Fragar v Fragar

Fragar v Fragar - [2024] NSWSC 193 - NSWSC 2024 case summary — Zoe

[3]

JUDGMENT

The parties to this matter are members of one family. Linda May Fragar (the plaintiff/cross-defendant) is the mother of Jeffrey Evan Fragar (the defendant/first cross-claimant), who is married to Katherine Margaret Fragar (the second cross-claimant), known as Kathy. Without intending any disrespect, I will refer to the parties by their first names, as I shall with Linda's late husband (and Jeffrey's father) Barry Douglas Fragar.
For many years, members of the Fragar family have owned and farmed a property in central western NSW known as Talgong. Between 1989 and 2013, Barry, Linda and Jeffrey carried on a farming business in a partnership which the parties have conveniently called the "three-way partnership". At all points during that period, legal title to the land, which I describe in more detail below, was held by Barry, Linda and Jeffrey in one or other form of co-ownership.
At the time of Barry's death on 15 November 2019, legal title to Talgong was held by all three members of the three-way partnership as tenants in common in equal shares. Since finalisation of Barry's estate, Linda has been the legal owner of two thirds of Talgong, and Jeffrey has been the legal owner of the remaining one third of the property. Jeffrey and Kathy continue to live at Talgong and to farm the land.
By summons filed on 24 August 2020, Linda sought orders for the appointment of trustees to, and sale of, Talgong, pursuant to s 66G of the Conveyancing Act 1919 (NSW).
By Further Amended Statement of Cross-Claim served on 26 January 2024 (leave to file which was granted at the hearing), Jeffrey and Kathy seek a variety of different orders. Key aspects of the relief sought are as follows: 1. a declaration that on 14 February 2013, Linda, Barry, Jeffrey and Kathy entered into an enforceable agreement that Linda, Barry and Jeffrey would be registered as joint tenants over Talgong and that the three of them would remain joint tenants. The terms of that agreement are pleaded in some detail and are set out more fully below (as alleged, the "February 2013 agreement"). Jeffrey and Kathy seek orders that the February 2013 agreement be specifically performed; 2. alternatively, a declaration that Linda is estopped from denying the existence of the February 2013 agreement; 3. in the further alternative, declarations as to either constructive or resulting trusts over Talgong and various other property, including a home unit in Dubbo owned by Linda (the "Dubbo unit"), a Toyota Landcruiser and a caravan; 4. in the further alternative, an order for restitution and equitable contribution for money expended on Talgong since 15 February 2013 (and an order for an account in respect of those contributions); 5. interest, which is expressed in general terms but which I take to be a claim for interest on any amounts that become payable pursuant to the immediately preceding claim for relief; and 6. in the further alternative, an order for provision out of Barry's estate pursuant to s 59 of the Succession Act 2006 (NSW).
Linda resists the entirety of Jeffrey and Kathy's claim. She denies that the alleged February 2013 agreement was ever formed either in whole or in part. She says that there was no intent to create legal relations as at 14 February 2013, and that any agreement that was formed would fail for non-compliance with ss 23C(1)(a), 23C(1)(c) and 54A of the Conveyancing Act 1919 (NSW). She denies that Talgong was ever an asset of the farming partnership. Her claim is that Talgong should be sold and the proceeds divided according to the legal interests that she and Jeffrey now have in the property.

[5]

The 2013 and 2014 transactions in summary

In the middle of 2013, following a number of family meetings discussed in more detail below, and with the assistance of their long-term accountants and business advisers, Murray Business Solutions (MBS), the Fragar family entered into a series of dealings which included the following: 1. Kathy used a large part of her mother's inheritance to "buy in" to the three-way partnership, which resulted in the partnership expanding to the so-called "four-way partnership". 2. Kathy was recognised as a 33% partner in the four-way partnership and Barry and Linda's interest was reduced to 17% each. 3. Barry and Linda, in turn, used the funds which Kathy had contributed, together with some other funds from the partnership bank account, to buy a house in Dubbo and some other assets.
Barry and Linda retired from living at and working on the farm. They subsequently retired from participation in the four-way partnership altogether. The business of farming Talgong continued uninterrupted but, as of mid-2014, was only carried on by Jeffrey and Kathy in what the parties have conveniently called the "two-way partnership".
Just before Barry and Linda retired from the four-way partnership in 2014, its accounts showed the following: 1. Barry and Linda each had a 17% partnership interest. 2. Barry and Linda each had a balance of "partners' funds" which reflected their current entitlements to share in the net assets of the partnership, taking into account their historical contributions to and borrowings from the partnership.
Upon formation of the two-way partnership, the partnership accounts showed the following: 1. Barry and Linda now each had a 0% partnership interest. Jeffrey and Kathy each had a 50% partnership interest. 2. Neither Barry nor Linda had any partners' funds. Instead, amounts equalling the whole of the net assets of the partnership stood to the credit of Jeffrey and Kathy's partners' funds. In each case, those amounts reflected their 50% partnership share of the net assets of the partnership taking into account their historical contributions to and borrowings from the partnership. 3. Barry and Linda now each had a loan account. Amounts equal to the closing balance of their partners' funds balance as at the date of dissolution of the four-way partnership, being the amounts referred to in [11(2)] above, were now recorded as "loans" to the two-way partnership.
Subsequent amounts paid to or on behalf of Barry and Linda from the two-way partnership were treated as repayments of these loan accounts.

[6]

The dispute about ownership of Talgong

Left out of this brief description of the parties' dealings is the critical question of ownership of Talgong itself, which is the central issue now in dispute.
Talgong was purchased by Barry, Linda and Jeffrey in 1989 as joint tenants at the very same time that they formed the three-way partnership. It was comprised of land identified in two folio identifiers, Lot 6/721739 and Lot 13/724609. Save for a brief period when Lot 13 was held as a tenancy-in-common, Talgong was held as a joint tenancy at law for the entire duration of the three-way partnership and also the four-way partnership. The joint tenancy was severed in September 2019 shortly prior to Barry's death and following a failed mediation between the parties.
Linda's case, shortly stated, is that the partnership and other dealings in 2013 and 2014 in no way affected the parties' interests in Talgong itself. She says that Talgong was never partnership property, that there was never any agreement as to what would happen with Talgong on Barry's death (or otherwise) and that Kathy's contribution to the partnership is to be understood as a contribution to a partnership whose partners, despite what was said in its accounts and tax returns, had no claim to Talgong as partnership property. On her case, Kathy became a partner in a partnership which could only claim the plant and equipment as partnership property but which, at the same time, was saddled with debts significantly exceeding the value of those chattels.
Jeffrey's case, shortly stated, is that Talgong was property of the three-way partnership and of the four-way partnership. He contends that the parties reached an enforceable agreement in February 2013 as to the terms on which Barry and Linda would retire from farming and as to what would happen with Talgong. His case is that there was an agreement that Kathy would contribute $300,000 to be admitted to the partnership, that Barry and Linda would receive $300,000 in return for their partnership interests, and that Talgong would be restored to joint tenancy and held by the legal owners as joint tenants to ensure that Jeffrey would inherit it on his parents' death. His principal case is that this February 2013 agreement was reached in a meeting held for the very purpose of agreeing a final and binding family succession plan in relation to the farm.

[7]

Summary of conclusions

The view that I have come to is that Jeffrey and Kathy are largely entitled to succeed. In summary, I have found that: 1. There was an agreement reached in February 2013, but that it was not nearly so detailed and extensive as alleged. The only material agreement reached as to a succession plan was that Barry and Linda would restore ownership of Talgong to joint tenancy and that it would remain so held. Other details of how, when and on what terms Barry and Linda would eventually retire from farming and from the partnership were discussed but not finally resolved at the February 2013 meeting. 2. Kathy contributed the lion's share of her inheritance to the partnership, in return for which the existing partners (Barry, Linda and Jeffrey) recognised her as a 33% partner (with contributed funds equal to the cash contribution). Barry and Linda continued as partners as to 17% each. 3. Talgong was partnership property of the three-way partnership largely but not only because it had been purchased by Barry, Linda and Jeffrey as partners and paid for out of the revenue of the business which they conducted as partners. It was also property of the four-way partnership. 4. Barry and Linda used cash provided by Kathy and other partnership funds which they used to purchase the Dubbo house plus other property. These transactions reduced their partners' funds in the four-way partnership and, later, their loan balances with the two-way partnership as further explained below. 5. On the dissolution of the four-way partnership which occurred on Barry and Linda's retirement in 2014, the parties went their separate ways on terms that are reflected in the immediately subsequent partnership accounts of the two-way partnership. Barry and Linda relinquished their claims as partners altogether. The balance of their partners' funds were carried to a loan account. The subsequent financial assistance that they received from the ongoing two-way partnership was part repayment of those loans. Those loans were at call and interest free. They have neither been demanded nor forgiven, despite disappearing from later financial statements. 6. Further, I find that the four-way partnership was wound up informally by the parties on terms that all of the partnership property would thereafter be owned by the two-way partnership. It was only in that way that the two-way partnership could continue to trade, which was everyone's very clear intention at the time, and to carry the significant debt, including Barry and Linda's loan accounts, with which all parties intended it should be saddled.
The practical effect of these findings is that I reject Linda's claim for relief under s 66G but I will also not make the declarations sought by Jeffrey and Kathy. I will deal with the question of final relief in due course.
I have also rejected most of Jeffrey and Kathy's alternative claims. Save for a representation that Talgong would revert to and be held in joint tenancy, I have found that the alleged representations and encouragement as to the precise terms on which Barry and Linda would retire have not been made out.
Talgong is not held on resulting trust for Jeffrey and Kathy, nor is the Dubbo unit.
There was also a purchase of a former Crown road, folio identifier 1/1208752, in 2015. This was purchased in the names of Barry, Linda and Jeffrey but paid for entirely by the two-way partnership and is held by its legal owners for the benefit of Jeffrey and Kathy as partners of the two-way partnership.
The conclusions I have reached have made it unnecessary to deal with Jeffrey's alternative claim for family provision. Were it necessary to deal with that claim, I would have made very substantial provision for him.

[8]

Facts in more detail

Barry and Linda have three children: Kenneth, Jeffrey and Joanne. Prior to 1989, Barry, Linda, Jeffrey, and Kenneth farmed various farms together, albeit not necessarily in partnership with each other. Nothing particularly turns on the details of these arrangements, but it is relevant to note that all four of them owned, as tenants in common, a farming property in Queensland known as Rhyddings. Linda's evidence was that Jeffrey and Kenneth were on title for tax reasons.
By about 1989, Barry, Linda and Jeffrey were in a partnership called "B.D Fragar & J Fragar & L.M Fragar" (the three-way partnership to which I have already referred). The three-way partnership had an ABN and carried on the family's farming business.
On about 30 January 1989, Barry, Linda and Jeffrey entered into an agreement to purchase Talgong for the sum of $521,220, as well as stock in the sum of $60,000 and plant in the sum of $40,000. As will by now be evident, there was a live dispute at trial about whether these purchases were made by Barry, Linda and Jeffrey individually, or as an asset of the three-way partnership. It was not in dispute that Barry, Linda and Jeffrey were registered as joint tenants of Talgong.
Linda's evidence was that the proceeds of sale of Rhyddings were used for the deposit and that the balance of the purchase price was provided by vendor finance. Rhyddings, as I have noted, was held by Barry, Linda, Ken and Jeffrey. I infer that Linda's reference to the proceeds of sale was to the proceeds received by each of them as vendors of Rhyddings. The evidence does not allow me to reach a conclusion about how much of the deposit was sourced from the proceeds of sale of Rhyddings but there was evidence that Rhyddings had been heavily encumbered. Jeffrey's evidence was that the deposit came primarily from cash earned from contract work which he did with Barry between the sale of Rhyddings and the purchase of Talgong.
As for the vendor finance for the purchase of Talgong, the resulting liability to the vendor, Mr Plummer, was recognised as a partnership liability. The Court did not have partnership accounts for the whole of the period 1989 to 2013 but Jeffrey's evidence was to that effect. To the extent partnership accounts and partnership tax returns of the three-way partnership were in evidence, they showed that interest on the vendor finance (as refinanced from time to time) was recorded as an expense against the revenue of the partnership for accounting purposes and was claimed as a deduction against assessable income in the partnership tax return. The partnership also had bank facilities for working capital which were secured against Talgong. Rates and taxes were also recognised as partnership expenses.

[9]

The February 2012 meeting

A family meeting occurred on 20 February 2012. Although it was not entirely clear who attended this meeting, the evidence allows me to find that Barry, Linda, Jeffrey and Kathy were definitely in attendance, along with some representatives of MBS.
As with each of the family meetings in issue, the evidence is mixed. In each case, the court received MBS's typed "client meeting notes". Ms Murray of MBS gave evidence that they were based on handwritten notes taken during the meetings and then typed up shortly afterwards. Both parties relied on the content of the client meeting notes and treated them as being reliable accounts of what occurred at the meetings. On the basis of Ms Murray's evidence I find that the client meeting notes are generally reliable accounts of what occurred, although they do not recount the actual words said.
In the case of the February 2012 meeting, the MBS meeting notes evidence a lengthy discussion of "the options and issues surrounding the succession planning for the farming operations." It was noted that: "In retirement it was identified that Barry and Lynda need two things - An income stream and independence (both B&L from J&K and vice versa). Historically some parents have chosen to stay around and draw funds from the farming operations, but inevitably this can cause resentment (especially in the tight years) - another reason why independence is a good idea. To achieve the income/independance targets, the farm needs to be bought by J&K if only at a notional value. The sale/ transfer of the farm has multiple effects: - J&K are independent to run the farm as they will - they are in control of their own destiny - B&L will get a cash injection into their superfund, where they will get income from this new capital injection. - B&L will have reduced their net assets by a significant margin making them eligible for a full aged pension. (although, there is a 5 year waiting period before it will be excluded from their net assets for Centrelink purposes) There are a couple other siblings to account for beyond Jeff which they want to be careful to avoid any family feuds. In DJM's experience, making sure there's a clear seperation between farm assets and non-farm assets is very important. Wills then need to reflect that all farm assets (land, plants etc) go to the farming kids and the non-farming assets (superfund balance/ retirement village deposit / Other) go to the non-farming kids. It has to be made clear that J&K has bought B&L out, it's not been given to him - Jeff has earned the right to buy the farm and assets at a discount through the reduced wages and work poured into the farm over 30 years. With respect to funding the payout, Kathy's mother has recently passed leaving their property in NZ to the kids and grandkids (1/2 to the 3 kids (ie. 1/6 to Kathy) and the other 1/2 to the 7 grandkids (3/7 of 1/2 to J&K kids)). The property has a government valuation of $2.25 million and an independant valuation of $1.95m and is under lease until May 2013. If the property gets around $2 million, Kathy anticipates they'd get around $300k alter converting to AU. It was thought that a super contribution could be made on Barry & Lynda's behalf, but because they're over 75, this isn't an option. Currently the farm is owned 1/3 each between Barry, Lynda and Jeff. Upon transfer there needs to be 1/6th transferred to Jeff and and 1/2transferred to Kathy to give them a 50% ownership each in the property. There shouldn't be any CG ramifications due to the application of the small business concessions (as we think the property is post CGT) After the transfer of the property, while B&L wait out the Centrelink 5 year period, a new partnership should be established made up of Jeff 1/3 , Kathy 1/3, Barry & Lynda 1/3.This new entity should be setup around May 31 to ensure Kathy has her first year of PP averaging set at a low level. After 5 years a new partnership will be established including just Jeff & Kathy. (note that a family trust isn't an option here, unless the parents are expressly excluded, as this will cause problems with the Centrelink Pension).The client meeting notes concluded with some action items for MBS, including that a new partnership would need to be set up for Jeff (1/3), Kathy (1/3) and Barry and Linda (1/3). It was noted that a valuation needed to be obtained for a "family farm transfer". There as also a note to "update wills reflecting farm assets for J&K and non-farm assets to other children"." [errors in original]
By early 2012 Barry and Linda were actively looking at how they could afford to move off the farm and retire without selling the farm. They did not wish to sell the farm. Jeffrey and Kathy were adamant in cross-examination that Barry did not want to sell the farm and I accept that evidence. It is consistent with and helps to explain the subsequent dealing with the partnership and the terms of Barry's 2013 will, which I discuss below. I find that that was also Linda's wish at all times up to about October 2017, when she and Barry struck financial difficulty on account of a Centrelink debt, which I also discuss below.
However, beyond having a firm wish not to sell the farm, I am unable to find that Linda or Barry had any particularly well-formed intention at this point as to how or on what terms they might retire from farming.

[10]

The May 2012 meeting

As had been foreshadowed at the February 2012 meeting, the Fragars procured a valuation for Talgong which was provided in about April 2012. It valued the land at $1,920,000. A further family meeting was held with MBS on 17 May 2012 with the benefit of that valuation. The purpose of the meeting was largely to continue the succession planning discussions which had commenced in February. The MBS client meeting notes record: "They are keen to move the property to Jeff & Kathy, but have to get something for it as they need something to live off of and live in and provide something for the other son and daughter. There appears to be a potential problem with the husband of the daughter who has advised that he is going to contest the will if Jeff gets the farm as he does not think it is fair. The current will does mention the two other children and makes provision for them. We looked at Jeff & Kathy borrowing money from the bank to purchase Barry & Lindon 2/3 share with a part payment (say $400k) and a loan which can be forgiven if needed. There is already $550k debt on the property ($400 Loan and $150 Line of credit) Additional loand on the property may make it unviable as they are hardly making a profit now. Jeff does quite a bit of airconditioning work (externally). I asked Jeff did he want to continue farming as i was concerned that if he brought the farm, the debt load would be too much and they may be forced to sell up in a few years, in which case they might as well look at selling not. A very tricky situation agrevated by years of low profit and two families living off the property. They have been receiving EC payments. Barry and Linda have spent there life farming and the farm is their lives work. Barry does not want to leave the farm. Linda is keen to move into town (Dubbo in Toltenham) but they really cant do anything as there is no money available. Linda is sick of having nothing all her life and no real way out of it. I get the drift from around town that Jeff may not be totalled dedicated to farming and Barry spends all his life on the tractor to keep things going. Kathy (Jeffs wife) is to receive a substantial legacy from her mothers estate (NZ) of about $180k and this may be used to purchase either a house for Barry & Linda or buy into the land. After a long discussion it was agreed we would leave the partnership rn for some time and concentrate of transferring the land. The partnership (3x1/3) owns the plant and livestock." [errors in original]
The parties each sought to gain support from this note in different ways. Jeffrey and Kathy argued that it confirms Barry and Linda's desire for the farm to be transferred to them. Linda argued that it confirms that there was no settled approach to how they would retire and that there was only ever a suggestion that Kathy "buy into" the partnership, not that she and Jeffrey, or Jeffrey alone, would obtain it outright. There is some merit to each of these arguments.
The only thing I am able to determine with certainty from the client meeting notes for this meeting is that the discussion was continuing and that no particular course of action was decided upon.

[12]

What was said about the value of the partnership?

I start by noting that Jeffrey's recollection of the meeting includes the following: "Kingsley said words to the following effect to all of us: "Barry and Linda, how much would be enough to retire from the partnership and Talgong?" Linda said words to the following effect to all of us: "Kathy's inheritance is about $300,000.00, that will be enough, and we will purchase a house off farm with it. If a house could be purchased in Tottenham Dad can still travel out to the farm." Barry said words to the following effect to all of us: "Yes, Kathy's $300,000.00 will be sufficient to constitute a satisfactory payment to us for our interest in the partnership, the partnership assets and if the farm supports us for a short period." Kingsley then said words to the following effect: "Paula and I have reviewed the financials. Allowing for debts secured against Talgong, the partnership B.D Fragar & J Fragar & L.M Fragar has a current a value of $450,000.00." Kingsley then said words to the following effect: "This means Barry's and Linda's interests in the partnership B.D Fragar & J Fragar & L.M Fragar has a combined value of $300,000.00.""
Kathy's recollection is almost exactly the same.
This evidence about what the partnership was worth is one of the key elements of Jeffrey and Kathy's case. For a long time, they pleaded that the first "express term" of the alleged February 2013 agreement was that "the [three-way partnership] allowing for debts against Talgong, had a value of $450,000", although I note that this term was not alleged in the final form of pleading filed in court on the first day of the hearing.
For a number of reasons, I find that Jeffrey and Kathy's recollection of this part of the discussion is unreliable.
Mr Mason, who had been one of the partnership's accountants since 2005, gave evidence that he always considered Talgong to be a partnership asset and I believe him when he says so. During the February 2013 meeting, he was aware that Talgong had recently been valued at $1,920,000. As at February 2013, the most recent partnership accounts of which Mr Mason would have been aware, and in fact very likely had in his hand at the time, revealed net assets of approximately $1,434,000. It is therefore unlikely in the extreme that he would have said that the partnership had a value of $450,000. That is a figure that might have made sense as a very rough (but still quite inaccurate) value of plant and equipment, but it made no sense as a value for the partnership as a whole.
Jeffrey also always understood the partnership to include the land, inasmuch as the two concepts were indistinguishable for him. Kathy had the same understanding. They were both aware of the valuation of Talgong and had it with them during this meeting.
In cross examination, Jeffrey sought to explain that he actually understood the $450,000 value mentioned by Mr Mason as being the value of each partner's share in the partnership, implying that he understood Mr Mason to be saying that the partnership as a whole had a value of around $1,350,000.
I cannot accept that aspect of Jeffrey's evidence. In his affidavit, he said in terms that what Mr Mason had said about the value of the partnership as a whole (ie, that it was worth $450,000) meant that he believed, at the time, that the value of his parents' combined two-thirds interest must therefore have been $300,000. But if, as he said in cross examination, he had understood Mr Mason to be saying that each share was worth $450,000, then this makes no sense. His parents' interest would in that event be worth $900,000.
The client meeting notes for this meeting relevantly record the following: "Meeting at Talgong with Barry , Linda, Jeff, Kathy, Stephanie, Natalie & Jason. Attended by Kingsley & Paula. - General meeting discussions around Succession Planning of the farm / farming business, and then subsequent estate planning considerations. Barry raised his concern around their daughter Joanne's husband 's claim some time ago that he would challenge their wills, and look to acquire a share of the farm. It is Barry & Linda's intention that the farm will go to Jeff. Barry & Linda are keen to ensure this can be protected as best as possible. Discussed the current land ownership structure - the farm is made up of 2 blocks. One block (Lot 6) is a much larger allotment 3093ha, and the other Lot 13 is a smaller parcel of land 424ha. Upon review of the Valuation report completed last year, the enclosed Certificates of Titles show that Lot 6 is in a Joint Tenancy, but that Lot 13 is currently showing Tenants in Common holding. There are copies of documents that appear to have been completed in 2005, with Des Murray as a witness, which transfers Lot 13 from a Joint Tenancy to a Tenants in Common holding. Seems unusual, so have resolved to discuss with Des to ensure there are not other circumstances to consider. That in mind, Barry & Linda are keen to confirm what is current and correct , and pending the outcome, ensure the land is in Joint Tenants holding as soon as possible. Kathy is likely to receive a considerable payment from her late Mother's estate in approximately May. An approximate figure of $300k was suggested, which she is happy to contribute to the farming partnership, and herself become a partner of the farming partnership . These physical funds could then be made vailable to Barry & Linda to purchase a home with, possibly in Tottenham. Family discussions indicated that between $230 - $300k should be sufficient to acquire a nice home in the town, and it currently has a good doctor, a good hospital, and a new airport and plane available for emergency medical issues. If these funds were applied through the partnership, it would provide Kathy with a partners funds credit balance , and the drawing would deplete Barry & Linda's bala-ces - effectively starting to 'buy them out' of the business itself. Barry & Linda indicated that the house they purchase in Tottenham could then provide an off-farm asset to leave in their will for their two other children - being Ken (son) and Joanne (daughter). Their current wills specify amounts of $150k for Ken as he was a partner in the farming business back in Qld, and $100k for Joanne. Any residual value could be left for the grandchildren potentially." [errors in original]
These notes confirm that there was discussion about Kathy contributing $300,000 to the partnership and then, in turn, Barry and Linda drawing an equivalent amount from the partnership to allow them to buy a house and "start[ing] to" be bought out of the business. But they do not corroborate Jeffrey and Kathy's recollection, or that of their children, that the parties reached a final agreement that Barry and Linda's share of the partnership had a value of $300,000. Nor do the notes corroborate an agreement that they would agree to be bought out entirely in return for $300,000.
I therefore cannot accept that Mr Mason or anyone else at the meeting said or believed that the partnership as a whole was worth $450,000 or that the value of Barry and Linda's combined interest was $300,000.

[13]

What was said about the payment of $300,000?

I also cannot accept another key aspect of Jeffrey's recollection of what was said at this meeting, namely that Barry and Linda's receipt of $300,000 would in effect be in full and final satisfaction of their partnership interests. This evidence is a critically important aspect of the agreement for which Jeffrey and Kathy contend, namely that: "It was an express term of the Agreement that [Linda and Barry] would be paid out $300,000 from the partnership for their respective interests in the partnership."
Jeffrey recalls his father saying "Yes, Kathy's $300,000.00 will be sufficient to constitute a satisfactory payment to us for our interest in the partnership, the partnership assets and if the farm supports us for a short period." He also recalls that Mr Mason said: "Kathy will buy into the partnership essentially buying out Linda and Barry which is her $300,000.00 from her inheritance. Kathy will then be a partner. The $300,000 will be paid into the partnership and then from the partnership to Linda and Barry. When Kathy becomes a partner, the current partnership will dissolve, and the new partnership will commence of the four of you. Linda and Barry will each have a seventeen percent interest in the partnership and Kathy and Jeff will hold thirty three percent interests each. Eventually, this partnership will dissolve, and it will just be an equal partnership of Kath and Jeff."
Kathy's recollection was essentially the same.
Jeffrey also recalled that Ms Murray said: "Linda and Barry, the new Wills have the following terms, each of you will leave your estate to each other, all partnership debts are forgiven, Jeff will receive your respective superannuation, and the residue which will be the house Kathy buys you, will go to Jo and Ken." (emphasis added)
These statements do not necessarily support the conclusion that agreement was reached on the terms alleged. They equally support Linda's case, namely that there was discussion about $300,000 being paid by Kathy to come into the partnership and for the purchase of a house for Barry and Linda, but that there was no conclusion reached as to how or on what terms Barry and Linda would be supported after that occurred. Mr Mason, it seems, was saying that the sum of $300,000 would be a payment that brought Kathy into the partnership and reduced Barry and Linda's interest to 17% each, not to nil. He was not saying definitively that $300,000 would be enough for Barry and Linda to retire altogether. To the contrary, as Barry said (even on Jeffrey's account) and as is corroborated by the client meeting notes and later correspondence, he and Linda would still need some form of additional support even after the payment of $300,000. What Ms Murray said about new wills and the need to forgive partnership debts was quite clearly a reference to the existence of loans to the partnership that would still exist after the payment of $300,000. Had anyone thought that the payment of $300,000 was to be in full and final payment of Barry and Linda's claims against the partnership, there would have been no occasion to mention the forgiveness of debts in their new wills.
I accept that there was discussion about Kathy paying $300,000 to become a member of the partnership and that these funds would be paid to Barry and Linda to buy a house off the farm and that this would reduce their partnership entitlements. But I find that Barry and Linda did not say or otherwise represent that they would relinquish all partnership claims in return for that $300,000. They did not then and there agree that the sum of $300,000 was sufficient for their retirement.
As I have mentioned, further light is shed on what occurred at this meeting by a very lengthy and detailed letter from MBS dated 25 February 2013. That letter, which was drafted by Ms Murray who had been in attendance at the meeting, included the following: "During our discussions, we talked through some succession planning of the farming partnership. Whilst both Barry & Linda will continue to no doubt play an invaluable role in the family business, it appears they are reaching a point where there would be benefit to them acquiring a residential property in Tottenham, and perhaps taking the occasional holiday, effectively retiring from a full time role in the farm operations. Kathy, as we understand is due to inherit a considerable sum, possibly around AUD300,000 in May this year, from her late mother's estate. These funds are certainly timely, and can facilitate a succession of the partnership. As we discussed, perhaps an effective process will be for Kathy to contribute the money to the farming partnership, as a "partners contribution" in her own name, and formally become a member of the business. The addition of Kathy, will in fact create a new 4 party partnership which we recommend commences before 30 June 2013 for tax averaging benefits as it will give Kathy a small profit or a loss for her "first year as a primary producer" and therefore allow her to go on to the average in the second year. These same funds, can then be made available to Barry & Linda, as a partners drawing from the partnership, which can then be used to purchase a home in Tottenham. Based on our discussions, the $300k figure should be sufficient to purchase a house, and would enable Barry & Linda to have better access to medical facilities, and still be relatively close to the farm. To facilitate the formal commencement of the new partnership, and effectively wind up the existing partnership, it will be necessary to have a valuation on the plant & equipment. This will enable us to have some visibility as to the true value of the farming business itself (excluding the land holding), and have an accurate picture of how the partners accounts appear after the $300k has been contributed by Kathy, and drawn by Barry & Linda. It would be ideal for that valuation to occur in May/June so as to coincide with the start of the new partnership."
This is consistent with the contemporaneous client meeting notes. It tends not to support Jeffrey and Kathy's recollection (and that of their children) as to what was said at the meeting. Ms Murray's letter instead suggests that the payment of $300,000 was to be Kathy's contribution to become a member of the partnership and that Barry and Linda would draw those funds down in order to acquire a house off the farm. It confirms that this was part of a succession plan, which it undoubtedly was. But the letter, like the client meeting notes, distinguishes between those transactions and what would then be required for there to be a final winding up of the four-way partnership and for Barry and Linda to retire. It does not support the proposition that the family reached a final position during the February 2013 meeting as to exactly how Barry and Linda would retire once they had bought the house off the farm.
Evidence of what was said at this meeting was also given by Jeffrey and Kathy's children. Jason Fragar, who was 14 years old at the time of the meeting, and Nicole Fragar, who was 16 years old, each recalled that someone from MBS said that Barry and Linda's interest in the partnership was worth $300,000. As I have noted, that is not corroborated by the client meeting notes and it is inherently unlikely that either Mr Mason or Ms Murray would have said it. Stephanie Frost, Nicole's twin sister, had a recollection of what was said that does not point particularly strongly in favour of either case. All three children were impressive witnesses but, for similar reasons to those indicated above in relation to Jeffrey's recollections, I am unable to accept that Nicole and Jason's honest recollections of what was said about the value of the partnership are accurate.

[14]

What was said about joint tenancy?

One aspect of what Jeffrey and Kathy recall from the meeting is, however, far more inherently reliable and is corroborated by the client meeting notes. Jeffrey recalls that Ms Murray said that part of Talgong was held as tenants in common (a reference to Lot 13) and that he, Jeffrey, said that this was something that needed to be fixed. This aspect of the evidence is important to another of Jeffrey and Kathy's contentions, namely that: "It was an express term of the Agreement that [Linda and Barry] would take all necessary steps to be registered as joint tenants of Talgong and would remain registered as joint tenants of Talgong, so that when [Barry and Linda] died, Jeffrey would receive the entirety of Talgong on survivorship."
I note that Jeffrey understood the difference between tenancy in common and joint tenancy. He understood that if Talgong was a joint tenancy then he would inherit it on his parents' death but that if it was a tenancy in common then they could deal with it in their wills.
Jeffrey recalls the following discussion: "Kingsley said words to the following effect: "Now Linda, Barry and Jeff will agree to always hold Talgong as joint tenants so that when Barry and Linda die, Jeff will hold onto Talgong. I don't know why the previous joint tenancy was severed but it can't happen again." Barry said words to the following effect: "No, of course not. We don't want to risk Jeff not getting the farm." Kingsley said words to the following effect: "So, Linda and Barry, you will be recorded as joint tenants but will hold your interests in Talgong for Jeff. Do you understand?" Barry and Linda said words to the following effect: "Yes""
Linda was cross examined about this evidence. She accepted that it is something that may have been said. More importantly, her recollection was that sorting out the title to Talgong was something which Mr Mason said had to happen in the first instance. Linda understood that returning the title to joint tenancy was "…part of the plan, that if we didn't do that, then he wouldn't be able to go ahead and work out what we do."
The fact that these things were said about joint tenancy is corroborated both by the client meeting notes and the 25 February correspondence. It is also quite clearly corroborated by Kathy and the children. Ultimately, Linda accepted in cross-examination that she and Barry had agreed to restore Talgong to joint tenancy and to continue to hold it as such.
I find that the discussion about joint tenancy as recalled by Jeffrey and set out above did take place. Barry and Linda would have left the meeting with a clear understanding that the first step in any eventual retirement plan was to return Talgong to joint tenancy and that they had agreed to do so.

[16]

The formation of the four-way partnership

Linda accepts that from 30 June 2013, the farming business was conducted on the basis that there was a four-way partnership and I so find. I find that all assets and liabilities of the three-way partnership became assets and liabilities of the four-way partnership. That finding extends to Talgong, for reasons to which I will come in due course.
Jeffrey and Kathy's case is that Kathy became a partner on 1 April 2013. This is corroborated by the accounts, although the precise date does not matter.
During the financial year ending 30 June 2014, Kathy made a number of payments to the partnership bank account as follows: 1. 18 July 2013: $20,000 2. 19 July 2013: $15,000 3. 1 August 2013: $18,500 4. 16 August 2013: $5,000 5. 28 August 2013: $7,000 6. 29 October 2013: $15,000 7. 13 December 2013: $20,000 8. 18 February 2014: $20,000 9. 20 February 2014: $20,000 10. 21 February 2014: $20,000 11. 24 February 2014: $10,000 12. 17 March 2014: $20,000 and $10,000 13. 19 March 2014: $20,000 These amounts total $220,500.
These payments were recorded in the accounts as partnership contributions to the four-way partnership.
Starting in around July 2013, Barry and Linda purchased a number of assets with funds that were either drawn from the partnership bank account or otherwise made available directly by Kathy or Jeffrey.
In about July 2013, a caravan was purchased for Barry and Linda in the amount of $32,554.03. It is not clear exactly how the transaction occurred, but the payment for the caravan was recorded in the accounts as a reduction to Linda and Barry's partnership funds. That is, the funds which they were entitled to withdraw from the partnership on dissolution were reduced to the extent of $32,554.03.
Similarly, sometime in July 2013, a Toyota Landcruiser was purchased for Bary and Linda, which, following repairs, amounted to a total of $29,069.65. Again, it is not clear how the transaction occurred but this payment was accounted for in the same way as the payment for the caravan, namely as a reduction in partners' funds.

[17]

New wills

On 26 November 2013, Barry and Linda executed new wills. Each primarily bequeathed their estate to the other in the first instance and then to the children. However, only nominal provision was made for Jeffrey. Each also provided that any amount owing from the partnership was to be forgiven on their death.
At about the time of preparing those wills, Barry and Linda each prepared a statutory declaration which included the following: "2. I have given careful consideration to the terms of my Will and I declare that I have left a smaller provision for my son Jeffrey Evan Fragar (Jeffrey) under my Will for the following reasons: 2.1 [Barry or Linda] and I currently own farming property known as "Talgong" in Tottenham in the said State (farming property) as joint tenants with Jeffrey. 2.2 On the death of the last surviving of [Barry and Linda], the farming property will automatically transfer to Jeffrey in accordance with the laws of survivorship. Jeffrey will therefore have complete control and ownership of the farming property. 2.3 [Barry or Linda] and I are currently partners in JE, KM, BD & LM FRAGAR PARTNERSHIP known as the FRAGAR PARTNERSHIP (partnership) with Jeffrey and his wife Kathy. 2.4 Pursuant to the terms of my Will I forgive any loans or balances owing to me from the partnership. Therefore, Jeffrey, as a surviving partner of the partnership and his wife Kathy, will receive the benefit of that forgiveness. 2.5 Jeffrey has contributed to the farming property and the partnership and continues to do so. It is my wish that he continue to work on the farming property after my death. 2.6 My son Kenneth William Fragar and my daughter Joanne Vera Rigg do not have any involvement with the farming property or the partnership. 2.7 Jeffrey will therefore receive the farming property and the control of the assets in the partnership rather than any further provision under my Will. 2.8 In the event that [Barry or Linda] and I both pass away I also leave my superannuation death benefits to my son Jeffrey. 2.9 I believe that Jeffrey will be adequately provided for."
Barry and Linda's intention as at late 2013 when they executed their new wills and the accompanying statutory declarations was that Jeffrey would inherit Talgong by right of survivorship.

[19]

Barry and Linda retire from the partnership

On 30 June 2014, Barry and Linda retired from the four-way partnership. The parties agreed that this dissolved the four-way partnership. Jeffrey and Kathy then commenced trading in equal partnership in the two-way partnership.
Accounts for the two-way partnership for the 2015 year disclose the following: 1. The partnership is recorded as owning Talgong with a value of $1,920,000. 2. The partnership assumed all of the liabilities of the four-way partnership, including all of the debt secured against Talgong. 3. Barry and Linda no longer had any partnership entitlement, the partnership now consisting only of Jeffrey and Kathy as to 50% each. 4. Amounts equivalent to Barry and Linda's closing partners' funds in the four-way partnership were now recorded as loan accounts in the two-way partnership.
During the financial year ending 30 June 2015, Kathy made the following additional contributions to the partnership from her personal funds: 1. 9 December 2014: $20,000 2. 15 December 2014: $20,000 3. 16 December 2014: $20,000 4. 17 December 2014: $19,500.
In total, across the 2014 and 2015 financial years, funds totalling $440,880.02 were paid to or on behalf of Barry and Linda as follows, almost all from the partnership bank account: 1. 19 July 2013: $28,500 for the caravan 2. 29 July 2013: $18,500 for the Toyota Landcruiser 3. 19 February 2014: $38,500.00 4. 16 December 2014: $30,000.00 5. 23 December 2014: $30,000.00 6. 31 December 2014: $30,000.00 7. 14 January 2015: $30,000.00 8. 20 January 2015: $30,000.00 9. 1 February 2015: $30,000.00 10. 10 February 2015: $30,000.00 11. 18 February 2015: $30,000.00 12. 24 February 2015: $30,000.00 13. 1 September 2015: $30,000.00 14. 9 September 2015: $30,000.00 15. 15 September 2015: $25,380.02
To the extent these payments were made during the time at which Barry and Linda were members of the partnership, they were recorded as reducing their partners' funds. To the extent they occurred subsequently, they were recorded as reducing their loan accounts.
Jeffrey's evidence demonstrated that at the time of making his affidavit in June 2021, Barry and Linda had received a total amount of $482,551.94 from the partnership. The balance sheet of the two-way partnership for the year ended 30 June 2016 showed a non-current liability owing to "BD & LM Fragar" of $602,391.03.
It is unclear what the balance of their loan accounts should be after taking full account of the $482,551.94 referred to above.

[21]

Linda severs the joint tenancy

A key aspect of Barry and Linda's plan for retirement had been that they would receive a full age pension from Centrelink. For some time, that is what occurred. However on about 24 October 2018, Barry and Linda were notified that their continued ownership interest in Talgong disentitled them to the full pension and a sizable debt was raised. This was undoubtedly a source of distress and hardship for both of them. Linda and Barry could not afford to repay the debt and they could not hope to get any financial assistance either from Joanne or Ken. Linda says that Jeffrey refused to provide financial assistance, although I doubt that there was any realistic prospect of Jeffrey being able to assist at that point, save by selling Talgong which would reasonably have been seen by him as a completely unacceptable solution to the problem.
The conclusions I have reached mean that Centrelink was mistaken to treat Linda and Barry as having a valuable interest in Talgong. They did not. They held a bare legal interest of nominal value. They did however have a loan which may or may not have affected their entitlement in any event.
At about this time, the parties began to correspond about the question of the ownership of Talgong. It soon became apparent that Barry and Linda considered themselves still to hold a sizable interest in Talgong. Linda's evidence is that the existence of the Centrelink debt caused her and Barry to want to sever the joint tenancy of Talgong. Once severed, so their thinking went, their two-thirds interest in Talgong could be sold. On 26 July 2019, Barry and Linda signed a document severing the joint tenancy over Talgong and the former Crown Road, which was registered on 5 September 2019.
On 15 November 2019, Barry died. By a new will executed in early 2019, Barry left the whole of his estate to Linda who thereby inherited his one-third tenancy in common in Talgong. His final will said nothing about forgiving any loans owing from the farming partnership.

[23]

Section 66G

Section 66G relevantly provides: "(1) Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition."
The principles applicable to s 66G are well settled.
In Scott Darren Pascoe as trustee of the property of Arthur Linden Dyason, a bankrupt v Lindsey Jane Dyason & Ors [2011] NSWSC 1217, Black J set out the relevant principles at [6]: "Although the Court has a discretion whether or not to make an order under this section, the grounds on which the Court will ordinarily refuse to make it are limited. For example, if it is inconsistent with a proprietary right or a contractual or fiduciary obligation, and there is no general jurisdiction to refuse to grant such an order on the basis of hardship or unfairness: Stephens v Debney (1960) 60 SR (NSW) 468; Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068; Ngatoa & Anor v Ford & Anor (1990) 19 NSWLR 72; Williams v Legg (1993) 29 NSWLR 687; Westpac Banking Corporation v Sansom (1994) 6 BPR 13,790; Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685. In Hogan v Baseden (1997) 8 BPR 15,723 at 15,723, Mason P observed that it "would not be a proper exercise of discretion of the power to decline relief under s 66G ... to refuse an application on grounds of hardship or general unfairness." His Honour also noted that: "[I]n the unhappy event that the parties are unable to settle their differences then the making of an order appointing trustees for sale seems inevitable unless the respondent could establish a legally binding agreement not to put her out of occupation of her home, or circumstances that would ground some estoppel to similar effect." (at [59]).""
Linda has made out a good prima-facie case that trustees for sale should be appointed for Talgong. Were it not for the cross-claim, I would readily make the orders sought.

[24]

The February 2013 agreement

The most significant issue at trial concerned the existence of the February 2013 agreement. I have set out the key aspects of what occurred at that meeting above.
Linda submits that as at February 2013, many significant matters that would need to be resolved before the making of an agreement of the kind alleged had not been resolved. She particularly points to the fact that the parties did not at that time have any common understanding as to what the overall value of the partnership was or, indeed, even what the partnership assets were. There is force in this submission.
These matters have ramifications for Jeffrey's case that there was final and binding agreement as to the terms on which Kathy would buy in to the partnership, the terms on which Barry and Linda would retire, and the terms on which the farm would be held into the future.
As I have already found, I am unable to accept key aspects of what Jeffrey recalls was said at the February 2013 meeting.
For Jeffrey and Kathy, it was submitted that Jeffrey was merely mistaken in the witness box and that his evidence about what was said in February 2013 as to the value of the partnership, although somewhat uncertain, is not of any particular consequence. It was submitted that Jeffrey's mistaken recollection about the value of the partnership should not stand in the way of a conclusion that the parties nevertheless reached an agreement about Barry and Linda giving up their partnership interests for $300,000. They pointed to the fact that the basis of the discussions which both preceded and took place during the February 2013 meeting was that Jeffrey would acquire their interests for a nominal value, not a market value. They point out that there was no particular need to obtain a valuation of all partnership assets in order for Barry and Linda to agree to retire for the sum of $300,000, particularly in circumstances where the land was the major asset of the partnership and there was a recent valuation of it available at the time.
Whatever may be the explanation for why Jeffrey said what he did in the witness box, I am still unable to accept that the version of the discussion to which he and Kathy deposed in their affidavits can be accepted in the critical respects discussed earlier in these reasons. I have concluded that Jeffrey and Kathy's recollection of what was said must be approached as being somewhat shaky, save to the extent it is corroborated by the client meeting notes.
For her part, Linda was adamant that she and Barry did not agree to retire from the partnership altogether in return for $300,000. She recalled that Kingsley Mason said that the partnership was going to have to be able to support Barry and Linda for some time after they retired. These are matters that are corroborated by the meeting notes.
The client meeting notes and the later correspondence cast serious doubt on the proposition that all parties agreed on 14 February 2014 that Kathy's payment of $300,000, and Barry and Linda's later receipt of it, would be in full and final settlement of all of Barry and Linda's claims as partners. Both of those documents described Kathy buying in for $300,000 and then Barry and Linda withdrawing funds in that amount, but neither document suggests that that was to be the end of the matter.
The client meeting notes show that the meeting concluded with a list of action items to be attended to, including that Ms Murray was to provide "extra information for the Fragar family re estate planning matters". This was no doubt a reference to what became the 25 February letter, which described a large range of estate planning matters for the Fragar family to consider and on which they needed to make decisions. I accept the plaintiff's submission that both the client meeting notes and the 25 February letter suggest that the terms on which Barry and Linda would finally retire had not been finally agreed by the parties at the 14 February meeting.
In the circumstances, I am unable to find that the parties formed an agreement on the terms alleged or that Barry and Linda made representations that they would retire on those specific terms.
However, I do find that the parties reached an agreement as to at least one matter, and that is that they would henceforth hold Talgong as joint tenants. I have set out the evidence in relation to this matter above. Three additional matters confirm my conclusion about this.
The first is that it is exactly what happened shortly after the meeting. It was only a matter of weeks before title to Talgong was restored to a joint tenancy.
The second is that when they made their wills a few months later in 2013, Barry and Linda intended that they would hold Talgong as a joint tenancy with Jeffrey. The statutory declarations accompanying their wills make this clear. Linda did not offer any explanation as to when she formed that intention but it is consistent with other evidence that, at all times up to that point, neither she nor Barry wanted to sell the farm and that they wished it to remain in joint tenancy.
The third matter emerged during Linda's evidence. On the second day of her cross examination, Linda was asked about the severance of the joint tenancy over Talgong in 2019: "Q. You severed the joint tenancy in 2019 knowing full well that you had agreed with Jeff and Kathy in 2013 that you would hold Talgong as joint tenants with Jeff until your death so that he would receive Talgong? A. Yeah. Q. You did that in the full knowledge of that earlier agreement, didn't you? A. Yes. Q. You accept that that step you took in severing the joint tenancy was completely contrary to what you had agreed in 2013, don't you? A. Completely contrary? Q. Completely against what you had agreed. You agreed to hold it in joint tenancy until your deaths-- A. Yeah. Q. --in 2013, and then you sever the joint tenancy in 2019? A. Yeah. Q. Do you accept that that's a breach of the agreement you had with them? A. Yes."
Jeffrey relied on this evidence as an admission of the existence of the February 2013 agreement and of its breach by Barry and Linda.
I do not think her evidence goes quite that far. Linda was generally consistent and cogent in her evidence in relation to what had happened at the February 2013 meeting. She consistently denied key aspects of the alleged conversation, such as that there was an agreed value of the partnership and that she and Barry agreed to be bought out entirely for $300,000. I do not think she was intending to acknowledge any such agreement in the above extract of her oral evidence. Rather, I understand her admission to be confined to the limited "agreement" which I have identified, namely the agreement to hold Talgong as a joint tenancy. In fairness to Linda, her 1 September 2021 affidavit more or less accepted as much.
In terms, Linda accepted that she did reach agreement with Jeffrey and Kathy in 2013 and that the substance of that agreement was that she and Barry would hold Talgong as joint tenants with Jeffrey until her death. This evidence supports my conclusion that the parties did agree on this one matter in February 2013.
These conclusions mean that I cannot make the declarations as sought by Jeffrey and Kathy. The parties did not reach an agreement in the terms alleged. Barry and Linda did not make representations to Jeffrey and Kathy that Kathy's $300,000 contribution to the partnership and the subsequent payment of that sum to them would have the consequence that Barry and Linda would retire altogether and give up all claims to Talgong and to the partnership. Accordingly, Jeffrey and Kathy's claims for specific performance must fail.

[25]

Estoppel

The conclusions I have reached as to what was said in the February 2013 meeting are also sufficient to dispose of Jeffrey and Kathy's claim based on principles of estoppel. In Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7, Brennan J described the requirements for establishing equitable estoppel in the following terms (at 428-429): "In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs."
Jeffrey and Kathy contend that Barry and Linda induced them to believe that if Kathy paid $300,000 into the partnership, then that amount would be drawn down by Barry and Linda and constitute the buying-out of their entire interest in the partnership.
For essentially the same reasons as indicated above, I am unable to find that this representation was made during the February 2013 meeting.
Even taking Jeffrey and Kathy's evidence about what was said at its highest, any representation as to the terms on which Barry and Linda would retire was quite ambiguous. Jeffrey and Kathy's account of what was said is also consistent with Linda's case that there were details yet to be concluded as to the precise terms on which the partnership would continue to provide for them and the terms on which they would eventually retire from the four-way partnership. When the words which Jeffrey and Kathy claim to recall are viewed in light of the whole conversation, I am unable to discern an unequivocal representation that a payment by Kathy of $300,000 would extinguish the entirety of Barry and Linda's claims against the partnership. Even if I were to accept the whole of Jeffrey and Kathy's account of what was said in the February 2013 meeting, I would find that any representation as to the terms of Barry and Linda's retirement were too ambiguous to found an estoppel: see, e.g., Legione v Hateley (1983) 152 CLR 406 at 435-437; [1983] HCA 11; Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [35], [149]; Galaxidis v Galaxidis [2004] NSWCA 111 at [94].
As noted above, the only representation that I have found was made out (and, in fact, carried into effect) is that Talgong would be held as a joint tenancy. The conclusions which I have reached below in relation to the ownership of Talgong in equity makes any relief which might flow from that representation unnecessary to consider further.
For these reasons, Jeffrey and Kathy's estoppel claim must fail.

[27]

Applicable principles

The starting point for determining whether an asset is partnership property is the proposition that "the acts and intention of the parties … determine finally and ultimately the question whether property owned by a partner becomes partnership property": O'Brien v Komesaroff (1982) 150 CLR 310 at 322; [1982] HCA 33.
In the absence of express agreement, a Court will imply an agreement that certain property is partnership property where the conduct of the parties toward the property evidences such an understanding: see the helpful summary given by Ward CJ in Eq (as her Honour then was) in Bassett v Cameron [2021] NSWSC 207 at [614], and also Lukin v Lovrinov [1998] SASC 6614. In determining the question, all of the circumstances surrounding the purchase of the disputed properties must be taken into account: Gerovich v Gerovich (as executor of the estate of Gerovich) [2018] WASC 153 at [47].
It has sometimes been said that where there is insufficient evidence from which to discern such intentions, "no more agreement between the parties should be supposed than is absolutely necessary to give business efficacy to that which has happened": Miles v Clarke [1953] 1 WLR 537 at 540, although the High Court in Kelly v Kelly (1990) 64 ALJR 234 noted (at 237) that the comment "may overstate the position, but it would plainly be wrong to ascribe agreement to the parties unless their dealings clearly point in that direction".
Section 2(1) of the Partnership Act 1892 (NSW) (the Partnership Act) must also be noted. It relevantly provides: "(1) In determining whether a partnership does or does not exist, regard shall be had to the following rules - (1) Joint tenancy, tenancy in common, joint property, or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof."
Section 20 of the Partnership Act provides: "20 Partnership property of firms other than incorporated limited partnerships (1) All property, and rights and interests in property, originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement. (2) Provided that the legal estate or interest in any land which belongs to the partnership shall devolve according to the nature and tenure thereof, and the general rules of law thereto applicable, but in trust so far as is necessary for the persons beneficially interested in the land under this section. (3) Where co-owners of an estate or interest in any land, not being itself partnership property, are partners as to profits made by the use of that land or estate, and purchase other lands and estate out of the profits to be used in like manner, the land or estate so purchased belongs to them, in the absence of an agreement to the contrary, not as partners, but as co-owners for the same respective estates and interests as are held by them in the land or estate first-mentioned at the date of the purchase. (4) This section does not apply to or in respect of an incorporated limited partnership."
Section 21 of the Partnership Act further provides: "21 Property bought with partnership money Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm."
Land, although not formally conveyed to the partners who constitute a partnership from time to time, may nevertheless be partnership property: see for example Robinson v Ashton (1875) LR 20 Eq 25. The nature of a partner's interest in partnership property, both before and after dissolution of the partnership, was explained in Commissioner of State Revenue (WA) v Rojoda Pty Ltd (2020) 268 CLR 281; [2020] HCA 7 at [30]-[35] (Rojoda).
These principles are usefully illustrated by Gordon v Scott (1858) 12 Moo PC 1; (1858) 14 ER 812; [1858] UKPC 14. In that case, Mr Gordon purchased a share in a partnership carried on by Messrs Scott, Dixson and Loxton in Sydney. The business premises, in Barker St, formed part of the partnership property. They were held by Scott, Dixson and Loxton on a lease. Prior to Gordon's entry into the partnership, the partnership acquired the freehold reversion to the premises in Barker St. The partnership failed. Scott, Dixson and Loxton sold the premises and refused to account to Gordon for the proceeds of sale, on the basis that the premises were bought by them personally, not by the partnership, and that the partnership held only the leasehold interest. As the partnership agreement did not specify precise interests in the premises, and because Gordon had bought "one share of it", the Privy Council held that Scott, Dixson and Loxton had to account to Gordon for his share of the proceeds of sale of the premises, as Gordon's payment for entry into the partnership included a payment for all assets of the partnership at that date, which, for all intents and purposes, appeared to include the reversion of the premises. The Council upheld (at 821), the reasoning of Justice Therry, then the "Primary Judge in Equity" of this Court, to the effect that: "as the Respondents had represented the capital of the concern as being of the value of £4000, such capital could only be of that value, by including the freehold of the premises on which such business was carried on, and … it was declared that the land, wharf, and buildings in the pleadings mentioned …. formed part of the joint property of the partnership" (at 818).
See also Waterer v Waterer (1873) LR 15 Eq 402, in which the whole of the circumstances of the partnership were said to indicate that the real property had become appropriated to the partnership itself.

[28]

Partnership property - application of principles to the facts

I am left with no doubt that Talgong was always partnership property, first of the three-way partnership and then of the subsequent partnerships.
In relation to the three-way partnership, I have already noted the circumstances in which it came to be acquired. Some part of the deposit was sourced from the proceeds of sale Rhyddings, which had been co-owned by Barry, Linda and Jeffrey together with Ken. The fact that I cannot determine how much of the deposit was sourced in those sale proceeds is of no particular consequence. The bulk of the funding for Talgong was provided by way of vendor finance supplied by the vendor, Mr Plummer, which was treated as a partnership liability. I was informed that some of that indebtedness, although refinanced over the years, was still on the books in 2013 in the form of a sizable debt to Sandhurst Nominees Ltd. The earliest full accounts of the three-way partnership in evidence were the 2004 accounts. Those accounts and all subsequent accounts show the interest on this loan as a working expense of the partnership.
Linda relied on the fact that the three-way partnership's 2004 financial statements did not include Talgong as a fixed asset. However, the family's accountant between 2005 and (at least) 2013, Mr Mason, said that he could not explain why that was so and that he considered Talgong to be a partnership asset. All accounts between 2005 and 2013, together with such of the partnership tax returns for that period that were in evidence, show Talgong as a partnership asset. Linda's evidence was that the accountants prepared the accounts and tax returns based on information provided by her.
This is not a case where partners used surplus or their individual partnership drawings to acquire property in co-ownership. If that had happened, I would have reached a different conclusion. But that is not what happened. The costs of acquiring and holding Talgong seem at all times to have been met directly out of the revenue of the partnership business as a working expense.
So far as the four-way partnership is concerned, I have seen no evidence to suggest that any change in partnership assets was contemplated at the time Kathy was admitted as a partner, save the increase in available cash occasioned by her contribution. Had she looked at the partnership accounts at the time, as she probably did, she would have seen that Talgong was identified as the single most significant partnership asset. When Kathy bought in, she obtained rights to Talgong in equity commensurate with her partnership entitlement, much like Mr Gordon in Gordon v Scott.

[29]

What happened when the four-way partnership ended?

It is not in dispute that, when Barry and Linda retired from the four-way partnership in the middle of 2014, that partnership was dissolved. At that time, Barry, Linda and Jeffrey were joint legal owners of Talgong which, as I have already found, was partnership property. However the dissolution of the partnership did not mean that the partnership ceased to be of consequence so far as Barry and Linda's ownership of Talgong was concerned. This is because of two additional matters that must be noted.
First, as among the partners including Kathy, Talgong along with all other partnership property was required to be treated as personalty for all partners for so long as the four-way partnership continued. The nature of a partner's interest in partnership property was described by Bell, Keane, Nettle and Edelman JJ in Rojoda in these terms at [38]: "The Partnership Act also preserved equity's unique treatment of the interest of partners under the trust. The partner's unascertained interest in relation to all of the partnership property is an equitable interest, not a mere equity, but the "partner's share" is defined in s 33 as being only "the proportion of the then existing partnership assets to which he would be entitled if the whole were realised and converted into money, and after all the then existing debts and liabilities of the firm had been discharged"."
It follows from this that at the time of dissolution of the four-way partnership, Barry, Linda and Jeffrey were not entitled to treat themselves as joint owners of Talgong to the exclusion of Kathy. Rather, they all, including Kathy, had an unascertained interest in Talgong and all other partnership property of the kind described in Rojoda.
Secondly, on dissolution of a partnership, partnership property is ordinarily held by the legal owners on a trust for sale: Rojoda at [35]. This ensures that the aforementioned claims of the former partners to their "partner's share" may be met from the sale of partnership property, including any property to which a partner does not have legal title.
These are both matters that do not usually present a difficulty. In the ordinary course when there are changes to a partnership in the context of a continuing business, the outgoing partners reach an agreement with the ongoing partners, either formally or informally, about the winding up of the old partnership and the commencement of the new partnership. So, for example, if an outgoing partner owns an asset which is partnership property, he or she may agree to transfer his or her interest in that asset to the ongoing partners if all agree that it is to continue to be property of the ongoing partnership. Whether it is done formally or informally, the trust for sale comes to an end when the affairs of the dissolved partnership are finally wound up. If the affairs of the partnership are not wound up, the parties will continue to hold any asset that was partnership property subject to that trust for sale.
It has also been held that a vendor of a partnership interest ordinarily holds his or her interest in the partnership on trust for the incoming partner: Hocking v Western Australian Bank (1909) 9 CLR 738 at 749; [1909] HCA 68; see also Commissioner of Taxation (Cth) v Everett (1980) 143 CLR 440 at 447; [1980] HCA 6. This proposition is not at all inconsistent with anything said in Rojoda.
It follows that the nature of Barry and Linda's ownership interest in Talgong cannot be determined without first ascertaining whether the affairs of the four-way partnership were wound up. If they were not, then the partners will continue to hold their legal title on trust to satisfy the claims of the former partners. If the partnership was wound up, then it will be necessary to determine whether the terms of the winding up affected their ownership interests.
The conclusion I have reached is that there was an informal winding up of the four-way partnership and that the terms of the winding up did affect the parties' ownership interests in Talgong. Specifically, the partnership was wound up on terms that were reflected in the immediately subsequent financial statements of the two-way partnership, namely that Talgong would thereafter be property of the two-way partnership and that each of Barry and Linda's partner's share would be converted to a loan account.
Although the direct evidence as to what was said or done at the time of the dissolution of the four-way partnership was scant, it is possible to reach a conclusion as to the consequences of what occurred by reference to the numerous MBS documents that preceded it (including the client meeting notes and the 25 February 2013 correspondence), the final accounts of the four-way partnership prepared on the basis of information provided by Linda, the initial financial accounts of the two-way partnership adopted by Jeffrey and Kathy, the acceptance by all parties that the 2015 and 2016 accounts correctly recorded loan accounts in favour of Bary and Linda and the way further cash drawings for Barry and Linda were accounted for in the 2015 and 2016 accounts.
In June 2014 when Barry and Linda retired, Talgong was being actively farmed by Jeffrey and Kathy. There is no evidence to suggest that any party thought that there should be a change in this general state of affairs. In fact, there is no evidence that, on retirement, Barry and Linda intended to retain an interest in Talgong or that they intended there to be any change to the business of the partnership. They did not, in effect, take two-thirds of Talgong with them and nor did they ever intend to. Nowhere is there any evidence to suggest that any part of their financial needs in retirement would be met by a continuing ownership interest in Talgong.
The general gist of their retirement planning and of the MBS notes and correspondence was that the farming partnership would pay them a lump sum in the first instance (funded by Kathy's contribution of $300,000) together with other drawings but that the farm (in Barry's words) might also continue to provide for them to some extent in the future. Given their retirement from the partnership, which was not in dispute, this could only be achieved if Jeffrey and Kathy kept farming in the two-way partnership.
The 2015 and 2016 accounts of the two-way partnership were in evidence. They both show a loan balance in favour of Barry and Linda. All parties accepted that these loans have neither been paid nor forgiven. Nor have they ever been demanded. The accounts show them as bearing no interest. No-one suggested that the accounts were wrong in this respect. Nor did the evidence disclose any other terms in relation to the loans.
The fact that the two-way partnership recognised a debt to Barry and Linda confirms my conclusion that the parties agreed to an informal winding up of the four-way partnership on the terms I have indicated. The loan account represents the amount that Barry and Linda would have been entitled to if accounts of the four-way partnership had been taken at the time it was dissolved, at least based on the book values. The two-way partnership could not have assumed those liabilities to Barry and Linda without Talgong. It would have had a net deficiency of assets and would in any event have been unable to pay the loans had they been called. I cannot accept that Barry and Linda would have accepted payment of Kathy's inheritance into the four-way partnership and then also claimed a significant debt from the two-way partnership unless the farm was partnership property of each partnership.
In final submissions, Jeffrey and Kathy accepted that the four-way partnership was wound up informally on this basis. Linda submitted that there had been no formal winding up and that there was no direct evidence from the parties as to what was actually intended at the end of the four-way partnership, but she did accept that the accounts and the evidence from the accountants to which I have referred were all consistent with an informal winding up on the basis I have indicated.
I note that Linda expressly said in her September 2021 affidavit that she did not consider Talgong to be a partnership asset. This could cast some doubt on whether she really did agree to an informal winding up on the basis that Talgong would continue to be partnership property of the two-way partnership.
However, I have difficulty accepting this aspect of her evidence. She was responsible for keeping the books and records of the three-way partnership for several decades. She would have appreciated that the cost of servicing the vendor finance with which Talgong was acquired was treated as a recurring revenue expense of the partnership whether it appeared as a fixed asset in the books or not. If there had been any suggestion that she or Barry did not consider Talgong to be a partnership asset during the family meetings to which I have referred, it is highly likely that this would have been a matter of note for the accountants, who kept detailed notes of matters affecting the family's succession planning. Mr Mason, as I have noted, firmly believed that the farm was a partnership asset.
It may well be that Linda did not have a clear idea of what it meant for an asset to be partnership property. She was content to represent Talgong as partnership property in the partnership accounts and its tax returns. She seems also to have been content for Kathy to base her decision about buying into the partnership, at least in part, on those accounts. But whatever her precise understanding, the objective evidence as to the terms on which the three-way partnership acquired and held Talgong and the terms on which Barry and Linda retired from the four-way partnership are all consistent with Talgong being partnership property of both partnerships.

[34]

Relief

The conclusions I have reached mean that Linda is not entitled to an order that trustees for sale be appointed for Talgong pursuant to s 66G. She holds her interest in Talgong on trust for the partners of the two-way partnership and it would be entirely inequitable for Talgong to be sold.
At the same time, I have rejected Jeffrey and Kathy's claim based on the alleged February 2013 agreement. Instead, I find that Talgong was always partnership property and that the parties intended to remain partnership property of the two-way partnership.
On the conclusions I have reached, the most appropriate orders would seem to be as follows: 1. Dismiss the summons. 2. Declare that the plaintiff holds her legal interest in the two blocks of farmland known as Talgong, folio identifiers 6/721739 and 13/724609 on trust for the cross-claimants trading as the Fragar Partnership. 3. Declare that the plaintiff holds her legal interest in the land identified in folio identifier 1/1208752 subject to a resulting trust for the cross-claimants trading as the Fragar Partnership. 4. The further amended cross-claim is otherwise dismissed. 5. The plaintiff is to pay the cross-claimants' costs.
It will also be appropriate to make a further order, declaring that the cross-claimants trading as the Fragar Partnership are indebted to the plaintiff in an amount that reflects the total payments already made to her and Barry in the sum of $440,880.02, referred to at [83] above. The parties should attempt to agree on the amount of indebtedness and bring in short minutes of order reflecting such agreement.
Because I have reached conclusions that differ in some material respects from the primary conclusions for which the parties initially contended, I will give the parties an opportunity to make submissions on the final form of orders before I make final orders, including on the amount of indebtedness in the event that the parties cannot reach agreement. If either party wishes to make submissions on the question of costs, they should do so at the same time.
I direct that any submissions as to the form of orders and costs be limited to five pages and that they be filed and served no later than 4pm on Monday 18 March 2024.

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