Gray v Guardian Trust Australia [2002] NSWSC 1218 | Case summary

Some other orders sought in the Amended Cross Claim are no longer pressed. 5 Essentially, the relief sought in the Amended Cross Claim is in the nature of an order applying the rule in Cherry v Boultbee (1839) 4 My & Cr 442 (41 ER 171), having the effect of requiring the first defendant to deduct the amount of the loans to the second defendant (including interest) from its distribution to him as residuary beneficiary. 6 The Schedule to the Amended Cross Claim identifies the following: (1) Advances made by the deceased to the Second Cross Defendant on or about 17 June 1988 totalling NZD 156,732.72. (2) the sum of NZD 10,000 referred to in a Statutory Declaration prepared by Messrs Hattersley & Hume, Solicitors, on or about 2 November 1990 on instructions by the deceased. (3) Payments made as follows: (i) $2000 [amended from $20,000] on 3 December 1996, by ANZ Savings Account cheque No 001070; (ii) $10,000 on 17 March 1998 by ANZ Account cheque No 159738; (iii) $7025 on 5 November 1993 by ANZ Account cheque No 159387. 7 I shall first consider the evidence concerning the claim for NZD 156,732.72, which is the largest claim and the one about which there is the most evidence. At the same time, I shall deal with the general facts regarding this sad history of family conflict. I shall then deal with the claim for NZD 5000, about which there is a limited amount of evidence. The specific evidence with respect to the other claims is very slim, but I shall consider such evidence as there is concerning, respectively, the claims to NZD 10,000, $10,000, $2000, $7025 and $1000. The claim for NZD 156,732.72 and the general facts 8 Mrs Gray's first husband, Rollo Gray, had been a senior legal officer in the Crown Law Office in New Zealand. He died in 1962. They lived in a property at 84 Wilton Road Wadestown, which Mr Gray left to his widow by his last will. The plaintiff and the second defendant were their children. 9 The plaintiff became qualified as a legal practitioner in New Zealand and practised law there until the early 1980s, when he moved to Sydney. He was a solicitor here until 1985, when he was admitted to practise as a barrister. He has continued to practise as a barrister in Sydney up to the present time. He married in 1985. The second defendant worked for the New Zealand Broadcasting Corporation from 1967 until he was made redundant in 1991, and then had difficulty finding satisfactory work, engaging in part-time consulting in information technology and working as an insurance agent. He had two children, Michelle (born 1970) and Stefan (born 1972), by his first wife, from whom he separated about 1977. He married his second wife in 1992. 10 The evidence indicates that the plaintiff is financially secure but the second defendant has had financial difficulties. There is also in evidence a substantial amount of correspondence between the second defendant and his mother, from which it appears that they were quite close. On the other hand, the evidence shows that the plaintiff and his mother had become estranged by 1989, and that lasted until about 1995. The plaintiff and the second defendant have had a tense relationship since about 1989. 11 The plaintiff and the second defendant owned a property in Paekakariki. In March 1982 they entered into a deed by which the plaintiff agreed to transfer the legal title to the Paekakariki property to the second defendant, to be held on trust for the plaintiff and the second defendant in equal shares, in order to permit the second defendant to raise finance on the security of the property, and pay out another mortgage. 12 Mrs Gray continued living in Wilton Road for some time after her first husband's death, but eventually she sold the property and acquired an apartment in the Dorchester Apartments in Oriental Parade, Wellington. The Dorchester apartment was held by company title, under which ownership of certain shares carried with it the right of occupation of a specified apartment. The shares were acquired by Mrs Gray and the plaintiff jointly. They were held subject to a mortgage which stood at just under NZD 20,000 in 1981. Monthly repayments were made by the plaintiff. The purpose of the borrowing is not clear from the evidence, although there is a suggestion that the money was used by the plaintiff to fund the acquisition of his share of the Paekakariki property. 13 In May 1986 the plaintiff and Mrs Gray entered into a deed which provided that if the Dorchester shares were sold during Mrs Gray's lifetime, the plaintiff would hold his share of the purchase money in trust for Mrs Gray. They entered into another deed by which the plaintiff transferred his residual rights and benefits in the shares to Mrs Gray, while remaining registered as a joint holder. He also granted a power of attorney to her to sell the shares. Effectively, the property then belonged beneficially to Mrs Gray. 14 At some time in the early 1980s Mrs Gray appears to have moved from New Zealand to Mosman in Sydney, where she lived in an apartment, which may initially have also been occupied by the plaintiff. In about February 1987 the plaintiff purchased a property at 47 Ernest Street Balgowlah on behalf of his mother. The purchase price was $255,000, financed by mortgage loan from the National Australia Bank of about $150,000. The balance of the purchase money, over $100,000, was provided by the plaintiff. Title to the property was placed in Mrs Gray's name but the plaintiff was a guarantor of the mortgage loan. The plaintiff later claimed that he bought the property for his own "superannuation", and that his mother understood that she held the property in trust for him. His mother contested that claim. 15 It appears that a proposal for Mrs Gray to sell the Dorchester apartment and use the proceeds to give financial assistance to the second defendant emerged in 1987. The second defendant wrote his mother an undated letter in which he raised the subject of purchasing a property, and said "before I do anything I need to know how much, if at all anything, you will allow me to use from the sale of the apartment". He said he needed to know what her intentions were "fairly rapidly". 16 There is no evidence of a direct reply to the second defendant's letter, although Mrs Gray did proceed to sell the Dorchester apartment early in 1988. The second defendant gave evidence, which was not challenged, that at the time of sale of the Dorchester apartment he and his son Stefan were living there, and when he said they would find a place to rent, his mother telephoned him and said: "I am not happy to see you and Stefan renting accommodation. I want you to buy a house using the proceeds of sale of Dorchester." 17 Mr Cuttance of Salek Turner Cuttance & Partners, barristers and solicitors in Wellington, acted for Mrs Gray in respect of the sale. The sale price was NZD 290,000. It appears that he also acted for the second defendant in respect of the purchase of a property at Oban Street Wadestown. Acting in the latter capacity, he made a proposal, by letter dated 12 January 1988, that Mrs Gray would provide financial assistance to the second defendant. The second defendant was asked in cross-examination whether Mr Cuttance acted for him as well as his mother. At first he denied that the letter of 12 January 1988 was written on his instructions, but later he acknowledged that he instructed Mr Cuttance to take the necessary steps to enable him to make an offer on the property he wished to purchase. In my view it is more likely than not that the second defendant approved the substantial contents of the letter of 12 January 1988. 18 Mr Cuttance's letter to Mrs Gray of 12 January 1988 said that after repayment of the mortgage then standing at NZD 12,500 and other expenses, the net proceeds of sale would be a little in excess of NZD 265,000. He noted that in view of the deed of May 1986, the total interest in the property belonged to Mrs Gray. The letter continued: "Robert has instructed us that he is wishing to buy a property in Wellington and he has proposed that you should make an advance of $160,000 to him to assist him with the purchase of this property. The property would be purchased in his name, and it is suggested that you would hold an unregistered mortgage over the property for the advance made to him. It is proposed that the advance would be for a period of two years, and that interest would be payable on it at the rate of 15% per annum, payable by monthly payments. Robert would have the right to make early repayment of the loan without penalty if this was required." 19 The letter referred to a proposal that Mrs Gray would repay the mortgage over the Dorchester apartment (presumably out of the proceeds of sale) in return for a transfer of the plaintiff's interest in the Paekakariki property to her. The evidence does not make it clear whether this proposal was implemented, although part of the proceeds of sale of the Dorchester apartment were used to pay out the mortgage. 20 The letter asked Mrs Gray to confirm the arrangements set out in the letter quickly. There is no evidence that she replied. 21 However, the sale of the Dorchester apartment was completed in due course, and Mrs Gray received a telegraphic transfer of the net purchase price of NZD 111,859.31. Apart from usual expenses, that figure was net of repayment of the mortgage loan on the property and payments of NZD 153,732.57 and NZD 3000 (the latter said to be for storage costs) to the second defendant. 22 The second defendant settled the purchase by him of a property at 120 Oban Street Wadestown on 27 May 1998. The purchase price was NZD 145,000. The balance due on settlement was NZD 137,533.56. 23 Mr Cuttance was slow to account for the sale of the Dorchester apartment. The second defendant wrote a critical letter to him on 16 June 1988, some three weeks after settlement. That letter referred to the NZD 3000 paid to the second defendant as an "advance". 24 Mr Cuttance replied to the second defendant on 17 June 1988, enclosing settlement statements showing that the amount payable on settlement of the purchase of 120 Oban Street Wadestown was debited to the sum of NZD 153,732.57 transferred from Mrs Gray's account for the sale of the Dorchester apartment, and that Mr Cuttance's firm held a balance for the credit of the second defendant in the sum of NZD 6,533.09. 25 Mr Cuttance's letter concluded: "There is one other matter outstanding and that relates to some form of acknowledgement of debt between yourself and your mother for the moneys which you had borrowed from her. At one stage, she had advised me that she wanted a monthly repayment of $500 from you but I appreciate that that arrangement may have changed. Should we be preparing some form of acknowledgement of debt? If so, can you tell us what the terms of that should be." 26 The copy of Mr Cuttance's letter that is in evidence contains a handwritten endorsement in respect of the quoted passage. The handwritten endorsement is: "I advised him that we will probably be making these arrangements separately and would advise him at a later date. I did not mention my plans to arrange this through another lawyer, namely Kaye." 27 Mr Cuttance was subsequently struck off the role of solicitors in Wellington and was convicted of offences, and he did not give evidence. However, evidence was given by Bruce Campbell, who had been a partner of Mr Cuttance. His evidence was to the following effect. Under New Zealand law, gift duty is payable, and has been payable at all relevant times, on gifts made in New Zealand or by New Zealand residents. The duty on a gift of the amount transferred to the second defendant would be in the vicinity of $27,000. Mr Cuttance practised in the areas of conveyancing and estate planning (I therefore infer that he must have been well aware of the requirements of New Zealand gift duty law). New Zealand law requires, and required at the relevant time, that a gift duty declaration be signed by the donor and lodged with the Inland Revenue Department. It is a fundamental professional responsibility of a New Zealand solicitor, acting in a transaction where a gift has been made, to ensure that the donor is aware of the obligation to complete and lodge a gift duty declaration. There is no evidence in Mr Cuttance's file of any gift duty declaration having been prepared or lodged in respect of the payments made to the second defendant. The existence of a gift duty declaration would be evidence, of course, that the payer intended the transaction to be a gift. The absence of a gift duty declaration is not fatal to the transaction having been a gift, for there may be an explanation for the absence of the declaration; but in a family transaction for a large amount where a solicitor is involved, it would be very unlikely that the transaction would have been by way of gift if there were no gift duty declaration. I accept this evidence. 28 It appears that the relationship between the plaintiff on the one hand, and Mrs Gray and the second defendant on the other, deteriorated during the 1980s, especially after the plaintiff married Pauline Green, whom his mother and brother disliked. The evidence includes a letter, dated 15 January 1989, from the plaintiff to his brother, in which he asserted that he had given considerable financial support to his mother over the years up to 1989. The plaintiff said it had become necessary for him, as the father of a young family, to give priority to his own financial commitments. He said that if his mother needed further financial support, it would be right that she should henceforward look to the second defendant. The letter said that the second defendant had a "debt-free" home purchased and furnished out of the Dorchester apartment, and assistance from their mother for the purchase of his car. (It is clear from the context that "debt-free" was not intended to imply the absence of any debt to Mrs Gray, but only the absence of a mortgage debt to an external financier.) The plaintiff suggested that the Paekakariki property be let for a proper rent, which would be supplied to their mother. The letter went on to propose that there be closer family ties. I infer that this proposal was not responded to favourably. 29 Later in 1989 the plaintiff instituted two proceedings in this Court against his mother, Nos 2652 and 4894 of 1989. In the first he claimed a declaration that she held the Balgowlah property upon trust for him absolutely. In the second, in which he essentially sought an alternative remedy to the first, he claimed judgment for $172,956.61 together with interest, alleging that he had advanced that amount to her for the purpose of purchasing the Balgowlah property. 30 Mrs Gray was extremely upset by the initiation of these proceedings. She described the plaintiff as "a traitor", "Uriah Heep" and other similar expressions. 31 Mrs Gray instructed Leonard Hattersley, solicitor, to act for her. While representing her in the proceedings, Mr Hattersley became involved in seeking a solution for Mrs Gray's financial predicament. I shall summarise Mr Hattersley's correspondence, but I should say at once that in my opinion, the correspondence was written by him on instructions from Mrs Gray. I reach that conclusion from the terms of the letters themselves, and also some other shorter correspondence between him and Mrs Gray. 32 Mr Hattersley wrote a letter to Mr Cuttance dated 30 June 1989 in which he explained that the National Australia Bank, which held the mortgage over the Balgowlah property, was pressing for payment and Mrs Gray did not have the means to meet the accruing interest on the loan. He referred to the distribution of NZD 153,732.57 to the second defendant, and said: "I gather that at one time you may have been suggesting that the payment of that sum of money to Robert should have been documented but I further gather from what Mrs Gray has advised me no documentation came into existence and therefore there is nothing in existence to record any obligations on the part of Robert to repay the advance received by him from his mother or to pay her interest on that substantial sum of money which represented in excess of one half of her then wealth." 33 He proceeded to urge that Mr Cuttance persuade the second defendant to provide some financial assistance to his mother by paying instalments of interest on the advance on a monthly basis. 34 He wrote to Mr Cuttance again on 7 August 1989, and sent a copy of that letter to Mrs Gray. He said to Mrs Gray: "I note you informed me that I was at liberty to express your feelings in relation to Robert's failure to be forthcoming with financial aid having regard to the substantial loan made to him." In the letter to Mr Cuttance, Mr Hattersley said: "On the other hand her son Robert appears to take the attitude that he is entitled to retain and enjoy the sum of NZD 153,000 odd which Mrs Gray would say was lent to him payable on her demand." He referred to the second defendant's "responsible and well-paid position with the New Zealand Radio or Broadcasting authority" and contended that the second defendant should be in a position, at the very least, to pay his mother a reasonable rate of interest on the loan. 35 Mr Hattersley prepared a draft letter to the second defendant, and sent it to Mrs Gray for review on 3 October 1989. He sent the letter to the second defendant in final form on 6 October 1989. It was a pleading letter designed to show that Mrs Gray was in acute financial need. It referred to "an unsecured and undocumented loan" by Mrs Gray to the second defendant of approximately NZD 170,000. 36 On 18 October 1989 Mr Hattersley wrote to a New Zealand solicitor called Brian Ranford, instructing him to conduct various searches. In the letter he recounted his concerns about Mrs Gray's financial plight, in view of her son's proceedings against her. He said: "Without there being any documentation or authorities in writing (but doubtless Mrs Gray provided verbal approval), Cuttance applied something like NZD 153,732 of Mrs Gray's money as the purchase money to complete Robert's home purchase." He said that the second defendant was "remaining unmoved" by calls upon him to at least pay a reasonable rate of interest. 37 The second defendant replied to Mr Hattersley on 19 November 1989. He said that he was just as concerned as Mr Hattersley for his mother's position. His letter continued: "I only wish I were in stronger position to be able to do something more constructive about it. "The reason no formal documentation has yet been made of the loan I received from Mother from the sale of Dorchester is due to my inability to finalise the settlement of my interest in the property at Paekakariki. (Unfortunately Ventry also has an interest in the property.) "My proposal was and still is that the property be sold and all proceeds be immediately forwarded to Mother as part payment towards the loan advanced by her to myself. This would also permit me to pay the regular monthly payments currently being paid on the mortgage for this property to Mother, an amount of some $302 per month and probably increasing at a later date once I was able to establish myself on a more firmer footing." 38 The letter proceeded to explain that the second defendant's attempts to sell the Paekakariki property to his ex-wife were being thwarted by the plaintiff, who had lodged a caveat. The letter continued: "The house we purchased with Mother's loan is a very simple ex 'Railways House' purchased for NZD 145,000 which at the time was a relatively cheap price for the area. … Should it be necessary we are quite prepared to sell this property so that Mother's loan to me can be paid off and used to dispel her obligation to the Bank. However we would require some warning to enable us to complete some minor work we have commenced on the property and to find alternative accommodation." 39 The second defendant endeavoured to explain the use of loan terminology in his letter on the basis that he was simply responding to the terminology used by Mr Hattersley. I find that explanation implausible, having regard to the terms of the letter and the context in which it was written. If the second defendant believed that his arrangement with his mother was a gift rather than a loan, and that he would accept a moral obligation to financially assist his mother, as a good son, without any legal obligation to repay, his reply to Mr Hattersley gave him a very good opportunity to say so. Instead, he wrote a letter which plainly and expressly acknowledged that the transaction was a loan. 40 The plaintiff's two proceedings against Mrs Gray were listed for hearing together on 11 and 12 December 1989. Active preparation for the hearing, by Mrs Gray's camp, continued until at least 7 December 1989, when counsel communicated with Mr Hattersley concerning some matters of final preparation. However, when the matter came on for hearing on 11 December, the plaintiff applied for leave to discontinue both proceedings. There was a contest as to whether discontinuance should be permitted. Waddell CJ in Eq permitted discontinuance, for reasons delivered ex tempore. However, he imposed terms that no further proceedings be brought upon the same cause of action against Mrs Gray without the leave of the Court, and in any case the plaintiff would not be permitted to claim an absolute interest in the Balgowlah property. His Honour ordered the plaintiff to pay Mrs Gray's costs, on an indemnity basis except for costs unreasonably incurred, and made provision for taxation of costs. 41 Mrs Gray was not happy with the outcome of the proceedings. She expressed concern to Mr Hattersley that the plaintiff could still sue her in the future. She said to the second defendant and Mr Hattersley: "I never want to speak to Ventry or Pauline Green again". 42 The second defendant gave evidence that after the conclusion of the court case, Mrs Gray, Mr Hattersley and he discussed options "as to how we could assist with the money still owing on the Balgowlah property". He said in his affidavit of 3 September 2001 that he told Mr Hattersley: "I will repay the moneys used to purchase the property at Oban Street either by raising a mortgage or by selling the Wadestown property and/or the Paekakariki property." 43 Unfortunately no final agreement was reached as to the amount of costs payable under his Honour's orders of 11 December 1989, until 18 December 1991, when the plaintiff and Mrs Gray entered into an agreement quantifying the costs at $49,000. The plaintiff had previously paid $30,000 on account of costs. 44 Mr Hattersley put the second defendant in touch with Mr Ranford, solicitor, so that Mr Ranford could assist the second defendant to remove the plaintiff's caveat on the Paekakariki property. In the course of his letter of 30 January 1990 to Mr Ranford, Mr Hattersley said: "You will be aware of the necessity also that her son repay to his mother a substantial part of the moneys she advanced him to enable him to purchase his Wadestown home which is presently unencumbered." 45 Mr Hattersley wrote to the second defendant on 11 April 1990, warning him that he ran the risk that his mother would lose her patience and seek to recover the money she had lent to him. Mr Hattersley said: "You know she is extraordinarily disappointed with Ventry. Surely you do not intend that same result to follow with you." 46 Mr Ranford took instructions from the second defendant and wrote to Mr Hattersley on 24 May 1990, explaining that he had taken steps towards challenging the plaintiff's caveat over the Paekakariki land. He explained that the proceeds of sale of the Paekakariki property would be used to "repay" Mrs Gray, and he expressed his understanding that the second defendant owed his mother approximately NZD 145,000, inviting Mr Hattersley to confirm the present indebtedness. The second defendant denied, without much elaboration, that Mr Ranford had acted on his instructions, but I find that evidence implausible, having regard to the terms of Mr Ranford's letter. Mr Hattersley replied on 1 June 1990, attaching Mr Cuttance's statement of account of 17 June 1988 and asserting that the second defendant benefited to the extent of NZD 156,732.57 from the sale of the Dorchester apartment. 47 I should note that the plaintiff and the second defendant were in dispute as to the ownership of the Paekakariki property until the property was sold, in November 1993, for NZD 85,000. At that time an arrangement was made under which the plaintiff received an agreed payment of NZD 53,750 and the second defendant received the balance after expenses of NZD 29,330.14. 48 Mrs Gray married Charles Smith in 1990. He provided her with financial assistance by paying off the mortgage of the Balgowlah property. The second defendant gave evidence that he also provided financial assistance to his mother. He estimated that he made cash payments to her over the period from 1989 to 1999 in the region of $15,000. 49 Before she married, Mrs Gray instructed Mr Hattersley to prepare a will. On 2 November 1990 Mr Hattersley wrote to Mrs Gray enclosing a "rough draft" of a will, and a statutory declaration. Although there is no evidence to indicate that the will and the accompanying statutory declaration were executed, the drafts are in evidence. 50 The draft will made no provision for the second defendant, apart from a contingent interest in residue. It gave the plaintiff a legacy of $172,956.61, indexed for inflation, conditioned on his not pursuing the claims he had made in the Supreme Court proceedings. It gave Mr Smith a legacy of $110,512.53, indexed for inflation. After another pecuniary legacy, the draft will provided that the residue of the estate should pass to Mr Smith if he remained alive, but if not, then to her sons in equal shares. 51 The draft statutory declaration was intended to explain the will, as a statement under s 32 of the Family Provision Act 1982 (NSW). In it Mrs Gray explained that the pecuniary legacy to Mr Smith was given because he had made a gift to her of that amount to discharge her mortgage liability to the National Australia Bank on the Balgowlah property, after conclusion of the plaintiff's Supreme Court proceedings. She explained that the pecuniary legacy to the plaintiff was equivalent to the amount he had claimed in the second of the Supreme Court proceedings. She noted, however, that she did not admit that she was indebted to the plaintiff for that amount. 52 As to the second defendant, the draft statutory declaration said: "I have made no provision in my will for my other son Robert simply because I have more than adequately provided for him in the last few years. Following the sale by me of my Wellington New Zealand property 'The Dorchester Apartment' in early 1988 my son Robert received from the settlement moneys payable to me sums of money in New Zealand currency approximating $156,000. Since then I have provided him with further moneys including AUD $10,000 on or about to enable him to purchase a motor vehicle. Robert using the payment of NZ $156,000 purchased for himself a home at 120 Oban Street Wadestown Wellington New Zealand without having to borrow upon such title or to mortgage the property. His solicitor Mr John F Cuttance wrote to me on 12 January 1988 saying 'Robert has instructed us that he is wishing to buy a property in Wellington and he has proposed that you should make an advance of $160,000 to him to assist him with the purchase of this property. The property would be purchased in his name and it is suggested that you would hold an unregistered mortgage over the property for the advance made to him. It is proposed that the advance would be for a period of 2 years and that interest would be payable on it at the rate of 15% per annum payable by monthly payments. Robert would have the right to make early repayment of the loan without penalty if this was required.' Mr Hattersley has written to Robert on several occasions during the past 12 months. I have not received one cent from Robert either as interest on the advances made to him or by way of repayment of any part thereof." 53 Though the text is not clear, this passage suggests either an intention to release the debts, or the view that the "loan" was not an asset of her estate. 54 Mrs Gray and Mr Smith made wills dated 21 December 1990, shortly after their marriage. There is some evidence that by that time she had ceased to be happy with Mr Hattersley's work for her. Each will left the estate to the other spouse, with no other beneficiaries. The solicitor who prepared the wills wrote to them on 6 December 1991 suggesting that it was unwise of them to have made such wills, while appreciating the wish of both spouses "to leave the estate to whoever [they wished] and the children can provide for themselves". 55 Mrs Gray made a new will, with an accompanying statutory declaration, on 17 August 1995. By this will she gave the whole of her estate to the second defendant, and expressly released him from "the debt of NZD 150,000 lent by me to assist in the purchase by my son of the property known as 120 Oban Street Wadestown". She also released interest owing on that debt at the date of her death. In her statutory declaration she explained that she had made no provision for her husband because he had his own means of financial support and was ninety years of age, and had children from his previous marriage to look after him. She said she had not provided for the plaintiff because his commencement of the Supreme Court proceedings against her had deeply upset and distressed her, and removed all trust and faith she had in him, and she had not met, seen or spoken to him since December 1989. 56 In July 1996 Mr Hattersley prepared a new draft will for Mrs Gray, which would leave two-thirds of the estate to the second defendant and one-third to the plaintiff, appointing the Perpetual Trustee Company Limited to be the executor and trustee. The evidence does not indicate that the draft will was ever executed. 57 In September 1997 an officer of the Permanent Trustee Company Limited attended Mrs Gray's home and gave her a draft will and "statement of wishes". The draft will contained a pecuniary legacy of $200,000 and some specific bequests of chattels to the second defendant, and subject to those gifts, the estate was divided equally between the two sons, with no mention of release of any debt. In the draft statement of wishes, she explained that she had treated the second defendant more favourably than the plaintiff because he was not as well placed financially as the plaintiff. She expressed her wish to make a gift to the second defendant to enable him to set up in business and lead more normal working hours. She expressed concern that the plaintiff might feel disappointed when he heard about what she had done. The evidence does not indicate that the draft will and the statement of wishes were ever executed. 58 In October 1997 Mrs Gray had another draft will prepared by solicitors in Chatswood. This draft provided that the executor would be the second defendant and that the estate would be divided equally between the second defendant and the plaintiff. The evidence does not indicate that this draft will was ever executed. 59 On 18 June 1998 Mrs Gray gave instructions for a will to an officer of the first defendant. She did not identify any debt owed by the second defendant as an asset, but the instructions noted that perhaps she owed $700 to the plaintiff. Her sons were to share her estate equally. The draft will was prepared on the basis of those instructions, and was executed by Mrs Gray on 25 June 1998. It is her last will, admitted to probate. She appointed the first defendant as her executor and trustee, and gave her estate to her sons in equal shares. On the same day she executed a general power of attorney in favour of the first defendant. 60 Mrs Gray died on 21 January 1999. Her estate comprised the Balgowlah property, valued for private purposes at $600,000, the bank account containing nearly $14,000, and investments valued at over $146,000. 61 On 22 March 1999 the plaintiff wrote to the first defendant, purporting to draw attention to a number of assets of the estate. They included the alleged loan of part of the proceeds of sale of the Dorchester apartment, and other alleged loans. The letter referred to a loan of approximately $40,000 to purchase a car, and a series of cheque transactions. The claim that there was a $40,000 was not pursued at the hearing. On 15 April 1999 the first defendant wrote to the second defendant formally notifying him of his brother's claims, enclosing a copy of his brother's letter. The letter asked whether the second defendant had any loan documentation and whether he believed that any amounts paid to him by his mother were loans. 62 The second defendant replied to the first defendant on 10 May 1999. He said: "No there are no loan documents between Mother and I. No moneys passed between us (either way) were ever regarded as loans. Mother and I had a very good relationship and she flatly refused to consider anything she did with or for us was to be regarded as a loan. The only thing she wanted was for us to visit her as much as we could (and did) and to feel she could come and visit or stay with us if she desired. "Similarly we also provided her with a vast amount of cash funds (she always refused to accept any cheques and tore them up) whenever we visited her. It was the way we worked, she was my and Robyn's mother and we enjoyed each other's company (on most occasions). A normal family relationship." 63 The first defendant wrote to the second defendant again on 7 June 1999. The letter was a review of a number of difficulties that had arisen in the administration of the estate, apparently because of the conflict between the brothers. It noted the plaintiff's requests that the first defendant investigate transactions said to be loans by Mrs Gray to the second defendant, and observed that as there was no documentary evidence establishing loans, the first defendant was reliant to some extent on the borrowers confirming that the loans existed. The second defendant replied on 4 July 1999, saying "there are no loans for you to investigate". 64 On 5 November 1999 the first defendant wrote to the second defendant setting out quotations from letters it had received from the plaintiff, and also from the correspondence between Mr Hattersley and the second defendant. The letter concluded that there were serious inconsistencies between the correspondence and the second defendant's claims in his letter of 10 May 1999, and asked him carefully to review the position and prepare a complete summary of any loans and repayments. The letter threatened the commencement of legal proceedings. On 29 June 2000, Izard Weston, New Zealand solicitors for the second defendant, wrote to the first defendant denying a list of debts provided in a letter of 16 June 2000, and saying that if the estate wished to recover alleged debts, it must commence proceedings. 65 There was further correspondence between Izard Weston and the solicitors for the first defendant. By letter dated 27 October 2000, Izard Weston denied the plaintiff's allegation that the common intention of Mrs Gray and their client was that the payments that had been specified in correspondence were loans rather than gifts. The letter said that Mrs Gray gave the second defendant part of the proceeds of sale of the Dorchester apartment to enable him to purchase a property. It contended that Mrs Gray considered this gave her a second home in New Zealand, and noted that the plaintiff's financial position had always been very sound whereas the second defendant's had been weak, and for that reason Mrs Gray was happy to assist the second defendant financially from time to time. 66 The letter added this: "We have made inquiries to see if we can obtain independent verification of Mrs Gray's intentions. We have now been able to speak with a Mrs Rachel Winton of Lane Cove, Sydney who was the Late Mrs Gray's closest friend and confidant. Mrs Winton lived next door to the Late Mrs Gray in Oriental Bay, Wellington and maintained close contact when they both moved to Sydney. Mrs Gray's Dorchester property was sold to Mrs Winton's son's mother-in-law. Mrs Winton was aware of all of the Late Mrs Gray's financial affairs and also accompanied her on visits to her solicitors when the late Mrs Gray gave instructions for wills to be prepared. Mrs Gray told Mrs Winton she was gifting moneys from the proceeds of sale of the Dorchester apartment to Robert Gray to enable him to purchase a house. Mrs Winton has a great deal of additional information relating to the financial affairs of the Late Mrs Gray. Mrs Winton is prepared to swear an affidavit detailing her knowledge of these matters." 67 Mrs Winton provided an affidavit but it was not read. It is appropriate to infer, and I do infer, that the evidence would not have assisted the second defendant's case. Findings as to the payment of $156,732.57 68 The second defendant's principal case is that the money that was provided to him out of the proceeds of sale of the Dorchester apartment was a gift rather than a loan. Issues have also arisen as to whether the payment was a "family arrangement" not legally enforceable as a debt, whether there was a presumption of advancement in favour of the second defendant, and whether Mrs Gray subsequently forgave and released any obligation to repay the money. I shall deal with these three points later. First, I shall consider whether there was a gift or loan of the $156,732.57. 69 From time to time, the second defendant used the word "advance" in his evidence. With some encouragement from me, counsel for the plaintiff explored with the second defendant in cross-examination his understanding of the difference between a loan and a gift, and the meaning he assigned to the word "advance". The following exchange occurred (Transcript page 29): "Q. Can we clear up some terminology, perhaps, so that we are not at cross-purposes? When you used the word 'advance' in paragraph 38 of your affidavit, what did you mean? A. I mean she advanced the money from the proceeds of the sale to purchase a house in Wellington. She made the money available for us to purchase a house in Wellington. Q. With or without an obligation, do you say, to repay? A. It was such that we had the understanding that, if she requested it, it would be repaid. Q. That is what you are referring to, isn't it, in paragraph 40 of your affidavit when you said, in substance, to Mr Hattersley, 'I will repay the moneys to my mother that I used to purchase the property at Oban Street'? A. Correct. Q. In other words, if she wants it back, I will repay its to her, correct? A. Correct. Q. If you use the word 'loan' you mean, do you not, an obligation to repay funds which have been made available to you, correct? A. Yes. Q. So, if your mother had made a loan to you, you would understand that phrase to mean that she had an obligation to repay it, correct? A Yes." 70 I am satisfied that in his evidence, the second defendant used the word "advance" neutrally, to mean "provide" or "make available", in a fashion consistent with either loan or gift. However, the passages quoted above seem to me to imply that he understood the transaction to give rise to some form of obligation to repay, although to repay only if requested. His answers suggest that the arrangement was for a loan repayable on demand. In re-examination, the second defendant was asked why he had agreed that he would make a repayment out of the proceeds of sale of the Paekakariki property, if he had no obligation to do so. He answered: "Because she needed money. I'd had an understanding with mother if she needed it and requested it we would repay. Mr Hattersley drew the picture, so I proceeded to try and provide." 71 I have considered whether the word "obligation" in this evidence should be treated as referring to a moral but not legal obligation. Having observed the second defendant in the witness box, and having listened as carefully as I could to his evidence, I have formed the view that when he used the word "obligation" he did not mean a merely moral obligation. The correct interpretation of his evidence is that he accepted an obligation to repay his mother if she was in need of money and asked for repayment. His obligation to do so was a legal obligation. 72 The second defendant's evidence on this point was from time to time self-contradictory. In particular, his absolute denials of any legal obligation to repay seem to me to be inconsistent with the answers in the passages which I have quoted. Perhaps more importantly, his denial of any obligation to repay is inconsistent with a long chain of correspondence, which I have set out in some detail. When one reviews, especially: · Mr Cuttance's letter to Mrs Gray of 12 January 1988, and his letter to the second defendant of 17 June 1988 (considered in the context of a New Zealand solicitor's obligation with respect to gift duty and the absence of a gift duty declaration); · Mr Hattersley's correspondence to Mr Cuttance of 30 June and 7 August 1989, written upon the instructions of Mrs Gray, Mr Hattersley's letter to the second defendant of 6 October 1989, again written on the instructions of Mrs Gray, and his letter to Mr Ranford of 18 October 1989; · the second defendant's reply to Mr Hattersley of 19 November 1989; and · Mr Ranford's letter to Mr Hattersley of 24 May 1990, written on the instructions of the second defendant; · it is quite plain that both Mrs Gray and the second defendant perceived the arrangement with respect to the proceeds of sale of the Dorchester apartment as a loan, in the sense that there was an obligation to repay Mrs Gray if she called for it. It was, in other words, a loan repayable on demand. The correspondence is weightier evidence than the second defendant's affidavit and oral evidence because it was written before the dispute between the brothers, as to the nature of Mrs Gray's "advances" to the second defendant, had crystallised. 73 Counsel for the first defendant cautioned me about relying on evidence of events that occurred, and correspondence that was written, well after the payment was made, citing Shephard v Cartwright [1955] AC 431, 445 and Calverley v Green (1984) 155 CLR 242, 262. Some of the evidence comprises correspondence contemporaneous with the payment transaction, especially Mr Cuttance's letter to Mrs Gray of 12 January 1988 and the settlement sheets that he sent to the second defendant on 17 June 1988. That evidence is of particular importance. It seems to me, however, that the later correspondence which I have listed may also be relied upon, as evidence pointing to the intention of Mrs Gray and the second defendant at the time of the payment transaction: cf Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540. As counsel pointed out, the later correspondence is significant, inter alia, for the absence of any denial by the second defendant of assertions that the transaction was a loan. And the second defendant's letter of 19 November 1989 is effectively an admission confirmatory of Mr Cuttance's proposal, made at the time of the payment transaction, that the payment be regarded as a loan. 74 The draft statutory declaration might be taken as presenting the transaction in a different light, but it is highly ambiguous and is open to the construction that Mrs Gray intended to release the debt. In her will of 17 August 1995 she expressly provided for a release of the second defendant's debts. 75 My conclusion, therefore, is that Mrs Gray made a loan repayable on demand to the second defendant out of the proceeds of sale of the Dorchester apartment, in the some of NZD 156,732.57. On the evidence, there is no justification for treating the NZD 3000 differently from the remainder of the proceeds of sale, for although it was described by Mr Cuttance as storage expenses, no other evidence was adduced that this was so, and no real attempt was made by the second defendant's evidence to separate it from the rest of the money. Indeed, the second defendant described that money as an "advance", just as he had described the remainder of the money. Family arrangement 76 In a careful argument, counsel for the second defendant contended that the evidence to which I have referred showed nothing more than a family arrangement, not giving rise to a legally enforceable debt. He relied on the decision of the English Court of Appeal in Jones v Padavatton [1969] 2 All ER 616. 77 In that case a mother promised her daughter that if she moved from the United States to England to read for the Bar, the mother would provide maintenance for her at a specified amount per month. The daughter accepted the offer, moved to London and began studying for the Bar. Subsequently the arrangements were changed. Under the new arrangements the mother bought a house in London and allowed her daughter to occupy part of the house, on the basis that the rents from letting other rooms would provide maintenance for the daughter in place of the previous monthly amount. The arrangements were not documented in writing. Later the mother took proceedings to recover possession of the house. 78 The Court of Appeal held, by majority, that the arrangement between mother and daughter was a family arrangement not intended to be legally binding (citing the famous case of Balfour v Balfour [1919] 2 KB 571). Danckwerts LJ characterised the case as "one of those family arrangements which depend on the good faith of the promises which are made and are not intended to be rigid, binding agreements" (at 620). Salmon LJ noted that when arrangements are made between close relations in respect of an allowance, there is a presumption of fact against an intention of creating any legal relationship. He said (at 621): "It derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations, but intend to rely solely on family ties of mutual trust and affection." 79 In my opinion that reasoning is inapplicable where a mother provides a very large sum of money, more than half of her wealth, to her son so that he can buy a house. The amount involved, and the significance of the amount to the wealth of the mother, suggest an intention to create legal relations: cf Dyke v Dyke [1998] VSC 211 (BC 9807191). In my view the present case is not a case of a non-binding family arrangement. It is true, as counsel for the second defendant emphasised, that much of the language used in the conversations with his mother to which the second defendant deposed, and in the correspondence, was informal and non-mandatory. Lying behind that polite language, however, was the idea, asserted by Mrs Gray through her solicitor Mr Hattersley, and by Mr Cuttance, and by the second defendant himself, that the money was paid by way of loan and therefore there was a legal obligation to repay it when required. Presumption of advancement 80 Counsel for the second defendant submitted that the payment of $156,732.57, being a payment by mother to son, was subject to the presumption of advancement explained in such cases as Nelson v Nelson (1995) 184 CLR 501. He submitted that the law in New Zealand is the same. 81 The presumption of advancement is of only limited use, because it is rebuttable by evidence of actual intention. The evidence that I have summarised shows, as I have said, that the intention of Mrs Gray and the second defendant at the time of the payment transaction was that it would operate as a loan rather than as a gift. The same evidence applies to exclude the application of any presumption of advancement in favour of the second defendant. Forgiveness of debt 82 In his affidavit sworn on 3 September 2001, the second defendant said: "At around [1990], Mother said words to me to the effect 'as far as I'm concerned you can forget about the money, what I need and what I want from you is to come over and visit me as often as you can for as long as you can'." 83 The requirements for forgiveness or release of the debt are not entirely clear, as I noted in Lewis v Cook (2000) 18 ACLC 490, at paragraphs 15-18. Meagher Gummow & Lehane, Equity Doctrines and Remedies (3rd ed, 1992), para [3502] notes that some cases suggest equity may recognise the voluntary release of the legal right by writing not under seal, or even orally, but the bulk of authority favours the view that, in the absence of valuable consideration, equity will not consider a legal right to be released unless it has been released at law. 84 I shall assume, for present purposes, that equity will recognise the voluntary release of a debt, for the purposes of administration of a deceased's estate and the application of the rule in Cherry v Boultbee. Even so, the evidence falls short of a voluntary release or forgiveness of existing debt. First, Mrs Gray's statement, as recounted by the second defendant, places emphasis on her desire to be visited, and her statement to "forget about the money" is merely an introduction to her main point. That would be a remarkably informal way to release an entitlement to a sum of about $150,000, and I therefore think it unlikely that the statement (if she made it) was intended to be a release or forgiveness of the loan. Secondly, Mrs Gray's will dated 17 August 1995 provides for the release of the debt. That would have been unnecessary if the debt had already been released or forgiven. My conclusion is that Mrs Gray did not disclose an intention to release or forgive the debt during the conversation in 1992 which the second defendant proposes. Interest on the loan of $156,732.57 85 The question of interest is a more difficult one. The plaintiff contended that either the interest rate should be 15%, or alternatively a "reasonable rate". A third alternative, advanced in written submissions, was that interest should be payable at the rate of 15% for a period of two years from the date of the advance, and thereafter at that rate or at a reasonable rate by way of common law damages (Cook v Fowler (1874) LR 7 HL 27) or by way of the equitable obligation of restitution (Nixon v Furphy (1926) SR (NSW) 409 at 414; cf Lai v Gong (1997) 8 BPR 15,837). 86 An interest rate of 15% for two years was proposed in Mr Cuttance's letter to Mrs Gray of 12 January 1988, written on the second defendant's instructions, but the evidence does not make it clear that that specific proposal was accepted by Mrs Gray. On the other hand, it appears from the second defendant's own letter of 19 November 1989 that he envisaged "formal documentation" upon the sale of the property at Paekakariki, and Mrs Gray's draft statutory declaration implies that she regarded herself as entitled to receive interest on the loan, though not necessarily the rate of 15% suggested by Mr Cuttance. Further, in her will dated 17 August 1995 Mrs Gray provided for release of the second defendant's obligation to pay interest, implying that she regarded him as obliged to do so. 87 In all the circumstances, I conclude that the arrangement between the parties was that the balance outstanding from time to time would bear interest at a reasonable rate, for the common intention was that interest would be paid but the quantum was not settled. The third alternative advanced by the plaintiff does not appear to me to accord with such evidence as there is concerning the intention of the parties. It is appropriate, in my view, to use the rates set out in Schedule J to the Supreme Court Rules in circumstances such as these. The claim for NZD 5000 88 The evidence on this matter is quite sketchy. I shall set out the evidence in what seems to me to be the correct temporal sequence, although some of the documents are undated. 89 The second defendant wrote his mother an undated letter in which he said he was going to put his car on the market and replace it with something cheaper so he would not have any repayments to make. He reported that he had inspected a car that was too expensive, and said he was considering coming to Australia to buy a car and ship it back. He enclosed an advertisement by a used-car dealer. 90 A file note was created by someone on 9 July 1984 saying that Mrs Gray rang from Sydney, and that her son Robert required $5000 "before the election", and that she would confirm her instruction in writing. There is a copy of a note from Mrs Gray, written from her Mosman address and dated 9 July 1984, addressed to "Mrs Thomson". The note confirms a conversation on the telephone that morning, when she requested that $5000 be made available to Robert who had an urgent need of it prior to 14 July. 91 The second defendant gave evidence that he bought a Nissan 180 in about 1984, and that he received no financial assistance from his mother in respect of the purchase of any other car. He said that his mother gave him $5000 towards the purchase of the Nissan 180 in 1984 but that it was not a loan. I infer that the denomination was New Zealand currency. His supplementary evidence in chief was that the money "just turned up", and there was no discussion about the terms of the payment. Later, in cross-examination, he recalled that he and his mother had had a discussion about a car, in which he explained his needs for a car and that he intended to pay a deposit and enter into a hire purchase commitment, and she told him she would provide money. 92 Although there may not be a direct inconsistency in this evidence, my view is that the evidence in chief was lacking in candour. The second defendant recollected the conversation with his mother only when pressed. It had not been referred to in any of his affidavits. If, as the second defendant admitted in cross-examination, there was a discussion about provision of money for a car, it would be surprising if nothing was said to clarify whether the money was provided as a loan or a gift. 93 There is also in evidence an undated note, evidently from the second defendant, enclosing a card to Mrs Gray and the plaintiff to thank them for all they did for Stefan and him, adding "some day it will be repaid". The card, evidently enclosed with the note, says (inter alia) "very many thanks for enabling me to make our purchase at the right time". There is a copy of an account to Mrs Gray from Tripe Matthews & Feist dated in 1985, reporting on the investment and disposition of a sum of over $12,000, being the proceeds of sale of a property in Waikanae. The statement records payment of NZD 5000 to Robert Gray on 10 July 1984. 94 The second defendant wrote to his mother expressing "deep appreciation for your assistance in obtaining a magnificent set of wheels". He said: "I am confident we made the right decision in buying a good car prior to the elections", and he went on to explain that finance companies had subsequently tightened up on car finance and prices were likely to rise. Later in the letter he said "thank you for your assistance in our purchase", adding "if need requires it then it can be sold relatively quickly for a good price so don't worry about it". 95 In my opinion these last two pieces of evidence point towards a loan rather than a gift. The second defendant thanked his mother for making money available so that he could buy a car at the right time. This suggests a temporary financial accommodation. He said that the money would be repaid, and if necessary he could repay it quickly. 96 My conclusion is that the NZD 5000 was a loan by Mrs Gray to the second defendant. There is nothing to indicate an agreement to pay, or not to pay, interest, perhaps because the financial assistance appears to have been regarded, at least by the second defendant, as temporary. The late payment of a debt does not carry interest, in the absence of evidence of an express or implied agreement that interest is to accrue: Hungerford v Walker (1988) 171 CLR 125, 138; Bickerdike v Hill (No 2) [1919] VLR 62, 65. 97 Counsel for the first defendant submitted that in the absence of evidence that payment of interest was a term of the loan, interest is not claimable from the date of the advance, but is payable as regards the period after Mrs Gray's death, at Schedule J rates (citing Bickerdike v Hill [1918] VLR 191 per Cussen J). I agree. The claims for other amounts

Gray v Guardian Trust Australia

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