E Co [a pseudonym] v Q

Evidence at the re-opened hearing

1. As noted earlier, further evidence was adduced at the re-opened hearing as to a range of matters. While much of it is not ultimately of assistance, having regard to my acceptance of the plaintiffs' criticism of the basis on which I had proposed to impose the conditions to which they object, for completeness I summarise below that evidence and my conclusions in relation thereto. The evidence may conveniently be grouped into the expert evidence, evidence of a private stamp duty ruling, other statistical evidence and lay evidence.

Business Valuation evidence - Business Valuation Report dated 14 November 2018

1. The parties jointly retained an expert (Ms Fiona Bateman of Dolman Bateman & Co Pty Ltd), a chartered accountant qualified in the field of forensic accounting and business and company valuation, to provide an expert report as to the value as at 31 December 2017 of the shares owned by the first defendant in each of E Co and EM Co.
2. Ms Bateman was instructed to value the shares on the assumption that E Co was in a position to continue its farming operations on the properties but was liable to reimburse the first defendant the sum of $2.123 million (the recorded book debt, to which sum I will refer, consistently with some of the experts, as the "Loan Amount", though I was not satisfied that this amount was an advance repayable in the first defendant's lifetime (see [1234] of the principal judgment)) and to account to the first defendant for a sum representing the net present value of the market rent for the subject properties as valued by an independent valuer from the date of judgment for the period of the first defendant's life expectancy (see the letter of instruction dated 12 October 2018). Ms Bateman was provided with certain information relating to the companies and with the separate conclusions that had been reached by the respective real estate valuers (Mr Tremain, who was engaged by the plaintiffs, and Mr Donoghue, who was engaged by the first defendant) as to the estimated future rent for the properties. (The valuers had not met in conclave by that time and hence there was at that stage no agreed position between the experts as to the gross market rent for the properties.)
3. In her report dated 14 November 2018, Ms Bateman assessed the value of E Co, as at 31 December 2017, in a negative amount (-$699,967) and the first defendant's 25% share of E Co, as at that date, at -$174,992. She assessed the value of EM Co, as at 31 December 2017, also in a negative amount (-$641,764) and the first defendant's 25% share of EM Co, as at that date, at -$160,441 (see Ms Bateman's report dated 14 November 2018 at [4].) The valuation was made on a going concern basis ([9]) and on the basis of "fair market value" ([10]) (which Ms Bateman explained is the standard adopted in Australia and which valuation concept does not assume that the business would be sold).
4. Ms Bateman noted that the liabilities exceeded the book value of the assets in both of the entities valued but considered it likely that the market value of the livestock and the plant and equipment exceeded the book value applied in her valuation (see at [5]). In cross-examination by Senior Counsel for the first defendant as to the balance sheet position (for E Co) if the balance sheet were to be reconstructed to give a market value (rather than the book value) for stock, and assuming the average income per head of cattle in 2017 (of $1,271) remained the same, Ms Bateman confirmed that the market value would be $2.6 million (T 433.4) and that this number would then replace the $112,000 figure adopted in the report by reference to the book value of the stock (T 433.30).
5. Ms Bateman assessed the net present value of the future rent (the "Specific Market Rent" - a capitalised term in the letter of instructions at [7(b)]) of the subject properties, applying the market rent provided in the valuation reports of each of the expert valuers, as being: $5,915,755 (the future net market rental as per Mr Donoghue's report; and as $6,316,726 (the future gross rental as per Mr Tremain's report) (see [7] of Ms Bateman's report). (The respective Specific Market Rent figures were thus calculated on a different basis - net versus gross; and hence the two cannot readily be compared.)
6. Ms Bateman noted that, for the purposes of her valuation report, she had been instructed to exclude the outgoings related to the ownership of the subject properties in her calculation of future rent payable (see at [8], where Ms Bateman also noted that reference was made to the outgoings related to the ownership of the subject properties in Mr Tremain's report, to which she referred as the Opteon report, at p 121).
7. Ms Bateman was cross-examined by Senior Counsel for the first defendant as to the value placed by her on EM Co's interest in a particular holding company (R Co) that holds investments in two properties (not being any of the properties the subject of this litigation) and, in particular, as to her adoption of the "adjusted book value" of those properties as shown in the relevant financial accounts (rather than the market value of those properties) (see T 434-435). Ms Bateman explained that she had been instructed by both parties so to do (T 434.31; T 434.48); said that she had never seen the use (in accounting documents, as I understand her answer) of the term "fair value adjustment" (T 435.33) but said that that was not necessarily incorrect; and accepted that, if the true market value was the adjusted amount, then that was the appropriate adjustment to be made (T 435.35). Ms Bateman accepted that if the total of the "fair value assessment" were notionally added back into the 2017 accounts (and assuming Senior Counsel's arithmetic, as put to her in cross-examination, were to be correct) that would produce a positive net asset situation for R Co (T 435.46) and hence a positive value in respect of EM Co's half interest in R Co (T 436.1; 436.22) (though I note here that Ms Bateman also seemed to suggest that the difference would not be great - a proposition that Senior Counsel for the first defendant appeared also to accept (see T 436.30)).
8. As to Ms Bateman's consideration of which valuation method to use when calculating the net present value of market rent, Ms Bateman explained in cross-examination the reason for her view that goodwill could not exist in a business of the kind operated by E Co (T 436.37ff); namely, the value of the net assets employed in the business, being the cattle, are so high that "the figures are never going to work for a goodwill to occur in this type of business"; (and see the exchanges with Counsel at T 437.19-46).
9. Ms Bateman also explained the methodology for calculation of the net present value for future rent (T 440-441) and, in essence, said that the easiest way to calculate it would be to take the annual amount divided by 52 to reach a weekly amount "and then find a website including ours that has the discount tables on it and use that" (T 441.21ff) or, as was put to her by Senior Counsel for the first defendant, to take the weekly amount, to take the multiplier for an amount of $1 and to multiply it by ten "as at 11 years" (T 441.45).
10. In response to questions from Senior Counsel for the plaintiffs, Ms Bateman explained that the discount rate she had adopted when assessing the net present value of future rent (of 3% - see Schedule 8 to her report) was what she considered appropriate in circumstances where there was "basically no risk", stating that it was "really only the market value of the money" (T 442.14) or the "market value of the interest" (T 443.7) and, hypothetically, that if a 4.5% rate had been adopted by another valuer that would probably be "[the valuer] considering that there would be a higher return available to the person receiving the money" (T 442.45). (Pausing here, I note that a 4.5% rate was adopted in the Lonergan Edwards report - [157] and see the summary of those reports from [175]ff below.)
11. The first defendant, in his closing submissions on the re-opened hearing, opposed the evidence from Ms Bateman as to the appropriate discount rate to be adopted, on the basis that no reason had been given as to why the process provided for in the orders made in May 2018 was not followed but that objection was not pressed orally. The May 2018 orders amended the letter of instruction in the form proposed by the first defendant to allow for alternative assumptions as to the rent to be payable for the subject properties in accordance with the expert evidence of the real estate valuers to be appointed by the respective parties in accordance with the orders (see 7(b) of the letter of instruction); and to allow for the alternatives of a calculation by reference to forensic tables as proposed by the first defendant or a calculation by reference to any expert actuarial evidence relied upon by the plaintiffs (see 7(c) of the letter of instruction). Ultimately, however, the question of the appropriate discount rate was treated as a matter for submission.
12. Ms Bateman accepted that she had effectively adopted a balance sheet valuation approach for E Co (T 446.1). Asked by Senior Counsel for the plaintiffs to assume various matters (namely, that the stock of cattle for E Co is now 50% of what it was for the financial year ending 2017; that there were increased sales of cattle to meet legal expenses of the proceedings; that the properties on which E Co conducts the farming business require some capital works to be undertaken; that there will need to be a level of expenditure or some "inputs", such as fertilizer, to improve the pasture and measures taken for blackberry control, to bring the properties back to the condition they might have been in sometime prior to 2015-2017; and that it might take three to five years in order to get stock levels, by natural increase, back to the sorts of levels in which they were in the past - see T 443.17-444.34), and then asked as to how those matters factored into the methods of valuation (T 444.36), Ms Bateman's response (from T 444.42) was as follows: A. Okay, so we're talking about this ‑ what I've done is basically 18 months old so there is stock value that is different than even the stock value ‑ the 2,012 or however many cattle they had on hand at 2017, so you'd be looking at the change in the net assets being whatever the new cattle amounts are. The fact that there is more expenditure to be incurred to get the property up to a certain level, that would really be ‑ I would expect to be in the value of the property because it's an expense of the company, the company will have to pay that, so it's, I suppose, a forward expense that's known or should be known, it's able to be calculated but wouldn't form normally a part of a normal balance sheet of a set of accounts, it can be a contingent expense that's going to be incurred but that would actually make the profit situation much worse because, clearly, the expenses of getting the pasture and the land up to its needed position is an expense that will be written off throughout the years. So, I mean, you can value it but all it does is ‑ I mean, you can value it at a point in time, so if you're saying, in 2018, the value's different to this because the cattle is valued at a different amount - Q. Yes? A. Fine, can do that, you're saying that the property needs to have $300,000 worth of expenses to put it back into a position, that's really the value of the property but it's calculable. Q. When you say it's the value of the property, you're drawing a distinction between the landlord and the operating company who's the lessee? A. Mm. Q. If you assume there's no difference? A. Yeah, well, it's just ‑ if I was the landlord - Q. Making that assumption? A. Yeah, if I'm the landlord, I'm operating the business too so the expenses just - it's just not normal to - it's normal but you look at your property and say, "Look, it's worth $1 million but not it's really only worth $950,000 because it's really in a poor condition." Q. … what tools we need so that we can then conceptually take those tools and apply them to the facts when we know them to value [E Co]? A. Being quite honest, I would take it off the value of the land, that's - it's like any sort of business, I'm just trying to conceptualise it into any sort of business, you've got a value that's not quite right because the land or the farm, it's not really worth quite that much, it's worth a little bit less because you've got to pay out something to bring back into a position, you need to fix up the fences, I don't know what it is you're talking about but you need to expend some capital to put it into a position that might make it the $17 million or whatever dollars the property is valued at. It's more of a property issue then, I would think. Of course, for profit and loss, it's going to be ‑ if I've got to expend 100, 200 grand each year into the next couple of years, my profits are going to be very poor.
13. Ms Bateman accepted that a balance sheet valuation approach was essentially a winding-up approach to assessment (T 446.4) - in effect, valuing the first defendant's shares as 25% of the value of the respective companies (as I noted earlier, in her report she said that she was valuing the companies on a going concern basis - see [9] of her report; and that the fair market valuation concept did not assume that the business would be sold - see [10] of her report). In response to some questions from me, Ms Bateman said that, if one approached the matter on a compulsory purchase order basis, there might need to be some adjustment to reflect that (see from T 447.5): A. Sorry, I'm selling to somebody today, based on what it is, you know, it's the net asset value. I know the property's worth a million dollars, I know the business is worth the cattle and the other things and I probably know that I have to spend $300,000 to get it up to the next level, the person buying the business. Q. Yes. So if you know that you're going to have a known capital expenditure you would expect that a willing but not anxious purchaser would be paying somewhat less to take that into account? A. Yes, exactly. Q. And a willing but not anxious vendor would assume that they would have to take that into account in lowering the price to meet the purchaser's expectations? A. That's right. Q. And that's how you would adjust for that on a compulsory purchase order basis? A. Yes.
14. Taken back to that issue by Senior Counsel for the first defendant, there was the following exchange (from T 448.50): Q. The question I had for you, madam, was you were indicating that when [you] were being asked about the impact of capital expenses, and I don't want to query your conclusion on that, but is it relevantly, if you were to take into account if you were a purchaser and you were taking into account needed capital expenditure, would it also at the same time be relevant for the purchaser in the method of valuation that might be relevant to consider the increased productivity or the increased value of the product being made as a result of that capital expenditure? A. Look, you have to make an educated decision based on if you know you've got to spend another couple of hundred thousand a year or whatever, is it worthwhile me operating this business, and that's the bottom line, that the business comes to a point that it's not a viable business anymore.
15. In essence, Ms Bateman's opinion was that the value of the business could be no less than the net asset value of the business. She said that the rent had been factored into the balance sheet assessment approach (T 447.31); that she had probably assumed that cattle sales were normal in the years in question (T 447.48); and (from T 448.8) that: A. Okay, when people buy businesses, you know, when somebody's buying something, so there can be no less value than what the value of the assets are. The value of the assets are what's on the balance sheet, adjusted for proper true values of assets and liabilities. Q. Yes, so that if you're looking at the assets on the balance sheet adjusted for the proper true value, would you not take into account the amount of stock that there is today irrespective of how it got to be that amount? A. Exactly and that's how I would look at it today, when I'm buying it I would look at that. Now, is the business valuable, maybe nobody wants to buy it, because the true value of the business might be negative, you know ‑ sorry, not the value of the business, the value of the business can be no less than the net asset value, we've already decided that, you know, so the net asset value has to be the value of the business, but I may not actually want to run the farm, I might just sell off the cattle because I can get $1,000 a head for the cattle and I can see all that off, but the farm itself might actually not be truly viable if the expenditure is so high that I can't make a profit, then it's not valuable, I don't want to keep using it, I don't want to keep doing it. So that's the other side of it, what's the ‑ it can be worth no less than the net asset value and maybe it's got ‑ the farm itself has no value other than the cattle and you sell that off if you buy it, but if I've got to pay 570,000 a year in rent and I'm not going to make enough profit to do so, then I won't do so, I won't continue. [my emphasis]
16. With no disrespect at all to Ms Bateman, who I considered to be an objective and careful witness who listened attentively to the questions and gave considered responses, and whose evidence I have no difficulty accepting, the proposition that a purchaser would not be likely to buy a farming business if the rent for the property on which the business was to be conducted was likely to be so high that no profit could be made therefrom seems to me to be self-evident as a matter of common sense (as Ms Bateman herself seems to have considered), at least unless there were some other reason for the purchaser to acquire what on that scenario would be assumed to be a property for a loss-making business. This highlights the difficulty I will come to with the evidence from the respective real estate valuers as to the likely market rent for the properties (namely, that each appears to have given weight largely to one side of the equation - the lessor's assumed wish to maximise investment returns or the lessee's assumed wish to conduct farming operations at a profit); although at least in the case of Mr Tremain, he had regard to some historical evidence of expenditure on outgoings, whereas Mr Donoghue's opinion as to investment return was based on no more than his generally stated opinion referable to what he considered to be "industry standard".
17. What I take from Ms Bateman's evidence, which I broadly accept, is that the value of the shares held by the first defendant in E Co and EM Co, on a balance sheet assessment approach, is a negative amount (or, at best, in relation to EM Co might be a small amount if the shares held by it in R Co have a small positive value by reference to the underlying market value of the investment properties held by that holding company). I also found helpful her explanation as to the easiest methodology by which to calculate the net present value of whatever might be the figure to be adopted as the notional future rent for the balance of the first defendant's life expectancy, though I propose to leave those final calculations to the parties. Relevantly, I did not understand Ms Bateman to cavil with the proposition that the value to be placed on a minority shareholding in a private company would be discounted to reflect the lack of control on the part of the shareholder (which I consider would be relevant if one were to be valuing the first defendant's shares in E Co on a compulsory purchase order basis).

Land Valuation evidence - Joint Valuation Report dated 22 October 2018

1. As adverted to above, expert valuation evidence was called from two real estate valuers: Mr Martin Tremain (called by the plaintiffs) and Mr Thomas Donoghue (called by the first defendant). Each prepared an individual report and, after a conclave, a Joint Valuation Report dated 22 October 2018 was prepared and signed by each of them.
2. In their Joint Valuation Report, the valuers agreed that: the market value for the properties in 2018 was $20,000,000; and the gross market rent for the properties in 2018 was to be calculated as 3% of the capital value (being $600,000) rising at 2% per annum thereafter.
3. Where the two valuers were not agreed was as to the calculation of "net" market rent (i.e., the gross market rent less outgoings).
4. Mr Donoghue (who the plaintiffs note was not provided with the reports of the expert agronomist, Mr Francis, or the expert financial analysts, Mr Lonergan and Dr Chu (see below at [100]ff and [160]ff respectively), nor with information as to the prior financial performance of the E Co farming business) adopted a methodology which valued net market rent at 2.5% of the capital value of the subject properties and produced a future net rental of $5,915,755.
5. Mr Tremain, on the other hand, was of the view that it was possible to have regard to comparable leases to determine the gross market rent, though he also acknowledged that "the apportionment of gross rental in terms of rental and apportionment of outgoings can vary considerably" (see Mr Tremain's report at [16.4]). Mr Tremain had regard to the actual outgoings paid in respect of the properties (see his 14 August 2018 report at [15.1]) and opined that the indicative net rental in respect of the subject properties was $166,245 for the period 2018-2022 and $185,611 for the period 2022-2026 (see Mr Tremain's report at [17.10]). The plaintiffs note that, included in Mr Tremain's costings, are amounts for fertilizer and pasture improvement (see Mr Tremain's report at [15.1]), which have not been undertaken in recent years (the plaintiffs' evidence being that the reason for this is a combination of drought and these proceedings).
6. Both Mr Donoghue and Mr Tremain expressed views as to the carrying capacity of the properties and the impact of the current drought (see Mr Donoghue's report at [4.1]; [4.3]; Mr Tremain's report at [12.2]; [15.1]). It is not necessary to dwell on those aspects of their reports.
7. Unfortunately, it was not possible for the two real estate valuers to give evidence concurrently, which obviously meant that (unlike the position with the tax experts) there was no opportunity for the first of the experts to be cross-examined, Mr Tremain, to comment on what Mr Donoghue said when he was later cross-examined.

• Mr Tremain

1. Mr Tremain (the plaintiffs' expert) was cross-examined on 21 November 2018. Relevantly (as would seem to me unsurprising), he accepted that it was a matter of negotiation between lessor and lessee as to the respective responsibilities between them in relation to outgoings (T 266.44). He also accepted (again surely a matter of common sense) that, from a lessor's perspective, the lessor would be trying to achieve an acceptable rate of return on his capital investment in the land (see at T 266.49). (Equally, I might add, one would expect a lessee of agricultural or grazing land to be seeking to obtain a rental that would permit an acceptable profit from the operation of the farming business, assuming that the property was to be rented for the purposes of such a business and not simply as a residence.)
2. Mr Tremain was cross-examined as to the comparables referred to in his report as comparable market indicators (T 267.5ff), from which cross-examination it was apparent that some of the information was derived from the selling agent for the particular property in question and some was based on his understanding of the apportionment as between lessor and lessee in relation to the outgoings and operational costs - evidence that was not before me and that it is impossible for me here to test. His evidence was that agricultural leases were "often not even produced" (T 269.13) and may not be in writing; and that, in the region where the properties in this case are situated, 4.5% would be the upper end of the range of gross rent figures to determine the applicable rent (T 269.25). Mr Tremain confirmed that he had been instructed to assume that all outgoings would be paid from the gross rent (T 270.22; 26; 29).
3. Asked by Senior Counsel for the first defendant whether it was consistent with his experience that one way of dealing with the issue of outgoings, and who bears the other costs associated with the land, is that the higher the percentage applied for the gross rent the more the outgoings that are borne by the landlord, Mr Tremain gave the following evidence (T 269.31ff): A. Agricultural leases are so variable. I'm not trying to miss your question, by the way, but they all come down to a negotiation on lease. Grazing leases in particular compared to a cropping farming lease, the conditions are a lot more straightforward. With grazing leases, regrettably, they can be very complex and on a one by one and often they can have a management plan and people will meet each year to discuss a new arrangement but, yeah, I couldn't agree there's a fixture between 2 and 4% in terms of waiting about going. It depends on the deal on the property at the time. Q. Perhaps I put it too emphatically. Would you agree that one of the methods for setting a lease amount between a landlord and a tenant that's adopted in the rural grazing industry, if I can use that word, is to say pay the X% which might be on the lower part of the range and, in consideration for that, because it's lower than it might otherwise be, the tenant will bear some of the outgoings? A. Yeah, they traditionally work on the gross and work backwards, so yep, if it's 3% and the outgoings are X and the net is the difference, it's traditionally based on gross and then work back to the net, as opposed to a net build up to a gross.

• Mr Donoghue

1. Mr Donoghue was cross-examined on 10 December 2018.
2. In his report of 14 August 2018, he had valued the properties as at 1 July 2018 as $21,080,000 and had given his opinion as to a rental value of $527,000 for that year, a percentage of 2.5% of the value of the properties. He accepted: that his process of reasoning was to assess the value of the properties as a freehold concern and then to consider an appropriate percentage rental to the owner of the properties in order to discern an appropriate market rental value (T 496.7); that his opinion was that 2.5% was the appropriate percentage (T 496.18); and that this was simply an exercise of judgment on his part (T 496.22). He said that this was "industry standard" in his view (T 496.36).
3. Mr Donoghue did not refer in his report to any "industry standard" as such (simply to a percentage range that he said in the witness box was adopted in rural leases); nor did he refer to any source materials or documentation in support of his contention that 2.5% was "industry standard". The unsatisfactory nature of his evidence on this issue can be gleaned from the following exchanges in cross-examination by Senior Counsel for the plaintiffs (from T 497.4ff): Q. … You have identified pages 91 and 92. Now, is there any reference on those pages to "industry standard"? A. Look, it touches on it in terms of the percentage range adopted in rural leases. Q. Well, I just want to make sure we're clear about it. You said that you were referring to an "industry standard." A. Grazing rates tend to be on the lower side, ranging from between 2.5 and 3.5. I'm basing that on an industry standard. Q. But am I right in saying that nowhere in your report do the magic words "industry standard," do you? A. Look, I can't clarify it because I haven't read over my report thoroughly today, so - Q. But if you were to put forward evidence about an industry standard, one would expect support from industry documentation, for example; correct? A. That's correct. And also from industry knowledge. Like, I've leased properties myself. We speak to many landholders that are leasing country. I didn't actually have any leases in that vicinity, therefore, I didn't put any in. I based it on an industry standard that I know myself. Q. But you haven't‑‑ A. As a professional, I'm aware of the percentage levels. … Q. Nowhere in your report do you bring forward any evidence for the Court where you identify any industry standard, do you? A. Well, I just noted the last line on page 843. It gives a percentage range, which I classify as industry standard. Q. Nowhere in your report do you put forward any evidence of an industry standard, do you? Meaning by reference to source materials or documentation? A. No. Other than my percentage range, no. Q. So from the terms of the Court assessing your opinion, you say 2.5% is industry standard. Why? Because I know. That's what it is; correct? A. Yes. Q. And you haven't provided any other support for it? A. No, I haven't. Q. So it's based on your judgment? A. Yes. Which I was asked to give. [my emphasis]
4. In response to a question by me as to what he meant by his reference to "industry standard" (when he said that there were "industry standards" in place), he said (from T 504.50): A. It's my knowledge of leasing country myself, and knowing many people are currently leasing, and that's - that's my industry knowledge.

• My assessment of the expert valuation evidence

1. I regarded Mr Tremain as the more reliable expert, in the sense that he had at least applied his mind to a consideration of what might be regarded as comparable leases (although there was little by reference to which one might test the comparisons) and the basis on which he explained the methodology by which a net rent is traditionally struck for agricultural leases made sense. I accept that he had been instructed to work on actual outgoings (and hence that he was not expressing an opinion as to the likely outgoings in the present case, other than by reference to the agronomist (Mr Francis)'s report as to the significant inputs that would be required in relation to the properties).
2. Mr Donoghue, on the other hand, seems to have regarded the process of giving expert evidence as one in which all that was sought was his personal opinion ("as a professional") without the need to disclose any reasoning process by which he had reached or held that opinion. To the extent that Mr Donoghue invoked "industry standards", it was clear from his evidence in cross-examination that all he was doing was expressing a personally-held opinion as to what he considers is generally the practice in relation to agricultural leases, not any particular industry standard as such (in the sense, say, of an accounting standard). His approach seemed to be that he had been asked to give his opinion; he had given his opinion; and that was that. He displayed a degree of truculence when tested in the witness box as to the basis for that opinion; seemingly taking issue with the temerity of anyone who sought to challenge his stated opinion and resorting to broad brush statements of opinion, without any apparent consideration of the question being asked (when, for example, he proffered the opinion as to how his opinion would change, if at all, in the trust scenario there put to him). I do not share Mr Donoghue's confidence as to my ability properly to assess the weight to be placed on what is, in essence, no more than an assertion by him that I should accept his opinion because he has a "good handle on the rural market" - see [72] above.
3. It is well-established that, in order to fall within the exception under s 79(1) of the Evidence Act 1995 (NSW) (Evidence Act), evidence must satisfy two conditions: first, the witness must have specialised knowledge based on his or her training, study or experience (Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 at [32] (Dasreef); Honeysett v The Queen (2014) 253 CLR 122; [2014] HCA 29 at [23]); and, second, the opinion must be wholly or substantially based on that knowledge (Dasreef at [32]; Honeysett at [24]). Relevantly, in Dasreef, the plurality (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ), quoting Heydon JA, as his Honour then was, in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 at [85] (Makita) said (at [37]) that "the expert's evidence must explain how the field of 'specialised knowledge' in which the witness is expert by reason of 'training, study, or experience', and on which the opinion is 'wholly or substantially based', applies to the facts assumed or observed so as to produce the opinion propounded". Their Honours later observed that "[a] failure to demonstrate that an opinion expressed by a witness is based on the witness's specialised knowledge based on training, study or experience is a matter that goes to the admissibility of the evidence, not its weight" (at [42]).

Evidence from expert agronomist - report dated 17 August 2018 of John Francis

1. Before turning to the expert evidence as to tax and financial issues, it is convenient here to deal with the evidence of an expert agronomist (Mr John Francis) as to the present condition of the properties and what would be required in order to restore them to the condition in which they were prior to the events that gave rise to the present dispute (i.e., before the purported termination by the first defendant of the E Co lease in June 2013).
2. There was some toing and froing at the commencement of the re-opened hearing as to the position in relation to two reports that had been prepared by Mr Francis (collectively, the Francis reports), on the instructions of the first defendant, and served on the plaintiffs by the first defendant.
3. This arose in circumstances where the plaintiffs' solicitor had notified the first defendant's solicitor that Mr Francis was required for cross-examination. As I understand it, an issue then arose as to Mr Francis' availability to give evidence, he apparently being in Kangaroo Island at the time of the re-opened hearing (although there was no opposition to his cross-examination being taken by telephone link).
4. The plaintiffs' solicitor was advised not long before the commencement of the re-opened hearing by the first defendant's solicitor that the first defendant did not propose to call Mr Francis.
5. The plaintiffs then raised objections to the admission into evidence of the expert financial reports (the Lonergan Edwards reports) prepared by the financial analysts retained by the first defendant (Mr Lonergan and Dr Chu), the first of which reference was made to Mr Francis' first report. The plaintiffs maintained that the whole of the Lonergan Edwards reports should be rejected, as the reports were premised in part on Mr Francis' first report. The position taken by the first defendant was that there were two discrete passages in the Lonergan Edward's first report in which reference was made to Mr Francis' report; and that he would not read those passages in the first Lonergan Edwards report.
6. What was then, however, foreshadowed by the plaintiffs was that, if their objection to the entirety of the Lonergan Edwards report(s) did not succeed, then the plaintiffs might themselves seek to tender the first of Mr Francis reports, being the report dated 17 August 2018 (which is what ultimately happened and which became Exhibit BJ) (the first Francis report). (Although Senior Counsel for the first defendant foreshadowed a possible objection to the admission of only one of Mr Francis reports (and not the second report as well), ultimately that objection was not pressed.) Mr Francis did not give evidence at the re-opened hearing and was not examined on his first report.
7. The plaintiffs rely on the first Francis report as being relevant (and uncontested) evidence that, based on long term average pasture growth rates supported with the use of fertilizer (see [4.1] of the first Francis report), some 2,360 (PTIC) (i.e., pregnancy tested in calf) spring calving breeders can be reasonably and sustainably managed on the properties, which equates to 2,600 breeding females (heifers and cows) joined with trading livestock sold as weaners in April/May (at [4.1] of the first Francis report).
8. The plaintiffs note that Mr Francis prepared a model of a "spring calving, weaner production system" with projections for revenue and expenses (see [5.9] of the first Francis report) (which they submit is not significantly different to the one currently being managed by E Co). On the basis of this model (and based on 2017/18 pricing and benchmarking data), Mr Francis expressed the opinion that: the gross revenue from beef cattle business operations is $2,053,682 (equating to gross profit of $1,963,682 after adjusting for $90,000 in bull purchases and assuming no difference between opening and closing numbers or values) ([4.1]); total operating expenditure would be $1,249,361 ([4.1]); and operations exclusive of capital works on the properties could be reasonably managed with 3.345 labour unit equivalents assuming the number of days worked per labour unit is 240 days per year (equating to 803 labour unit days per year) ([4.1]); and see [7.1]ff.)
9. Mr Francis also expressed the opinion (see [4.1]; [9.1]) that the expenses relating to the land that are typically paid by the landlord include: Council rates but not local land services rates; insurance of fixed assets and infrastructure; public liability insurance; a proportion of the legal and preparatory costs of associated documentation; administration costs including accountancy fees and book keeping relating to the lease; and expenditure for capital improvements (typically only where prior agreed). Mr Francis stated that the landlord will pay only for insurance relating to the fixed assets on the leased land and public liability ([4.1]) and that, typically, the landlord would be responsible for the payment of insurance covering accidents relating to fixed farm assets and infrastructure including fences and gates, pumps, houses, buildings, sheds, storages and grain stores ([4.1]).
10. Mr Francis also expressed opinions as to: low stock numbers present at the time of his visual inspection of the properties ([5.5]); the species of grass in the paddocks ([5.5]); and that there had been a pasture improvement program at some time in the past but that fertilizer had not been applied in the past five years ([5.5])
11. As to the costs that Mr Francis considered would reasonably be expected on a beef operation of the scale projected of the properties (set out in Table 12 in the first Francis report at [7.4]), the plaintiffs emphasise that these included an amount of $52,299 for "rates and rent", calculated by indexing the rates and rents figure from the 2017 chart of accounts in the profit and loss statement ($42,062) by 2% compounding per annum. The plaintiffs calculate that if, for this figure, there is substituted a figure for rates in 2018 of $25,725.55, and the gross market rent of $600,000 agreed by the valuers, then the EBITDA (i.e., earnings before interest, tax, depreciation and amortization) for E Co under Mr Francis' spring calving model (i.e., what Mr Francis considers E Co should be earning on its current business if it were operating under optimal conditions, including yearly maintenance expense of fertilizer, pasture improvement and weed-control, and after an initial capital application to restore the properties, as well as the restoration to the herd to a size of 2,600 breeding cows) is $140,895. (The relevance of this, it is said, goes to the ability of E Co to make loan payments and for any interest, depreciation, amortisation and profit (i.e., profit for distribution to shareholders and investment in capital improvements); issues raised when considering the financial ability of E Co to comply with conditions of the kind I had proposed to impose on the acceleration of the sons' interests or expectations in relation to the properties.)
12. Ultimately, in my opinion little turns on the first Francis report. It is not disputed that no pasture improvement or development program has been implemented on the properties since the purported termination notice in 2013 (and probably since 2008 when the properties went into drought and rent was suspended); nor is it disputed that the cattle stocks have been sold down to approximately half the herd (although the first defendant disputes that the reason for this is of any relevance to the issues now before me and contests the manner in which the plaintiffs have calculated the so-called "out of cycle" sales of cattle - see from[254]ff below).
13. The first defendant criticises the sons for letting the farms run down (see, for example, what was put in the cross examination of B); the plaintiffs say in effect, that there was no point expending money on capital improvements once the termination notice was served due to the uncertainty of ownership. However, it does not seem to be seriously contested that it will be necessary for there to be some expenditure (at the very least in relation to pasture improvement and weed control) for the properties to be restored to an optimum operational level (although the quantum of capital required in this regard was disputed - see, for example, the challenge to the sons' evidence (in particular that of A) in cross-examination in this regard).
14. In any event, the reason that I say little turns on this is that, insofar as it goes to the financial ability of E Co (or the sons and E Co collectively) to comply with conditions of the kind I had proposed to impose, I am persuaded for other reasons that those should not be imposed (and Mr Lonergan's evidence amply supports the conclusion that there is not the financial capacity on the part of E Co and/or the sons to meet those conditions by way of lump sum payments at the present time irrespective of the need for capital improvement being undertaken in relation to the properties).

Capital Gains Tax - Mr Andrew Sneddon and Mr Andrew Lam

1. Each side adduced evidence on the question of the likely CGT consequences of the events that have occurred and in respect of the relief that might be granted: Mr Andrew Sneddon (a chartered tax adviser called by the plaintiffs) and Mr Andrew Lam (a chartered accountant called by the first defendant). Those experts were cross-examined concurrently.
2. Before turning to their evidence, it is useful here to restate the dates of acquisition of the relevant properties in respect of which the potential CGT liability is here being considered, namely: Properties No 3, 4 and 5 (acquired in 1993); Property No 6 (acquired in 1998); the Main /7 Aggregation (those properties being acquired in 1999); Property No 8 (acquired in April 2002); Property No 9 (acquired by contract dated 29 August 2002); Property No 10 (acquired by contract dated 10 September 2003); and Property No 11 (acquired 1 July 2005).
3. Relevantly, there are two CGT events under the Income Tax Assessment Act 1997 (Cth) (the 1997 Act) that may be applicable in the present case: a CGT E1 event (the creation or settlement of a trust) and a CGT A1 event (a change in ownership of a CGT asset) (see [9] of Mr Sneddon's affidavit sworn 16 November 2018). (I refer to these respective CGT events as CGT E1 or A1 events, respectively.)

• Mr Andrew Sneddon

Application to ATO

1. On 2 November 2018, Mr Sneddon made an application for a private ruling from the Australian Taxation Office (ATO) as to the capital gains tax ramifications of the findings made in the principal judgment (see his affidavit sworn 7 November 2018 which annexes a copy of the application). This followed earlier discussions between Mr Sneddon and an officer in the ATO's Complex Issue Resolution Unit. As Mr Sneddon explained in cross-examination, a private ruling issued by the ATO is binding on the taxpayer, subject to the taxpayer making full and true disclosure to the ATO of the facts and circumstances for which the ruling has been sought (T 248.19).
2. Mr Sneddon notes that in the application to the ATO, he expressed the opinion that the establishment of the sons' claim against the first defendant in proprietary estoppel gave rise to novel tax questions (see at [18] of Annexure C to Mr Sneddon's 7 November 2018 affidavit). (As I apprehend it, those novel tax questions would include how the recognition, by way of a remedial order the subject of the grant of relief on a proprietary estoppel claim, of a constructive trust would be characterised for CGT purposes - see further below.)
3. In the application to the ATO, Mr Sneddon referred to authorities as to the meaning of a "change of ownership" (in the context of the question whether the coming into existence of a constructive trust over the farms constitutes a CGT A1 event) and as to the question of whether a CGT E1 event had arisen. In particular, reference was made to the decision of Jagot J (with whom Siopis J agreed) in Ellison v Sandini Pty Ltd (2018) 125 ACSR 249; [2018] FCAFC 44, where her Honour said (at [99]): 1. there is no change of ownership if a person continues to be a "beneficial owner" of an asset - so much is made express by the second sentence of s 104-10(2); 2. a "beneficial owner" of an asset has more than a mere proprietary interest in the asset. To be a beneficial owner the person must have rights which a court of equity would enforce involving full dominion over the asset; 3. if the original owner continues to enjoy rights to deal with the asset, including rights of disposal, then it could not be said that another entity is the beneficial owner of the asset, even if the other entity may have a beneficial interest in the asset.
4. Mr Sneddon's submission to the ATO on behalf of the sons (see at [31]-[32]) was that the imposition of a constructive trust, from the time that the first defendant sought to terminate the lease agreement (and evict E Co from the farms) (i.e., June 2013) constituted a change of ownership for the purpose of the 1997 Act and that the imposition of a constructive trust in favour of the sons over the farms with effect from 27 June 2013 is therefore a CGT A1 event.
5. As to the proposition that there has been a CGT E1 event on the facts of the sons' case against the first defendant (see [39]), reference was made to Kafataris v Deputy Commissioner of Taxation (2015) 243 FCR 291; [2015] FCA 874 (Kafataris) where the taxpayer had contended that a CGT A1 event occurred because the change in beneficial ownership of the property occurred pursuant to a constructive trust imposed over the property owned by the taxpayer in favour of a company, such constructive trust arising immediately upon the taxpayer accepting the company's written offer for the land. Mr Sneddon noted in the application that in Kafataris, Davies J had found that there was an express trust (and hence a CGT E1 event because there had been both a declaration and a settlement within the meaning of the legislation) but pointed to the reference by her Honour to the "uncontroversial" proposition that a constructive trust arises as soon as the conduct which has given rise to its imposition; and that her Honour had noted that a constructive trust arises by operation of law without reference to the intention of the parties concerned and without any need for a curial declaration (citing Jacobs' Law of Trusts in Australia (7th ed, 2006) at [1301]).
6. As far as the anticipated timing of any tax ruling is concerned, Mr Sneddon's evidence was that the ATO indicates a timeframe of six weeks from the time of the application, measured by the time the ATO has to consider all the information that might be relevant (so that if further information is requested by the ATO "the six‑week clock stops and starts again when that information is provided") (T 248.30). As at the time of the re-opened hearing there had been no ruling from the ATO (and as far as I am aware there has been none since); nor had Mr Sneddon received any requests for further information from the ATO.
7. In his application to the ATO, Mr Sneddon thus sought a ruling both as to the applicable CGT event and as to the time of that CGT event.

Mr Sneddon's opinion

1. In his affidavit sworn 16 November 2018, Mr Sneddon provides his expert opinion as to those CGT issues. He has expressed the opinion that "[t]he CGT event in relation to the properties may have happened on 27 June 2013 (as noted, this being the date on which the purported notice of termination was issued by the first defendant in relation to E Co's lease of the properties) and he considers that the ATO "may conclude that CGT event E1 happened on 27 June 2013". (See Mr Sneddon's affidavit at [10].) However, Mr Sneddon has calculated the capital gain and assessable income arising from either a CGT E1 event or a CGT A1 event (thus his opinion addresses either possible ruling by the ATO, albeit one based on a 27 June 2013 CGT event date).
2. As I understand his oral evidence, while Mr Sneddon considers that it is more likely that the relevant CGT event was a CGT E1 event, he considers that it is likely that the ATO will determine that it is a CGT A1 event, saying that the creation of settlement of the trust "is a sophisticated provision as far as the ATO is concerned, and by that I mean it's not one that they entertain lightly" (T 258.9).
3. Mr Sneddon referred in that regard to the decision in Truesdale v Commissioner of Taxation of the Commonwealth of Australia (1970) 120 CLR 353; [1970] HCA 27 (Truesdale), in which Menzies J held that a person who pays money to the trustee of an existing settlement trust (of which another person was the settlor) with instructions that it is to be applied subject to the trust did not "create a trust" within the meaning of s 102(1) of the Income Tax Assessment Act 1936 (Cth) in respect of the money or of the income of assets in which it is invested. Mr Sneddon referred to this simply for its consideration of the concept of creation of the trust in the context of the person who settled the sum that created the trust; contrasting this with the constructive trust situation which Mr Sneddon described as "not the simple case of somebody settling a sum and thereby creating a trust in respect of that settled sum". (I interpose to note that, in Truesdale, Menzies J considered that the words "created a trust" in the statutory provision there under consideration were not apt to describe the payment of money to a trustee to hold under a trust already constituted (see p 362); and held that the meaning of those words should not be expanded to cover the making of contributions to a trust already created (see p 363). It is not suggested that this authority assists in determining the issues here raised on the capital gains tax implications of a declaration of a constructive trust over property.)
4. In summary, Mr Sneddon has calculated the capital gain resulting from a CGT event (either E1 or A1) happening on 27 June 2013 in respect of the properties as totalling $7,752,473 (see at [115] of his 16 November 2018 affidavit). He then deducts from that amount a series of CGT concessions (totalling $6,958,075) which he considers would apply, as follows: a Division 115, 50% discount ($3,876,237); a Division 152-B, 15 years exemption ($1,287,442); a Division 152-C, 50% asset reduction ($1,294,397); and a Division 152-D, retirement exemption ($500,000); and calculates that the assessable/taxable income is $794,398.
5. Insofar as Mr Sneddon's calculations (as also was the ATO application) are based on the assumption that the happening of the CGT event (be it an E1 or A1 event) was on 27 June 2013 (the date on which the purported notice of termination of E Co's lease occurred), Mr Sneddon confirmed, in cross-examination by Senior Counsel for the first defendant, that his adoption of the 27 June 2013 date as the date of happening of the CGT event was something done on instructions, in the sense that the information with which he had been provided contained a statement that there was a finding that a constructive trust came into existence on or around 27 June 2013 (see T 247.10; 23). (That is consistent with the opening submission for the plaintiffs on the re-opened hearing to the effect that a constructive trust over the properties would be found to have arisen by "no later than" 27 June 2013; and, as I understand it, this was the basis for the instructions given to Mr Sneddon.)
6. While Mr Sneddon also said that he thought it more likely that 27 June 2013 would be the time of the CGT event (see T 246.34); as I understand his oral evidence this is based on his understanding of the findings that had been made in the principal judgment, namely his understanding that by the judgment the sons "acquired an interest in the properties on 27 June 2013" (see [8] of his 16 November 2018 affidavit), whereas I did not make any specific finding to that effect.
7. Thus, insofar as Mr Sneddon's opinion as to the capital gain and assessable income in the present case is based on an understanding that a constructive trust came into existence on or about that June 2013 date; and hence that there was either a change in the beneficial ownership of the property at that date (a CGT A1 event) or new interests in the property were created at that date (a CGT E1 event) (see T 246.49), his calculations are premised on a basis that, as I explain below, I do not accept to be correct.
8. There was some debate in the course of oral submissions as to the time at which, in accordance with the authorities, such a trust would be recognised as having arisen - to which I refer in due course (see [607]ff below). Suffice it here to note that I remain of the view expressed in Varma v Varma (2010) 6 ASTLR 152; [2010] NSWSC 786 (Varma), and cited with approval in McNab v Graham (2017) 53 VR 311; [2017] VSCA 352 (McNab v Graham), that such a trust would be recognised as arising at the time of the reliance on the relevant representation or promise (or in this case on the expectations encouraged by the first defendant in his sons) that makes it unconscionable for the relevant party later to resile from that representation or promise (or to act otherwise than in accordance with those expectations). Accordingly, I consider that any constructive trust that should be declared to have arisen in the present case is one that should be recognised as having arisen much earlier than 27 June 2013.
9. Hence, the calculations carried out by Mr Sneddon (while instructive as to the likely CGT consequences of the findings of constructive trust) will (as he accepted in the witness box) require some amendment (through no fault of his own), whatever the position the ATO may take as to the particular kind of CGT event that has here occurred. What both experts seem to agree with, however, is the proposition that there is likely to be at least some CGT liability on the part of the first defendant if relief of the kind contemplated in respect of the properties is now granted in favour of the sons.
10. Before turning to the way in which Mr Sneddon has calculated the potential CGT liability (based on a 27 June 2013 CGT event), I note that one relevant distinction between the two types of CGT events, as explained by Mr Sneddon in cross-examination, is as to whether the ATO would now be out of time to issue an amended assessment. Mr Sneddon explained that, where there is a CGT A1 event (i.e., a change in ownership), the ATO has unlimited time to issue an amended assessment (see T 256.36ff) but that, where there is a CGT E1 event (i.e., creation or settlement of a trust), the general amendment provisions in s 170 of the Income Tax Assessment Act 1936 (Cth) would generally apply (under which there is a four year time period within which an amended assessment can be made). That said, Mr Sneddon also pointed out that, even if there is a CGT E1 event, there would be power to amend an assessment at any time where there has been fraud or evasion (the latter, "evasion", being used in the sense of avoidance, Mr Sneddon giving as an example of this the scenario where the taxpayer knows there is a tax liability but does not report it) (see T 257.39ff).
11. Mr Sneddon's explanation as to the basis of his conclusion that the concessions referred to at [115] of his affidavit would be applicable in the present case is as follows.
12. As to the Division 115 concession, Mr Sneddon notes (at [23]) that this Division of the 1997 Act allows 50% of a capital gain derived by an individual to be disregarded where the CGT asset was acquired more than 12 months before the CGT event happened. (Pausing here, all of the properties in question were purchased more than 12 months before 27 June 2013, which means that this requirement is satisfied if that be the date of the relevant CGT event. However, if the relevant CGT date is 1 July 2003 then only the properties other than Properties No' 9, 10 and 11 were purchased more than 12 months before that date - Property No 9 was purchased just within that 12 month period - on 10 October 2002; Property No 10 was not purchased until about October 2003 and Property No 11 was not purchased until April 2005. Insofar as those last two properties were not purchased until after the July 2003 date, there cannot logically be a CGT event in relation to a particular asset before it is acquired. (For those later property acquisitions, which occurred after the date on which I have found there was detrimental reliance on the expectations engendered by the first defendant, it seems to me to follow from the findings I have made that those properties should be recognised as having been immediately impressed on acquisition with a constructive trust, in which case there would probably be no CGT liability at all. That issue was not, however, explored in cross-examination of the tax experts.)
13. As to the Subdivision 152-B (small business 15-year exemption) concession contained in the 1997 Act, Mr Sneddon says this is often described as the "15-year retirement exemption" (see [39] of his affidavit). He explains that, in general terms, this provides a total exemption for CGT on an asset which would otherwise be subject to CGT, if the taxpayer owned the asset for at least 15 years and the taxpayer is 55 years of age or over and is retiring or permanently incapacitated (see [40]). Thus, if it applies, and Mr Sneddon explains that the taxation legislation does not permit the taxpayer to choose whether or not to apply the 15-year exemption (see [44]) and that where the 15-year retirement exemption applies none of the other CGT small business relief concessions can be applied (see [45]), this exemption operates to allow the taxpayer to disregard the whole of the capital gain (as reduced by Division 115) derived by the individual from the CGT event (whether that be a CGT E1 event or CGT A1 event) (see [43]).
14. Mr Sneddon explains (see [46]) that, for the CGT small business 15-year exemption (i.e., the exemption under Subdivision 152-B) to apply, the following conditions must be satisfied: first, the four "basic conditions" in Subdivision 152-A; second, that the taxpayer continuously owned the asset for the 15 year period ending just before the CGT event happened; and, third, where the taxpayer is an individual, when the CGT event happened the taxpayer was 55 years or older and the event happened in connection with the taxpayer's retirement or the taxpayer is permanently incapacitated at the time of the CGT event.
15. Mr Sneddon then (from [47]-[84]) addresses the four basic conditions in subdivision 152-A (which included that the taxpayer is a small business entity for the income year and that the CGT asset satisfies the active asset test) before addressing the additional conditions for the exemption (as to age and retirement/incapacity) (at [85]-[104]).
16. Mr Sneddon, having expressed the opinion that the first defendant satisfies the conditions for the operation of Subdivision 152-B of the 1997 Act by the application of the small business 15-year exemption ([22]), concludes at [106] that the small business 15-year exemption will operate to exclude the whole of the capital gain from the CGT event happening in consequence of the disposal of both the 3/6 Aggregation and the Main/7 Aggregation ([107]) but that the exemption will not apply to Properties No 9,10 and 11 (as they have not been held by the first defendant for more than 15 years before the happening of the CGT event) (see [108]).
17. However, at [28] of his affidavit Mr Sneddon records the acquisition of the Main/7 Aggregation as having occurred in 1999 and, in the table of calculations at Annexure A, Mr Sneddon records the Main Property (by which he seems also to include Property No 7, which together with the Main Property, is referred to as the Main/7 Aggregation) as having been acquired in March 1999; therefore having been acquired less than the 15 year period before the CGT event (assuming for present purposes that to be 27 June 2013). In cross-examination (T 249.36) Mr Sneddon accepted that that was the case. Therefore, the small business 15-year exemption at best would only be capable of operation in relation to the pre-June 1998 acquisitions (of which there were only four, namely Properties No 3, 4, 5 and 6).
18. As to the Subdivision 152-C concession, this is referred to by Mr Sneddon as the "small business 50% active asset reduction" (or in his summary as the "50% asset reduction). Mr Sneddon explains (at [110]) that the small business 50% active asset reduction (by which I understand him to be referring to the Subdivision 152-C concession) applies (unless the taxpayer chooses for it not to apply) if the basic conditions (set out in Subdivision 152-A) are satisfied (namely, that a CGT event happens to a CGT asset; that the CGT event has resulted in a gain; that the taxpayer is a small business entity for the income year; and that the CGT asset satisfies the active asset test (see [49] of his affidavit) but that there are no further requirements (see [112]). (He also says that "[o]therwise the small business retirement exemption of [sic; query or?] the small business rollover (or both) may apply to the capital gain that remains after applying the small business 50% active asset reduction" (see [111]).)
19. As to the Subdivision 152-C exemption, Mr Sneddon explains that if the taxpayer satisfies the basic conditions, the capital gain that remains after applying any current year capital losses and any unapplied prior year net capital losses, and the discount capital gain concession of 50% (where the property has been held for more than 12 months) is reduced by a further 50% (i.e., effectively the capital gain is reduced by 75%).
20. Finally, as adverted to at [111] of his affidavit, Mr Sneddon applies the Subdivision 152-D small business retirement exemption (of $500,000) (see [26]). Mr Sneddon explained in cross-examination that the amount of $500,000 is the maximum (lifetime cap) permitted by the subdivision in relation to the application of that concession (that not being indexed) (see T 250.21ff).
21. In cross-examination by Senior Counsel for the first defendant, Mr Sneddon confirmed that "the best case scenario in terms of minimising the liability" is the conclusion at [115] of his affidavit (T 250.19), i.e., that the assessable or taxable income is calculated at $794,398.
22. I emphasise here that this, however, assumes that the relevant CGT date is 27 June 2013. If the relevant CGT date were to be, say, 1 July 2003, then none of the relevant properties had by then been held by the first defendant for the requisite 15 year period in order to enliven the 15-year exemption (and, as noted above, one of the remaining properties would not have been held for more than 12 months before the CGT event so as to trigger the Division 115 discount - Property No 9). (As also noted above, Properties No' 10 and 11 were not purchased until after that date so the relevant CGT event in relation to those properties was not made clear.)
23. The prospect of an earlier CGT event date was not explored in any real depth in the course of the concurrent hearing of the experts' evidence on the CGT issues. Mr Sneddon was asked about the position that the ATO might take if there were findings (made not until, say, 2018) that there was a trust arrangement in place from 2002 or 2003 but his response to that was to address this in the context of whether an amended assessment could now still be issued (there explaining the distinction between the CGT events E1 and A1). He said that (from T256.36): WITNESS SNEDDON: So the first thing is if a CGT event took place in 2002 could the ATO take any further action. Section 170 of the 1936 Act generally limits the Commissioner to four years in which to make an amended assessment. There is an exception which, as set out in subsection (10)(aa) of section 170 [sic; s 170(10AA)] ‑ and my recollection is at item 10 of the table to that section, which allows the Commissioner an unlimited time to amend assessments in relation to certain CGT events. One of those CGT events for which there is an unlimited time of amendment is CGT event A1. I mention that particularly because you might recall that the application for a private ruling to the ATO was asking whether the relevant CGT event was A1 or E1. If the relevant event was CGT A1 then the Commissioner, pursuant to section 170(10(aa) [sic; s 170(10AA)] has an unlimited time in which to amend an assessment to give effect to the CGT event in 2002. Would the Commissioner impose penalties? The answer is that if the Commissioner issues the assessment ‑ in other words, if the taxpayer doesn't advise the Commissioner and requests an assessment and the ATO issues what's described as a default assessment, the legislation provides for a mandatory 75% penalty to be imposed. At the same time, where that penalty is imposed, it is open to the taxpayer to appeal to have the penalty remitted and naturally the ATO will take all circumstances in to account when determining whether to remit the penalty. I will be very surprised if the ATO did not charge interest on any additional tax that had been assessed in consequence of the CGT event of 2002. The ATO has unlimited time to amend the assessment if it's CGT event A1.
24. Mr Sneddon had earlier confirmed, in answer to a question as to what further action the ATO, on its own initiative, might take after a private ruling was made on the application, that he expected that the ATO would assume that the taxpayer concerned would lodge any amended returns that were necessary and, failing lodging those returns, that in the fullness of time the ATO might issue default assessments itself (T 248.1).
25. Questioned (at T 253.9) as to whether, on the assumption that the CGT event was the date on which the actual transfer of the properties occurs (i.e., if there were now to be an order for the transfer of properties some time in 2019), there would be any exemption applicable "beyond the 50%" (by which I understood Senior Counsel for the first defendant was referring to any exemption beyond the initial Division 115, 50% concession), Mr Sneddon said (at T 253.18ff), that in his opinion it was more likely than not that "the concessions" (by which I understand him, in the context of his answer, to be referring to the Division 152-C and 152-D concessions) would be able to apply. What he said was (from T 253.18): Well, my opinion is that there probably - it's more likely than not, that the concessions would be able to apply, the reason being that the concessions ‑ to be eligible for the concession, you must satisfy either of two ‑ the four basis conditions, one of those conditions is that you satisfy either the net asset value test or the small business turnover test. Accepting your assumption that the time of change in ownership might be around now, approximately now, then it means that the parent ‑ the father, at this time, on the face of it, seems to be not carrying on a business, so the small business test would not be appropriate and that couldn't be satisfied. The alternative test would have to be considered and the alternative test is an asset value test, the market value of the assets less the liabilities that relate to those assets and I have expressed in my affidavit of 16 November that I would believe that I consider the market value of the properties should take into account the interests in those properties created by the judgment in consequence of the actions of 27 June 13 or, alternatively, if those circumstances don't change the market value but that has created a liability which relates to those assets and the consequence of that may be to bring the taxpayer, in this case, the father, to a position where his net assets were less than $6 million in which case the CGT small business concessions may apply, in which case the 15‑year exemption may apply.
26. The last comment (that the 15-year exemption may apply) is consistent with the assumption that the CGT event is only found to arise on the actual transfer of the properties (in which case all of the properties will have been held for the requisite 15 year period). Thus the issue that Mr Sneddon was addressing in the above answer, as I understand it, is that the first defendant would not now satisfy the third of the four basic conditions in Subdivision 152-A (namely, that he be a small business entity for the relevant income year); but what Mr Sneddon there seemed to be saying was that there was an alternative test (the net asset value test), and that, for the purposes of that test, the ATO would take into account (when determining the market value of the properties in the first defendant's hands) that, by reference to the findings made or which might be made consequent upon the principal judgment as to the existence of a constructive trust, that the value of the properties was considerably less or that there were liabilities (as constructive trustee) in relation to those properties that also had to be taken into account. He said (from T 254.45): What I was raising was that if a person owns land in the capacity as trustee, then the value of the land may be one figure but the value of the land to the trustee could only be determined after taking into account the rights of the beneficiaries.
27. Mr Sneddon explained the active asset test in cross-examination (in the context of whether it was necessary to satisfy the affiliate requirement as at the time of the CGT event (for the best case result that he considered would arise - see [115]), Mr Sneddon explained the position as follows: (from T 250.46) ... If you like - I'm sorry that these provisions aren't as straightforward as they might be. In order for the small business concessions to apply four basic conditions have to be satisfied and one of those conditions which is sometimes the most important of those four conditions is either the turnover test or the net asset value test. The turnover test hinges on whether a person is carrying on a business and whether the ordinary income exceeds 2 million. The asset test turns on what's the market value of the assets less the liabilities that relate to those assets, then the other condition or one of the other three conditions is the active asset test, and that means that an asset must qualify as an active asset. In order to qualify as an active asset, briefly, the asset must have been used for more than 50% of the period of ownership in the course of conduct of business by the taxpayer or the taxpayer's affiliate. So strictly speaking, it is possible that an asset might be acquired in year 1 used for ten years in business, then rented up until year 15, then sold in year 15 but yet that asset would qualify as an active asset and if the property had been used in business by a company owned by the owner from years 1 to 10, then the asset would still satisfy the active assets test but it wouldn't be necessary that the company which conducted that business be an affiliate of the owner at the time of the sale. So, strictly speaking there does not have to be a coincidence between the affiliate and the time of the CGT event. [my emphasis]
28. Mr Sneddon explained that if the relevant CGT date was 27 June 2013 then, for the 15 year exemption to operate, the relevant property or properties would have to have been purchased by no later than June 1998 and, as to the active asset requirement, Mr Sneddon explained that the property has to be an active asset for more than half of its life and an active asset is an asset used in the course of business. He explained that it can be used by an affiliate of the owner; what is required is that for more than 50% of the period of ownership it is used in the course of business by either the owner or the affiliate of the owner (T 252.24). Thus, he explained, it is not essential that it be used by an affiliate for the period in which it qualifies as an active asset. Mr Sneddon gave the following example (from T 252.36): So I could carry on business on a block of land, I could then have my company take over that business and continue to conduct the business on that same block of land so for part of the period of ownership I have conducted business, it's qualified as an active asset, for another part of the period of ownership my affiliate has conducted business, both terms contribute to the period it has been an active asset.
29. Mr Sneddon considered that if the affiliate relationship (the affiliate carrying out business on the land) was sustained to within seven and a half years of the 27 June 2013, the active asset test is likely to have been satisfied (see from T 253.1): '-[T]he test for an active asset is that it must be used for half of the period of ownership or where the period of ownership is 15 years or more, seven and a half years is sufficient. So, if I own a piece of land and I use it in business for seven and a half years but, nonetheless, I rent it for another 12 and a half years, when I sell it, it will still qualify as an active asset because of that seven and a half years being used in the conduct of business either by myself or an affiliate.
30. As to how the ATO would take into account whether the first defendant had retired (it being put to him that, although on 27 June 2013 the first defendant was no longer on the property, this had nothing to do with the first defendant retiring), Mr Sneddon said that (T 260.10): The ATO is reasonably generous in that area and I think you would have to include other factors and the ATO would probably consider other factors. The other factors would include the age of the taxpayer, the health of the taxpayer and also the provisions don't anticipate an immediate retirement of the taxpayer. In other words, a person can retire gradually over a period so I wouldn't like to say that what you have said is correct.
31. Mr Sneddon accepted that it would be relevant, that not long after that CGT event, there was a campaign to sell the properties, which would be consistent with the retirement proposition. He also accepted that if it was the expressed view of the person in question to take up their small business activity at a later time that would be another factor that ATO would take into account but said (from T 260.30): It's a factor that the ATO would take into account. The ATO has, if my recollection is correct, issued private rulings which, in circumstances where the taxpayer has ceased to carry on what you might describe as large scale undertakings and continued with smaller undertakings and the ATO has accepted that the person has retired but it would be fair to say that there have been other circumstances relevant to that individual private ruling which assisted the ATO reaching that conclusion.
32. As I understand his evidence (at T 255.30; 38), Mr Sneddon confirmed that, for the purposes of the asset value test, the ATO takes into account, where land is held by a trustee, that the value of the land to the trustee (as trustee) might be a lesser value than the value of the land if it were held outright (i.e., if it were not impressed with a trust having regard to something that had happened many years ago). In that regard, Mr Sneddon said (at T 255.38ff): Yes. It's the value of the assets of the taxpayer, so what is the value of the asset of the taxpayer? In this case the taxpayer may be in a position or role as a trustee, so what is the value of the taxpayer's interest as trustee in those properties.
33. The plaintiffs note that, in cross-examination, Mr Sneddon accepted that, when considering capital gains tax where the landowner was a trustee, "the value of the land may be one figure but the value of the land to the trustee could only be determined after taking into account the rights of the beneficiaries" (T 254.45ff).
34. I found Mr Sneddon to be an impressive witness. He explained logically the issues raised by the particular circumstances of the present case and gave considered answers to the questions he was asked in cross-examination. I have confidence in his assessment of the likely potential CGT liability (albeit that it proceeds, as he was instructed, on the basis that the CGT event occurred on 27 June 2013; a proposition which I do not accept insofar as I have found that the constructive trust arose from 1 July 2003).

• Mr Lam

1. Mr Lam's opinion, as contained in his report dated 16 November 2018, differs markedly from that of Mr Sneddon (Mr Lam opining that the first defendant's liability for capital gains tax will be significantly greater than that estimated by Mr Sneddon). He estimated the net capital gain, based on Mr Donoghue's valuation of the properties (of $21,080,000), at $6,916,236 and, based on Mr Tremain's valuation (of $18,950,000), at $5,821,236. He said that the estimated capital gains applied the 50% general discount (on the basis that the first defendant had held the assets for more than twelve months) but concluded that the small business CGT concessions should not apply ("as the basic conditions appear to be incapable of being met") and was of the opinion that no other CGT concessions were available (see the executive summary to his report).
2. The main explanation for the difference between the two experts is largely based on the assumed CGT event. Mr Lam was instructed to assume that there would be a transfer of the properties following the outcome of these proceedings and he calculated the capital tax liability on the happening of that event. He had not been provided with either the plaintiffs' instructions or the reports of Mr Sneddon (see T 261.32-262.4). (There was also a difference of opinion as to whether the first defendant had retired as primary producer but that, as I understand it, followed from the different dates at which the CGT event was being approached.)
3. In cross-examination, Mr Lam accepted that he had been asked to assess the capital gain tax consequences of a transfer to happen at or after 23 October 2018, and was asked to assume that the first defendant had not been consulted by A, B or C in regards to the business of E Co since at least 2010.
4. Mr Lam also accepted in cross-examination that his understanding was that the calculation of the market net asset value of a taxpayer was to be done at the time of a CGT event and that the ATO would take into account the assets of the taxpayer, legally held or beneficially held, at that time. He accepted that if the CGT event is a transfer which happens now or at some point in the future (i.e., a CGT event A1) "the ATO would have regard to the correct characterisation of the taxpayer as the owner of the asset which is the subject of the A1 event as to whether or not that taxpayer at the time of the CGT event A1 was a trustee or they owned the property outright" (T 262.31ff). He confirmed that it would make a difference to the ATO's assessment if the taxpayer was the beneficial owner or a trustee.

• Conclusion as to CGT evidence

1. Without intending any disrespect to Mr Lam, I found his evidence less helpful than that of Mr Sneddon. That is because the instructions on which Mr Lam's opinion was based did not address the real question thrown up in relation to the CGT issues, which is how the ATO would approach the CGT consequences of a declaration, made at the end of contested proceedings, that properties were held on constructive trust that had arisen at a date many years before. Further, the fact that he had not been provided with Mr Sneddon's report (or the plaintiffs' instructions in relation thereto) meant that Mr Lam was not able usefully to engage in discussion on the topics that I considered of most relevance.
2. I therefore regard Mr Sneddon's evidence as the most helpful on the issue as to the potential exposure of the first defendant to CGT liability but am still not confident that the extent of the CGT liability has been calculated on the correct assumptions. Without the benefit of submissions from the Commissioner, or the Commissioner being bound by any such finding (he not being a party to these proceedings), it is not appropriate for me here to express an concluded view about that issue.
3. The upshot of Mr Sneddon's evidence, as I understand it, is that the actual quantum of any potential CGT liability cannot be determined unless and until the nature and time of the CGT event is determined. The likelihood, however, seems to be that there will be significant concessions applicable to reduce the CGT liability - whether because the CGT event is taken to be 27 June 2013 and the concessions identified by Mr Sneddon are applicable; or because the CGT event is the date of actual transfer of the properties but at that stage the value of the assets in the hands of the first defendant must take into account the imposition (or declaration) of a constructive trust over those properties arising from conduct many years ago; or because the relevant CGT event is a CGT E1 event occurring back in 2003 but the Commissioner is out of time to issue an amended assessment; or, on what seems to me perhaps the most likely scenario, that the relevant CGT event is a CGT A1 event occurring back in 2003 (there then being an unlimited time in which an amended assessment might be issued) but at which time the capital gain would be significantly less (having regard to the values attributed to the properties by the respective valuers in 2003), nevertheless it is a liability in respect of which the Division 115 50% reduction would apply in relation to most of the properties, to which there might be added the Division 152-C reduction and the Division 152-D reduction. I readily accept that this may not cover the realm of CGT possibilities on what Mr Sneddon says is a novel tax situation. On none of those scenarios, however, is the total assessable income in the order of that estimated by Mr Lam.
4. There would, of course, be the prospect of interest and/or penalties. Mr Sneddon considered that it would be very unlikely that interest would not be charged but, as to penalties, he explained that the ATO would take all circumstances into account when determining whether to remit the penalty and one might well envisage an application for relief at least against the imposition of penalties if the relevant CGT event is one that no one appreciated had arisen (and that was not recognised by Court order until the making of orders at the conclusion of a long and bitterly fought case).

Expert Financial opinion - Lonergan Edwards reports

1. The first defendant relied on three reports prepared jointly by directors of Lonergan Edwards & Associates Ltd, Mr Wayne Lonergan and Dr Hung Chu, namely reports dated 12 September 2018, 19 November 2018 and 7 December 2018, respectively (Exhibits 19, 20 and 21).

• Objections to the Lonergan Edwards reports

1. Objection was taken by the plaintiffs (perhaps rather ironically, since the ultimate conclusion reached in those reports is as to a present inability of the plaintiffs, individually or collectively, to pay amounts of the order there being considered if that were to be required as a lump sum following the making of final orders - a position with which one would not expect the plaintiffs to cavil) to the admission of the whole of the reports on various grounds. The general complaints made were: first, insofar as reference was made to the first Francis report that the first defendant was not proposing to read that report or to call Mr Francis for cross-examination; and, second, that the Lonergan Edward report, were jointly prepared (invoking what was said in Paino v Paino [2005] NSWSC 1313 (Paino); see below). There was also objection taken (at the conclusion of the re-opened hearing) to those portions of the Lonergan Edwards report in which reference was made to certain valuations obtained by the plaintiffs in 2016 as to the respective hotels (the C and P Hotels) (the Robertson Valuations) (see for example [170]-[178] of the first Lonergan Edwards report, where the combined adjusted/maintainable annual EBITDA (i.e., earnings before interest, tax, depreciation and amortization) of the hotels adopted in the Robertson Valuations was adjusted and an indicative valuation range was derived; and [60]-[61] of the third report, which applied the adjustments used in the 2016 Robertson Valuations to the FY17 adjusted EBITDA).
2. As to the plaintiffs' complaint in relation to the reliance placed by Lonergan Edwards on the first Francis report (dated 17 August 2018), the first defendant's response (as adverted to earlier - [98]) was to confirm that he would not read the passages in the first Lonergan Edwards report (see Exhibit 19 at [6(b)] and from [201]-[206] (or perhaps through to [209]) of that report), which referred to issues in the Francis report that were considered to be relevant to the assessment of the ability of E Co to raise additional interest bearing debt) (see T 36.15) (but to indicate that, if the plaintiffs chose ultimately to tender the Francis report(s) as had been foreshadowed, then the first defendant would seek to rely on the parts of the Lonergan Edwards report that referred to it - see T 38.40). Ultimately, after I had indicated that I was not proposing to reject the whole of the Lonergan Edwards first report on that basis, the plaintiffs themselves adduced into evidence the first Francis report (as outlined earlier). In those circumstances, nothing further need here be said about this first ground of objection (save to note that in the end the first defendant did not revisit the issue of reliance upon section IX ('Response to Issue 5') of the first Lonergan Edwards report but nothing here turns on it because the assessment of the capacity of one or more or any combination of the plaintiffs to pay the amounts I had considered requiring as a condition of the acceleration of their expectations in relation to the properties was ultimately dealt with by reference to the more up to date information then to hand by the time of the third Lonergan Edwards report).
3. As to the second ground of objection, reliance was placed on what was said by Barrett J, as his Honour then was, in Paino, in relation to the position where a report had been prepared by two persons but only one gave evidence. His Honour (at [6]-[8]) cited what had been said by Stone J in Cooke v Commissioner of Taxation (2002) 51 ATR 223; [2002] FCA 1315 (her Honour there noting that the requirement that an expert opinion be wholly or substantially based on the expert witness's specialised knowledge could not be met if it was partly based on the knowledge or opinion of someone else; and referring to the approach cited with approval in Rhoden v Wingate [2002] NSWCA 165 per Heydon JA, as his Honour then was, at [61]). Barrett J permitted the plaintiff to examine the expert witness, by means of non-leading questions so that he might inform the court of the parts of the joint report, if any, for which he has been solely responsible; and ultimately rejected the report.
4. The Court of Appeal subsequently held that the primary judge had erred in rejecting the expert's report (Paino v Paino [2008] NSWCA 276 at [70] (Paino (No 2)), drawing a distinction between the factual components of the report and those expressed as opinion of valuation ([69]) and emphasising that the question whether the report was based wholly or substantially on the expert's knowledge was to be determined on the balance of probabilities. The Court of Appeal (Hodgson JA, McColl JA and Young CJ in Eq, as his Honour then was) made clear (at [66]-[67]) that it was inherent in the process of preparing many expert reports that the factual basis for the opinion expressed is derived from third-party information (noting the necessity that the factual bases of opinions be clearly laid out so that the opinion can be tested) and that an expert is rarely the source of all the factual information in his or her report; and that an expert need not amass all the factual data on which an opinion is to be expressed but could delegate that task to another. Relevantly, for present purposes, at [67], their Honours quoted with approval what had been said by Austin J in Australian Securities & Investments Commission (ASIC) v Rich (2005) 190 FLR 242; [2005] NSWSC 149 (at [329]): …There is nothing in the law to prevent such delegation from occurring. But it is necessary for the expert who is the author of a report to apply his or her mind to the analysis and reasoning processes that his or her subordinates have developed, so that when the report is finalised, the whole of the reasoning and conclusions that it contains have been adopted as the expert's own reasoning and conclusions. Were that not the case, the expert could not claim to be the author of the report.
5. The first defendant submitted that the Lonergan Edwards reports in terms made clear that they were prepared as joint reports (noting that the reports are written in the first person plural (see T 37.36) and jointly signed by both Mr Lonergan and Dr Chu (see T 37.46)) and thus that the Lonergan Edwards reports themselves indicated that the authors were jointly responsible for the opinions (and submitted that this could be tested in cross-examination if there were any issue as to this (see T 38.8)). I proceeded at the time on the basis that, if Mr Lonergan made clear, when he was made available for cross-examination, that he held all of the opinions set out in this report (or alternatively that he held some but not others, making it clear which ones he did hold), based on the information set out in the reports, then I would have no difficulty concluding that this was sufficient (in accordance with the principles articulated on appeal from the decision in Paino) for the report(s) to be admitted.
6. Although, when called, Mr Lonergan was not expressly invited to identify which of the opinions contained in the joint reports were his (as opposed to Dr Chu's) (as I had envisaged when provisionally ruling on the admissibility of the reports), it was in my opinion abundantly clear from the evidence he gave in cross-examination that the opinions expressed in the first person plural in the reports (based on the facts and assumptions set out in those reports) are opinions which he holds (and which he was able cogently to explain. That disposes of the second ground on which objection was taken to the Lonergan Edwards reports.
7. Finally, as to the objection (raised only towards the conclusion of the re-opened hearing) to those portions of the Lonergan Edwards' reports in which reference was made to the Robertson Valuations, the complaint made was that these valuations could not be relied upon as expert evidence (not having been adduced as expert evidence and the valuer in question not having been called to give evidence in the proceedings).
8. Senior Counsel for the plaintiffs informed me that the significance of the Robertson Valuations only became apparent when the third Lonergan Edwards report was received (it was served on the Friday before the commencement of the re-opened hearing) because it was only in that report (based on the assumption at that stage of a sale of the C Hotel), that the analysis of the security available by reference to the P Hotel became relevant (and, in that context, it was noted that Mr Lonergan had sought to rely on the adjustments contained in the Robertson Valuations). It was submitted that it was only then, for the first time in the proceedings, that the Robertson Valuations were sought to be relied upon by the first defendant as to the truth of their contents (as distinct from them being contained in a document which was shown to a witness and cross‑examined on during the principal hearing in 2017); and that the prejudice to the plaintiffs at that stage was that they were not able to test the Robertson Valuations (see T 636.31).
9. It was submitted for the first defendant that these reports had been relied upon by the plaintiffs in the past, from which it was said that the inference could fairly be drawn that the plaintiffs accepted the contents as being accurate (see T 492). This was a reference to the fact that, by letter dated 5 December 2016 from the plaintiffs' solicitor to the first defendant's solicitor (admitted provisionally on the re-opened hearing as Exhibit 22), copies of the Robertson Valuations were provided to the first defendant's solicitor in the context of a request that had been made that the first defendant agree to an extension of a Westpac facility that was in place in relation to the acquisition of the C Hotel (that being a loan to E Co which in turn on-lent the money to AH Co, as trustee for the CI Unit Trust, in relation to the said purchase). The letter stated that this (and other) financial information was provided "with the intent that [the first defendant] is then able to appreciate that financially he has little risk, that the status quo can be maintained without causing loss to either [the first defendant] or [the plaintiffs], and that no matter which [of the plaintiffs or the first defendant] wins the court case, the Westpac facility can be either discharged or maintained as the case may be". As indicated above, I provisionally admitted the letter dated 5 December 2016 from the plaintiffs' solicitor to the first defendant's solicitor as Exhibit 22, and said that I would rule on its admissibility in my final reasons.
10. The submission for the first defendant was that the plaintiffs had relied upon the Robertson Valuations as accurate documents that properly calculated the value of the hotels, and had used them for a number of purposes, "including to try to satisfy [the first defendant] to provide finance in 2016" (see T 492.22; 634.2). It was said, in closing submissions, that the plaintiffs had placed "heavy reliance" on the Robertson Valuations in seeking to assure the first defendant that he was not at risk by allowing his property to be used as security and it was submitted that this was an admission as to the reliability of the Robertson Valuations. ""In addition, it was noted that the Robertson Valuations had already been admitted in evidence (having been part of a folder of documents put to one or more of the sons in cross-examination at the principal hearing) (see CB Vol 31), without objection by the plaintiffs (and, I might add, without any limitation or qualification by me) and that therefore they were now in evidence for all purposes.
11. In that regard, as I indicated when this issue was raised in the re-opened hearing, I am not persuaded that any implied admission against interest (as to the proper value of the hotels as at May 2016 or, more relevantly, as to the accuracy of the adjustments made in the Robertson Valuations to which the Lonergan Edwards reports refer) arises out of the provision to the first defendant's solicitors in December 2016 of a copy of the Robertson Valuations. It is clear from the contents of Exhibit 22 that the provision of those documents (together with a raft of other financial information) was for the purpose of providing comfort to the first defendant in the context of the request that he agree to a variation of the Westpac facility (that was secured in part over one or more of his properties). There was no warranty as to the accuracy of any of the financial information there provided (and, given the state of the relationship between the parties by that stage, it could hardly have been assumed that the first defendant would accept at face value, or rely upon the accuracy of, any proposition put to him by or on behalf of the plaintiffs).
12. Although it was submitted that there had been two occasions (those being, as I understand it, during the principal hearing when the Robertson Valuations formed part of a tender to which there was no objection and at the commencement of the re-opened hearing when no issue was raised as to reliance on those portions of the Lonergan Edwards reports which referred to the said valuations) where the plaintiffs had had an opportunity to say that they have had concerns about the valuations or that they should only be relied upon for a particular purpose, I do not accept that this leads to the conclusion that the plaintiffs' objection to that evidence now being relied upon as expert evidence at this re-opened hearing (or as evidence as to the truth of the opinions contained therein) should be rejected.
13. That said, the Robertson Valuations were not admitted into evidence as expert reports compliant with the applicable requirements under the rules relating to such evidence (nor was it suggested that this was the case). In circumstances where it is impossible for me on the material before me to test the opinions expressed in the Robertson Valuations, the weight that could be placed on the opinions contained therein is doubtful. (Although it was submitted for the first defendant that, having utilised the valuations for their own purposes, it might be assumed that the plaintiffs would not have sought to cross-examine on this material in any event, I cannot accept that - in circumstances where the valuations are now sought to be deployed in a different context and where there has been a complaint by Senior Counsel for the plaintiffs as to the prejudice that would be sustained by reference to the inability to test that evidence suggesting that evidence might have been sought to be adduced in relation to this issue had it been raised earlier.)
14. Thus I have concluded that, although the letter dated 5 November 2016 (Exhibit 22) should be taken now to be admitted without the provisional qualification formerly placed on it; being relevant to the basis on which the Robertson Valuations were provided to the first defendant, I do not accept that the plaintiffs have thereby (in any sense that would be relevant to the present question, which ultimately is as to the objection raised to portions of the Lonergan Edwards reports) accepted as accurate the statements contained in the Robertson Valuations. Furthermore, I consider that no weight can be placed on the contents of those valuations insofar as they have not been tested.
15. Accordingly, insofar as the Lonergan Edwards reports place reliance on the adjustments applied in the Robertson Valuations, I am not persuaded that the factual basis for those adjustments has been established. That has the consequence that those portions of the Lonergan Edwards reports (as identified earlier) should be rejected. (I note that in cross-examination Mr Lonergan indicated that he would, independently of the Robertson Valuations, have been of the view that there should be an adjustment to various items in the hotel trading results; basing this largely on a common sense view of certain expenses - I refer to this further in due course.)

• Summary of the Lonergan Edwards reports

1. I turn now to the Lonergan Edwards reports themselves.
2. As to the first 12 September 2018 report, what was sought (by a letter of instructions dated 20 July 2018) was an expert opinion as to the ability of E Co, or the sons, or E Co and the sons collectively, to pay to the first defendant, without jeopardising E Co's grazing business: either $2,123,253 (the Loan Amount); or the total market rent payable in respect of the first defendant's life expectancy (the Market Rent Amount); or both the Loan Amount and the Market Rent Amount, having regard to the instructions given by the first defendant's solicitor as to various matters and the documents with which the experts were provided (see 5-(c) of the first report). In each case, if the conclusion was that E Co, or the sons collectively, or E Co and the sums collectively, was or were unable to repay the Loan Amount and/or the Market Rent Amount as a lump sum, opinion was sought as to a reasonable regime for the repayment of the Loan Amount and/or the Market Rent Amount (see [5(d)] of the first report).
3. Opinion was also sought as to whether the answer to one or more of the said issues would change if E Co's actual annual profit were to be replaced with the reasonable annual profit that could be earned by E Co from grazing operations on the subject properties (referred to as the Achievable Annual Profit) (see [5(e)]). (The response to this last issue (issue 5) (see section IX of the first report) is that portion of the report which, as noted above, was not read by the first defendant in circumstances where Mr Francis, was not by then being called by the first defendant.)
4. As to the second report dated 19 November 2018, Lonergan Edwards was instructed to adopt the projected annual market rental for the period 1 July 2018 and 1 July 2030 (inclusive) in Mr Donoghue's report; to convert the projected annual market rental stream to be received over the first defendant's life expectancy into a lump sum as at 1 July 2018; and to use the said lump sum as the Market Rent Amount (see [2] of the second report).
5. By the time of the third report dated 7 December 2018, the plaintiffs had produced an unsigned financial statement of E Co for the financial year ended 30 June 2018 and other financial documents (see [5] of the third report) and it had become known that the C Hotel was on the market for sale (as to this sale, see further below). Lonergan Edwards was instructed to have regard to various 2018 financial statements and other documents of E Co and to make various assumptions in relation to a sale of the C Hotel (see [6] of the third report), including as to: the outstanding balances on the two facilities used to finance the C Hotel (totalling around $11 million) and the outstanding balance on a facility used to finance the P Hotel (around $4.1 million); the agent's commission of 1.75% plus GST payable on sale; the value of the P Hotel; a particular sale price for the C Hotel; and that E Co is not obliged to use any part of the sales proceeds to repay (either in whole or in part) a $2 million loan obtained from Westpac).

• Reasoning

1. The methodology adopted in the Lonergan Edwards reports (see section IV of the first report) in assessing the ability of, first, E Co; second, the sons; and, third, E Co and the sons collectively, to pay the Loan Amount and/or the Market Rent Amount is, broadly: to assess the "surplus assets" of E Co that could in principle be converted into cash and the ability of E Co to raise additional interest bearing debt (in each case without affecting E Co's grazing operations) and then, in the case of the sons, to assess their ability collectively (through their own assets or through their interests in the respective hotels) to raise additional debt "against the uplift (if any) in the market value of their collateral assets" (being their interests in the C and P Hotels and the properties of B and C). Because the proposed sale affects that analysis, where there has been a revision of the calculations it is only necessary to refer to the third Lonergan Edwards report.
2. As to the assessment of E Co's ability to raise additional debt, the report considered: the interest bearing debt carrying capacity of the company; the extent to which that capacity had been utilised; and the "spare debt carrying capacity" (the difference between the total debt carrying capacity and the currently utilised debt carrying capacity) (see [120] first report).
3. As to the debt carrying capacity, this was re-calculated in the third report using the FY 18 balance sheet at some $907,000 (see at [35]). Its ability to raise the additional debt of between $2.8 and $4 million necessary to pay the respective amounts was assessed having regard to a re-calculated core asset value base of $22.4 million, comprising the subject properties (at $20 million), the cattle herd (of some $2.5 million), net working capital assets/liabilities (at -$0.2 million) (see [37] of the third report).
4. Based on that revised core asset base and the assessed target gearing ratio of 25% and 30% (see the first report at [139]-[145], which considered the gearing ratio of two listed companies involved in the farming industry), E Co's implied spare debt carrying capacity was assessed at between $2.5 million and $3.6 million (a mid-point of $3 million) (see third report at [38]). In that calculation, the debt capacity already utilised represented the Westpac loan of $2 million and a $1.1 million loan from Rabobank borrowed against the properties and on-lent to AH Co.
5. In the first report, the interest cover implied by the utilisation of E Co's spare debt carrying capacity was assessed to ensure the ability sustainably to service the interest payable on the additional debt (see [147]). In calculating that interest cover, EBITDA was used as a measure of profits. In assessing the interest rate payable on the additional debt that it was considered could be raised by E Co, the report adopted a 4.5% interest rate (see [150(d)]).
6. The third report calculated E Co's adjusted EBITDA for FY18, based on the 2018 profit and loss statement at $365,000. In that calculation, there was added back an amount of $901,500 for "non-recurring legal costs". Then, based on E Co's adjusted EBITDA for FY 18, the report re-calculated its average adjusted EBITDA for the period FY13 to FY18 as $563,000 (see [40]), and, using this an implied interest cover ratio (ICR) of between 3.5 times and 5.0 times was derived (see [41]) (the implied ICRs there calculated being above the observed target/minimum ICR adopted by one of the farming companies to which reference was made in the first report - see [152]).

• First defendant's submissions on the Lonergan Edwards reports

1. It is submitted by the first defendant that the Lonergan Edwards' reports give support for the following findings: first, that the plaintiffs are able to raise as a lump sum the amount of between $4.4 million and $4.9 million, if the sale proceeds from the C Hotel are used to repay the St George debt on the P Hotel; second, that the plaintiffs are able to raise as a lump sum the amount of $5.89 million if the sale proceeds from the C Hotel are not used to repay the St George debt on the P Hotel (see the plaintiffs' evidence on this position -T 93.40-.45; T 97.12; T 93.2ff); and, third, that in either of those two scenarios, the remaining amount due for rent and payment of the Loan Amount can be repaid "over time".
2. Should no weight be given to the third Lonergan Edwards report on the issue of the further debt raising potential for the plaintiffs upon the sale of the C Hotel, the first defendant says that the position nevertheless remains that the plaintiffs have available to them an increased capacity to make the payments to the first defendant, for the following reasons: first, that the conclusion of the first Lonergan Edwards report remains that there is a capacity to raise a lump sum of up to some $5 million; second, that there is no requirement of St George for the reduction of the debt on the P Hotel upon the sale of the C Hotel; third, that the evidence supports the submission that the net proceeds received from the sale of the C Hotel, after paying out the St George facility on that hotel, will be some $2.4 million; fourth, that the result is the plaintiffs have the capacity to pay as a lump sum the amount of some $7.4 million; and, fifth, that, by realising assets, a significant lump sum amount can be paid (in this regard, reference is made to the evidence (at T 102.12) where B conceded that, by realising the pubs, the plaintiffs (and B's wife) could realise some $9 million (or allowing for the now known sale price of the C Hotel, $6.2 million).
3. The first defendant notes that the prospect of the need for the plaintiffs to borrow to meet the payments due to the first defendant was something that was raised in the principal judgment. It is submitted that, in order to make the payment of the balance of moneys "due" to the first defendant, orders could be made for a payment schedule over the next 12 to 24 months. Further, insofar as it would be open to the plaintiffs to meet orders for payment to him by selling an asset, the first defendant says that this "would reduce debt-servicing commitments, would still see the plaintiffs with an accelerated asset, would deal with the equity of the first defendant, and allows the plaintiffs to grow their assets".

• Cross-examination

1. Mr Lonergan was cross-examined over parts of three hearing days as to various aspects of the Lonergan Edwards reports.
2. Strong criticism is made by the plaintiffs of Mr Lonergan's expert evidence, both as to his report and as to his oral evidence. I consider that criticism to be unfounded. I accept that in some particular aspects of the reports the reasoning was not explicitly stated (such as the adoption of a mid point for the EBITDA, which Mr Lonergan explained was "in the maths"); that the comparable organisations used by him were quite different from the business with which comparison is being made (though Mr Lonergan adequately explained the reasons for that in the course of cross-examination); and that his opinion as to the Robertson Valuations adjustment was not supported by any express reasoning in the report. As to his oral evidence, however, I reject the criticisms that have been made of his evidence and, in particular, the suggestion put to him in cross examination that he was acting as an advocate for the first defendant.
3. In that regard, the following criticisms were made, to which I note my brief response.
4. First, it is submitted for the plaintiffs that Mr Lonergan "very often answered the question he wished to answer rather than the question that he was asked, and took every opportunity to provide long, discursive answers to questions which were generally non-responsive and included material that was not in any of the reports prepared by him or Dr Chu". One example of a complaint that Mr Lonergan was not being responsive related to the following exchange (from T 603.37): Q. So if [E Co] borrows $5.2 million, and we assume an interest rate of 4.5%, it's paying $234,000 per annum. Do you agree? A. It doesn't quite work like that. It's only the additional debt that they have to pay interest on because the existing debt is being paid for by the pubs. So the only debt you worry about is the new debt. It's a slightly peculiar arrangement where‑‑ Q. Mr Lonergan, please, I was asking you about the additional debt.
5. I did not form the view that Mr Lonergan was being unresponsive in answer to that (or other) question(s). Rather, my observation was that Mr Lonergan (both in the above example and in other instances) was endeavouring to explain the logic of his conclusion. So, in the above instance, I considered that he had been about to explain why it was that the proposition put to him (that E Co on the assumptions given would be paying $234,000 per annum) did not "quite work like that" (T 606.31). I consider that, as an expert witness, Mr Lonergan was there to assist me to understand the financial implications of the matters being put to him; and it does not appear to be disputed that he was well qualified and had considerable experience to be able to do so.
6. There were certainly occasions on which Mr Lonergan gave relatively lengthy answers. I would describe those as didactic or educative, not discursive, and I regarded them as generally responsive to the questions asked (though perhaps addressing the questions in a more expansive way than the cross-examiner might have wished). True it is that Mr Lonergan on occasion referred to material not in the reports (so, for example, to the cross-referencing work carried out by his staff; or to his knowledge of matters in the hotel industry or of his experience of bankers) (though I note that no particular examples were proffered to support this criticism by the plaintiffs). However, as to the former, it was clear that Mr Lonergan had not been partisan in that respect - he had not provided the cross-referencing material to the first defendant's solicitor nor discussed it with him; and he had no difficulty providing copies to Counsel to review. It was also clear that this material was being referred to and relied upon in effect as an aide memoire not as additional reference material. As to the latter, those arose in the context of the reference in his reports to the adjustments to operating expenses for hotel businesses made in the Robertson Valuations (and seemed to me more to be a statement of what Mr Lonergan considered to be common sense than anything else) and in the context of cross-examination which threw up the question as to how the banks would be likely to treat the overall facility position. Mr Lonergan certainly did not cavil with the proposition I put to him, which was that, if the Robertson Valuations were not able to be relied upon, then there would be nothing in the reports to enable me to test the basis for the adjustments in question (which was hardly the response of someone advocating for a particular outcome); and his view that the banks would be likely to take an "overall" view of things is borne out by the position it appears that Westpac has itself taken (see the Westpac credit memoranda which I refer to in due course and to which the plaintiffs themselves refer in closing submissions).

• Conclusion as to the Lonergan Edwards reports

1. Early in his cross-examination, Mr Lonergan said that he had not spoken with the legal representatives of the first defendant and he had not provided working notes or the cross-referencing notes to the first defendant's legal representatives. Later, (as already extracted) he observed that he was not entirely clear as to the underlying dispute or issues that might have to be determined in this hearing. There was no suggestion that he had any interest in the outcome of the dispute whatsoever. Mr Lonergan certainly expressed his opinion forthrightly in the witness box; he made clear that his reports were based on instructed assumptions and was careful to identify those; and, where he considered that unfair criticism was made of his report, he responded to that and in some instances challenged the cross-examiner on that; but he also was prepared to express opinions based on assumptions he had not earlier been asked to make and he did not advocate any particular outcome at all. True it is, that he was not able to be swayed from the proposition that a bank would consider the overall asset position of the sons and the companies which they control but in my opinion that is a not unreasonable proposition from a common sense point of view and not unresponsive in circumstances where from time to time in the cross-examination he was being asked to express opinions as to matters on which the bank's perspective of the funding position would be relevant. I consider that the criticism of Mr Lonergan in this regard is misplaced and I regarded him as an impressive and helpful expert witness.

Stamp duty ruling

1. There was evidence from a solicitor, Mr James Eager, by affidavit affirmed 31 October 2018, that he obtained a private ruling from Revenue NSW on behalf of the plaintiffs on 10 August 2018 to the effect that a transfer of the properties the subject of the present dispute will be eligible for the exemption under s 274 of the Duties Act 1997 (NSW) and as such will not be liable for stamp duty at ad valorem rates (see his affidavit at [3]-[4] Annexure B). The first defendant complained in initial submissions for the re-opened hearing as to the affidavit of Mr Eager evidencing "in a hearsay fashion" a private ruling of Revenue NSW that no stamp duty is payable. Ultimately, however, there was no dispute on this issue. The first defendant notes that ordinarily stamp duty is borne by the transferee and submits that an order should be made in terms that any such liability is borne by the plaintiffs.

Statistical evidence as to life expectancy

1. The plaintiffs' solicitor, Mr Fitzgerald, annexed to his affidavit of 31 October 2018: the most recent published life tables, being the Life Tables NSW 2015-2017, which disclose that, as and from the first defendant's 79th birthday this year (2019), he has an average life expectancy of 9.27608 years (see Mr Fitzgerald's affidavit of 31 October 2018 at 2, Annexure A); and the most recent published household expenditure survey, being the Household Expenditure Survey Australia 2015-2016, which discloses that the average weekly total goods and services expenditure of a household consisting of a lone person aged over 65 years is $539.65 per week (Mr Fitzgerald's 31 October 2018 affidavit at 2; Annexure B). There was no dispute as to the life expectancy tables. (There was also no dispute as to the household expenditure survey evidence though the first defendant's submission is that it should not be the basis for calculation of the notional rent payment - as to which I refer in due course.)

Evidence as to "out of cycle" cattle sales and condition of the property

1. Each of A, B and the cattle manager employed by E Co at the properties (to whom I will refer eponymously as the Cattle Manager) gave evidence as to the present size of the herd of cattle on the properties and as to sales of cattle said to be "out of cycle" and to have been made in order to fund these legal proceedings. A and the Cattle Manager gave evidence as to the condition of the properties and the need for capital expenditure on the properties. There was an objection by the first defendant that this could not be expert evidence (due to the lack of independence of the defendants) but, as I understand it, this was not sought to be relied upon as expert evidence.

• Submissions on the relevance of this evidence

1. In the plaintiffs' written submissions before the commencement of the re-opened hearing it was said that this evidence was adduced in order to establish that the issue of the termination notice by the first defendant on 27 June 2013 and the subsequent court proceedings had caused "significant damage" to the faming business and the properties for two reasons: first, that the plaintiffs' insecurity of tenure meant that it would be imprudent for them to make any kind of medium to long term investment which might be denied to them if they were not ultimately successful in the proceedings; and, second, that E Co had been forced to make significant out of cycle sales of cattle, first in late 2013 to avoid a "fire sale" in the event that E Co was evicted from the properties, and later to fund the proceedings.
2. The plaintiffs submitted that A, B and the Cattle Manager had all contributed data and analysis to in the preparation of various tables for the purpose of setting out this "damage". They described those tables as follows: Tables 1 and 2 set out the historical size of the cattle herd and rainfall in the region of the properties; Tables 3, 4, 7 and 8 set out the number of (asserted) "out of cycle" sales of breeding cattle "and the consequent loss of weaners into the future"; Tables 5, 6 and 9 set out the "lost income" flowing therefrom culminating in "lost sales/damages" to the farming business (totalling approximately $9 million); Tables 10 and 13 set out the expenditure on seed and fertilizer on the properties from 2002 to 2014; and, at p 14, the farm income profit and loss from FY 2003 to 2017 and, at p 15, the first defendant's profit and loss from FY 2003 to 2014.
3. Objection was taken by the first defendant to much of this evidence (and in particular to various tables that had been prepared in relation to this issue) largely on the basis of relevance. (So, for example, there was an objection to [62] and [63] of A's 4 September 2018 affidavit and to a number of the tables contained in what in due course became Exhibit AZ in the proceedings).
4. There was no objection in this regard to evidence as to the present financial position of the sons (and E Co), nor ultimately as to evidence of past cattle sales (indeed the first defendant accepts that it is probably accurate to say that since 2013 approximately half the stock has been sold off - though noting that this was in a period of drought - see T 25), but it was submitted that the reason that the plaintiffs were in their present position was not relevant on the issues before me in the re-opened hearing. Further, insofar as the plaintiffs had sought to extrapolate into the future the cost to the business of selling (to fund these legal proceedings) what otherwise would have been breeding cows, the first defendant's objection was that this assumed an entitlement to costs on the part of the plaintiffs as against the first defendant, that being an issue not yet determined (or, the first defendant says, able to be determined at this stage of the proceedings) (see T 22.5).
5. There was a distinction drawn between evidence as to what the plaintiffs referred to as "termination sales" (i.e., sales of cattle following service of the purported notice of termination of E Co's lease on 27 June 2013), to which no objection was taken, and evidence as to what were referred to as "forced sales", to which objection was taken and the extrapolated losses from the reduction of the breeding stock (which are said to be hypothetical). I rejected the description of the sales as "forced" on the plaintiffs by the first defendant, the reference in the heading to Table 9 of Exhibit AZ to "damages" (and I note that the plaintiffs did not place reliance on this heading and expressly disavowed any damages claim in these proceedings), but the objection as to relevance went beyond this.
6. The relevance of this evidence was put by the plaintiffs as going to the issue that I had raised in the principal judgment, namely that any order be framed so as not to jeopardise E Co's farming business. In essence, the argument for the plaintiff was that one cannot look at the financial position and proceed on the basis that the profitability of the business at present (to which the "out of cycle" sales of the cattle have contributed) is the usual or ordinary profitability of the business and at the same time treat expenses such as the legal expenses (to fund which it is said those sales occurred) as non-recurring expenses, so as to project into the future the profitability of the business at this (what I might call artificial) level. The submission was made that "as matters keep going, they won't have a herd … they'll be farming dirt, that's the reality" (T 24.17).
7. Relevantly, Table 5 was headed "Loss of income from Termination Notice". There was no objection to the first half of that table, rather the objection was as to the second half of the table ("Loss of income from Forced Sales"). I admitted Table 7 (which dealt with the forced sales over the period) on the basis that it might be relevant to the argument as to any conclusions drawn as to the historic profitability of the business subject to relevance. I rejected Table 8 ("Loss of production and forced sales") and admitted Table 9 (again subject to relevance) (though not the reference to damages in the header).
8. In submissions, Table 9 was described as "an attempt to put a monetary figure on the losses of E Co flowing from the issue of the Termination Notice and the need to pay legal fees to fund these proceedings". As noted above, the plaintiffs disavow any claim for damages (or equitable compensation) flowing from the conduct of the first defendant but they submit that, to the extent that there is "a balancing of the equities on the question of final relief", the present financial position of the plaintiffs is substantially a consequence of the conduct of the first defendant.
9. The relevance of Table 9 was put on three bases (as indicated above): first, that business, as presently conducted, is in a position where it has had to sell down about 50% of its stock, so it has a profitability which is inflated by sales which have been out of cycle in order to meet legal costs; second, that the reduced size of the herd impacts on profitability of the business moving forward; and, third, the comparison between that position and the position in which the business might otherwise have been in but for those abnormal expenses. I accepted the potential relevance of that material on the first two points, not the third.
10. The plaintiffs' submission, based on the evidence of the so-called "out of cycle" cattle sales, is that, whatever methodological doubts may attend the calculations which ultimately appear in the table(s), there is an evidentiary foundation for the claim that the herd has been sold down, and that money has not been expended on pasture improvement, fertilizer and spraying on the properties, by reason of the plaintiffs' insecurity of tenure and the need to pay legal fees.

• Substance of the evidence

1. Turning then to the nub of the evidence as to the castle herd, A's evidence is that the current composition (i.e., as at November last year) of the herd is: 60 bulls; 1306 cows; 259 steers; 147 heifers; and 342 older heifers (next year's maidens) (see A's 15 November 2018 affidavit at [3]); and that 330 nine year old cows and their calves were to be sold in December 2018 and January 2019 to fund these proceedings (A's 15 November 2018 affidavit at [6]). B's evidence is that E Co has been left with no capital reserves to fund improvement of the properties or of the herd (see B's 3 September 2018 affidavit at [47]). B's evidence is further that the plaintiffs are planning to sell further cattle to fund the proceedings, as well as feed for cattle during the drought (see B's 29 October 2018 affidavit at [9]).
2. The Cattle Manager has deposed in his affidavit sworn 4 September 2018 that he has been employed by E Co since February 2006. His role (explained in more detail at [19] of his affidavit) includes the preparation of monthly reports as to, among other things, sale numbers and which includes a paddock count of stock and monthly handwritten report (see at [6] of his affidavit).
3. The Cattle Manager deposes (from [20]) to the cattle business cycle of events and (from [23]) to the herd development carried out from 2006. In relation to the state of pasture development, he deposes that 2006 was the last time he recalled that superphosphate was applied to the properties ([31]) and says that the uncertainty of the litigation means that no money has been spent on pasture improvement ([37]).
4. The Cattle Manager gives evidence as to what he says were out of cycle sales in the financial years 2013 and 2014 (after the termination notice) and then in the period through to August 2018 (and was cross-examined on that evidence), by reference to his monthly reports.
5. It quickly became apparent in the course of the Cattle Manager's evidence in cross-examination that he had provided the monthly management reports or returns to A (saying that "it goes through the office") and that someone else had prepared the tables to which he refers in his affidavit. Without any criticism of him, it was apparent that he was not readily able to understand the tables. As I understand his evidence, it is simply that in the ordinary course calves or cows would not be sold before the end of their breeding cycle (and hence those sales were labelled "out of cycle" sales). He accepted that there were errors in the tables insofar as sales were included in the tables that did not fall within that category of sale. So, for example, there was the following exchange in relation to Table 3 (from T 221.19): Q. When you say at paragraph 55, and I'll ask you a question about table 3 then for a moment, sir, when you say at paragraph 55 that, "From looking at the monthly reports to which I've referred to just above, I have formed a view about which sales were out of cycle sales"? A. Yep. Q. When you say from looking at the monthly reports you have formed a view, does that mean that what's set out in table 3 is based on those monthly reports that you've prepared? A. Yeah, I think so, this is all come out of - it's put in a different way that I put it in, but it ‑ come out on the monthly reports. Q. I'll come back to that in a moment, but if it's come from the monthly report and you've formed a view, does that mean that at the time you formed that view that you've set out as the two ‑ the sales that are out of cycle, you had reference to your monthly reports, you looked at the numbers in there? A. Yeah ‑ yeah, well I think so. I'm sorry. … Q. … I'm just trying to work out that you're getting those numbers that are in table 3 what you referred to to help you get those numbers was you went through your monthly reports to work out which were out of cycle and which weren't? A. Well, all this, you know, all this stuff that's out of cycle, like cows and calves, we just don't sell cows and calves. It, you know, sort of ‑ we let the cow rear the calf and then we turn the cow off as a fat cow and keep the calf.

• First defendant's submissions as to the "out of cycle" cattle sales" evidence

1. It is convenient at this point to note the submissions made by the first defendant as to the evidence adduced by the plaintiffs in support of their submission as to the impact of the need to pay legal costs on the operation of the business (i.e., that the out of cycle cattle sales has meant that E Co has been left with no capital reserves to fund improvement of the properties or the cattle herd).
2. The first defendant submits "[t]his part of the case is as damaging to the plaintiffs as their lack of disclosure", and, in particular, makes the following submissions: first, that B has no real idea of what a "DSE" (Dry Sheep Equivalent) is, pointing to the seemingly inconsistent references to it at [11] and [12] of B's 3 September 2018 affidavit and B's refusal to conceded that "progeny" is a reference to both male and female calves (at [11]), whereas "maidens" (at [12]) is not; second, that in significant respects the figures in Table 1 do not match the figures in the Livestock Trading Report which forms part of the financial statements of E Co each year; and, third, that the tables assessing loss of income (already said to be of no use due to the unreliability of Table 1) take no account of the costs savings of having a lesser herd nor of the benefit of the greater income from the sales. The first defendant in general submits that B is an unreliable witness in this regard.
3. The first defendant submits that the Cattle Manager's evidence showed that Table 3 was unreliable and that there is no reason for sales to be "out of cycle" when reference is made to the Cattle Manager's monthly reports; says that Table 7 was "disowned" by the Cattle Manager; and argues that Table 9 is "meaningless" as the earlier tables are unreliable. While prepared to concede that the Cattle Manager is "doubtless an able stockman and cattle manager", the first defendant argues that the Cattle Manager's affidavit should not have been placed before the Court (having regard to the Cattle Manager's admissions in cross-examination that he did not understand his own affidavit; that he did not prepare his affidavit; that his affidavit was inaccurate; and that Table 7 was unreliable).
4. The first defendant does not take issue with the proposition (which he submits is hardly surprising or controversial) that the plaintiffs have paid legal fees from the sale of some of their cattle (saying that he too has paid his legal fees from assets under his control), though noting that the vast majority of the plaintiffs' legal fees were paid by E Co (around $3.5 million), a company of which he is a shareholder.
5. In that regard, the first defendant submits that the fact that the sons have paid this amount of legal fees through the business and yet the business remains solvent tells against the plaintiffs' case in this respect; and it is submitted that the Lonergan Edwards report indicates "just how profitable" the business is. Insofar as the financial records of E Co show that the costs of this litigation have been treated in the books of E Co as a business expense, it is submitted that this will have reduced the amount of tax otherwise payable by the company, so that the impact on the cash reserves of E Co is the amount paid less the tax portion. Further, it is noted that the first defendant is a 25% shareholder of the company and hence has, in effect, funded the litigation against himself to the extent of 25%. (Pausing there, I note that there was no claim made by the first defendant of oppression by the majority by reference to the payment by E Co of that proportion of legal fees referable to the claims made by the sons in these proceedings or their defence of the first defendant's cross-claim though he submitted this meant he had funded 25% of the claim brought against him).

• Conclusion as to "out of cycle" cattle sales evidence

1. What emerged from cross-examination as to the "out of cycle" sales" evidence was that A had provided figures largely sourced from the Cattle Manager's monthly reports (and cross-referenced to the legal bills that the plaintiffs had to pay from time to time in relation to these proceedings) to B and that the Tables were then prepared by B and/or the plaintiffs' solicitor. The basis on which sales were characterised as "out of cycle" was a combination of the timing of those sales (by reference to whether they were in the normal sales period and by reference to what legal bills the plaintiffs then had to pay) and the numbers (and type) of cattle then sold; but the exercise was at least to some extent an impressionistic one.
2. There were acknowledged inconsistencies in the tables and, ultimately, I treat them only as an indication that the cattle herd has been reduced in size over the period from 2009 (which is not disputed by the first defendant), at least in part due to the need to meet legal expenses (albeit that there would have been other ways open to the plaintiffs to raise funds - such as a sale of one or both of the hotels). None of that seems particularly controversial. Nor is the proposition that, for the cattle herd to be built up again there will need to be one or both of a renewed breeding program and a pasture development program in respect of the properties. ''

Plaintiffs' evidence as to their financial position/ability to borrow funds

1. As to the plaintiffs' current financial position and ability to borrow funds, affidavits were sworn by each of A, B and C on 3 and 4 September 2018, respectively (on 3 September in the case of B and C; and on 4 September in the case of A); and then on 24 and 29 October 2018, respectively (on 24 October by A and on 29 October by each of B and C); with a further affidavit of B sworn 16 November 2018 being filed, with leave, at the commencement of the hearing (only served on the first defendant the Friday before the commencement of the hearing); and a further affidavit sworn by B on 9 December 2018.
2. Objection was taken by the first defendant to the affidavit sworn by B on 16 November 2018, on the basis that it was served late and would impact on the Lonergan Edwards reports (since it provided for the first time copies of the 2018 returns and financial statements of E Co that the first defendant had been seeking for some time).
3. I gave leave for the filing in court of that affidavit and provisionally read the affidavit subject to that objection, indicating that I would rule on that once the first defendant had had an opportunity to obtain advice from Lonergan Edwards. In due course the third report of Lonergan Edwards was filed, which took into account those 2018 financial statements. In those circumstances, I consider that no prejudice was caused by the late service of the affidavit and it may now be taken to have been admitted without the provisional qualification.
4. As to the 9 December 2018 affidavit of B, no objection was taken by the first defendant to those paragraphs ([1]-[6]) dealing with the sale of the C Hotel (as to which sale I will say more below) but objection was taken to the balance of the affidavit: in particular, [7] where evidence was given as to the insurance, rates and payments for farm workers paid by E Co (said for the plaintiffs to be updating evidence; see T 459) and [9], in which B deposes to the fact that certain rates and invoices had been forwarded by the second defendant for payment by the plaintiffs.
5. The objection was put on the basis that it was too late (as at 10 December 2018) for the plaintiffs to lead this evidence (which it was said might properly be characterised as reply evidence to the evidence contained in the first defendant's 3 September 2018 affidavit, in which the first defendant gave evidence that he had been paying the rates on the farms at least since about 2010 and to which were annexed a large number of documents which were invoices for rates said to have been paid in relation to the farms). Complaint was made that by this stage the plaintiffs had already closed their case (which was correct); that it was procedurally unfair for there to be a further opportunity permitted to the plaintiffs to respond to the first defendant's evidence in this regard; and that Counsel for the first defendant had not had the opportunity to determine the implications of this evidence for his client's case. (I note in this regard that the first defendant's evidence (Exhibit 15) did not include receipts identifying who had paid the invoiced amounts.)
6. My difficulty with the submission as to procedural unfairness derived from the fact that B's evidence was to the effect that the first defendant's solicitor (the second defendant) had forwarded at least some rates invoices to E Co for payment by it. The first defendant's solicitor was in Court throughout the re-opened hearing. It seemed to me that it would be a simple proposition for instructions to be taken from him as to whether he accepted that the invoices in question had indeed been forwarded by him to E Co for payment (particularly when at that stage there remained a further 3 days of the time that had by then been set aside for the extended re-opened hearing, with the prospect of a tenth day, if necessary); and I considered that there was ample time for Counsel to consider the implications of that material for his client's case. Hence, it was not obvious to me that there would be any insuperable prejudice or procedural unfairness by the affidavit being admitted; and I considered that it would be unfair to the plaintiffs, if there was documentary evidence to refute the assertion made by the first defendant that he had paid all the rates and invoices, not to admit that evidence despite the lateness of its appearance. That was particularly so where B had been questioned in cross-examination as to whether the first defendant had paid all the rates in relation to the properties and had expressed doubt as to whether that was "100% correct" (T 77.6).
7. Accordingly, I provisionally read the affidavit on that basis. Although the objection was not withdrawn, there was no suggestion later in the hearing that the second defendant disputed that the said invoices had been forwarded to E Co for payment. The first defendant had the opportunity, through the second defendant, to contest B's evidence as to the forwarding of those invoices for payment by E Co. He did not do so. In those circumstances, I will now treat the 9 December 208 affidavit as read without the provisional qualification.

• Evidence as to the proposed sale of the C Hotel

1. I have already adverted to the fact that, as at the commencement of the re-opened hearing, the C Hotel was on the market for sale (and, indeed, there was an indicative price for the hotel, there having been an offer made by a purchaser in relation to the hotel). None of the sons, in his September 2018 affidavit, make any reference to a proposed sale of the C Hotel.
2. As it emerged in the course of cross-examination of the sons, the decision to put the hotel on the market for sale had been made in early August 2018. Steps were taken in this regard around 7 August 2018 (see B's evidence at T 83.24) and an agency agreement in relation to the marketing and sale of the hotel was signed in mid-August 2018 (a copy of which was not provided to the first defendant or his legal representatives until during the course of the re-opened hearing). Both those events occurred prior to the making by the sons of their respective September 2018 affidavits.
3. The first mention of a proposed sale was in the sons' October affidavits and in the subsequent written submissions (31 October 2018) served by the plaintiffs in advance of the commencement of the re-opened hearing. In those initial written submissions, it was said that the continued need to pay legal fees, and minimal income from other sources, had meant that the plaintiffs were planning to sell further cattle to fund the proceedings, as well as feed for cattle during the drought and that they were "also in the process of selling" the C Hotel. The submissions further stated that it was not clear if there would be any surplus from the sale of the C Hotel.
4. In their respective 29 October 2018 affidavits, both B and C depose (for the first time) that they are in the process of selling the C Hotel (B at [11]; C at [7]). In particular, in his 29 October 2018 affidavit (at [32]) B deposes that "we appointed a broker" for the sale of the C Hotel and "we have not had a written offer". He also deposes (at [100]) of his affidavit that Westpac may require him to keep a significant equity in his home to support any personal guarantee that they may require as a condition of renewing the Westpac loan facility on the Main Property (T 111).
5. Neither B nor C in his October 2018 affidavit referred to the fact that an exclusive selling agency agreement had been signed (although that might perhaps be implicit in the evidence that they had "appointed" a broker); nor as to the then asking price (or, in B's words, "aspirational value") for the C Hotel (see B's evidence at T 93.10; T 91).
6. In cross-examination (following his recall after the production by Westpac of documents on subpoena), B was taken to an email dated 25 October 2018 from a broker in which the "final unconditional position of the purchaser" was conveyed (see Exhibit BG). Although B, having been taken to that email, was prepared in cross-examination to agree that [32] of his affidavit (in which he deposed that "we have not had a written offer") was wrong, I have - and at the hearing expressed - my doubts about that, in that the communication was from the broker and simply conveyed what was said to be a final unconditional position of the purchaser. It was not in terms a written offer from a purchaser. Nevertheless, it seems that, as at 25 October 2018, there was at least an indicative offer in relation to the C Hotel which was not disclosed in B's 29 October 2018 affidavit. In re-examination by Senior Counsel for the plaintiffs, B said that since 25 October 2018 there had been no offers in writing and one orally (T 116.41-117.37).

• Ability to borrow funds

1. Broadly speaking, the sons' affidavit evidence on this issue was to the effect that: EM Co does not have any significant realisable assets (see B's 3 September 2018 affidavit at [49(a)]; B's 29 October 2018 affidavit at [88]; C's 29 October 2018 affidavit at [15]); E Co and A cannot borrow further because they do not own the properties and the first defendant has, since the commencement of proceedings, refused to consent to amending or renewing facilities to permit further borrowing (see B's 3 September 2018 affidavit at [49(b)-(c)]; B's 29 October 2018 affidavit at [89]; C's 29 October 2018 affidavit at [20]); and the plaintiffs are already carrying significant debts (see below), which, apart from C's liability to BankWest, are cross-collateralised.
2. As to the latest financial position of E Co, as disclosed in the financial statements annexed to B's 16 November 2018 affidavit, the plaintiffs note that E Co's assets are recorded as $4,268,110, and its liabilities as $5,518,002 (i.e., a total negative equity of -$1,249,892); and that its balance sheet records: stock on hand at its book value of $138,561 (the value of the herd is said to be substantially in excess of this); its largest asset is $2,701,312, (the loan to the CI Unit Trust), matched against a liability to Westpac of $2,000,000; its second largest asset is a loan to EM Co of $971,893 (in respect of which the plaintiffs submit that the likelihood of repayment is slim); and total plant and equipment is valued at $22,749 after depreciation (said to demonstrate a significant need for the purchase of new vehicles and agricultural plant and equipment). The plaintiffs note that the balance sheet also records a book debt to the first defendant in the sum of $2,123,523 (pointing out that I held in the principal judgment that this was not payable as a debt, albeit that I considered that it might be required to be paid as a condition of the acceleration of the plaintiffs' expectations in relation to the properties).
3. In respect of E Co's 2018 profit and loss statement, the plaintiffs note that a total revenue of $1,143,123 is disclosed (of which $1,129,828 was from cattle trading) and total expenses were $1,693,047, resulting in a total loss of $549,924 for the year; that the most significant expense was $901,505 for legal expenses relating to these proceedings, and that the third largest expense, after the second salaries and wages, was $203,311 for fodder, by reason of the drought.
4. In summary, the debts under the relevant facilities (copies of those facility documents being in evidence) were said to be: $4,282,000 by PI Co under its facility with St George Bank (see B's 29 October 2018 affidavit at [35]); $11,160,000 by AH Co under its variable facility with St George Bank (see B's 29 October 2018 affidavit at [35]); $2,000,000 by E Co under its facility with Westpac (see B's 29 October 2018 affidavit at [29]); $849,485.04 by EM Co under its facility with Rabobank (see C's 29 October 2018 affidavit at [10]); and $923,104.28 by C under his facility with BankWest (see C's 3 September 2018 at 5(ii)-(iii)).

• Position regarding discharge of Westpac $2 million facility or Rabobank facility

1. A contentious issue in the course of cross-examination of the sons was as to whether the $2 million debt owing to Westpac would be (or would be required to be) discharged out of any surplus funds obtained from the sale of the C Hotel.
2. B had accepted in cross-examination that if there were surplus funds after the C Hotel sale those would be for he and his brothers to do as they pleased (T 93.45). He had had discussions with C from which he knew C was keen to be released from the security over P Hotel (in which C has no interest) (T 97.42) but said that "there is generally time constraints around those things" when asked about any discussions or enquiries with the bank as to a release of that security (T 97.31; 97.41-98.1).
3. B was cross-examined as to whether certain loans (the EM Co loan for example) would be repaid out of the net proceeds of sale if the C Hotel is sold (see from T 110). He made the point when first cross-examined on this that the Rabobank $862,000 facility had not expired and was not in default.
4. Recalled on day four of the re-opened hearing (after the production of documents subpoenaed from Westpac had occurred), B was taken to an email sent by him to Westpac on 14 February 2017 in which he had given an estimate of the value of the C Hotel (Exhibit 11) and an email of 1 March 2017 from him to Westpac (Exhibit 7) in which he informed the bank of his expectation of the outcome of the litigation, namely the transfer of the farms "with no disturbance of the mortgage on [the Main Property] to Westpac". B accepted that, by this, he meant that the E Co loan from Westpac of $2 million would remain in place (T 300.18). B agreed (at T 302.47) that it was not being suggested in that email that repayment of the $2 million would come from E Co and he did not suggest that repayment would be coming from AH Co. B said that there was no discussion with the bank officer named in that 1 March 2017 email (Mr Campbell) from March 2017 to the present to the effect that there would be repayment of the $2 million loan by either E Co or AH Co (see T 304.14). The internal credit memorandum of Westpac marked Exhibit 8 appears consistent with the above statements by B.
5. Taken to an email from a Westpac officer, Mr Viney, B accepted that, as at April 2017, B knew that Westpac would forbear from legal action (in relation to the $2 million loan facility subject to the 3 criteria there stated) and that there would be further review of the facility in October 2017.
6. There was in evidence an internal credit memorandum of Westpac dated October 2017 (Exhibit 13), which referred to a meeting between B and C with Mr Viney. B said, in response to a number of questions, that he did not recall that meeting (see, for example, at T 305) but he accepted (by reference to the document) that it "clearly occurred" (see T 307/308;308.47). B also accepted (at T 310.32) that in October 2017 there was no proposal for repayment of the $2 million loan by E Co or AH Co.
7. The position of Westpac in that credit memorandum (that the plaintiffs do not accept was communicated to them at the time but which they are prepared to accept was the bank's position) was that interest payments on the $2 million loan would continue; the bank would monitor the result of the court case; and a full valuation was to be undertaken if the loan was to be extended into a new facility. There is a note to the effect that should the brothers succeed (in these proceedings) a new valuation would be required in connection with the loan application.

Evidence of the son's' in cross-examination on other issues

• Sons' relationship with the first defendant

1. B agreed in cross-examination that his relationship with father has irrevocably broken down (T 78.23; 78.27) (and see his reason for not disclosing the C Hotel sale). At T 102.27, B referred to the first defendant's history of refusing to sign documents; and how he was fearful that there would be difficulties in dealing with the first defendant (at T 102.36).
2. A's position, when asked as to the feasibility of the operations continuing with the first defendant remaining as the owner of the land, was that (from T 139.17): Q. Sir, do you consider it's at all feasible for [E Co] to continue to operate its farming business on the properties with [the first defendant] remaining as the owner? A. No, I don't. Q. Why is that? A. Because I don't believe he has an interest in the farm. [my emphasis] Q. Has it got to do with your own attitudes towards him as well? A. Yep. Q. Is that because the relationship between you and [the first defendant] is just irreparably broken? A. I think so. Q. Do you think it would be feasible if say, [the first defendant] was still on title, still the owner on title of the land, and in the day to day workings of the farm there was a need for the owner, for example, to sign certain documents, if you needed to build a shed and get permission or if you needed to have some slight boundary adjustment or anything that might emerge like that, do you think it'd be feasible to then have to go off and say, [the first defendant], we need to get this signed or is that just going to be one big problem? A. It's been a problem to date. Q. You don't see it changing? A. No.
3. Similarly, C's position was that the concept of a continuing working relationship with his father was that it would not be ideal (from T 166.25): Q. … say someone suggested there shouldn't be a transfer of the properties to you right now, so the registered proprietor on title of the properties out there at [xxx] would remain [the first defendant] and [E Co] would continue to run its farming business on those properties, on whatever basis might transpire, okay, from what you've just said about [the first defendant], the idea of [E Co], you, [B] and [A] having an ongoing relationship connected to the farms with [the first defendant] would be unthinkable? A. It's probably less than ideal. Q. Would you agree with unthinkable? A. Less than ideal. Q. Well, when you say, "Less than ideal," I'm just trying to get an understanding of the extent of your view on the matter, sir, it would be something to be avoided at all costs, perhaps? A. No, it would be less than ideal. Q. If you think that [the first defendant] might be a person who would disrupt your sale of your hotel do you think you would hold a fear that he would be a person who would disrupt the running of the [E Co] business on the properties if he was still the owner? A. I would presume there'd be some structure put in place that would allow any destructive efforts to be managed, or put aside. Q. You consider that subject to some regime the likelihood would be for [the first defendant] to try to be disruptive A. Well, history says potentially, yeah.

• Concerns by sons as to serviceability of any finance

1. There was a common theme in the oral evidence of B and C as to whether they (and/or E Co) would be in a position to service any borrowings obtained to pay any sum that might be ordered in favour of the first defendant.
2. So, for example, when taken to the statement in his affidavit as to his inability to borrow because E Co does not own property (see [58]) and it was put to him that that problem would be solved if a transfer of the properties was ordered, B said "subject to serviceability, yes" (T 100.44). As to whether he had access to capital (as deposed to at 58 of his affidavit), B accepted (at T 101.28) that he "may have access to security, yes" but said that he was there talking about being able to obtain funds (T 101.32). B accepted that if the P Hotel was sold he and his wife would "potentially" have funds available (T 101.49).
3. Similarly, C's evidence at T 167.9ff was that: Q. So, you have ownership of the land in every sense with you and your two brothers, you would realise that that would give you a greater prospective of raising some finance to finance whatever projects you wanted to finance? A. The finance would still be contingent on it being able to be serviced. and when it was put to him that if his home were no longer security for the C Hotel he would have some potential money, C responded immediately "[n]ot without serviceability" ( T 169.6).

• Claim by the first defendant in relation to what he says were his cattle

1. At T 104.50, B's evidence was that he knew nothing of the first defendant's cattle; at T 105, he said that he assumed that when Property No 8 was sold the herd was sold with it but he did not know if that comprised any part of the original herd.

• The plaintiffs' priority in relation to the properties

1. The plaintiffs are seeking a declaration of constructive trust over (and, if their interests be accelerated, a transfer to them of) all the properties that were the subject of their expectations in relation to the farming business. They were cross-examined, however, as to which of the properties they would most wish to retain (or, conversely, might choose to sell) if it were necessary to sell properties either to fund a payment to the first defendant or otherwise as part of the conditions imposed on relief in these proceedings.
2. At T 107.22, B accepted that he was most concerned to keep Property No 4 (which, it will be remembered, is the property that has been A's home for many years and the subject of A's separate proprietary estoppel claim).
3. A said he would be speculating as to whether if any properties might be sold if necessary to meet orders (T 145.34) but accepted that the one property he would not like to sell was Property No 4 and that if necessary he would sell Property No 11 (see T 146.5).
4. C's position was (from T 167.37): Q. And if we did that, would you agree with the proposition, sir, that if you look at the various aggregations of the properties out there overall it makes sense to so far as possible, keep intact the [3/6 Aggregation] together with [Property No 10] and [Property No 9] and then on the other hand set aside for either meeting with [the first defendant] or selling the [Main/7 Aggretation], [Property No 11] properties? A. Well [Property No 11] has always been one discussed as being potentially sold, or sold. Q. I think [Property No 11's] worth approximately $1.6 million, if we assume that that was insufficient to make the payment that was ordered to be paid the next most obvious property to satisfy the payment requirement, or to be left with [the first defendant] would be [Main/7 Aggregation], wouldn't it? A. Yeah, I guess so.

Submissions by the plaintiffs' as to their ability to borrow funds

1. As to the plaintiffs' ability to borrow funds to make payments of the kind envisaged, the plaintiffs submit that neither B (see B's 3 September 2018 affidavit at [50]-[52]; [54]) nor C (see C's 3 September 2018 affidavit at [7]) can himself borrow because of the terms of the security documents over their homes, a restriction which also applies to the hotels (see B's 3 September 2018 affidavit at [53]); C's 3 September 2018 affidavit at [7]-[8], [10]); and that all of the plaintiffs are severely limited in their ability to raise finance because of low income and available capital (see B's 3 September 2018 affidavit at [58]); 'C's 3 September 2018 affidavit at [7]-[8], [10]).
2. The plaintiffs submit that the likelihood is that Westpac Banking Corporation (which for these purposes is treated as the same corporate entity as "St George Bank") will demand that the full proceeds of sale from the C Hotel (the anticipated amount of which will not here be published) (see B's affidavit of 9 December 2018 at [6]), will be required to pay down debts owed to it (which they say will have the consequence of dramatically affecting the "surplus assets" analysis of Lonergan Edwards as set out in [35] of the third Lonergan Edwards report).
3. The plaintiffs submit that the great likelihood is that neither the E Co loan to the CI Unit Trust nor the E Co loan to EM Co will ever be repaid, pointing out that: the CI Unit Trust will have no assets after the C hotel is sold and EM Co does not trade (T 547. 37); that EM Co's only income is interest paid by the CI Unit Trust (T 547.43-548.2; first Lonergan Edwards report at [96]); that Em Co itself has a loan from the CI Unit Trust in the amount of $1,080,030 as at 30 June 2017 (T 547.43-548.2, first Lonergan Edwards report at [97]); and that EM Co has a significant excess of liabilities over assets (first Lonergan Edwards report at [97]).
4. The plaintiffs' position as to their ability to pay the first defendant the sums that I had envisaged might be required as a condition of acceleration of their expectations in relation to the land is thus to the effect that they have very little ability to pay the first defendant before the ultimate conclusion of the proceedings (by which, I interpose to note, they mean "not simply after the making of final orders, but after the determination of the final appeal and the present drought (whichever comes later)"). They say that, after that time, it would depend on the nature of the orders made but that their ability to pay significant sums without selling off some or all of the properties is dependent upon a period of five to seven years to restore the herd and the properties to a position where the farming business could generate sustainable profits (as it is said it would have done but for the issue of the termination notice) (see B's 29 October 2018 affidavit at [59]; A's 4 September 2018 affidavit at [38]-[39]); A's 24 October 2018 affidavit at [25], [39]).
5. The plaintiffs submit that the evidence of Mr Lonergan and Dr Chu in the Lonergan Edwards reports as to E Co's capacity to service debt ought be disregarded in its entirety, for failing to recognise that, if legal fees are non-recurring items, then adjustments need to be made for the "artificially inflated" revenue, and because a number of the expenses that Mr Francis considered necessary (such as fertilizer and the like) are largely absent from the recent accounts (for reasons that A and B explained in their evidence).
6. It is submitted that Mr Francis' report provides a safer guide to the earning potential of the farming business and that, in terms of the ability of the farming business to generate revenue to allow for payments to the first defendant, there are three important limitations.
7. First, that while these proceedings are ongoing (including what seem to be regarded by the plaintiffs as the inevitable appeal(s)) E Co will continue to incur legal fees which will need to be paid by selling down the herd, and the insecurity of tenure will mean that E Co will be very unlikely to make any capital investment to improve the Properties as each of Mr Francis, A, B and the Cattle Manager have set out that they should. (In this regard, in the context of their submission that "acceleration" must be considered not only in the context of what are the rights and obligations of the parties when the expectation is vindicated but also at the time that the final orders giving effect to the expectation become unconditional, i.e., after the final appeal from those orders has been determined, the plaintiffs submitted that the time between the hearing on final relief and that time is likely to be two to three years and that, in the meantime, the farming business will at best be in a kind of "caretaker" mode pending a determination as to their tenure.)
8. Second, that if orders are made in favour of the plaintiffs vesting in them legal and beneficial title, it is said that it will still require significant time and expense before the properties and the herd are in the condition where they could earn revenue in accordance with Mr Francis' model. The plaintiffs say that this process is likely to take about five to seven years (referring to B's 29 October 2018 affidavit at [59] and A's 4 September 2018 affidavit at [38]-[39]); during which time profits will need to be returned to the business.
9. Third, it is said that if any of the properties need to be sold to make payments, this will reduce the maximum carrying capacity of the properties and hence the potential revenue from the farming business.
10. It is further submitted that if (contrary to the plaintiffs' submissions) there is a finding that the first defendant "is entitled to payments in the nature of rent and return of money contributed", then any such payments ought to commence only after the orders in the proceedings are made final "given the likelihood of the grant of a stay on any appeal" and after a further five years' abatement to restore the properties and the herd to the proper operating capacity.
11. The sons submit that neither their interest in the P Hotel, nor B and C's ownership of their homes, should be subject to sale or charge for the benefit of the first defendant. It is submitted that they have based their lives around their homes, and that the P Hotel was part of the off-farm investments of all parties. The plaintiffs argue that it is difficult to see what principle of equity could demand the sale of the homes or the hotel, or risk as security for the benefit of the first defendant (noting that in the principal judgment I considered that the payments to the first defendant would need to be structured so as not to jeopardise the operation of the farming business).

Submissions by the first defendant as to the plaintiffs' ability to borrow funds

1. As to the plaintiffs' suggestion that the consequences of the orders I had proposed would be financially ruinous, the first defendant says (in essence) that it is illogical of the plaintiffs to speak of "financial ruin" when they stand to receive assets worth $20 million and, second, that the plaintiffs have been "less than candid" in putting forward their financial affairs (in particular in: failing to disclose that the C Hotel is for sale; obfuscating the position concerning the E Co loan to AH Co; and failing in a timely fashion to disclose the 2018 financials of E Co).
2. It is submitted by the first defendant that there are obvious ways in which the plaintiffs can afford to pay whatever amount may be determined as being payable to the first defendant, namely, by selling assets or by restructuring their financial affairs. The first defendant notes that on the orders contemplated in the principal judgment the plaintiffs would receive land worth $20 million, 100% of a business worth some $1.8 million (of which the sons presently own, through E Co, only 75%), a 100% interest in EM Co (rather than their existing 75% interest), and various pieces of farm equipment, all "an estimated 11 years before even they say this was to occur". It is submitted that, depending on the findings as to the amount of the rent and other quantification issues, the "cost" to the plaintiffs of the acceleration of their expectations could be in the vicinity of $10 million. Thus, it is submitted, the plaintiffs will be some $10 million better off.
3. The first defendant contends that the plaintiffs have not appropriately assisted the Court in this re-opened hearing in respect of their financial circumstances and how any payments ordered to be paid will be made and secured. In particular, it is submitted by the first defendant that the evidence of both C and B as to the position since April 2017 of the E Co loan from Westpac of $2 million, and their meeting with Westpac as recently as 16 October 2018, is "difficult to accept". The first defendant points to the fact that the plaintiffs chose not to tell the Court that their intention (and that of Westpac) was for the facility to be replaced by a new facility once title to the farms is transferred to the sons (there referring to the subpoenaed material from Westpac to which I have referred above); and did not until the October affidavits disclose that the C Hotel was for sale (although the C Hotel has been on the market since early August 2018). Insofar as the plaintiffs' explanation for not disclosing the fact of the sale was a concern that the first defendant would interfere with the attempted sale, the first defendant says that (whether or not that be correct), this does not mean that steps could not have been taken to disclose this information on certain terms and so to allow a full investigation of the proposed sale by legitimate forensic means by the first defendant; and that it was incumbent upon the plaintiffs to do so.
4. The first defendant also says that, when disclosure was made, it was selective, namely, that that there was no mention in the plaintiffs' affidavits of any offer for sale or any price at which the hotel was being offered and that it was only when the sales agency agreement was produced that this information was made known. Complaint is made that there was no explanation as to why the plaintiffs did not produce the sales agency agreement in the first instance (noting the evidence of B that the document was given to his solicitor and that the document was then produced in Court the following day).
5. The first defendant's submission in this regard is that the plaintiffs sought to keep relevant evidence from the Court in order to bolster their case and that this raises legitimate concerns as to the extent to which account can be taken of the plaintiffs' evidence in determining the amount and manner of the payment(s) to be made by the plaintiffs to the first defendant.
6. As to the evidence of the sons' financial circumstances, reference is made to the disparity between their taxable income and expenses incurred or intended to be incurred by them (by way of example referring to the evidence of C's taxable income). Acknowledging that this was not put to C in cross-examination, the first defendant nevertheless argues that this causes speculation as to the contributions by other family members. Reference is also made in this regard to evidence given at the principal hearing to the effect that B's wife receives a reasonable income from a family trust (the only relevance I can see in this fact is to the extent that it might relieve B of the need from any separate income to meet family expenses).
7. The first defendant submits that the plaintiffs have chosen not to disclose great detail of their immediate financial circumstances; arguing that the plaintiffs' own material "showed their personal asset position to be healthy"; and submits that he, in contrast, "was an open book", pointing to the various notices to produce and subpoenas issued by the plaintiffs seeking documents as to his financial position. (I interpose here to note however, as will be seen below, I am not satisfied that the first defendant has presented a complete position as to his own assets despite submitting that he has been an "open book".)
8. The first defendant submits that the prospect that the plaintiffs may have to sell their hotel interests, or their homes, or part of the properties themselves, in order to obtain increased wealth in the order of $10-20 million is "entirely logical and appropriate"; and that there is nothing inequitable in the plaintiffs needing to make decisions as to the reorganisation of their financial structure so as to be able to afford this additional asset. It is submitted that the asset(s) then obtained can be utilised for income earning and capital growth over the next 11 years so that by that time the expectation of ownership of the properties is fulfilled. The first defendant submits that the concern (see [1235] of the principal judgment) that the reimbursement to the first defendant of the $2,123,253 not jeopardise the farming business of E Co is respected by the proposal put forward by the first defendant as to the final relief (see below); and that the business will not thereby be jeopardised.
9. The first defendant says that the plaintiffs' approach to the reopened hearing went, first, to the financial position of both themselves and himself and, second, sought to attribute, for the consideration of equity, difficulties with the farming business due to the litigation. As to the first, it is submitted that the result was to expose non-disclosure by the plaintiffs of their position (and a failure to reveal any similar non-disclosure by the first defendant); as to the second, it is submitted that the case has not been made out. Among other things, the first defendant notes that during the course of the litigation some $1.75 million has been re-paid with interest on the extension of a Rabobank loan indicating that funds were available (though B says that this money could not have been used to meet legal costs as it was a reducing facility - see T 80.32ff).
10. The first defendant submits that there is a distinction to be drawn between considering the positions of the parties in the overall circumstances of the case, and determining the appropriate compensation for the acceleration of an interest in property and says that the latter is not an amount to be determined by the financial state of the parties.

Conclusion as to the sons' evidence of financial position

1. I have referred above to the complaint made by the first defendant as to the non-disclosure by the sons in their September 2018 affidavits of various matters relating to their (and/or E Co's) financial ability to meet payments of the kind I had proposed (relevantly, the proposed sale of the C Hotel and the position of Westpac in relation to any requirement for the repayment of the Westpac $2 million loan). I do not accept that an enquiry could not reasonably have been made to ascertain the bank's position in relation to potential finance if the properties were to be transferred (and/or if the C Hotel were to be sold) but that can be accepted as a forensic decision on the part of the sons not to make, and then put on evidence of, any such enquiry. However, I find most troubling the apparently deliberate non-disclosure (until the October affidavits and October submissions) of information squarely relevant to the proposition that led to the re-opening of the hearing in the first place (namely the financial ruin that it was perceived might be occasioned by the proposed Market Rent and Book Debt conditions). I do not accept that such information could not have been disclosed on a confidential basis in some fashion so as to enable the first defendant properly to test the financial capacity of the plaintiffs, even if he could not personally be privy to the detail of that information. Orders limiting the disclosure of confidential information to the parties' legal representatives are by no means uncommon in this Court. And if there were a perception that the information could not be conveyed to the second defendant lest it be passed on to the first defendant, then that is a matter that should have been raised in a directions hearing.
2. The position as to the sons' intentions (or the bank's requirements) as to the repayment of the Westpac $2 million facility (relevant to the question of what surplus assets or borrowing capacity E Co will ultimately have) is less clear at least insofar as it depends in essence on how one reads internal bank credit memoranda (or how the sons may have understood what was being conveyed by bank officers from time to time).
3. I accept that there was some resistance in cross-examination of B and C to the acceptance of propositions that seemed self-evident (such as B's resistance to the proposition that there were other means of funding amounts that might need to be paid, such as the sale of the hotels), though at some points I considered that this may have been explicable by a concern on the part of the witness to be clear as to what he was being asked and/or some confusion as to the questions. The demeanour of B and C suggested to me a wariness on their part to accept at face value any proposition put to them by the first defendant's Counsel.
4. However, none of that alters the fact that the third Lonergan Edwards report itself makes clear that the plaintiffs cannot individually or collectively afford to pay both the market rent and the loan amount as lump sums. That seems to me to be sufficient for present purposes.

The first defendant's evidence as to his financial position

1. The first defendant argues that the consequences of orders for the transfer of the properties to the plaintiffs could be that the first defendant is left with "but a fraction of his asset base" (for example, if the amount ordered as a condition of the acceleration of the plaintiffs' expectations in relation to the properties is modest and there is an almost matching CGT liability). It is submitted that that would plainly be an inequitably harsh result. It is in that context that the first defendant has sought to rely on evidence as to his own financial position (an affidavit sworn by him on 3 September 2018 as to his assets, liabilities, income and expenses).

• Objection to receipt of such evidence

1. Prior to the commencement of the re-opened hearing, an application was made by the plaintiffs for an advance ruling, pursuant to s 192A(a) of the Evidence Act 1995 (NSW), seeking to exclude the first defendant's affidavit of 3 September 2018. I heard that application on 11 October 2018 and declined to make such an order. I did not provide separate reasons for the ruling at that time. For completeness, I do so now.
2. It was not suggested that the first defendant's financial position would not be a relevant factor to take into account when considering the relief to be granted; nor that the evidence would not have probative value. Rather, the basis for the advance ruling was that the probative value of the first defendant's evidence was substantially outweighed by the danger that the first defendant's evidence might be unfairly prejudicial to the plaintiffs and/or result in an undue waste of time contrary to s 135(a) and (c) of the Evidence Act.
3. The unfair prejudice identified by the plaintiffs was said to be the result of what the plaintiffs submitted was a deliberate tactical decision by the first defendant not to adduce evidence as to the first defendant's assets and income at the principal hearing of this matter (see T 11/10/18; 3.29). It was submitted that this had the consequence both that the plaintiffs were, in the time available, unable properly to test any such evidence (by way of discovery, subpoenas and cross-examination) and also that the first defendant would be permitted "the unwarranted advantage" of being able in substance to "rerun" part of their defence of the proceedings on a different basis.
4. The undue waste of time was said to arise because of the range of evidence and issues that it was then contemplated were to be the subject of cross-examination and submissions at the re-opened hearing (then fixed only for three days from 19-21 November 2018). Complaint was made that at no time in the course of the submissions of the parties prior to the making of orders for the re-opening of the hearing had the first defendant indicated that he would seek to adduce evidence of his financial circumstances "having declined to do so prior to 14 August 2017". The plaintiffs argued that providing them a fair opportunity to test this evidence, "even if possible", would have the likely result that there would not be time properly to argue the other matters that fell for decision in the re-opened hearing.
5. In support of their application, the plaintiffs relied on two affidavits, sworn 17 September 2018 and 3 October 2018 respectively, by their solicitor, Mr Michael Fitzgerald, to the second of which affidavit were exhibited copies of a notice to produce and subpoenas issued to the defendants and the first defendant's accountants and siblings "to safeguard against the prospect that the plaintiffs' application is refused" (as it ultimately was).
6. It is not necessary here to set out the text of s 192A(a) of the Evidence Act, nor to do more than note the authorities referred to in the submissions then put forward by the plaintiffs as to the making of advance rulings under that provision (namely, NA & J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering Water Management Act 2000 (No 4) [2012] NSWLEC 120 at [40] per Biscoe J; Lambert Leasing Inc v QBE Insurance Australia Ltd [2012] NSWSC 953 at [11]-[13] per Stevenson J; Beslic v MLC Ltd [2015] NSWSC 908 at [33] per Robb J).
7. As adverted to above, the plaintiffs accepted that the order made on 14 May 2018 for the re-opening of the hearing to permit evidence (including expert evidence) to be adduced, and further submissions to be made, as to the final orders to be made in these proceedings permitted the first defendant to adduce evidence relevant (within the meaning of s 55 of the Evidence Act) to the making of final orders in these proceedings; and that the first defendant's 3 September 2018 affidavit was potentially evidence of that kind.
8. The plaintiffs, however, submitted that the application of s 135 to that evidence must take into account the context in which the orders of 14 and 25 May 2018 were made, and the first defendant's decision not to adduce this evidence prior to the hearing of 14 August 2017.
9. In particular, the plaintiffs submitted that the first defendant's financial circumstances was relevant to the question of proportionality and relief to be determined at the full hearing of the matter; and that the decision not to adduce such evidence by the first defendant was deliberate. In those circumstances they submitted that the first defendant ought not now be permitted to re-exercise this earlier decision, to the prejudice of the plaintiffs.
10. I took the view, when the application for the advance ruling was made, that the plaintiffs had chosen to open up the question as to the financial consequences of the making of orders of the kind that I had contemplated (in the words I then used, to "open up this can of worms") and that prejudice of the kind that had been adverted to could be met by a timetable that permitted the issue of notices to produce/subpoenas and by allowing further time for such evidence to be tested at the re-opened hearing. It seemed to me that, having themselves chosen not to put forward at the principal hearing evidence of the kind that the plaintiffs were now seeking to adduce at the re-opened hearing (albeit that the plaintiffs say this was because orders of the kind I had contemplated had not been foreseen at the time of the principal hearing and were not raised on the then pleadings), it did not lie in their mouths to seek to deny the first defendant an opportunity to adduce relevant evidence of this kind. I was of the view that the probative value of the evidence was not substantially outweighed by the danger that the first defendant's evidence might be unfairly prejudicial to the plaintiffs and/or result in an undue waste of time contrary to s 135(a) and (c) of the Evidence Act and I declined the relief then sought.
11. At the re-opened hearing, the plaintiffs again took issue with reliance by the first defendant on this evidence, in essence as a pleading issue. They note that the first defendant did not plead (and has not amended to plead) in his defence the material fact that he would be "left with nothing" if orders were to be made in favour of the plaintiffs.
12. The plaintiffs point out that, at the time of the principal hearing, they made clear that they did not acquiesce to the first defendant's case being "enlarged" in this fashion, pointing to the following submission made in the plaintiffs' 2 October 2017 reply submissions (at [329]) in response to the submission made for the first time in the first defendant's closing submissions to the effect that he would be left "without any assets at all and no source of income": [The first defendant] nowhere states in his evidence that without access to the farms he would be left without both assets and income. He has plainly been able to afford substantial legal fees, including the involvement of senior counsel in both his criminal proceedings and these proceedings, from the commencement. If [the first defendant] wished to establish the foundation for this submission, it was incumbent upon him both [to] plead it and support it with evidence, so that it could be subject to forensic testing by the plaintiffs and to the scrutiny of the Court. For this reason alone, the plaintiffs submit that this submission may not be made by the defendants. [my emphasis]
13. The first defendant's position in this regard is that: … it was open to infer his financial position was parlous from the evidence of the earlier trial, and his later affidavit could hardly have been too surprising. The first defendant spent money without restraint when the money was available, and the plaintiffs well know this for they were significant beneficiaries of that spending.
14. Cases are of course to be decided on the issues framed by the pleadings (assuming the case is conducted on pleadings, as was the present) (see Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 (Ingot) where Ipp JA noted that the rule that, in general, relief is confined to that available on the pleadings is a rule that secures a party's right to a basic requirement of procedural fairness though there are instances where a party will be permitted to depart from the pleadings during the hearing (see Gould v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 at 517; [1916] HCA 81 per Isaacs and Rich JJ; Ingot per Ipp JA, citing Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11 (Banque Commerciale) per Mason CJ and Gaudron J at 286-7).
15. The general rule is that a defendant must plead in the defence all the material facts on which reliance is placed (see Sir Jack Jacob and Iain Goldrein, Pleadings Principles and Practice (Sweet & Maxwell, 1990) 48). Rule 14.14(2)(a) of the Uniform Civil Procedure Rules 2005 (UCPR) requires a defendant specifically to plead, among other things, any matter that, if not pleaded specifically, may take the opposite party by surprise (see Tyson v Brisbane Market Freight Brokers Pty Ltd (1994) 120 ALR 1; [1994] HCA 67 ; Banque Commerciale). Furthermore, there are instances in which effect may properly be given to defences that have not been pleaded (see Pirie v Richardson [1927] 1 KB 448 at 453
16. I accept that a failure to plead material facts relating to a particular ground of relief may raise concerns in relation to procedural fairness. So, for example, it has been recognised that raising questions regarding a particular ground of relief not strictly pleaded may mean that the party to which the questions are put has not been given any notice and thus the opportunity to respond accordingly (see Banque Commerciale at 286).
17. Here, the relevant evidence sought to be relied upon by the first defendant (as to his financial position) goes to the question of final relief; in particular, the financial impact of acceleration of the plaintiffs' expectations in relation to the properties (absent an order for compensation) or, perhaps, an anterior question as to whether a declaration of constructive trust should be made at all (as opposed to the fashioning of equitable relief in some other way). As I see its relevance, such evidence goes to whether final relief of the kind sought by the plaintiffs would be "wholly disproportionate" to the detriment suffered (see Ambridge Investments Pty Ltd (in liq) (rec apptd) v Baker [2010] VSC 59; Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 413; [1990] HCA 39 (Verwayen)) or "out of all proportion" to the detriment (see Priestley v Priestley [2017] NSWCA 155 at [164] per Emmett AJA (with whom McColl and Macfarlan JJ relevantly agreed) (Priestley)).
18. In Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84 (Delaforce) at [4], Allsop P, as his Honour then was, (in a passage I extracted at [1187] in the principal judgment), acknowledged that proportionality of the claimed interest or remedy to the prejudice or detriment was "undeniably a relevant consideration, and sometimes of considerable importance" but his Honour went on to say that it should not be transformed into a "necessary constitutive element of a cause of action to be pleaded or proved by the party seeking relief". His Honour considered that the role of proportionality was better understood as assisting in an assessment whether what is claimed or contemplated to be granted is disproportionate or unjust in all the circumstances. Equally, it might be said that the first defendant was not required in his defence to plead the issue of proportionality as such (i.e., that the grant of the part or all of the relief claimed by the plaintiffs would be wholly disproportionate, or out of all proportion, to the detriment alleged to have been suffered by the plaintiffs).
19. However, where relying on material facts to support an argument as to the disproportionate nature of the relief sought, those would need to be pleaded. The first defendant's defence to the amended statement of claim (which ultimately stood as his defence to the second further amended statement of claim) did plead (in further answer to the claims of the plaintiffs seeking equitable relief and of A's claim seeking equitable relief in relation to Property No 4) (at [158] and [159], respectively), a denial of entitlement to any such relief and various matters by reason of which the first defendant said that equity would not intervene. Those matters did not include any pleaded fact as to the first defendant's financial position.
20. In Mercanti v Mercanti [2015] WASC 297 (Mercanti), an application by the defendants to amend their defences was made at the conclusion of the trial (and resisted by the plaintiffs). Le Miere J, having noted the equivalent rules in that jurisdiction as to the pleading containing a statement of material facts on which the party relies in defence and that there be pleaded any matter which if not specifically pleaded might take the opposite party by surprise (see [191]), was of the opinion that the defendants were not required to plead the maxim "he who seeks equity must do equity", nor the way in which the pleaded facts and the maxim would operate, but noted that the defendants were required to plead the facts upon which they intended to rely (see [193]).
21. His Honour gave leave for the amendment of the defence to plead that if any relief were granted it should be conditional upon matters (namely, the procuring of releases in favour of the defendants from any liability pursuant to security given by one of the defendants to support liabilities for the business, in the case of one of the defendants, and from obligations under a lease executed in connection with the business, in the case of the other defendant), though stating that those were not matters which the defendants were required to plead by the rules (see at [197]). His Honour was of the view that the plaintiffs were not prejudiced by the defendants' delay in pleading the matters then sought to be pleaded (see at [198]).
22. As the plaintiffs in the present case emphasise, there has been no application by the first defendant to amend his defence to plead any material fact going to the claimed disproportionality of the relief sought by the plaintiffs by reason of his financial position.
23. It cannot be said, however, that by the re-opened hearing, this was a matter that would have caught the plaintiffs by surprise. It had been raised (and objections had been taken thereto at the tine) in submissions as to relief in the principal hearing. Had the evidence remained closed at that point (and the question of relief only been the subject of further submissions), the complaint here made by the plaintiffs would have had more force. However, with the re-opening of the hearing (on the plaintiffs' application, unsuccessfully resisted by the first defendant) the opportunity for further evidence to be adduced arose. The first defendant's financial position was squarely raised in the first defendant's evidence filed in advance of the re-opened hearing (that being the evidence that the plaintiffs had sought unsuccessfully to have rejected well in advance of the re-opened hearing) and the plaintiffs were clearly able to (and did in cross-examination) test that evidence.
24. I remain of the view that it was appropriate, in the interests of justice as between all of the parties, for that evidence to have been admitted. What might have taken the plaintiff by surprise at the close of the principal hearing surely cannot have done so by the time of the re-opened hearing; by which time the plaintiffs had been given ample opportunity to test that evidence. Hence, while they certainly did not acquiesce in any enlargement of the pleaded case, they were not in my opinion prejudiced in the relevant sense by the receipt of that evidence. In any event, since at the end of the re-opened hearing I was left with considerable doubt as to whether the first defendant had painted a complete picture of his financial position, that evidence is not determinative of the questions raised as to the relief now to be granted and hence (other than perhaps in relation to costs) nothing turns on its admission.

• Substance of the first defendant's evidence as to his financial position

1. In his 3 September 2018 affidavit, the first defendant deposes that his intention when making the agreement for $100,000 rent with E Co was that he would "at some point in the future raise the rent back to $300,000 or possibly more" (see at [5]). (The plaintiffs say that this was presumably his subjective uncommunicated intention. There is certainly no evidence that this was ever communicated to them.)
2. As to his assets, the first defendant deposes that he: owns the sole share in the company (to which I will refer as H3 Co, and will add this to the schedule of pseudonyms kept confidentially in relation to this matter; it not having been referred to in the principal judgment) which is the registered proprietor of the property referred to in the principal judgment as House No 3 (which he says is worth between $550,000 and $590,000 and is occupied by a long-standing friend, rent-free - see T 332); owns 2 motor vehicles together said to be worth $61,255; has $534,448.74 in two bank accounts (the quantum of which has since then been reduced according to the first defendant's oral evidence in cross-examination, as to which see below); and owns 200 head of cattle on the properties plus unquantified progeny (a claim denied by B). As t that last aspect of the matter (the 200 head of cattle), the first defendant accepted in cross-examination that he had not included in his cross-claim any claim for the 200 head of cattle that he said had been run as part of the herd run by E Co and said that that was an oversight on his part (T 4.11.27); nor had he ever claimed the progeny of those cattle (T 412). He said that he had just wanted those 200 head of cattle for his primary producer status (T 412).
3. As to his liabilities, the first defendant deposes that he has the following expenses: $5,214 per month for the apartment in Sydney in which he now resides; Council rates on the properties the subject of these proceedings, the assessment for FY 19 being $17,710.14; Council rates and landlord's insurance for House No 3; motor vehicle insurance; and daily living expenses such as food, clothing and petrol.

• Cross-examination of the first defendant

1. The first defendant was cross-examined as to the evidence he had given in respect of his assets and liabilities; in effect to suggest that he had not painted a complete picture of those assets and liabilities and that, if his position is as he now says it is, then he has expended substantial sums of money in the past few years for which he cannot now account.
2. It was clear from the cross-examination that some of the information in the first defendant's affidavit was incomplete. For example, there was no reference in his affidavit to F Co despite the fact that the first defendant is the sole shareholder of that company (and the first defendant's solicitor is its sole director). In cross-examination, the first defendant said that: he did not realise he was a shareholder; he does not recall setting it up; and that it has "never been utilised at this point" (T 334-335). Nor was there any reference to the trust of which F Co is trustee, which the first defendant accepted he controls (T 336). I interpose to note that this was a discretionary trust set up by the first defendant by Deed of Settlement 20 August 2013 (Exhibit BL), and referred to by him as the grandchildren's trust; and that under the first defendant's 22 August 2013 will the residue of his estate is to be left for the benefit of that trust; it being suggested for the first defendant at the principal hearing that his sons hade misconceived the effect of the 2013 will because they may potentially receive a distribution out of that discretionary trust. The first defendant's evidence is that at present no amount has yet been settled on that trust (because the present proceedings "disrupted" that - see at T 349.28).
3. Nevertheless, other than pointing to the incompleteness of the evidence in this regard, nothing turns on the fact that there was no disclosure of the first defendant's shareholding in F Co, since it does not appear to be suggested that it holds any assets. The first defendant was not aware of any shares other than in H3 Co and F Co (T 355.30).
4. The first defendant (who says he "wouldn't have a clue" how much tax he has had to pay in last four or five years (see T 336.29) was taken through his tax returns produced on subpoena by his accountants (Exhibit AX); from which it can be seen that from the financial year ended 2016 the first defendant was no longer claiming any primary production losses (see T 341ff) (relevant to the question when his status as a primary producer ceased) (see the tax returns Exhibit BM).
5. As to the first defendant's cash resources, the first defendant was cross-examined as to 3 bank accounts held by him: two with Westpac (ending in "139" and "420") respectively and one with Rabobank (ending in "6-00"). The first defendant referred to the Westpac "420" account as his normal trading account (T 370.12 375.38) ("this is the one I pay my rent and bills out of" - see T 382.50). The Rabobank account seems not to have been a trading account (T 383ff) (and was the account through which the first defendant had a $4 million loan facility used in part to make a $3 million loan to a company associated with his brother - T Co, see below). The first defendant accepted that his 3 September 2018 affidavit should be understood as meaning that he has no available cash sources anywhere else than disclosed in this affidavit (T 346.29).

Submissions by the plaintiffs as to the first defendant's financial position

1. In their submissions, the plaintiffs point to the evidence given by the first defendant at the principal hearing, where, in cross-examination he agreed that: (leaving aside the vendor finance for Property No 4) he received moneys from the Sydney Family Trust to purchase each of the farms (28/8/2017; T 718.28); on 30 June 1999, the directors of the company which was the then trustee for the Sydney Family Trust (his two brothers) resolved that he was to receive the benefit of a trust corpus application of $13,438,266 (28/8/2017; T 719.4; Exhibit H); on about 5 April 2002, the directors of the said trustee company (by then his two brothers and his sister), resolved that the first defendant was to receive the benefit of a trust corpus application of $14,401,687 (28/8/2017; T 719.18; Exhibit H); for the financial years ending 30 June 2003 to 30 June 2008 (inclusive), he received capital sums distributed from the Sydney Family Trust in the sum of approximately $13,990,901 (see Exhibit H); and for each financial year between the years ending 30 June 2002 and 30 June 2012 he received, in addition to capital, a distribution of franked income (28/8/2017; T 725.30).
2. The plaintiffs note that the first defendant did not at the principal hearing dispute that the amounts of income were as shown in documents produced by his Sydney accountant (28/8/2017; T 725.35), which the plaintiffs point out showed franked income that the first defendant received from the Sydney Family Trust in the financial years ending 30 June 2002 to 30 June 2012 (inclusive) in amounts totalling $2,475,606 (see Exhibit H); and that the first defendant agreed at the principal hearing that in mid-2002 he was "cashed up" (28/8/2017; T 728.4).
3. The plaintiffs calculate that the first defendant received a total of $35,132,725.79 over the relevant period from 1999. They also calculate that the first defendant expended some $11,412,054.80 over that period, which leaves an excess of receipts over payments of $23,720,670.99 (taking into account in this regard, the purchase of various of the properties (Properties No 8-12); the purchase of homes for B and C; the loan (partly repaid) to T Co; the sale of Properties No 8 and 12; the acquisition of House No 3 and an amount of $400,000 paid to the ATO in June 2014). The plaintiffs accept that a portion of the surplus moneys would have been expended on: legal fees; monthly payments to the plaintiffs from 2002 to 2010; and the first defendant's living expenses (though they note that the first defendant was in gaol for four years of this period and say that nothing in his evidence regarding living expenses indicated a lavish lifestyle).
4. What the plaintiffs draw from this is their suspicion that there remain funds somewhere available to the first defendant (noting that there is no explanation, if it be the case that the first defendant has spent the whole of his substantial inheritance, as to what was done with a large amount of inheritance (and see the cross-examination of the first defendant on this issue, to which I have referred above).
5. The plaintiffs submit that if (absent a pleading of that material fact) the first defendant is permitted to argue that the making of orders should be influenced by his contention that he would be left without assets or income then the onus of establishing that contention lies on the first defendant, as he is making the assertion and he has the sole means of knowledge (citing Paino (No 2) at [74]); and that he has not discharged that onus.
6. The plaintiffs submit that the first defendant has not been frank about his assets for the following reasons: first, that he did not raise this an issue in dispute well in advance of the hearing (it being said that had he done so "his financial affairs would have been the subject to the degree of rigorous scrutiny to which the plaintiffs have been exposed"), thus inhibiting the plaintiffs' ability to investigate his affairs in the time available; second, that the first defendant did not, in his evidence, explain the "obvious" question said to arise therefrom (namely as to where, if his assets were as diminished as he claims, he has spent his money) other than in relation to the loan to T Co; third, that the email of 28 November 2018 from the accountant's office to the first defendant's solicitor, which contained the statement "BTW there should be some additional funds coming in soon" (part of Exhibit BS) was suggestive of other funds available to the first defendant not disclosed in the evidence (though this was denied by the first defendant at T 469.18ff); and, fourth, the first defendant's statements in cross-examination and re-examination, on three occasions, in effect that his siblings had bought him an apartment to live in after he was first released from gaol (T 466.50; T 467.17; T 474.2).
7. As to the last of those matters, it is submitted that the first defendant only recanted his evidence after he realised the consequences for his case of what he was saying. It is noted that on the first of those occasions it was the first defendant who volunteered that it was "financed by my brothers" (see T 466.44). It is submitted that it is especially significant that, in re-examination, the first defendant again stated that they bought the apartment (which the plaintiffs submit was a spontaneous utterance which is likely to be the truth) (T 474.7ff).
8. The plaintiffs thus submit that, even if an affirmative finding is not made that the first defendant has not been truthful about the true extent of his assets and available financial resources, there is enough suggestive material which has not been explained by him that the Court could not be satisfied that he would indeed be left without assets.
9. Furthermore, the plaintiffs note that the first defendant, on his own evidence, could choose to reside in House No 3 and he accepted that his own siblings would at least wish to look after him (T 409.20; 420.46).

The first defendant's submissions as to his financial position

1. The first defendant maintains that his evidence as to financial circumstances should be taken into consideration and that it establishes that the making of orders for the transfer of the properties without compensation in the order of that which I had contemplated would operate to his significant detriment such that it would be an unjust result in all the circumstances of the case.
2. As to the matters raised by the plaintiffs in relation to his financial position, the first defendant submits that the evidence shows that, other than his interest in the properties and the farming business (that it was expected he would retain until his death), he has no remaining assets beyond his interest in House No 3. It is submitted that, even were I not to be satisfied that that is the case, there is no less an obligation on the plaintiffs to pay the amounts that the first defendant contends should be paid to him and "no reason in law or logic why the first defendant should be dispossessed of a valuable asset at less than its price simply because he is or is not wealthy".
3. Pausing here, it should be noted that there is at present no "obligation", as such, for the plaintiffs to pay the amounts in question to the first defendant; rather, that was simply what was contemplated by way of conditions to be imposed on the relief to be granted as at the time of the principal judgment. More relevantly, the basis on which it was contemplated by me that the first defendant be required to transfer the properties had nothing to do with his wealth or otherwise; rather, it was a consequence of my view (shared, it would seem, by all the parties) that the relationship between the family members had irrevocably broken down - namely that the plaintiffs' expectations should be accelerated but with orders to compensate the first defendant for the fact that those expectations were being accelerated.
4. The only relevance I see of the first defendant's financial position is to the extent that it can properly be taken into account when determining whether any proposed relief to make good the plaintiffs' expectations would be wholly disproportionate, or out of all proportion, to the detriment suffered by the plaintiffs from the resiling by the first defendant from the expectations that had been encouraged and not disabused in his sons as to the holding of the properties and operation of the farming business on those properties during his lifetime and those properties becoming the sons' properties after his death. (The plaintiffs, of course, maintain that it cannot be taken into account even for that purpose because it was not pleaded as a material fact in the defence. I have already considered their submissions on this issue.)

Conclusion as to first defendant's evidence as to his financial position

1. As set out earlier, I have admitted the first defendant's evidence as to his current financial position (over the plaintiffs' objections). However, I am not persuaded that I can rely on it as an accurate or complete account of his position. That is because the bank statements themselves show transfers between various accounts the explanation for which is not clear.
2. On more than one occasion, the first defendant made reference to his forgetfulness or said that his memory was terrible (see, for example at T 359.15; T 363.49; T 364.24; T 381.20), evidence consistent with that he gave at the principal hearing. That may well be so; but, if so, it was incumbent on him (if he wished to rely on his present financial circumstances) to adduce documentary evidence from which his financial position could be clearly discerned. The confusion surrounding the ownership or otherwise of a property (the suggestion being that it was Apartment No 1) financed or purchased for the first defendant by his brothers (and the commotion in the courtroom when that evidence was given), taken with the unexplained note about other funds soon becoming available and the series of transfers between bank accounts for which the first defendant had no real explanation, leaves a number of questions in the air as to the first defendant's financial resources. Whatever the position as to the first defendant's siblings (i.e., whether they are, or would be, in a position to support the first defendant, in circumstances where they too apparently benefited from a substantial family inheritance in an amount corresponding to the first defendant's inheritance) is not to the point (though I do not accept the first defendant's protestations in this regard). What is clear is that the first defendant's siblings have been supportive of him throughout the hearing and that he has been remarkably generous to one or more of them in the past (in particular his now deceased brother, through the T Co Loan). It beggars belief that his siblings would not step in to assist him if they were in a position to do so - and the proposition by the first defendant to the effect that they might throw him a burger when he was in the gutter seemed to me to be pure bravado on his part. That said, there is no basis on which I could make a positive finding on the evidence before me as to the financial ability of the siblings to assist the first defendant and certainly none on which I could make any finding that there are assets held by them or controlled by them on behalf of the first defendant (which seems to be what the plaintiffs surmise is the case).
3. However, it also seems to me not insignificant that the second defendant, who holds the first defendant's power of attorney and is a signatory over his various cheque accounts, and who was in Court throughout the whole of the re-opened hearing, was not called to give evidence as the first defendant's financial position (nor was there any evidence from his accountants in that regard).
4. Thus, in the circumstances, I cannot be confident that the whole picture as to the first defendant's assets has been put before the Court.

The plaintiffs' submissions as to the relief to be granted

1. Although the plaintiffs do not appear to take issue with my conclusion that relief on the claim based on a joint endeavor constructive trust would effectively be subsumed into the relief I proposed to grant in relation to the sons' jointly made proprietary estoppel claim, and they accept that it is not necessary for present purposes to consider A's claim separate from the sons' jointly made claim and that of E Co, they do cavil with the proposition that E Co's relief is in effect subsumed by the relief to be provided in favour of the individual plaintiffs (see the principal judgment at [62]).
2. The plaintiffs emphasise that there were three conceptually distinct proprietary estoppel claims made in the proceedings: the sons' jointly made claim; E Co's separate claim; and A's (also separate) claim; each of which succeeded. They argue that each of E Co's claim, on the one hand, and the sons' joint claim, on the other, needs first to be considered in isolation before consideration is given to whether or not the relief granted in respect of the latter subsumes any relief to be granted in respect of the former. They point out that they did nor plead, nor did they make any submission at trial, to the effect that any relief in respect of E Co's proprietary estoppel claim would be subsumed in the relief to be granted to the sons (referring to [467]-[489] of the plaintiffs' closing submissions of 21 September 2017 and [271]-[292] of the plaintiffs' closing submissions in reply).
3. The practical significance of the plaintiffs' submissions in approaching the question of E Co's relief in isolation first, as I understand it, is that it highlights the limited nature of the rights that (absent acceleration of the sons' expectations) the first defendant, as registered proprietor, would retain in relation to the properties (and, hence, the basis on which the plaintiffs say that any order for payment of a sum notionally representing future rent for the balance of the first defendant's life expectancy should be imposed).
4. The plaintiffs submit that, having made out the elements of its claim in proprietary estoppel, E Co is entitled to relief against the first defendant and that, prima facie, E Co is entitled to have made good the expectation created and encouraged by the first defendant's conduct. It is submitted that there should be a declaration that E Co's leasehold interest in the farms was held on constructive trust by the first defendant for E Co since the date of the first notice of termination dated 27 June 2013 (see Outline of Closing Submissions dated 12 December 2018 at [23]). Apart from the question of the date from which a constructive trust should be found to have arisen (which I will deal with in due course), one conceptual issue which that submission throws up is the identification of what the first defendant would in those circumstances be found to be holding on trust. The plaintiffs' submissions speak in terms of "E Co's leasehold interest in the farms" being held on constructive trust. As I understand it, what is meant by that is that, during his lifetime, the first defendant would hold his freehold interest in the land subject to E Co's leasehold interest under the agreement for lease that was in place as at 27 June 2013, that lease not being able to be terminated by the first defendant during his lifetime.
5. Prayer 1 of the relief claimed in the second further amended statement of claim dated 4 September 2017 is not framed in precisely those terms, rather it seeks a declaration that the first defendant holds [relevantly, the farms and the farming equipment and machinery owned by the first defendant] on trust for A, B and C "or alternatively [E Co]". Prayer 4 of the relief there claimed relevantly seeks "[f]urther or alternatively" an order that the first defendant perform the trust the subject of the declaration in prayer 1 "by transferring to the joint ownership of [A, B and C]" [note, not E Co] the farms and the farming business assets (i.e., the farming equipment and machinery). Prayer 6, again prefaced by the words "[f]urther or alternatively" seeks an order that the first defendant transfer to the ownership of E Co the farms and the farming business assets. No such relief is sought in relation to the shares in E Co or EM Co.
6. Obviously enough, an expectation on the part of E Co as to an entitlement to retain a leasehold interest in the farms (on the terms of the existing agreement for lease unless otherwise varied by agreement - as the plaintiffs submit) during the first defendant's lifetime would not support an order for the transfer of the freehold interest in the land to E Co. Thus prayer 1 must in context be referring to E Co's leasehold interest insofar as it seeks the alternative relief in favour of E Co.
7. That seems to be made clear by the closing submissions for the plaintiffs in which it is submitted that, to give effect to the expectation created and encouraged by the first defendant in respect of E Co, the first defendant would hold E Co's leasehold interest in the farms on trust for E Co "and would be "estopped from terminating the Agreement for Lease, and evicting E Co from the farms, before the first defendant's death" (see submissions at [29]). The estoppel there referred accords with the relief sought in prayers 15 and 16 of the second further amended statement of claim, namely, for a declaration that the agreement for lease does not confer on the first defendant any rights as lessor to evict E Co from the farms; and, further or in the alternative, an order that the first defendant be restrained from exercising any rights under the agreement for lease to terminate it or to evict E Co from the farms.
8. As to the separate position of the sons on their jointly made proprietary estoppel claim, the plaintiffs again argue that the prima facie measure of relief is to give effect to the expectation created and encouraged by the first defendant and frame that expectation in similar terms (though here clearly meaning the freehold interest in the farms), namely that the first defendant would "hold" onto the farms for the sons until the first defendant's death, and be estopped from terminating the agreement for lease and evicting E Co from the farms, before the first defendant's death.
9. The plaintiffs' submission is that the sons should be recognised to have held a proprietary interest in the farms from no later than 27 June 2013 (my emphasis), that being the date the second defendant served the first notice of termination of lease on E Co '(and, it is said, most likely in the period between 21 October 2009 - the date of the initial confrontation as to the first defendant's criminal offending - and November 2011, the date that B and the first defendant agreed to the "second lease agreement" and that the latter would move his own cattle operation to Property No 8 (see the plaintiffs' submissions at [116]). At [116] of their closing submissions, the plaintiffs submit that the date the constructive trust came into existence is the date from which the equitable interest in the land arises. (Elsewhere in the plaintiffs' submissions there seems to be a tension between the submissions that the trust the subject of a declaration nunc pro tunc would be from the time the trust came into existence "being the time it would first have been unreasonable for the first defendant to have resiled from the expectation" (see outline of submissions at 3.)
10. The plaintiffs submit that the date on which it became unconscionable for the first defendant to depart from the plaintiffs' expectation in relation to the agreement for lease was some time between November 2011 (when the agreement was reached that E Co would in effect resume the payment of rent that had been suspended by agreement in 2008 due to the drought and would pay a lease fee of $100,000 per annum, inclusive of rates and insurance, and that, in addition, E Co would pay electricity, repairs & maintenance; and motor vehicle registrations - see [321] of the principal judgment) and the disappointment of the expectation on 27 June 2013 (the date of service of the notice of termination of the agreement for lease) (see closing submissions at [33]). (However, in their proposed orders, the plaintiffs postulate a third date- namely, the date of the confrontation with their father as to his criminal offending in October 2009.)
11. The plaintiffs say that, in that period, they remained committed to the joint family business "despite the egregious breach of trust visited on the plaintiffs by the first defendant" albeit on a basis of a separation of personal affairs; and that at each stage following this it was the first defendant (not the plaintiffs), who sought to sever the parties' economic relationship (it being his choice: to separate his personal grazing business in Property No 8 in November 2011; to attempt to evict E Co from the properties by the issue of the termination notice on 27 June 2013; and to seek to disinherit his sons by a revised Will on 22 August 2013 (after establishing his discretionary trust - the F Trust on 20 August 2013).
12. The plaintiffs submit that a finding that the first defendant holds, and has held, the properties on trust for the plaintiffs (by which I understand them to refer to this being as to the freehold for the sons and as to the leasehold for E Co) has important consequences on the question of final relief (see closing submissions at [122]).
13. They point to the duty of a fiduciary to act in the exclusive interests of those to whom fiduciary duties are owed (citing Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 at [11]-[12]; [2006] FCAFC 44; and referring also to Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 at 407-409; [1929] HCA 24; to the recognition that this is a duty of "absolute and disinterested loyalty" (citing Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 104; [1984] HCA 64, quoting Phelan v Middle States Oil Corporation (1955) 220 F 2d 593 at 602-603; Bristol & West Building Society v Mothew [1998] Ch 1 at 18, Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [174]; [2012] FCAFC 6); and noting that the duty of loyalty is enforced in equity by means of two overlapping "proscriptive obligations" (referring to Friend v Brooker (2009) 239 CLR 129 at [84]; [2009] HCA 21, citing Breen v Williams (1996) 186 CLR 71 at 93-94, 113, 135-137; [2009] HCA 57; and Pilmer v Duke Group Ltd (In liq) (2001) 207 CLR 165 at [74]; [2001] HCA 31), namely, the "conflict rule" and the "profit rule".
14. The plaintiffs further make reference to Westpac Banking Corporation v Ollis [2008] NSWSC 281 where Einstein J at 26, in relation to the duties imposed upon a constructive trustee, referred to the observation by Professor Scott in the Law of Trusts, 3rd ed, Little, Brown & Co, 1967 (at 462) that, in the case of a constructive trust, the duty of the trustee "is merely to surrender property".
15. The plaintiffs submit that under their Pathway A (i.e., the separate declarations of constructive trust in favour of each of E Co on the one hand and the sons, collectively, on the other), although there would be no immediate transfer of the freehold title in the properties, the nature of the trust obligations imposed upon the first defendant leaves no room for the pursuit of private profits. They argue that, as a consequence, there is no basis for the making of orders for payments from the plaintiffs to the first defendant predicated on the ability of the first defendant to earn such profits arising from the use of trust property.
16. Emphasis is placed on the fact that the first defendant did not: plead (including any pleading of material facts upon which to found such a case); adduce any evidence to support; or make any submission at the trial to support: either a case or any contention to the effect that there should be a "clean break" with the consequence that the Court ought make an assumption based on a hypothetical that E Co and the first defendant would agree to "market rent" ([145] Outline of Submissions). Nor, it is submitted, did the first defendant plead, or adduce evidence, or make any submission to support a case that if there were to be a "clean break" between the sons and the first defendant in relation to the operation of the family farming business, and the clean break encompasses the buy-out by the sons of the first defendant's shares in the relevant family companies, it would not be unconscionable for the first defendant to require the repayment of those moneys (assuming a reasonable repayment regime to permit this to occur without jeopardising E Co's ongoing business or farming operations) (cf [70] of the principal judgment); or that it would not be unconscionable in all the circumstances for the first defendant to depart from the expectation that E Co (and his sons) were to have the benefit (indefinitely or during his lifetime) of the advance made to E Co or the transfer of the cattle (and hence require the repayment of the sums he has made available to the company over the years and recover the book value of the cattle) (cf [70] of the principal judgment); or that a "clean break" is necessary premised on the hypothetical that "if the assumption is that the family business arrangement is now brought to an end, then there is no reason to assume that the first defendant would not in those circumstances (had he retained ownership of the farms) have sought a market rent for the properties" (cf [75]; [77] - [80] of the principal judgment); or that, as a term of the relief to be granted under which the sons' interest in the farms is to be accelerated, an order should be made that the first defendant's shares in E Co and EM Co be acquired by the sons (at a price to be determined by an independent valuation of the shares) would be appropriate (cf [78] - [79] of the principal judgment); and/or that, as a term of relief, E Co should pay to the first defendant the book value of the cattle transferred to E Co in 2003, and the advances made to E Co over the years (without interest) on a basis that does not interfere with the reasonable operations of E Co's ongoing farming business (cf [79] - [80] of the principal judgment) (there paraphrasing, in effect, the reasons I had given as to why I considered the proposed conditions to be appropriate).
17. As to the pleading issue, it is relevant to note that the relief claimed in the second further amended statement of claim sought, among a variety of other relief, a declaration that the first defendant holds the properties (and the farming equipment and machinery) on trust for the sons or alternatively E Co. In the defence to the further amended statement of claim, in answer to the claims of the plaintiffs seeking equitable relief the first defendant (at [158]) denies any entitlement of the plaintiffs or each of them to any such relief and further says that equity would not intervene by reason of the matters pleaded. There was, however, no pleading to the effect that relief should be refused on the basis that it would be wholly disproportionate by reference to the first defendant's financial position, nor was that put in issue as a material fact.
18. The plaintiffs say that they conducted the case on the pleadings and did not acquiesce in any enlargement of the pleaded case (giving in support of this proposition two examples that it is not necessary here to summarise; neither relating to the particular complaints now made).
19. As to Pathway B (acceleration of the expectation) the plaintiffs submit that an alternative way of making good the relevant expectation (and one which would not have the effect of accelerating the sons' interest in the farms) would be the imposition of a constructive trust over the properties in favour of the sons and the first defendant being restrained from terminating the lease to E CO; and that in that event the only practical benefit of the farms to the first defendant would be the ongoing receipt of rent. In those circumstances they say that acceleration of the sons' interests in the land would not be out of all proportion to the equity established by the sons (referring to [76] of the principal judgment). Their position is that the legal and equitable rights of the first defendant mean that he is entitled, on the declaration of trust, over the properties to no payment from the plaintiffs other than payment pursuant to the agreement for lease as last varied, and that even in that case, he holds (and from the date the trust came into existence, held) the profit from such agreement on trust for the plaintiffs (see [233] Outline of Submissions). In the event that "acceleration" relief is not granted, then the plaintiffs submit that orders ought be made prohibiting the first defendant from encumbering, alienating or otherwise dealing with the properties to preserve the plaintiffs' rights until his death.
20. If there is to be an acceleration, then the plaintiffs (in their 31 October submissions) submitted that the choice of discount rate, being a rate of compound interest, is not, as submitted by the first defendant, the 3% and 5% rates applied in the calculation of common law damages (which rates, it is said, are to compensate the plaintiff for the time value of money and include little or no risk or inflation component to the discount rate) (see their submissions at [73]). The plaintiffs at that stage submitted that such rates are not appropriate to the net present value of rent on a grazing lease, which is subject to the "well-known risks and variables that apply to the cattle industry" (see 31 October 2018 submissions at [73]) and contemplated that Ms Bateman would opine on this issue as part of her valuation exercise. Ms Bateman did. The discount rate that Ms Bateman used was a 3% discount rate. It is not clear to me whether, in those circumstances, the plaintiffs have revised their position as to the applicable discount rate.

Submissions as to the proposed conditions referred to in the principal judgment

1. The plaintiffs object to the imposition of the conditions referred to in the principal judgment at [1222] (the Market Rent Condition), [1225] (acquisition of the first defendant's shares in E Co and EM Co, to which I will refer as the Share Acquisition Condition); and [1235] (the Book Debt Condition, i.e., payment of sums in respect of the book debts recorded in E Co's accounts in respect of the value of cattle transferred to E Co at book value) on a number of bases.
2. First, that the imposition of such conditions is contrary to legal principle and inconsistent with the maxim "he who seeks equity must do equity". Second, that the recognition in intermediate courts of appeal in Australia that equitable relief may be moulded to recognise practical considerations (such as the need for a "clean break") is "trumped" by, and subject to the application of, the maxim "he who seeks equity must do equity"; and that if regard is had to a practical consideration such as the need for a "clean break" in considering equitable relief, the court cannot arbitrarily impose terms upon a plaintiff, but is restricted to requiring a plaintiff to accept terms which flow from the legal or equitable rights of the defendant to the suit. Third, that the occasion for the clean break arises from the conduct of the first defendant (though the plaintiffs accept that in the typical case it may be that the need for a "clean break" arises "without attributable blame").
3. As to those conditions, the plaintiffs submit as follows.

• Market Rent Condition

1. The plaintiffs submit that, in the event that a constructive trust in favour of the sons were to be declared in respect of the farms (coupled with an injunction restraining the first defendant from terminating the lease to E Co), i.e., their Pathway A, the only practical benefit to the first defendant of his ownership of the farms (given that he would not on that hypothesis have possession of the farms) would be the ongoing receipt of rent; and hence that the only consideration relevant to the imposition of a conditions necessary "to do equity" to protect the first defendant's legal right as the legal owner of the farms, is compensation for the loss of future rent.
2. The plaintiffs point out that, if there is a declaration of constructive trust, the first defendant's two legally cognisable rights, as legal owner of the properties, would be a right of residence and a right to rent. They submit further that the first is not a right in respect of which the plaintiffs would be required to "do equity", i.e., by compensating the first defendant in respect of the loss of this right of residence by reason of: the fact that the first defendant voluntarily moved his residence from the region of the properties to Property No 8 in 2011 and has not resided there since; and that the first defendant has a right of residence in a home which is in substance owned him (House No 3), there being no evidence that he could not share that residence with the long-standing friend who occupies it rent-free, and noting that the plaintiffs owe no equity to her.
3. As to the second, the right to rent, the plaintiffs note that the first defendant sued for past rent on the terms of the agreement for lease as amended, accepting that it had been amended so that he was entitled to sue upon it for past rent. It is submitted that, being bound by a contract, the first defendant could not unilaterally renegotiate the terms of that lease and therefore that the only way that the first defendant could have a legal or equitable right to market rent going forward would be if he were not estopped from exercising his right to terminate the lease. It is submitted that the imposition of the payment of market rent by the plaintiffs to the first defendant is inconsistent with the upholding of E Co's claim for a proprietary estoppel in relation to its tenancy (and subverts the lease agreement).
4. In their 31 October 2018 submissions, the plaintiffs postulated (as I read them, on the scenario that there would be no acceleration) that the position of the parties in relation to rent after final determination of the proceedings (and any appeals) would be as follows: first, that the proceedings being at an end, the parties would be bound by the expectation (as to the operation of the farming business) and an obligation to do equity in accordance with their legal and equitable rights, second that that expectation includes within its scope that the parties work together for the long term benefit of the business "to be inherited by the sons", but in the meantime recognising the legitimate rights of the first defendant as legal owner of the properties; third that, on this hypothetical, the parties would, at the "appropriate time" renegotiate their arrangement to something that was akin to that which was agreed by them in 2003 a "commercial", but not "market" rent; and, fourth, that this starting position would be adjusted in the following ways.
5. First, that the first defendant, himself being obliged to do equity, would concede that his conduct has significantly damaged the farming business and has placed it in such a position that it would require approximately five years to recover after final orders are made unconditional and would, consistently with past dealings as to rent, grant a concessionary rent or a rent holiday to permit the business to recover from that damage (and the present drought, if it continues). Second, that after this period of five years of grace, the plaintiffs would recognise that it made little sense to require the first defendant to pour his earnings from rent back into the properties, and would grant him a rent that gave him "real benefits, albeit being calculated by reference to a figure of rent minus outgoings".
6. Further, it is submitted that, that in making the award for compensation in the nature of rent, it would be inappropriate to require the figure to be calculated by reference to rent less outgoings, as the parties who will in fact be paying the outgoings including those outgoing such as rates and insurance that the plaintiffs submit are typically paid by the land owner.
7. The plaintiffs thus submitted in their 31 October 2018 submissions that, on this scenario (i.e., as I understand it, no acceleration), it would be appropriate for the present lease arrangement to continue undisturbed until the expiry of the "grace period" (five years after the date final orders are made unconditional) and they pointed to the estimate made by Mr Tremain as to the future rates and insurance cost (that it is said would enable a net present value to be calculated). It was submitted that, after the so-called "grace period", and for the remainder of the first defendant's life, an appropriate figure representing the net benefits that would accrue to the first defendant by reason of his legal ownership is the "indicative net rent" calculated by Mr Tremain (see the Joint Valuation Report at p 4). (In this respect, the plaintiffs note the first defendant's evidence that his subjective intention when renegotiating the lease in 2011 was that it would at the appropriate time return to a more commercial arrangement as it had been before the drought in 2008-2011 but point out that he does not there say that he would have demanded market rent.)
8. Pausing here, the submissions made in October 2018 as to the rent position both before and after a "grace period" seem to acknowledge that, even as constructive trustee of the properties, it would not be inequitable for the first defendant to obtain "real benefits" from the rent payable for the properties (see 58 of the 31 October 2018 written submissions) (albeit postulating the hypothetical negotiation process by which it is submitted such a rent would be struck).
9. The proposed orders put forward on 31 October 2018 contemplate payment of an amount representing rent for the period from the making of the orders after the hearing to a date five years after the date of the last appeal being determined of the net present value of a yearly payment of $100,000 "less rent ([sic], presumably "rates") and insurance" set out in Mr Tremain's report p 66 and thereafter the net present value of a yearly payment for net market rent as set out on p 4 of the Joint Valuation Report.
10. In oral submissions, as adverted to earlier, it was seemingly accepted that a notional rent reflecting the historical basis on which rent had been struck would not be inappropriate were there to be an acceleration of the sons' interest or expectation in relation to the properties (though, as I have said, the plaintiffs quantified this in a nominal amount).

• Book Debts Condition

1. As to the amounts recorded in the books of E Co as loan advances (or book debts) (pleaded at [6] and [7] of the cross-claim; and see [158.4] and [158.5] of the defence to the second further amended statement of claim), in respect of which the first defendant claimed the sum of $2,123,253, and the claim in respect of the transfer to E Co of the cattle at book value (for approximately $758,427, being 2838 head of cattle at $267.24 per head), the plaintiffs note that these were rejected ([1234] of the principal judgment) on the basis that the expectation on the part of the sons, encouraged and understood by the first defendant, was that the sums advanced by E Co by the first defendant for the purpose of the family business farming operations (and the transfer to E Co of the cattle at book value) would not be payable during their father's lifetime ([1235] of the principal judgment). It is submitted that it follows from the finding that the first defendant does not have any legal or equitable claim to the repayment of those moneys recorded as loans in the books of E Co that repayment of those moneys cannot be ordered as a condition of relief.
2. The plaintiffs say that, insofar as the conditional finding regarding payment of market rent (at [77]) or the repayment of the "book debts" (at [70]) or the transfer of company shares was predicated on the cessation of the joint farming business, this has not come to an end. The plaintiffs argue that this is not a case where they have undermined the substratum of the joint undertaking. Rather, they say, it is the first defendant who is in substance solely responsible for attempting to bring the parties' relationship to an end: first, by his criminal conduct, and then by resiling from the relevant expectation(s). The plaintiffs say that at all times they attempted to preserve at least the economic relationship with their father and that, to permit him to rely upon the necessity for a "clean break" (assuming that that is not a matter that should be left to the election of the plaintiffs), where that necessity arises almost entirely from his own wrongful conduct, would offend the principle ex turpi causa non oritur actio and the equitable maxim that those who come to equity must come with clean hands.
3. It is noted that the first defendant, not a director and a minority shareholder, never had a right to control the business (and after the confrontation in 2009 did not seek to guide the business, especially after he separated his affairs from those of E Co in late 2011). It is submitted that the first defendant cannot in equity use his own wrong to bring that joint endeavour to an end as the basis for a finding that the plaintiffs are therefore liable to him for an amount in excess of $2 million.
4. The plaintiffs emphasise that it has been held that the first defendant had no right to receive that money before his death. The plaintiffs accept that if might be otherwise if (as they say underpins the reasoning at [70] of the primary judgment) hypothetically the plaintiffs had undermined the substratum of the joint undertaking, but they say that they have not done so. They argue that the purpose of these proceedings is significantly to preserve the business the plaintiffs have made "life changing decision" to bring into being. It is further submitted that although the first defendant intends that the plaintiffs "receive absolutely nothing from the farms" (something I noted at [689] of my principal reasons), the plaintiffs owe no equity to the first defendant's likely beneficiaries of his current Will (such as his sisters).

• The Share Acquisition Condition

1. As to the first defendant's shares in the respective companies and the right to dividends, the plaintiffs submit that their expectation was such that the plaintiffs would inherit the farming business and the "off-farm" investments business. (This was not pleaded as such, although I considered it implicit in the expectations that the plaintiffs had at the relevant time - see the principal judgment at [78]; [1154]; [1225].) The plaintiffs submit that an order in accordance with prayer 11 in the relief claimed in the second further amended statement of claim (which sought not only an order restraining the first defendant during his lifetime from, in effect, disposing of his legal or beneficial interest in the farms and the farming business assets but also an order restraining him from executing any further Wills during his lifetime - and a declaration that his 22 August 2013 Will is null and void) would be necessary if there is no acceleration as it would clearly be inappropriate for the shares in the corporate plaintiffs to fall into the residue of the estate of the first defendant, and under the control of the second defendant and the first defendant's sister.
2. The plaintiffs submit that the appropriate order in this regard is that the first defendant's shares in the corporate plaintiffs are held on constructive trust just as the properties are, and on exactly the same basis (namely, that they were to inherit both the land and the business and, in the meantime, both were to be held for the mutual benefit of the parties, but with an aim of the long term enrichment of the plaintiffs rather than the making of short term profits).
3. As to the first defendant's minority shareholding in both E Co and EM Co, the plaintiffs argue that the fact that the first defendant is a shareholder, and there has been an irretrievable breakdown in the relationship with his sons (of which they reiterate that he was the sole effective cause), does not per se permit the imposition of a condition on the sons that they purchase the first defendant's shares in E Co and EM Co. (In oral submissions an argument was advanced by reference to which such an order might, it was said, be able to be maintained (see T 659.22) as the basis for such an order but the plaintiffs quite rightly note that no such claim was made on the pleaded case nor in the submissions at the principal hearing.)
4. The plaintiffs accept that, during his lifetime, the first defendant would (by reason of his ownership of the shares) have a legitimate expectation to a quarter share of the profits of the businesses (see 31 October 2018 submissions at [64]) but they note that the evidence is that EM Co is unlikely ever to generate a profit, and hence submit that that expectation in relation to EM Co does not yield compensation in equity and they submit, in respect of E Co, that the first defendant has no legitimate expectation to profits until the expiry of the "grace period" because during that time all profits would be returned to rebuilding the business as set out in the evidence of the plaintiffs. In their 31 October 2018 submissions, the plaintiffs appeared to accept that after the "grace period" the first defendant would thereafter be entitled to one-quarter of the profits of the business "operating at high effectiveness", which value they say can be estimated as one quarter of the EBLIT determined by Mr Tremain in respect of Mr Tremain's "reasonable weaner" model less payment for rent and subject to a reduction for tax; and they proposed an order to that effect in their 31 October 2018 submissions. (In that regard, the plaintiffs submitted that on no reasonable scenario does the business have the time and resources both to achieve the "reasonable weaner" model after the conclusion of the proceedings, and then the further $2.6 million required to achieve the "high profit feeder" model, within the first defendant's expected lifetime (see and fn 69 to the 31 October 2018 submissions). Hence the proposition that there might be a significant benefit payable to the first defendant in this respect does not seem to be accepted by the plaintiffs.)

• First Defendant's entitlement to compensation for maintenance

1. The plaintiffs accept (see their 31 October 2018 submissions) that conditions may be imposed on a plaintiff to take into account conditions subject to which the plaintiff assumed he would acquire ownership of property (referring to Flinn v Flinn [1999] 3 VR 712; [1999] VSCA 109 (Flinn) at [122] per Brooking JA, where his Honour cited Crabb v Arun District Council [1976] Ch 179 at 198-199; S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637 at 653; 656-657; and Giumelli v Giumelli (1999) 196 CLR 101 at 123-124; [1999] HCA 10 (Giumelli)).
2. It is submitted that (leaving aside the pleading issue) the first defendant is not entitled to compensation for rent for his own accommodation and that the first defendant has not disclosed any significant expenses (apart from rent for his unit, and expenses such as rates and insurance for the properties which will be paid by the plaintiffs). It is noted that the first defendant will be receiving sums in respect of rent and profits of the farming business, and hence, he does not need maintenance. (I note that those submissions were at a time prior to the most recent evidence as to the first defendant's cash reserves, namely when he had some $534,448.74 in available cash. That last proposition is now unlikely to be the case unless the first defendant has undisclosed resources independent of any amounts he may receive from the sons.)
3. The plaintiffs nevertheless accepted that it is "likely" that they would be required, as occurred in Flinn, to provide an income for the first defendant's living expenses, pointing to the statistical evidence as to the average weekly expenses for a single person over the age of 65 ($539.65 per week), referring to Mr Fitzgerald's 31 October 2018 affidavit, Annexure B); approximately $28,158.17 a year.
4. However, the plaintiffs say that there is nothing, in the authorities where regard is made to a practical consideration such as the need for a "clean break", that would have the consequence that the defendant be put in a better position than the defendant was before the defendant departed from the expectation created and encouraged by his or her conduct. In the plaintiffs' submission: … a practical consideration such as the desirability of a "clean break" is not to be elevated into a blade which severs the (economic) relationship between the parties and then uses that severance as the foundation to compensate the defendant for rights that the defendant would not otherwise have, arising from a situation brought ought by reason of the defendant's own wrongful (unconscionable) conduct.
5. The plaintiffs again emphasise in this context that the imposition of conditions on relief to be granted by the Court must have regard to, and cannot exceed the bounds of, a requirement that the party relying upon the estoppel must "do equity" (referring to Verwayen at 442; and the explanation and application of the maxim that "he who seeks equity must do equity" in Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [67]; [2009] HCA 44 (Bofinger); Langman v Handover (1929) 43 CLR 334 at 351-352; [1929] HCA 42 per Rich and Dixon JJ; Gibson v Goldsmid (1854) 5 De GM & G 757 at 765; 43 ER 1064 per Turner LJ; and Mercanti at [186] per Le Miere J).

• Election

1. In their submissions before the commencement of the re-opened hearing, the plaintiffs submitted that until they know what sums they are obliged to pay to the first defendant by way of their obligation to do equity, they could not make an election as to whether a full clean break by way of acceleration is appropriate (see 31 October 2018 submissions at [72]).
2. They maintained the submission that it would be appropriate to permit them to make an election between Pathway A and Pathway B once findings have been made as to the imposition of terms as a condition of relief in respect of each of the two pathways. The plaintiffs argued that as the sole effective cause of the breakdown in the relationship of the parties, and as an unsuccessful defendant, it ought not lie in his mouth to dictate the terms on which the parties' economic relationship is severed, especially if that places him in a position of advantage.

Balance of orders

1. As to the balance of the orders to be made (and leaving aside the question of costs at this stage) the plaintiffs' position is as follows.
2. First, as to the claim for unpaid rent (see [1230] of the principal judgment), apart from their submission that (in the absence of any amendment to the pleadings) the issue of "market rent" remains an issue that is not in dispute between the parties, the plaintiffs submit that the claim for rent on the basis pressed by the first defendant fails for the following reasons: first, that receipt of rent to the first defendant was the subject of a legally binding contract between E Co and the first defendant as varied in 2008 and again in 2011 and that, as at 27 June 2013, the first defendant's entitlement to rent was pursuant to the lease agreement as varied in 2011; second, that the first defendant's cross-claim (at [2]-[5]) against E Co for an annual fee for the years ending 30 June 2008 through to 2011, and then 2015 and 2016 (in the sum of $1.54 million) was rejected; and, third, that the claim to possession of the farms on the basis that any entitlement of E Co to occupy and use the first defendant's properties had been validly terminated (see at [8]-[9] of the cross-claim) was also rejected.
3. The plaintiffs accept that the first defendant is entitled to rent pursuant to the agreement for lease as amended up until the proceedings are finally determined (including "the likelihood of any appeals given that one party or another is almost certain to seek either a stay of orders and/or a continuation of the present interlocutory regime").
4. The plaintiffs note that the E Co financial statements for the financial years ending 30 June 2014 to 2018 and onward record payments for insurance and rates and taxes totalling $99,228. The plaintiffs argue that it follows, under the terms of the lease agreement as last varied, that the first defendant is entitled to $100,000, less the payments made by E Co, in each of the relevant financial years, namely: $22,677 (FY 2014;) $6,739 (FY 2015); $83,572 (FY 2016); $39,648 (FY 2017); and $772 (FY 2018).
5. Second, as to the amount to be accounted for in respect of the proceeds of sale of Property No 12 ([1224] of the principal judgment), the plaintiffs accept that the evidence indicates that the amount of the net proceeds of sale was $769,953.35 and that three-quarters of this amount is $577,465. Thus, they accept that the amount to be accounted for by the first defendant in this regard (which I had considered should be set-off against the sum to be paid to the first defendant by way of compensation for the loss of the future income stream from the lease of the rural properties), is $577,465, (not $600,000, as I had indicated, plus interest from the date of settlement of that sale).
6. Third, as to the claim for relief in respect of the obligations under the Westpac Deed, the plaintiffs say that once (or, perhaps having regard to their submissions this should be, if) acceleration of their expectation in relation to the farms (i.e., a transfer of the farms) occurs, the only relief necessary relates to the release of the personal guarantee given by the first defendant. The plaintiffs submit that they should, as a condition of the relief to be granted in their favour on the proprietary estoppel claim(s), be required to obtain a release of that guarantee from the bank and, if such a release cannot be procured from the bank for any reason, the plaintiffs should be ordered jointly and severally to indemnify the first defendant from any liability arising under that guarantee (secured by way of charge over farming properties to be transferred to the sons) (see [1237] of my principal judgment).
7. Fourth, as to the first defendant's suggestion that they should be made responsible for any CGT liability the plaintiffs say that, insofar as the effect of the evidence of both Mr Sneddon and Mr Lam is that there is either a CGT A1 event or CGT E1 event, the plaintiffs say that this is the result of the conduct of the first defendant in disappointing the plaintiffs' expectation, founding the proprietary estoppel. They resist any suggestion that they should bear any such liability.

Costs set-off

1. I concluded that it would, in the ordinary course, be appropriate to the plaintiffs to have their costs of the proceedings in light of the outcome (see [1239] of the principal judgment) and that I proposed to order that, to the extent that there is a surplus payable to the first defendant (plus the amount payable to him for compensation in respect of loss of future rent) this should be set-off against any orders made in favour of the plaintiffs (see [1240] of the principal judgment). The plaintiffs say that the necessity for such an order as to set-off is borne out by the first defendant's evidence (here, seemingly assuming it has been accepted) relating to his extant personal assets.
2. As to the proposed set-off, at [32] of the plaintiffs' closing submissions, the plaintiffs do not cavil with the proposition (see [1238] of the principal judgment) that there should be a set-off, as against the amount payable to the sons in respect of three-quarters of the proceeds of sale of Property No 12 (plus interest from the date of settlement)) of the amounts payable by the sons to the first defendant under the W Deed (together with interest on the W Deed amounts from the date they were due) and the amounts payable by E Co to the first defendant for unpaid rent to 30 June 2017.

First defendant's submissions as to final relief

1. The first defendant submits that the case conducted by the plaintiffs following the re-opening of the hearing has not sought to challenge the factual basis on which I considered that there was a need for the acceleration of the expectation (i.e., the irreparable breakdown of the relationship between father and sons) and therefore argues that the focus of the present enquiry is whether, in all the circumstances of the case, the compensation that I had envisaged be payable to the first defendant is appropriate (i.e., not whether there should be the remedy of an acceleration of the expectation but in what manner should the acceleration of the expectation be ordered). (The plaintiffs, as evident from their submissions, do not concede that there is any inevitability as to the acceleration of their expectations in relation to the properties but their evidence certainly reinforces the need for a clean break so far as possible.)
2. In that regard, the first defendant identifies the issues raised (expressly or by implication) as to the orders I had proposed in the principal judgment as being: the financial capacity of the plaintiffs to pay the present value of the future market rent, calculated for the rest of the first defendant's life expectancy; the amount of that rent; the impact of a presently unknown CGT liability and, in respect of any CGT liability, who should be bear that liability as between the parties; and whether the use by the plaintiffs of income from the farming business to pay legal fees "adds somehow to the inequity of the situation for which they obtain relief".
3. As to the plaintiffs' proposition that there should be a declaration of a constructive trust (understood by the first defendant as the alternative relief mooted by the plaintiffs but, having regard to the plaintiffs' oral submissions, I understand as being part of the combined Pathways A and B - and the predicate for the imposition of any conditions if Pathway B is adopted), the first defendant says this raises issues as to: the point in time at which that trust come into existence; the CGT consequence of that declaration of a constructive trust; which of the parties should be liable for any CGT liability; how the parties would co-exist (which I understand to be the issue as to the practicability of the parties "remaining entwined with each other's affairs in the constructive trust scenario"); and, as to rent, what amount would be paid, how it should be secured, and how it should be paid. It can thus be seen that there is some overlap between the issues the first defendant sees as being raised in relation to the relief that I had contemplated in the principal judgment and any relief consequent upon the making of one or more declarations as to the existence of a constructive trust in relation to the properties.
4. In summary, the first defendant's position is that the constructive trust remedy is not practicable and should be put to one side and that the conclusion that there must be a clean break has been "thoroughly endorsed" by the plaintiffs' own evidence; and therefore that the forms of relief that should now be considered are as follows.
5. First, that there be an acceleration of the plaintiffs' expectation(s), with the plaintiffs required to pay to the first defendant the amounts identified in the first defendant's outline of submissions dated 12 November 2018 (in effect, the relief contemplated in the principal judgment, with the relevant amounts now able to be quantified). This is the relief for which, as I understand it, the first defendant principally presses.
6. Second, that there be an order for the transfer of some but not all of the properties to the plaintiffs (so as to leave the first defendant as the registered proprietor of the Main/7 Aggregation and Property No 11, without any trust being impressed on the first defendant's holding of those properties) (which is what the first defendant refers to as Pathway C and on which scenario the first defendant says, there would be no payment of money by the plaintiffs to the first defendant, and any CGT liability issue is significantly reduced). This is, in essence, the fallback position put for the first defendant, with emphasis on the flexibility of the remedial discretion following the establishment of the proprietary estoppel claims.
7. Third, payment by the first defendant to the plaintiffs of an amount by way of equitable compensation (a remedy that had been raised by the first defendant at the principal hearing).
8. Finally, in effect, a combination of the second and third remedies, namely that there be a transfer of land to A (presumably Property No 4, to which his separate claim related) and the payment by the first defendant of equitable compensation to each of B and C.
9. In support of the first of those proposed remedies, the first defendant submits that the orders proposed by him in April 2018 (in essence the relief I had envisaged in the principal judgment) gives effect to the findings and conclusions of the principal reasons, in that they: achieve the clean break found to be appropriate; effect the acceleration of the expectation necessary to affect a clean break; are not "financially ruinous" of the plaintiffs; and are in line with the authorities (in particular the principles canvassed in Rodda v Ian Rodda Pty Ltd [2015] SASC 95 (Rodda) per Nicholson J at [90], and in Kevin John Lewis v Peter William Stewart by his tutor Peggy Lillian Mayhew [2018] NSWSC 1186 (Lewis v Stewart) per Robb J at [219]).
10. The first defendant says that a constructive trust remedy is impracticable, by reference in particular to the fact that the relationship between the plaintiffs and the first defendant has "irreparably broken down". It is not necessary here to set out the evidence of each of A, B and C to which the first defendant points when submitting that a clean break is the appropriate course (and hence a constructive trust remedy is unworkable). That evidence has already been referred to above. I accept that it supports the conclusion that it is not feasible to contemplate a scenario under which the parties can now work co-operatively together in the operation of the farming business on the farms into the future. The likelihood of difficulty in determining in future how rent would be set for the properties is an obvious example of this (as indicated by the gulf in expectations between the parties already as to the payment of rent from 2014 to the present date).
11. Thus, the first defendant says that the appropriate remedy is acceleration of the sons' interest in the land, subject to certain conditions (including as to the payment of a notional market rent). The first defendant puts forward proposed short minutes which allow for that and the variables that were outlined in the draft short minutes prepared after the principal judgment. (Pausing here, this unworkability submission does not address the proposed combination of a declaration of constructive trust followed by acceleration of the plaintiffs' expectations - which is the remedy urged by the plaintiffs, as I apprehend their oral submissions.)
12. The first defendant submits that the conclusions as to the issue raised by the plaintiffs (in their submissions) as to when any declared constructive trust may arise (see below) and the related issue of CGT support the view that there is no benefit in the constructive trust remedy that outweighs the imperative of a clean break. It is noted that a lesser form of relief is permitted where relief framed on the basis of the assumed state of affairs would be inequitably harsh. The first defendant refers to Lewis v Stewart at [219], noting there that his Honour referred to Handley AJA in Delaforce for the propositions that relief depends very much on the facts and that the court must look at the circumstances in each case to decide in what way the equity can be satisfied; and to Sledmore v Dalby (1996) 72 P&CR CA 196; [1996] 2 WLUK 129 (Sledmore) for the proposition that relief may be refused or reduced if the plaintiff's equity has been diminished by later events. It is further noted that equity permits the giving of relief on terms (see [1180] of the principal judgment); and the first defendant refers to the authorities that show examples of "(principled) flexibility" (as noted at [1180] of the principal judgment).
13. The first defendant emphasises that the particular facts of the present case include the fact that the estopped party who encouraged an expectation that included the transfer of title of the properties to his sons upon his death is not dead, and the fact that the relationship of the parties has "irreparably broken down". It is submitted that the further evidence of the first defendant shows that his financial position is now far worse than at the time of creating the expectation.
14. The first defendant notes that what is in contemplation due to the particular facts of this case is relief accelerating the occurrence of the expectation, namely, beneficial ownership of the properties. It is submitted that, where the relief is to accelerate the expectation, it is necessary to ensure the result is not to place the estopped party in a position of disadvantage compared to the estopped party's position in the assumed state of affairs, and being a position never contemplated by the parties, without fashioning orders that counteract that disadvantage. In this case it is said that the position never contemplated by the parties was one of the plaintiffs being the legal and beneficial owners of the properties in the first defendant's lifetime and with no obligation to perform in accordance with their expectation (namely, to conduct the farming business of E Co), and with the first defendant having no interest in the properties or the worth thereof, and having no income from the properties, and no right of residence on the properties.
15. It is said that it also needs to be taken into account that, because of the acceleration, the plaintiffs will be relieved from acting in accordance with the assumed state of affairs. The consequence of acceleration, it is said, means that from the date of judgment until the death of the first defendant, the plaintiffs will not need to work the farming business; they will be relieved from performing the very tasks they were required to perform to obtain the properties that they obtain.
16. It is submitted that, as a matter of logic, to receive the properties now means that the plaintiffs are receiving more than they expected they would. This is so because they are receiving $20 million of property in 2018, not (according to life tables) in 2029. Thus, the plaintiffs enjoy their expectation for that extra period and at the same time are free of any continuing obligation in that same period which otherwise would have, on their case, subsisted. It is submitted that not only do these "variables" seek to "compensate" the first defendant (or to adopt the words of the authorities, to avoid an outcome that is "inequitably harsh") for the loss of property that was on any account the first defendant's property until his death, but they also have the effect of adjusting the benefit to the plaintiffs to accord with their expectation. It is said that, on one view, upon receiving the properties now, the payments required by the orders will have been accounted for by 2029, so that upon that date the plaintiffs duly receive what they expected to receive.
17. It is submitted by the first defendant that it would not be contrary to the equity of an accelerated result if the plaintiffs were required to sell some part of the properties because the plaintiffs, by receiving the properties now, are receiving more than their expectation and will, by the time they expected to receive the properties, in all likelihood have the equivalent thereof.
18. Further, it is submitted that there is no difference in terms of the equity held in the properties by the plaintiffs upon acceleration if the payments to the first defendant are financed by way of loaned funds secured by mortgage, or a sale of a one or more of the properties.
19. As to the time at which any declared constructive trust would be found to have come into existence, the first defendant argues (based on the reasoning applied by the Victorian Court of Appeal in McNab v Graham at [102], [107]-[108]) that this would be at the time of the detrimental reliance on the relevant expectation or assumed state of affairs. The first defendant identifies this as being from 25 September 2002; and argues that the plaintiffs' argument (that the date of the creation of the constructive trust was in 2009, 2011 or 2013) cannot be maintained.
20. As to the question of CGT liability, the first defendant submits that the declaration (or imposition) of a constructive trust would be prohibitive by reason of the CGT consequences that would flow from such a remedy. The first defendant argues that if there were now to be a declaration of constructive trust, then a CGT event would have occurred in 2002. It is submitted (which must be correct) that there would then be no concession available based on any of the properties having been held for 15 years. The first defendant points out that no calculation has been carried out on this scenario, noting Mr Sneddon's evidence that this would be a CGT A1 event, in respect of which there is no limitation period for amendment of the assessment and for which the general interest charge would apply (and possibly penalties).
21. The first defendant says that if CGT liability were to be calculated and the properties were to be transferred now (a scenario that, as I understand it, is predicated on there being no declaration as to a constructive trust and hence no earlier CGT event), then the proposed transfer would result in a CGT liability in the hands of the transferor (the first defendant) on his marginal rate of tax at the relevant time (45%) on an amount of capital gain of $6,376,236; hence a liability of some $2.8 million. The first defendant says that insofar as Mr Sneddon suggested that it may be arguable that CGT liability would be assessed on a lower value (if the value of the land took into account interests created by the judgment, i.e., that what was being transferred was the bare legal interest, the beneficial interest already being held by the sons) there is no indication as to what that lesser value would be (nor any evidence of the attitude of the ATO to any asserted lesser value). The first defendant says that arguably that might be a nil value or that perhaps the value would be "whatever amount is finally ordered by way of the market rent assessment".
22. The first defendant emphasises that the adoption by Mr Sneddon as to a 27 June 2013 CGT event date was an assumption he was instructed to make (and not his opinion as to the relevant CGT event date) but in any event it is said that should the CGT event be at some different date there may be available concessions not otherwise available. Hence, as I understand it, the first defendant's submission is that the amount of CGT liability is presently unknown.
23. The first defendant accepts that the remedy to which the plaintiffs are prima facie entitled is "the fulfilment of the expectation engendered" and that the requirement that the plaintiffs, in seeking equity, must do equity is not an arbitrary process. As to what conditions should be imposed if there is to be an acceleration of the interest of the sons in the land, the first defendant emphasises that the result must be an equitable one, namely, "one that is proportionate and that is not inequitably harsh".
24. In that context, the first defendant turns to the proposed condition for payment of a sum to reflect the notion future market rent for the properties and advocates acceptance of Mr Donoghue's view that the lower the percentage rate of the value of land used to determine rent, the lesser the amount of the outgoings that are borne by the landlord. Criticism is made of Mr Tremain's report insofar as he gives no opinion as to what outgoings are borne by the landlord and simply adopts an instructed assumption to deduct from the gross rent the entirety of the tenant's outgoings. It is submitted that a 0.008% return on capital would plainly be an "uneconomic figure unlikely to be accepted by any owner of such a valuable asset" as the farming properties in the present case (and that Mr Tremain's failure to concede this is a matter that discredits him). The first defendant argues that there is no evidentiary support for the proposition contended for by the plaintiffs that all the outgoings of a tenant are to be deducted from some gross rent figure to arrive at the net rent figure.
25. The first defendant submits that there should be a finding that the gross rent is 3% of the value of the land and that the net rent payable is arrived at by deducting from the gross rent the amount that can be attributed to rates and insurance. It is submitted that the first report of Mr Francis (which it is noted was tendered by the plaintiffs) supports this approach (and supports the proposition that a lower percentage would be adopted to account for outgoings to be borne by the lessee.
26. As to the discount factor to be adopted when calculating the net present value of the future market rent, it is noted that in the second Lonergan Edwards report discount factors of both 4.5% and 3% were used (see [35]-[42], producing figures of $5,121,076 and $5,534,708, respectively, based on a gross rent of 3% land value less rates and insurance). It is noted that, on Mr Donoghue's figures (a net rent of 2.5% of the land value) and using a 3% discount factor, the present value of future rent would be $5,154,815. The first defendant submits that the results are similar enough to suggest that either approach is reliable (given the margin of difference is less than 10%). The first defendant argues for the approach of Mr Donoghue in this regard, submitting that Mr Tremain's assumption as to outgoings was "just an unevidenced assumption".
27. The first defendant compares this with the calculations of Ms Bateman as to net present value of the future rent (at [64]-[71] and Schedule 8 of her report; and see T 440) which were based on the respective valuers' conclusions (the Donoghue net rent figure and the Tremain gross rent figure), namely, $5,915,755 and $6,316,726 respectively. It is submitted that if there is a finding that the net rent should be 3% of land value less rates and insurance, then the first year figure arrived at on the agreed figures, and using Mr Tremain's rates and insurance figures, namely, $522,000) is very close to the first year net rent figure of $530,000 used by Ms Bateman by reference to the Donoghue figures.
28. The first defendant argues that there is no distinction between a market rent and a commercial rent (referring to his submissions of 12 November 2018 at [22]-[25]) and submits that it is of particular relevance that the initial rent agreed was based on 5% of the land value.
29. The first defendant further argues that it is important to take into account (in the debate concerning gross rent and net rent) that the present case (unlike other landlord and tenant relationships) is one where the tenants "are also the future owners of the land". The first defendant submits that the rationale for a landlord bearing any outgoings is the notion that some benefit accrues to the landlord by reason of the fact that the landlord will later, upon the end of the lease, regain the benefit of the land; whereas, in the present case, it is the lessee that will ultimately reap the benefit of the outgoings. The first defendant submits that this strengthens the position of the first defendant in the rent debate; adds weight to the view of Mr Donoghue that no deductions should be made at all; and adds weight to making deductions of only rates and insurance, as stated by Mr Francis.
30. Hence it is submitted that there should be a finding that the present value of the future rent is approximately $5.9 million and that this is the amount of compensation required on the acceleration of the sons' interest (or expectation) in the land.
31. As to the second of the consequential payments that I had concluded (at [79] of the principal judgment) would be appropriate to be paid to the first defendant as a term of the acceleration of the plaintiffs' expectation, namely, the value of the first defendant's shares in E Co and EM Co, the first defendant accepts Ms Bateman's nil valuation for the shares in EM Co but cavils with her conclusion in respect of E Co.
32. In that regard, the first defendant says: first, that the balance sheet of E Co records stock at book value, not its real value (see T 432); and, second that because the $2,123,253 "loan" account of the first defendant has been found not to be an enforceable debt (see [1234] of the principal judgment), this amount should be added back into the company's balance sheet (see T 438.45-439.19)
33. The first defendant says that those two matters result in a "positive" adjustment to the net worth of E Co (set out in Ms Bateman's report as being $699,967) in a total amount $4,705,627, comprising the sums of $2,582,374 (for the real value of the stock - see T 438.39) and $2,123,253 (for the unenforceable book debt), thus giving a surplus of assets over liabilities of $4,005,660 (see T 439.11). The first defendant accepts that this figure will differ as stock numbers vary. However, it is submitted that this figure calculated could reliably be utilised given that it is the plaintiffs, to the exclusion of the first defendant, who have had the entire benefit of any realised stock.
34. It is thus submitted that as the first defendant holds 25% of the shares in E Co, the value of his shareholding in E Co is approximately $1 million but that (given the way that I had concluded that the amount of $2,123,253 is to be treated), the value of the first defendant's shares in E Co should be valued as if there remained a debt of that amount on the books of E Co, which would reduce the net assets of E Co to $1,882,407, and the first defendant's share value to $470,601.
35. Pausing here, I raised with Ms Bateman during the course of her cross-examination the basis on which the minority shareholding was being valued as simply a quarter of the net assets of the company. As I understand it, this was calculated on a winding up basis. The reason for my concern to clarify this was because I had apprehended that if the minority shareholding were to be valued on a different basis, say for the purpose of the making of a compulsory purchase order (which was akin to what I was envisaging), I would have expected there to be a discount on the value of such a shareholding in a family company to reflect the lack of control of the minority shareholder in the company. Ultimately, however, this point of distinction is not necessary to be explored because (for the reasons I will come to shortly) I accept the plaintiffs' criticism that such an order should not be made (even though, I would add, the first defendant considers that this would be sensible and accepts that there should be a buy-out of his shares). This has consequences for the notion of a clean break - in that it cannot be a completely clean break if the first defendant remains the holder of the minority shares in the respective companies.
36. As to the sum of $2,123,253 recorded in the books of E Co as a debt owing to the first defendant, the first defendant submits that if there is a buy out of his first defendant's shares in E Co (as envisaged at [1235] of the principal reasons), then on such an outcome the amount of $2,123,253 should be reimbursed to him by the plaintiffs. It is submitted that on this basis, that amount should sensibly be viewed as being in the balance sheet of E Co. It is said that not do so would see the first defendant benefiting twice in respect of that amount.
37. Insofar as the plaintiffs resist any reimbursement of this amount by relying on the maxim that equity follows the law (as was the tenor of the original submissions by the plaintiffs on this aspect), it is submitted that this involves conceptual confusion, namely: that the "foreshadowed reimbursement of the money is not the equitable enforcement of a debt"; rather, it is an acknowledgement that if there is to be an equitable remedy for the benefit of the plaintiffs that sees a transfer of land and a buy out of shares of a company in a way that was never the intention of the parties (so that without further redress it would mean the plaintiffs would retain the use of the $2,123,253 to the exclusion of the first defendant, when it had always been intended he would benefit from it) then those who seek equity must do equity. It is submitted that to allow the plaintiffs to retain the $2,123,253 would be unconscionable. Thus it is said that the reimbursement of the $2,123,253 is not acceding to a claim of the first defendant, but is part of the remedy being obtained by the plaintiffs.
38. Insofar as I had indicated that the repayment of this money must occur in a way that does not jeopardise the ongoing business of E Co (see [1235] of the principal judgment), the first defendant submits that the evidence of Mr Lonergan shows that this can be "comfortably" achieved. Moreover, it is submitted that the ability of E Co to pay such sums of money is reflected in the fact of it having paid some $3.5 million in legal fees over recent years, at the same time as repaying some $1.7 million of debt to Rabobank in the same period. (As to this last submission, the payment of legal fees, to the extent achieved by E Co after cattle sales, gives rise to the debate as to the implications for the profitability of the business going forward due to the need to re-stock the properties.)
39. The first defendant submits that on the plaintiffs' argument a conundrum emerges, namely that, on the one hand, a constructive trust is unworkable, as confirmed by the evidence on reopening; and, on the other hand, it is said that the cost of acceleration is too great.
40. The first defendant's submission in that regard is to suggest that there be an order (this is Pathway C) for the transfer to the sons of the farms other than Main/7 Aggregation and Property No 11. It is submitted that this has the advantage of not requiring any payment to be made between the parties and lessens the impact of any CGT liability. It is said that on this scenario, the plaintiffs should bear any CGT liability on the land they receive, and the first defendant should bear any CGT liability arising from how he may deal with the land he retains.
41. It is noted that each of the sons was cross examined in relation to the viability of a separation of part of the properties; and that the evidence shows that their preference is to retain the 3/6 Aggregation, that there is a willingness to dispose of Property No 11 and, it is submitted, an openness to the Main/7 Aggregation remaining with the first defendant, should an in specie resolution become the only viable resolution.
42. As noted above, another option (put forward by the first defendant at the end of the trial in October 2017 and repeated at the re-opened hearing) is that the first defendant pay an amount (not uniform) of equitable compensation to each of the sons, which payment could be charged upon the properties. (The plaintiff complains that this goes beyond the scope of the re-opened hearing.)
43. Further, the first defendant submits that this case is like no other. It is said that it does not fit the farming pattern of cases (comparing the position of the plaintiffs in Flinn and in Rodda with that of B and C; and the position of the farm worker plaintiff in Gillett v Holt [2010] Ch 210; [2010] 2 All ER 289 (Gillett v Holt) with that of A).
44. It is submitted that the distinguishing characteristic of this case is the benefits received by the plaintiffs, in contrast to the cases just mentioned where no such benefits were received. It is noted that the authorities support the view that in fashioning relief all the facts and circumstances of case are to be considered. The first defendant says that the relief necessary to remedy the unconscionable conduct of the first defendant is tempered by these benefits, noting that it is necessary to consider the overall justice of the case.
45. In the present case the first defendant notes that the detriment is the decision to devote time to the E Co farming business rather than to some other venture. It is accepted that, as Allsop P, as his Honour then was, noted in Delaforce at [5], it is not necessary to evidence the likely prosperity or adversity of that hypothetical other course. Nevertheless the first defendant notes that the course adopted here by the plaintiffs in reliance on the proven expectation was a course with benefits beyond the expectation, namely the largesse of the first defendant, emphasising that the plaintiffs came into the E Co business at no initial cost, something said to be unlikely to be the case on any alternate scenario. It is said that these benefits diminish the unconscionability of the detriment suffered, just as in Sledmore a lengthy rent free period diminished the equity arising from the improvement to the property.
46. It is submitted that there are two other ways to provide relief by way of a clean break. One is where there is no transfer of land, but simply an assessment of what is the appropriate amount of equitable compensation that should be ordered by the Court for the first defendant to pay now. It is noted that this remedy was canvassed in oral submissions in October 2017, with the figure being calculated as some $3 million to supplant the amounts secured on the properties, with a further $327,000 to be paid to A in respect of the cost of the renovations. It is submitted that this remedy better accommodates the fact of the claims of the sons each being different. It is said that if the Court took the view that some differentiation beyond this was necessary, then possibly an argument exists for some additional payment to B, as he ordered his affairs to be involved with E Co in a more significant way than either A or C. This is because A's evidence was that had he not relied on the expectation he would have done largely what he in fact did. As to C, it is said that equity has no need to interfere since in the overall scheme of the case, C has not only benefited greatly, but performed little by way of working for E Co.
47. It is submitted that, on this view, a total payment of some $3.5 million may be justified, or such other sum as the Court may assess in light of the earlier money calculations discussed above, and reflected in the proposed short minutes of order.
48. The remaining method is to divide the properties. This prospect arose in the course of submissions the example given being that orders could be made transferring to the sons the properties save for the Main/7 Aggregation and Property No 11. The first defendant says that this minimises any CGT and stamp duty issues; it allows the sons to continue farming; it allows the first defendant to continue farming; and that, depending on just what properties were divided, it removes the need for orders relating to issues such as the present value of the future rent, and of offsetting other amounts such as the W Deed moneys and may also account for the sum of $2,123,253. By way of example, the first defendant says that the evidence shows Main/7 Aggregation and Property No 11 together to be worth $8.6 million (or $8.855 million), meaning the sons would receive $11.4 million, or some $3.8 million of assets each, and would no longer have the burdens of the W Deed and "loan" account matters, (plus the machinery and stock), in addition to their current asset positions.
49. As to the submission that such a result is not financially ruinous, in the first set of submissions the first defendant emphasised that the plaintiffs have called no expert forensic accountant to support their claims of unaffordability. The first defendant says that the evidence of the independent expert should be preferred. Should that evidence be rejected, the first defendant says that the simple fact remains that, by realising one or more of the properties, the plaintiffs could make the payments required and could conduct E Co on a debt free basis, freeing E Co up to grow the business and to acquire more land, with the likelihood being that by the expected end of the first defendant's life, the plaintiffs will have the benefit of what was expected to be received at that time.
50. The first defendant says that the concerns of the plaintiffs that orders reflecting the principal judgment could leave them in financial ruin or with "absolutely nothing" have been shown, even on their own evidence, to be unfounded. The first defendant argues that on the relief envisaged in the principal judgment the plaintiffs will receive $20 million worth of land some 11 years earlier than they otherwise would have, with all the accompanying financial benefits; the net benefit now (depending on the rent figures to be determined) being at least $10 million.
51. Finally, the first defendant argues that the suggestion of allowing the plaintiffs to choose from alternative remedies should not be permitted; that it is for the Court to determine what is the equitable result, noting that in Rodda, where Nicholson J invited submissions from the parties as to whether Pathway A or Pathway B should be the form of relief, his Honour determined the appropriate remedy noting at [70] that "[u]ltimately the appropriate remedy is one for the Court".

• Other relief

1. Finally, as to the matters not connected with any acceleration of the plaintiffs' expectation(s), the first defendant submits the following.
2. First, as to the payment of rent or an occupation fee since July 2014, the first defendant argues (as is not disputed) that no rent (or occupation fee) has been paid since then. The first defendant points out that in his cross claim the claim made for a fee for the use of the properties was not limited to a claim for unpaid rent; and says that the period for which the occupation fee was sought was up to the date of filing the cross claim (and, it is said, implicitly up to the date of orders).
3. The first defendant has submitted that the date approximating the continued occupancy of the properties in the face of a termination notice should be considered to be the time when the familial relationship of the parties had irreparably broken down. It is submitted that from 30 June 2014 (the last date to which rent has been paid) the relationship should revert to one requiring a market rent. It is submitted that it does not follow, from a finding that the first defendant was not entitled to evict E Co, that the amount of rent/fee remains forever more at $100,000. It is submitted that this view is supported by the same reasoning as to why a market rent should be paid from the date of judgment.
4. The first defendant points to the valuers' reports (those of both Mr Tremain and Mr Donoghue) as demonstrating the value of occupation of the land in the period from 1 July 2014 to date (and refers to the calculations contained in the third Lonergan Edwards report at p 13). Adopting Mr Tremain's figures, the first defendant calculates the total past rent without deductions at $2,201,575. The first defendant says that this does not allow for the deduction of rates and insurance ($77,000 per annum, totalling $308,000), of which the first defendant says he has already paid $110,000. Thus, he says, the net amount owing on these figures is calculated at $2,003,575.
5. The first defendant says that the plaintiffs' argument (that his claim was a claim under the lease for an amount of $110,000 per annum less the rates and insurance) fails to recognise the legitimate alternative claim for an occupation fee. It is submitted that, as the relationship of the parties had by this time broken down (to the point where there was later to be a finding that a clean break remedy is needed), there is no logical basis to assess the occupation fee on a basis different than the future rent assessment.
6. In other words, as I understand it, the difference between the parties on the unpaid rent/occupation fee issue is as to whether the period from July 2014 to the date of judgment should be calculated on the basis of the terms applicable under the lease agreement as last varied or, instead, on the basis of a notional occupation or market rent amount for that period. This, of course, has significant differences in terms of quantum.
7. Second, the first defendant notes that there is no dispute that an amount of $156,250 is owed under the W Deed (and points out that this does not include interest.

Determination

1. Before addressing the balance of the issues raised in the respective parties' submissions, I make some introductory observations.
2. First, as to the complaint made by the plaintiffs as to the statement (at [62] of the principal judgment) to the effect that any relief in relation to E Co's proprietary estoppel claim would be subsumed by the relief to be provided to the individual plaintiffs (i.e., the sons). What I said there, in the course of summarising the conclusions I had reached in the body of the judgment, was: As to E Co, its proprietary estoppel claim is established by the matters to which I have already referred in the context of the jointly made claims by the sons (see [50]; [52] above) in terms of the capital improvements it made to the first defendant's farms in the expectation that it would be able to continue its farming operations on those properties during the first defendant's lifetime and until his death. However, any relief in that regard is in effect subsumed by the relief to be provided to the individual plaintiffs.
3. Insofar as it is necessary here to explain that statement, I note that what I there had in mind was that, given the sons effectively control E Co, the transfer of the ownership of the land to the sons would, as a practical matter, lead to the position that E Co's expectation that it would be able to continue its farming operations on the properties during the first defendant's lifetime would be made good.
4. In part, my conclusion in that regard was informed by the fact that E Co and the sons had joint representation, so I did not appreciate that there would be any conflict in their respective positions in that regard. Insofar as the complaint made in this regard is, at least implicitly, that such a statement involves an impermissible piercing of the corporate veil, I accept that that criticism has force (though it was not put as such). Strictly speaking, if the control of E Co were to pass to third parties (on the first defendant's death) in accordance with where I considered implicit in the expectation held by the sons, then the interests of the sons and the company might nevertheless diverge and the fact that the sons were the registered proprietors of the land might not ensure the ability of E Co to continue to operate its farming operations on that land.
5. What seems to flow from the position of the plaintiffs in this regard is that, in order to make good the expectation of E Co (and the sons) as to the continued operation of the farming operations by E Co on the properties up until the first defendant's death, any declaration as to the basis on which the first defendant holds (and has held from the relevant time - as to which see below) his interest as registered proprietor of the lands (vis a vis E Co) is that his freehold interest is subject to E Co's leasehold interest in the property for the balance of the first defendant's life (and that the first defendant is estopped from terminating the agreement for lease, in its terms as last varied in November 2011, or evicting E Co from the properties). In other words, the freehold interest held by the first defendant in the properties would be subject to a lease terminable only upon the death of the first defendant. If a declaration to that effect is made, then any trust over the properties in favour of the sons (and any transfer of the properties now to the sons) would necessarily be subject to the interests of E Co under its lease of the properties (absent any priority or other dispute as between E Co and the sons).
6. Second, I have referred above to the terms of the lease as last varied. There was some debate in the course of the re-opened hearing as to the effect of the two agreements (in 2008 and 2011) to vary the terms of the initial agreement for lease - i.e., as to whether there were three successive agreements for lease or one agreement as varied on two successive occasions. That debate (arid as I consider it to have been) raised for consideration the reasoning of Finn J in GE Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50 (at [224]ff). For what it is worth, I read his Honour's reasons as standing for the proposition that when one reaches an agreement to vary a lease there are then two agreements: first the lease and, second, the agreement to vary the lease; but not that there are two successive leases as such - rather, the second agreement is a variation agreement that operates to vary the terms of the existing (and subsisting) lease. However, nothing here turns on this.
7. Third, as to the issue of the time at which any constructive trust should be declared as having arisen, the submissions made for the plaintiffs, as noted above, were to the effect that any constructive trust over the freehold or leasehold interest in the properties had arisen by no later than 27 June 2013 (the date on which the purported notice of termination of lease was issued). In the proposed orders, the plaintiffs in effect hedge their bets on this issue (nominating also dates in 2009 - the initial confrontation as to the first defendant's criminal offending; and November 2011; the date on which the first defendant effectively ceased his participation in the joint farming enterprise (moving to Property No 8). The first defendant, in his submissions puts the date at 25 September 2002, that being the date of the second of the two relevant meetings in September 2002 from which I accepted that the sons held the relevant expectations in relation to the properties.
8. I concluded that the expectation held by each of the sons (engendered as a result of the discussions held in September 2002 and the conduct of their father in participating in the new business structure following those discussions), on which each relied to his detriment was that the sons would be involved, with their father, in the management and operation of the family farming business on their father's farms; that their father would make his farms available to them during his lifetime for the use of the farming business that was to be transferred to the new business entity (E Co) (and in that sense that the first defendant would "hold" - or retain ownership of - the farms for his sons during his lifetime); and that the farms would be left to them on his death. Further, I found that, as and from the time the meeting of 25 September 2002, the first defendant knew that his sons were making life-changing decisions to join in the new family business in reliance on a belief or understanding or expectation that the purpose of the new family business was to generate wealth for all of them (including the first defendant) and their families and that the first defendant would make his farms available for the purposes of that new family business (and in that sense "hold" - or probably more accurately hold onto or retain ownership of - the farms for his sons during his lifetime to be used for the purposes of that family business) and that the farms would pass to his sons under the first defendant's Will on the first defendant's death.
9. The issue as to the time from which a constructive trust arises, where a claim in proprietary estoppel has been made out, was considered in McNab v Graham (to which I referred in the principal judgment), the question raised on appeal as relevant to the application of the limitations legislation. In this context, (at [102]) Tate JA said: There is considerable authority for the proposition that, where detrimental reliance upon a promise gives rise to a constructive trust, in the context of an estoppel, the constructive trust comes into existence before a court makes any order. It comes into existence at the time of the conduct which gives rise to the trust. [my emphasis] adopting the proposition that, as a matter of general principle, the accepted position under Australian and English law is that a constructive trust will be treated as coming into existence at the time of the conduct which gives rise to the trust. Tate JA went on to say (at [107]): … equity recognises the constructive trust as having come into existence from the time of the conduct which gives rise to the trust. The relevant time is the time at which there is reliance on a promise giving rise to the estoppel, that is, the time of the reliance which would render departure from the fulfilment of the promise unconscionable. [my emphasis]
10. Her Honour regarded this as an application of the maxim that equity regards as done that which ought to be done, saying at [109]: … It is not a matter of a court engaging in 'backdating' the trust arbitrarily, or, as the McNabs would have it, to defeat a limitations period; it is a matter of the court declaring, as with all applications of the maxim nunc pro tunc, the appropriate date on which that which ought to have been done is to be regarded as having been done. Once so declared, the effect of the maxim is that it was done at that time. …
11. Tate JA also noted that in Department of Social Security v Agnew (2006) 96 FCR 357; [2000] FCA 59 (Agnew), the trust was taken to have come into existence when the conduct which gave rise to it occurred "that is, when the sons acted in reliance on the statement that the land was theirs". Her Honour went on to observe, in the case then before the Victorian Court of Appeal, that, "[t]o deny that Mr Turner was a trustee when he died is to deny the operation of the principles of proprietary estoppel" (at [114]). As to the precise time at which the constructive trust arose, Tate JA said that that it would have arisen "from the time when the detrimental reliance rendered it unconscionable for Mr Turner to depart from the assumption created by the representation". On any account, that was before the commencement of the proceeding, and therefore, it was not necessary to identify with greater precision the time at which the trust arose, because the plaintiffs fell within the exception to the limitation statute.
12. The decisions in McNab, Agnew and Varma indicate that in a case of estoppel the constructive trust arises from the time when the promisee's detrimental reliance rendered it unconscionable for the promisor to resile from the promise (not from the time at which the promisor unconscientiously, or in more modern parlance, unconscionably resiles from the promise).
13. In the course of oral argument at the re-opened hearing, having put forward in submissions (and in the proposed final orders) various dates at which it might be said that a constructive trust had arisen, Senior Counsel for the plaintiffs referred to decisions which it was suggested might point to a different conclusion (although he did not contend for such a conclusion), and on the basis of which it was said that the instructions given to Mr Sneddon had been drafted.
14. See, for example, Evans v Evans [2011] NSWCA 92, where Campbell JA (Giles JA and Sackville AJA agreeing) said (at [107]) that the equity involved in proprietary estoppel operates by considering whether it would be contrary to good conscience (measured according to equity's standards) for a defendant to disappoint the relevant expectation and that the relevant time for consideration is the time at which the defendant seeks to disappoint the expectation. I read that passage as indicating that one considers the time at which the conduct would be contrary to good conscience as (so as to bring into operation the principles of proprietary estoppel) the time at which the defendant seeks to disappoint the expectation or resile from the promise (not necessarily that this is the time from which a constructive trust as a consequence of that conduct is to be taken to have arisen). Similarly, reference was made to the decisions of the Court of Appeal in DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728 (at [72]-[73] per Meagher JA) and Arfaras v Vosnakis [2016] NSWCA 65 (at [112]). The question of unconscientiousness or unconscionability is thus to be determined at the time of the departure from the promise or expectation ("the time at which there is reliance on a promise giving rise to the estoppel, that is, the time of the reliance which would render departure from the fulfilment of the promise unconscionable").
15. Ultimately, the plaintiffs submitted that it did not much matter and that the relevant issue was that there was continuing reliance throughout the period and, at the latest, there is a constructive trust impressed upon the land no later than the time of the disappointment of the expectation (though accepting that it might be some time earlier). But for one qualification I would accept that proposition. However, insofar as the CGT consequences of what has occurred might require the date to be identified with more precision than across a spectrum of some ten or eleven years, there may well be a difference depending on whether the constructive trust is taken to have arisen at the time of departure from the expectation in June 2013 or at an earlier date (say, for example, in around 2003).
16. Having reflected afresh on the various Court of Appeal decisions to which Senior Counsel for the plaintiffs referred, I do not think that they compel a different conclusion from that articulated in McNab v Graham. Rather, the focus in those decisions appears to be on the time at which it can be said that it became unconscientious or unconscionable for the promisor to resile from the promise (by reason of the reliance on that promise, that reliance necessarily occurring, as the plaintiffs accept, at an earlier time, though it may well continue through to the time of disappointment of the promise).
17. I adhere to the view expressed in Varma, namely, that (absent circumstances, such as the intervention of third party interests, that might lead to a different conclusion - see, for example, Parsons v Bain (2001) 109 FCR 120; (2001) 192 ALR 722; [2001] FCA 376 where the Full Court of the Federal Court (Black CJ, Kiefel J, has her Honour then was, and Finkelstein J) considered (at [15]) that any "discretion" attaching to the determination of this date from when the constructive trust (there considering a common intention construction trust) it is said to have related to whether interests protected by the constructive trust ought yield to other competing interests, such that some "lesser" equity might be required (and see P Young, C Croft and M Smith, On Equity (LawBook Co, 2009) at 6.850) the date upon which a constructive trust is taken to have come into existence in a case such as the present is when the conduct which gave rise to it occurred, that is, when the relevant plaintiffs acted in reliance on the promise or expectation (such that it later became unconscionable or unconscientious for the maker of the promise or the inducer of the expectation to resile therefrom).
18. In the present case, in the principal judgment, my conclusions as to reliance are set out from [1035].
19. I found that each of the three sons relied on the expectation engendered in them by their father (which was known to him and of which he did not disabuse any of them): A, in continuing to work on the farms and, importantly, in not looking to purchase a property elsewhere on which he could have built up a farming (or other) business which was not subject to his father's control (in the sense that he would not have had the risk of the farm being sold and making the business effectively inoperable); B by concentrating his endeavours on the family business up until the time of his involvement in the P Hotel and thereafter in working both in the family business and in his own interests; C in making his time available to assist in the family business and to look for investment opportunities to pursue as part of the family business or with his brothers and with the potential involvement of his father. I did not there specify a particular time on which the conduct in question commenced.
20. The reliance relied upon by A for his separate claim in relation to the homestead on Property No 4 was found to be the payment in 2003, at his father's request for renovations to the property out of the moneys made available to him by his uncle and which he could have invested elsewhere.
21. I found that the reliance by E Co on the expectation (held by the sons) that it would be in a position to build up a cattle farming business on the first defendant's properties and reap the benefits of that business without the risk of eviction or the like (as set out in the plaintiffs' submissions summarised in the principal judgment) commenced, following October 2002, with development of infrastructure at the properties to cater for increased cattle numbers; the undertaking of significant works on the properties; work performed on the farms from 1 July 2003; the employment from 2004 of a large number of employees to carry out the substantial works to the farms, and significant capital expenditure in the short term.
22. Although the relevant expectation was held from the meetings in September 2002 (and in particular from the conclusion of the meeting on 25 September 2002), the acts comprising reliance on the expectation in my opinion (and which rendered it unconscientious or unconscionable for the first defendant later to resile therefrom) can in my opinion be most clearly be seen from 1 July 2003, when the agreement for lease was minuted. Accordingly, I consider that the time from which any constructive trust in respect of the properties should be taken (and declared) to have arisen is 1 July 2003 (notwithstanding that the plaintiffs' expectation was held from September 2002 and I accept that some acts in reliance on that expectation will have occurred in the period from then to July 2003).
23. Fourth, it is important to keep in mind that, as noted in Halsbury's Laws of Australia, volume 430 at [570] (Halsbury) "[t]he constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court, and its rationale is still found essentially in its remedial function" (the authors there citing Muschinski v Dodds (1985) 160 CLR 583 at 613); and (at [430-565]) that "the expression 'constructive trust' does not describe a concept of fixed meaning". It is there suggested (by reference to Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 at 300; [1969] 2 All ER 367 that the boundaries of the constructive trust "have been left perhaps deliberately vague, so as not to restrict the court by technicalities in deciding what the justice of a particular case may demand". At [430-575] it is said (again citing Muschinski v Dodds at 616-617) that: In light of the predominantly remedial character of the constructive trust, the circumstances in which it may arise are not closed, but extend to any case where some principle of the law of equity calls for the imposition upon the legal owner of property of the obligation to hold or apply the property for the benefit of another.
24. In Jacobs' Law of Trusts in Australia (J D Heydon & MJ Leeming, Jacobs' Law of Trusts in Australia (Lexis Nexis, 8th ed, 2016) (Jacobs)), the learned authors state at [13-10] (p 238) that: the objective of a constructive trust is often remedial in that it seeks to bring to an end a situation where the defendant unconscionably refused to hand over property or effect restitution for some equitable delinquency, rather than institutional by being concerned with the investment and administration of property held, for a time that may be bounded only by the perpetuity period, on behalf of beneficiaries pursuant to an express trust.
25. The authors in Jacobs at [13-11] (p 240) continue: In Australia, some constructive trusts have the following features. First, they are only to be applied as the last resort. A plaintiff seeking a remedial constructive trust may have to exclude the possibility that there is some other effective remedy which is non-proprietary - that is, which does not attach to specific assets. Thus in that sense, in Australia constructive trusts are discretionary and exceptional. It does not necessarily follow from the fact that a remedy is used only as an exceptional last resort that it does not or should not exist.
26. The form of a constructive trust or other equitable remedy ordered can vary (see Jacobs at [13-11] (p 241)). Further, it is noted in Jacobs at [13-11] (p 241) that the cases in Australia "exhibit diversity in the relief granted" in relation to the form of the constructive trust imposed.
27. In my opinion, a constructive trust declared over the properties in the present case would best be seen as institutional not remedial (see McNab v Graham, approving a statement to that effect in Varma). In that regard, the plaintiffs point to the conclusion (at [75] of the principal judgment) to the effect that the relevant expectation (that the sons would be able to carry on the farming operations on the first defendant's farms, through E Co, during the first defendant's lifetime and would then inherit the farms on the first defendant's death) could be made good by imposing "a remedial constructive trust over the properties in favour of the sons (and requiring the first defendant to account to the sons for three-quarters of the proceeds of sale of Property No 12)" and they correctly surmise that the reference to a "remedial" constructive trust in that paragraph of the judgment was a slip and that what was there intended was a reference to "an institutional" constructive trust. I will amend the principal judgment to correct that unintentional error.
28. Leaving aside the taxonomical debate as to whether a constructive trust of the kind here being considered be institutional or remedial, the declaration of a constructive trust is still a choice to be made in determining the appropriate remedy to be granted. As stated in Bathurst City Council v PWC Properties Pty Limited (1998) 195 CLR 566; [1998] HCA 59 at [40], a constructive trust "serves as a remedy which equity imposes regardless of actual or presumed intention". It is made clear in the authorities (see Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 9 (Sidhu v Van Dyke) and Giumelli, for example) that the prima facie entitlement (on establishing a claim of proprietary estoppel) is the making good of the relevant expectation. That may well involve the declaration as to the existence of a constructive trust but that is only one of a number of ways in which potentially the expectation might be made good (and it might be coupled with other relief - indeed, as the plaintiffs argue, in the present case one might declare a constructive trust over the freehold but not accelerate the beneficiaries' interests under that trust and simply make orders restraining the first defendant from terminating the E Co lease). It is also clear that such a prima facie entitlement will give way where particular relief would be wholly disproportionate, or out of all proportion, to the detriment; and, in a number of cases there is reference to the flexibility of equity in the crafting of relief in all the circumstances of a particular case.
29. The plaintiffs have admonished against indulgence in idiosyncratic notions of fairness and justice (there citing Muschinski v Dodds at 614) and pointed to the reminder that decisions of equity are not a "wilderness of single instances determined by idiosyncratic exercises of discretion" (citing Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd ( 2001) 208 CLR 199 at [138]; [2001] HCA 63). For what it is worth, in proposing orders in the principal judgment I had certainly not intended so to act. In essence, the complaint by the plaintiffs as to the conditions I had indicated I considered it would be appropriate to propose is that it is not open for such conditions to be imposed as this would go beyond the proper scope of the maxim "he who seeks equity must do equity"; the plaintiffs citing the reasons of the plurality of the High Court in Bofinger, where the Court held at [67]: In particular, contrary to the submission by the Solicitors, the appellants were not bound to do equity by offering to perform an obligation to "protect" the second mortgagee as the price of any equitable relief founded on their subrogation rights in respect of the first mortgage. In Langman v Handover Rich and Dixon JJ said that the maxim that he who seeks equity must do equity "does not substitute moral for legal standards in the determination of the conditions of relief". Rather, those who ask for the assistance of a court of equity must be willing to do justice by accepting terms which flow from the legal or equitable rights of the defendant to the suit. and the admonition implicit in what was said in Mercanti by Le Miere J at [186]: The maxim "he who seeks equity must do equity" means that equity looks to the conscience of the applicant in determining whether to grant relief. It means that no plaintiff can get an equitable remedy unless that plaintiff fulfils his or her own legal and equitable obligations arising out of the subject matter of the dispute. Meagher, Gummow and Lehane caution that the limits of the maxim must be remembered, the maxim does not empower a court of equity to impose on a plaintiff as a condition of relief any term merely because it considers it reasonable.
30. Accepting those propositions, it remains the case that whether a constructive trust is the appropriate remedy in all the circumstances of the case must be determined having regard, among other things, to the proportionality of that relief; and, if it were necessary to structure any such trust in order to address proportionality issues, I would not see this as necessarily being in conflict with the above propositions (though the plaintiffs emphasise that this must be done in a principled way).
31. Finally by way of introduction, it seems to me that there is a risk, when approaching the question of which one or more of the proposed "pathways" for relief should now be followed, of conflating the notion of recognition of the existence from an earlier date of a constructive trust (from which date the first defendant might be said to hold no more than a bare legal interest in the properties subject to that trust) and the concept of acceleration of the interest of the beneficiaries of that constructive trust in the land (as a means of protecting and enforcing the rights of those beneficiaries).
32. In the present case, making good the expectations of the sons (and I leave aside for the moment the expectations of E Co in relation to the leasehold interest in the farms) does not require a transfer of the properties to them in advance of their father's death (as the plaintiffs own submissions recognise).
33. Both the recognition of an institutional constructive trust (by way of declaration if that now be granted) and the decision to accelerate the sons' expectations as to their ultimate ownership of the farms involve a decision as to the appropriate way in which to remedy the unconscionable conduct of the first defendant in resiling from the accepted basis on which the sons had made life-changing decisions in the expectation (encouraged, and not disabused, by him) that the farms would be made available to them during the first defendant's lifetime for the use of the farming business that was to be transferred to the new business entity (E Co) and that the farms would be left to them on his death (see [50] of the principal judgment).
34. If one approaches the matter from the premise that acceleration is simply the collapse of a bare legal trust (the premise from which some of the plaintiffs' submissions seemed to proceed), it might be said that this obscures the remedial choice which is made when and if an order is made for the immediate transfer of the land. Acceleration of the sons' interest or expectations in relation to the farming properties by a transfer of the land is but one way that their rights as beneficiaries of a constructive trust might be protected and enforced; declaration of a constructive trust accompanied by injunctive relief in relation to the properties, as the plaintiffs postulate, is another; yet another, as the first defendant urges as an alternative remedy, would be the payment of equitable compensation.
35. In that sense, while the proposed pathways for relief may not, as the plaintiffs argue, involve a binary choice, pathway B does involve the making of a decision for acceleration separate from the decision to declare (and thereby recognise the existence as from an earlier time) of a constructive trust.
36. Turning then to the question of the appropriate final relief, there was no dispute between the parties as to the proposition (to which I referred at [1182] of the principal judgment) that the appropriate starting point is the plaintiffs' "prima facie entitlement" to relief framed on the basis of the assumed (or expected) state of affairs (see Verwayen at 442; Giumelli at [42]; [50]; Donis v Donis (2007) 19 VR 577; [2007] VSCA 89 at [19] (Donis v Donis); Delaforce at [63]-[65]; and Sidhu v Van Dyke at [82]-[86]), which may involve the taking of positive steps by the first defendant.
37. In the present case, the prima facie entitlement (the making good of the relevant expectation) must be considered by reference to the particular expectations: in the case of the sons, the relevant assumption or expectation was that the family farming business would operate on the first defendant's farms (and in that sense the properties would be "held" for the benefit of the long-term benefit of the sons and/or E Co) and would only later pass to the sons upon the first defendant's death (see [1193]; [50] of the principal judgment); in the case of E Co, the relevant assumption or expectation (informed by the expectation of the sons) was that it would be able to continue farming operations on the properties during the first defendant's lifetime and until his death (see [62]); and that the sums advanced by the first defendant for the purposes of the family business operations (and the transfer to E Co of the cattle at book value) would not be repayable during the first defendant's lifetime (see [67]).
38. In relation to the first defendant's existing shareholdings in E Co and EM Co, while I was of the view that it was implicit in what was understood by the first defendant to be his sons' expectations in entering into the new family business that they would have the benefit of that family business going forward after his death (see [1225] of the principal judgment), that was not pleaded as such.
39. The sons' pleaded expectations did not involve them acquiring a freehold interest in the first defendant's properties (or the acquisition of his shares) during the first defendant's lifetime (although, at least in relation to the properties and implicitly in relation to the shares in the companies, there was a testamentary component to their expectation).
40. The most obvious way to make good the sons' expectation as to the properties (and the shares) is thus the grant of declaratory relief recognising the existence of a constructive trust over the properties (and the shares) during the first defendant's lifetime, such that the sons would only acquire the freehold interest in the properties (and acquire the shares), on his death. An order for equitable compensation, on the other hand, while it would attempt to represent in money's worth the loss of that which the sons had been encouraged to expect in relation to the properties (and the shares) would not conform as closely to the expectation that the sons would have the benefit of use of the properties (and the farming business carried on at the properties) for the balance of the first defendant's lifetime nor their expectation that they would inherit the properties on the first defendant's death.
41. Similarly, the most obvious way of making good E Co's expectation (as to the use of the properties during the first defendant's lifetime) would be the grant of relief to preclude the first defendant dealing with the properties during his lifetime in a manner which would preclude E Co continuing to carry on its farming operations on the properties. While the plaintiffs have put this as a declaration that the leasehold interest is held on constructive trust for E Co, that seems to me on further reflection to be problematic. The first defendant does not hold a leasehold interest in the land as such, he holds the freehold title, subject to a lease in favour of E Co. Thus, making good E Co's expectation as to the position during E Co's lifetime would more appropriately in my opinion be effected by a declaration that the first defendant holds his interest in the properties on constructive trust for the sons but that this freehold interest is subject to a lease in favour of E Co that the first defendant is precluded from terminating during his lifetime.
42. That, however, gives rise to the practical difficulty as to what was to be the position if the parties to the agreement for lease were unable in the future to agree as to ongoing terms of the lease, such as the rental; and as to what the first defendant's rights as landlord were to be in the event that there were a breach of the agreement for lease that in other circumstances would have entitled the landlord to terminate for breach - in other words, the terms on and manner in which the leasehold relationship between the parties was to continue during the first defendant's lifetime would potentially give rise to difficulties. Those difficulties would not necessarily be met by a finding (consistent with the plaintiffs' submissions) that the existing lease terms are set in stone, so to speak, in the sense that they could not be varied without E Co's agreement because there would still be the difficulty as to what would occur if, say, there was conduct amounting to a repudiation by E Co of the lease. One answer to that problem might be that the first defendant was limited to a claim in damages or to enforce the terms of the agreement for lease, but that situation is hardly ideal in the present context (of litigation reminiscent of trench warfare). Nor are those difficulties necessarily able to be addressed by assuming an hypothetical exercise of negotiation of lease terms having regard to the obligations deriving from the basis of the expectations held in relation to the ongoing farming business (as was the gist of submissions earlier made by the plaintiffs in relation to the hypothetical situation to which the parties would return at the conclusion of every possible invocation of the appellate process, as referred to above).
43. Another difficulty is that E Co's expectation cannot be (and was not) said to have a testamentary component. It cannot have been assumed (nor was it pleaded that there was an expectation) that the existing leasehold arrangements between E Co and the first defendant would continue after the latter's death and arguably that would be inconsistent with their expectation as to their inheritance. Logically, if the expectation of the sons was that they would inherit the properties on the death of the first defendant, any expectation by E Co as to its ability to continue farming operations on the properties at that stage must be tied to its expectations as to what the sons would choose to do when they inherited the properties (and cannot relevantly have been induced or encouraged by the first defendant). Thus, from the position of E Co, any relief to be granted against the first defendant to make good its expectation of occupation and use of the farming properties can surely not go beyond the lifetime of the first defendant.
44. It has been recognised (and does not seem to be disputed by the plaintiffs) that the prima facie position as to the relief being to make good the relevant expectation or assumption will yield to individual circumstances (see Donis v Donis at [20]). In the principal judgment I observed that relevant circumstances may include practical considerations such as the need for a "clean break" (referring there to Pascoe v Turner [1979] 1 WLR 431 at 438 (Pascoe v Turner) and Delaforce at [60]); the impact of the relief upon third parties; concerns of proportionality (see Delaforce at [62]); or the need for the party relying on the estoppel to "do equity" (see Verwayen at 442). (As to the need for a clean break, the plaintiffs point out (correctly) that this term was not used in Pascoe v Turner. It is, however, an apt description for what was there sought to be achieved by the relief granted.)
45. Further, what is in my opinion made clear by cases such as Giumelli and Sidhu v Van Dyke is not only that any prima facie entitlement is to be framed by reference to the assumed or expected state of affairs but also that, in assessing the relief to be granted, proportionality of the remedy to the prejudice or detriment is a relevant consideration (and, as Allsop P, as his Honour then was, said in Delaforce at [4], this consideration is sometimes of considerable importance). As Nicholson J said in Rodda (at [305]), to which I referred in the principal judgment at [1210]: Whilst it is not the case that the court should search for the "minimum equity" to do justice in the circumstances and it is not a case of assessing or measuring or weighing the detriment minutely in order to convert it into some equivalent of cash or kind, there must be a sufficient proportionality of any interest or remedy ultimately granted when compared with the prejudice or detriment suffered by the plaintiffs and the overall justice of the case.
46. As to the need for a clean break, as I have indicated above, and as I said in the principal judgment, I consider that to be an overriding practical consideration in the circumstances of the present case (subject to conditions appropriate to ensure that the outcome is not inequitably harsh to the first defendant or out of all proportion to the detriment in question). The continued holding by the first defendant of legal title to the properties on which the farming operations are to be carried on does seem to me to be unworkable from a practical perspective (and the first defendant does not suggest otherwise). (The question of his continued holding of the shares is a different matter, to which I will return shortly.)
47. The real question for me following the re-opened hearing is whether an order for the transfer of the properties to the sons at this stage would be disproportionate to the detriment in the sense considered in the authorities to which I have referred above. I considered in the principal judgment that it would not; but that was in the context where I also there considered that it would be appropriate to impose conditions on the acceleration of the sons' interest or expectations in relation to the properties, the effect of which would be to provide a measure of compensation to the first defendant for the loss of his interest in the land.
48. As noted above, the plaintiffs have challenged the proposed imposition of those conditions on the basis that they are not necessary in order that the plaintiffs to "do equity" and/or conceptually inconsistent with a recognition that a constructive trust came into existence in respect of the properties by no later than 27 June 2013.
49. I accept that the payment of a sum to reflect the net present value of the estimated market rent for the properties over the balance of the first defendant's life expectancy would not be conceptually consistent with a recognition that the freehold interest in the properties is (and has been since the time of the relevant reliance by the sons) held on constructive trust for the sons, at least unless that constructive trust were to be structured in such a way that the trustee could properly benefit or profit from the rents payable in respect of the properties (noting in this regard that trustees may on occasion be permitted to benefit from their position as trustees). I also accept that the other proposed conditions (i.e., the making of a payment in respect of the amount recorded as a book debt in E Co's accounts or for the transfer of the first defendant's shares in E Co and EM Co) would not readily be characterised as necessary for the plaintiffs "to do equity" in all the circumstances of this case and in that sense would not fall within the scope of the discretion as to the relief to be granted (again, unless perhaps an order of that kind were to be necessary to prevent disproportionality).
50. The criticism made by the plaintiffs as to the course that I had proposed (insofar as it attempted flexibly to craft relief that would address the respective parties' positions) was that it followed the approach that seems broadly to be adopted in the United Kingdom (and advocated in academic literature such as Professor Macfarlane's text) and suggested a larger discretion than the principled approach to be adopted in this jurisdiction having regard to what was said in Langman v Handover, Bofinger, and Giumelli. I accept that there is some force to that criticism (particularly in relation to the proposed Share Acquisition Condition but also in relation to the Market Rent and Book Debts Conditions, both of which assume that the first defendant would be entitled to profit from the holding of the properties and the shares), though the plaintiffs themselves (in their 31 October 2018 submissions) appeared to consider that the first defendant, albeit as constructive trustee, might have a legitimate expectation to "real benefits" or a share of the profits of the business at least after some kind of "grace period". However, if such conditions are not imposed then in my view the question of proportionality becomes a live issue.
51. What clearly emerged from the evidence at the re-opened hearing was the significance of the issue as to the potential CGT consequences flowing from the final relief to be granted (an issue about which there was no evidence at the principal hearing). It was not suggested by the plaintiffs that this was an irrelevant consideration to take into account in determining the final relief in this matter. Indeed, the plaintiffs in their submissions relied upon English authority as to the relevance of the likely effect of taxation when assessing the relief to be given on a proprietary estoppel claim (referring to Jennings v Rice [2003] 1 P & CR 100 at [52] per Robert Walker LJ; and academic commentary by Professor B Macfarlane, The Law of Proprietary Estoppel, Oxford University Press, 2014, at [9.62]).
52. The difficulty which this poses for me in the present case is that there is a real prospect that a declaration recognising the existence of a constructive trust over the properties from a particular date (whether that be 27 June 2013 or, as I consider to be the appropriate date, 1 July 2003) may have significant CGT consequences, irrespective of whether there is also an order providing for the acceleration of the sons' interests or expectations in relation to the farms. The argument by the plaintiffs in this regard seems to be (and I am here only paraphrasing the effect of their submissions) that the first defendant caused the problem and he should therefore live with the consequences (or, to use a colloquial expression, that having made his bed he must lie in it). I am not, however, persuaded that the spectre of CGT consequences can be dismissed so readily. This has been the aspect of the matter that, since the re-opened hearing, has given me the most pause in the determination as to what relief should finally be granted.
53. Subject to one qualification, I remain of the view expressed in the principal judgment that orders should be made for the acceleration of the sons' interests or expectations in relation to the properties. That qualification is this. While I accept the plaintiffs' submissions that transfer of legal title to the properties should not be subject to a Market Rent Condition in respect of the land, and that this in practical terms would be inconsistent with the basis on which the lease agreement was struck in the context of the joint farming business endeavour in which the first defendant and the plaintiffs were participating, I am troubled by the likelihood that a declaration of a constructive trust over the properties (whether or not coupled with an order for the acceleration of the beneficial interests under that constructive trust) will give rise to a significant CGT liability on the part of the first defendant.
54. I consider that this makes the relief sought by the plaintiffs (on either Pathway A or Pathway B; or, indeed, a combination of the two) sufficiently disproportionate, or out of all proportion, to the detriment or prejudice the plaintiffs will suffer (from the first defendant's decision to resile from the expectations he encouraged in his sons that he would hold the farms during his lifetime to be used for the purposes of the family business then to be entered into with his sons and that the farms would be left to them on his death), in the sense considered in Delaforce (at [4]) and Priestley (at [164], to which I referred at [1187] and [1189] of the principal judgment), to require a departure from the strict making good of the plaintiffs' expectations on either of those "pathways". That is because, even taking into account the possibility that the first defendant may have access to a source of funds hitherto not disclosed by him, the very making of a declaration of constructive trust over all of the properties (whether the sons' beneficial interest therein might then be accelerated or not) has the potential to give rise to a not insignificant CGT liability (and probably interest, if not also penalties) at the same time as none of the said properties would on that hypothesis be available to the first defendant to offset any part of that liability.
55. In those circumstances, I have concluded that the appropriate relief as to the farming properties is an amalgamation of each of the so-called pathways put forward by the respective parties: namely, that there be a declaration as to the existence of a constructive trust as from July 2003 over each of the farming properties the subject of the dispute, with the exception of Property No 11 (and, but only as to the date of the constructive trust having arisen, Property No 10); that there be an order for the transfer to the sons of the legal title to the said properties (i.e., with the exception of Property No 11); that there be an order for the payment to the first defendant of an amount representing the net present value of a notional rent for the now remaining nine years of the first defendant's life expectancy; that Property No 11 be sold; and for the payment to the sons, as equitable compensation in respect of their expectations in relation to Property No 11, such amount, if any, as remains out of the net proceeds of sale of that property after any payment by the first defendant out of those proceeds of sale to satisfy any CGT liability that arises from the findings I have made and/or the final orders that are to be made in accordance with these reasons.
56. I accept that the making of such an order in relation to Property No 11 means that the sons will in effect be contributing to the payment of any CGT liability (or, if that liability be no more than the proceeds of sale of Property No 11, in effect meeting that liability). However, in all the circumstances of the case (and notwithstanding the fact that it was the first defendant's decision to resile from the relevant expectation in relation to the properties that precipitated the findings that are likely to lead to that CGT liability), I consider that this is necessary in order to ensure that the making good of the sons' expectations (their prima facie entitlement to relief) does not operate in a way that is inequitably harsh to the first defendant. It also seems to me not inconsistent with the expectation itself that one of the properties the subject of the proposed joint farming activity should be available to meet a liability incurred in relation to the recognition of the sons' beneficial interest in the remaining properties (noting that the relevant expectation was never in terms of the holding of the specific farms as such - it being contemplated that there might be a sale or acquisition of one or more properties over which the farming business was to be conducted during in the course of the first defendant's lifetime, albeit after consultation with the sons).
57. Another course to remove the disproportion that I consider would otherwise arise between detriment and relief would have been to adopt the first defendant's alternative suggestion, namely that there be a transfer only of Property No 4 to A (with or without some additional equitable compensation) and the payment of equitable compensation to B and C. However, that form of relief would not in my view adequately make good the expectation of the sons that the properties would be held, and made available for the joint farming business, during the first defendant's lifetime and then would pass to them on their father's death; and would potentially give rise to issues as to how A's expectation in relation to the whole of the properties would be measured against B and C's expectations in relation thereto, for the purposes of assessing the amount of equitable compensation necessary to make good those expectations. Nor was there any principled basis put forward as to the calculation of any such equitable compensation.
58. So that there is no doubt, I emphasise that I consider that it is necessary to carve Property No 11 out of the declaration and relief to be granted (and for it to be made available for the payment of part or all of any CGT liability) not because of any obligation on the part of the plaintiffs to "do equity" but because I consider that otherwise the relief I propose to grant would be wholly disproportionate, or out of all proportion, to the detriment suffered by the plaintiffs and hence the equity which is to be made good. The likelihood is that there will be a CGT liability arising from the recognition of the existence of a constructive trust over the remaining properties (other than Property No 10) as from July 2003 (whether that be a CGT event E1 or CGT event A1; and whether that event is determined by the ATO to have occurred in July 2003 or, later, say on 27 July 2013).
59. I consider it appropriate for Property No 11 to be carved out of the relief because Property No 11 has not historically been regarded by the parties as essential for the operation of the farming business (it being a property that the sons conceded it had been contemplated at one stage might be sold). Property No 11 represents roughly 16% in terms of overall acreage of the properties (1,625.37ha out of the aggregate holding 9,893.97ha (adopting Mr Tremain's measurements (cf Mr Donoghue who stated 1,625.35 ha and 9,899.30ha, respectively)) and between 8-11% in terms of value (it being valued at about $1.6 million by Mr Tremain and $2.29 million by Mr Donaghue), i.e., 11% of value ($2.29 million out of $21.08 million as per Mr Donaghue) or 8% ($1.6 million out of $18.95 million as per Mr Tremain). It is the property the sale of which, were it necessary, the sons would least complain about (although I do not by this suggest that they will be at all happy with, or likely to accept, such an outcome).
60. I also remain of the view (which the plaintiffs do not challenge other than as to its calculation) that there should be compensation for the loss of the future income stream from the properties if the expectation is accelerated. I accept that it should not be calculated on a market rent basis for the reasons put forward by the plaintiffs but I do not consider that it should be limited to the amount the plaintiff suggests. As to the amount of the notional rent, I note that the plaintiffs in oral submissions acknowledged that it would be equitable to permit the first defendant a sum to support him for the balance of his life, and that they have advocated for this amount to be informed by the basis on which, historically, rent for the properties had been set and agreed between the parties (and that, in at least some of their written submissions appeared to consider that the first defendant might obtain "real benefits" to some extent from the business to be operated on the properties).
61. The rent, as at the time of the purported termination of the lease, was $100,000 per annum, less rates and insurance to be borne by the first defendant. On the transfer of the properties, the plaintiffs will become liable for rates taxes insurance and other outgoings in respect of the properties (other than Property No 11, which I have concluded should be carved out of the relief to be granted to the plaintiffs). They will not have the benefit of the ongoing use of Property No 11 and will not be liable to pay any notional rent for that property.
62. Historically, the arrangement whereby rent was struck was as a percentage of the value of the leased property; but, more importantly, for present purposes, it was struck so as not to produce a taxable income for the first defendant. I infer that it was anticipated that the rent (and income from the farming operations) was at least intended (with whatever distributions from his family trust that the first defendant would at that stage receive) to maintain him during his lifetime. The first defendant is no longer a primary producer and is approaching the end of his life. The evidence at the principal hearing confirmed at the re-opened hearing was that the family trust distributions have now ceased and the first defendant's evidence in the witness box, largely consistent with his bank statements and income tax returns, is that he does not now receive an income. I accept that there is a suspicion that he receives or is able to call upon income from other sources and that his evidence as to his financial position raises more questions than it answers in this respect. I have therefore not relied on that evidence in reaching the conclusions I have reached as to the question of proportionality of the final relief. Nevertheless, the fact remains that the expectation held by the sons included an expectation that the first defendant would benefit to some extent from the arrangement into which they were entering; and it might well be thought that it would not be inappropriate in that context for a notional rent to encompass some kind of buffer for contingencies that may arise towards the end of the first defendant's life.
63. Balancing the fact that the lease would not include Property No 11 (and hence the area leased would be reduced by about 10%) and that on this scenario the first defendant would not be paying rates and insurance for the properties to be transferred to the sons, but also that the first defendant's needs towards the end of his life are unknown (and that the plaintiffs at least at one stage contemplated that there might be "real benefits" after the expiry of a "grace period"), and approaching the matter in a broad brush way, I have concluded that the appropriate notional rent for the purposes of calculating the compensation payable for the lost future income stream would be a fixed $80,000 per annum without deduction for rates or insurance. Applying a discount rate of 3% (as Ms Bateman would do), the present value of that income stream over nine years would be in the order of $640,000; applying a discount rate of 4.5% (as Mr Lonergan would do) the figure would be in the order of $600,000 (on my rough calculations, which I do not suggest would meet actuarial standards). On the Lonergan Edwards' calculations, either sum would be able to be met by E Co (or the sons) as a lump sum. That is particularly the case where it has been contemplated that there would be set-offs applicable in any event.
64. I have noted earlier Ms Bateman's reason for adopting a 3% discount rate (that it reflects the likely risk rate for the return on money in the hands of the recipient). Mr Lonergan adopted 4.5% on the basis that the projected relevant payments would have been akin to E Co's "debt-like fixed obligations" and applied the interest rate payable on long term agri-business loans" (see [157]; 150 of the first Lonergan Edwards report), referring to the fixed interest rates on a five year Agri-business interest only loan applied by NAB (4.45%) and CBA (4.55%).
65. In that regard, I consider that it is appropriate to adopt the discount rate put forward by Ms Bateman (as the joint expert); though I note there is little difference between the two outcomes. That is because it is not clear to me that the Agri-business interest only rate would be the most relevant to be adopted in circumstances where the first defendant is the recipient of the income stream; and because the approach adopted by Ms Bateman seemed in general to be a conservative one.
66. As to the position in relation to the first defendant's shares, acceptance of the plaintiffs' arguments on the re-opened hearing (and absent acceleration in relation to the shares) will logically leave the first defendant as a minority shareholder in both E Co and EM Co (giving rise to the possibility of further disputes, a matter seemingly of concern to the plaintiffs having regard to the submissions made on 31 October 2018 as to the shares falling into the hands of the first defendant's solicitor and sister as executors of the first defendant's estate - a problem which I had sought to pre-empt by the compulsory acquisition of the first defendant's shares).
67. In the principal judgment (at [78]) I raised the question as to whether the expectation as to the benefit of the farming business extended to what was to happen on the death of the first defendant. At [78]-[79], I said: I have also considered in this context the first defendant's existing shareholdings in E Co and EM Co. The intention of the first defendant was that, subject to the uncommunicated success condition, his sons (and by extension their families) would obtain the benefit of the farming business conducted on the farms during his lifetime (see T 808). It is less clear what expectation there was (or that the first defendant understood his sons to have) as to the ownership of his interest in the companies on his death. I am of the view that it is implicit in what was understood by the first defendant to be his sons' expectations in entering into the new family business that they would have the benefit of that family business going forward after his death. On that basis an order that the first defendant's shares in E Co and EM Co be acquired by the sons (at a price to be determined by an independent valuation of the shares) would similarly be appropriate. Moreover, to effect a clean break between the parties it seems to me that it would be necessary for the sons to buy out their father's interest in E Co/EM Co. I have thus concluded that it would be appropriate, as a term of the relief to be granted under which the sons' interest in the farms is to be accelerated, for the sons to acquire the first defendant's shares in the companies at a value that represents the present worth of those shares (independently valued) calculated on the assumption that E Co is in a position to continue its farming operations on the properties but having regard to the requirement (to which I turn below) for E Co to pay to the first defendant the book value of the cattle transferred to it in 2003 and the advances made to it over the years (without interest). However, relief in those terms was not canvassed in oral submissions at the close of the hearing. In those circumstances I propose to seek further submissions on this aspect of the relief to be granted.
68. See also at [1225] of the principal judgment. While there was no pleaded expectation relating to the ownership of the business (through the shareholding of the respective companies), there was no pleading point taken on this issue by the first defendant and the only complaint by the plaintiffs (ironically, perhaps given their stance in relation to adherence by the first defendant to the pleaded case) was as to the proposition that there should be a buy out of the first defendant's interest in the companies.
69. The plaintiffs have argued that there is no basis for an order for the buy out of the first defendant's shares (though they seek an order for the transfer of those shares). In that regard, the plaintiffs argue that in Gillett v Holt part of the proprietary estoppel was directed not just to the land, but to the relevant companies which farmed the land. It is submitted that it was in that context, where there were company law suits also involved in the litigation, that in Gillett v Holt, the court came to deal with those as part of the orders that were made. It is submitted that, there (unlike the present case), the issue and part of the substratum of the facts in the case was that part of the nature of the disappointment of the expectation related not just to the land and the farming on the land, but the control of the companies and their management; and in effect the shares in the company formed part of the property the subject of the proprietary estoppel.
70. The plaintiffs submit that it might be a different circumstance if, in the present case, the first defendant had been the director or, effectively, the controller of E Co but the plaintiffs say that is not here the case (and it is submitted that the accounting and taxation advice in the latter part of 2002 made clear that there was a deliberate separation of the father from having a controlling position in the company). The plaintiffs nevertheless accepted in their 31 October 2018 submissions that the first defendant might have a legitimate expectation to a quarter of the profits of the business (after the grace period") - see [66] of the submissions.
71. In the circumstances, I will make no order for the acceleration of the sons' expectations in relation to the first defendant's minority shareholding in the companies. I appreciate that that means a complete break is not possible but I do not consider it affects the relief to be granted in relation to the properties. (Had a compulsory purchase order been sought, and made, I would have been inclined to accept Ms Bateman's evidence that the shares have a nil value, not least because even if adjustments of the kind that first defendant says should be made to the valuation in respect of E Co, on a compulsory purchase order there would need to be an appropriate discount to reflect the minority nature of the first defendant's shareholding and his lack of control in relation to the company. However, the issue does not here arise given the objection by the plaintiffs to the conceptual basis on which any order for the purchase of the shares might be made.) I will, however, put in place a mechanism for the transfer of the shares on the first defendant's death in an attempt to obviate disputes arising at that stage.

Conclusion as to the final orders

1. The above sets out my conclusions as to the principal relief necessary to make good the plaintiffs' expectations: a declaration of constructive trust in favour of the sons - in the case of the properties (other than Property No 11) with effect from 1 July 2003, in the case of all of the properties (other than Property No 11) except Property No 10 and, in respect of Property No 10, with effect from the time of its acquisition, such trust being subject to the agreement for lease between the first defendant and E Co in respect of all the properties (other than Property No 11, which is to be sold in accordance with these orders); the acceleration of the sons' beneficial interest in the said properties with an order for the transfer of the properties the subject of the constructive trust to the sons; an injunction to restrain the first defendant dealing with or entering the properties the subject of the agreement for lease; in the case of Property No 11, an order that it be sold (at public auction or by agreement with the sons) and out of the net proceeds of sale, after payment by the first defendant to satisfy any CGT liability that arises from the findings I have made and/or the final orders that are to be made in accordance with these reasons, payment of the balance by way of equitable compensation to the plaintiffs; and an order that the first defendant hold the shares in E Co and EM Co on constructive trust for the sons but be entitled to profit distributions if any in respect of those shares during his lifetime, the shares to be transferable on his death to the sons.
2. As to the notional rent amount, I consider it should be calculated on the basis indicated above. I had considered whether there should be a mechanism whereby it be paid in exchange for the provision of signed transfers in respect of the properties (other than Property No 11), rather than set off against other amounts payable or to be payable to the plaintiffs by the first defendant but in the circumstances where the amount to be paid to the first defendant in this regard will largely be balanced by the amount to be repaid by him in relation to the proceeds of sale of Property No 12, that does not seem to me to be necessary to remove any disproportion that would otherwise have arisen had there been a large difference between the two amounts). As to set-offs in respect of other accounts there was no dispute that this should be as I had earlier envisaged.
3. As to the remaining matters, I can deal with them in relatively brief compass.
4. I consider that the unpaid rent for the period from July 2014 to the date of judgment (in effect to 30 June 2019 since the rent is payable under the agreement for lease at the end of the financial year) should be calculated as the plaintiffs propose in accordance with the provisions of the agreement for lease as last varied. I see no basis for there to be a calculation of unpaid rent inconsistent with the terms of the agreement for lease that I considered to have been wrongly terminated by the first defendant. As to the evidence of B in relation to invoices forwarded on to E Co for payment (to which objection was made but which the first defendant was in a position, had he wished, to adduce evidence to dispute), I accept that evidence. Accordingly, the unpaid rent amounts will be as the plaintiffs have calculated.
5. As to the W Deed amount that is due, I accept that interest should be paid both on this and on the plaintiff sons' three-quarter share of the net proceeds of sale of Property No 12 (as from the dates set out in the plaintiffs' proposed orders) on the basis that the treatment of interest should be uniform (but that interest should be payable on both).
6. As to the release of the guarantee given by the first defendant to Westpac, I accept the first defendant's position that the plaintiffs should be required to procure a release of that (and any other extant guarantees provided to secure borrowings by them or the companies or in relation to their business(es)); and that, if for some reason those releases cannot be procured, there should be an indemnity in the first defendant's favour in relation thereto.

Costs

1. As to costs, it was agreed that the question of costs should be reserved pending the final determination as to the appropriate orders. I will make directions to facilitate this when these reasons are published; and will consider at that stage the extent of any set-off in relation thereto.

Orders

1. For the reasons above, I propose to make the following orders. In circumstances where the structure of the relief to be granted has been hotly contested (and already the subject of a re-opened hearing following the plaintiffs' complaint as to procedural fairness were that not to occur), I will defer making these orders until the issue of costs has also been resolved. This will give the parties an opportunity to point to any necessary corrections to be made in the arithmetical calculations or any misapprehension by me as to the submissions that were made in the course of the re-opened hearing in relation to the matters considered above (the possibility for which arises not least because of the successive sets of submissions relied upon in that regard). The orders that I propose are as follows. 1. Judgment for the plaintiffs on their second further amended statement of claim. 2. Dismiss the first defendant's cross-claim. 3. Declare nunc pro tunc that the first defendant holds his freehold interest in the properties listed in Confidential Schedule 1 to these reasons (the Properties) (which, for the avoidance of doubt, excludes the property referred to in these reasons as Property No 11), subject to the existing leasehold interest of the first plaintiff in the Properties pursuant to the terms of the agreement for lease entered into between the first plaintiff and the first defendant on or about 1 July 2003 and as varied in November 2011, such trust having arisen: 1. in the case of each of the Properties other than the property referred to in these reasons as Property No 10, on or with effect from 1 July 2003, that being the date on and from which I am satisfied that there was sufficient detrimental reliance by the plaintiffs on the expectation from which the first defendant sought to resile on 27 June 2013 to make the first defendant's conduct unconscientious; and 2. in the case of Property No 10, with effect from the time of its acquisition, by which time there was sufficient detrimental reliance by the plaintiffs on the expectation from which the first defendant sought to resile on 27 June 2013 to make the first defendant's conduct unconscientious. 1. Declare nunc pro tunc that the first defendant holds his shares in the first plaintiff and the second plaintiff, respectively, (the Shares) on constructive trust for the third, fourth and fifth plaintiffs in equal shares, such trust again having arisen on or with effect from 1 July 2003, that being the date on and from which there was detrimental reliance by the plaintiffs on the expectation from which the first defendant sought to resile on 27 June 2013 to make the first defendant's conduct unconscientious. 2. Declare that the legal title to the Shares be transferred to the third, fourth and fifth plaintiffs (absent any agreement between the parties for the shares to be transferred to them at an earlier time) on the first defendant's death but that, during the term of the first defendant's life, the first defendant be entitled to participate in any dividends payable in respect of the Shares as if the Shares were not held by him on constructive trust for the third, fourth and fifth plaintiffs. 3. Order that the first defendant forthwith transfer the Properties to the third, fourth and fifth plaintiffs, and do all things necessary to effect those transfers within 28 days of these orders. 4. Order that the first defendant, by himself, his servants and agents or otherwise, be restrained from selling, disposing, encumbering, or in any way dealing with, any of the Properties or the Shares so long as the first defendant retains legal title to any of the Properties or the Shares. 5. Order that if the first defendant fails to execute a document as required to effect order 6, the Registrar of the Supreme Court of NSW execute such document pursuant to s 94 of the Civil Procedure Act 2005 (NSW) on the plaintiffs presenting to the Registrar an affidavit by their solicitor setting out facts proving the failure of compliance to the satisfaction of the Registrar. 6. Order that the first defendant, by himself, his servants and agents or otherwise, be restrained from entering upon the Properties. 7. Order that the plaintiffs pay to the first defendant, within 28 days, the sum of $640,000, representing the net present value of the sum of $80,000 per annum over the period of the first defendant's present life expectancy (namely, nine years), calculated at a discount rate of 3%. 8. Order that the first defendant provide to the plaintiffs within 28 days of these orders executed transfers for nominal consideration in their favour in equal shares of the Shares, such transfers to be held in escrow by the plaintiffs and not registered until the first defendant's death. 9. Order that the first defendant pay to the third, fourth and fifth plaintiffs the sum of $577,465, in respect of the proceeds of sale of Property No 12, plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 11 September 2012. 10. Order that the third, fourth and fifth plaintiffs pay to the first defendant the sum of $156,250, in respect of the Deed referred to in these reasons as the W Deed, plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 30 April 2014. 11. Order that the third, fourth and fifth plaintiffs pay to the first defendant the following amounts by way of unpaid rent for the following financial years, plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from the dates specified: 1. $22,677, for the financial year ending 30 June 2014, plus interest from 30 June 2014; 2. $6,739, in respect of rent for the financial year ending 30 June 2015, plus interest from 30 June 2015; 3. $83,572, in respect of rent for the financial year ending 30 June 2016, plus interest from 30 June 2016; 4. $39,648, in respect of rent for the financial year ending 30 June 2017, plus interest from 30 June 2017; 5. $772, in respect of rent for the financial year ending 30 June 2018, plus interest from 30 June 2018; and 6. such amount, if any as represents unpaid rent of $100,000 less rates and insurance paid by the plaintiffs in relation to the Properties in respect of rent for the financial year ending 30 June 2019. 1. Order that Property No 11 be sold as soon as practicable by the first defendant (at public auction or otherwise by agreement with the third, fourth and fifth plaintiffs) and that, after payment of any amount to the Australian Taxation Office in payment of any capital gains tax liability arising in respect of a capital gains tax event in relation to the Properties, the first defendant pay to the plaintiffs the balance, if any, of the net proceeds of sale by way of equitable compensation for the loss of their expectations in relation to Property No 11. 2. Order that the payments ordered in orders 10 and 12-14 above be stayed until the issue of costs is determined; and then set-off against each other. 3. Order that the third, fourth and fifth plaintiffs do all things necessary to obtain a release of the guarantee provided by the first defendant to the Westpac Banking Corporation, being the subject of the Westpac Deed (the Westpac Guarantee). 4. Order the plaintiffs jointly and severally to indemnify and hold harmless the first defendant from any liability arising under the Westpac Guarantee and any other guarantee provided by the first defendant in connection with any business or other activity of the plaintiffs. 5. Reserve the question of costs of the proceedings.

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