Canale v G W & R Mould Pty Ltd [2018] VSCA 346

1 I have had the advantage of reading, in draft, the judgment of Whelan and McLeish JJA. I agree, for the reasons their Honours give, that the applicants should not be permitted to raise a new argument on appeal, namely that the effect of cl 17(c) of the deed of settlement is that Benjamin Mould surrendered his claimed prior equitable interest in the properties with the consequence that that interest was extinguished. The applicants have not met the test of exceptional circumstances as expressed by this Court in Harplex Pty Ltd v Konstandellos.[1] As the proposed grounds of appeal do not extend beyond the new argument (and, in particular, do not challenge the judge's rejection of the applicants' arguments below based on estoppel) I agree with Whelan and McLeish JJA that leave to appeal should be refused.

2 The Mould family has operated a fruit growing business since 1964. Raie Mould, the mother of Susan Hicks, Benjamin Mould and their two other siblings, died on 8 November 2014. Before her death Raie Mould was the sole shareholder of G W & R Mould Pty Ltd ('GWRM') through which the fruit growing business was primarily conducted. GWRM was the owner of properties at 38 and 46 Hunter Street, Wandin North ('Hunter Road properties') and 135 Beenak Road, Wandin North ('Beenak Road property'). GWRM and Benjamin Mould are the respondents to these applications for leave to appeal.

3 Eight days before her death, Raie Mould executed a will leaving all her shares in GWRM to Susan Hicks. This replaced a previous will, made in 1997, by which she left the shares to her son Benjamin Mould. In the meantime, Raie Mould had appointed Susan Hicks as the sole director and secretary of GWRM on 24 October 2014.

4 On 26 March 2015 Benjamin Mould lodged caveats over the Hunter Road properties and the Beenak Road property, claiming to have an equitable interest in the properties based upon a proprietary estoppel. This claim was founded on statements made to him by his parents, including promises that 'Dad and I want you to run the farms' and '[a]t the end of the day, all this will be yours. We've built all this up, and we want you to carry it on'. Benjamin Mould claimed that he worked in the fruit growing business on the properties over many years for little or no compensation in reliance on such statements.

5 On 27 August 2015 Benjamin Mould filed grounds of objection alleging that his mother had lacked testamentary capacity at the time of her final will, that she did not know and approve the contents of the will and that the will was procured by the undue influence of Susan Hicks and another person.

6 Susan Hicks subsequently caused GWRM to enter into contracts for the sale of the Hunter Road properties and the Beenak Road property. In a contract of sale dated 18 December 2015, GWRM sold the Hunter Road properties to neighbouring fruit growers, Mario and Oraziantonio Canale ('Canale parties') for the sum of $4.06 million. On 10 February 2016 GWRM sold the Beenak Road property to members of the McMillan family ('McMillan parties') for $675,000. Benjamin Mould's caveats were disclosed in the vendor's statement for each contract of sale. The Canale and McMillan parties are the applicants in the present applications for leave to appeal.

7 On 16 May 2016 Benjamin Mould commenced proceedings against GWRM alleging that his mother and father had held their shares in GWRM on trust for him, or alternatively that GWRM held the properties on trust for him ('GWRM proceeding'). On about 23 May 2016 GWRM applied to remove the caveats under s 90(3) of the Transfer of Land Act 1958. On 10 June McMillan J ordered the removal of the caveats, partly on the basis that any equity that Benjamin Mould might establish would give him an interest in the shares of GWRM rather than its assets.[2]

8 Following the removal of the caveats, Susan Hicks and Benjamin Mould were able to reach a settlement of the GWRM proceeding and his claims against their mother's estate. This resulted in a deed of settlement that is described below.

9 Subsequently, the Canale parties and the McMillan parties commenced proceedings seeking specific performance of their respective contracts of sale. Benjamin Mould then commenced a proceeding seeking declarations that GWRM held the properties on constructive trust for him and that his interest had priority over the interests of the Canale and McMillan parties, and injunctions against those parties restraining them from registering transfers of the properties to themselves.

10 The three proceedings were heard together. As explained below, the trial judge upheld the claims of Benjamin Mould and dismissed the claims for specific performance. The present three applications for leave to appeal are brought from that decision. For the reasons that follow, leave to appeal should be refused.

11 The deed of settlement in respect of the GWRM proceeding and Benjamin Mould's claims against the estate was dated 5 August 2016. The parties were GWRM,[3] Devon on Yarra Pty Ltd, Wild Juice Pty Ltd, Susan Hicks, Benjamin Mould, and the two executors of Raie Mould's estate (one of whom was Susan Hicks). Devon on Yarra and Wild Juice are two other companies associated with the Mould family business but are not directly involved in this appeal.

12 The recitals to the deed detailed the dispute over Raie Mould's estate and the GWRM shares as well as the caveats lodged by Benjamin Mould over the properties. The recitals noted the contracts of sale and concluded by stating:

In order to avoid further expense and inconvenience of litigation, the Parties have agreed to settle all claims arising out of [the] last will, the death of the Deceased and the administration of the Estate and the Deceased's interests in GWR, DOY and Wild Juice by agreeing to the following terms and conditions.

13 It was agreed under the deed that Benjamin Mould would 'pay to the Estate of the Deceased and the executors of the Estate agree to accept the sum of $2,050,003' for the shares in GWRM, Wild Juice and Devon on Yarra. It was agreed under cl 7 that Benjamin Mould would be made the sole director and secretary of GWRM and the other two companies.

14 Under cl 10, the deed stated that GWRM 'shall not complete the contracts of sale of the Hunter Road property [sic] or the Beenak Road property, unless Ben fails to pay the Settlement Sum as and when required by this deed'.

15 Central to the applicants' proposed appeals, the parties under cl 17 agreed that:

Ben agrees to accept the transfer of the shares in GWR, Wild Juice & DOY to himself or his nominated entity:

(a) in full satisfaction of any claim he may have pursuant to Part IV of the Administration and Probate Act 1958 for provision to be made for his maintenance and support out of the Estate of the Deceased,

(b) in full satisfaction of all claims or rights which he had, now has, or may hereafter have against the Estate of the Deceased or to participate in the distribution of the Estate of the Deceased, and

(c) in full satisfaction of any claims in the nature of those made by him in the contested probate proceeding or the constructive trust claim.[4]

16 The 'constructive trust claim' was defined in recital T which stated:

On 16 May 2016, Ben commenced proceedings in the Supreme Court of Victoria by writ against DOY, GWR, and the Estate of the Deceased claiming inter alia a declaration that the Deceased or any appointed legal personal representative of the Deceased held the whole of the Deceased's interest in the shares of GWR upon trust for him (proceeding no. S CI 2016 1833) (constructive trust claim).[5]

17 The 'contested probate proceeding' was defined in recital R as proceeding no. S PRB 2015 011096, being the proceeding in which Benjamin Mould's grounds of objection were to be decided.

Proceedings brought by the Canale parties, the McMillan parties and Benjamin Mould

18 On 29 August 2016 Benjamin Mould, now sole director of GWRM, informed the Canale parties that GWRM would not complete the contract of sale of the Hunter Road properties. On 8 September 2016, GWRM similarly informed the McMillan parties that the contract of sale of the Beenak Road property would not be completed.

19 As already mentioned, the Canale and McMillan parties then commenced proceedings seeking specific performance of the contracts of sale ('Canale proceeding' and 'McMillan proceeding', respectively). Benjamin Mould commenced a proceeding against the Canale and McMillan parties seeking declarations that GWRM held the properties on constructive trust for him and that his interest in the properties had priority over the interests of the purchasers. He also sought injunctions restraining the purchasers from seeking to register transfers of the properties ('Mould proceeding').

20 In his defence to the Canale and McMillan proceedings, Benjamin Mould pleaded that specific performance should not be granted because of the hardship it would cause him. He further alleged an oral agreement with the Canale parties by which they agreed not to continue with the sale and GWRM agreed to return the deposit.

21 The primary judge dismissed the Canale and McMillan proceedings to the extent that the plaintiffs sought specific performance. As agreed by the parties, it followed that GWRM was ordered to pay the Canale and McMillan parties damages in the sum of the respective deposits paid, together with interest. In the Mould proceeding, the judge made orders declaring that GWRM held the Hunter Road properties and the Beenak Road property on constructive trust for Benjamin Mould, and that his equitable interest had priority over the beneficial interests of the Canale and McMillan parties as purchasers pursuant to their respective contracts of sale. Those parties were also restrained from seeking registration of transfers of the properties in question.

22 The three applications for leave to appeal before this Court are brought by the Canale and McMillan parties against all the above orders.

23 The primary judge summarised the issues before him in the three proceedings as follows:

(a) Does Ben have an equitable interest in the Hunter Road properties and the Beenak Road property, based upon principles of proprietary estoppel, arising from representations made to him by his parents?

(b) If so, does that interest have priority over the equitable interests of the Canales and the McMillan parties as purchasers under the Contracts of Sale?

(c) If Ben had a prior equitable interest in the land, is he nonetheless estopped from asserting that interest either because of the decision of McMillan J to remove his caveat, or because he settled the GWRM proceeding?

(d) Did the Canales make an agreement not to proceed with the sale of the Hunter Road properties that this Court should enforce by way of an injunction?

(e) If Ben does not have an equitable interest in the land that competes with the interests of the purchasers, should the purchasers nonetheless be denied specific performance of the contracts due to the hardship Ben will suffer if the properties are conveyed?[6]

24 The primary judge answered these questions as follows:

(a) Ben has an equitable interest in the Hunter Road properties and the Beenak Road property, based upon principles of proprietary estoppel;

(b) that interest has priority over the equitable interests of the Canales and the McMillan parties as purchasers under the Contracts of Sale;

(c) Ben is not estopped from asserting that interest either because of the decision of McMillan J to remove his caveat, or because of the settlement of the GWRM proceeding;

(d) the Canales did not make any legally enforceable agreement not to proceed with the sale of the Hunter Road properties; and

(e) although the fifth question was unnecessary to answer, had it been relevant I would not have denied specific performance of the contracts due to any hardship Ben would suffer if the properties were conveyed.[7]

25 The effect of these answers was that the contracts of sale could not be specifically performed as Benjamin Mould had a prior equity of which the purchasers had notice through his caveats. This meant that Benjamin Mould's interests in the properties prevailed.

26 The applicants do not seek to challenge any of the above findings of the primary judge. It is necessary to describe their proposed grounds of appeal below. First, however, it is convenient to explain the basis upon which the judge answered the third question set out above.

27 The Canale and McMillan parties argued that Benjamin Mould was estopped from asserting his equitable interest on two grounds. The first was the order of McMillan J that the caveats be removed, which was said to give rise to an issue estoppel. The judge rejected this argument, principally because the order of McMillan J was interlocutory.[8] The second estoppel was founded on the settlement of the GWRM proceeding and the subsequent order of the Court disposing of that proceeding. Again, the argument was one of issue estoppel. The judge rejected the argument on two grounds. The first was that the Canale and McMillan parties were not parties to the GWRM proceeding. The second was that the order disposing of that proceeding was a consent order dismissing the proceeding without an adjudication on its merits.[9]

28 The proposed ground of appeal in respect of the Canale and McMillan proceedings is not illuminating. In each case, the ground states merely that the judge 'erred in not ordering specific performance' of the relevant contracts of sale. The stated reason for granting leave to appeal is equally unhelpful, asserting only that the judge was wrong to find that Benjamin Mould had a prior equitable interest.

29 In the application for leave to appeal in the Mould proceeding, the proposed grounds are stated more expansively:

(a) G W & R Mould Pty Ltd held the Hunter Road properties and the Beenak Road property on trust for the Respondent when G W & R Mould Pty Ltd and the Respondent had entered into a Deed of Settlement by which the Respondent had accepted the shares in G W & R Mould Pty Ltd in satisfaction of the Respondent's claim of a constructive trust over the properties, and

(b) The Respondent's interest in the properties had priority over the Applicants' interests.

The Trial Judge should have found by reason of the Deed of Settlement that there was no constructive trust claim capable of being made by the Respondent against G W & R Mould Pty Ltd as registered proprietor of the properties and the Respondent could not re-litigate that constructive trust claim having found that the subject matter of the GWRM proceeding intersected with the claims and defences raised in the three proceedings heard by His Honour.

30 It is clear from the second of these grounds that the issue sought to be raised by way of appeal is that the deed of settlement precluded Benjamin Mould from advancing the constructive trust claim. The proposed ground does not take issue with the primary judge's rejection of the argument that Benjamin Mould was estopped from advancing a constructive trust by reason of the settlement of the GWRM proceeding (which, it will be recalled, was an argument about issue estoppel). Instead, the argument of the applicants, as expressed in their written cases, is that because of 'the settlement of the GWRM proceeding between Ben and GWRM, Ben no longer had a constructive trust claim against GWRM for an interest in the Hunter Road properties and the Beenak Road property'.

31 This was confirmed and expanded upon in a document titled 'Points to be made in Oral Submissions by the Applicants', provided to the Court at the hearing. This stated that by reason of the deed of settlement and its performance, 'Mr Mould merged, otherwise gave up and brought to an end the pre-5 August 2016 equities which he claimed: (a) in the issued shares in G W & R Mould Pty Ltd; (b) in the property of which the company was the registered proprietor'. The document contended that the 'merger/release is recorded and effected in cl 17(c)' of the deed, which is set out at [15] above. Counsel for the applicants accepted that this argument was not raised before the primary judge.

32 Counsel for the applicants submitted that cl 17(c) of the deed of settlement released Benjamin Mould's claims to the properties. The effect of the clause was said to be that he surrendered 'any claims in the nature of ... the constructive trust claim' and that this included his claimed prior equitable interest in the properties. Counsel argued that what Benjamin Mould was receiving instead, for $2,050,003, was ownership of a company that was party to contracts of sale worth approximately $4.7 million.

33 Counsel for the applicants was pressed on whether there might have been evidence led as to the purpose of the deed of settlement had the surrender point been raised at trial. In response he submitted that such evidence would only have been evidence of the subjective intention of Benjamin Mould or another party, which would not have been permitted under the objective theory of contract. The applicants argued that the only clear commercial purpose of the deed was for Benjamin Mould to acquire the shares in GWRM and that any purpose he had regarding the contracts of sale of the properties was extraneous to the construction of the deed.

34 The applicants submitted that evidence of the subjective intention of Benjamin Mould would not be admissible on the question of construction. Counsel pointed to GWRM's defence dated 9 May 2017, which stated that 'Ben acquired the whole of the shares in GWRM for the purpose of avoiding it concluding the sale of the Property, which would have deprived him of the ability to retain the Property by obtaining a declaration of a beneficial interest pursuant to a constructive trust with priority over the purchaser's interest ...'. He submitted that such a statement of the subjective purpose of one party could not be used to establish the commercial purpose of the parties in entering into the deed.

35 Counsel for the respondents emphasised that the surrender point was not argued at trial and submitted that it was also not raised on the pleadings. The applicants ran an estoppel argument relating to the deed at trial, but not an argument that the deed extinguished or surrendered Benjamin Mould's prior equitable interest.

36 The respondents submitted that there were two threshold points at which the applicants' argument failed. First, there was no application to amend the pleadings. Secondly, even if there had been such an application, the applicants would need to establish that there could have been no evidence which could possibly have prevented the point from succeeding.

37 Counsel submitted that all that was required to dispose of the applicants' surrender or extinguishment argument was to demonstrate that there could have been evidence that could possibly have prevented the point succeeding at trial. It was said that this did not require the respondents to identify that evidence precisely. However, counsel submitted that further evidence from Benjamin Mould and Susan Hicks, as well as contemporaneous documentary evidence, could have been led as to the construction of cl 17(c).

38 In response to the argument that Benjamin Mould was exchanging approximately $2 million for a company with contracts worth more than twice that amount, counsel for the respondents submitted that it was clear from McMillan J's judgment in the caveat proceeding that, taking into account mortgages, the land would have been worth far less to GWRM than the sale prices might suggest. Counsel noted that these matters were not in evidence before the primary judge, but it was an example of a type of evidence that might have been adduced to establish the context and commercial purpose of the deed. For example, if the evidence suggested that Benjamin Mould was paying more for GWRM than it was worth, this would be consistent with his purpose being to preserve his ability to assert his interest in the land rather than simply to receive its value through the shares.

39 The respondents pointed to cl 10 of the deed under which GWRM committed to not completing the sales of the properties unless Benjamin Mould failed to pay the settlement sum. It was submitted that this was consistent with the deed preserving Benjamin Mould's prior equitable interest in the properties. Counsel emphasised that this argument should not be directly entertained on appeal and that this was merely one area in relation to which evidence could have been led before the primary judge.

40 Clause 17(c) of the deed of settlement raises for consideration a clear question of construction. On one view, Benjamin Mould was accepting the transfer of GWRM shares in full satisfaction of any claims in the nature of those made by him in the constructive trust claim or in the nature of those made in the contested probate proceeding. The proprietary estoppel claims upon which he succeeded at trial might be said to fall within the former class. On another construction, Benjamin Mould was accepting the shares in full satisfaction of the constructive trust claim and any claims in the nature of those made by him in the contested probate proceeding. The proprietary estoppel claims would not be within that description, because the 'constructive trust claim', as defined in recital T, was the claim that Raie Mould or her estate held her interest in the GWRM shares upon trust for Benjamin Mould. It was a claim in respect of the shares, not the land.

41 Even if the former construction of cl 17(c) were adopted, a further issue would arise as to whether the proprietary estoppel claims in respect of the land were 'in the nature of' the constructive trust claim. However cl 17(c) is read, an issue would arise as to its intended scope.

42 It is immediately apparent that it would be relevant, in addressing the above issues, for a court to seek to identify the commercial purpose of the parties to the deed of settlement, and in particular whether that purpose extended to settling the question whether Benjamin Mould had an equitable interest in the properties. To some extent, that purpose could be seen from the document itself. As already mentioned, recital Z stated:

In order to avoid further expense and inconvenience of litigation, the Parties have agreed to settle all claims arising out of [the] last will, the death of the Deceased and the administration of the Estate and the Deceased's interests in GWR, DOY and Wild Juice by agreeing to the following terms and conditions.

That description did not explicitly include claims arising out of GWRM's interest in the properties or Benjamin Mould's claims in relation to the properties.

43 Moreover, cl 10 provided that GWRM was not to complete the contracts of sale unless Benjamin Mould failed to pay the estate the settlement sum. This afforded an indication that part of the purpose of the deed was to preserve to Benjamin Mould, if he acquired the shares in GWRM, the ability to secure ownership of the properties for himself by procuring that the sales not proceed.

44 Such indications as there are in the deed therefore tend to suggest, not only that it was not the commercial purpose of the parties to have Benjamin Mould surrender his claims to the properties, but that they intended to enable him to preserve control of the properties. But as counsel for the respondents submitted, the identification of the commercial purpose of the deed of settlement could also have been assisted by other evidence. In particular, evidence as to the value of the properties or the subject matter of the dispute being settled could well have cast light on the commercial purpose of the parties.

45 It is no answer to say that evidence as to the subjective intentions of the parties is inadmissible under the objective theory of contract. The evidence that might have assisted was not evidence of the parties' actual intentions and expectations but evidence of objective background facts known to the parties.[10] As this Court recently explained, in the course of a review of the authorities governing the interpretation of commercial contracts:

It is clear, then, that there is a distinction between 'context' (being the entire context of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and 'the circumstances the contract addresses and its commercial purpose or objects'.[11] As to the latter, admissible evidence of mutually known objective background circumstances is always admissible, no matter how clear the 'ordinary meaning' of the words to be construed is said to be.[12]

46 The principles governing the raising of new arguments on appeal are well known. In Coulton v Holcombe, Gibbs CJ, Wilson, Brennan and Dawson JJ said:

Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.[13]

47 The respondents relied on this Court's statement of the principles, by which it may be decided whether such exceptional circumstances exist, in Harplex Pty Ltd v Konstandellos:[14]

It is clear ... that the onus rests on the applicant to show that exceptional circumstances exist whereby it is expedient in the interests of justice that the issue ... be decided on appeal. That entails showing, at least, that the point could not possibly have been met by evidence at trial.[15]

48 The applicants have not discharged this burden. They have failed to show that the point they now seek to raise could not possibly have been met by evidence at trial. To the contrary, it is clear that evidence could have borne on the point. That is enough to dispose of the present applications.

49 But even if that were not so, it would be far from clear that it would be expedient in the interests of justice to permit the point to be decided upon appeal. There is a significant interest in the finality of litigation and no explanation was proffered as to why the argument was not run at trial. In short, no reason was advanced as to why it would be expedient in the interests of justice for the argument to be heard and determined for the first time on appeal. Especially in circumstances where the merits of the argument appear weak, the interests of justice here tend strongly towards ensuring the finality of litigation.

50 The same reasoning would suggest that leave to amend the pleading, if it had been sought, would not have been granted. But in light of the foregoing conclusions it is not necessary to consider that matter further.

[1] (2018) 54 VR 174, 190 [67].

[2] GW & R Mould Pty Ltd v Mould [2016] VSC 330.

[3] GWRM was referred to as 'GWR' in the deed.

[6] Mould v Canale [2017] VSC 793 [10] ('Reasons') (emphasis in original).

[9] Ibid [119], citing Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [No 2] [2001] FCA 1861; (2001) 119 FCR 1, 267-8 [1154] (Goldberg J).

[10] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 352 (Mason J).

[11] Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95 [46] (Santamaria, Ferguson and McLeish JJA).

[12] Lopes v Taranto [2018] VSCA 288 [66] (Kyrou, McLeish and Hargrave JJA).

[13] [1986] HCA 33; (1986) 162 CLR 1, 8, quoting University of Wollongong v Metwally [No 2] (1985) 59 ALJR 481, 483.

[14] (2018) 54 VR 174 (McLeish and Hargrave JJA and McDonald AJA).