Chetwynd & Ors v Rose

Court of Appeal (NSW)|2021-03-17|Before: Meagher JA, Leeming JA, White JA, Kunc J

Solicitors: Fishburn Watson O'Brien (Respondent) File Number(s): 2020/00233444 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Citation: [2020] NSWSC 111 Date of Decision: 21 February 2020 Before: Kunc J File Number(s): 2015/223303

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The first and second appellants, Mr and Mrs Chetwynd, for a long time enjoyed a close personal and business relationship with the respondent, Ms Rose. After the Chetwynds sold a property to discharge the debts of a company through which the Chetwynds and Ms Rose conducted their business, Ms Rose granted Mr and Mrs Chetwynd each a one-third interest in a property which she owned in Neutral Bay. That property was leased, and the rent was paid into an account in the name of Ms Rose. In 1990, Mr Chetwynd and Ms Rose acquired shares 10% and 90% respectively of the shares in a company, Wincot Pty Ltd, which is the third appellant. As with the Neutral Bay property, it was agreed that Mr and Mrs Chetwynd and Ms Rose were to have a one-third beneficial interest in the shares in Wincot. In 1993, the Chetwynds negotiated the purchase of a property in Armidale in which they intended to live. The property was purchased in the name of Ms Rose to conceal it from the claims of the Chetwynds' creditors. A sum of $110,000 was to be paid to the vendors on completion and a further $110,000 was payable over seven years with interest at 9.5% per annum, secured by a mortgage over the property in the name of Ms Rose. The Chetwynds guaranteed the debt. Most of the funds used to acquire the property were provided by Wincot, which also made $151,018.56 worth of vendor finance repayments, which were debited to Ms Rose's loan account. Between 1993 and 2000, the Chetwynds paid to Wincot $780 per month (giving a total sum of $67,760), either from salary paid or credited to them, or by debit to their loan accounts. After a deterioration in the parties' relationship, the Chetwynds brought proceedings seeking a declaration of their full beneficial ownership in the Armidale property, which they said Ms Rose held on trust for them or, alternatively, for Wincot. Ms Rose contended that, as with the Neutral Bay property and Wincot, she enjoyed a one-third interest in the property, and sought the appointment of trustees for sale of the property. A number of other monetary claims were made by the Chetwynds. The primary judge found that the Armidale property was held according to the same "three way split" arrangement which governed the parties' ownership of the Neutral Bay property and Wincot, and appointed trustees for sale. His Honour ordered that the Chetwynds were to pay Ms Rose a further $100,679.04 plus interest, representing an indemnity in favour of Ms Rose for two-thirds of Ms Rose's loan account debt. The principal issues on appeal were: 1. Whether the Chetwynds (or alternatively Wincot) enjoyed full beneficial ownership of the Armidale property; 2. Whether there was an agreement that the Armidale property was not to be sold without the agreement of the Chetwynds and Ms Rose; 3. Whether the Chetwynds repaid Wincot for its payment of the purchase price of the Armidale property; 4. Whether the primary judge erred in adjusting the parties' entitlements to the sale proceeds; and 5. Whether the Chetwynds were entitled to an adjustment in respect of monies purportedly debited to their salary or loan account with Wincot as payment of rent to Ms Rose that enabled Ms Rose to claim tax deductions when the Armidale property was negatively geared. The Court held (per White JA, Meagher JA and Leeming JA agreeing): In respect of the beneficial ownership of the Armidale property: The primary judge did not err in rejecting Mr Chetwynd's evidence that Ms Rose had agreed to hold the Armidale property on trust for the Chetwynds. Mr Chetwynd's explanations for documentary evidence which suggested otherwise were rightly rejected: at [43]-[44]. In respect of whether there was an agreement that the Armidale property could be sold only if the Chetwynds and Ms Rose agreed: The only evidence of such an agreement was the uncorroborated evidence of Mr Chetwynd which his Honour rejected: at [53]. There was no error in the trial judge's finding that the arrangement between the parties that the Chetwynds be permitted to live in the property could not be elevated to an agreement of the kind contended for: at [57]. In respect of whether the Chetwtynds repaid Wincot for the purchase price: The monies paid by the Chetwynds to Wincot from salary paid or credited to them, or by debit to their loan accounts were accounted for as purported rent paid to Ms Rose for occupation of the Armidale property. Had they constituted repayments to Wincot, they would have been credited to the Chetwynds' loan account: at [64]. In respect of the adjustment of the sale proceeds: The debiting of Ms Rose's loan account for vendor finance paid by Wincot did not mean that she was entitled to be indemnified by the Chetwynds for two-thirds of the amounts so debited when she did not personally fund the payments, but Wincot's payments were funded either from rental payments from another property of which the parties were co-owners or from Wincot's trading operations: at [82]-[85], [89]-[90]. In respect of the purported payment of rent: Treating Wincot's vendor finance repayments as debits to Ms Rose's loan account allowed Ms Rose to claim tax deductions in respect of purported income in the form of rent purportedly paid by the Chetwynds to Ms Rose: at [93]. This scheme had no legitimate basis: at [94]. The purported landlord and tenant relationship did not reflect the substance of the relationship between the parties as beneficial co-owners, or if the relationship was treated as legitimate, Ms Rose would be obliged to account to the Chetwynds as beneficial co-owners: at [99]-[100]. There was no evidence that the payments were by way of occupation fee payable by the Chetwynds as co-owners for exclusive occupation: at [101]. Accordingly, an adjustment is to be made in favour of the Chetwynds amount to two thirds of the "rent" purportedly paid by them to Ms Rose: at [108].

Judgment

MEAGHER JA: I agree with White JA.
LEEMING JA: I agree with White JA.
WHITE JA: The principal issue in this appeal is: who are the beneficial owners of a property in Armidale? The respondent, Ms Rose, was the sole registered proprietor of the property. On 16 July 2020 the primary judge (Kunc J) made an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for sale of that property. That order was made on Ms Rose's application. She contended, and the primary judge found, that she held the property on trust for herself and for the first and second appellants, Mr and Mrs Chetwynd, in equal one-third shares (Chetwynd v Rose [2020] NSWSC 111).
The Armidale property was purchased in Ms Rose's name in 1993. Before the purchase Mr and Mrs Chetwynd leased the property from the vendors. They negotiated its purchase from the owners, Mr and Mrs Phillips ([91]). The property was bought in the name of Ms Rose to conceal the Chetwynds' beneficial ownership from the claims of creditors ([91]).
The property was purchased for $220,000 with $110,000 being payable on completion and $110,000 being payable over seven years with interest at 9.5% per annum. ([92])
Mr and Mrs Chetwynd contend that they are the sole beneficial owners of the property. Alternatively they contend that the property is held by Ms Rose on trust for the third appellant, Wincot Pty Ltd.
It was common ground that Ms Rose and Mr and Mrs Chetwynd were each entitled to a one-third beneficial ownership of the shares in Wincot. (As for the legal ownership of the shares in Wincot, Ms Rose is the holder of 90% of the issued shares and Mr Chetwynd holds the remaining 10%.)
Wincot provided most of the funds used to acquire the Armidale property. Mr and Mrs Chetwynd contended that they repaid Wincot but the primary judge did not accept that contention. The primary judge rejected Mr and Mrs Chetwynd's claim that they were the sole beneficial owners of the property and rejected their claim that Ms Rose held the property on trust for Wincot.
The primary judge also rejected Mr and Mrs Chetwynd's contention that there was an agreement between them and Ms Rose that the property could only be sold if all parties agreed to that course.
The primary judge found that on the sale of the Armidale property by the trustees for sale, Ms Rose is entitled to be paid $100,679.04 plus interest from the Chetwynds' share of the net proceeds. This order was made on the basis that Ms Rose had incurred a liability to Wincot for payments totalling $151,018.56 that Wincot made in paying the vendor finance, which payments were debited to her loan account with Wincot. ($100,679.04 is two thirds of that amount.)
The Chetwynds challenge these findings.
The Chetwynds and Wincot also made numerous monetary claims against Ms Rose. Two of those claims were successful. There is no cross-appeal in respect of these claims.
One such successful claim related to a dividend declared but not paid by Wincot to Ms Rose. The primary judge found that the dividend so declared was $31,487 ([448], [454]). The effect of the declaration of the dividend was to clear a loan debt due from Ms Rose to Wincot. The primary judge accepted the evidence of Wincot's accountant, Mr Bill Herd, that on the basis that the shares in Wincot were held beneficially by a "three way split" arrangement, a fair reckoning would require Ms Rose to pay each of Mr and Mrs Chetwynd one-third of the amount of the dividend after accounting for the tax Ms Rose paid on the dividend ([450], [455]). Order 2 made by the primary judge (quoted at [17] below) was that Ms Rose pay Mr and Mrs Chetwynd that amount plus prejudgment interest.
The second adjustment made in favour of Mr and Mrs Chetwynd was that they were entitled to an adjustment in the accounts of Wincot in their favour in a sum of $53,740 by that sum being deducted from Mr Rose's loan account and credited to their loan account. This adjustment related to a claim from a sale of a different property, namely a property in Neutral Bay, referred to later in these reasons. No issue was raised on the appeal in relation to this issue (dealt with by the primary judge at [522]-[528]).
Other monetary claims made by the Chetwynds and Wincot against Ms Rose were unsuccessful. It is not easy to identify which of those are the subject of the appeal. The notice of appeal is deficient. It does not include any specific grounds. (The appellants did not have legal representation). Ms Rose accepted that it was open to the Chetwynds and Wincot to press challenges to the primary judge's findings so far as those challenges were identified in their written submissions.
In a separate judgment, the primary judge found that the Chetwynds were liable to pay Ms Rose's costs of the proceedings on an indemnity basis. His Honour assessed costs on a gross sum basis in the amount $350,000. There is no separate appeal from that order, although the Chetwynds submitted that a gross sum costs order should not have been made and the costs claimed were excessive.
The orders of the primary judge, so far as relevant to this appeal, were as follows: 1. Declare that the First and Second Plaintiffs are entitled to an adjustment in the accounts of the Third Plaintiff in their favour in the sum of $53,740 by that sum being deducted from the loan account of the Defendant and being credited to the loan account of the First and Second Plaintiffs. 2. The Defendant pay the First and Second Plaintiffs $20,919 [being $15,953 plus pre-judgment interest from 3 January 2015]. 3. Order that the amount referred to in Order 2 be set off against the amounts referred to in Order 7(b) below. 4. The Further Amended Summons is otherwise dismissed. 5. Pursuant to s 66G of the Conveyancing Act 1919 (NSW), order that: (a) Morgan James Chubb and David Michael Morgan ("the Trustee") be appointed trustee of the property situated at 74 Balgownie Drive, Armidale, NSW, 2350, being the whole of the land comprised in Folio Identifier 945/755808 ("the land"); (b) the land vest in the Trustee subject to any encumbrances affecting the entirety thereof but free from any encumbrances affecting any undivided share or shares therein upon the statutory trust for sale pursuant to Division 6 of Part 4 of the Conveyancing Act 1919 (NSW); 6. Order that the Trustee pay out of the proceeds of sale of the land: (a) Council rates, water rates, strata levies and other statutory duties or charges (if any) in respect of the land; (b) real estate agent's commission and charges and any other costs of the sale of the land; and (c) the Trustee's costs of acting as trustee. 7. Order that the net proceeds of sale remaining after all such payments have been made be divided and distributed as follows: (a) Subject to paragraph (b) below, the sum be divided and distributed in equal 1/3 shares ("Shares") between the First Plaintiff, the Second Plaintiff, and the Defendant; (b) Before the division and distribution referred to in Order 7(a) above, the following amounts be distributed to the Defendant from the combined Share of the First and Second Plaintiff less the amount referred to in Order 2: (i) the sum $100,679.04, being the s 66G adjustment referred to in paragraph [376] of the Principal Judgment dated 21 February 2020 ("Adjustment Sum"); (ii) interest on the Adjustment Sum, being $31,221.52 pre-judgment interest on the Adjustment Sum from 3 January 2015; (iii) the Defendant's costs, pursuant to Orders 8 and 9 below. 8. Pursuant to s 98(1) of the Civil Procedure Act 2005 ("Act"), order that the Plaintiffs are jointly and severally liable to pay the Defendant's costs of the proceedings on an indemnity basis. 9. Pursuant to s 98(4) of the Act, order that the Defendant is entitled to a gross sum of costs in the amount of $350,000 instead of assessed costs, and that the Plaintiffs are jointly and severally liable to the Defendant for that sum.
For the reasons which follow I would reject the appeal insofar as it challenges the primary judge's findings as to the beneficial ownership of the Armidale property and the order for the appointment of trustees for sale. I would allow the appeal against order 7(b)(i), (ii) and (iii). I would make a further declaration in favour of the Chetwynds that they are entitled to an adjustment in the accounts of Wincot in their favour in the sum of $47,093.33 being two-thirds of the alleged rent debited to their loan account with Wincot and credited to Ms Rose between 1994 and 2000. I would make a different costs order.

Beneficial Ownership of the Armidale property

The first issue is whether the primary judge erred in holding that Ms Rose held the Armidale property on trust for Mr and Mrs Chetwynd and herself in equal shares, rather than on trust for Mr and Mrs Chetwynd or for Wincot.
The primary judge summarised the background to the acquisition of the Armidale property. His Honour noted that the background facts were not in dispute. His Honour described that background as follows: "72 …The Chetwynds owned photographic stores. Glynis has known the Chetwynds for many years, having been first employed by them during the 1970s. 73. During the course of her employment, Glynis formed a close personal and business relationship with the Chetwynds of more than 35 years' duration. Brian described the relationship between the Chetwynds and Glynis as being "practically family". 74. In addition to being employed by the Chetwynds, Glynis also became good friends with them. Between 1970 and 2005, Glynis regularly saw Jill and Brian in social situations, averaging approximately twice a month. Her relationship with the Chetwynds extended to being close with their children, and they referred to her as "aunty". 75. The early business relationship with the parties was developed through a company called Rogote Pty Ltd ("Rogote"). Their business relationship was not documented in formal contracts, instead consisting of and relying upon a great deal of trust between the parties. 76. In April 1979, Glynis purchased a unit in Neutral Bay (the "Neutral Bay Property"). This property was purchased in her name and she was the sole contributor of funds to purchasing the property. 77. Rogote began experiencing financial difficulties in 1989 and consequently the Chetwynds sold their home in Forestville to discharge the outstanding debts for Rogote and stave off creditors. The Chetwynds had personally guaranteed the company's debts. 78. Following the Chetwynds sale of the Forestville property, there was an agreement between Chetwynds on one hand, and Glynis on the other. This agreement was known as the "three way split" agreement. Under this agreement, the Chetwynds sold the Forestville property, discharged the debts of Rogote and subsequently each gained a one third interest in Glynis' Neutral Bay Property. In terms of what was to happen in relation to the Armidale Property, it is important at this point to recall that Glynis gave up two-thirds of her interest in the Neutral Bay Property which up until that time had undoubtedly been her property absolutely. 79. It was agreed, as Brian put it in his affidavit sworn 2 November 2015, that "everything we do will be equally shared one third between the three of us and that includes assets and liabilities." While this agreement initially related to discharging the debt of Rogote and the Chetwynds gaining an interest in the Neutral Bay Property, there was no dispute that this agreement extended into other aspects of the parties' relationship. 80. As with other important arrangements between the parties, the three way split agreement was not reduced to writing. Despite this, all parties accept that the agreement existed. 81. At this time, the Neutral Bay Property was being rented out. The rent was paid into Glynis' personal Commonwealth Bank account, and not into any business account. Glynis paid tax on the rental income she received from the Neutral Bay Property. This arrangement was in place until the Neutral Bay Property was sold. 82. The Neutral Bay Property was tenanted from 1991 until 2010 when it was sold. 83. In 1990 the parties acquired a shelf company: Wincot. At the time of purchasing Wincot, it was agreed that Glynis would hold a 90% shareholding in the company, whilst Brian would hold the remaining 10% share. Glynis' evidence was that there was a conversation between her and Brian, namely that she would actually own 100% of Wincot, and the 10% shareholding which Brian held was actually to be held on trust for her. 84. Despite this arrangement where Glynis was effectively the sole owner of Wincot, it was agreed between the parties that Wincot too was subject to the three way split agreement. As with previous agreements between the parties, the arrangement was not recorded in writing. 85. The purpose of Wincot was to purchase photography stores. The company purchased a store in Armidale and also in Coffs Harbour. 86. The Chetwynds moved to Armidale to run the store which Wincot had bought. Similarly, following Wincot purchasing a store in Coffs Harbour, Glynis moved to Coffs Harbour to oversee the running of that store. 87. The Coffs Harbour store closed in approximately 1993, which consequently saw Glynis also move to Armidale to work in the shop there. 88. In the early 1990s, Wincot secured an interest only line of credit from Citibank. This loan was secured against the Neutral Bay Property. There was an original limit of $225,000, with each of the parties being guarantors for the loan. 89. In 1992 after moving to Armidale, Brian and Jill moved into the Armidale Property. The Armidale Property was formerly owned by John and Barbara Phillips, who were friends of the Chetwynds. At this time, Brian and Jill were housesitting for the Phillips. 90. After housesitting for approximately twelve months, the Phillips told the Chetwynds that they were going to sell the Armidale Property and offered to sell it to them. 91. The Chetwynds were interested in purchasing the Armidale Property and Brian and Jill carried out the negotiations with the Phillips. These negotiations concerned price and terms of the sale of the Armidale Property. Glynis was not involved in the negotiations. 92. The terms of the purchase were that $110,000 would be paid up front to the Phillips and $110,000 would be borrowed off the Phillips by way of vendor finance. This loan of $110,000 would be repayable over seven years at a rate of 9.5% interest. 93. At this time, Brian was particularly concerned that he could still be liable to creditors from his previous business ventures. In order to protect his assets and the purchase of the Armidale Property, it was suggested by the Chetwynds that Glynis would be the legal owner of the Armidale Property, however she would hold the property on trust for the Chetwynds. Additionally, the Chetwynds would reside in the Armidale Property. Glynis agreed to purchase the Armidale Property for the Chetwynds as the legal owner."
Although the primary judge said that the Chetwynds were "housesitting" the Armidale property for the Phillips, they paid rent of $780 per month to Mr and Mrs Phillips up to the purchase of the property in 1993.
In his affidavit made on 2 November 2015, that is, more than 23 years after the purchase of the Armidale property, Mr Chetwynd deposed there was a conversation between his wife, Ms Rose and him to the following effect: "36. During this same time it was agreed between my wife and I and Ms Rose that the Property would be put in the name of the Ms Rose. We had words to the following effect: Me: 'Would you consider holding the property on trust for Jill and I We will make all the repayments and pay the interest and outgoings etc, but given the risk of litigation against me and Jill, it may be better if the property and the mortgage were both in your name. Ms Rose: 'If it's in my name, will I be responsible for anything at all, including repayments, maintenance and rates?' Me: 'As I said, you won't have to make any mortgage repayments or payments towards the upkeep or pay any of the expenses. We want this to be our family home and I'm sure that we won't want to sell it and I don't want you to sell it either, is that OK?' Ms Rose: 'Yes, I understand and that's fine by me. I am prepared to have the property and the mortgage in my name and I will only ever act in your best interest and of course I will never sell the property without the three of us agreeing to do so.'"
He deposed that there was a further conversation to the following effect: "37. Thereafter, the terms of the agreement were as follows and we had a conversation in words to the following effect: Me: 'Now that we have agreed, we need to get the terms right, so that all of us agree and understand them. I would suggest the following: a. The Property will be transferred into your name as the sole registered proprietor: b. You, as the sole registered proprietor, will be liable to the Phillips under a vendor finance mortgage over the Property (which Jill and I would indemnify you in respect of); c. As it is Jill's and my family home, we will pay off the mortgage; d. As it is Jill and my family home and we are paying for all outgoings, no fee is payable to you for us occupying the Property; e. Jill and I will be solely responsible for all outgoings of the property; including water rates, council rates, land tax, home and contents insurance, general maintenance, and improving repairs. You will not be required to contribute to these costs; and f. The Property is not intended to be used to realise income or profit by way of lease to a third party.' Ms Rose: 'Yes I understand and am happy to agree with all that.' Me: 'Of course, in the event that Jill and I cannot pay off the entire mortgage, a contingency mechanism will be that we each share a 1/3 split and you will have a 1/3 split in the purchase price of the property, which is $220,000.' Ms Rose: 'Yes, of course and I do agree and fully understand that this is your family home and my 1/3 is only applicable as you state and also to protect my interests as the property is in my name.' Me: 'It's all agreed, then let's go ahead.'"
The primary judge did not accept this evidence. His Honour did not accept Mr Chetwynd as a witness of credit. He made strong adverse credit findings against Mr Chetwynd and concluded that he did not accept Mr Chetwynd's evidence unless it accorded with the objective probabilities, was against interest, or was supported by contemporaneous documents ([175]). The substantial reason for these findings was that Mr Chetwynd's evidence was contrary to documents that he wrote both before and after a dispute arose, in which he recognised that Ms Rose had a one-third beneficial interest in the Armidale property. These are referred to below.
Except on well recognised grounds that do not exist in the present case (Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[29]; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55]; Robinson Helicopter Company Incorporated v McDermott (2016) 90 ALJR 679; [2016] HCA 22 at [43]), an appellate court cannot interfere with such a finding, even though the finding was not expressly based upon Mr Chetwynd's demeanour (see for example White Constructions Pty Ltd v PBS Holdings Pty Ltd [2020] NSWCA 277 at [106], [154]-[156]). In any event, for the reasons below the primary judge was clearly justified in accepting Ms Rose's contention as to how the beneficial ownership of the property was held on the basis of Mr Chetwynd's documents and the evidence of Mr Herd.
Mrs Chetwynd also made an affidavit in which she deposed that when the property was purchased Ms Rose agreed that she would hold the property on trust for her and Mr Chetwynd. She was not cross-examined but the primary judge recorded that it was agreed that the Chetwynds would not submit that any inference should be drawn against Ms Rose solely by reason of Ms Rose's election not to cross-examine Mrs Chetwynd ([151]).
Ms Rose deposed that she did not recall Mr Chetwynd using the word "trust". Nor did she recall his proposing that the property be held exclusively for the Chetwynds and not for her. She deposed that her best recollection was that Mr Chetwynd said something to the effect of: "This transaction will be treated the same as all our other dealings. We will split the asset in one-third shares, just like the Neutral Bay property."
Ms Rose deposed that she recalled Mr Chetwynd saying something to the effect of "we will pay all the outgoings" but did not recall his saying anything to the effect of "we will make all the repayments". She recalled Mr Chetwynd saying that she would not be liable for any of the maintenance and other outgoings in relation to the property and that "you won't have to make any payments towards the upkeep or pay any expenses".
Ms Rose deposed that around the time the Armidale property was purchased she did not recall any discussions about the circumstances in which the property could, or could not, be sold. She gave no evidence of any agreement for the payment of rent or an occupation fee. She did not recall Mr Chetwynd saying that no occupation fee would be payable. She recalled that at the time of the purchase she had a discussion with someone about rent but did not recall the gist of the discussion or whether it was with Mr Herd or Mr Chetwynd. She said her best recollection was that the Chetwynds paid her some amount of rent for a short time, but the payment of rent was discontinued fairly soon after the Chetwynds moved into the property. She did not recall why the payment of rent stopped.
Mr Chetwynd denied that any rent was paid, or was agreed to be paid. Adjustments were made to the loan accounts of the parties in the books of Wincot to record the payment of rent so that Ms Rose, who was the legal owner, could obtain a taxation advantage by treating the property as if it were negatively geared. This treatment and its consequences are dealt with below.
It was common ground that in the 1970s Ms Rose and Mr and Mrs Chetwynd had been in business together as shareholders and directors of companies that carried on wholesale photography businesses from the late 1970s. In the 1980s their business was carried on by a company called Rogote Pty Ltd. Between 1980 and 1990 the Chetwynds' family home in Forestville and Ms Rose's unit in Harriette Street, Neutral Bay, were used as security to finance the purchase of supplies for that business. Mr Chetwynd deposed that in about 1989 secured creditors of Rogote were pressing for payments. It was agreed between the Chetwynds and Ms Rose that the Forestville property would be sold and that Mr and Mrs Chetwynd would have a two-thirds beneficial interest in the Neutral Bay property. The Forestville property was sold in September 1990 and the surplus proceeds of $187,500, after payment of secured creditors, were deposited to an account Wincot had with Citibank.
Legal title to the Neutral Bay property remained in the name of Ms Rose. There was no dispute that the Chetwynds had a two-thirds beneficial interest in the Neutral Bay property.
In 1988 Mr and Mrs Chetwynd and Ms Rose decided to start a photographic shop and retail business that was conducted through Wincot Pty Ltd. Ms Rose holds 90 of the 100 issued shares in Wincot and Mr Chetwynd owns the other 10. Ms Rose deposed that Mr Chetwynd held his 10% shareholding on trust for her. But the primary judge recorded that it was agreed that Wincot too was subject to a "three way split agreement" between the parties. His Honour found (at [79] quoted above]) that it was agreed that "everything we do will be equally shared one third between the three of us and that includes assets and liabilities".
Wincot purchased photography stores in Coffs Harbour and Armidale. It later purchased three other stores. The Chetwynds moved to Armidale to run the Armidale store and Ms Rose moved to Coffs Harbour to run the Coffs Harbour store. Ms Rose deposed that in 1993 the Coffs Harbour shop was struggling and so it was agreed between all three parties that Ms Rose would move to Armidale to help run the store there. Ms Rose stayed in Armidale from 1993 to 2005.
After the Armidale store was closed in mid 2005 Ms Rose returned to Coffs Harbour. She resigned as a director of Wincot in 2012.
After Wincot ceased trading, its accountant, Mr Herd, wrote to the directors saying that it was appropriate that the ability to meet remaining creditors be addressed. In his letter of 26 August 2005 Mr Herd said: "For varying reasons, personal assets of each of the directors have been intertwined and although specific assets may be held in one particular name, I am informed, that each of the three directors have an interest in such assets. The difficulty in the present situation is that both Neutral Bay and Balgownie Drive [Armidale] are registered as owned by Glynis."
Mr Herd proposed an arrangement whereby the Armidale property would be transferred to the Chetwynds and they would surrender their beneficial interest in the Neutral Bay property. His proposal did not proceed. Implementation of the proposal would have involved stamp duty and capital gains tax. Mr Chetwynd replied on 10 November 2005. He said: "I believe that all parties acknowledge that the whole of the assets and liabilities are apportioned one third to each person."
In 2006 Mr Chetwynd prepared a document called "Financial Position Report" which he said was prepared with the assistance of and input from Ms Rose. Ms Rose said she did not recall receiving the document but did not doubt that she did receive it at the time. She did not recall reviewing the document or discussing it with Mr or Mrs Chetwynd or Mr Herd. The document stated that "…all assets, including business and property, would be owned equally (one third) by each person, irrespective of the legal owner". The properties referred to in the document were the Armidale property and the Neutral Bay property.
On 3 January 2015 Ms Rose sent an email to the Chetwynds. She said that, as she was turning 65 in June 2016, she was thinking of retiring. She proposed that the Armidale property be sold and "finances sorted" ([134]). In the correspondence that followed Mr Chetwynd, replying for himself and his wife, clearly admitted their understanding that the Armidale property was owned beneficially by the three of them in equal shares. The correspondence is extracted in the reasons of the primary judge. It suffices to note the following:

On 9 January 2015 Mr Chetwynd replied to Ms Rose saying "As you know, we are all one third beneficial owners of the property and all three of us must agree for the property to be sold".
On 16 January 2015 Mr Chetwynd wrote: "Our concerns are because for some 25 years we have had a one third arrangement in all activities and assets where every decision was discussed and agreed by the three of us … … any decision on the property or any sale thereof is a decision to be made by the three of us equal beneficial owners…"

On 11 February 2015 the Chetwynds lodged a caveat over the Armidale property. The caveat claimed that Mr and Mrs Chetwynd had an equitable interest as beneficiaries under a trust by virtue of the fact that: "The Registered Proprietor purchased the property as trustee for the benefit of the caveators as to a 1/3 interest to Brian Chetwynd and 1/3 interest to Jill Chetwynd and in her personal capacity to 1/3 interest".
Mr Chetwynd attempted to explain the admissions that Ms Rose was a one-third beneficial owner in the Armidale property by saying that he was attempting to appease her out of fear she would sell the Armidale property immediately and that what he meant to say was that she had a one-third beneficial ownership in the original purchase price of $220,000.
In relation to the caveat, Mr Chetwynd said that his solicitor must have misunderstood his instructions and that what he instructed his solicitor was that Ms Rose had a one-third interest in the purchase price of the Armidale property (that is, she was entitled to one third of the purchase price of $220,000, presumably recoverable when the property was sold). He did not call his solicitor to corroborate that evidence.
The primary judge rejected these attempted explanations. His Honour did not err in doing so.
The primary judge considered that Mr Chetwynd's evidence of his conversations with Ms Rose in 1993 (22 years before proceedings were commenced) was a reconstruction based on what Mr Chetwynd hoped he might have said ([258]). There is no basis to interfere with that finding. Indeed any other finding, in the light of the subsequent correspondence and the caveat, would be surprising. Mr Chetwynd's attempted explanations of his correspondence and the caveat he caused to be lodged had no objective corroboration and were rightly rejected.
The proceedings as initially instituted in 2015 were commenced by Mr and Mrs Chetwynd alone. The summons as originally filed sought a declaration that Ms Rose held the Armidale property on trust for Mr and Mrs Chetwynd. The summons was amended (or further amended) in 2018. By their amended (or further amended) summons the Chetwynds claimed in the alternative that Ms Rose held the Armidale property on trust for Wincot. This claim was made on the basis that Wincot provided almost all of the moneys for the purchase of the property. The primary judge held (at [350]) that it was clear that the intent of all relevant parties was that Wincot would not be the beneficial owner of the property but acted as a lender for the purchase of the property.
Ms Rose acknowledged that she did not personally pay anything towards the purchase of the Armidale property. She acknowledged that loan account entries (referred to below) did not reflect any personal payments made by her.
As explained below, the purchase of the Armidale property was substantially funded by Wincot using a credit facility that it had with Citibank. Payments of the Citibank facility were substantially funded from rental payments from the Neutral Bay property that it was agreed was beneficially owned by Ms Rose and the Chetwynds in equal shares. The funding of the purchase of the Armidale property does not cast doubt on the primary judge's conclusion that all parties intended that Ms Rose would hold the Armidale property on trust for herself and Mr and Mrs Chetwynd in equal shares.

No agreement that Armidale property only be sold if all parties agreed

The second issue was whether there was an agreement between Ms Rose and Mr and Mrs Chetwynd that the Armidale property could only be sold if all agreed.
The primary judge observed that the only evidence of such an agreement was the uncorroborated evidence of Mr Chetwynd which his Honour rejected (at [355]).
Ms Rose gave the following evidence in cross-examination in relation to the Chetwynds' right to occupy the property: Q. Was there any arrangement to terminate the Chetwynds' occupation? A. I don't recall, no. Q. So the Chetwynds could live there as long as they wished; is that correct? A. Yes. HIS HONOUR Q. Are you saying that you recall an arrangement to that effect? Or is it simply a consequence that, as far as you're concerned, they could live there as long as they want? A. As far as I was concerned, it was their home. Q. But just so I'm clear - A. Sorry. Q. -do you recall there being any express arrangement about how long they could live there for? A. No. … Q. So in closing on this Ms Rose, the Chetwynds, in your view, are entitled to stay in the house for as long as they wish? A. Yes. Q. So they can't be evicted or thrown out? A. I don't know. Q. In your view. A. Well, I don't want to do that. … HIS HONOUR Q. Ms Rose, just before Mr Chetwynd asks the next question, can I go back to the answers you've just given him? Can you help me with understanding how those answers sit with the fact that one of the issues in this case, that I have to determine, is that if I am satisfied that you in fact have a one-third interest in the property, your relief also includes an application for the sale of the property? You're aware that that's part of what you're asking for in the proceedings, aren't you? A. Yes Q. And do you maintain that that should occur if I find that you're a one-third owner? A. Unless they can come up with the third of the value without selling it.
Ms Rose's concession that in her view the Chetwynds were entitled to stay in the house for as long as they wished, but did not know whether they could be evicted, was evidently based upon her assumption that as there was no arrangement to terminate the Chetwynd's occupation of their home, they could not be evicted. That was far from establishing any agreement between the Chetwynds and Ms Rose that the Armidale property could not be sold without the consent of the Chetwynds in any circumstances.
His Honour found: "[357] In my view, it is clear that the Chetwynds have sought to elevate what had been the historical practice between the parties into an express agreement. Their longstanding arrangement had obviously operated on deep trust which enabled them to agree, or acquiesce in, how things were to be done from time to time. However, that is not the same thing as an express agreement of the kind Brian sought to persuade the Court existed. His repeated assertions of such an agreement in the January 2015 email exchanges is, in my view, a case of protesting too much. The Chetwynds have failed to satisfy the Court that there was any agreement in relation to the Armidale Property to the effect that unanimous consent was required, with the result that it could not be sold without their consent. [358] In reaching this conclusion I have not overlooked Brian's argument that this was the Chetwynds' family home and they would not have agreed to a situation where it could be "sold out from under them". If the holding of the Armidale Property was the only point of relationship between the parties, that argument might have some force. However, it is not persuasive when the arrangements in relation to the Armidale Property are understood, as the Court has found them to be, as part of the longstanding three way split agreement that governed the entirety of the parties' personal and professional relationship."
There is no error in that reasoning.

Finding that the Chetwynds did not repay Wincot for its payment of the purchase price

In support of their contention that they were the beneficial owners of the property the Chetwynds submitted that their agreement with Ms Rose was that they would pay the purchase price for the property and they did so.
Mr Chetwynd gave evidence quoted at [22] above that Ms Rose agreed that the Chetwynds would be responsible for repayments and she would not have to make mortgage repayments. But the primary judge rejected that evidence.
Ms Rose accepted there was agreement that the deposit and up-front payment would be made from the Wincot Citibank line of credit but had no recollection of any discussion about how that would be accounted for. She had no recollection of any discussion that such payments would be debited to the Chetwynds' loan account. No entry was made against the Chetwynds' loan accounts. She deposed that there is no reason she would not have made such debit entries against the Chetwynds' loan account if that had been agreed.
The vendor finance provided by the Phillips was secured by mortgage dated 17 September 1993 given by Ms Rose under which she covenanted to repay the principal sum of $110,000 together with interest. The Chetwynds guaranteed to the Phillips that Ms Rose would duly pay the mortgage debt. Ms Rose was personally liable to the Phillips for the payments of the balance of the purchase price with interest. Had the Chetwynds' guarantee been called on, subject to any contrary agreement between Ms Rose and the Chetwynds, Ms Rose would have been liable to indemnify the Chetwynds against any payments they were required to make under their guarantee.
The only contrary agreement found by the primary judge was that ownership of the Neutral Bay property, Wincot and the Armidale property and the liabilities pertaining to them should be split between the Chetwynds and Ms Rose equally. This must have been subject to an exception in the case of rates, outgoings and repairs for the Armidale property as Ms Rose agreed with Mr Chetwynd that it was agreed that the Chetwynds would be responsible for those payments.
Mr Chetwynd deposed that he and his wife repaid Wincot for the purchase price of the Armidale property. Mr Chetwynd deposed that between October 1993 and 1995 he and his wife received monthly cheques of $780 from Wincot as part of their salary and then re-banked the proceeds back to Wincot towards payment of the purchase price. Later these became annual payments up to 2000. The primary judge rejected that contention ([249]).
There is no dispute that between 1993 and 2000 the Chetwynds paid either from salary paid or credited to them, or by debit to their loan accounts, $780 per month. But the primary judge did not err in concluding that these were not payments towards the purchase of the Armidale property. Rather they were accounted for as purported rent paid to Ms Rose for their occupation of the Armidale property in order that Ms Rose could claim a purported tax deduction for interest paid on the loan from the vendors for the balance of the purchase price and other property expenses. I deal with these matters at [91]-[105] below. The Chetwynds have a legitimate complaint as to that accounting. But the primary judge did not err in rejecting their claim that the payments were to reimburse Wincot for the payments it made for the purchase of the property. Had they been they would have been credited to the Chetwynds' loan account.
Mr Chetwynd also deposed that the Chetwynds made payments to Wincot between 2002 and 2004 totalling $55,000 in reduction of the debt the Chetwynds owed Wincot. The primary judge found that it was common ground these moneys were paid but rejected Mr Chetwynd's contention that they were paid as repayment of moneys paid by Wincot to the Phillips. As his Honour correctly said: "[231] The Court also has taken into account the characterisation of the $55,000 by the Chetwynds themselves in their Amended Summons. One of the grounds for relief initially pressed by the Chetwynds was that "the Defendant pays to the First and Second Plaintiffs the amount of $55,000 … being the monies paid by the First and Second Plaintiffs, that should have been repaid by the Defendant, or applied to the payment of the Armidale Property." Seeking that relief is entirely inconsistent with the notion that the payments made by Brian were repayments to Wincot for the purchase of the Armidale Property."
Mr Chetwynd also relied upon what he called a set of correcting ledgers for the Wincot accounts prepared to reflect what he said was the true nature of journal entries, as they should have been made. He submitted that credit entries to his loan account, as recorded in his reconstructed ledgers, totalling $111,860 were repayments to Wincot for payments it made for the Armidale property.
The primary judge accepted Mr Herd's criticism of Mr Chetwynd's reconstructed ledger and found there was no evidence as to what the credit entries in the reconstructed ledgers related, and no evidence that they related to any payments of cash to Wincot. ([254]-[258]).
Mr Herd's principal criticism was that the reconstructed ledger proceeded on the assumption that Wincot acquired the Armidale property as an asset of Wincot. That criticism is justified. Although the moneys for the purchase of the Armidale property, including the payments of the vendor finance, were paid from Wincot's Citibank line of credit, it was not the intention of either Ms Rose nor the Chetwynds that Wincot would own the property. Rather Wincot acted as a financier.
The primary judge did not err in rejecting the Chetwynds' submission that they paid for the Armidale property in the ways for which Mr Chetwynd contended.

Order 7(b)(i) and (ii): Adjustment from sale proceeds of two-thirds of vendor finance payments

The primary judge ordered that after the sale of the Armidale property Ms Rose receive from Mr and Mrs Chetwynd's two thirds share of the proceeds of sale an "Adjustment Sum" of $100,679.04 plus interest. The basis for this adjustment, as found by the primary judge, was that vendor finance payments paid by Wincot were debited to Ms Rose's loan account in the amount of $151,018.56 and that Mr and Mrs Chetwynd were liable to indemnify her against her liability to Wincot for two thirds of that amount, namely $100,679.04. The primary judge said: "[360] Glynis originally made a claim for two separate adjustments in any distribution of the proceeds of sale of the Armidale Property. [361] The first was an adjustment for $80,232 in respect of disproportionate contributions said to have been made by Glynis to facilitate the purchase of the Armidale Property. [362] The second was a claim in relation to disproportionate contributions said to have been made by Glynis for the vendor finance repayments for the Armidale Property. This was noted in Glynis' cross-claim as being for $96,482 but the calculation ultimately pressed in the submissions, and which the Court accepts, was for $100,679.04. [363] In her final written submissions of 11 August 2017 for the 2017 hearing, Glynis expressly acknowledged that she no longer pressed her claim for the disproportionate funds used to purchase the Armidale Property. [364] The claim for the adjustment in respect of the vendor finance payments is still pressed. The vendor finance, of $110,000, was repayable over 7 years at 9.5%, with 84 repayments of $1,797.84. [365] The practice for repaying the vendor finance was set out in Mr Herd's affidavit of 4 December 2015. He set out the arrangement as follows: "I am aware that these transactions [vendor finance repayments] were accounted for in the Wincot accounts in the following manner: a) 'Credit' entry in relation to Wincot's 'bank account', reflecting that money was paid from that account to the vendors; b) 'Debit' entry in relation to 'Glynis Rose loan account', reflecting that payment of the mortgage debt by Wincot was effectively a loan by Wincot to the Property owner: ie, a loan to Glynis. I considered it appropriate all the payments be booked against Glynis, because she was the legal holder of the property (regardless of any beneficial interest which Brian or Jill held.)" [366] This effectively meant the payment was made by Wincot and was subsequently debited against Glynis' loan account. [367] This practice was not contested by the Chetwynds. While Wincot made the repayment, the payment was entirely debited against Glynis' loan account. This meant Glynis incurred the liability to Wincot for the payment. [368] Glynis submitted she was entitled to recover two thirds of the amount paid from the Chetwynds on two alternative bases: (1) A claim analogous to a claim for contribution for disproportionate contributions to the discharge of a joint mortgage; and (2) A claim for indemnity as trustee. Glynis incurred liability to Wincot in her capacity as trustee of the Armidale Property, giving rise to a right of indemnity against the beneficiaries of the trust. [369] The claim for $100,679.04 is calculated as follows: (1) The quantum of the vendor finance was $151,018.56 (the vendor finance was $110,000 at 9.5%, over 84 months). (2) Two thirds of $151,018.56 is $100,679.04."
The purchase price of the Armidale property was $220,000. $110,000 of the purchase price was paid on settlement and the balance of $110,000 was payable over seven years at an interest rate of 9.5% per annum.
Contracts for the purchase of the Armidale property were exchanged on 13 August 1993. The contract provided for payment of a 10% deposit of $22,000. The deposit was paid by Wincot.
The balance of the purchase price was $89,315.01. Of this sum, $80,000 was paid by Wincot. The balance was provided by Mr and Mrs Chetwynd.
Between 1993 when the Armidale property was purchased and 2000 when the loan for the balance of the purchase price (including interest) was repaid, the Neutral Bay property was leased. Rental payments for the Neutral Bay property were paid into a Commonwealth Bank account in Ms Rose's name. The primary judge found: "[205] …Wincot paid for the Armidale Property using the Citibank line of credit secured against the Neutral Bay Property, which was owned by Glynis and held on trust by her for the Chetwynds and herself in equal shares. Rent was received by Glynis for the Neutral Bay Property in her personal account and she subsequently used that rent to pay the interest on the Citibank line of credit for the Armidale Property…"
In dealing with a claim by the Chetwynds that Ms Rose was liable to account to them for two thirds of rent received from the Neutral Bay property between 1991 and 2001 the primary judge said: "[388] Glynis rejected the argument that she did not pay any money to Wincot in relation to rent for the Neutral Bay Property. While she acknowledged that she did receive rent and was liable to split any income she received three ways with the Chetwynds, she submitted that once the Court took into consideration the payment of expenses for the Armidale Property and the interest charges which had accrued as a result of the Citibank line of credit, there is no liability to account to the Chetwynds. [389] Glynis presented evidence to the Court that the "surplus" of rent from 1991 until October 2019 was approximately $164,623. Surplus was used to mean any money left over after the payment of expenses for the Neutral Bay Property. The bank statements which were in evidence clearly showed Glynis receiving the rental payments on a monthly basis, and then making a payment of roughly the same amount as the rental payment for the Citibank mortgage. In some instances, the payment made to Citibank exceeded the amount received for the rent of the Neutral Bay Property. [390] In the same period, evidence was presented to assert that $183,412.82 was paid to Citibank as the total monthly repayments for interest. This exceeds the surplus of $164,623. As such, it was put that there was no surplus once the Citibank interest was taken into account. The Court accepts this submission."
Ms Rose accepted that she did not personally pay any money towards the purchase of the Armidale property. It is not possible to say how much of the payments of vendor finance made by Wincot was funded by payments made by Ms Rose from her Commonwealth Bank account and how much was funded from Wincot's trading operations. But the payments from Ms Rose's account were funded by rental payments from the Neutral Bay property that was beneficially owned by Ms Rose and the Chetwynds.
The Neutral Bay property was sold in 2010 ([391(1)]).
Mr Herd understood that Ms Rose and the Chetwynds each had a one-third equal interest in the Neutral Bay unit, the Armidale property and Wincot. But he treated all of the rent from the Neutral Bay property as income derived by Ms Rose. Consistently with the parties' intention to conceal the Chetwynds' beneficial interest in real property in Ms Rose's name, she declared all of the Neutral Bay rent as her income.
Wincot had a line of credit with Citibank. Mr Herd deposed that he first became aware that Wincot's Citibank line of credit had been the source of the deposit and part payment of the purchase price for the property some time in the early to mid 1990s. He deposed: "22. I am aware that no entry had been made in the Wincot accounts in relation to those payments. I considered that the absence of any such entry in the Wincot accounts was appropriate because: (a) The effect of the transaction was that Wincot was effectively borrowing from Citibank, to make a loan to Glynis as to the purchaser of the Property; (b) The technical characterisation of the dealing would be that Wincot incurred liability to Citibank, and acquired a directly corresponding asset (comprising a debt from Glynis to Wincot). Those transactions were balance sheet neutral (in the sense that the liability to Citibank was directly offset by the asset). Further, the transactions had no taxation implications for Wincot. (c) Although it may have been appropriate to record those transactions on audited accounts, there was really no practical necessity to record them in the accounts of Wincot."
As the primary judge noted, at [361] and [363] quoted at [70] above, Ms Rose made no claim in respect of the $80,232 paid by Wincot on completion of the purchase (nor the deposit of $22,000).
$110,000 of the $220,000 purchase price was provided by vendor finance repayable over seven years at 9.5% interest by monthly instalments. Those payments were made from Wincot's Citibank account. Each monthly repayment was $1,797.84. The total repayments of principal and interest from July 1993 to June 2000 totalled $151,018.56.
Unlike the payments made by Wincot towards the first part of the purchase price, Wincot accounted for the payments from its Citibank line of credit for the vendor finance by debiting Ms Rose's loan account with the payments made reflecting, in substance, a loan to Ms Rose for those payments. It was on that basis that the primary judge ordered that the Chetwynds indemnify Ms Rose for two-thirds of Ms Rose's loan account debt. But that is to ignore the fact that the money from which the payments to the Citibank line of credit were made came from the Neutral Bay rent payments of which Mr and Mrs Chetwynd were two-thirds beneficial owners, or from Wincot's trading operations of which the parties were equal shareholders, even if not from the Chetwynds.
Mr Herd deposed that "…all interest payments on the total outstanding balance of the Citibank line of credit, were made from Glynis' personal banking account." He was referring to the account that Ms Rose had with the Commonwealth Bank. But Ms Rose did not give evidence that she personally contributed to that account. Ms Rose accepted in cross-examination that she personally did not pay a cent towards the purchase.
Ms Rose deposed that the reason the Wincot payments for the vendor finance were debited to her loan account was because the property was in her name not because she made or personally contributed to the payments.
Mr Herd deposed that the debit entries made to Ms Rose's loan account with Wincot from August 1993 were appropriate because she was the purchaser of the Armidale property and it was appropriate that the full amount of the moneys paid by Wincot for the purchase of the property be debited exclusively to her account and not to the account of the trust beneficiaries, because Wincot was transacting with her and not the beneficiaries for whom she held the Armidale property. Although Mr Herd may have been justified in ignoring the trust arrangements between Ms Rose and the Chetwynds when advising on the preparation of Wincot's accounts, those arrangements cannot be ignored when an account is purportedly taken between the beneficiaries.
Mr Herd deposed that the accounting treatment he described would have imposed significant tax liabilities on Ms Rose by reason of the operation of Division 7A of the Income Tax Assessment Act 1936 (Cth). (In fact the relevant provisions at the time were contained in the then Division 7 of the Income Tax Assessment Act but they were to the same effect as Division 7A).
Mr Herd deposed: "26. To seek to eliminate the substantial tax exposure to which GR would otherwise have been exposed, I conceived and implemented a new accounting policy for the manner in which the Citibank Line of Credit was accounted for. It involved the re-characterisation of the Citibank Line of Credit from being in substance a liability to Wincot, to being in substance a liability of GR. … 29. The conceptual re-characterisation of the Wincot line of credit as being in substance GR's facility (rather than Wincot's) necessitated adjustments to the Wincot accounts. By way of summary: (a) Wincot's liability to Citibank had to be removed from the balance sheet; (b) If the line of credit was in substance GR's facility, then it followed that any drawdown on the line of credit for the benefit of Wincot was properly characterised as being in commercial substance an advance from GR to Wincot, which needed to be recognised as a credit in GR's Wincot loan; (c) Those adjustments were effected by Journal Entry 1593, which is extracted at CB4.104, which provided: (i) Debit: Loans, Citibank: $82,037; (ii) Credit: Loans, G Rose: $82,037. (d) $82,037 was the closing balance of the Citibank Line of Credit on 30 June 1994: CB 4.105 (e) The effect of that journal entry was effectively to transform Wincot's liability for the outstanding balance on the Line of Credit, from a liability owed to Citibank to a liability owed to GR, reflecting that GR was now (in substance) the party to the Citibank facility, and advancing to Wincot sums drawn down from that facility. 30. After that initial "transfer" of the Line of Credit to GR, subsequent dealings in relation to the facility were accounted for as follows. 31. Because: (a) the Citibank line of credit was deemed in substance a facility of GR's; and (b) drawdowns by Wincot on the line of credit for its business purposes were therefore deemed drawdowns by GR, and subsequent advances by GR to Wincot of the sums drawn down, then (c) If the company drew down further on the facility causing funds to be deposited in Wincot's bank account, that in substance constituted a further advance by Glyn to Wincot, accounted for by: (i) "Debit" Wincot bank account (reflecting deposit of the funds in the Wincot bank account) (ii) "Credit" GR loan account (reflecting that GR had in substance advanced funds to Wincot). (d) If the company repaid principal to Citibank, that in substance constituted a repayment to Glyn by Wincot of advances she had earlier made, accounted for by: (i) "Credit" Wincot bank account (reflecting the transfer of funds from the Wincot trading account), (ii) "Debit" GR loan account (reflecting that the previous advance was repaid) (e) In relation to the payment of interest which accrued on the outstanding balance from time to time, to the best of my recollection the interest was paid directly by GR from her personal Commonwealth Bank account to the Citibank account. The payments did not "pass through" Wincot trading accounts (except perhaps for 93/94). I referred to the process of the payment and accounting for Citibank interest in paragraph [28]-[29| of my First Affidavit, which for the convenience of a comprehensive description I extract below '28. I am aware from my involvement in the accounts of Wincot and Glynis, that all interest payments on the total outstanding balance of the Citibank line of credit, were made from Glynis' personal banking account. 29. The following entries were made in the Wincot accounts in relation to those interest payments: a) A calculation was made of the total interest payments made over the year, in relation to the outstanding balance of the Citibank line of credit ("Total Interest"); b) A calculation was made of the interest which was attributable to the Wincot drawdowns relating to the deposit and part payment of the purchase price of the Property ("Property Payments Interest"); c) A calculation was made of the balance of the Total Interest Payments, less the Property Payments Interest ("Wincot Interest Balance"); d) When accounts were prepared for Wincot, there was a "debit" made in the "Interest Paid" account, and a "credit" made in "Glynis Rose loan account", in relation to the Wincot Interest Balance. This entry was made to reflect that Glynis had personally paid the interest on the drawdowns from Wincot's Citibank line of credit (which were unrelated to the Property purchase), and had therefore in substance lent Wincot the amount of the interest paid. (It was not appropriate to "credit" Glynis' loan account in relation to the Property Payments Interest, because those payments were for her benefit as purchaser of the Property, and Glynis' payment of such interest was not in substance a benefit/loan to Wincot.) 30. I have no recollection one way or the other about whether I had discussions with Glynis in relation to this accounting practice. However, Glynis invariably prepared the draft trial balance consistently with that practice; and I settled the accounts consistently with that practice.' The effect of that accounting arrangement in relation to the payment of interest on the Citibank line of credit, was that GR received a credit in her loan account only in relation to the interest which was attributable to the drawdowns on the line of credit which related to Wincot's general business (and that GR received no credit in loan account in relation to interest attributable to the drawdowns on the line of credit which related to the purchase of the Armidale Property).
It is not clear that Ms Rose had a "personal" bank account with the Commonwealth Bank separate from the account in her name into which rent from the Neutral Bay property was paid. But that does not matter for the purpose of considering the adjustment of $100,679.04 that the primary judge ordered, because the accounting as described by Mr Herd did not affect the debits to Ms Rose's loan accounts for Wincot's payments of the vendor finance. Rather it avoided Division 7 tax liability and provided a purported justification for Ms Rose's being able to deduct interest on the vendor loan against rent said to have been derived by her from the Armidale property.
The primary judge had found that Ms Rose did not have to account for the Neutral Bay rents paid into her Commonwealth Bank account because they had been applied to the Citibank line of credit, from which Wincot paid the Phillips $151,018.56. On a trust accounting between beneficiaries Ms Rose is not entitled to contribution from the Chetwynds if all three contributed equally to the discharge of the vendor finance for the purchase of the Armidale property.
Even when Mr Chetwynd's evidence is rejected, Ms Rose did not contribute to the payment of the vendor finance except as a one-third beneficial owner of the Neutral Bay rental income.

Alleged Rental Income

Mr Herd deposed that during the 1994 to 2000 financial years, rent in the amount of $780 per month in relation to the Armidale property was debited against the Chetwynds' loan account and credited to GR's loan account. He said: "(i) I recall that in around 1994, I proposed (and oversaw the implementation of) an arrangement by which the Chetwynds notionally paid rent in the amount of $780 per month for the Armidale Property. As to this: A. The purpose of the arrangement was to decrease the tax payable by GR. B. At the time, GR was also the legal owner of the Neutral Bay property, and receiving rental income in that capacity. Because Neutral Bay was "positively geared", GR was paying tax on that rental income; C. If an arrangement was implemented under which GR notionally received rent in the amount of $780 per month in respect of the Armidale Property, the Armidale Property would be "negatively geared". Consequently, the implementation of the rental arrangement in relation to the Armidale Property would decrease GR's overall taxable income, and decreased the overall tax payable by GR; D. As set out below, the arrangement did not involve the actual expenditure by the Chetwynds of their personal financial resources for the payment of rent, and for that reason did not impose any monetary burden on the Chetwynds. The arrangement did, however, involve debiting their loan accounts, and crediting GR's loan account, in respect of rental payments. I assumed that there would need to be some account taken of this, when there was a final reckoning between the partners."
The primary judge accepted Mr Herd's evidence. His Honour found $780 per month was debited against the Chetwynd loan account and credited to Ms Rose's loan account [236]. His Honour said: "[236] This arrangement saw $780 per month being debited against the Chetwynd loan account and subsequently being credited to Glynis' loan account. At this time, Glynis was the legal owner of the Neutral Bay Property which was being rented out. The Neutral Bay Property was positively geared. As such, she was paying tax on the income she received from that property."
Mr Herd proposed a round robin of cheques whereby the Chetwynds would cause Wincot to draw cheques in their favour that would be paid to Ms Rose as the legal owner of Armidale as rent, who would then repay the money back to Wincot ([234]). By debiting the Chetwynds' loan account and crediting Ms Rose's loan account in this way, Ms Rose purportedly derived income from 1994 to 2000 against which she claimed deductions for interest (and also for rates and other expenses for the Armidale property).
The Chetwynds said that this was a fraud on the Commissioner. It certainly had no legitimate basis, as under the arrangements between the Chetwynds and Ms Rose they were not liable to pay her rent and she was not liable to pay rates or maintenance or other property expenses. The primary judge acquitted Ms Rose of fraud. His Honour found that Ms Rose followed directions from Mr Herd.
As noted above, the Chetwynds contended that they made the payments not as payments of rent but as repayment of Wincot for the vendor finance ([233]). The primary judge rejected that submission. His Honour found: "[249] As such, the Court accepts Mr Herd's evidence in relation to the cheques not being personal funds of the Chetwynds. Mr Herd devised and implemented the system of round robin cheques concerning the payment of rent for the Armidale Property, and did so for tax purposes. Consequently, his evidence as to the nature of those payments is highly probative and the Court gives it determinative weight in determining the nature of the cheques. These payments were not repayments from the Chetwynds to Wincot and should not be characterised as such."
The primary judge dealt with a claim his Honour described as having been made by Wincot that Ms Rose account for the financial benefits she received from the Armidale property by accounting for two-thirds of the rents she received ([540] - [543]).
His Honour found: "[544] As stated above in paragraph [420], there is nothing to suggest Glynis received rental payments in her capacity as trustee, as opposed to being the landlord of the Armidale Property. Glynis received $780 in rent to ensure the Armidale Property was negatively geared, and that arrangement ceased in 2000 upon the advice of Mr Herd, when the property became positively geared. Consequently there is nothing to suggest Glynis is liable to anyone for the rent she received for the property."
I do not accept that reasoning.
First, the purported creation of a landlord and tenant relationship was an accounting device to evade taxation and did not reflect the substance of the arrangement under which the Chetwynds occupied the property: namely not as Ms Rose's tenants but as beneficial co-owners.
Secondly, if the arrangement were that of landlord and tenants, Ms Rose as legal owner would be obliged to account for the rent received in her capacity as landlord to her beneficial co-owners. Mr Herd recognised that such an accounting would be required between the beneficiaries (affidavit quoted at [91] above).
Thirdly, it would only be if the credits and debits of $780 per month were an occupation fee that the Chetwynds agreed to pay for the advantage of exclusive occupancy of the property that Ms Rose would not be required to account. This was how she sought to characterise the position on appeal. But there was no evidence that Ms Rose and the Chetwynds made any such agreement. Nor can it be overlooked that $780 per month was the rent the Chetwynds paid the Phillips. There was no evidence and no suggestion that a market rent had tripled so that the Chetwynds were willing to pay Ms Rose the same rent as they paid the Phillips of which she would enjoy full beneficial ownership.
It was submitted for Ms Rose on appeal that there was insufficient evidence to determine whether the favourable tax treatment was for the benefit of Ms Rose alone or for the benefit of all three parties. I reject that submission. The tax returns lodged by Ms Rose were her personal returns, not trust estate returns. In her tax returns Ms Rose declared herself entitled to all of the so-called rent and personally claimed deductions for interest and property expenses.
The primary judge said that the claim for two-thirds of $67,760 was made by Wincot. This may have been because Wincot paid the alleged rent. In fact, by their amended summons the Chetwynds claimed that if it were determined that Ms Rose held the property for three beneficiaries, she pay to the Chetwynds $47,093.33 (being two-thirds of the rent) plus interest. They also sought an order that Ms Rose account for any financial benefit she received as trustee of the Armidale property.
I assume that in final submissions before the primary judge the Chetwynds did not make their own claim if it were found that they were the sole beneficial owners or two-thirds beneficial owners. (The parties' final submissions before the primary judge were not reproduced in the appeal books). However, the Chetwynds' claim for an accounting was raised on appeal and no objection was taken to its being raised.
The appropriate form of account is to reverse the debit and credit loan account entries in Wincot's accounts. I am conscious that Ms Rose has derived actual taxation benefits from the accounting treatment adopted by Mr Herd, but that does not warrant a fiscal adjustment directly between the Chetwynds and Ms Rose. The taxation benefit Ms Rose obtained could not have been obtained by the Chetwynds or Wincot (who made the payments). They could not have claimed a deduction for the interest and expenses for their residence.
On one view the adjustment should be of $67,760 and not two-thirds of that sum because the journal entries were fictitious. To adjust the entries only by two-thirds is to treat as genuine an arrangement for the payment of seven years rent by the Chetwynds to Ms Rose and then to give the Chetwynds credit for those payments. No payments were made. They were only notionally made by the credit and debit entries in the parties' loan accounts with Wincot.
However, no submissions were made on appeal as to whether the greater adjustment should be made and it does not appear whether any such submission was made at trial.
I would propose the following orders in relation to these accounting issues: 1. set aside order 7(b)(i) and (ii) of the primary judge; 2. declare that the first and second appellants are entitled to adjustments in the accounts of the third appellant in the sum of $47,093 by that sum being debited to the loan account of the respondent and credited to the loan account of the first and second appellants.

Other monetary claims

In their written submissions, the Chetwynds submitted that the primary judge did not award any monetary claims against Ms Rose although substantial evidence was submitted. The primary judge dealt with the claims in detail. No particular submission was made as to why the primary judge erred in the way those claims were resolved. As no grounds of appeal nor any particular submission dealt with those claims, Ms Rose did not address them.
As noted above ([65]), it was uncontested that Mr Chetwynd transferred $55,000 to Wincot. He claimed that was a payment towards the purchase of the Armidale property. I have found that the primary judge did not err in rejecting that claim. Alternatively, Mr Chetwynd sought repayment of that sum from Ms Rose. The primary judge rejected that claim, holding that he had been reimbursed $50,000 ([426]-[443]). In oral submissions Mr Chetwynd said he disputed that finding but advanced no reasons for doing so. In any event, as the primary judge correctly held ([444]) any outstanding amount would be payable by Wincot and not Ms Rose.

Other grounds of appeal

The Chetwynds submitted that, in the latter part of 2016, they ceased to have legal representation and the proceedings were set down for hearing shortly thereafter. (The hearing was due to commence on 20 March 2017). Mr Chetwynd submitted that he and his wife wanted to include Wincot as a party due to additional evidence they had discovered but they had insufficient time to prepare the matter to join Wincot before the commencement of the hearing. They submitted that Ms Rose put undue pressure on them and took advantage of their lack of knowledge and experience in the court process leading to gross injustice.
That submission should be rejected.
A similar submission was made before the primary judge on the question of what costs order should be made. In his second judgment (Chetwynd v Rose (No 2) [2020] NSWSC 870) the primary judge said: "[12] First, Brian submitted that Glynis had been intransigent in her approach to the litigation and had sought "to deliberately frustrate, delay and hinder the Plaintiffs, by taking advantage of same being a self litigant". A detailed history of these proceedings is set out in paragraphs [14] to [71] of the Principal Judgment and in the affidavit of Glynis' solicitor, Mr Campbell, sworn 16 March 2020. Having regard to that history, the matters to which Brian has referred the Court and my observation of the proceedings over an extended period of time, I am in no doubt that Brian's characterisation of Glynis' conduct of the proceedings is the opposite of what in fact occurred. [13] The Court is satisfied that every appropriate concession (and more) was extended to the Chetwynds and Wincot by Glynis in the conduct of the proceedings. To my observation, the proceedings were a model of how a represented party should conduct litigation against an unrepresented party: not sacrificing the represented party's interests but ensuring that the overriding purpose under s 56 of the Civil Procedure Act 2005 (NSW) (the "CP Act") is achieved by not insisting on technicalities and offering practical and procedural assistance to the self-represented litigant (to the extent that the latter will accept that assistance)."
The procedural history of the litigation set out by the primary judge at [14]-[71], coupled with the material to which the primary judge referred, shows that there was no procedural injustice and Ms Rose took no advantage of the Chetwynds' position as self-represented litigants. Indeed it was Ms Rose's solicitor who suggested, after a failed mediation in August 2016, that if the Chetwynds wished to raise claims they asserted Wincot was entitled to against Ms Rose, they should do so by amendment and even formulated possible amendments for the Chetwynds' consideration.

Costs of the appeal of the proceedings below

On my findings, both parties have had a substantial degree of success and failure on the appeal. The time taken on the hearing of the appeal and, so far as can be judged, in the preparation of appeal books and written submissions, was and would be approximately equal in respect of the issues upon which the Chetwynds failed and the issues upon which they have succeeded. I would make no order as to the costs of the appeal to the intent that the parties bear their own costs.
As to the costs of the proceedings below, as noted above, the primary judge determined that the Chetwynds pay Ms Rose's costs on an indemnity basis and assessed those costs in the gross sum of $350,000. This was a substantial discount from the total solicitor-client costs incurred up to 5 June 2020 of $532,881.21 (J No 2 [39]).
An experienced costs assessor, Ms Ashe, estimated that the total of Ms Rose's costs on a costs assessment would be in the order of $405,000 plus GST and that based on a broad-brushed assessment, the application of the typical range of recovery for different components of costs translates to a 76% overall recovery of the costs incurred when costs are assessed on the ordinary basis ([42]). The primary judge found that: "[54] … the figure of $350,000 advanced by Glynis represents a more than sufficient discount to her likely recoverable costs on the indemnity basis to which I have determined she is entitled. Furthermore, even if I were wrong in my conclusion that she was entitled to her costs on the indemnity basis, in my view the discount represented by her claim for $350,000 would yield the same result (and I would make an order to like effect) even if her costs were assessed only on the ordinary basis."
Given the Chetwynds' success on appeal Ms Rose is clearly not entitled to indemnity costs of the proceedings below. Nor is she entitled to all of her costs below on the ordinary basis.
Ms Rose is entitled to her costs of the Chetwynds' summons that sought an order that she held the Armidale property on trust for them and an order that she transfer the property to them. She is entitled to her costs of the amended summons in so far as it sought an alternative order that she held the property on trust for Wincot and an order that she transfer the property to Wincot. She succeeded before the primary judge in respect of numerous monetary claims for alleged breaches of trust in relation to the Neutral Bay property which were not the subject of any grounds of appeal or specific submissions. She succeeded in defending claims that she had breached various provisions of the Corporations Act 2001 (Cth) that were not ventilated on appeal.
Ms Rose succeeded in her claim for an order for appointment of trustees for sale. The usual order in applications for an order under s 66G for the appointment of trustees for sale is that the costs of both parties be treated as an incident of the dissolution of the relationship of co-owners of property, and be paid out of the proceeds of sale (Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]; Chow v Chow (No 2) [2015] NSWSC 1348 at [8]).
However, in this case opposition to the order for appointment of trustees for sale was primarily based on the Chetwynds' claim that they or Wincot were the beneficial owners of the Armidale property: a claim on which they failed and should pay Ms Rose's costs.
Ms Rose filed an amended cross-summons in which she sought adjustments to the amounts to be distributed from the proceeds of sale: a claim on which she succeeded at trial but on which I consider she ought to have failed. I also consider that the Chetwynds ought to have succeeded at trial on one of the monetary issues on which they failed.
The various monetary claims were analogous to the taking of a partnership account. In Kardos v Sarbutt (No 2) Brereton J (as his Honour then was) said: "[28] However, the costs of adjusting property interests consequent upon the failure of a domestic relationship are an incident of the failure of a joint relationship, usually without attributable fault. In this sense, there is an analogy with partnership disputes. In partnership proceedings, it was once the rule that no costs would be given up to the decree directing the account, a position that was not departed from except in cases of gross misconduct [Hawkins v Parsons (1862) 8 Jur (NS) 452; Parsons v Hayward (1862) 4 De GF&J 474]. The prevailing rule nowadays is that the costs of both parties of an action for dissolution are paid out of the partnership assets, unless there is some good reason to the contrary [Hamer v Giles (1879) 11 Ch D 942], except where the action is one which in substance is to try some disputed right, in which case the unsuccessful party will be ordered to pay the costs [Hamer v Giles; Warner v Smith (1863) 9 Jur (NS) 169]. The costs of taking accounts, although disputed, are usually defrayed out of the partnership assets [Butcher v Pooler (1883) 24 Ch D 273; Newton v Taylor (1827) 19 Eq 14]. Similarly, in proceedings under Conveyancing Act, s 66G, for the appointment of trustees of sale of jointly held land, the costs are usually paid out of the proceeds, the rationale being that the costs of such an application are an incident of joint ownership."
This might suggest that there should be no order as to the costs below in relation to the accounting issues, particularly having regard to the parties' mixed success on those issues. However the primary judge found that a significant motive for the proceedings was a vendetta by Mr Chetwynd against Ms Rose and Mr Herd and that the Chetwynds' conduct caused the case to be prolonged by groundless contentions, particularly by Mr Chetwynd's introduction of his reconstructed ledger (J (No 2) [29], [30]). Costs were also increased by allegations of fraud that the primary judge held were not properly made ([31], [32]). Those findings were not challenged.
The parties made no submissions as to what order for costs should be made with respect to the proceedings below if the appeal were partially successful. Given the complexity of the question and the amount of costs involved the parties should be given the opportunity to address that question by written submissions.
For these reasons I propose the following orders: 1. Appeal allowed in part. 2. Set aside orders 7(b), 8 and 9 made on 16 July 2020 and vary order 7(a) by deleting the words "subject to paragraph 7(b) below". 3. Stay the operation of order 7(a) made on 16 July 2020 pending determination of the order to be made as to the costs of the proceedings below. 4. Declare that in addition to the adjustment provided for by the declaration in order 1 made on 16 July 2020, the first and second appellants are entitled to adjustments in the accounts of the third appellant in the sum of $47,093 by that sum being debited to the loan account of the respondent and credited to the loan account of the first and second appellants. 5. Otherwise dismiss the appeal. 6. Make no order as to the costs of the appeal to the intent that the parties bear their own costs of the appeal. 7. Order that within 14 days the appellants file and serve written submissions of no more than seven pages as to what orders should be made with respect to the costs of the proceedings below, including as to whether any costs ordered in favour of the respondent should be assessed on a gross sum basis and should be deducted from the appellants' share of the net proceeds of sale the subject of order 7 made on 16 July 2020. 8. Direct that within 14 days thereafter the respondent file and serve written submissions of no more than seven pages on the matters referred to in order 7. 9. Any submissions in reply by the appellants (to be of no more than five pages) be filed and served within seven days thereafter.

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