Ellis v Marshall

PARTIES : Susan Vaughan Ellis (as Executrix of the Estate of the Late Sheelagh Robertson) - Plaintiff Janette Marshall (as Executrix of the Estate of the Late Patricia Marie Miles) - Defendant

COUNSEL : G Rundle - Plaintiff B Washington; J Lo Schiavo - Defendant

SOLICITORS : Connah, Steed & Co - Plaintiff F C Bryant Thomas & Co - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

1 HIS HONOUR: This is a dispute which relates to an asset in the deceased estate of Patricia Marie Miles who died on 16 January 2005. She was known to the family as Marie. For convenience I will adopt the course, without intending any disrespect to anyone, of referring to people by the first names by which they were known in their family.

2 Marie was one of a family of three girls. The other girls in the family were Sheelagh, who married Edward Robertson, and Miriam Findlay. Miriam Findlay was the only one of the sisters who herself had children. She had one child, who herself has married and is now Susan Ellis.

3 Sheelagh Robertson's husband Edward inherited from his mother, Rose, a house at 20 Iris Avenue, Riverwood. When Edward Robertson died, he left that house, by his will, to Sheelagh, Marie, and their mother, as joint tenants. After the death of their mother it came to be held just by Sheelagh and Marie, as joint tenants. That was the house in which Marie had lived for some years, initially with her mother, but after her mother's death, alone.

4 In August 1994 Marie was admitted to Lidcombe Hospital.

5 She was there seen by a social worker, who recommended that she should not return to independent living, but should move to supported accommodation.

6 Marie had for many years been deaf. She was not profoundly deaf, in that she could herself speak, but she still had very significant deafness. It was such that the usual method of conversation with her within the family involved both saying things, and also, writing the more important elements of a conversation down, to make sure that Marie could follow the substance of what was being said. It was usual for Marie herself, upon reading such a note of what had been said, to be able to respond orally.

7 While, at one stage, Marie had been in paid employment as a receptionist or typist, she stopped that employment, probably in her twenties. She lived on a pension after that.

8 At the time she went to Lidcombe Hospital in 1994 her niece, Susan Ellis, flew up from where she was living Tasmania. She found that there was around $16,500 in bank notes hidden behind Marie's wardrobe. She also found that the house itself was in what she describes as a filthy and extremely run-down condition.

9 Janette Marshall had been a friend of Marie for many years, and provided significant assistance to her. She was also involved, at the time of Marie going into hospital, in seeking to locate money which Marie had in the house. She found around a thousand dollars worth of loose coins.

10 Susan made extensive enquiries to find hostels which were suitable for Marie to live in, preferably near where Susan's mother was living. After a lot of looking around, they located a unit which they thought would be suitable at the Caroline Chisholm Retirement Village in Lane Cove, which was about ten minutes drive from Susan's mother's house.

11 Susan had a conversation with Sheelagh about the situation. Sheelagh said to Susan: "There'd only be just enough money to buy the unit even with the money from the Riverwood house. I suppose I could loan Marie the money from my half of the Riverwood house when it's sold but it would only be as a loan. If anything happens to Marie I want the unit to be sold and the loan paid back."

12 About four weeks after this visit, Susan and her husband came to Sydney again. On that trip, Susan took Marie to see the unit at Caroline Chisholm. In the course of that visit, Marie said that she liked the unit.

13 After that visit, Marie and Susan went back to Sheelagh's home. Susan gives evidence to the following effect: "When we got back to Sheelagh's home I said to Sheelagh words to the effect:- Marie liked the unit . Sheelagh said:- So you liked the unit pet? I wrote:- Sheelagh wants to know if you liked the unit? Marie read the note and said: Real nice, Sheel . Sheelagh said: You won't have enough money for the unit, but, if you like it, I'll lend you the money that you need. I wrote: Sheelagh said that you won't have enough money for the unit, but if you want to live there she'll lend you the money that you need. Marie said: Very kind of you Sheel. Sheelagh then said to Marie:- Yes, I'll lend you the money from my share of Rose's house when it's sold but I'll need to keep the paperwork just like I kept the paperwork for Rose's house. I gave Marie the previous note to read again and then wrote:- Sheelagh says she'll lend you her share of the money from the house at Riverwood when it's sold. She said though that she needs to keep the paperwork for the unit, like she did for Rose's house. Marie then said:- That's OK Sheel. Marie then said:- Don't want you to go short, Sheel. Sheelagh said:- No pet, I'm right. I don't want you to pay me anything back now but if anything happens to you I will want the unit to be sold so that I will get back the money I'm lending you. I wrote:- Sheelagh's right for now. She doesn't want any repayments but if anything happens to you she will want the unit to be sold to get back the money she lends you. Sheelagh will keep the title deed as security for the loan and handed it to Marie. Marie read it and responded by nodding. I wrote:- You'll still get your pension, but the cost of meals, washing and cleaning will come out of it and handed it to Marie. Marie read it and said to Sheelagh:- Real happy Sheel, very kind."

14 Arrangements were made with the management of Caroline Chisholm Retirement Village for Marie to go into occupation of the unit. There was a problem of finance. On 23 September 1994, the management of Caroline Chisholm Retirement Village wrote to Connah, Steed & Co, the solicitors who were acting, at that time, for both Sheelagh and Marie, offering a concessional arrangement, whereby, at least in the first instance, she would be allowed to stay at the village upon payment of 85% of her pension, plus rent allowance to be received from the Commonwealth government. That offer was specifically stated to be made "as she is financially disadvantaged". As well, the management offered to waive a $2,000 refurbishment fee which was normally payable on registration of a transfer of shares.

15 The units in the retirement village were held under a company title arrangement, whereby a particular block of shares, in a company called Caroline Chisholm Lodge Pty Ltd, entitled the holder to exclusive occupation of a particular unit in the village.

16 Contracts for the purchase of the shares which would entitle Marie to occupy the unit were exchanged on 11 November 1994. That contract was one which provided for a deposit of $5,000 to be paid, and the balance of the purchase price of the unit to be paid within six months, subject to a condition that if 20 Iris Avenue, Riverwood was sold, and the sale was completed before expiry of that six months, then completion of the purchase of the shares would take place within seven days of completion of the sale of the house.

17 On 22 September 1994 - that is, before the contract for purchase of the shares was executed - Sheelagh, Marie, Susan, and Susan's husband, Phillip (who is known as Pip), were all at Sheelagh's house. Susan gives evidence of a conversation occurring on that occasion, the substance of which is: SHEELAGH: "Pip, what can I do to record the fact that I'm loaning my half of the money from the sale of Rose's house to Marie so she can buy the unit at Caroline Chisholm?" PIP: "The best thing to do is to write a note to say that's what you're doing and then sign it and date it." SHEELAGH: "Lets get that done now while we're at it. Could you write the note out for me and I'll sign it. My writing's not too good these days." PIP: "I'll write it out for you. If you like we can give it to the solicitor for safekeeping along with the paperwork to do with selling the Riverwood house and buying the unit." SHEELAGH: "That's a good idea. Can I leave you to take care of that?" PIP: "That's fine leave it to me." Pip then wrote out the note … and Sheelagh read it and signed it. After Sheelagh signed the note, I showed it to Marie. She appeared to read it and then looked at me and said: "Yes, Susan" and then she smiled at Sheelagh and said:- "Reel kind of your Sheel."

18 The document which was signed was in the following form: "On sale of 20 IRIS AVE, my one half of the proceeds is to be paid over to my sister Marie, to be used by her towards the purchase of a one bedroom unit in Caroline Chisholm Retirement Village, by way of loan."

19 That document was written out by Phillip, and signed by Sheelagh. However, it was not signed by Marie.

20 Settlement of the sale of the Riverwood property took place on or shortly before 9 December 1994. The net proceeds of sale, after deduction of all expenses, was $129,622.56. Marie had, it seems, found the $5000 deposit purchase of the shares concerning the Caroline Chisholm unit from somewhere, and the remaining $120,000 was paid from the net proceeds of sale. After payment of a debt which was owing to Caroline Chisholm, which had been incurred during the period when Marie had been allowed to stay there on the basis of a concessional payment, an amount of $6,394.36 remained. That was divided equally between Marie and Sheelagh.

21 It is apparent, from this flow of funds, that the $120,000 was funded, in particular, from Sheelagh's share of the proceeds.

22 By a means on which the evidence is silent, the share certificate relating to the shares in the Caroline Chisholm company has come to be in the custody of the plaintiff.

23 Sheelagh died on 7 June 1995. She appointed Susan as her executrix, and gave Susan all her estate.

24 At the time of making application for probate, Susan completed the usual inventory of assets. It made no mention of any debt which was owed by Marie. However, on 15 March 1996, she disclosed to the Court, in connection with the probate application, and as a supplementary asset, an item she described as "7.6.95 - Debt due to the deceased by Patricia Marie Miles of 03 Caroline Chisholm Village 40A, Cope Street, Lane Cove - $61,814.10".

25 In November 1996, there was some correspondence between Ken Thomas & Associates, solicitors acting for Marie, and Connah, Steed & Co. At that time, Connah, Steed & Co were acting for Susan, in her capacity as executrix of Sheelagh's estate. On 6 November 1996, Marie's solicitors wrote, enquiring: "Please supply full particulars including copies of any agreement between our client and the late Sheelagh Robertson as to how the claimed equitable charge on the share arose. In addition confirm as to which solicitors acted for each of the late Sheelagh Robertson and Patricia Marie Miles in establishing the equitable charge which is claimed."

26 On 8 November 1996, Connah Steed replied, saying: In response to your letter dated 6th November, 1996:- 1. There was not to our knowledge any written agreement between Miss Miles and the late Mrs Sheelagh Robertson relating to the equitable charge. 2. The equitable charge arose by operation of law. 3. The facts upon which the equitable charge arose are that by mutual agreement between them the late Mrs Sheelagh Robertson contributed the sum of $61,814.10 out of her own one half share of the nett proceeds of sale of property 20 Iris Street, Riverwood towards the purchase of Apartment 03 Caroline Chisholm Lodge."

27 This provoked a response of 12 November 1996, as follows: "We refer to your letter of 8th November, 1996. The reply is insufficient. As regards the reply enumerated 3, this does not disclose any basis on which an equitable charge could have arisen. The "contribution" to which you refer (if made by Sheelagh Robertson) could have been a repayment to our client for monies owing or could have been made as a gift inter vivos or another purpose. In the absence of anything more substantive than the bare assertion as set out in your letter, it will be our client's demand to return the share certificate forthwith. In any event, was the alleged "equitable charge" included in the inventory of assets attached to the probate application for the estate of the late Sheelagh Robertson. We await your early reply."

28 The last letter in this chain of correspondence is one which Connah, Steed & Co wrote on 22 November 1996 to Ken Thomas & Associates. It said: "Your letter dated 12th November, 1996 is acknowledged. We note that your client does not acknowledge that the contribution referred to was made by the late Mrs Sheelagh Robertson. The amount secured by the equitable charge was included in the assets of the late Mrs Sheelagh Robertson disclosed to the Supreme Court."

29 There, the matter has been left, until these proceedings were begun.

30 When Marie died in January 2005, her last will appointed Janette Marshall as her executrix and gave her all her estate. At the time of her death, Marie's assets consisted of the shares in Caroline Chisholm Lodge Pty Ltd, and around $12,000 in bank accounts.

31 These proceedings are brought by Susan, as executrix of Sheelagh's estate, against Janette Marshall, as executrix of Marie's estate. They seek to enforce an alleged charge over the shares. The shares have, in fact, been sold, and sufficient proceeds to meet the plaintiff's claim if she were to succeed have been placed into a controlled money account.

32 The first question which needs to be considered is whether there was a loan at all. It is clear enough that there has been a payment of money from Sheelagh to Marie, from the proceeds of sale of the Riverwood property, and this question of whether there has been a loan relates to the characterisation of that payment.

33 It is clear law that, where there is a payment of money by A to B, and the sole question for decision is whether that payment is a loan or a gift, the onus of proving it is a loan is on the person who so asserts: Heydon v Perpetual Executors Trustees and Agency Company (WA) Limited (1930) 45 CLR 111; Coshott v Sakic (1998) 44 NSWLR 667 at 671.

34 It is relevant to whether an onus of proof has been discharged in the present case that the claim is one against a deceased estate, and where the principal parties to the transaction are both dead. The Court always examines particularly closely evidence given in such cases. However, the ordinary civil onus of proof, namely, proof on the balance of probabilities, is still applicable in such a case.

35 The way in which the death of the relevant parties is taken into account is in the course of deciding whether, on the balance of probabilities, the claim has been made out. As well, while this is more a matter of practice than of law, the Court treats uncorroborated evidence of communications with deceased people with considerable caution, and regards as of particular significance any failure of a claimant to bring forward corroborative evidence which was, or ought to have been, available: Plunkett v Bull (1915) 19 CLR 544 at 549.

36 In the present case, it will be observed that the principal players in the conversations on which the plaintiff's case is founded are herself, Sheelagh, and Marie, with one exception. That exception is the meeting on 22 September 1994, which I have referred to earlier. Susan's husband was present at that meeting.

37 When the evidence in the case was first filed by affidavit, there was no evidence from Phillip. However, today, Mr Rundle applied for, and was granted, leave to call Phillip to give oral evidence. He gives evidence which supports the account his wife has given, to the extent that he recalls being at the meeting on 22 September 2004, he recalls that Susan, Sheelagh and Marie were both there, he recalls that there was conversation, but does not recall the substance of it; he recalls that he drafted the document which was signed that day, that Sheelagh signed it, that it was shown to Marie, and that she smiled.

38 That evidence is evidence which, in my view, corroborates the account which the plaintiff gave of that meeting, in so far as Phillip's memory lets him.

39 There is, as well, some corroborative evidence which arises from the circumstances of the transaction. It is clear that Marie was in need of accommodation where she could be assisted in 1994. It is clear that, from her own resources, she did not have enough money to buy her way into the Caroline Chisholm unit. I accept the plaintiff's evidence that that unit was the one which seemed most appropriate to Marie's needs, and that Marie herself approved of it.

40 It is also of some significance, in my view, that it was the Riverwood house which was the source of funds. That house, coming as it did from Sheelagh's husband's mother, was one to which Sheelagh would have, quite justifiably, felt that she had an entitlement. She did not cavil at what her husband had done, in leaving the house (eventually) to both Marie and Sheelagh, but it is understandable that she would seek to preserve the half interest in the house which she had. The settlement sheet demonstrates the clear flow of funds from the sale of the Riverwood house into the purchase of the unit.

41 Not all of the possible corroborating evidence is available. The notes which were the aid to carrying out the conversation with Marie were, the plaintiff says, ones which she left on the kitchen table at Sheelagh's house that day, and has not seen since. I do not find that course of events at all surprising.

42 As well, the plaintiff's claim would have been a lot clearer if Marie had actually signed the acknowledgment of the loan which Phillip drafted. She was in the room at the time, according to the plaintiff, and so it would have been quite possible, and very easy, for her to sign it, but that step was not taken.

43 I do not think, however, that this is ultimately of much significance. What was in train was a family discussion, between people who trusted each other. It is not particularly surprising that a course which would have seemed a desirable one to a lawyer was not followed.

44 I mention here that Susan is someone who had obtained university qualifications in science and education and works as a psychologist. Phillip is someone who worked as a manager of disability support services, and is now retired. Their respective occupations are such that the failure to have Marie sign the document does not have the same weight that a similar failure by a lawyer or a sophisticated businessman might have.

45 Finally, I have considered the way that the plaintiff performed in the witness box. There was nothing in her demeanour which gave me any unease about her evidence.

46 In those circumstances, the plaintiff has discharged the onus of proving that the money in question was advanced as a loan.

47 The deposit of title documents, without more, gives rise to an inference that the deposit was intended by the parties to operate as creating an equitable charge or mortgage over the property whose title document is deposited: Bank of New South Wales v O'Connor (1889) 14 App Cas 273 at 282; Shaw v Foster (1872) 5 Eng & Ir App 321 at 339-340, per Lord Cairns; Westpac Banking Corporation v Cronin (1990) 6 BPR [13,105]; Re Wallis & Simmonds (Builders) Limited [1974] 1 All ER 561.

48 That inference is, as I have said, one which arises when there is a mere deposit of title deeds without more. If the Court is satisfied that there has been an actual agreement about the basis on which those title documents are deposited, the inference ceases to operate: Westpac Banking Corporation v Cronin (1990) 6 BPR [13,105] at 13,110. In that situation, the rights which arise from the deposit will be whatever the parties are demonstrated to have actually agreed. It is not necessary to decide whether the detailed process of reasoning in Cronin - that the presumption did not operate when it was proved that there was an agreement about the basis on which the title deeds were held, but both parties failed to discharge the onus of proving what the agreement was - is correct.

49 The process of reasoning at work here is closely analogous to the process of reasoning which is involved when the Court is asked to find a resulting trust, where an inference is drawn from the mere provision of money towards a purchase price, that it was intended to confer a beneficial interest in favour of the person who provided the money, but that inference has no room to operate to the extent that it is proved that there is an actual, and different, agreement: Black Uhlans Inc v NSW Crime Commission [2002] NSWSC 1060; (2002) 12 BPR 22,421 at [136]-[142], 22424-5.

50 Here, I am satisfied that there was an agreement as to the purpose of the deposit. It is the agreement which was arrived at in the course of the conversation to which I have referred to earlier (para [13] above) in which the plaintiff wrote "Sheelagh will keep the title deed as security for the loan", and a note containing those words handed to Marie, to which Marie responded by nodding.

51 Mr Washington, counsel for the defendant, criticised the plaintiff for failing to call Mr Steed, the solicitor who was involved in the transaction. He was in a good position, Mr Washington submitted, to give evidence of what the arrangement between his two clients was.

52 A Jones v Dunkel (1959) 101 CLR 298 inference can be drawn when there is no explanation for the failure of a witness to give evidence. Here, unless he sought to obtain a release, Mr Steed would owe an obligation of legal professional privilege to Marie. While it would have been open to the plaintiff to seek to have that privilege waived, the fact that that step needed to be taken considerably detracts from any Jones v Dunkel inference which might otherwise be drawn.

53 Further, it is not as though Mr Steed was a witness to the actual transactions. It is speculation as to whether he would have been able to give any admissible evidence. He would, of course, have been able to pass on what his instructions were, but that is the sort of evidence which would just as likely be open to objection on the ground of hearsay, quite apart from any question of privilege.

54 As well, whether a Jones v Dunkel (1959) 101 CLR 298 inference is actually drawn depends on all the evidence in the case. In the present case, Mr Steed was both the solicitor who was involved in the settlement of the conveyancing transaction, and the solicitor who wrote the letters emanating from his firm in November 1996. It would have been quite impossible for a solicitor behaving properly to have written those letters if he had reason to believe that the true facts were that the transaction was other than a loan supported by an equitable mortgage. That results in there being a competing inference to the Jones v Dunkel inference here, which significantly detracts from any inference which might otherwise be drawn from his mere non-calling, that his evidence would not have assisted. I do not regard the failure to call Mr Steed as detracting from the plaintiff's case.

55 A final question concerns the terms on which the loan was made. That is relevant because, if the loan was one which was on demand, it would by now have become statute barred. On that topic, I accept the evidence which the plaintiff has given, to the effect that the agreement between Marie and Sheelagh was that the loan was not to be repaid until something happened to Marie. In the context in which that conversation occurred, that language, which, considered by itself, is quite imprecise, clearly meant that the loan was not repayable until either Marie died, or else, Marie was in such a condition that she was no longer able to live in the unit.

56 As things happened, Marie was able to continue living in the unit until, effectively, the time of her death. Thus, it was only at the time of her death, that the loan become repayable. The recoverability of the loan was not defeated by the Limitation Act 1969.

57 In those circumstances, there will be a judgment for the plaintiff.

58 In the factual situation where the unit has been sold, the particular declarations and orders which were sought in the Summons are no longer appropriate. I will seek assistance from counsel in formulating orders which give effect to the reasons for judgment, in the light of the facts about the property which now exist.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.