour commented:
[I]t seems to me that Mr Rosenberg had become disgruntled by the failure of [Sabrina and Ian] to wait for his death before attempting to obtain the full benefit of the assets which he had built up.[7]
8 Although that conclusion is challenged in the grounds of appeal, it is unnecessary in order to determine this appeal to decide why the conflict arose. The appeal concerns whether various representations were made by Emanuel, and if so, whether they were acted upon by the Bergers to their detriment. It is sufficient to say that the difficulties between the Bergers and Emanuel came to a head in early 2004,[8] when Emanuel, then aged 86, made changes to his personal affairs and to the trust arrangements.
9 On 29 March 2004, Emanuel revoked ‘any and all Powers of Attorney... given by [him] to [his] daughter Sabrina Berger and/or [his] son-in-law Ian Berger’.[9] He later executed successive wills, depriving Sabrina of the benefits previously conferred on her by a will he had made in 1988 and subsequent codicils. Under his 1988 will, Emanuel had appointed his brother, Lionel, as executor and Sabrina as executrix if Lionel predeceased him. He left his residuary estate to his wife, Bloom, or if she should predecease him, to Sabrina.[10]
10 In the 1988 will, Emanuel said that he had made no provision for Barry because he had ‘adequately provided for him during his life-time’. The will also provided that if Barry predeceased him, the power which Emanuel held to change the trustee of the Investment Trust[11] would vest in Sabrina from his death and that, if his wife should predecease him, his power to alter the trustee of various other trusts would also vest in Sabrina. Bloom Rosenberg made a will in similar terms.
11 Under a 1995 codicil, executed after the death of Bloom, Sabrina was appointed sole executrix and trustee; specific bequests of $70,000 were made to each of Emanuel’s grandchildren; and his residuary estate was left to Sabrina or to her two children, if she should predecease him. A 1997 codicil altered the timing of one of the grandchildren’s bequests, but in all other respects confirmed the 1988 will and the earlier codicil.
12 On 21 April 2004, Emanuel executed a new will, appointing Barry as his executor and trustee, and dividing his residuary estate into two portions. His grandchildren and great grandchildren were to receive half of the residuary estate, and the other half was left to Jewish Care (Victoria) Inc. On 27 October 2004, Emanuel made yet another will, under which Barry’s children were made the sole beneficiaries of a testamentary trust. Neither Sabrina, Ian nor their children benefited under the October 2004 will (the ‘2004 will’).
13 As we have said, Fifteenth Eestin was the trustee of the Investment Trust, which was established in 1977.[12] The main assets of the Investment Trust were, and are, three valuable commercial properties – one is situated in Alexandra Parade, Clifton Hill, and the other two are in Hoddle Street, Clifton Hill. The three properties are collectively referred to in the evidence and in his Honour’s judgment as ‘the corner properties’. The properties are all leased and generate a rent of approximately $500,000 per annum, which is income of the Investment Trust. Because the control of the assets and income of the Investment Trust lies at the heart of this dispute, we now briefly describe the history of the management of the Trust.
III MANAGEMENT OF THE INVESTMENT TRUST
14 Originally, both Emanuel and Barry were directors of Fifteenth Eestin as well as appointors under the deed establishing the Investment Trust. In November 1990, a Dissolution Agreement to split various family businesses between family members and various corporate entities was entered into. Barry resigned as appointor of the Investment Trust and was replaced by Bloom. After Bloom died in October 1993, Emanuel became the sole appointor under the Investment Trust. Under the Dissolution Agreement, Barry also agreed to resign as a director of Fifteenth Eestin in favour of Sabrina. In 1991, Ian became a director of Fifteenth Eestin. From then on, Emanuel and the Bergers were directors of Fifteenth Eestin.
15 Over the years, the Investment Trust made distributions of income to family entities, including: Project Hardware (which, as previously mentioned, owned Delf Brass); S & I Investments (Australia) Pty Ltd (‘S & I Investments’) (a company of which Mr and Mrs Berger were directors); Emanuel and his wife Bloom; and Sabrina and Ian. In the financial year ending 30 June 1999, Mr Norman Same, the Investment Trust’s accountant, advised that potential taxation liability could be reduced if the Trust made a capital distribution.[13] His Honour found that a capital distribution of $2,085,777 was applied as a credit to Ian and Sabrina’s joint loan account with the Investment Trust, and that $153,021 was credited to Emanuel’s loan account. His Honour said that it was common ground that Ian was not then a beneficiary of that trust, and that his half share of that capital distribution and an income payment of $3,000 made to him in 1998 were distributions made in error. Ian repaid the $3,000 to the trust.[14] We discuss the additional issues relating to these distributions in further detail below.[15]
16 On 15 July 2004, following the conflict to which we have referred, Emanuel exercised his powers as sole remaining appointor under the trust deed to remove Fifteenth Eestin as the trustee of the Investment Trust and to appoint Glen Oak in its stead. Glen Oak consented to act as trustee, and on 16 July 2004 signed an authority directing Fifteenth Eestin to deliver relevant documents, property and income to it. Mr John Adams, a partner in the accounting firm Horwath, is the sole director and shareholder of Glen Oak.
17 After Fifteenth Eestin failed to comply with that request, Emanuel and Glen Oak commenced proceedings in the Supreme Court.[16] They relied primarily on clause 10A of the Trust Deed, which gave Emanuel the power to remove the trustee and to re-appoint a new trustee. In the alternative, they relied on a number of alleged breaches of trust as the basis for Fifteenth Eestin’s removal.
18 In their amended defence and counterclaim, Fifteenth Eestin and the Bergers alleged that Emanuel had made various representations to the Bergers; that the Bergers had acted to their detriment in reliance on those representations; and that, as a consequence, Emanuel was estopped from removing Fifteenth Eestin as trustee. (The particular representations pleaded are discussed in more detail below.) Further, or in the alternative, it was alleged that Emanuel held his assets and wealth on a constructive trust for Sabrina.[17]
19 The judge held that Sabrina and Ian had not satisfied the onus of proving that Emanuel had made the pleaded representations.[18] His Honour further held that, even if the representations had been made, the Bergers had not shown that they had suffered any detriment in reliance upon them.[19]
20 His Honour further held that, even if the Bergers had suffered a detriment as claimed, he would have made an order compensating them, rather than giving effect to any of the alleged representations. His Honour held that the defence and counterclaim were not made out, and that Emanuel had been entitled to exercise his power to change the trustee of the Investment Trust. [20]
21 Although it was not strictly necessary to do so, his Honour also held that Fifteenth Eestin had not exercised its discretion in the interests of all the beneficiaries of the Trust. He said that for that reason, he would have been prepared to order its removal as trustee in any event.
IV SUMMARY OF GROUNDS OF APPEAL
22 The appellants relied on 76 grounds of appeal. In essence they contend that his Honour erred in:
23 Counsel for the appellants made very lengthy written submissions before the hearing. After the hearing, the appellants filed amended submissions covering 89 pages. Many of the submissions simply repeated the substance of the grounds of appeal. Because of the repetition in both the grounds of appeal and the submissions, we address the essential elements of the complaints rather than dealing separately with each of the grounds of appeal.
24 The respondents filed a notice of contention to the effect that, his Honour should have held that removal of Fifteenth Eestin was warranted because it breached the terms of the trust by paying income and distributing capital to persons or companies which were not beneficiaries. The notice of contention alleged that purported amendments to the deed of settlement of the Investment Trust, under which Project Hardware and S & I Investments became beneficiaries, were invalid.
25 Before turning to the matters under appeal, we deal briefly with a preliminary question as to the orders to be made for substitution of parties. This arises because of the death of Emanuel, which occurred after his Honour delivered judgment and before the hearing of the appeal.
26 We turn then to the grounds of appeal relating to the estoppel and constructive trust claims. We deal first with his Honour’s finding that Emanuel did not make the pleaded representations. We go on to consider the grounds which challenge his Honour’s findings that:
Finally, we briefly consider the question of Fifteenth Eestin’s conduct as trustee.
27 At the time of the hearing of the appeal, Emanuel had left a will which had not been proved. Prior to the hearing, Barry Rosenberg and Glen Oak applied for orders that:
The application was accompanied by an affidavit sworn by Barry, stating that he was the executor under the 2004 will. The application was heard immediately before the hearing of the substantive appeal.
28 At the hearing of the application, counsel were informed of the Court’s preliminary view that, because Barry was Emanuel’s personal representative, Barry could be substituted as a party to the proceeding under r 9.09(2) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic). It was therefore unnecessary to consider whether the Court should exercise the power conferred by r 16.03(1)(b) (to ‘appoint a person to represent the estate for the purpose of the proceeding with the consent of the person appointed’). Where the Court exercises that power, the judgment binds the estate of the deceased as if the personal representative were an original party to the proceedings.[25]
29 Counsel for the appellants indicated that they would consent to Barry being appointed to represent Emanuel’s estate for the purpose of the appeal, but that they objected to his being described as ‘executor of the will of Emanuel Rosenberg’. It was submitted that the Court should not make an order substituting Barry as a party in place of the original party under r 9.09(2), but should instead exercise power under r 16.03. Counsel also submitted that, because Emanuel had ceased to be an object of the discretionary trust of which Fifteen Eestin was trustee, and since Barry was not a beneficiary of the trust, he had no standing to seek the alternative relief (which the plaintiffs had initially sought against Fifteenth Eestin for breach of trust).[26] Further, it was submitted, Glen Oak had no standing to seek such alternative relief.
30 Counsel submitted that the person named as executor in the will was not the personal representative of the deceased until probate had been granted. Further, if the pleaded estoppel or constructive trust were made out, the provisions of the will might be so inconsistent with the representation made by Emanuel that the will could not operate. The Court should not ‘pre-empt the outcome of that issue’ by making an order for substitution – ie, designating Barry as executor - but should instead make an order under r 16.03.
31 Counsel for the respondents said that r 16.03 was irrelevant because there was a personal representative of Emanuel’s estate. The 2004 will had appointed Barry as executor and, once probate was granted, the estate of the deceased would vest in the executor as from the date of death.
32 In our view, the submission of counsel for the respondents should be accepted. At common law, the title to the personal estate of the deceased vests in his or her executor from the date of death.[27] That principle continues to apply in Victoria. When probate is granted, s 13 of the Administration and Probate Act 1958 (Vic)[28] provides that any real estate belonging to the deceased vests in the executor retrospectively to the date of death. Thus, once a grant of probate has been made, the executor will be bound by any decision affecting Emanuel’s real or personal property, even if the Court does not proceed under r 16.03.
33 The only basis on which it was submitted that a grant of probate could be refused was that Emanuel had represented to Sabrina that she would be entitled to the proceeds of his estate under the 1988 will. Even if Sabrina succeeded in establishing that his Honour should have found that the property left by Emanuel’s 2004 will was affected by an estoppel or constructive trust, neither the validity of that will, nor the title of the executor and trustee appointed by it to administer his estate, would be affected. Instead, the executor would be required to administer the property and hold it on any trust imposed as a result of court orders made on the appeal, rather than in accordance with the terms of the will.
34 The situation is similar to that in Stone v Hoskins,[29] where it was argued that probate of a will should not be granted because the property was held on a constructive trust arising from an agreement between the testatrix and her husband. Sir Gorell Barnes said that where an agreement to make mutual wills is established, the Court does not set aside the will, but orders the executor of the will to act as the trustee to perform the contract.[30] The High Court followed this approach in Birmingham v Renfrew[31] and Barns v Barns.[32] Although there is no direct authority for the principle in the context of estoppel, the same reasoning applies by analogy. In our opinion, it is therefore unnecessary for the Court to proceed under r 16.03.
35 We would also reject the appellants’ claim that Glen Oak does not have standing in the appeal in relation to the alternative claim for breach of trust sought by it and Emanuel. Glen Oak’s standing to claim alternative relief was not challenged below. It is now too late for the appellants to claim that it should not have been a party to the breach of trust claims.
36 If we had concluded that his Honour erred in holding that Emanuel was entitled to exercise his power to remove the trustee of the Investment Trust, Barry would not have had standing to pursue the alternative claim for breach of trust because he was not a beneficiary of the Investment Trust and does not have any interest in it in his capacity as executor. But since we have concluded that his Honour was correct to dismiss the estoppel claim (so that Emanuel was entitled to remove Fifteenth Eestin and appoint Glen Oak as trustee), Barry’s lack of standing has no practical significance.
VI WERE THE PLEADED REPRESENTATIONS MADE?
37 In their defence and counterclaim, the appellants relied on representations and promises made on four separate occasions. The first representations were said to have been made after Emanuel had by-pass surgery in mid-July 1990. Around that time there were disagreements between him and Barry about the management of Delf Brass (which was then being run on a day-to-day basis by Barry’s brother–in–law) and a timber business. Barry and Emanuel were directors of Project Hardware, which, as mentioned above, owned the Delf Brass business. Sabrina, Bloom and Barry’s wife, Sara, were the shareholders. Barry was also responsible for running the timber business, owned by the Provans Timber group of companies.[33] Emanuel was then contemplating a division of the various family businesses and entities between Barry’s interests (covering Barry and his wife, Sara) on the one hand, and Emanuel’s interests (covering Emanuel, Bloom and Sabrina) on the other.
38 The defence and counterclaim alleged that in July 1990 Emanuel made the following promises to Sabrina (‘the July 1990 promises’):
(a) to avoid any dispute between Barry and Sabrina over the division of family controlled assets after his death, [Emanuel] would, during his life, split up his wealth between Barry and Sabrina; and(b) he would take steps to ensure that the assets of the [Investment Trust[ would -
(i) be, and remain, managed and controlled by Sabrina;
(ii) be used for the benefit of [himself[ and [his wife Bloom] (‘the parents’) and Sabrina while the parents were alive;
(iii) be for the sole benefit of Sabrina after the parents' deaths.
39 The second representations were said to have been made in or around October 1990, prior to the execution of the Dissolution Agreement. They were said to have been made to Sabrina, who informed Ian of them. We call these ‘the October 1990 promises to Sabrina’.
40 As pleaded, the representations were that:
(a) [Emanuel] would, during his life, split up his wealth between Barry and Sabrina;(b) he was arranging for a Dissolution Agreement to be drawn so as to divide the assets of the family between Barry, his wife, and their associated corporate entities, of the one part, and [Emanuel], Bloom Rosenberg and Sabrina, and their corporate entities, of the other part;
(c) the purpose and effect of the Dissolution Agreement was to ensure that Sabrina would be looked after financially in the future after the parents' deaths, so that she would not be reliant on Barry;
(d) Barry and his family were getting properties under the Dissolution Agreement, and Sabrina would get the properties held by the [Investment Trust];
(e) [Emanuel] would ensure that Sabrina would be looked after financially, in the future after her parents' deaths;
(f) [Emanuel] would ensure that the assets of the [Investment Trust], would -
(i) be, and remain, managed and controlled by Sabrina and Ian;
(ii) be used for the benefit of the parents and Sabrina while the parents were alive;
(iii) be for the sole benefit of Sabrina after the parents' deaths;
(g) [by implication] [Emanuel] would do everything necessary to ensure that Sabrina had the benefit of the represented state of affairs and his promises as set out [above]; and
(h) [by implication] [Emanuel] would not do anything inimical to the represented state of affairs and his promises as set out [above], nor would he do anything to prevent or frustrate the fulfilment of the said represented state of affairs and his promises.
41 The third representations were also said to have been made in or around October 1990, but in this case, to Ian. It was alleged that these promises were made to Ian when Emanuel asked him to take over the management of Project Hardware and the Investment Trust, and that Ian had informed Sabrina of them. We call these ‘the October 1990 promises to Ian’. They were that:
(a) [Emanuel] was going to split his assets between Barry and Sabrina;(b) the assets of the [Investment Trust], and all other assets under his management and control, would be for the benefit of the parents and Sabrina during the lifetimes of the parents, and thereafter for the benefit of Sabrina;
(c) [Emanuel] would ensure that the assets of the [Investment Trust], and all other assets under his management and control, would -
(i) be, and remain, managed and controlled by Ian and Sabrina;
(ii) be used for the benefit of the parents and Sabrina while the parents were alive;
(iii) be for the sole benefit of Sabrina after the parents' deaths;
(d) under the [1988 will] all proceeds of his estate went to [Bloom], then to Sabrina;
(e) the asset arrangements in sub-paras (a), (b), (c) and (d) were for the benefit of Sabrina and Ian.
42 As earlier mentioned, the Dissolution Agreement was entered into in November 1990 between Emanuel, Bloom, Barry, Sara, Sabrina and other corporate entities which owned various family businesses or held property on trust for family members. Fifteenth Eestin was a party to the agreement in its own right and as trustee of the Investment Trust. Clause C of the Preamble to the Agreement said that disagreements had arisen about the future operation and management of Delf Brass and the timber business. Clause D of the Preamble said that, in order to resolve these disagreements, the principals (Barry, Sara, Emanuel, Bloom and Sabrina) had agreed to a division of defined real estate and business assets between Barry’s interests (covering Barry and Sara) and Emanuel’s interests (covering Emanuel, Bloom and Sabrina). To bring about that division, the agreement provided for the appointment and retirement of family members from specified company positions and trusteeships and for transfers of shares in specified companies.
43 Under a deed of variation and a deed of nomination executed on the same day, Barry resigned as appointor of the Investment Trust in favour of his mother.[34] He also resigned as director of Fifteenth Eestin and Sabrina took his place as director. ASIC records showed that Ian became a director of Fifteenth Eestin on 17 May 1991, though the judge said that ‘no minutes were produced of any meeting of directors at which such appointments were said to have been made’.[35]
44 The overall effect of the Dissolution Agreement was as follows. Bloom and Sabrina transferred their shares in the Provans Timber group entities to Barry and Sara, who thereby obtained full control of the timber business. Sabrina retained her 50 per cent shareholding in Project Hardware. The other 50 per cent was owned (in equal parts) by Bloom and by Rangeway Nominees Pty Ltd (‘Rangeway’), which was the trustee of another family trust.[36] Ian took over the day to day management of the Delf Brass business, with some assistance from Sabrina.
45 The fourth representations were said to have been made to Sabrina and Ian after Bloom’s death, when Emanuel sold the apartment in which he was living and divided the proceeds between his five grandchildren. We call these ‘the 1994 promises’. According to the pleading, Emanuel:
(a) informed Sabrina and Ian that he would sell his apartment in South Yarra and divide the proceeds of sale amongst his five grandchildren, but [that he expected Sabrina and Ian] to see that he had a place in which to live;(b) represented to Sabrina and Ian, and promised them, that Sabrina would get everything on his death pursuant to the [1988 will]; and
(c) repeated his earlier representation and promise that the assets of the [Investment Trust] would -
(i) be, and remain, managed and controlled by Sabrina and Ian;
(ii) be used for his benefit and for the benefit of Sabrina while he was alive;
(iii) be for the sole benefit of Sabrina after his death.
46 The pleadings alleged that, in reliance on the July and October 1990 promises to Sabrina, the October promises to Ian and Emanuel’s request to Ian to take over the Delf Brass business (through the request to manage Project Hardware), Sabrina was induced to accept appointment - and thereafter remain - as a director of Fifteenth Eestin, and to participate in the management and control of the Investment Trust thereafter. Further, in reliance on Emanuel’s request and the July and October 1990 promises to Sabrina and the October 1990 promises to Ian, Ian accepted an appointment as director of Fifteenth Eestin and took over the management of Project Hardware. It was said that, by making these promises, Emanuel had fostered various assumptions or expectations on the part of Sabrina and Ian, which they relied on to their detriment. It was also said that Sabrina and Ian had provided Emanuel with a place to live in reliance on the 1994 promises.
B Summary of alleged representations
47 The various representations alleged to have been made by Emanuel to Sabrina and/or Ian can be summarised as follows:[37]
(a) Sabrina would be looked after financially in the future after her parents' deaths, so that she would not be reliant on Barry.[38]
(b) Emanuel would split his wealth between Sabrina and Barry, or would, during his life, give his entire wealth to Sabrina.[39]
(c) Emanuel would ensure that the assets of the Investment Trust and all his other assets would be (and would remain) managed and controlled by Sabrina,[40] or by Sabrina and Ian, for the benefit of Emanuel and his wife and Sabrina while the parents remained alive - and after their deaths, for the benefit of Sabrina.[41]
(d) Sabrina would be entitled to the properties held by the Investment Trust after Emanuel’s death.[42]
(e) After Bloom’s death, Sabrina would get ‘everything on [Emanuel’s] death’ under the 1988 will. [43]
48 It is necessary to summarise the relevant evidence (respectively) of Sabrina, Ian, Mr Fisher (the Rosenbergs’ friend and solicitor) and Emanuel.
1 Sabrina Berger
49 In her first affidavit, Sabrina deposed that in July 1990, shortly after Emanuel left hospital, he had told her that he was unhappy with the way Barry was running the Delf Brass business; that he did not want a conflict between her and Barry ‘over the division of the family controlled assets; he would rather see them enjoying themselves whilst he was still alive and ensure that they did not fight after his death’; and that he had decided to split his wealth between his two children.
50 She said she had had a discussion with her father in October 1990 in which he said his intention, and the purpose of the proposed Dissolution Agreement, was that she ‘would be looked after into the future and after his death so that [she] would not be reliant on [her] brother’; that he would give her a power of attorney to use if required; and that the assets of the Investment Trust ‘would be utilised for the benefit of himself, [Bloom] and [Sabrina] whilst [her] parents were alive, and after their deaths for [her]’. He also said to her that he would give Gard Nominees Pty Ltd and the Provans Timber companies to Barry.[44]
51 Sabrina also deposed that there was a later meeting between herself, Barry and Emanuel, at which Emanuel said that he had decided to split ‘all of the assets’, except for the Delf Brass business. At this meeting, Emanuel asked Barry if he wanted to buy Delf Brass or get out of the business. Barry said that he wanted to get out of the business. Shortly after that meeting, Emanuel asked Ian if he wanted to run Delf Brass, but he declined. In November 1990, however, Ian told Sabrina that he had changed his mind after pressure from Emanuel, and would agree to run Delf Brass.
52 Sabrina also said in her first affidavit that in 1994, Emanuel had told her and Ian that he wanted to sell his apartment in South Yarra and split the proceeds of sale between his five grandchildren:
He emphasised to us that, because he had rearranged the family asset affairs in 1990 so that the assets of the Trust would be mine after his death, once he sold his apartment in South Yarra it would be up to my husband and me to provide him with a place to live and look after him in his old age. I agreed to do so.
53 Sabrina described the improvements made to the three properties owned by the Investment Trust (ie, the corner properties). The funds expended on demolition and construction works on the Alexandra Parade property in 1996 were financed by an advance of $400,000 from the Investment Trust, a Macquarie Bank loan of $550,000 to the Investment Trust, a $300,000 loan from Project Hardware Ltd[45] and smaller loans from other family companies and trusts.[46] That property is leased by Delf Brass at a rent of $220,000 per annum.
54 Between 1991 and 1996, Project Hardware had made improvements to the property at 457 Hoddle St at its own expense; and between 2000 and 2003, the Investment Trust had expended approximately $74,000 on improving the property. In 2000, a new building was constructed at 477 Hoddle Street, Clifton Hill, financed by a loan of $772,077 from Macquarie Bank. Kaylock (Australia) Pty Ltd, in which Sabrina and Ian then had a 50 per cent interest, pays rent of $155,000 per annum to the Investment Trust.
55 In her third affidavit, sworn on 21 December 2005, Sabrina deposed that Emanuel had said at the hospital that he ‘wanted to split everything equally between Barry and me, so that there would be no problems if he died’. She said that, by what her father had said and the way that he had spoken, she understood him to be referring to various properties (including the properties of the Investment Trust) and the two businesses, Provans Timber and Delf Brass.
56 Emanuel told her that she would become a director of Fifteenth Eestin in order to participate in the management and control of the Investment Trust. He said that the assets of the Investment Trust and his other assets would be used for him, Bloom and Sabrina whilst he and Bloom were alive, and thereafter for Sabrina’s benefit alone. She said that she had told Ian about these discussions with Emanuel.
57 Sabrina said that, apart from attending the meeting previously referred to, she had not been involved in the negotiations for the Dissolution Agreement because she had a young baby at the time. She now recalled, however, that Ian was present at that meeting and that Emanuel had offered Delf Brass to Barry, but Barry had said that he did not want it. She said that Delf Brass had accumulated large debts under the management of Barry’s brother-in-law, Ady Broder.
58 She also said that in November 1990, Ian said that he had told Emanuel that, despite his reluctance, he was willing to take over the management of Delf Brass. She said that she had signed the Dissolution Agreement in reliance on the fact that Ian would be joining with her in the control and management of the Investment Trust. She had also relied on Emanuel’s statements that in the long term, Delf Brass and the assets of the Trust would be hers.
59 Sabrina also deposed that, in discussions about the Dissolution Agreement, Emanuel had told her that she was getting the corner properties. She said that Emanuel had told her that what he was doing would ensure she would never be reliant on Barry to ‘do the right thing’ once he (Emanuel) was no longer around. She said that Emanuel had also told her that his will stated that Barry had been taken care of during his lifetime, and that it provided for his estate to go to Bloom and then to Sabrina. Since 1990, she said, Emanuel had repeatedly said he had done the ‘right thing’ in dividing the family business assets. Sabrina said that she had relied on what Emanuel had said when providing support and assistance to Ian in the management and control of Project Hardware and the Investment Trust.
60 Although Sabrina repeated many of these statements in her evidence-in-chief, much of her evidence in cross-examination was not helpful to the appellants’ case. So far as the effect of the Dissolution Agreement was concerned, she agreed that she had thought that Emanuel ‘would look benevolently on [her] in the future’. She said that she had ignored the detail of the Dissolution Agreement because she had thought that Emanuel would look after her interests. Sabrina also agreed that she had understood that the Dissolution Agreement did not split Emanuel’s wealth between her and Barry. She had been aware that the Agreement had left Emanuel and Bloom with their residential property and with shares in various companies, and had left herself and Emanuel in control of the assets of the Investment Trust for the benefit of the beneficiaries of the Trust. But she reiterated that Emanuel had said that he would split his wealth between her and Barry.
61 She said that she had expected that, after her parents’ death, Emanuel’s wealth would ‘eventually ... be [hers] anyway, so to [her] that related [to] the same conclusion’. She agreed that her expectation reflected the fact that Barry was her only sibling and that there was ‘tension’ between Emanuel and Barry, who were ‘disentangling their business connections’.
62 The following exchange then occurred between Sabrina and cross-examining counsel:
COUNSEL: Was it your understanding that in the arrangements that your father was proposing to be made, that he was expressing the view that he had provided in Barry taking a share that he had provided sufficiently for Barry?WITNESS: Yes.
COUNSEL: You were rather younger than Barry, nine years?
WITNESS: Yes.
COUNSEL: But a time might come, mightn’t it, when your father was satisfied that he had provided sufficiently for you, mightn’t it?
WITNESS: Possibly.
This was a significant admission because it undermined Sabrina’s claim that she believed her father had promised she would receive all his remaining property.
63 Sabrina’s answers in cross-examination show her appreciation of the fact that the Dissolution Agreement did not divide all the family wealth between her and Barry. At most her evidence supports the claim that Emanuel led her to believe that he would divide his wealth between her and Barry, either during his lifetime or by his will.
64 Sabrina also gave evidence about her state of mind in relation to Fifteenth Eestin. She said that when Emanuel made her a director of that company in 1990, he said that he ‘was making arrangements that would benefit [her] if he was not around’ - that is, if he died shortly after making the arrangement. At that time, Emanuel had had heart surgery and it was expected that Bloom would outlive him. The transcript notes an inaudible response to a question in cross-examination about whether Sabrina knew what would happen if Emanuel was ‘still around’ - that is, if he survived Bloom for a significant period.
65 In cross-examination, Sabrina agreed that she had realised that she did not become entitled to the assets of the trust simply by becoming a director of Fifteenth Eestin; that Emanuel and Bloom were both beneficiaries of that trust; and that her participation was for the purposes of making decisions that would benefit all the beneficiaries.
66 In her affidavit of 21 December 2005, Sabrina said that at about the same time that Emanuel was talking to Ian about taking over the Delf Brass business, Emanuel had told her that she ‘was getting the corner properties, being those owned by the Trust’. As his Honour noted, however, Sabrina also agreed in cross-examination that Emanuel had never given her any assurance that particular buildings would always remain the property of the Investment Trust, nor had he made any promises about the nature of the assets of the Investment Trust.[47] She also agreed that Emanuel regarded the Investment Trust properties as his, and that he had never ruled out the sale of those properties. She also said that she had been aware in 1990 that Emanuel intended to leave all his assets to Bloom, if she survived him.
67 It was put to Sabrina that Emanuel’s concern about her financial security in 1990 arose from his concern that he might not live much longer. Sabrina said that she had believed that everything in Emanuel’s will would come to her, even if she was financially secure by the time he died. His Honour then asked her whether that meant that Emanuel could not change his 1988 will and the codicils to it (for example, to leave something to a charity). Sabrina said that, in the period after the will was made, she and Emanuel ‘had discussions to change his will and he mentioned that he would want to do, give some to charity. Well that was fine’.
68 Ian swore six affidavits in these proceedings. In his first affidavit, he said that he had been invited by Emanuel to come into the Delf Brass business. He had at first refused but, on being pressed by Emanuel, he eventually agreed, mainly because of Sabrina. In his second affidavit, he said that he had been appointed as a director of Fifteenth Eestin following the division of the Rosenberg family assets in November 1990, and that his becoming a director was ‘sought and encouraged’ by Emanuel, who said he was seeking to ‘hand over the reins’ so as to relieve himself of the burdens of managing the assets under his control’.
69 It was not until his third affidavit that Ian referred to the promises said to have been made by Emanuel. According to that affidavit:
• From July 1990 onwards, Emanuel had told Ian on a number of occasions that his will did not provide for Barry, and that everything was left to Bloom, and then to Sabrina.
• At the time he took over Delf Brass, Ian had considered it to be ‘a basket case’. When he agreed to take over control and management of that business, he was influenced by the fact that Emanuel had told Sabrina and him that Project Hardware and the Investment Trust would belong to Sabrina in the long term.
• In late 1990, Emanuel had told Sabrina and Ian of the impending agreement to divide the family business assets. Ian said that Emanuel had:
emphasised to us that what he was doing was for the benefit of Sabrina into the future [so] she would never be reliant upon Barry Rosenberg to do the right thing by her, once Mr Rosenberg was no longer around to take care of her. Mr Rosenberg told us that his will stated that Barry Rosenberg had been taken care of during his lifetime, and that his estate would be left to his wife, then to Sabrina. In many conversations with Mr Rosenberg over the years following 1990, he repeatedly said that what he had done in 1990 to divide the family business assets was the right thing, and that he felt he could rest easy knowing that he had provided for both of his children fairly.
• In mid-1990, Sabrina had told Ian of discussions between herself and Emanuel, in which Emanuel had said he would during his life split his wealth between his two children; that Sabrina would become a director of Fifteenth Eestin, in order to participate in the management and control of the Trust; and that the assets of the Trust and his other assets would be used for the benefit of Sabrina and her parents whilst her parents were alive and then they would be for the sole benefit of Sabrina.
• Sabrina had told Ian of discussions between herself and Emanuel in about October 1990, in which Emanuel had told her that he would, during his life, split his wealth between her and Barry; and that he was arranging for a Dissolution Agreement, to divide the assets of the family between Barry, Sara and their associated corporate entities on the one hand, and Emanuel, Bloom and Sabrina and their associated corporate entities on the other. The Dissolution Agreement was intended to ensure that Sabrina would not be dependent on Barry after Emanuel’s death. Sabrina would get the properties held by the Investment Trust and Delf Brass. Emanuel would ensure that Project Hardware and the assets of the Investment Trust would be managed and controlled by Sabrina and Ian, and would be used for the benefit of Sabrina and her parents while her parents were alive, and then would be for the sole benefit of Sabrina after the parents’ death.
• Sabrina had also told Ian that Emanuel had asked her to become a director of Fifteenth Eestin, for the purpose of taking part in the management and control of the Investment Trust.
• In reliance on these discussions, Ian had accepted an appointment as a director of Fifteenth Eestin and had carried the primary responsibility for the management and control of the Investment Trust. Emanuel had given Sabrina and Ian a copy of his will and codicil dated September 1995, pursuant to which the balance of Emanuel’s estate (after bequests of $70,000 to each of the five grandchildren) was left to Sabrina if she survived him.[48] In his evidence at trial, Emanuel said that he had spoken to Sabrina in 1990 about what the will then provided, but did not speak to her about the benefits that would come to her when he and Bloom passed away. Emanuel contradicted himself about whether Sabrina had a copy of the 1988 will.[49]
70 Some of Ian’s evidence in cross-examination related to the circumstances in which he had backdated a deed executed by Mr Lionel Rosenberg, Emanuel’s brother. The deed assigned to Project Hardware (which, at the time, was still called Rosekay) Lionel’s interest as an object of the Investment Trust (which was a discretionary trust).[50] The backdating was intended to ensure that distributions made by Fifteenth Eestin to Project Hardware (both before and after the execution of the Dissolution Agreement in November 1990, when it was not yet a beneficiary of the Investment Trust) did not result in a re-assessment of tax liability.
71 We refer below to his Honour’s strongly adverse findings about Ian Berger’s credit, which were in part based on his evidence relating to these matters. His Honour regarded it as ‘quite unbelievable’ that Ian would not have recalled the backdating episode. His Honour noted Ian’s
prolonged reluctance to state that one of the reasons for the backdating of the documents in 1993 was that, if the distributions had to be reversed because they were in breach of trust, there would be taxation issues.[51]
72 In cross-examination, counsel put to Ian an apparent inconsistency between his affidavits about what Emanuel had told him about the management and benefit of the assets of the Investment Trust. In his first affidavit, Ian had said that Emanuel had told him that the assets of the trust would be for the benefit of himself and Sabrina during their lives and then for Sabrina. In his third affidavit, however, Ian had said that Emanuel had told Sabrina that the assets of the trust and his other assets would be used for the benefit of Sabrina and her parents whilst her parents were alive and then for the sole benefit of Sabrina. Ian said that this was a ‘drafting error’ by his legal team, which was changed in a later affidavit, and that he had not read the previous affidavit ‘100 per cent thoroughly’.
73 It was also put to Ian in cross-examination that it was inaccurate to describe Delf Brass as having been a ‘basket case’ in 1990. Ian responded that the statement was correct because Delf Brass had large borrowings and unsaleable stock, and because Mr Broder, the manager of the business, had put customers off by his attitude. Ian was then taken to the accounts, showing that in 1990 Delf Brass had sales of $3,439,000 (an increase over the previous year), a gross profit of $1.24 million and an overall profit of $50,000, despite paying large amounts for interest, management fees and building up of inventory. The accounts also recorded a substantial inventory, which did not include any substantial amount for writing off unsaleable assets. Ian maintained that Delf Brass was a basket case because the overdraft had risen to just under $2 million, stock had only increased by $900,000 and interest would be continuing to rise.
74 In cross-examination, Ian agreed that he had not believed that Sabrina had become the owner of Project Hardware as a result of the Dissolution Agreement. He said that he had believed that there was a division of assets into the interests of Barry and his family on the one hand, and Emanuel, Bloom and Sabrina on the other. He said that he had understood that ‘Project Hardware was for [Sabrina] in the future but she would get [sic] in the future. He repeated his assertion that there had been a discussion between himself and Emanuel in mid-1990, in which Emanuel had expressed concern that Barry might not provide for Sabrina if he (Emanuel) was to die, and that he would make arrangements so that Sabrina would not have to depend upon Barry. When asked whether Emanuel had promised him that Sabrina would be looked after to ‘any particular level of comfort’, Ian said:
He told me that the assets of the Trust and Delf Brass or Project Hardware or Rosekay Holdings were for Sabbie, so obviously you can draw any inference you want from that you like [sic].
75 Ian agreed that Emanuel had said nothing about any particular asset of the Trust being preserved. It was also put to him that the conversations he had had with Emanuel in 1990, and subsequently, had nothing to do with him taking a position with Project Hardware. Ian said he did not understand the question. He also agreed that he had said nothing in his first affidavit to indicate that it was because of promises by Emanuel that he had agreed to work for Delf Brass, and that this was only said in later affidavits. He also conceded that his recollection had failed him on a number of occasions - for example, when questioned about the capital re-distribution made by the Investment Trust. But he maintained that what Emanuel had said - and what Sabrina had told him Emanuel had said - was that the Investment Trust would be used for the benefit of Emanuel, Bloom and Sabrina in the lifetimes of the Rosenbergs, and that he had relied on those statements in taking on Delf Brass and the management of the Investment Trust.
76 It was also put to Ian that Sabrina had never said in her affidavits that Emanuel had made a promise to her in relation to assets which fell outside the Dissolution Agreement. Ian responded that he could not recall what Sabrina had said in her affidavits. When it was put to him that Emanuel had never told him that his other assets would be for Sabrina’s benefit, Ian said that he could not recall at what point Emanuel ‘did tell me about his will, that he had provided for Sabbie in his will’. But he reiterated that Emanuel had said that Sabrina would not have to rely on Barry and that ‘he would look after her into the future’. According to Ian, Emanuel had said that
he was making sure that [Sabrina would] be financially secure and the assets of the trust and the – would be for her benefit after – would be for her benefit as well as her parents while they are alive and then for her afterwards.
3 Mr Fisher
77 Mr Fisher is a solicitor retained as a consultant by the legal firm of Wisewoulds. At the time of the trial he had been a friend of the Bergers for approximately 15 years. He deposed that:
[F]rom about the mid 1990s onwards Mr Rosenberg told me on many occasions, that he had been clever, by distributing his wealth to his children before he died. He told me that he had provided for his son, Barry Rosenberg, and his daughter, Sabrina. He said that Barry took over the business of Provans Timber and the properties associated with that business, and that the rest was for Sabrina. He told me that Sabrina had agreed to look after him. He jokingly referred to himself as being a pauper, because he had given everything away. He appeared to be self-satisfied with that situation.
As we discuss below, in cross-examination, Emanuel denied telling Mr Fisher that ‘the rest was for Sabrina’ and could not recall saying that ‘he was a pauper’ because he had given away his property to his children. He conceded that Sabrina had agreed to look after him, but denied informing Mr Fisher of this.
78 In April and May 2003, Mr Fisher met with the Bergers on three occasions to discuss matters relating to corporate and trust structures and wills and estate planning. Mr Fisher said that he had been asked by the Bergers to explain these proposals to Emanuel. He attended a meeting on 26 May 2003 with Ian, Sabrina and Emanuel. Emanuel was present for only part of the meeting. Mr Fisher deposed as follows:
...
On 9 October 2003, Mr Fisher met again with Ian, Sabrina and Emanuel at the Bergers’ home. After the meeting commenced, he met with Ian and Emanuel in Ian’s study, where he explained to Emanuel the things he had been retained to do:
79 In his notes of the meetings on 2 April 2003, 30 April and 13 May, Mr Fisher recorded Ian and Sabrina as saying that Emanuel would not be happy to be ‘removed’ from Project Hardware. The notes also say that:
Ian advises that the assets of the investment trust have been dealt with in E Rosenberg’s will. The dissolution agreement dealt with interests in the investment trust. E Rosenberg’s will was made post dissolution. Wisewoulds to review the trust deeds of the family trust and investment trust, in particular the offices of appointor and guardian to ensure control retained by Ian and Sabbie.
80 In cross-examination, Mr Fisher said that he had formed the view that the removal of Emanuel as appointor of the Investment Trust was consistent with the Dissolution Agreement. At the trial he was cross-examined on this issue:
COUNSEL: Why did Mr Rosenberg need to be removed as appointor?WITNESS: It was appropriate in that he had agreed to pass control of assets, or assets as the case might be to his daughter that therefore that be appropriately documented.
COUNSEL: Why did he need to be removed?
WITNESS: Well first off it wasn’t an issue of removing him, as I mentioned before, but it’s an issue of ensuring that the legal documentation in existence properly reflected the intentions of the parties.
...
COUNSEL: Does the same reasoning apply to any need that might exist for him to be removed as a director of a shareholder of Rangeway Nominees?
WITNESS: Well again I have not used the word ‘removed’ and it is the same logic.
81 Mr Fisher was asked about the statement in his notes that ‘Ian and Sabbie advises [sic] that E Rosenberg will not be happy with the removal’. He said that this related to the transfer of all shares in Project Hardware to a holding company, Project Hardware (Australia) Pty Ltd (‘PHA’), and the consequent allotment of shares in that company. Mr Fisher explained that the removal of Emanuel as appointor of the Investment Trust reflected his own view that Emanuel had effectively relinquished the role, but the documentation had not been done. Asked why he had not advised Emanuel to seek independent legal advice, Mr Fisher said that he had understood that the changes were consistent with Emanuel’s earlier intentions. He said that the restructuring was intended to formalise what had been in place for many years.
82 Mr Fisher said that, when he had spoken to Emanuel to persuade him to transfer his shares in Project Hardware and to relinquish his power of appointment, he had in substance pointed out to Emanuel that the Trust was being managed by Ian for Sabrina and the children and that Emanuel should ‘tidy up the paperwork’ and resign in favour of Sabrina. He said that Emanuel did not clearly differentiate between his own property and property owned by the Investment Trust. He was then asked how Emanuel had responded to being told that he had ‘no on-going involvement in the trust’:
COUNSEL: But in response to your proposition to him, ‘You have no ongoing involvement in the trust’, he was quiet as a lamb, was he?WITNESS: No he – he accepted that, he wasn’t – Mr Rosenberg is – was rarely quiet as a lamb, he agreed.
COUNSEL: So if there were an understanding between Mr Rosenberg and Mr Berger and Sabrina Berger that the assets of the trust would be used during Mr Rosenberg’s lifetime for him as well as for others that would be entirely inconsistent with him saying, ‘Yes, I’ve got no involvement’?
WITNESS: But that wasn’t the position. The position was always, as I had understood it, based on discussions that I participate – or was a party to, or would hear, and conduct, that the assets of the trust were managed by and for the benefit of the Berger family, effectively Sabbie, with the clear understanding that they would provide for Mr Berger – sorry, I apologise, Mr Rosenberg, during his life.
83 Mr Fisher was asked about the statement in his affidavit that Emanuel had told him that he had been clever by distributing his wealth to his children before he died. The trial judge put to Mr Fisher that he must have known when he was speaking to Emanuel ‘that he was still possessed of shares and interests of that nature that he hadn’t actually disposed of to Sabrina in his lifetime’. Mr Fisher said ‘I only became aware of that as a function of the instructions that I received in early [2003]’.
84 Mr Fisher conceded that the way in which he had proposed to Emanuel that he dispose of his assets was to the benefit of the Bergers, but said that he had regarded it as addressing the issue of division of assets. In re-examination he reiterated that the restructuring he had discussed with Emanuel was intended to effect Emanuel’s intention to give his assets to Sabrina. He said it had not occurred to him to tell Emanuel that he should get independent legal advice.
85 Emanuel denied statements in Sabrina’s first affidavit to the effect that:
86 Emanuel did not deny Sabrina’s assertion that he had given her a copy of his 1988 will in 1994, around the time he sold his apartment, but simply said that he had made a new will on 21 April 2004. He denied that he had given assurances that control and management of the Investment Trust would reside with Ian and Sabrina. He deposed that he had agreed to allow Sabrina to manage the Investment Trust, along with himself, for the benefit of himself and Bloom. He said that he had told Sabrina she ‘would benefit from the trust assets’ after his death.
87 Emanuel said that he had not opposed Ian becoming a director of Fifteenth Eestin but he had neither instigated nor encouraged it. He had ‘always reserved to [himself] the power to ultimately decide who should manage the trust and how it should be managed, and who should benefit from it’. His intention was that the Investment Trust should ‘be run collaboratively by [himself] and [Sabrina], for [his] benefit, and for [Sabrina] to then derive a benefit from the trust assets after [his] death’.
88 Emanuel said he had never told Mr Fisher that ‘the rest [of his assets] was for Sabrina’. He said that he had never agreed ‘with any statement that Sabrina and Ian had been in control of the [Investment Trust] since ... 1990’, or ‘that anything needed to be formalised’ by his resignation as appointor of the Investment Trust. Although Ian was involved in administering the Investment Trust, Emanuel said that he had never agreed that the assets of the Investment Trust belonged to Ian or to Ian and Sabrina.
89 Emanuel said:
In speaking with Sabrina and Ian, I never departed from what I had always said, namely that the assets of the trust were to be used for Bloom, my and Sabrina’s benefit while we were all alive, and (after Bloom had died) that the assets of the trust were to be used for my and Sabrina’s benefit while I was alive.
He said that he had said that he ‘would ensure that Sabrina would benefit from the trust assets after Bloom and [he] were dead’.
90 He denied having ever agreed that any shareholding of his in PHA should remain within the Berger family after his death. He denied having said to Sabrina in July 1990 that he wanted to ‘split everything equally between Barry and Sabrina’. Such a statement would, he said, have been inconsistent with the Dissolution Agreement, which provided for the assets of the Investment Trust to be held on trust for specified beneficiaries, including himself, his wife and Sabrina. He said:
If I had simply wanted to split everything equally between Barry and Sabrina, I would have ensured that the dissolution agreement achieved this result.
91 In cross-examination, Emanuel agreed that he no longer had good recall of what had happened in 1990, around the time when he had his heart operation and prior to the execution of the Dissolution Agreement. He said that he had had no discussions with Sabrina about the family assets when she had visited him in hospital. Nor did he recall any meeting with Barry, Sabrina and Ian before the Dissolution Agreement was made, though he could not deny that there might have been such a meeting.
92 He was asked about the circumstances in which Ian became involved in the running of the Delf Brass business. When asked whether Ian was reluctant at first, Emanuel responded: ‘Well, he said he was’. He agreed that from 1990 onwards, his own work at Delf Brass had decreased and that Ian and Sabrina had taken on a bigger workload.
93 Emanuel was extensively cross-examined as to the circumstances in which Sabrina became involved in the management of the Investment Trust. He was asked about his statements that he had never given assurances that control and management of the trust would reside with Ian and Sabrina and that he had agreed to allow Sabrina to manage the trust along with himself:
COUNSEL: So the words were, ‘I agreed to allow Sabrina to manage the trust along with me’?WITNESS: Yes.
COUNSEL: Now when did you make that agreement? Mr Rosenberg - - - ?
WITNESS: When did I make the agreement?
COUNSEL: I’ve asked you when you made that agreement, no need to look at any document?
WITNESS: I can’t remember when I made that agreement.
COUNSEL: You actually said to Sabrina that she could manage the trust with you?
WITNESS: No.
COUNSEL: When did you say that – well how did you agree to allow Sabrina to manage the trust along with you?
WITNESS: Along with me?
COUNSEL: How did you agree to that and when, what date. I’m asking you that?
WITNESS: Well I can’t remember the date.
COUNSEL: Well was it before the dissolution agreement, after the dissolution agreement?
WITNESS: No, I can’t recall that. I’m sorry, I can’t recall.
COUNSEL: Do you recall at any stage agreeing to allow Sabrina to manage the trust along with you?
WITNESS: No.
COUNSEL: Did you ever indicate to Sabrina that she and you could manage the trust for the benefit of you and Bloom?
WITNESS: No.
COUNSEL: I’ll take that slowly for you. Did you ever agree in anyway with Sabrina that you, she and you could manage the trust for the benefit of you, Mr Rosenberg, and Bloom?
WITNESS: No.
COUNSEL: You told Sabrina, did you, that you would make sure that she would benefit from the trust assets after your death?
WITNESS: No.
COUNSEL: I’ll take that slowly. Would you look at p.380 at the top?
WITNESS: Yes.
COUNSEL: Now you see the words, ‘I told Sabrina’?
WITNESS: Yes.
COUNSEL: Just read that sentence to yourself. Have you read that sentence?
WITNESS: Yes.
COUNSEL: Is that true or not?
WITNESS: The bottom part’s true.
COUNSEL: No, no, just the one sentence, ‘I told Sabrina that I would ensure’, just that sentence, the first - - - ?
WITNESS: No, no.
COUNSEL: That’s not true?
WITNESS: I made a will and it was in the will, was in the will.
COUNSEL: But this is talking about what you told Sabrina?
WITNESS: No, I didn’t tell Sabrina, to my knowledge now I don’t – I can’t remember - - -
COUNSEL: All right.
HIS HONOUR: Well that’s slightly different Mr Rosenberg. Are you saying that sitting now in the witness box, you can’t remember whether or not you told Sabrina - - - ?
WITNESS: No.
HIS HONOUR: That you’d be sure that she’d benefit from the trust assets after her death or are you saying - - - ?
WITNESS: I’m not saying I didn’t, but I can’t remember I did.
94 Emanuel was also cross-examined about what he meant by saying in his affidavit that he had always reserved to himself the power to ultimately decide who should manage the Investment Trust:
COUNSEL Now, first of all, how did you reserve the power to decide who should manage the trust?WITNESS How did I decide?
COUNSEL How did you reserve that power?
WITNESS Because I’ve never asked anybody else for an opinion when I go to do something. Right? I act as my own judge. I don’t ask anybody.
COUNSEL Right?
WITNESS I act as my own judge. I don’t ask anybody.
...
COUNSEL How were you going to do that, Fifteenth Eestin is a company with three directors?
WITNESS: Well, what date is this?
COUNSEL: It doesn’t have a date, you made a statement there with no dates, you’ve always done this you say. Is that accurate - or not an accurate statement?
WITNESS: Well I say it on the top one but how it should be managed and who should benefit from it, is that what you’re asking me?
COUNSEL: Yes.
WITNESS: Well, I would say it’s the shareholders, whoever they are.
COUNSEL: Do you mean the beneficiaries?
WITNESS: Yes.
COUNSEL: If we take the beneficiaries, if Barry was not a beneficiary and if Sara wasn’t, and if you, Bloom and Sabbie were, how were you going to decide ultimately who would benefit?
WITNESS: But I’m still here.
...
HIS HONOUR This is talking about the trust.
WITNESS I understand that.
HIS HONOUR Not under a will.
WITNESS He’s talking about who’s going to get the money in the trust.
95 Emanuel could not recall if he had told Sabrina who would benefit from the Investment Trust when he died. He said that, in 1990, he had spoken to Sabrina about what his will provided for, but ‘I can’t recall it though’. Nor could he recall whether he had told her that she would benefit from the corner properties, although he could not state definitely that he had not made the statement.
96 Emanuel agreed that he had told Sabrina that he did not want to see her and Barry in dispute after he had died. He was then cross-examined about what he had told Sabrina after he had been in hospital:
COUNSEL: And you told her that you would rather see Barry and Sabbie enjoying themselves whilst you were still alive?WITNESS: Yes.
COUNSEL: You told her that you wanted to ensure that they didn’t fight after your death?
WITNESS: Correct.
COUNSEL: You told her that you had decided to split your wealth up between Barry and Sabbie?
WITNESS: Yes.
97 There was further cross-examination of Emanuel about what he had told Sabrina about the corner properties:
COUNSEL: Did you indicate to Sabbie that she would get some benefit from the corner properties when you died?WITNESS: Yes, I would say – if she read my will, she would.
COUNSEL: Did you tell her that Barry gets certain properties, and she gets the balance of your estate, including the corner properties when you died?
WITNESS: No.
COUNSEL: You didn’t say that?
WITNESS: No.
COUNSEL: Did you talk to her and say that she would have the – that she would get the corner properties?
WITNESS: If she had read my will, she would have known that she was probably going to get it.
COUNSEL: And if you hadn’t given her the will in 1990, you’d have to tell her, wouldn’t you?
WITNESS: No, I didn’t. I think they had the will to read.
...
COUNSEL: But you did give Barry a copy of your 1988 will?
WITNESS: No.
...
COUNSEL: Did you give him a – did you give Sabbie a copy of your 1988 will?
WITNESS: No.
Emanuel was then taken to the 1988 will, in which he left all his property to his wife Bloom and then to Sabrina, and which stated that he had made no provision for Barry because he had made adequate provision for him. Asked what provision he had made for Barry in 1988, before the Dissolution Agreement, he said he could not recall. When pressed, he said that: ‘[Barry] had his share – he had taken his share’. But he was unable to clearly explain what benefits Barry had received.
98 Emanuel gave somewhat confused answers to questions about how he would carry out his intention that Sabrina would benefit from the trust assets after his death. The following passage of cross-examination suggests, for example, that he thought she would derive that benefit under his will:
COUNSEL: And if you told Sabbie that she got everything including the corner properties that would be because you thought they would pass by your will?WITNESS: Yes.
COUNSEL: You did tell Sabbie that, you did tell Sabbie that she would get everything including the corner properties?
WITNESS: Well, I did tell her.
COUNSEL: Yes?
WITNESS: Are you saying I did tell them?
COUNSEL: I am saying that.
HIS HONOUR: And he’s asking you whether you agree or not with that?
WITNESS: I did agree, yes, probably yes.
COUNSEL: But she would only get that after your death?
WITNESS: I couldn’t give it to her before, it’s mine.
99 Emanuel denied telling Mr Fisher that Barry had taken over the Provans Timber business, although he acknowledged that Mr Fisher probably knew that as a fact. He denied telling Mr Fisher that ‘the rest was for Sabrina’ or that he had provided for Sabrina. He agreed that he had told Mr Fisher ‘probably once’ that he had been clever by distributing his wealth to his children before he died.
100 Emanuel conceded that he had given (or intended to give) the Delf Brass business to Sabrina, but was unclear as to when this occurred. He said that by ‘giving’ Sabrina the business, he meant he had given her ‘control and the business’. He said that he could not recall how he had done this, but said: ‘I think she’s a big shareholder there now’.
101 To summarise, there were significant contradictions in Emanuel’s evidence. He denied having told Sabrina prior to the Dissolution Agreement, that the effect of the agreement would be to divide his wealth between Barry and Sabrina while he was alive; or that all his assets would be managed and controlled by Sabrina and Ian, for the benefit of Sabrina, himself and Bloom during their lifetimes, and thereafter for the sole benefit of Sabrina. In contrast, some of his answers in cross-examination supported Sabrina’s claim that he had told her that he intended to divide his wealth between her and Barry and that she would benefit from the assets of the Investment Trust after his death.[55]
102 As his Honour said:
His evidence was very confused about whether he had ever told his daughter that his intention was that she should derive a benefit from the assets of the Investment Trust after his death — first denying that he said it, then saying that he could not recall and later agreeing that he said it. Mr Rosenberg also agreed that he told Mrs Berger that he did not want to see his son and daughter in dispute when he died, that he would rather see them enjoying themselves whilst he was still alive and that he had decided to split his wealth up between them, ‘in equal halves’.[56]
In our opinion, this was an accurate description of Emanuel’s evidence.
103 As mentioned at the outset, his Honour held that the pleaded representations were not made out. He held that the only representation made by Emanuel in July and October 1990 to Ian and Sabrina was that he would ensure that Sabrina was looked after financially, so that she would not be reliant on Barry after her parents died. His Honour said:
Mrs Berger was, of course, at this time newly married to a man with limited assets but who was looking to invest in a business, whilst she had just become a mother and was not likely to resume employment. Having made his 1988 will and having arranged for the Dissolution Agreement, Mr Rosenberg would have thought that he had done all that he could to see that his daughter, and most importantly, his wife, were financially secure in the event that he died in the near future. He would have believed that, in that event, Mrs Rosenberg, Mrs Berger and her children (if she had more than Antony) would benefit from the assets of the Investment Trust, and that the Delf Brass business would be owned directly and indirectly by Mrs Rosenberg and Mrs Berger, in both cases free of any claim by, or entitlement of, Barry and his family to those assets.Given that by 2004 Mr Rosenberg had survived for a further 14 years and that in that time the financial position of Mr and Mrs Berger had improved dramatically, it is hardly surprising that Mr Rosenberg concluded that he no longer needed to be concerned about his daughter’s financial situation after his death and that he could be satisfied that he had provided sufficiently for her. One only has to state that by 2004 the Bergers owned a luxury home, which Mrs Berger estimated to be worth between $7 and $10 million, plus a majority shareholding in [Project Hardware Australia Pty Ltd] which owned the multi-million dollar Delf Brass business and that their limited liabilities were outweighed by their other assets, to see that these views would have been justified.[57]
104 His Honour said that virtually the only evidence supporting the claim that Emanuel had given all his wealth and businesses to Barry and Sabrina equally was that he had said in his 1997 memoirs that he had done so.[58] His Honour said: ‘I consider this to be an example of the tendency of some old people to ‘cry poor’.’[59] His Honour pointed out that the statement was not correct in 1990, when Emanuel retained ownership of his matrimonial home, nor in 1997, when he owned the shares in Project Hardware left to him by his wife.[60] In any case, Ian and Sabrina could not rely on the statement in the memoirs as a representation on which they had acted to their detriment because it was not made until 1997, by which time the alleged acts of reliance had already occurred.[61]
105 His Honour also referred to Mr Fisher’s evidence that Emanuel had told him that:
His Honour said that his comment about Mr Rosenberg ‘crying poor’ in his memoirs applied ‘equally’ to what Mr Rosenberg had said to Mr Fisher.[62]
106 His Honour’s factual findings reflected both his assessment of Emanuel’s personality and his assessment of the credibility of the principal witnesses. His Honour said that the issue of whether the Bergers had satisfactorily demonstrated that the pleaded representations had been made had to be decided by reference to Mr Rosenberg’s characteristics at the time that he was said to have made them. In his Honour’s view, Mr Rosenberg was a ‘forceful and dominant person’, who was proud of his rise from ‘rags to riches’ and who saw himself as ‘unquestionably in charge of the family’s affairs’.[63] His Honour observed that Emanuel had difficulty distinguishing between what he owned personally and what was owned by companies or held by trusts. For example, his Honour said:
Although Mr Rosenberg acknowledged in cross-examination that Fifteenth Eestin was the trustee of a trust in which there were beneficiaries other than himself, he said that he regarded the corner properties as his, to do with as he pleased. He said: ‘If my money purchased it, it's my property’. He said that he had owned those properties for ‘20 odd years’.[64]
107 His Honour described Emanuel as follows:
[A]n elderly, not particularly healthy gentleman with a failing memory. He also suffered from deafness. Undoubtedly this meant that giving evidence was not easy. Nevertheless, even making allowance for this and the normal stress of giving evidence, it has to be said that much of Mr Rosenberg's evidence during cross-examination was vague and confused. For example, he answered many questions put to him by saying that he could not recall what had happened. A second example was that he said in cross-examination that he could not recall certain things, when he had said in an affidavit sworn only days earlier to the contrary. He sometimes even said that he could not recall them at the time he swore his affidavit![65]
108 The grounds of appeal allege that his Honour gave inadequate weight to Emanuel’s admissions and did not give adequate reasons for rejecting those admissions.[66] That claim must be considered in light of his Honour’s finding that Emanuel’s memory was failing and that much of his evidence during cross-examination ‘was vague and confused’.[67] That finding cuts both ways, of course. It is relevant not only to Emanuel’s admissions against interest but to his evidence that particular representations were not made.
109 Although his Honour found that some statements made by Emanuel were ‘simply not correct, or, at best, exaggerated’,[68] his Honour found that Emanuel was ‘basically an honest witness’.[69] His Honour said of Emanuel:
[He] had a clear view of what he considered had been said by, and agreed or understood between, him and his daughter and son-in-law on the critical occasions in the past. I consider that in giving his evidence Mr Rosenberg was attempting to faithfully reproduce those discussions. Obviously, given the difficulties he was labouring under, it is not surprising that he was unable to recall many things and sometimes became confused when in the unfamiliar and stressful situation of giving evidence from the witness box. I reject any suggestion that he tailored his evidence about these matters to suit his claims in this proceeding.[70]
110 By contrast, his Honour made very adverse findings about Ian’s credibility and also about Sabrina’s. His Honour described Ian as ‘a most unimpressive witness’, who was ‘often evasive in answering questions’.[71] His Honour said that on a number of occasions, Ian was forced to concede that what he had said in an affidavit or in the witness box was not correct.[72] His Honour said that he ‘had the greatest difficulty in accepting’ some of Ian’s evidence.[73] His Honour concluded that:
The result of these criticisms is that I have serious reservations about Mr Berger's credibility as a witness. When it comes to the critical issues of fact, therefore, I am not confident that I can place much reliance on what Mr Berger said occurred.[74]
111 His Honour said that Sabrina was ‘also a witness who did not inspire confidence in her credibility’ and that her recollection of past events was ‘poor’. [75] As one example he referred to the fact that Sabrina had said in her first affidavit that Delf Brass was ‘making little or no profit’ before Ian began to manage it, but in cross-examination, she said it was making ‘a large loss’. As another example, his Honour referred to the fact that Sabrina did not recall receiving ‘substantially more than $2 million for the buy-back of her D class shares in [PHA] in 2003.’[76] His Honour concluded that:
The main criticism of Mrs Berger's evidence was that she appeared to be simply sticking to her well rehearsed lines about what she maintained her father and she and her husband had said and done in 1990 and 1994 rather than giving her evidence from actual recollection and belief.[77]
E The significance of the credibility findings
112 This was a case where the judge’s conclusions as to the credit of witnesses were of particular importance. All of the alleged representations were oral. The witnesses were giving evidence many years after the representations had allegedly been made. The circumstances make applicable the approach described by Tamberlin J in Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (trading as Uncle Ben’s of Australia)[78] (in a passage cited with approval by the High Court when it upheld his Honour’s decision):[79]
[Given the lapse of time] between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time.[80]
113 Difficulties of recollection are likely, in our view, to be even greater in a case such as the present, where the dispute in question concerns dealings between members of the same family about family finances and inheritance. Recollections of what was said, or intended, are inevitably clouded by the overlay of emotion and by the intrusion of individual hopes and expectations and feelings of entitlement. The emotional overlay is all the more significant where, as here, those contending that promises were made, and relied on, are seeking to make good their sense of disappointed expectations.
114 In such circumstances, the advantage which the trial judge has over the appeal court is very significant indeed. As Lord Sumner said in SS Hontestroom v SS Sagaporack,[81] in an oft-cited passage -
[N]ot to have seen the witnesses puts appellate judges in a permanent position of disadvantage against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their view of the probabilities of the case. The course of the trial and the whole substance of the judgment must be looked at, and the matter does not depend on the question whether a witness has been cross-examined to credit or has been pronounced by the judge in terms to be unworthy of it.[82]
115 As this Court pointed out in Aqua-Max Pty Ltd v MT Associates Pty Ltd and Ors,[83] this statement by Lord Sumner was relied on by McHugh J in his leading judgment in Abalos v Australian Postal Commission (‘Abalos’)[84] (with which Mason CJ, Deane, Dawson and Gaudron JJ all agreed). In Walsh v Law Society of New South Wales,[85] the issue was put in the following way by McHugh, Kirby and Callinan JJ, in a passage in which their Honours again referred to Abalos:
[T]he appellate court will be bound generally to defer to any conclusions on the question of credibility formed by the court or tribunal from whom the appeal is brought where the latter has seen and heard the witnesses. In particular circumstances, it will be open to an appellate court to reach conclusions contrary to those of the court or tribunal below, notwithstanding a credibility finding. Sometimes it will be authorised to reject those findings where they are ‘glaringly improbable’ or ‘contrary to compelling inferences’ of the case. But the caution required of all appellate courts in such matters has long been recognised and frequently upheld in decisions of this Court. [86]
116 This question was revisited by the High Court in Fox v Percy.[87] Gleeson CJ, Gummow and Kirby JJ described the approach which an appellate court should take in determining whether to set aside findings of fact made by a trial judge based on the credibility of witnesses:
On the one hand, the appellate court is obliged to ‘give the judgment which in its opinion ought to have been given in the first instance’. On the other, it must, of necessity, observe ‘the natural limitations’ that exist in the case of any appellate court proceeding wholly or substantially on the record.[88]
These ‘natural limitations’ include the disadvantage which an appellate court has in evaluating the credibility of witnesses and in understanding the ‘feeling’ of a case, which may not be fully appreciated by a reading of transcript.[89] In that context, we note that his Honour heard evidence over a period of approximately three weeks. The transcript of evidence covered more than 1,000 pages.
117 The majority in Fox v Percy were at pains to point out, however, that the appellate court was not relieved of its function (that is, conducting an appeal by way of rehearing) merely because the trial judge had reached a conclusion influenced by an opinion concerning the credibility of witnesses.[90] In particular cases, ‘incontrovertible facts or uncontested testimony will demonstrate’ that the trial judge’s decision is wrong, even when that decision is based on credibility findings.[91] Further, their Honours said:
In some, quite rare, cases although the facts fall short of being ‘incontrovertible’, an appellate conclusion may be reached that the decision at trial is ‘glaringly improbable’ or ’contrary to compelling inferences’ in the case.[92]
F The attack on the credibility findings
118 The appellants allege that it was not open to his Honour to conclude that Sabrina ‘was simply sticking to her well rehearsed lines rather than giving evidence from her actual recollection and belief’,[93] when this had not been put to her.[94] Counsel submitted that the divergence between Sabrina’s affidavit evidence and her evidence in cross-examination as to the profitability of Delf Brass was a minor detail, which did not justify his Honour’s conclusion.
119 Sabrina’s inability to recall receipt of the amount paid for her D class shares was said to be explicable by the fact that it may simply have been a ‘book entry’ rather than an actual payment. Sabrina had herself said that she did not recall much of the detail of the 2003 restructure and had left it to Ian and his advisers. Further, her cross-examination related to an amount of $2.8 million, whereas Ian’s evidence was that the correct amount was $2.38 million.
120 Counsel for the appellants also said that in referring to Sabrina’s poor recall and apparent rehearsal of evidence, his Honour was relying on her demeanour, and that reliance on her demeanour was undermined by the 13-month delay between the trial and the delivery of his Honour’s judgment. Finally, it was said that Sabrina’s evidence was supported to a large extent by Emanuel’s admissions and Mr Fisher’s evidence.
121 Counsel for the respondents contended that his Honour’s conclusions as to Sabrina’s credibility were justified in light of the inconsistencies between her affidavit evidence and her evidence in cross-examination. His Honour had not relied solely on her demeanour, or on his findings as to her credit, but on the evidence as a whole. The issue of delay was therefore irrelevant.
122 Although the grounds of appeal did not specifically challenge his Honour’s findings on Ian’s credibility, counsel for the appellants submitted that the finding that he was ‘an unimpressive witness’ was unjustified and that Ian’s reluctance to acknowledge that documents had been backdated to minimise tax was explicable. He might simply have forgotten that documents had been backdated in 1993. Once he became aware of this, he had sworn an affidavit based on his refreshed memory.
123 We have carefully read the entire transcript of the evidence. Nothing in it suggests that his Honour was wrong to regard Ian’s evidence as unreliable, or to regard Sabrina as having a poor memory of events occurring many years previously. So far as Sabrina’s evidence is concerned, the inconsistency about the profitability of Delf Brass may, of itself, have been of little significance, but it should be noted that she attempted to correct it by saying that Emanuel had made different statements to her at different times. She agreed in cross-examination that she had said in her first affidavit that Delf Brass had an overdraft of $1,600,000 in 1990. She then said that she had been advised of the figure and agreed that it was ‘somebody else’s idea’ to deal with that in her affidavit. Her evidence about Delf Brass’ financial situation in 1990 was contradicted by Emanuel. Sabrina also made numerous concessions in cross-examination, to which we have referred above.[95]
124 Sabrina appears to have had little recall of events occurring shortly before the trial. For example, she did not recall that she held different classes of shares in Project Hardware, or that as part of the process of restructuring, a portion of her shares were purchased by PHA. In cross-examination, she said that she did the things she was required to do as part of the restructuring as a consequence of her trust in Ian, and agreed that ‘the circumstances in 1990 with [her] father leading up to the dissolution agreement were precisely the same‘. In these circumstances, his Honour was entitled to conclude that she had a poor memory of events relevant to the alleged representations. Since his Honour made no finding that Sabrina had fabricated the alleged representations, there is no substance in the complaint that this allegation was not put to her in cross-examination.
125 The appellants placed considerable reliance on admissions made by Emanuel in his affidavit evidence, in cross-examination and in his memoirs.[96] As we have already mentioned, his Honour found that Emanuel was an honest witness, though his memory was unreliable. Little weight could safely be placed on what Emanuel said in his evidence-in-chief or cross-examination. His memory was poor and he frequently contradicted himself.
126 His Honour made no findings about Mr Fisher’s credibility. The appellants assert that his Honour should have given greater weight to Mr Fisher’s ‘unchallenged evidence’.[97] We return to that issue below.
127 Because his Honour found that Emanuel’s evidence was affected by his poor memory and did not regard Ian and Sabrina as credible witnesses, it was necessary for him to give considerable weight to other matters which supported, or which undermined, the Bergers’ claims that Emanuel had made the pleaded representations to them. In Galaxidis v Galaxidis,[98] a case which also involved a family dispute, Tobias JA (with whom Giles and Hodgson JJA agreed) said that, in considering the intention of the person alleged to have made a representation and its effect on the person to whom it was made,
it is both appropriate and necessary to consider the whole history of the relationship [between the parties] in order to provide a context against which the conversations ... are to be understood.[99]
128 It was also necessary for his Honour to take account of the conduct of the parties after the representations were said to have been made. Thus, for example, the fact that Ian took primary responsibility for managing the Investment Trust and Project Hardware without objection from Emanuel,[100] provides some support for the Bergers’ claim that Emanuel had previously represented that the Investment Trust would continue to be managed by them. At the least, it is consistent with Emanuel’s having behaved in a way that encouraged them to believe that this was his intention.
129 We deal first with the alleged representation that Emanuel promised in July or October 1990 that he would then ‘split his wealth’ between Barry and Sabrina. We then consider the alternative way in which this representation was put, which was that Emanuel promised that he would split his wealth between his children during his lifetime.
1 The alleged promise that Emanuel would ‘split his wealth’ between Barry and Sabrina
130 His Honour found that Emanuel said to Sabrina in July and October 1990 that he was arranging for a split of the family assets into two parts: one for Barry, his wife and family, and the other for himself, Bloom and Sabrina. He had told Sabrina that the purpose (and effect) of the Dissolution Agreement was that she would be looked after financially in the future, so that she would not be reliant on Barry and there would be no disputes between them.[101]
131 His Honour found that Emanuel did not tell Sabrina in July or October 1990, or Ian in October 1990, that he was then ‘splitting his wealth’ between Sabrina and Barry. At that time, Bloom was still alive. Emanuel had clearly intended to leave his wealth to Bloom if he died first, which at that time was the most likely outcome.[102] If Emanuel had wished to divide his wealth between his children in 1990, he could have used the Dissolution Agreement for that purpose. His Honour said:
Mrs Berger stated in both cross-examination and re-examination that she believed that the Dissolution Agreement was putting into effect what had been discussed between her father and herself in the preceding months. That was clearly correct, in my opinion, and shows that Mr Rosenberg did not tell Mrs Berger or her husband that he was then splitting up his wealth between her and her brother. This is particularly the case given that the Dissolution Agreement contained, amongst other provisions, recitals, a warranty regarding the truth and correctness of the recitals, and clause 29, in which the parties acknowledged that the Dissolution Agreement contained the entire agreement and understanding of the parties and declared that there was no collateral agreement, understanding, warranty or representation with respect to the parties' dissolution which in any way qualified or altered the effect of the Dissolution Agreement.[103]
132 His Honour also rejected the claim that Emanuel told Sabrina in 1990 that he would split his wealth between her and Barry during his life-time or that, following the Dissolution Agreement, all his wealth would, during his life, be left to Sabrina. He said that:
Once again, it must be remembered that in 1990 Mrs Rosenberg was still alive and it was anticipated, given Mr Rosenberg's uncertain health, that she would survive him. In that case, she had to be looked after, which was why his residuary estate was left to her in his 1988 will. Although Mrs Rosenberg had made a similar will, so that in the normal course of events, on her husband's death and then her death, everything would have been left to Mrs Berger, there could be no claim that Mrs Rosenberg could not have changed her will if she subsequently chose to do so.The assertion that Mr Rosenberg had made such representations or promises in 1990 is also contradicted by the fact that there was no complaint from Mrs Berger, or her husband, in 1994 when Mr Rosenberg told them that he was proposing to give the proceeds of the sale of his apartment to his five grandchildren. Although two of the five were, of course, Mrs Berger's children, three were Barry's children. Thus, Mr Rosenberg's proposal meant that the majority of the asset in question was not going to be received by Mrs Berger, when it was supposedly hers or promised to her, or even by her children, but by members of Barry's family which had supposedly already received its share of the Rosenberg family wealth.[104]
133 Counsel for the appellants submitted that his Honour’s findings on this issue gave inadequate weight to Emanuel’s admission during cross-examination that he had said in 1990 that he wanted to split his assets between his children, and to Sabrina’s[105] and Ian’s evidence[106] as to the representations that had been made to them. It was also said that his Honour had erred in rejecting the statement made by Emanuel in his memoirs, that he had decided to give his wealth and business to Sabrina and Barry in equal shares[107] on the basis that this was simply an example of the tendency of some old people to ‘cry poor’.[108] Counsel relied on Emanuel having confirmed in cross-examination that the statements in his memoirs were true. His Honour had not given the appellants any opportunity to address the possibility that he would find that no weight should be given to the statement in the memoirs and had acted on material which was neither in evidence nor the subject of argument. Moreover, his Honour’s conclusion was said to be contrary to his observation during the hearing that ‘the memoirs speak for themselves’.
134 In our opinion, these submissions should be rejected. We have already expressed our view that his Honour was justified in making adverse credibility findings about the evidence of Sabrina and Ian. We also consider that his Honour was entitled to give relatively little weight to what Emanuel said in his memoirs. The relevant statement could have been interpreted in a number of ways. For example, it could have referred to the split of assets effected by the Dissolution Agreement. Further, as noted earlier, the statement was not true in 1990 when Emanuel retained his matrimonial home, nor in 1997 when he owned the shares in Project Hardware left to him by Bloom.[109] Finally, as his Honour noted, the memoirs were written in 1997, well after the alleged representations were made. Although they provided some support for the Bergers’ claim that various representations had been made to them in 1990, they were not decisive on that issue.
135 His Honour’s comment that ‘the memoirs speak for themselves’ was made in the context of a discussion about whether questions could be put to Emanuel about his attitude to the ownership and control of the corner properties because this related to the likelihood that he would have made particular representations. His Honour then made the relevant comment and followed it by remarking, ‘maybe that’s debating the issue but I thought Mr Rosenberg’s position was whatever he might have said he’s entitled to change his mind’.
136 In our view, the comment that ‘the memoirs speak for themselves’ meant no more than that they were but one of the pieces of evidence which his Honour would consider in determining whether the representations were made in 1990. Viewed in that light, it was open to his Honour to decide that little weight should be given to the statements in the memoirs.
137 As his Honour noted, there were contradictions in Emanuel’s evidence about what he had told Sabrina and Ian. The admissions on which the appellants’ counsel relied were not unequivocal. In his second affidavit, Emanuel denied that the purpose of the Dissolution Agreement was to divide the family assets. In his third affidavit, he denied saying in 1990 that he wanted to divide his wealth between his children. In cross-examination, he agreed with counsel that he had thought in 1990 that a division of his wealth and business in equal shares was best.
138 Counsel for the appellants also submitted that his Honour failed to have any regard to the ‘unchallenged evidence’ of Mr Fisher that Emanuel had told him on many occasions that he had been clever in distributing his wealth to his children before he died;[110] that ‘the rest was for Sabrina’; and that he was ‘a pauper’ because he had given everything away. It was said that such evidence should have been given considerable weight because Mr Fisher was a legal practitioner and was a disinterested witness.[111]
139 His Honour did not disregard Mr Fisher’s evidence. He referred in considerable detail to the meetings Mr Fisher had with Emanuel on 26 May and 9 October 2003. Even if his Honour had accepted Mr Fisher’s evidence, it did not establish that Emanuel had made the claimed representations to Sabrina and Ian in 1990. Emanuel denied that he had told Mr Fisher that ‘the rest [of his property] was for Sabrina’. Further, the statement that ‘the rest was for Sabrina’ was equally consistent with the fact that, after the death of his wife, Emanuel intended that his property should pass to Sabrina under his will rather than during his lifetime.
140 It was submitted that, because his Honour had treated the alleged promise as one under which Emanuel had agreed to split his wealth immediately, he had given too much weight to the terms of the Dissolution Agreement. The appellants contended that the entry into the Dissolution Agreement was not inconsistent with the representation that Emanuel would divide his assets between his children. The purpose of the Dissolution Agreement, it was said, was to divide property between ‘Barry‘s interests’ and ‘Emanuel’s interests’ (covering Emanuel, Bloom and Sabrina) rather than to effectuate Emanuel’s intention to divide his assets between his children.[112]
141 We do not agree. The alleged 1990 promises were substantially contemporaneous with the entry into the Dissolution Agreement. As Emanuel himself remarked in evidence, if he had wished to divide his assets between his children at that time, he could have used the Dissolution Agreement for that purpose.[113] His Honour was also entitled to conclude that it was unlikely that Emanuel would have intended to divide all his wealth between his children at a time when his wife was still alive.[114]
142 The appellants’ counsel also submitted that his Honour’s finding that Emanuel did not represent in 1990 that he was then splitting his wealth between Sabrina and Barry,[115] was based on an unduly narrow and literal view of this representation. It was argued that Emanuel’s promise was that over time he would bring about that result. His Honour should have given greater weight to the fact that the promise was made in a family context, where it could not be expected that Emanuel would use precise wording. It was also said that his Honour’s findings did not address the Bergers’ claim that Emanuel had said that he would make arrangements to divide his wealth between his children during his lifetime, rather than at the time of the Dissolution Agreement.
143 Despite that contention, some parts of the evidence suggest that the trial was run on the basis that Emanuel had represented that the division of wealth would be achieved by the Dissolution Agreement. Thus, Ian’s first affidavit stated that Emanuel had told him in 1990 that ‘as a result of the division of family assets he had split his assets’[116] between Sabrina and Barry. In his second affidavit, Ian referred to the details of the split of family assets as set out in the Dissolution Agreement. As already noted, it was not until his third affidavit that Ian deposed that Emanuel had represented that during his life-time he would split his assets between his children. In his fourth affidavit, Ian again referred to repeated assurances by Emanuel that he had divided his wealth.
144 In her evidence-in-chief, Sabrina said that she expected to find the content of her discussions with Emanuel written into the Dissolution Agreement, and that she understood the Dissolution Agreement would divide Emanuel’s wealth between his two children.[117] In cross-examination though, she conceded that she understood that the Dissolution Agreement had not done so. She also repeated her statement that she believed that the Dissolution Agreement would divide Emanuel’s wealth.
145 We assume, favourably to the appellants, that it was open to them to argue that Emanuel represented to Sabrina in 1990 that he would divide his assets between his children during his life-time. Emanuel’s admissions, such as they were, do not require the Court to set aside his Honour’s finding on this issue. As his Honour pointed out, in 1990 it was anticipated that Emanuel would predecease his wife, who was the beneficiary of his 1988 will. Counsel’s submission that Bloom always deferred to her husband is not an answer to the fact that if he had predeceased her, she could have left the property to anyone she wished, though Emanuel may well have assumed that his wealth would eventually pass to Sabrina and/or her children.
146 Having regard to all of the above matters, we do not consider there is any basis for setting aside his Honour’s conclusion that Emanuel did not promise the Bergers in 1990 that he would then ‘split his wealth’ between his children, or that he would do so during his life-time.
2 The alleged promises about management of the Investment Trust, the assets of the Trust and Emanuel’s other assets
147 The Bergers claimed that Emanuel made representations to them in 1990 that the Investment Trust would be, and continue to be, managed and controlled by Sabrina, or by Sabrina and Ian, and would be used for the benefit of Emanuel, Bloom and Sabrina during their lifetimes, and for Sabrina after her parents had died. Their pleadings alleged that the October 1990 representation to Sabrina included an implied representation that Emanuel ‘would not do anything inimical’ to the fulfilment of these express representations.
148 His Honour rejected the claim that Emanuel had made representations in 1990 about the management and control of the Investment Trust. His Honour considered that this would have been ‘a complete anathema’[118] to Emanuel, who regarded the properties held by the Investment Trust as his own and would have wanted to continue managing them. His Honour did not accept that Emanuel had asked Ian to become involved in the management of the Investment Trust before the parties entered into the Dissolution Agreement. He said that this was inconsistent with the fact that Ian was not made a director of Fifteenth Eestin until May 1991, whereas Sabrina became a director contemporaneously with the Dissolution Agreement.
149 Further, his Honour said, the alleged promise that the Investment Trust would be managed and controlled by Sabrina, or by Sabrina and Ian, was inconsistent with the other alleged promise, that Emanuel would take steps to ensure that the assets of the Investment Trust would be used for the benefit of Sabrina and her parents while they were alive, and then for the sole benefit of Sabrina. In his Honour’s view, Emanuel could not have fulfilled that promise if he had handed over management and control to the Bergers. The learned judge considered that when the Dissolution Agreement was entered into, Emanuel wanted Sabrina to assist him by participating in the management of the Investment Trust for the benefit of her parents and herself while her parents were alive, and for her benefit (but not sole benefit) after her parents had died.[119]
150 His Honour also held that Emanuel had not told the Bergers that he would not exercise his power of appointment to remove Fifteenth Eestin as trustee of the Investment Trust. There was no evidence that this had been spoken about in the latter half of 1990. His Honour also regarded the alleged representation as inconsistent with the fact that Sabrina and Ian had asked their solicitor and family friend, Mr Fisher, to speak to Emanuel in 2003 about resigning as appointor of the Investment Trust in favour of Sabrina.
151 His Honour held that when Emanuel had said that the Investment Trust was to be for the benefit of Sabrina after her parents died, neither Sabrina nor Ian had understood this to mean that the corner properties would inevitably come to be owned by Sabrina, or that the assets of the Investment Trust were to be for her sole benefit. These assets were owned by Fifteenth Eestin as trustee and there were other beneficiaries of the trust, including the Bergers’ children.[120]
152 His Honour pointed out that, in cross-examination, Sabrina had agreed that Emanuel had made no promise about the nature of the assets of the Investment Trust, nor that they would be retained at a certain value, nor that the Alexandra Parade and Hoddle St properties would not be sold.[121] She had also accepted that the use of the trust funds during the lifetimes of her parents could have resulted in the trust funds being exhausted. She conceded that being the ‘dealer’ he was, Emanuel could have ‘done what he wanted to do’ with the properties. His Honour placed considerable emphasis on the fact that Sabrina had agreed in cross-examination that, just as Emanuel had decided that the Dissolution Agreement had provided sufficiently for Barry, ‘a time might come when Mr Rosenberg was satisfied that he had provided sufficiently for her’.[122]
153 His Honour also rejected the related allegation that Emanuel had promised Ian in October 1990 that, in addition to the assets held by the Investment Trust, all his other assets would be managed and controlled by Sabrina and Ian for the benefit of Sabrina and her parents during her parents’ lifetimes, and thereafter for the sole benefit of Sabrina. His Honour commented that:
Elsewhere, and significantly in the actual pleading of the assumption and expectation itself in the defence and counterclaim, the management and control allegation is limited to the Investment Trust/Fifteenth Eestin, and its assets. As counsel for the plaintiffs submitted, the claim that Mr Rosenberg represented and promised Mr Berger that his assets would be managed and controlled by Ian and Sabrina bore the appearance of something thought up by him after the event, probably in order to seek to catch Mr Rosenberg’s shares in [Project Hardware Australia].[123]
154 The appellants’ counsel attacked the finding of inconsistency between the alleged 1990 promise that the Bergers would manage the Investment Trust and Emanuel’s intention that the assets of the Investment Trust would be used for the benefit of Sabrina and her parents while the parents were alive. Counsel pointed out that in 1990, Emanuel remained a director of Fifteenth Eestin along with Sabrina and Ian, so that he continued to have some control over the income and assets of the Investment Trust. It was also submitted that Emanuel might have made that representation despite the inconsistency to which his Honour referred.[124]
155 We accept the appellants’ submission that there was no necessary inconsistency between the alleged representation and Emanuel’s intention that the trust assets would be used for the benefit of himself, Bloom and Sabrina during his and Bloom’s lifetimes. If Emanuel did make such a representation, he might have done so on the basis that Sabrina and Ian would simply do as he wished in distributing the income and/or assets of the Investment Trust whilst he remained alive.
156 In our opinion, however, his Honour was correct to conclude that the fact that Ian was not appointed a director of Fifteenth Eestin until May 1991[125] tended to undermine the Bergers’ claim that they were told in 1990 that they would have ongoing management of the Investment Trust. His Honour was also entitled to take account of the fact that in 1990, Emanuel was still actively involved in business affairs and that it would have been ‘anathema’ to him to hand over control to Sabrina and Ian.
157 The appellants also argue that a finding in their favour following necessarily from the judge’s finding that
[Emanuel] wanted [Sabrina] to assist him by participating in the management [of the Investment Trust] for the benefit of her father and mother and herself, whilst they were all alive, and for the benefit (but not sole benefit) of [Sabrina] after her parents’ deaths’.[126]
It was said that there was no basis for the distinction which his Honour drew between Emanuel’s intention that Sabrina should benefit from the assets of the Investment Trust after his death, and the pleaded representation that she would derive the sole benefit of those assets at that time. It was said that in 1990, a promise that Sabrina would benefit from the Investment Trust after the deaths of her parents would have been understood by both Emanuel and the Bergers to mean that she would be the sole beneficiary.[127] It was also said that this was consistent with Emanuel’s admissions in his third affidavit, where he said:
In speaking with Sabrina and Ian, I never departed from what I had always said, namely that the assets of the trust were to be used for Bloom, my and Sabrina’s benefit while we were all alive, and (after Bloom had died) that the assets of the trust were to be used for my and Sabrina’s benefit while I was alive.
And that:
I said that I would ensure that Sabrina would benefit from the trust assets after Bloom and I were dead.
We note that neither of those promises refers to Sabrina becoming the sole beneficiary of the Investment Trust.
158 At the time the alleged promises were made, the beneficiaries included Barry, Sara and their children, who were specified beneficiaries in the Trust Deed,[128] together with a further category of beneficiaries described as
[a]ny spouse, parent, brother, sister, child, grandchild or remoter issue of the specified beneficiaries and the children of such brother, sister, child, grandchild and remoter issue.[129]
As a consequence of the Dissolution Agreement, Barry, Sara and their children were removed as specified beneficiaries, leaving the clause relating to their relatives in operation.[130] Sabrina and her children and remoter issue remained additional beneficiaries of the Investment Trust, though Sabrina did not come within the specified beneficiary provision.
159 As we have said, Lionel Rosenberg (Emanuel’s brother) purported to assign his interest as a beneficiary[131] to Project Hardware in about May 1993.[132] At that time, Bloom was still alive and held shares in Project Hardware. After subsequent changes to the Trust Deed to enable a company to become a beneficiary of the Trust, S & I Investments Pty Ltd (one of the Berger family companies) was nominated as a beneficiary by Fifteenth Eestin.[133] Both Ian and Sabrina were aware of the changes to the beneficiary clause and actively involved in their making. The Bergers did not object to those changes on the basis that Sabrina was to receive the sole benefit of the Investment Trust assets after Emanuel’s death.
160 In our opinion, Emanuel’s admission was equally consistent with Sabrina receiving ‘a benefit’ and with her receiving the ‘sole benefit’ of the Investment Trust. The onus was on the appellants to establish that they understood Emanuel to mean the latter. Having regard to their involvement in the expansion of the class of beneficiaries and to the awareness they must have had that their children were eligible (as members of the class of additional beneficiaries), we see no error in his Honour’s finding that Emanuel intended Sabrina to benefit under the Trust Deed, but not to become its sole beneficiary, and that this was understood by the Bergers.
161 The appellants also submit that his Honour disregarded Mr Fisher’s ‘undisputed evidence ... that on many occasions from the mid-1990s Mr Rosenberg never challenged Ian Berger’s authority in the management of the Trust properties’.[134] Further, it was said that Mr Fisher had given undisputed evidence of admissions made by Emanuel at the meetings held on 26 May 2003 and 9 October 2003.[135]
162 Mr Fisher deposed that from 1990 onwards, he was present on a number of occasions when Ian and Emanuel talked about the trust properties. During many of those conversations Ian told Emanuel how much rent tenants were paying and Emanuel would sometimes ask Ian questions. He said:
It was clear to me on the many occasions when I was present and heard [Ian] and [Emanuel] having conversations, that [Ian] was managing the properties, and that he was keeping [Emanuel] informed by informal conversations.
163 It is clear that Emanuel’s involvement in the management of the Investment Trust properties diminished as he grew older, although he maintained his interest in family business affairs. As Ian acknowledged in his evidence, Emanuel organised a valuation of the three properties in about September 1998. In the previous year, a real estate agent had written to Emanuel giving him an opinion about what the Investment Trust properties would realise if they were sold.[136] We do not consider that because Ian gradually took over the role of managing the Investment Trust, his Honour was required to hold that this had occurred because representations had been made that the Investment Trust would be managed and controlled by Sabrina, or by Sabrina and Ian. It is not uncommon for an ageing parent to be assisted by a child (or the child’s spouse) in managing the parent’s property.
164 As counsel for the respondents correctly submitted, his Honour did not ignore Mr Fisher’s evidence as to what occurred at the meetings between himself and Emanuel.[137] His Honour described Mr Fisher’s evidence as follows:
Mr Fisher said that he told Mr Rosenberg at this meeting that as a result of the proposed corporate restructure Mr Rosenberg would be required to transfer his shares in Project Hardware. Mr Fisher said that Mr Rosenberg replied that he was agreeable to that, subject to there being no problem in relation to any capital gains tax issues. Mr Fisher said that he also told Mr Rosenberg that as he had no ongoing involvement with the Investment Trust, which was being managed by Ian for Sabrina and the children, it was appropriate that in tidying up the paperwork, if Mr Rosenberg was still the appointor, he should resign in favour of his daughter and that the arrangements entered into in 1990, whereby Sabrina and Ian had been in control, had to be ‘formalised’. Mr Fisher said that Mr Rosenberg ‘readily agreed to that’. According to Mr Fisher, similar issues were raised in respect of the Family Trust and again Mr Rosenberg agreed. Mr Fisher said that new wills for Mr and Mrs Berger and Mr Rosenberg were discussed. He said that the issue was raised by Mr Rosenberg who wanted to ensure that provision would be made in the wills of Mr and Mrs Berger for his maintenance, in case they happened to predecease him. Mr and Mrs Berger agreed to this. Mr Fisher said that he also raised concerns about the inter-relationship of his existing will and codicils, and that Mr Rosenberg instructed him to prepare a new will to ensure that the residue of his estate passed to Mrs Berger if she survived him, and to her children if she predeceased him. None of the documents mentioned in this meeting were ever prepared because, Mr Fisher said, he was waiting on the advice as to the final form of the corporate restructure, so that all of the required documents could be finalised at the same time.Mr Berger gave a similar account of the meeting of 26 May 2003 in his third affidavit, sworn on 21 December 2005.[138]
165 This discussion was in an earlier part of his Honour’s judgment rather than in the section explaining his reasons for rejecting the representation relating to management and control of the Investment Trust. It nevertheless supports the respondents’ claim that his Honour took account of Mr Fisher’s evidence of his meetings with Emanuel in deciding whether the 1990 representations about management and control of the Investment Trust had been made.
166 In his affidavit sworn on 27 February 2006, Emanuel referred to ‘having meetings’ with Mr Fisher and the Bergers in 2003 to discuss the restructure of family entities. In his oral evidence he said he could only remember one of those meetings. He denied that he had agreed to resign as appointor of the Investment Trust, or that anything had needed to be formalised.
167 His Honour did not make any factual findings about what happened at the meetings between Mr Fisher and Emanuel, but appears to have accepted that Mr Fisher was a credible witness. It may well be that Mr Fisher’s evidence about what happened at those meetings should have been preferred because of Emanuel’s poor memory. But even if it is accepted that Emanuel agreed to resign as appointer of the Investment Trust when he met with Mr Fisher, Mr Fisher’s evidence does not establish that Emanuel did so in fulfilment of a promise made to Sabrina (or Sabrina and Ian) in 1990 that Sabrina would have management and control of the Investment Trust and all of its assets after his death. When he met with Mr Fisher, Emanuel may have been agreeable to resigning because he then had an amicable relationship with Sabrina and Ian, though he changed his mind later.
168 We have previously referred to his Honour’s reasoning that the fact that Sabrina and Ian had asked Mr Fisher to speak to Emanuel to persuade him to resign as appointor of the Investment Trust was inconsistent with the alleged representation that he would not remove Fifteenth Eestin as trustee of the Investment Trust.[139] Ground of appeal 44 alleges that his Honour erred in taking that view. We agree with the submission that such conduct was not necessarily inconsistent with the pleaded representation. At the same time, the fact that the Bergers were apprehensive about Emanuel’s response to the proposal to remove him as appointor of the Trust may indirectly support Emanuel’s denial that the purpose of the proposed restructure was to effectuate earlier representations he had made to Ian and Sabrina.
169 It is significant that in cross-examination Sabrina conceded that she knew that, as a director of Fifteenth Eestin, she would be administering the Investment Trust for the benefit of all the beneficiaries and that, before the Dissolution Agreement was made in 1990, she had understood that Emanuel wanted to leave his assets to Bloom. His Honour was entitled to give considerable weight to those concessions in assessing whether Emanuel had made the express representation as to management and control of the Investment Trust in 1990, and whether he had, in so doing, impliedly promised that ‘he would not do anything inimical’ to the fulfilment of the representation.
170 The appellants’ counsel also submitted that[140] his Honour failed to have sufficient regard to Ian’s undisputed evidence that by 1995, Emanuel was no longer involved in the management of the Investment Trust or of Project Hardware. Although Emanuel’s involvement certainly lessened as he got older, he continued to sign documents as a director of Fifteenth Eestin until June 2000, and took an interest in the redevelopment of the buildings on two of the corner properties.
171 His Honour also pointed out[141] that Ian had said in his first affidavit that he had been told by Emanuel that the assets of the Investment Trust should be managed for the benefit of Emanuel and Bloom during their lifetimes, and after their deaths, for the benefit of Sabrina. By contrast, in cross-examination, Ian had said that he had meant that the Trust should be administered for the benefit of the Emanuel, Bloom and Sabrina while they were all alive, and then for Sabrina after her parents’ deaths. Ian attributed the conflict between his affidavit evidence and his evidence at the trial to an error made by his legal team.[142]
172 Taking account of all these matters, we do not consider there is any basis for setting aside his Honour’s finding that Emanuel did not promise to the appellants in 1990 that they would have management and control of the Investment Trust and its assets.[143] Because of our conclusion on that matter, it is unnecessary to consider the pleaded implied representation that he would not do anything inimical to that promise.
(a) The corner properties
173 One of the reasons for his Honour’s conclusion that Emanuel did not represent that Sabrina would receive the corner properties was that these properties were owned by Fifteenth Eestin (as the trustee of the Investment Trust), and that other than Sabrina, there were other beneficiaries of that trust including her children.[144] With respect, however, that reasoning is not necessarily consistent with his Honour’s earlier comment that
like many lay people, [Mr Rosenberg] had difficulty distinguishing between what he personally owned and what was owned by legal entities such as companies or trusts. Although Mr Rosenberg acknowledged in cross-examination that Fifteenth Eestin was the trustee of a trust in which there were beneficiaries other than himself, he said that he regarded the corner properties as his, to do with as he pleased.[145]
174 Counsel for the appellants relied on Emanuel’s statement in cross-examination that he regarded the corner properties as his to do with as he pleased. They also relied on the following passage of cross-examination of Emanuel:
COUNSEL: So Mr Rosenberg you said earlier that you regarded the corner properties as your properties?WITNESS: All the properties were mine, yes.
COUNSEL: You regarded the corner properties, the Fifteenth Eestin properties as your properties?
WITNESS: Yes
COUNSEL: Are you saying to the court that you assumed that therefore those properties would pass by your will?
WITNESS: Yes
COUNSEL: And if you told Sabbie that she got everything including the corner properties that would be because you thought they would pass by your will?
WITNESS: Yes.
COUNSEL: You did tell Sabbie that, you did tell Sabbie that she would get everything including the corner properties?
WITNESS: Well I did tell her.
COUNSEL: Yes?
WITNESS: Are you saying I did tell them?
COUNSEL: I am saying that.
HIS HONOUR: And he’s asking you whether you agree or not with that?
WITNESS: I did agree, yes probably yes.
COUNSEL: But she would only get that after your death?
WITNESS: I couldn’t give it to her before, it’s mine.
In our view, this passage establishes no more than that Emanuel may have promised Sabrina that she would receive the relevant properties after he died. The fact that the properties were owned by Fifteenth Eestin (as trustee) might have made it impossible for him to fulfil that promise.
175 The most significant support for his Honour’s conclusion comes, in our view, from the concessions made by Sabrina in cross-examination. As noted earlier, she conceded that:
• Emanuel made no promise to her about the assets of the Investment Trust;
• she understood that the trust assets might be used up during her parents’ lifetimes; and
• Emanuel could have done what he wanted with the corner properties.[146]
These concessions are fatal to the claim that Emanuel told Sabrina in 1990 that she would be entitled to the corner properties. It is not the case, as the appellants submitted, that this alleged representation was supported by Sabrina’s ‘unchallenged evidence’.[147]
176 In our view, there is no basis for setting aside his Honour’s finding on the corner properties.
(b) Other assets
177 As noted earlier, Ian testified that in October 1990, Emanuel promised him that all his other assets would be managed and controlled by the Bergers and would be for the benefit of Sabrina and her parents and, after her parents’ deaths, for the sole benefit of Sabrina. In his reasons, his Honour said that this claim ‘bore the appearance of something thought up by [Ian] after the event, probably in order to seek to catch [Emanuel]’s shares in PHA’.[148]
178 The appellants’ counsel argued that this finding was not based on the evidence.[149] The ‘other assets’ were said to be implicitly included in the pleaded representation that Emanuel would divide his assets between Sabrina and Barry. Counsel submitted that it was not contended at trial that every asset of Emanuel’s, including his personal bank account, would be divided between his children equally, but rather that Delf Brass and Project Hardware would be managed and controlled by Ian and Sabrina during the lifetimes of her parents, and that Sabrina would receive Delf Brass and Project Hardware after Emanuel’s death. Counsel said that it was neither suggested in evidence nor put to Ian or any other witness that this claim regarding ‘other assets’ was a recent invention on the part of Ian. [150]
179 It is not clear from the transcript whether the ‘other assets’ claim was treated at the trial as part of the alleged representation that Emanuel would divide his wealth between his children,[151] or whether the appellants claimed that Emanuel had made a specific representation that they would receive the Delf Brass business and Emanuel’s shares in Project Hardware.
180 The grounds of appeal seem to confuse this issue further. Ground of appeal 1(f) says that his Honour failed to have regard to Emanuel’s admissions that he gave, or intended to give, the Delf Brass business to Sabrina.[152] Ground of appeal 28(d) says that his Honour failed to have regard to Ian’s ‘undisputed evidence’ that in October 1990 Emanuel told him that Delf Brass would eventually be for Sabrina. Ground of appeal 28(e) refers to Ian’s evidence that Emanuel told him that the assets of the Investment Trust and Project Hardware were for Sabrina. Ground of appeal 36(a) says that his Honour should have found that Emanuel represented to Ian that ‘all other assets’ would be, and remain, managed and controlled by Ian, Sabrina and Emanuel. Ground of appeal 36 (b)(ii) says that his Honour should have found that Emanuel represented that Project Hardware would be, and remain, managed and controlled by Ian, Sabrina and Emanuel.
181 The respondents submitted that it was not actually pleaded by the appellants that Emanuel’s alleged representation related to all other assets under his management and control. The pleaded representation instead related to all other assets under the management and control of Fifteenth Eestin,[153] and it was for that reason that his Honour considered that Ian’s evidence bore the appearance of a recent invention.
182 A careful perusal of the pleadings suggests that the ‘other assets’ representation was pleaded in both ways. In relation to the October 1990 promise to Ian, the pleading alleged a representation about the assets under the control of Emanuel, whereas the July and October promises were pleaded as representations relating to the assets of the Investment Trust, which would not catch Emanuel’s shares in PHA. Regardless of this ambiguity, it was put to Ian in cross-examination that he had at no time been told by Emanuel – or by Sabrina that Emanuel had told her - that his other assets would be managed and controlled by Ian and Sabrina and would be for Sabrina’s benefit after her parents died. The relevant passage of cross-examination was as follows:
COUNSEL: If you go to your affidavit of 21 December 2005. It’s p. 995, Mr Berger. Do you have that?WITNESS: Yes.
COUNSEL: Paragraph 7 is the first occasion upon which you speak about any statement of promise by Mr Rosenberg in relation to Project Hardware, isn’t it? In the last sentence, that was the first occasion upon which you mentioned it?
WITNESS: Yes.
COUNSEL: Mrs Berger had not suggested in her affidavit of 12 September 2004, when you made yours, that Mr Rosenberg had made any promise to her about Project Hardware at all, did she?
WITNESS: I can’t recall.
COUNSEL: We might look at that later. Anything that Mr Rosenberg said to you about taking a position with Project Hardware was irrelevant to issues of how the assets of the trust might be employed, wasn’t it?
WITNESS: They were two separate issues, yes.
COUNSEL: Now at a later stage then in Paragraph 14 of that affidavit, can I suggest that you sought to improve your hand further in Paragraph 14 by saying that not only had Mr Rosenberg made a promise in relation to Project Hardware but he’d made a promise in relation to his other assets as well? Do you see that?
WITNESS: In relation to the discussion he had with Sabbie?
...
COUNSEL: If you look at Paragraph 14 you say, ‘In or about mid 1990, Sabrina told me that she had had a discussion with her father in which he told her in substance that to avoid any dispute between her and her brother over the division of the assets after his death, he would during his life split up his assets between his two children’. Now any discussion that you had had with Mr Rosenberg concerning splitting up his assets between his two children had centred upon the result that would be achieved by the dissolution agreement, wasn’t it?---
WITNESS: We discussed it as well, yes.
COUNSEL: You add, ’and that Sabrina would become a director of Fifteenth in order to participate in the management and control of the trust’. Discussions about her becoming a director of Fifteenth were in the context of the arrangements made for the dissolution agreement, weren’t they?
WITNESS: Yes.
COUNSEL: Then you add, ‘And that the assets of the trust and his other assets would be used for the benefit of Sabrina and her parents while her parents were alive’. Now she never says in her affidavit material that Mr Rosenberg made a promise in relation to his other assets, does she?
WITNESS: I don’t know what Sabbie said – I can’t recall what Sabbie said in her affidavit.
COUNSEL: You can’t recall what she said to you in 1990, can you?
WITNESS: I recall a very traumatic time between the time when Mr Rosenberg had open heart surgery up until the time of the dissolution. It was very clear in my mind.
COUNSEL: Yes, but he made no promise to you and she did not tell you that he made a promise to her that his other assets would be for her benefit, did he?
WITNESS: Well – could you ask the question again please?
...
COUNSEL: I put it to you that at no time did Mr Rosenberg say to you and at no time did Mrs Berger say to you that Mr Rosenberg had told her that his other assets would be used for her benefit?
WITNESS: I can’t recall at what point he did tell me about his will, that he had provided for Sabbie in the will.
COUNSEL: So you’ve drawn an inference have you, from what Mr Rosenberg told you about the terms of his will?
WITNESS: He had told me at the time that the trust – the assets – in mid 1990, there was issues in regards to the Project Hardware or to Rosekay Holdings that had yet to be resolved.
COUNSEL: Is the fact that as a result of something Mr Rosenberg said to you about the terms of his will, you drew an inference?
WITNESS: He said to me that Sabbie wouldn’t have to rely on Barry. He said to me that she – he would look after her in the future.
COUNSEL: Yes?
WITNESS: Yes.
COUNSEL: But he didn’t say to you that- - -?
WITNESS: And that he’s splitting everything up with Barry and Barry gets his and you’ll get mine.
COUNSEL: But he didn’t say to you and she didn’t say that he had said that his other assets would be used for the benefit of Sabrina and her parents whilst her parents were alive, did he?
WITNESS: He said that he would take care of Sabrina into the future.
COUNSEL: You are differentiating there, are you not, between trust assets, Project Hardware and other assets. I’m putting to you that he never said to you anything about the other assets, did he?
WITNESS: What, which other assets are you talking about?
COUNSEL: All right well, can I suggest that the reason that that found its way into your affidavit is because you were concerned about the shareholding that Rangeway had in Project Hardware?
WITNESS: Nothing to do with it.
183 Following the re-structuring of the Berger interests in 2003 to 2004, Emanuel became a 30 per cent shareholder in PHA, which owns all the shares in Project Hardware and in S & I Investments.[154] In the passage in the judge’s reasons to which the appellants object,[155] his Honour refers to Emanuel’s shares in PHA, rather than in Project Hardware. However, we consider that in the passage of cross-examination set out in paragraph [182] above, counsel implicitly put to Ian the allegation of ‘recent invention’ in relation to ‘other assets’, though he did not explicitly refer to Emanuel’s PHA shares.
184 His Honour seems to have regarded this as a separate representation, rather than treating Emanuel’s PHA shares as covered by the representation that Emanuel would split his wealth. If the promise is to be regarded as part of the alleged representation that Emanuel would ‘split his wealth’ between his children, we refer to our earlier reasons for rejecting the attack on his Honour’s findings about that representation.[156] If it was treated at trial as covered by the representation relating to ‘other assets’, we do not consider that his Honour erred by making a finding against Ian.
185 The appellants’ counsel also submitted that Emanuel had admitted on several occasions that he promised to give the Delf Brass business to Sabrina, and that this was supported by Sabrina’s evidence. His Honour considered the alleged representation – that Emanuel had given or would give the Delf Brass business to Sabrina – in the context of the claim that Emanuel had reneged on his promise to leave her all of his assets by will. His Honour noted that, when this representation was said to have been made in 1990, Emanuel owned no shares in Project Hardware, though his wife Bloom did. He also noted that when Emanuel was asked in cross-examination what he had meant by saying he had given Delf Brass to Sabrina, he replied that he had given her control of that business because ‘she’s a big shareholder there now’.[157]
186 In our opinion, there was ample evidence supporting his Honour’s conclusion that Emanuel did not represent that Sabrina would be entitled to the Delf Brass business, or to his shares in Project Hardware (which, as a result of the restructure, resulted in him acquiring a 30 per cent share-holding in PHA).
187 His Honour held that the Bergers had not proved that Emanuel promised them in 1990 that he would leave his remaining wealth to Sabrina. At that time, Bloom was still alive. It was anticipated that she would outlive Emanuel, who intended to leave her all his property if he died first. Those intentions were reflected in his 1988 will.[158]
188 His Honour also held that Emanuel had not promised in 1990 to leave his assets to Sabrina. He rejected the allegation that Emanuel had then said that ‘Sabrina would get everything on his death’.[159] His Honour noted that there had been no complaint from Sabrina or Ian in 1994, when Emanuel told them he was proposing to give the proceeds of the sale of his apartment to his five grandchildren, three of whom were Barry’s children.
189 His Honour said that:
The allegation that Mr Rosenberg had gone back on his promise to leave all of his assets by his will to Mrs Berger really only related to the claims that Mr and Mrs Berger had been told that the Delf Brass business was Mrs Berger’s or that one day it would be. Of course, Mr Rosenberg did not own any shares in Rosekay in 1990, although his wife did. Moreover, it is instructive to note what Mr Rosenberg said, when asked in cross-examination what he meant by saying that he had given Mrs Berger the Delf Brass business. Mr Rosenberg replied that he had given Mrs Berger ‘control’ of the Delf Brass business because ‘she’s a big shareholder there now’. Although not all of the shareholding in PHA is now owned directly or indirectly by the Bergers there is no doubt that they control PHA and, through it, Project Hardware.[160]
190 For similar reasons, his Honour also rejected the submission that Emanuel had represented that he would not revoke his 1988 will, noting that there was really no suggestion that he had made such a promise. He said that Emanuel’s only promise was that Sabrina would be looked after financially, so that she would not be reliant on Barry. Moreover, Sabrina had accepted that Emanuel might one day decide he had provided sufficiently for her and, in that case, changing his will would have been a natural step for him to take.[161]
191 So far as the 1990 promise is concerned, the appellants again contend that his Honour should have given greater weight to admissions made by Emanuel, and to the evidence of Mr Fisher, Sabrina and Ian.[162] This argument is not persuasive, for the reasons we have already given.
192 The appellants also argue that because Emanuel knew that Bloom had made a will mirroring his own, and because she always deferred to him, his Honour wrongly treated the terms of his 1988 will as inconsistent with a representation that on his, Emanuel’s, death Sabrina would succeed to his assets.[163] Emanuel knew in 1990 that Sabrina was only a residuary beneficiary under his 1988 will. Sabrina conceded in cross-examination that she knew in 1990 that her father intended to leave all his property to Bloom if she should survive him. It may well be that Emanuel then thought that if, as expected, Bloom did survive him, she would leave the wealth she inherited to Sabrina. But this falls well short of establishing the pleaded representation.
193 The appellants also claim that his Honour wrongly regarded the representation relating to the will as inconsistent with the pleaded representation that during his life-time Emanuel would divide his wealth between Sabrina and Barry.[164] It is said that those representations are not inconsistent and that, even if they were, it did not follow that they were not made by Emanuel and relied on by the Bergers.
194 In our view, what was said to be an inconsistency was not decisive in his Honour’s consideration of whether Emanuel made a representation to leave his property to Sabrina. We accept that a promise by a father to his daughter that she will become entitled to his property may lack precision as to whether this will be achieved by a disposition made during his life-time or by his will. However, the primary reason for his Honour’s finding was that in 1990, Emanuel had made a will in favour of Bloom, whom he expected would survive him. Sabrina and Ian may have assumed that the balance of Emanuel’s wealth would eventually pass to them. But that does not mean that they have satisfied the onus of showing that in 1990 he promised that he would leave Sabrina the balance of his property. His Honour was entitled to give considerable weight to the 1988 will in deciding whether the 1990 representation was made. We consider that the evidence supports his Honour’s finding on this issue, and that his Honour gave adequate reasons for his conclusion.[165]
195 Finally, we turn to the alleged 1994 promise that, after Emanuel’s death, Sabrina would inherit his property.[166] The appellants contend that his Honour wrongly treated as an admission against interest,[167] Sabrina’s failure to complain in 1994, when Emanuel told her he was proposing to sell his apartment and leave the proceeds to his five grandchildren. It may be that her failure to complain at that time was not necessarily inconsistent with Emanuel’s having promised in 1994 that he would leave all his wealth to her. The Bergers might perhaps have decided not to object to the splitting of the proceeds of the apartment sale between the grandchildren because they believed that the rest of Emanuel’s wealth would pass to Sabrina. As his Honour recognised in relation to the Bergers’ agreement to provide Emanuel with somewhere to live, it is hardly surprising that Ian and Sabrina would agree to do so, given their improved financial situation since 1990, which was due in large part to Emanuel’s generous treatment of Sabrina.[168]
196 The question whether his Honour erred in finding that Emanuel did not promise Sabrina in 1994 that she would inherit his assets is, in our view, a difficult one. At that time, there were no difficulties in the relationship between Emanuel and the Bergers. Ian was successfully managing the Delf Brass business and Emanuel had reduced his involvement in that business. He was close to Sabrina and her family and estranged from Barry. Bloom had recently died and Emanuel had inherited her shares in Project Hardware, which owned the Delf Brass business. It is not improbable that Emanuel intended to leave his property to Sabrina. It would not be surprising if his conduct at that time created or encouraged an assumption in the Bergers that Sabrina would inherit Emanuel’s property. On the other hand, the Bergers may simply have expected that Emanuel would benefit Sabrina under his will because he had made a will benefiting her in the past and was unlikely to change his mind in the future.
197 The appellants submit that his Honour should have given greater weight to Mr Fisher’s evidence that on 26 May 2003, Emanuel instructed him to prepare a new will leaving his estate to Sabrina and that on 9 October 2003, Emanuel agreed that it was appropriate for the shareholding that he would acquire in PHA (as a result of the proposed restructure) to remain in the Berger family, and that he would make a provision in his will to that effect. But these instructions were given many years after the 1994 representations were said to have been made, and may have simply reflected Emanuel’s intention to make a will in Sabrina’s favour.
198 In our view, the appellants have not established that his Honour’s finding relating to the alleged 1994 representation should be set aside.
VII THE ISSUE OF DETRIMENT[169]
199 Even if his Honour ought to have concluded that one or more representations were made, the appellants could only succeed if the evidence established that the Bergers had acted to their detriment in reliance upon such representation(s): Waltons Stores (Interstate) Ltd v Maher;[170] Giumelli v Giumelli;[171] Flinn v Flinn;[172] Pearson v Williams.[173]
200 Both Sabrina and Ian pleaded various acts of detrimental reliance. In her third affidavit, Sabrina deposed that, ever since 1990, she had relied on Emanuel’s promises in supporting and assisting Ian in the management and control of Project Hardware and the management of the Investment Trust. She said that Ian began to manage Delf Brass in about November 1990 in order to protect and develop the assets which she was to receive under the Dissolution Agreement, or by virtue of the representations Emanuel had made to her. For the same reason, Ian had become a director of Fifteenth Eestin and had managed the Investment Trust.
201 Sabrina testified that Ian ‘had to put a large sum of money into Delf Brass when he took over its management, in order to reduce the debt to the bank ‘and that she had supported him in doing so. Sabrina acknowledged in cross-examination, however, that nothing Emanuel had said to her in 1990 had been responsible for her failure to pursue a career.
202 Ian deposed in his first affidavit that he spent time looking after the affairs of the Investment Trust in reliance on Emanuel’s representation that he had split his assets between Barry and Sabrina, and that the assets of the Trust would be for the benefit of Emanuel and Bloom during their lives, and then for Sabrina. For that reason, Ian said that he had ‘devoted an untold number of hours to managing the affairs and properties of the Trust since October 1990, and [had] never sought any salary or remuneration for [his] efforts’.
203 In his third affidavit, Ian said that in taking over the management of Delf Brass, he was influenced by the fact that Emanuel had told him and Sabrina that ’Project Hardware and the Trust would be [Sabrina’s] in the long term’. He said that, immediately after he began to run the business in November 1990, he had lent $335,000 to Project Hardware, which had paid no interest on the loan.
204 As his Honour explained,[174] the Bergers’ counsel grouped the alleged acts of detrimental reliance into the following categories:
• Sabrina’s relinquishment of interests in various companies under the Dissolution Agreement.
• The time and effort expended by Sabrina and Ian in managing the Investment Trust without remuneration, in improving the corner properties and finding tenants for them, and in the guarantees which Ian provided for bank loans made to Fifteenth Eestin, including the $3 million facility from Macquarie Bank, which at the time of the trial secured a debt of about $1 million.
• The fact that Ian gave up the opportunity to pursue other business opportunities when he took over the Delf Brass business, and that he lent his own funds to Project Hardware and provided guarantees for bank loans made to it. Ian and Sabrina were also said to have acted to their detriment by causing Project Hardware (of which they were directors) to make loans to Fifteenth Eestin, which resulted in Fifteenth Eestin owing Project Hardware $4,434,191 on 30 June 2004.
• The fact that the Bergers provided a place for Emanuel to live from late 1995, when he sold his South Yarra apartment.
205 We now turn to his Honour’s findings on each of the pleaded detriments. His Honour acknowledged that Sabrina had relinquished shares in the timber companies to Barry under the Dissolution Agreement, but said:
On the other hand, Mrs Berger benefited by Barry giving up any entitlements he had to the Investment Trust and Rosekay. I do not consider that this re-arrangement of interests was shown to be detrimental to her. Moreover, Mrs Berger agreed that the Dissolution Agreement put into effect the things that she and her father had discussed and that whatever arrangements he had made would be in her interests.[175]
206 As regards the work done by the Bergers in managing the Investment Trust and its assets, and Ian’s guarantee of bank loans to Fifteenth Eestin, his Honour said:
I have already referred to the conflict in the evidence about just how much time and effort was spent by Mr and Mrs Berger in looking after the affairs of the Investment Trust. All of that work has been for the benefit of the beneficiaries generally, and Mrs Berger in particular, given the direct and indirect benefits she has received by way of income (and capital) distributions to her or companies in which she has an interest and by way of loans. Moreover, both Mr and Mrs Berger said that they chose not to be remunerated by Fifteenth Eestin for their work done for it. It was not said by either of them that this decision was influenced by any representation or promise by Mr Rosenberg. In any event, the saving by Fifteenth Eestin in not paying any remuneration to Mr and Mrs Berger meant that there was more to be distributed to them or their companies, so that the suggestion of detriment is not correct. Finally, it is difficult to see how the giving of the guarantee by Mr Berger to Macquarie Bank, which was the only guarantee by him referred to in the evidence, could constitute a relevant detriment when he was a party to the loan facility in his own right and therefore liable to the bank regardless of his guarantee.[176]
207 His Honour also rejected the claim that it was detrimental to Ian to take over management of the Delf Brass business, and to provide guarantees for bank loans to Project Hardware. He said:
Whilst it is true that Mr Berger did give up the possibility of another career or business venture, the reality is that taking over the Delf Brass business was the perfect opportunity for him. He was looking to buy a business and he had already rejected a number of other options. Given the present financial strength of the Delf Brass business, due no doubt to the skill and hard work of Mr Berger in developing the existing business, it is difficult to see how it could be said that Mr Berger has suffered a detriment by agreeing to take over the running of that business. Both Mr and Mrs Berger have received a salary from Project Hardware and substantial superannuation payments have been made for them.Mr Berger’s loans have been repaid. It was his decision whether or not to charge Project Hardware interest. Again, if this had been found to be a relevant detriment, then compensation for the lost interest would be an equitable outcome. There was no evidence that any guarantees given by Mr Berger in respect of loans to Project Hardware had been called on.
The outstanding loans by Project Hardware to Fifteenth Eestin is not a detriment suffered by Mr and Mrs Berger. The fact that they were made interest free was Mr Berger’s decision. The benefit to the Investment Trust has been reflected in the distributions made by it, the most significant of which was the capital distribution of more than $2 million to Mr and Mrs Berger jointly.[177]
208 His Honour also found that the provision of a home for Emanuel was not a detriment to the Bergers because Emanuel had always paid rent to the family company which owned the apartment in which he had lived.[178] Moreover, the various properties in which he had lived had been owned by the Berger’s family company, Mistirose Pty Ltd (‘Mistirose’), so any relevant detriment was not suffered by the Bergers personally.[179]
209 As well as attacking his Honour’s specific findings on acts alleged to be detrimental, counsel for the appellants said that his Honour had erred by failing to regard the Bergers’ disappointed expectation as amounting to detriment. The relevant ground of appeal said:
The Judge erred by excluding or omitting the loss of the benefit of Mr Rosenberg’s promises as an element of detriment.
In support of this ground of appeal, the appellants relied on Nettle JA’s statement in Donis v Donis (‘Donis’)[180] that:
The detrimental reliance which supports the estoppel is, therefore, not to be conceived of as consideration in any sense. It is not a case of quid pro quo and even less one which requires correspondence as between the financial value of whatever may move each way.[181]
210 In our opinion, this ground of appeal is misconceived. The failure to make good a promise unsupported by consideration does not, of itself, mean that the promisee suffered a detriment. The doctrine of equitable estoppel applies only if the promisee has detrimentally relied on the representation in question.
211 The appellants’ submission elides the question of whether the representee has acted to his or her detriment with the question of the remedy which may be ordered if acts of detrimental reliance are shown to have occurred.[182] In Donis it was found that the claimant had suffered a detriment by spending money improving the property promised to her by her parents-in-law; by becoming pregnant, and consequently suspending her school teaching career sooner than she would otherwise have done; and by moving to the parents’ property when she would have preferred that she and her husband purchase their own property closer to Melbourne. The grounds of appeal in that case related to an alleged disproportion between the remedy ordered by the trial judge (which was that the claimant should receive a payment of $600,000 out of the proceeds of sale of the property) and the extent of the detriment she had suffered. Nettle JA’s comment related to that issue and does not support the appellants’ submission. The grounds of appeal relating to his Honour’s comments on the nature of the remedy are discussed in paragraphs [263]-[272] below.
212 We now discuss counsels’ submissions relating to the alleged acts of detrimental reliance and explain our conclusions on each of them.
A Execution of the Dissolution Agreement
213 Counsel for the appellants contended that his Honour wrongly found that Sabrina did not suffer any detriment by entering into the Dissolution Agreement. It was not correct that Sabrina had benefited from Barry giving up his interests in the Investment Trust and Project Hardware, since Barry had never held any shares in Project Hardware. Barry did not give up any ‘entitlement’ under the Investment Trust because it was a discretionary trust under which he had no more than an expectancy.
214 Even if Barry had given up various entitlements, so it was said, this did not benefit Sabrina. Sabrina had a 50 per cent shareholding in Project Hardware before the Dissolution Agreement was entered into, and had the same shareholding afterwards. It was also said that the Dissolution Agreement did not give effect to all the matters discussed by Sabrina and Emanuel, and that his Honour had wrongly treated Sabrina as having conceded that the arrangements made in the Dissolution Agreement were in her best interests, whereas she had simply said that she assumed that this would be the case.
215 Counsel for the respondents submitted that, after entering into the Dissolution Agreement, Barry resigned as a director of Fifteenth Eestin and as appointor under the Trust, and Sabrina became a director of Fifteenth Eestin. In that capacity, Sabrina was in a position to make decisions that would benefit Emanuel, Bloom and herself, while Barry lost the capacity to influence distributions of Investment Trust income in favour of himself and his family.[183] Sabrina had therefore not suffered any detriment as a result of entering into the Dissolution Agreement.
216 Barry’s wife, Sara, had five H class shares in Project Hardware, which she was required to give up under the Dissolution Agreement. Barry was a director of Project Hardware and of Fifteenth Eestin with Emanuel, and held a single share in Fifteenth Eestin, which he was also required to relinquish under the Dissolution Agreement. Sabrina was appointed a director of Fifteenth Eestin in his stead. Barry also agreed to resign as appointor of the Investment Trust in favour of Bloom,[184] thus giving up his joint power with Emanuel to appoint or remove the trustee of the discretionary trust.
217 At that time, the specified beneficiaries of the Investment Trust were Barry, Sara and their children. As noted earlier, the additional beneficiaries included ‘any spouse, parent, brother, sister ... of the specified beneficiaries and the children of such brother, sister.’[185] Although no changes were made to the list of eligible beneficiaries in 1990, no distributions were made in favour of Barry and Sara after the Dissolution Agreement was executed.
218 In 1993, Emanuel’s solicitor wrote to Barry’s solicitor about the need to have Barry, Sara and their children removed as beneficiaries of the Investment Trust and certain other family trusts, to give effect to the Dissolution Agreement. By an undated deed, probably executed in 1993,[186] Fifteenth Eestin removed Barry, Sara and their children from the list of specified beneficiaries under the Investment Trust.[187]
219 His Honour erred in stating that Barry gave up his Project Hardware shares, when it was Sara who had done so. But the issue was whether Sabrina suffered any detriment by becoming a party to the Dissolution Agreement. In our view, the judge was correct to conclude that, when the overall effect of the Dissolution Agreement was taken into account, it did not operate to Sabrina’s detriment.
220 In reaching that conclusion, we would give little weight to Sabrina’s concession in cross-examination that she had assumed that whatever arrangement her father made in the Dissolution Agreement would be in her interests. In making that concession, Sabrina also agreed that she ‘didn’t take much interest in or note of’ the provisions of the Dissolution Agreement. However, there is no evidence indicating that the Dissolution Agreement was not in fact in her interests.
221 As we discuss below, Sabrina’s involvement in the management of the Investment Trust has given her and Ian significant benefits.
B Management of the Investment Trust and its assets
222 The appellants also allege that the judge erred in holding
that in managing and controlling the Trust and its assets and day to day affairs without remuneration, Sabrina Berger and Ian Berger did not say they were influenced by any representation or promise by Mr Rosenberg.[188]
Counsel for the appellants referred to Ian’s and Sabrina’s affidavit evidence that they had relied on Emanuel’s representations in deciding to manage the Investment Trust.[189]
223 Counsel for the respondents said that his Honour made no finding that the Bergers’ decision to manage the Investment Trust was not influenced by any alleged representation that its assets would one day belong to them. His comments related only to their decision to manage the Investment Trust without payment. We agree with that submission. When read in context, it is clear that his Honour’s comment related to the Bergers’ decision not to claim remuneration, rather than to their decision to manage the Investment Trust, though ultimately nothing much turns on this.
224 The appellants also contend that his Honour wrongly held that the Bergers’ management of the Investment Trust did not amount to detriment because any savings made by Fifteenth Eestin in not paying them a salary meant that there was a larger sum to be distributed between them and their companies. It was submitted that none of the distributions made by the Investment Trust between 1990 and 1993 were made to the Bergers.[190] Counsel said that his Honour’s findings were based on the assumption that any saved remuneration had been distributed to Sabrina and Ian, though this had not been established in evidence. Further, if there were accumulated undistributed profits in the Investment Trust, Sabrina would lose the benefit of that promise if the trustee was changed.
225 In our opinion, his Honour’s reasons amply justify his conclusion that it was not detrimental to the Bergers to manage the Investment Trust because this enabled them, or the companies they controlled, to receive substantial capital and income payments. His Honour’s reasons set out the distributions made to Project Hardware and S & I Investments between 1992 and 2003:[191]
|
Date
|
S & I Investments
|
Rosekay/Project Hardware
|
|
30 June 1992
|
―
|
The balance after $40,000
|
|
30 June 1993
|
The balance after $40,000
|
―
|
|
30 June 1994
|
The first $50,000
|
The balance
|
|
30 June 1995
|
$50,000
|
The balance
|
|
29 June 1996
|
$15,000
|
The balance
|
|
30 June 1997
|
―
|
100% of $185,834
|
|
30 June 1998
|
The balance after $6,000
|
―
|
|
30 June 1999
|
100% of $168,703
|
―
|
|
30 June 2000
|
100% of $160,894
|
―
|
|
30 June 2001
|
100% of net income
|
―
|
|
30 June 2002
|
―
|
―
|
|
30 June 2003
|
The balance
|
$299,000
|
|
TOTAL
|
$792,640
|
$1,027,978
|
226 In about May 1993, Lionel Rosenberg executed a deed purporting to assign to Project Hardware his interest as a discretionary beneficiary under the Investment Trust.[192] S & I Investments was registered in June 1993, with the Bergers as directors and original shareholders. In June 1993, S & I Investments was nominated by Sabrina and Emanuel, in their capacity as directors of Fifteenth Eestin, as a beneficiary of the Investment Trust.[193] The total income distributions made by the Trust between 1 July 1991 and 30 June 2003 amounted to $792,640 to S & I Investments, and $1,027,978 to Project Hardware. Sabrina Berger held half the shares in Project Hardware.[194] A capital distribution of $2,085,777 was made by the Investment Trust to the Bergers in 1998[195]. Even if this was a book entry made for taxation purposes, the Bergers cannot now claim that they received no benefit from the capital distribution. In these circumstances, we consider that his Honour correctly held that the Bergers’ management of the Investment Trust without payment did not amount to detriment.
227 The appellants’ counsel contended that these distributions should not be taken into account because they were made some years after the alleged promises. We do not agree. A representor is only estopped from resiling from a representation if it is unconscionable to do so because the party seeking to assert the estoppel has relied upon it to his or her detriment. On the facts of this case, Sabrina’s and Ian’s management of the Trust enabled them to make distributions which substantially benefited them. In these circumstances, it would not be unconscionable for Emanuel to refuse to give effect to the alleged representations. The appellants also said that, if there were accumulated undistributed profits in the Investment Trust, Sabrina would lose the benefit of the alleged promises if the trustee were changed. For the reasons already discussed, the failure to carry out a promise does not, of itself, amount to detriment.
228 The appellants also allege that his Honour wrongly held that, because Ian was a party to the $3,000,000 loan facility provided by Macquarie Bank in 2003 in his own right, he did not suffer any detriment by guaranteeing the loan to the Investment Trust. It is said that his Honour disregarded Ian’s evidence that the loan facility was taken out solely for the purposes of the Investment Trust. It is further said that his Honour did not take account of Ian’s affidavit evidence that he had given another guarantee in September 2002, under which he was liable only as a surety, and not as a borrower in his own right.[196]
229 The respondents contend that the evidence supports his Honour’s finding that the loan facility provided by Macquarie Bank in June 2003 was provided to Ian in his personal capacity as well as to Fifteenth Eestin, and that Ian guaranteed that loan. We agree with that view. In his affidavit of 19 January 2005, Ian deposed that the $3,000,000 loan facility was ‘taken out solely for Fifteenth, and the funds from that loan have been used solely by Fifteenth for the purposes of the Trust’. But a letter from Macquarie Bank to Fifteenth Eestin, Ian, Sabrina, Rangeway and Emanuel, dated 23 June 2003, indicates that the loan was made to all of them, other than Emanuel. Rangeway was the trustee of a different family trust, the Emanuel Rosenberg Family Trust, and Sabrina was a director of that company.[197] Ian, Fifteenth Eestin and Rangeway were guarantors and the purpose of the loan was said to be ‘to assist the customer [defined as including Ian and Sabrina] with investment opportunities’. In light of the fact that other individuals and family companies were named as borrowers, Ian’s evidence that the loan was taken out solely for Fifteenth Eestin cannot be accepted.
230 The fact that the loan was provided to Ian in his personal capacity, as well as to the Investment Trust, would not necessarily prevent the Bergers from relying on the giving of the guarantee as an act of detrimental reliance, if the loan was used solely for the purposes of Fifteenth Eestin. Although the three corner properties owned by Fifteenth Eestin were provided as security for the loan, and there is no evidence that Fifteenth Eestin was likely to default, Ian assumed legal liability to repay the loan, if default occurred.
231 It is clear that the decisions made by Emanuel, and later by the Bergers, about which company or trust should borrow money for business and personal purposes, were largely informed by taxation considerations. Decisions as to which entity should borrow funds and how profits should be distributed among particular individuals and entities were informed by advice given by the Bergers’ accountants. In cross-examination, Sabrina agreed with the proposition that ‘[t]he level of liabilities and who those liabilities are owed to now and in the recent past, has been a function of a decision making process engaged in [by Ian and the accountant] about how the affairs of the trust and the other companies associated with [Sabrina] are best served’. She also agreed that ‘the fact that the trust had certain levels of liabilities and owed those liabilities to certain people or companies was not something that could be viewed in isolation from the picture of everything else’.
232 Further, any investments made by Fifteenth Eestin as the result of the loan would have benefited the companies which received distributions from the Investment Trust, including the companies controlled by the Bergers. The evidence does not indicate that Fifteenth Eestin has insufficient assets to repay the amount of the loan. In these particular circumstances, we do not consider that the assumption of liability under the guarantee constituted any detriment to Ian.
233 We are unable to find any evidence identifying a separate guarantee given in September 2002, which is said to be exhibited to Ian’s affidavit of 17 February 2006. Exhibit ‘IB 16’ is a letter dated 13 September 2002 from Macquarie Bank, enclosing a variation letter in relation to the fully drawn advance facility provided to Fifteenth Eestin in its own capacity and in its capacity as trustee for the Investment Trust, which reduced the amount of the facility from $1,750,000 to $1,000,000. There is no explicit reference in that letter to a guarantee granted by Ian in September 2002, though the blank acceptance form attached to the variation letter provided for Ian to sign as guarantor.
234 Even if it is assumed that Ian gave a guarantee in 2002 for moneys provided to Fifteenth Eestin (and not to him in his personal capacity), we would reach the same conclusion in relation to that guarantee as in the case of the 2003 guarantee.
C The taking over of the Delf Brass business
235 The appellants allege that his Honour erred in concluding that Ian did not incur detriment in taking over the Delf Brass business (and in managing Project Hardware, which owns Delf Brass), because this was a good business opportunity for him. It was said that this finding was speculative, and that it disregarded the poor financial state of Delf Brass when Ian took it over in late 1990. Counsel for the appellants submitted that his Honour had disregarded Ian’s evidence that Delf Brass was ‘a basket case’, which had massive debts and was in need of a substantial injection of cash at that time.
236 It was contended that his Honour should have had regard to the position of Delf Brass when Ian took it over in 1990 rather than deciding with the benefit of hindsight that the Bergers had not suffered any detriment because it was now a successful business.[198] Counsel said that the Bergers
made the life-changing decision to take the risk of running the Delf Brass [business] and the Trust. Mr Berger stopped his search for other business opportunities and Mrs Berger went along with that.
It was also said that his Honour had wrongly found that Sabrina and Ian had not suffered a detriment because they had received salaries and substantial superannuation as the result of their involvement in the management of Delf Brass.[199] It was said that in making this finding ‘his Honour confused the concept of reliance and the concept of detriment’.
237 As his Honour noted, there was a conflict in the evidence as to Delf Brass’s financial position when Ian took it over. In her affidavit evidence, Sabrina said that shortly after Emanuel left hospital in 1990, he had told her that Delf Brass was making little or no profit under the management of Barry and Ady Broder. All sales made to Provans Timber were made at cost price, and at that time Delf Brass’ overdraft had risen to about $1,600,000, and it was incurring interest at the rate of about $30,000 per month.
238 In cross-examination, Sabrina said that Emanuel had told her that Delf Brass was making a large loss at that time. As noted earlier, she was asked about the inconsistency between that evidence and the statement in her affidavit that Delf Brass was making ‘little or no profit’. She said that, although Emanuel had told her in mid-1990 that the business was making little or no profit, closer to the time of entry into the Dissolution Agreement, he had told her that it was making a ‘large loss’. One of the biggest customers of Delf Brass was the other family business, Provans Timber. In cross-examination, Sabrina agreed with counsel that, when Barry was managing both the timber companies and Delf Brass, the latter was selling goods to Provans Timber at cost price, because a management decision to make a profit in Provans Timber, rather than in Delf Brass. Sabrina said that, after the Dissolution Agreement, Delf Brass began to trade with Provans Timber on normal business terms.
239 In his affidavit of 22 September 2004, Emanuel did not agree that in 1990 Delf Brass had an overdraft of $1.6 million, or that interest charges were $30,000 per month. He said he did not recall the precise amount of the overdraft at that time, but said that it was significantly less than the amount claimed by Sabrina. In cross-examination, he said that the Delf Brass business was ‘going all right’ in 1990 and that, although Project Hardware had a liability to ANZ Bank, it had guarantees from other companies. He conceded that in his memoirs written in 1997, he was happy to say that Delf Brass was a ‘thriving, successful operation’ because Sabrina and Ian had taken it over.
240 In our view, his Honour’s finding that Delf Brass was ‘the perfect opportunity’ for Ian is unchallengeable.[200] In his affidavit of 21 December 2005, Ian deposed that early in 1990, he was looking to buy a business and had discussed this with Emanuel. He said that he told Emanuel that ‘despite his reluctance’ he was willing to take over managing Delf Brass, but there is no evidence that he gave up a specific business opportunity at that time. In cross-examination, he said that he had looked at a business which involved manufacturing car seat covers and at a business known as Kaylock, which he later acquired, but he did not suggest that he had had to give up these opportunities because of his involvement in Delf Brass, or because he took over the management of Project Hardware, in which his wife then had a 50 per cent shareholding. Contrary to the submission made by counsel for the appellants, his Honour did not have to find that ‘the Delf Brass business was better than any business opportunity Ian Berger could have undertaken’, in order to justify the conclusion that Ian did not suffer any detriment in managing the business.
241 It may be that Delf Brass was not very profitable in 1990, at least in part because it was selling goods to another family company at cost. But, even accepting Ian’s evidence that Delf Brass was ‘a basket case’ when he began to manage it, it does not follow that Ian and Sabrina incurred a detriment by becoming involved in its management. As his Honour noted, they were paid salaries and received superannuation entitlements through their involvement in the business. The successful operation of the business was also reflected in the value of Sabrina’s shares in Project Hardware.
242 The question his Honour had to decide was whether, assuming that one or more of the relevant representations was made, it was unconscionable for Emanuel to fail to make them good. His Honour did not err in considering whether this requirement was satisfied at the time when Emanuel purported to remove Fifteenth Eestin as trustee of the Investment Trust, or to otherwise dispose of his property.
D Ian Berger’s loan to Project Hardware, the guarantee of its debts and the loan by Project Hardware to the Investment Trust
243 When Ian took over the management of Delf Brass, he borrowed against the security of his house and incurred interest in doing so. He made interest free loans to Project Hardware in 1990 and 1991, amounting to $335,000. The appellants’ submissions also allege that he had in 1990 provided guarantees for bank loans made to Project Hardware. The appellants allege that his Honour should have found that Ian’s interest-free loans to Project Hardware and his guarantee of bank loans were acts performed in detrimental reliance on Emanuel’s promises.[201]
244 So far as the loans are concerned, the respondents contend that Ian simply made a choice to lend the money interest-free, and that in any case this amount was repaid in three or four years.
245 The fact that Ian chose to lend the money without claiming interest on it would not, of itself, prevent him from asserting that it was an act of detrimental reliance. He incurred a financial loss by lending money to Project Hardware, interest-free, when he was himself paying interest on the loan. He assumed the risk of becoming legally liable when he guaranteed Project Hardware’s loan from the ANZ Bank. The assumption of such a risk is capable of amounting to a detriment which gives rise to an estoppel.
246 It cannot be ignored, however, that the loans were repaid in full by 1995. Moreover, the amount of interest forgone by Ian, and any detriment he suffered as the result of guaranteeing loans to Project Hardware, pales into insignificance when compared with the benefits which the Bergers have derived from the business and from Sabrina’s 50 per cent shareholding in Project Hardware. Finally, his Honour did not find that any guarantee was given by Ian in 1990.[202] For these reasons, his Honour did not err in finding that, on the particular facts of this case, Ian did not act to his detriment in lending $335,000 to Project Hardware or in guaranteeing its bank loans.
247 The same applies to the appellants’ claim that his Honour erred in failing to treat the making of interest-free loans by Project Hardware to Fifteenth Eestin as detriment suffered by Ian and Sabrina. As we have said, Sabrina held half the shares in Project Hardware and significant distributions were made by Fifteenth Eestin to Project Hardware between 1 July 1991 and 30 June 2003.[203] Thus, the benefit to Fifteenth Eestin in not having to pay interest to Project Hardware was reflected in the income earned by the Investment Trust, from which the Bergers benefited. As in the case of Ian’s decision to manage Delf Brass, it is not now unconscionable in the light of these events for Emanuel to renege on any promises he may have made.
248 Our conclusion on this issue is reinforced by the evidence of the Bergers’ accountant, Mr Same. He said in cross-examination, that the interest-free loans to Fifteenth Eestin reduced Project Hardware’s profit, but meant that the recipients of distributions under the Investment Trust received more than they would otherwise have done. It is clear from Mr Same’s evidence that arrangements relating to loans were made in order to minimise the tax paid by the Investment Trust and by other family companies and trusts. Mr Same said that the effect of the loan arrangements was that loan accounts were balanced between all the entities in the group so that the net effect of the transactions was zero.
249 It is convenient at this point to address the appellants’ contention that his Honour erred in holding that Sabrina’s actions in supporting Ian in the management and control of the Investment Trust and Project Hardware, did not amount to detriment[204] because nothing Emanuel had said to her in 1990 had led to her failing to pursue a career, or had shaped her conduct since then.[205] Counsel submitted that Sabrina’s answers in cross-examination did not support this conclusion because the questions put to her were ambiguous. She had been involved in management of the Investment Trust and Project Hardware in reliance on Emanuel’s representations.
250 There is no doubt that forgoing or suspending a career may amount to detriment for the purposes of equitable estoppel.[206] In their defence and counterclaim, however, the Bergers did not plead that Sabrina had forgone a career in reliance on Emanuel’s representations. Even if it is assumed, favourably to the appellants, that she could nevertheless claim that she had done so in detrimental reliance on Emanuel’s promise,[207] his Honour’s findings on this issue are unassailable.
251 Sabrina agreed when it was put to her in cross-examination, that ‘nothing your father said to you in 1990 has been responsible for you not pursuing any career that you wanted to pursue’. When the overall position of the Bergers is examined, we consider his Honour correctly found that they did not suffer any detriment by managing Delf Brass or the Investment Trust, despite the work involved and the legal liabilities incurred as a consequence.
252 When Ian began managing Delf Brass and Project Hardware, and became a director of Fifteenth Eestin, his assets were limited to a property in Malvern worth about $220,000 and cash of between $150,000 and $200,000.[208] His capacity to buy into a business was limited to those assets and any loan he could obtain. Sabrina owned a house bought for her by Emanuel, who had also paid for its renovations.[209]
253 We have already referred to the income distributions by the Investment Trust which benefited the Bergers’ companies. With Emanuel’s acquiescence, the Bergers’ involvement in the management of the Trust also gave them access to substantial funds which were used for their benefit. In the financial year ended 30 June 2001, the Investment Trust lent Sabrina $975,240 to finance the purchase of a luxury home in Toorak. To do so, the Investment Trust borrowed moneys from other family companies, including Rangeway, Project Hardware and Mistirose. In the following year, the Investment Trust lent Sabrina a further $1,133,620 to renovate the house. In April 2002, she repaid to the Investment Trust $1,500,000 of the proceeds from the house bought for her by Emanuel.[210] In her evidence, Sabrina estimated their house to be now worth between $7 million and $10 million. In May 2004, $794,000 was lent to Jassi Investments Pty Ltd, the Bergers’ own family company, by Fifteenth Eestin, to finance the purchase of an apartment in Surfers Paradise.
254 As we have said, Sabrina had a majority shareholding in Project Hardware which owned Delf Brass. Project Hardware was valued by Ernst & Young in July 2003 as worth $12.5 million. When PHA acquired the shares in Project Hardware as part of the restructuring arrangements, Project Hardware was valued at around $10 million. Sabrina’s D class shares in Project Hardware were bought back for approximately $3,000,000.[211]
255 In these circumstances, his Honour was right to conclude that the Bergers had not relied to their detriment on Emanuel’s alleged promises. It was not unconscionable for Emanuel to fail to give his remaining wealth to Sabrina during his lifetime or to leave it to her by will. Nor was it unconscionable for him to remove Fifteenth Eestin as trustee of the Investment Trust.
256 We consider below[212] the appellants’ contention that his Honour erred in taking the view that any detriment suffered by the Bergers in reliance on Emanuel’s promises could have been rectified through the making of orders for equitable compensation.
E Provision of a home for Emanuel
257 The final act of detrimental reliance was said to be the provision of a home for Emanuel to live in, in reliance on his promise that he would leave his property to Sabrina. The appellants allege that his Honour erred in holding that, because Emanuel paid rent, the provision of an home to him from 1995 did not amount to a detriment.[213] Counsel submitted that Emanuel would never have been required to use his own funds to pay rent, and that he was not charged rent between June 2002 and February 2004, when he lived in the Bergers’ family home.
258 It was also submitted that his Honour wrongly disregarded the detriment suffered by the Bergers on the ground that Mistirose (and not the Bergers) owned various properties in which Emanuel lived.[214] It was said that the Bergers had suffered a detriment because Mistirose had bought apartments that Emanuel had selected to live in, rather than investing in property purchased by reference to commercial considerations alone.
259 Unlike his Honour, we do not consider that the fact that the apartments were owned by Mistirose, rather than personally by the Bergers, would necessarily prevent them from claiming that in providing a residence to Emanuel, they had detrimentally relied on the promise that Sabrina would be entitled to his property under the 1988 will. Sabrina and Emanuel were the original directors and shareholders of Mistirose. From 1994, the Bergers were the directors of that company, which, by 2005, was 88.9 per cent owned by SFSG Pty Ltd, as trustees of the Berger Family Superannuation Fund. The remaining 11.1 per cent of Mistirose was owned by Project Hardware.[215] Thus, any detriment incurred by Mistirose could legitimately be regarded as a detriment which was at least partially suffered by the Bergers.
260 Rent for the apartments in which Emanuel lived was debited to his loan account with Fifteenth Eestin. According to Mr Same’s evidence, this amounted to a total of $165,104. Two of the properties purchased as a home for Emanuel were sold at a substantial profit, with Mistirose receiving the benefit of this capital gain. In these circumstances, we consider that his Honour correctly held that the Bergers did not suffer any detriment by providing Emanuel with a home.
261 In essence, the Bergers’ claim is that they did not get what Emanuel is said to have promised them.[216] As we have said, this misconstrues the nature of proprietary and promissory estoppel, both of which reflect the jurisdiction to prevent a person from resiling from representations where it would be unconscionable to do so. It is not unconscionable for a person to refuse to carry out promises unsupported by consideration unless the claimant has suffered a detriment as a result of relying on those promises. For the reasons discussed above, we do not consider that his Honour erred in concluding that the Bergers did not satisfy this requirement.
262 Further, even if detrimental reliance was established, the Court would not necessarily enforce the relevant representations. This brings us to the third group of grounds of appeal, relating to the remedy which should be ordered for the alleged estoppel.
263 The learned judge below held that, even if the Bergers suffered a detriment by looking after the affairs of the Investment Trust in reliance on a representation made by Emanuel, the appropriate remedy would be an award of equitable compensation rather than an order preventing Emanuel from exercising his power of appointment under the Investment Trust, or from changing his 1988 will.[217] He also said that if, contrary to his view, Ian had been detrimentally affected by making an interest-free loan to Project Hardware, equitable compensation would be the appropriate remedy.[218]
264 Counsel for the appellants submitted that his Honour had wrongly considered that the value of any detriment suffered by the Bergers must be equivalent to the value of the property ordered to be transferred, as the result of detrimental reliance on the representation.[219] Counsel said that, where an estoppel arises, the ‘primary remedy’ is to give effect to the expectations encouraged by the representations, and that equitable compensation is awarded only in exceptional cases, for example to avoid injustice to third parties.[220] It was further claimed that his Honour gave insufficient reasons for denying that primary remedy to the Bergers.[221] In support of these submissions, the appellants relied on the High Court’s decision in Giumelli v Giumelli (‘Giumelli’)[222] and the decision of this Court in Donis.[223]
265 Counsel for the respondents contended that, even if Emanuel was estopped from denying any of the pleaded representations, the appropriate orders would be those which ‘effect the minimum equity to do justice’.[224] On the facts of this case, his Honour did not err in holding that equitable compensation was the appropriate remedy.
266 Competing views have been expressed on the nature of the remedy which should be ordered if an estoppel is made out. In Commonwealth of Australia v Verwayen,[225] those members of the Court who held in favour of Mr Verwayen did not take a consistent approach on this issue. Among the majority, Deane J considered that the prima facie remedy for estoppel by conduct was to preclude departure from the assumed state of affairs, although he recognised that where relief granted on that basis would be inequitably harsh, some lesser form of relief should be awarded.[226] Dawson J said that the facts of the case required the Court to give effect to the assumption created by the representation, though he did not say that this was the prima facie remedy for estoppel.[227]
267 By contrast, Toohey and Gaudron JJ[228] said that the primary purpose of equitable estoppel was to rectify the detriment suffered as the result of representations made by another person, rather than to make those representations good. Like Mason CJ, however, they accepted that in some cases the only means of rectifying detrimental reliance on a representation was to give effect to it.[229] Mason CJ, who dissented in the result, commented:
[A]s a matter of principle and authority, equitable estoppel will permit a court to do what is required in order to avoid detriment to the party who has relied on the assumption induced by the party estopped, but no more. In appropriate cases, that will require that the party estopped be held to the assumption created, even if that means the effective enforcement of a voluntary promise. [230]
Brennan J,[231] who also dissented, considered that the primary remedy for equitable estoppel was not the enforcement of the promise, but the minimum equity necessary to avoid detriment. However His Honour also acknowledged that in some situations, enforcing the promise will be the only means of rectifying the detriment.[232]
268 In Giumelli,[233] the High Court held that nothing which had been said in Verwayen precluded the making of an order to give effect to the respondent’s expectation that he would receive a block of land promised to him by his parents, in circumstances in which he had acted on that representation to his detriment.[234] Giumelli concerned the kind of estoppel which arises when a person expends money on property, or otherwise acts to his or her detriment, in reliance on an assumption or expectation encouraged by a property owner that the claimant already owns, or will receive an interest in, that property. One of the early cases of this kind was Dillwyn v Llewelyn,[235] where the Court gave effect to a father’s promise that he would give his son a piece of land if the son built a house on it. In proprietary estoppel cases, courts often give effect to the assumption created by the representation. This is not necessarily the case for other forms of estoppel. Courts still tend to deal with proprietary estoppel as a distinct category. An ‘overarching’ doctrine of estoppel of the kind to which Mason CJ referred in Verwayen has not yet emerged.[236]
269 In Donis, Nettle JA made the following remarks on the proprietary estoppel line of cases:[237]
In such cases the remedy relates to the understanding of the parties and the expectation that has been encouraged. Prima facie the estopped party can only fulfil his or her equitable obligation by making good the expectation which he or she has encouraged. The estopped party, having promised to confer a proprietary interest on the party entitled to the benefit of the estoppel, and the latter having acted upon the promise to his or her detriment, is bound in conscience to make good the expectation.[238] It follows that the detrimental reliance that supports the estoppel need not constitute in any sense a consideration moving to the party bound. It is a unilateral element of the estoppel and not the price paid for it.[239]The prima facie position will yield to individual circumstances. Principle and authority compel the view that where a plaintiff’s expectation or assumption is uncertain or extravagant or out of all proportion to the detriment which the plaintiff has suffered, the court should recognise that the claimant’s equity may be better satisfied in another and possibly more limited way.[240] Thus, as was also said in Giumelli,[241] before granting relief the court is required to consider all of the circumstances of the case, including the possible effects on third parties, and to avoid going beyond what is required for conscientious conduct or would do injustice to others. But that does not mean that the court is required to be ‘constitutionally parsimonious’[242] or that it is necessary for there to be substantial correspondence between expectation and the monetary value of the detriment suffered, or which but for the relief to be accorded would be suffered.[243] The object of the exercise is to do equity and for that purpose ‘detriment’ is no narrow or technical concept. It need not consist of expenditure of money or other quantifiable financial disadvantage so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether departure from a promise would be unconscionable in all the circumstances.
270 Ashley J took a more cautious view about the appropriate remedy in Pearson v Williams,[244] another proprietary estoppel case. He said that
in determining what relief should be granted (if relief is appropriate) the court must look closely at the circumstances of the particular case to see in what way the equity can be satisfied. It should approach the matter cautiously, in order to achieve the ‘minimum equity to do justice to the plaintiff’. Clear it is that the court is not precluded from requiring the party stopped to make good the assumption. On the particular facts, such an order was made in Flinn and (in substance) in Gillett. But, on the particular facts, it was otherwise in Giumelli and in Rogers.
271 Unlike the situation in Donis, Emanuel’s alleged promise that Ian and Sabrina would continue to manage and control the Investment Trust was not a promise to confer an interest in property. We doubt whether the prima facie position which Nettle JA said applied in Donis is relevant in such circumstances. However, even if that were the case, we consider that a remedy preventing Emanuel from exercising his power of appointment under the Investment Trust would be disproportionate to the detriment incurred by the Bergers in managing the Investment Trust without remuneration, or by Ian in making interest-free loans to Project Hardware which have since been repaid. If the other benefits gained by the Bergers as a result of their management of the Investment Trust are taken into account, the extent of disproportion would be even greater.
272 The respondents submit that the principles in House v R[245] govern an appellate challenge to the exercise of his Honour’s discretion to determine the remedy.[246] We will assume in favour of the appellants that they do not. Nevertheless, we do not consider his Honour erred in concluding that, if the alleged representations were made and the Bergers acted upon them to their detriment, they would be adequately compensated by an award of equitable compensation.
IX REMOVAL OF A TRUSTEE FOR BREACHES OF TRUST
273 His Honour held that Emanuel was entitled to exercise the power conferred upon him by clause 10A of the Trust Deed to remove Fifteenth Eestin as trustee and replace it with Glen Oak. That clause provided that:
(a) no beneficiary shall be a trustee;(b) the said appointor shall not appoint himself or herself or any legal entity in which he or she has a financial or controlling interest in [sic] or a company which he or she is a director of or in which he or she owns or holds any part of the issued capital of, as a trustee.
(c) ...
(d) No removal or appointment under this clause shall be effective in the event that the appointor or the successor imposes or attaches any conditions whatsoever upon the Trustee purportedly appointed or to be appointed that relate to the manner in which the Trustee is to exercise any of the discretions conferred upon him hereunder.
(e) ...
274 The power conferred on Emanuel by clause 10A of the Trust Deed was discretionary in nature. Courts will not interfere with the exercise of a discretionary power under a trust, except when the power is exercised in bad faith.[247] That is why it was necessary for the Bergers to rely on estoppel in order to restrain Emanuel from exercising his powers under the Trust Deed.
275 Clause 10A of the Trust Deed imposed some limits on Emanuel’s power of appointment, including a prohibition on him appointing as trustee ‘any legal entity in which he ... has a financial or controlling interest’. His Honour held that the appointment of Glen Oak could not be challenged on the basis that Emanuel had ‘a financial or controlling interest in Glen Oak’.[248] He also rejected the appellants’ submission that Glen Oak would not exercise its discretion independently of Emanuel. The sole director and shareholder of Glen Oak is a Mr John Adams, a member of the accounting firm Horwaths, who is a registered company liquidator and bankruptcy trustee and an accountant with experience in administering trusts. His Honour was satisfied, by the answers which Mr Adams gave to his questions, that Mr Adams was
an independent professional person who ... would approach the exercise of discretion by the trustee in an appropriate manner.[249]
The grounds of appeal do not challenge that conclusion, which is, in our view, unassailable.
276 His Honour also considered that the Court could have exercised its jurisdiction to remove Fifteenth Eestin to ensure satisfactory administration of the Investment Trust and a faithful and sound exercise of the trustee’s discretion.[250]
277 The appellants challenge his Honour’s findings, that since approximately 1992, distributions from the Investment Trust were governed by tax minimisation considerations; that no thought was given by Fifteenth Eestin to the individual needs of a beneficiary such as Emanuel; and that Fifteenth Eestin did not exercise its discretion as a trustee in the interests of all the beneficiaries.[251] For the reasons set out above, it is unnecessary to consider these submissions. If required to determine whether the relevant grounds of appeal were made out, and/or whether his Honour should have found that Fifteenth Eestin could have been removed for breach of trust, we would consider that his Honour’s findings on these issues should not be set aside.
278 The respondents’ notice of contention alleges that his Honour should have found that the income distributions made by Fifteenth Eestin to Project Hardware and S & I Investments, and the capital distribution made to Ian and Sabrina in 1998, or a combination of those distributions, were breaches of trust which warranted the removal of Fifteenth Eestin as trustee. In light of our previous findings, it is also unnecessary to consider the notice of contention.
279 For the above reasons we would dismiss the appeal.
[1] Rosenberg v Fifteenth Eestin Nominees Pty Ltd [2007] VSC 101 (‘Reasons’).
[2] Reasons [11]-[115].
[3] In 1990, following the Dissolution Agreement described below, Sabrina owned half of the shares in Rosekay, Bloom owned one quarter of the shares and the other quarter was owned by Rangeway Nominees Pty Ltd, the trustee of the E Rosenberg Family Trust (note that this is a different Trust from the Investment Trust): Reasons [49].
[4] The document was a tax return also signed by the Bergers.
[5] The various sales and purchases are described in the Reasons at [99]-[100].
[6] Reasons [109].
[7] Reasons [152].
[8] The matters which gave rise to conflict between them are discussed in more detail below.
[9] Reasons [110]. Emanuel had executed an enduring power of attorney in favour of Sabrina on 16 October 1990: Reasons [37]. It is unclear whether he had at any time executed a power of attorney in favour of Ian.
[10] And if Sabrina predeceased him, to Sabrina’s children.
[11] Clause 8, referring to the BD Rosenberg Investment Trust, which became the E Rosenberg Investment Trust (‘the Investment Trust’). The same provision was made in relation to the power conferred on Bloom by the BD Rosenberg Trading Trust. In addition, clause 7 provided that if his wife predeceased him, the power to appoint a new Trustee conferred by the E Rosenberg Family Trust dated 25 November 1972, and the BD Rosenberg Family Trust dated 1 February 1976, should vest in Sabrina.
[12] The trust was initially known as the BD Rosenberg Investment Trust, but on 28 June 1991 it changed its name to the E Rosenberg Investment Trust.
[13] Reasons [83].
[14] It was submitted on behalf of the appellants that Ian was eligible to be added as a beneficiary of the Investment Trust because he was the brother-in-law of Barry, who was originally a specified beneficiary. This is relevant to the respondents’ notice of contention. Given our view that it is unnecessary to decide the issue raised by the notice of contention (see paragraph [278] below), we do not examine this matter further.
[15] See paragraphs [225]-[226] and [277]-[279].
[16] For details of the proceeding below, see Reasons [2].
[17] The pleadings relied on a number of different factual scenarios in the alternative, as the basis for the imposition of a constructive trust.
[18] Reasons [132]-[156].
[19] Ibid [157]-[169].
[20] See Reasons [163], [166].
[21] Grounds of appeal 1-47, 50-51. Because the grounds of appeal overlap considerably, references to particular grounds in this judgment are necessarily imprecise.
[22] Grounds of appeal 48-49, 52-66.
[23] Grounds of appeal 67-69.
[24] Grounds of appeal 70-76.
[25] Rule 16.03(2).
[26] In the proceedings below, the plaintiffs claimed orders that Fifteenth Eestin had ceased to be trustee and that Glen Oak was trustee. In the alternative, it sought a declaration that Fifteenth Eestin had acted in breach of trust, and an order removing Fifteenth Eestin and substituting Glen Oak.
[27] Ryan v Davies Brothers Limited [1921] HCA 53; (1921) 29 CLR 527.
[28] Under s 13(2), this includes property over which the testator had a general power of appointment.
[29] [1905] P 194, 197.
[30] Ibid 197.
[31] [1937] HCA 52; (1937) 57 CLR 666, 677 (Latham CJ).
[32] (2003) 214 CLR 169, 199 (Gummow and Hayne JJ). See also Ogilvie v Ryan [1976] 2 NSWLR 504, where the constructive trust arose from a promise made by the deceased on which the defendant had acted to her detriment.
[33] Provans Timber Pty Ltd, Provans Timber (Joinery) Pty Ltd and Provans Timber Joinery (Vic) Pty Ltd were all parties to the Dissolution Agreement.
[34] Note that at that time, the Investment Trust was known as the ‘BD Rosenberg Investment Trust’: Reasons [14].
[35] Reasons [51].
[36] This was the E Rosenberg Family Trust, established by deed of settlement dated 25 November 1972: see Reasons [13], [49]. Initially Emanuel and Bloom were directors of Rangeway, however Sabrina also became a director of the company in 1984: see Reasons [13] and [15].
[37] See reasons [132]-[157]. His Honour grouped the alleged promises according to when they were said to have been made. As a number of the promises were said to have been repeated, we have classified them as separate promises, rather than dealing with them by reference to the dates they were said to have made. Although the defence and counterclaim describes them slightly differently, the differences do not appear to be significant.
[38] October 1990 promise to Sabrina.
[39] July and October 1990 promises to Sabrina and October 1990 promise to Ian. In the defence and counterclaim, this is described as a promise that Mr Rosenberg would give his entire wealth to Sabrina.
[40] July promise to Sabrina. Reasons [153].
[41] July and October 1990 promise to Sabrina, October 1990 promise to Ian, the 1994 promises to Ian and Sabrina.
[42] October 1990 promise to Sabrina.
[43] The 1994 promise.
[44] Gard Nominees was trustee of the BD Rosenberg Family Trust, which owned property in Toorak (the home of Barry and Sara) and a property on Alexandra Parade, Clifton Hill. The Provans Timber group owned two other properties in Alexandra Parade: Reasons [31].
[45] In 1990, following the Dissolution Agreement half of Rosekay Pty Ltd (later Project Hardware Pty Ltd) was owned by Sabrina, Bloom owned a quarter and the remainder was owned by Rangeway as trustee for the BD Rosenberg Family Trust: Reasons [49].
[46] Mistirose Pty Ltd lent $115,861.09. Mistirose was a family company of which Mr Rosenberg and Sabrina were originally the two directors and shareholders. By 2005, Mistirose was 88.9 per cent owned by SFSG Pty Ltd as trustee of the Berger’s superannuation fund and 11.1 per cent owned by Project Hardware. SFSG lent the Trust $100,000. The Macquarie Bank loan was repaid by Project Hardware. See Reasons [16], [77].
[47] Reasons [143].
[48] Statements to similar effect were contained in Ian’s third affidavit.
[49] Sabrina gave evidence that her father gave her a copy of his 1988 will in around mid-1995.
[50] Reasons [64].
[51] Ibid [125]-[127].
[52] Emanuel inherited his deceased wife’s shares in Project Hardware: Reasons [69].
[53] As mentioned earlier, this was another family trust.
[54] In October 2003, Ian and Sabrina Berger were the directors of S& I Investments (Australia) Pty Ltd.
[55] Mr Rosenberg said that he could not recall saying to Ian and Sabrina that ‘the trust assets would be used for the benefit of me, [Bloom] and Sabrina while we were alive’, despite having deposed to that matter just one week previously.
[56] Reasons [27].
[57] Ibid [150]-[151].
[58] Ibid [139].
[59] Ibid.
[60] Ibid.
[61] Ibid.
[62] Ibid [140].
[63] Ibid [132].
[64] Ibid.
[65] Ibid [121].
[66] See grounds of appeal 1-5.
[67] Reasons [121].
[68] Ibid [122].
[69] Ibid [124].
[70] Ibid.
[71] Ibid [125].
[72] Ibid [126].
[73] Ibid [127].
[74] Ibid [129].
[75] Ibid [130].
[76] Ibid.
[77] Ibid [131].
[78] [1995] (Unreported, Tamberlin J, 29 June 1995).
[79] Effem Foods Pty Ltd (trading as Uncle Ben’s of Australia) v Lake Cumbeline Pty Ltd [1999] HCA 15; (1999) 161 ALR 599, 603 [15] (Gleeson CJ, Gaudron, Kirby and Hayne JJ).
[80] Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (trading as Uncle Ben’s of Australia) [1995] (Unreported, Tamberlin J, 29 June 1995), 122-123.
[82] Ibid 47.
[83] [2001] VSCA 104; (2001) 3 VR 473, 484 [63].
[84] [1990] HCA 47; (1990) 171 CLR 167, 178 – 9.
[85] [1999] HCA 33; (1999) 198 CLR 73.
[86] Ibid [54] (Footnotes omitted).
[87] [2003] HCA 22; (2003) 214 CLR 118.
[88] Ibid [23] (Citations omitted).
[89] Ibid.
[90] Ibid [26].
[91] Ibid.
[92] Ibid [29] (Citations omitted). See also Pledge v Roads and Traffic Authority; Ryan v Pledge (2004) 205 ALR 53, [43] (Callinan and Heydon JJ, McHugh ACJ and Kirby J in agreement); [2004] HCA 13; 78 ALJR 572, 581-2 [43]; CSR Ltd and Anor v Della Maddalena [2006] HCA 1; (2006) 224 ALR 1, [21] (Kirby J, with Gleeson CJ in agreement). For recent consideration of these principles in this Court, see Burk v Commonwealth of Australia [2008] VSCA 29, [29]–[32] (Warren CJ); Church v Echuca Regional Health [2008] VSCA 153, [115] (Ashley JA), [139] (Pagone AJA); WPS Enterprises Pty Ltd v Radford [2009] VSCA 22, [27] (Buchanan JA); Re Hollen Australia Pty Ltd;Holt v Burnside [2009] VSC 95, [31].
[93] Reasons [131].
[94] Ground of appeal 27. See also grounds 22-26, relating his Honour’s rejection of Sabrina’s evidence.
[95] See paragraph [60] above. Sabrina also made a significant concession relating to the claim that her father had represented that the corner properties would be hers.
[96] Grounds of appeal 1-5, 15-21, 33, 34, 36, 37, 38, 40, 41, 42 and 45.
[97] Grounds of appeal 6-12.
[99] Ibid [95].
[100] Mr Rosenberg also said in re-examination that he ‘signed anything that Mr Berger put to [him] because [he] trusted [Mr Berger]’.
[101] Reasons [133].
[102] Ibid [137] - [138].
[103] Ibid [138] (emphasis added).
[104] Ibid [141]-[142].
[105] Grounds of appeal 22-27.
[106] Grounds of appeal 28, 29.
[107] Grounds of appeal 15-21.
[108] Reasons [218].
[109] We refer to the submission relating to Mr Fisher’s evidence at paragraphs [138]-[139] below.
[110] Grounds of Appeal 8, 10(a) and 37(f).
[111] Grounds of appeal 11-14.
[112] Ground of Appeal 37(d).
[113] See paragraph [90] above and Reasons [138].
[114] Reasons [137].
[115] Ibid [137]-[138].
[116] Emphasis added.
[117] This was in re-examination.
[118] Reasons [134].
[119] Ibid [133]-[135].
[120] Ibid [143].
[121] Ibid.
[122] Ibid.
[123] Ibid [136].
[124] See ground of appeal 35.
[125] Reasons [134].
[126] Ibid [133].
[127] Grounds of appeal 1 (n),(q), 33.
[128] It would be more accurate to describe them as the objects of a discretionary trust.
[129] We will hereafter refer to this category of beneficiaries as the ‘additional beneficiaries’. There were a number of other categories of beneficiaries, but these are irrelevant to this appeal.
[130] In relation to this, see footnote 187 below.
[131] His Honour found that he was not in fact a beneficiary: Reasons [173].
[132] The originally undated document was subsequently backdated by Ian: see paragraph [70] above.
[133] Sabrina and Ian were the directors and original shareholders of S & I Investments: Reasons [66].
[134] Ground of appeal 10(e).
[135] See Grounds of Appeal 6, 7,10(f)-(g). See paragraphs [78]-[84] above.
[136] Ibid and Reasons [84].
[137] Reasons [94]-[97].
[138] Ibid [95]-[96].
[139] Reasons [147].
[140] Ground of appeal 28.
[141] Reasons [41].
[142] See paragraph [72] above.
[143] Grounds of appeal 1(d)-(f) and 33.
[144] Reasons [143].
[145] Ibid [132].
[146] See paragraph [66] above.
[147] See grounds of appeal 22(f), 40, 46. These concessions were also fatal to ground of appeal 38(e).
[148] Reasons [136].
[149] Ground of appeal 36.
[150] Ground of appeal 36(a). See also 28(e).
[151] See paragraphs [129]-[146] above.
[152] See paragraph [100] above.
[153] That is, the first defendant.
[154] Note that Sabrina’s shares in PHA were bought back for approximately $3 million.
[155] Reasons [136]. Ground of appeal 36 (e).
[156] See paragraphs [129]-[146] above.
[157] Reasons [148].
[158] Ibid [141].
[159] Ibid [153].
[160] Ibid [148].
[161] Ibid [145].
[162] See grounds of appeal 1(p), 10(i), (k) and (l), and 45.
[163] Grounds of appeal 1(p), 36(b)(iii) and (iv), 37(g) and 40.
[164] Ground of appeal 42.
[165] Ground of appeal 40(b).
[166] Ground of appeal 45.
[167] See grounds of appeal 1(p) and 37(h).
[168] Reasons [155].
[169] Grounds of appeal 53-69.
[170] [1988] HCA 7; (1988) 164 CLR 387.
[171] [1999] HCA 10; (1999) 196 CLR 101 (‘Giumelli’).
[172] [1999] VSCA 109; [1999] 3 VR 712 (‘Flinn’).
[174] Reasons [159]-[161], [164] and [168].
[175] Ibid [160].
[176] Ibid [162].
[177] Ibid [165]-[167].
[178] From August 1995 to May 1998, Emanuel lived in a South Yarra apartment purchased by Mistirose. From June 1998 to June 2002, he lived in a Toorak apartment also purchased by Mistirose. From 1994, Sabrina and Ian were the directors of Mistirose. Between June 2002 and February 2004, he lived with Sabrina and Ian and their children at their Toorak home, which had been purchased partly from funds provided by the Investment Trust. From February 2004 he lived in an apartment in Toorak, again purchased by Mistirose.
[179] Reasons [168].
[180] [2007] VSCA 89 (‘Donis’).
[181] Ibid [56].
[182] The elision is apparent by the fact that the appellants’ final submissions on ground 66 refer to ground 61, which relates to the remedy for the estoppel.
[183] Ground of Appeal 53.
[184] Reasons [47].
[185] See paragraph [158] above.
[186] Reasons [174].
[187] See Reasons [62] and [64]. It was assumed in the proceedings that the provision relating to what we have called the ‘additional beneficiaries’ continued to operate, despite the removal of Barry, Sara and their children as specified beneficiaries.
[188] Ground of appeal 54(a) and (b).
[189] Ground of Appeal 54(a) and (b).
[190] Ground of Appeal 54 (c).
[191] Reasons [68].
[192] That document was backdated by Ian to 19 June 1989. His Honour found that to conceal that backdating, Ian used an old company seal of Rosekay, and got Sabrina to sign the deed using her maiden name: Reasons [64].
[193] Ibid [67].
[194] Ibid [49].
[195] Ibid [84].
[196] Grounds of Appeal 55 and 56.
[197] Reasons [13], [15].
[198] Ground of appeal 58.
[199] Ground of appeal 59.
[200] Reasons [165].
[201] Grounds of appeal 60, 62.
[202] His Honour found that the only guarantee to which Ian referred in evidence was the guarantee he gave to Macquarie Bank: Reasons [162].
[203] See paragraph [225] above.
[204] Reasons [158].
[205] Ground of appeal 52.
[206] See for example Donis [2007] VSCA 89.
[207] In Donis, Nettle JA held that the respondent’s failure to amend her the pleadings to include an unpleaded element of detriment was not fatal to her claim. We would take a similar view here.
[208] Reasons [20].
[209] Ibid [19].
[210] Ibid [91].
[211] Ibid [104].
[212] See paragraphs [263]-[272] below.
[213] Ground of appeal 64(a).
[214] Ground of appeal 64(b).
[215] Reasons [16].
[216] This is in effect stated in ground of appeal 69.
[217] Reasons [169].
[218] Ibid [166].
[219] Grounds of appeal 57 and 69.
[220] Grounds of appeal 61 and 67.
[221] Ground of appeal 68.
[222] [1999] HCA 10; (1999) 196 CLR 101.
[223] [2007] VSCA 89. See also Flinn [1999] VSCA 109; [1999] 3 VR 712.
[224] Reliance was placed inter alia on Crabb v Arun District Council [1976] Ch 179, 198 (Scarman LJ) and Gillett v Holt [2001] Ch 210, 235 (Robert Walker LJ).
[225] (1990) 170 CLR 394 (‘Verwayen’).
[226] Ibid 443.
[227] Ibid 462.
[228] Toohey J, who decided the case on the basis of waiver (but in the context of promissory estoppel), said that ‘the [C]ourt should enforce the promise only as a means of avoiding detriment and to the extent necessary to achieve that end’: Ibid, 475-6. Gaudron J’s comments on the remedy for estoppel were qualified by her recognition that ‘it may be that an assumption should be made good unless it is clear that no detriment will be suffered other than that which can be compensated by some other remedy’: Ibid 487.
[229] Ibid 475-476 (Toohey J) and 487 (Gaudron J).
[230] Ibid 412.
[231] Ibid 429.
[232] See also 501 (McHugh J).
[233] [1999] HCA 10; (1998) 196 CLR 101.
[234] Ibid 125 (Gleeson CJ, McHugh, Gummow and Callinan JJ) and 127 (Kirby J).
[235] [1862] EngR 908; (1862) 4 De GF & J 517. See also Ramsden v Dyson (1866) LR 1 HL 129, 170 (Kingsdown LJ).
[236] (1990) 170 CLR 394, 410-411; see also 440 (Deane J).
[237] [2007] VSCA 89, [20]. See also Flinn [1999] VSCA 109; [1999] 3 VR 712, 744 [96] and Gillett v Holt [2001] Ch 210, 232.
[238] Olsson v Dyson (1969) 120 CLR 365, 378-9; Meagher, Heydon, Leeming, Meagher Gummow & Lehanes Equity, Doctrines & Remedies, [17-085]; see also Pascoe v Turner [1978] EWCA Civ 2; [1979] 1 WLR 431, 436.
[239] Sullivan v Sullivan [2006] NSWCA 312, [20] (Handley JA, who dissented in the result but whose judgment contains a thorough and, with respect, persuasive analysis of the relevant authorities). See also, Handley, The three High Court Decisions on estoppel 1988-1990, (2006) 80 (11) ALJ 724.
[240] Jennings v Rice [2003] EWCA Civ 159, [48] (Robert Walker LJ).
[241] [1999] HCA 10; (1999) 196 CLR 101, 125[49].
[242] Jennings v Rice 2003] EWCA Civ 159; Sullivan v Sullivan [2006] NSWCA 312, [23].
[243] Plimmer v The Mayor, Councillors and Citizens of the City of Wellington (1884) 9 App Cas 699 at 714; Pascoe v Turner [1978] EWCA Civ 2; [1979] 1 WLR 431 at 436.
[244] [2001] VSC 509, [74].
[245] [1936] HCA 40; (1936) 55 CLR 499.
[246] The issue was left open in Flinn [1999] VSCA 109; [1999] 3 VR 712, 749-750 (Brooking JA) and Donis [2007] VSCA 89, [17] (Nettle JA).
[247] See generally JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (7th ed) [1606] and Butterworths, Trusts Law Australia: Principles and Practice, Vol 1 (at 17,071) [9030]. The discussion in those texts relates to trustees or donees of powers to appoint property to objects of a discretionary trust, but a comparable approach probably applies to the exercise of a discretionary power to appoint or remove a trustee.
[248] Reasons [190].
[249] Ibid.
[250] Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, 580 (Dixon J).
[251] Grounds of appeal 70-76.
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