HALFORD -v- HALFORD [2022] WASCA 1 (11 January 2022)

3 On 15 February 2016, Jeffrey, in his capacity as trustee, sold Glen Iris, the remaining asset of the Estate. The net proceeds of the sale were $4,625,912.83.[4] At the time of the sale, Jeffrey was entitled to two‑thirds of the trust estate, Glen Iris, under Maurice's will and Kai was entitled to one‑third[5] (Ewart having previously in effect assigned his one‑third interest to Jeffrey for reward).[6] As at settlement, there were outstanding bank loans to Bankwest secured against Glen Iris (totalling $3,225,677.78), and part of the proceeds of sale were applied to repay those bank loans.[7]

4 By his claim in the primary proceedings, Kai contended that the Bankwest loans secured against Glen Iris were personal debts of Jeffrey and Pamela,[8] such that they should not have been paid out of the Glen Iris sale proceeds. Kai also brought an alternative claim for the taking of an account, based on an alleged failure by Jeffrey to keep proper accounts of the trust from when he was appointed trustee in 1999, and for an account of any profits obtained by Jeffrey and Pamela from using Glen Iris as security for the purposes of their own farming partnership from 14 June 1984.[9]

5 The main issue in the primary proceedings, as identified by the learned trial judge, was whether Kai was entitled, as he alleged, to one‑third of the net sale proceeds of Glen Iris before repayment of the Bankwest loans, or only to one‑third of the balance after repayment of the Bankwest loans.[10] The judge found that (1) the Bankwest bank loans secured against Glen Iris were personal liabilities of Jeffrey and Pamela incurred in relation to their partnership business, which was not a business of Maurice and the Estate, and (2) the liabilities to Bankwest were not liabilities to which Jeffrey was entitled to an indemnity out of the trust assets (Glen Iris).[11] The judge rejected an estoppel plea by Jeffrey to the effect that Jeffrey was induced by Kai to assume that Kai did not object to Glen Iris being used as security for the borrowing of funds for the farming operations conducted by Jeffrey and Pamela.[12] However, the judge dismissed Kai's primary claim on the basis of laches.[13] Thus, his Honour held that Kai was only entitled to one‑third of the net proceeds of the sale of Glen Iris after, relevantly, first deducting the mortgage debt to Bankwest.[14]

6 Kai also claimed in the primary proceedings that a smaller sum, which Jeffrey had agreed in January 2016 to pay for the rent of Glen Iris in the period before sale, was payable by Jeffrey and should not have been paid from the sale proceeds.[15] The judge found in favour of Kai on this point, and these matters do not arise in the appeal.[16] The appeal concerns the finding of laches referred to in [5] above, in respect of which the respondents, Jeffrey and Pamela, have also filed a notice of contention.

7 In substance the single issue in the appeal, and on the respondents' notice of contention, is whether the judge was correct in finding that laches precluded Kai from asserting that he was beneficially entitled to one‑third of the trust property, Glen Iris (subject only to the costs of sale), without reduction on account of the mortgage debt on the land, which Jeffrey and Pamela had incurred for the purposes of their partnership.

8 Kai seeks, relevantly, that the orders of the learned trial judge be set aside, and that judgment be entered in his favour against Jeffrey and Pamela for the amount of $1,410,953.99 (reflecting his entitlement to one‑third of the net sale proceeds prior to repayment of the Bankwest loans) minus $488,299.14 (the sum already paid to Kai), plus interest (from 13 June 2020 at 6% per annum).[17]

9 Ewart did not take part in the primary proceedings (relevantly, no relief was sought against him)[18] and he has not filed a respondent's notice of intention to participate in the appeal. There is no separate contention or issue in relation to Pamela's liability. As noted above, the single issue is in relation to laches.

10 For the reasons which follow, the appeal should be allowed. The learned trial judge erred, with respect, in finding that Kai's claim was barred by laches.

11 On 31 December 1958, a Bank of New South Wales Mortgage 15352/1958 was registered over Glen Iris, with Maurice as mortgagor.[20]

12 On 28 December 1962, Maurice executed his last will and testament.[21] At the time, Iris was only 31, and all three children were aged 10 years or younger.[22]

13 As at 2 January 1966, Maurice was a member of a partnership trading as 'Halford Bros' (Halford Bros Partnership), which carried on a farming business at Glen Iris and Credo Station (a pastoral station near Kalgoorlie). The members of the Halford Bros Partnership were (1) Maurice, (2) Kai, (3) Jeffrey, (4) Iris, (5) Credo Pastoral Co Pty Ltd (Credo Pastoral Co), and (6) Halford Pastoral Co Pty Ltd (Halford Pastoral Co).[23]

14 On 3 January 1966, Maurice died.[24] By his will dated 28 December 1962, he appointed his mother (Sophia) and his widow, Iris, as joint executors and trustees of the trust created by the Testamentary Trust.[25] The relevant parts of his will were as follows:[26]

2. I DEVISE AND BEQUEATH all my property and estate of what nature soever and wheresoever situate unto my Trustees UPON TRUST to sell call in and convert the same into money (with power in their uncontrolled discretion to postpone the sale calling in and conversion of any part thereof for such time as they shall deem fit without being liable to account notwithstanding that it may be of a wasting speculative or reversionary nature) and to pay thereout my debts funeral and testamentary expenses ... and all other duties costs charges and expenses assessed or payable upon or by reason of my death or the succession to my estate AND TO STAND POSSESSED of the residue thereof UPON TRUST:-

(a) For my said wife IRIS ... during her life and

(b) after her death for such of my children as shall survive me and if more than one in equal shares as tenants in common.

3. I DECLARE that my Trustees shall have the following powers (in addition to and without limiting any powers they may have by law:-

(a) To carry on or join in carrying on any business which I may own or be interested in as partner or otherwise at my death until the same shall vest in the respective persons beneficially entitled to the same under the provisions of this my Will and for that purpose to retain and employ therein the capital or my share of the capital which shall at my death be employed therein and such additional capital as my Trustees shall think fit to advance from time to time out of my residuary estate with power to employ or concur in employing at such salary wages or remuneration as my Trustees shall think fit any manager or managers servants workmen and contractors (including any beneficiary entitled under this my Will) in connection with the said businesses or business and generally to act or concur in acting in all matters relating to the said business or businesses as if my Trustees were beneficially entitled thereto or to my share or interest therein and also with power to delegate all or any of the powers vested in my Trustees in relation to the said businesses or business to any person or persons whom they may think fit and my Trustees shall be free from all responsibility in respect of any loss arising in relation to the carrying on of the said businesses or any of them.

(b) To lease any real or personal estate belonging to me or my estate for such term or terms at such rent or rents and upon such terms and conditions (including options for extension and for purchase) as they shall deem fit.

(c) For the purpose of paying and discharging my funeral and testamentary expenses ... and/or for the purpose of paying and discharging the liability of my Trustees of and incidental to carrying on any businesses or business of mine and my estate or any partnerships or partnership in which I am or may be interested at my death to raise or borrow or join in raising and borrowing from any Bank or other corporation firm or person either on fixed mortgage or mortgages or on one or more fluctuating current account or accounts or otherwise such sums or sum of money as my Trustees may deem necessary for the purposes aforesaid or any of them.

(d) For the purpose of securing the due payment of the moneys so borrowed together with interest thereon at the usual current banking rate from time to time charged by banks in the said State or any such other rate or rates as to my Trustees shall deem fit (and which interest may be capitalised in accordance with the usual banking practice) to mortgage and/or pledge the whole or any part of my estate and to execute or join in executing such securities as they may think fit over my real and personal property (including the wool increase and progeny of any livestock and of all crops now or hereafter to be sown in or growing upon any property of mine or property in which I am interested as a partner or otherwise and any after acquired stock plant chattels and effects) and that such securities may be in such form and may contain such covenants powers and provisions (including a power of sale) as my Trustees may deem proper or as such bank corporation firm or person may require and such bank or other lender of any money in pursuance of the powers herby conferred on my Trustees shall not be liable to see or enquire as to the application of any moneys so borrowed or be liable for the misapplication of the same or any part thereof. (emphasis added)

15 On 22 August 1966, Maurice's will was admitted to probate.[27]

16 Following Maurice's death, and after payment of his debts and other expenses, the Estate property included:[28]

1. Glen Iris, being five contiguous parcels of land at Gibson, within the Shire of Esperance;

2. half of the pastoral leases registered over Credo Station; and

3. a four-twentieth share in the surplus (if any) of the assets of the Halford Bros Partnership upon a final settlement of partnership accounts pursuant to s 57 of the Partnership Act 1895 (WA).[29]

17 The Halford Bros Partnership was not, however, wound up. Instead a new partnership was entered into, as noted below.

18 From 3 January 1966, the farming business at Glen Iris that was previously carried on by the Halford Bros Partnership was carried on, in partnership, by (1) Sophia and Iris as trustees of Maurice's Estate (as to a four‑twentieth share), (2) Kai (as to a four‑twentieth share), (3) Jeffrey (as to a four‑twentieth share), (4) Iris in her personal capacity (as to a two‑twentieth share), (5) Credo Pastoral Co (as to a three‑twentieth share), and (6) Halford Pastoral Co (as to a three‑twentieth share) (the 1966 Partnership).[30]

19 Maurice's death brought about a technical dissolution of the Halford Bros Partnership, and the 1966 Partnership was a new partnership.[31]

20 The 1966 Partnership kept the Halford Bros name.[32]

21 From Maurice's death until 30 July 1980, Iris was the sole director of each of Credo Pastoral Co and Halford Pastoral Co. From 30 July 1980, Iris and Jeffrey were the directors of each company until they were deregistered on 26 August 2003.[33]

1967/1968: Maurice's mother's death and Iris as sole trustee

22 Iris' brother, Evan Ball, moved to Credo Station to run it with her until Kai finished school in 1967 and was able to take over responsibility with Iris.[34]

23 On 11 May 1968, Sophia died, leaving Iris as the sole trustee of the Testamentary Trust.[35]

24 On 22 April 1969, the Bank of New South Wales Mortgage 15352/1958 was discharged,[36] and effectively replaced by a registered Bank of New South Wales Mortgage, A157306, over Glen Iris. Iris executed the mortgage as mortgagor as executrix of the Estate.[37]

25 On 10 May 1972, a Rural Reconstruction Authority Mortgage A519325 was registered over Glen Iris. Iris executed the mortgage as mortgagor as executrix of the Estate.[38]

26 On 21 November 1975, the Commonwealth Development Bank of Australia Mortgage B057172[39] was registered over Glen Iris. Iris executed the mortgage as mortgagor as executrix of the Estate.[40] This loan was for restocking, following a prolonged drought in the early 1970s.[41]

27 Before Kai moved to Glen Iris in 1975, Iris employed a couple to manage the farm. From 1975 ‑ 1978:[42]

2. Iris, Jeffrey and Ewart lived on Credo Station.

28 In 1978, Kai and his family returned to Credo Station. After Kai returned to Credo Station, another couple were employed to manage Glen Iris.[43]

29 Around 1978, differences about the management of the family business arose between Kai and Jeffrey. Kai's evidence was that he wanted to implement changes, but the other family members did not agree to them. Jeffrey said there were other disagreements, escalating to a physical confrontation between the brothers. Kai denied that it was anything more than a disagreement about the changes he wanted to make.[44]

30 On 23 January 1979, a further Bank of New South Wales Mortgage, B652387, was registered over Glen Iris. Iris was the mortgagor as executrix of the Estate.[45]

1980: Kai's retirement from the 1966 Partnership and the commencement of the 1980 Partnership

31 On 30 April 1980, Kai retired from the 1966 Partnership.[46]

32 On 10 July 1980, the partners executed a deed (1980 Deed), which provided that:[47]

1. The 1966 Partnership was dissolved by mutual consent from 30 April 1980.

2. From 1 May 1980, a partnership (the 1980 Partnership) also known as 'Halford Bros' was carried on by the remaining partners and Ewart as an incoming partner. Thus, the partners of the 1980 Partnership were (1) Iris, as trustee of the Estate, (2) Iris, in her personal capacity, (3) Jeffrey, (4) Ewart, (5) Credo Pastoral Co, and (6) Halford Pastoral Co.

3. Kai agreed to transfer his shareholding in Credo Pastoral Co and Halford Pastoral Co to Jeffrey and Ewart.

4. Iris and Jeffrey were to pay Kai the sum of $21,260, being the agreed value of his interest in the partnership, with $10,260 of the agreed amount being satisfied by the transfer to Kai of land in Esperance.

5. The remaining partners indemnified Kai against the debts and liabilities of the partnership as at 30 April 1980.

6. Kai released the other parties from all actions, accounts, claims and demands in relation to the former partnership.

33 After Kai left the farm, he had no personal contact with Jeffrey before the primary proceedings began, and he did not see his mother again. What information Kai had about the family (and Glen Iris and Credo Station) came from visits from relatives or friends, and occasional accounting enquiries. Kai said he did not believe Jeffrey and Ewart would want to share information about the partnership with him, he did not feel entitled to it, and did not ask, and that he also did not ask for any information about the Estate or the Testamentary Trust.[48]

34 After 30 April 1980, the farming business at Glen Iris and Credo Station was carried on by the 1980 Partnership.[49]

35 Around July 1980, Kai left the Esperance region and moved to the northwest of WA, eventually settling in Kununurra.[50]

36 After Kai left, Jeffrey moved to Esperance to manage Glen Iris, initially renting the house that had been given to Kai in the partnership dissolution. Iris remained on Credo Station (near Kalgoorlie) with Ewart.[51]

37 In 1981, Jeffrey and Pamela moved onto Glen Iris.[52]

38 On 10 March 1982, Kai wrote to Jeffrey regarding an outstanding matter from the dissolution of the 1966 Partnership - the failure by the continuing partners to repay $5,000 which Kai had raised on the security of a life insurance policy. Kai received a reply, signed 'Halford Brothers', advising that things had improved over the last 18 months, and they were trying to pay it off 'as quick as possible'.[53]

39 In April 1983, Kai had a solicitor write to his brothers, foreshadowing legal action unless the amount was paid.[54]

40 In April 1984, Kai corresponded with his uncle, Evan Ball. Kai at least suspected that Jeffrey was borrowing through the 1980 Partnership for the accumulation of personal assets. Kai was also aware of the possibility that Ewart would buy Jeffrey out of Credo Station.[55]

14 June 1984: termination of the 1980 Partnership and agreement between Jeffrey and Ewart

41 On 14 June 1984, the 1980 Partnership was dissolved. The 1980 Partnership had $80,358 of secured debt and $51,847 of unsecured debt.[56]

42 Also on 14 June 1984, Jeffrey and Ewart executed an agreement by which, for a consideration of $60,000 to be paid by Jeffrey to Ewart:[57]

1. Jeffrey transferred his interest as joint lessee in Credo Station to Ewart (subject to ministerial approval);

2. Ewart took responsibility for liabilities relating to Credo Station;

3. Ewart transferred to Jeffrey his right as a beneficiary in the Estate of Maurice in relation to Glen Iris;

4. Jeffrey took over responsibility for payment of certain debts relating to Glen Iris; and

5. Jeffrey and Ewart each agreed to pay Iris $250 a month for her personal living expenses, with Iris to continue to reside at Credo Station for as long as she wished.

3 August 1984 - February 1985: the 1984 JG & PD Halford Partnership

43 On 3 August 1984, the business name 'JG & PD Halford' was registered.[58] Jeffrey's explanation was that this change in trading name was due to Ewart leaving the partnership, leaving Jeffrey as the only Halford brother farming Glen Iris.[59]

44 On 21 January 1985, a Westpac Banking Corporation Mortgage C940550 was registered over Glen Iris. Iris executed the mortgage as mortgagor as executrix of the Estate.[60]

45 On 28 February 1985, following ministerial approval of the transfer of Jeffrey's interest in Credo Station to Ewart, Ewart transferred his beneficial interest in Glen Iris to Jeffrey, subject to encumbrances specified in the deed.[61]

46 From about 1984, or at the latest February 1985, Jeffrey and Pamela farmed Glen Iris as partners (the 1984 JG & PD Halford Partnership).[62]

1986 - 1989: early days of the 1984 JG & PD Halford Partnership

47 The judge observed that the early days of the 1984 JG & PD Halford Partnership were difficult. Jeffrey had been granted drought relief in 1984, and between 1986 and 1988, Jeffrey needed to work part‑time for another local farmer.[63]

48 In 1986, Kai made one of the 'accounting enquiries' referred to in his evidence at trial, contacting Bird Cameron, the former accountants to Halford Bros. Kai was advised by the accountants that:[64]

1. he no longer had any financial interest in Halford Bros;

2. he had transferred his shares in the two pastoral companies;

3. he had sold his interests in the Credo Station and Callion Station pastoral leases under a Deed of Family Arrangement; and

is to be held in trust for the benefit of your Mother during her lifetime, and after her death for the benefit of yourself and your two Brothers in equal shares as tenants in common. ... Up till five years ago, being the date in which we were actively involved in the Partnership affairs, this property had been mortgaged to secure advances by Westpac Banking Corporation, Commonwealth Development Bank and The Rural Reconstruction Authority. It may be that at the current moment it is similarly encumbered as security for the partnership borrowings.

... Your Mother is the surviving Executrix of the Estate ..., and if confirmation of your entitlement under the Will of your late Father was necessary, then we suggest that contact be made with your Mother.

50 On 17 March 1986, the Commissioners of the Rural & Industries Bank of Western Australia Mortgage D215666 was registered over Glen Iris. Iris executed the mortgage as mortgagor as executrix of the Estate.[66]

51 On 3 June 1987, the Bank of New South Wales Mortgage A157306 and the Bank of New South Wales Mortgage B652387 were discharged.[67]

52 In 1989, Iris left Kalgoorlie and she and Jeffrey purchased a house in Nugent Street, Esperance, for her to live in. Jeffrey paid the deposit, and the balance was borrowed. The mortgage was discharged in May 1990.[68]

1990: Jeffrey's offer and Kai's counteroffer for Kai's interest in the Estate

53 The judge noted that Jeffrey said that he and Pamela again went through tough times between 1988 and 1990 due to drought, and that in 1990, they were struggling.[69]

54 In 1990, Jeffrey, through his then accountant, approached Kai to ask whether he would consider transferring his interest in the Estate 'in lieu of exercising your right on your Mother's death'. Jeffrey offered consideration of $100,000.[70]

55 Kai responded by offering, 'in view of his apparent financial difficulties', to purchase Jeffrey's share for $200,000. The counteroffer was refused. The judge stated that 'Kai was assured that Jeffrey did not have financial difficulties'.[71]

56 On 18 February 1991, the Rural Reconstruction Authority Mortgage A519325 was discharged.[72]

57 On 19 April 1991, the Commonwealth Development Bank of Australia Mortgage B057172 was discharged.[73]

58 On 12 May 1994, the Commissioners of the Rural & Industries Bank of Western Australia Mortgage D215666 was discharged.[74]

59 In April 1995, Iris was approved by an aged care assessment team for admission to a hostel. She was admitted to the Esperance Community Nursing Home later that year. Iris was only 64 years old, but was a chronic alcoholic.[75] The fee for Iris to enter the hostel was paid from the partnership accounts.[76]

60 Iris had previously received a monthly payment as part of the agreement between Jeffrey and Ewart in 1984. Once Iris received the pension, these monthly payments were no longer made on a regular basis, and Jeffrey and Pamela relied on the pension to meet the cost of Iris staying in a hostel.[77]

61 At this time, Glen Iris was operated by the 1984 JG & PD Halford Partnership and the business was operated for the benefit of the respondents and they paid nothing to the Estate. Iris did not receive income as life tenant but received what Jeffrey described as 'a son that stayed and looked after her until she died'.[78]

62 On 13 May 1999, in her capacity as trustee, and pursuant to her powers under s 7 of the Trustees Act 1962 (WA), Iris executed a Deed of Appointment appointing Jeffrey as an additional trustee of the Testamentary Trust.[79] From then until Iris' death, Iris and Jeffrey were joint trustees of the Testamentary Trust. At the same time, Iris appointed Jeffrey as her attorney, though the power of attorney was never used.[80]

63 In 2001, it appeared that Iris would no longer be able to receive a full pension from Centrelink. This affected the extent to which her hostel fees would be subsidised. In the primary proceedings, the respondents said that they could not afford to pay hostel fees and living expenses for Iris, and were desperate. The trial judge regarded this evidence as exaggerated, if not false. The respondents approached Centrelink (including through a solicitor) and wrote to their local member of parliament, seeking to have the Centrelink decision changed. Pamela wrote, in particular, that the debts secured against Glen Iris would significantly reduce Iris' net asset position. Eventually, Iris' pension was reinstated.[81] The trial judge said that the respondents' conduct demonstrated a willingness to put their financial interests ahead of other considerations, including Jeffrey's obligation as trustee.[82]

64 On 2 August 2005, an Elders Rural Bank Limited Mortgage J382034 was registered over Glen Iris. The mortgage was executed by Iris and Jeffrey as mortgagors.[83]

65 On 19 May 2006, the Westpac Banking Corporation Mortgage C940550 was discharged.[84]

66 In 2007, Jeffrey and Pamela's son, Blake, left the army and returned to Esperance to work on Glen Iris.[85]

67 On 18 December 2009, Bankwest wrote a letter offering facilities 'for the takeover of the Elders debts'.[86]

68 On 21 December 2009, Bankwest offered loan facilities to the 1984 JG & PD Halford Partnership totalling $2.1 million.[87]

69 The Elders Account was cleared in February 2010, with refinancing from Bankwest.[88] On 21 January 2010, Bankwest Mortgage L226573 was registered over Glen Iris. The mortgage was executed by Iris and Jeffrey as mortgagors.[89]

70 On 23 March 2010, Iris and Jeffrey signed a joint statutory declaration, witnessed by Jeffrey's daughter Sheree, confirming that the mortgage was given for a purpose set out in cl 3(c) of Maurice's will.[90] Jeffrey and Iris made similar statutory declarations, before other witnesses, in 2005 and April 2010.[91]

71 On 27 April 2010, Bankwest provided a letter of variation, by which the facilities to the 1984 JG & PD Halford Partnership were restructured.[92]

72 Iris was the guarantor for each facility. Each provided for the guarantor to acknowledge that she had obtained independent financial and legal advice regarding her obligations. Iris did not, at any time, obtain independent advice.[93]

73 On 30 April 2010, Bankwest Mortgage L311490 was registered over Glen Iris. The mortgage was executed by Iris and Jeffrey as mortgagors.[94]

74 The two Bankwest mortgages registered in 2010, mortgages L226573 and L311490 (Bankwest Mortgages), were both in place when Glen Iris was sold in 2016.[95]

75 The Bankwest Mortgages were security for facilities provided by Bankwest to the respondents, trading as the 1984 JG & PD Halford Partnership, as borrowers.[96]

76 On 11 May 2010, Bankwest disbursed $2 million to Jeffrey and Pamela's Bankwest Agrione account pursuant to two fixed interest commercial loans. The terms included interest only repayments.[97]

77 Each Bankwest Mortgage provided that, for the purpose of securing to the Bank the payment of the Secured Money the Mortgagor mortgaged to the Bank:[98]

(a) all the Mortgagor's estate and interest described in this mortgage in the land described in this mortgage; and

(b) each fixed structure, or improvement on the land or fixed to it; and

(c) any growing or mature crops on the land[.]

78 Clause 4.6 of the Common Provisions provided for a mortgagor who entered into the mortgage as trustee of a trust, to give undertakings that the Mortgagor:[99]

(a) (mortgage binding) acknowledges that this mortgage is binding on it personally and in its capacity as trustee of the Trust;

(b) (legal and beneficial interest charged) in giving this mortgage, charges the whole of the legal and beneficial interest in the Secured Property;

(d) (right of indemnity) upon the occurrence of an Event of Default and on demand by the Bank, shall exercise the Mortgagors' rights of indemnity in relation to the Trust Fund and its rights against the beneficiaries of the Trust to cause payment of the Secured Money to the Bank or otherwise hold such rights for the Bank;

(e) (no conflict of interest) acknowledges that the giving of this mortgage does not constitute a conflict of interest by the Mortgagor nor does the giving of this mortgage constitute a breach of the terms of the Trust;

(o) (no distribution) the Mortgagor will not make any distribution of:

(i) the capital of the Trust;

(ii) the income of the Trust if an Event of Default has occurred. (italics emphasis added)

2011 - June 2014: variations to Bankwest facilities

79 On 14 April 2011, Bankwest sent a second letter of variation increasing the overall facility limit by $100,000 by an increase in the Existing Agrione Overdraft Facility.[100]

80 On 2 May 2013, Bankwest sent another letter of variation, adding a Temporary Agrione Overdraft Facility with a facility limit of $200,000.[101]

81 On 6 August 2013, Bankwest sent a further variation letter.[102]

82 On 21 May 2014, the facility was again restructured.[103]

83 On 25 June 2014, Bankwest disbursed $2,976,886.95 into accounts of the 1984 JG & PD Halford Partnership, which were used to refinance existing facilities.[104]

84 On 1 September 2014, Iris died.[105] The judge noted that, whilst Iris' death certificate recorded 'Dementia (10 years)' as a contributing cause of death, Jeffrey disputed the correctness of this. The judge observed that there was no direct evidence about Iris' mental capacity.[106]

85 Iris' death left Jeffrey as the sole trustee of the Testamentary Trust. Jeffrey subsequently caused Glen Iris, by transmission, to be registered in his name.[107]

86 The judge noted that Kai was told of his mother's death by Ewart's wife. Within a couple of weeks, Kai saw an advertisement on the internet for the sale of Glen Iris. Kai sought legal advice and representation from the firm of Durack & Zilko, resulting in a caveat being lodged over each of the Glen Iris properties.[108]

87 The judge also noted that Kai said he did not know that Jeffrey had been appointed as trustee until September 2014, when he received Landgate documents that listed Jeffrey as an additional trustee.[109]

Mid-2015: further variations to Bankwest facilities

88 On 24 April 2015, there was a further variation of facilities, in effect consolidating the Commercial Advance Facility and the Fixed Rate Loan into a single Commercial Advance Facility of $2.5 million.[110]

89 On 10 July 2015, an Agrione Overdraft Facility of $120,000 was added to the overall facility.[111]

90 On 25 September 2015, Jeffrey, acting in his capacity as trustee of the Testamentary Trust, entered into two contracts for the sale of the Glen Iris properties for the total sale price of $4,800,000.[112]

91 Kai was told in December 2015 that Jeffrey had entered into the contracts, and that settlement was to take place on or before 15 February 2016. Kai's solicitors corresponded with Jeffrey's solicitors, Pacer Legal, in relation to arrangements for the caveats to be removed at settlement.[113]

92 Kai claimed that he was only informed on 10 February 2016, by a letter from Pacer Legal to his solicitors, Durack & Zilko, that there were bank loans secured over Glen Iris totalling approximately $3.06 million.[114]

93 Jeffrey's solicitors, Pacer Legal, advised Kai that Jeffrey was agreeable to Kai attending settlement to collect his cheque 'for 1/3 of the sale proceeds after the discharge of encumbrances and associated settlement fees in exchange for the withdrawal of caveat'. Pacer Legal also said that Jeffrey required a deed of release, and enclosed a draft deed.[115] In the primary proceedings, the judge rejected a submission by counsel for Kai that the deed of release was 'improperly sought' and showed a conscious awareness by Jeffrey that he had acted in breach of trust. The judge held that Kai and Jeffrey had been estranged for such a long time that 'the conduct of his solicitors in asking for a release is equally characterised as prudent'.[116]

94 On 15 February 2016, Jeffrey (in his capacity as trustee of the Testamentary Trust) sold Glen Iris, the remaining asset of the Estate. The net proceeds were $4,625,912.83.[117] The judge stated that, at the time of the sale, Jeffrey (in his personal capacity) was entitled to two‑thirds of Maurice's residuary estate, and Kai was entitled to one‑third.[118]

95 As at 15 February 2016, the Bankwest Mortgages remained undischarged. Both mortgages were 'all moneys' mortgages, securing all the liabilities of the Mortgagor to the Bank under or by reason of any transaction, matter or event.[119]

96 At settlement, Bankwest received the amounts of $3,017,859.62 and $201,463.40 to remove limits on and discharge the liabilities under four accounts or facilities held by the 1984 JG & PD Halford Partnership and secured by the Bankwest Mortgages.[120]

97 A liability of $6354.76 on a credit card was also discharged.[121]

98 The total sum secured by the Bankwest Mortgages and discharged by the net proceeds of the settlement of Glen Iris was $3,225,677.78.[122] By agreement between the parties, the remaining balance of the net proceeds was held in an interest‑bearing trust account pending determination of the parties' beneficial interests in those monies.[123]

99 The judge's findings included findings to the following effect.

100 Maurice's will did not require the trustees to sell, call in and convert the assets of the Estate into money as soon as practicable after payment of debts, duties and expenses, and, in particular, the trustees were not obliged to retain Glen Iris no longer than was necessary to permit its prudent realisation. Rather, the trustees were given the power to carry on any business in which Maurice may have been interested at the time of his death, and to retain and employ capital for that purpose.[124]

101 The trustee, Iris, was authorised under the Testamentary Trust to participate in the 1966 Partnership, which farmed Glen Iris and remained in existence in the period from 3 January 1966 ‑ 30 April 1980.[125]

102 For approximately 14 years, Kai, as a member of the 1966 Partnership, participated in running the farming business.[126]

103 Mortgages were granted over Glen Iris, after the death of Maurice, as summarised in the following table, in the period of the operation of the 1966 Partnership.[127]

Mortgages 1969 - 1979 (entered into by the 1966 partnership)

104 Mortgages were granted over Glen Iris in the period in which the 1984 JG & PD Halford Partnership farmed Glen Iris, as set out in the following table.[128]

Mortgages 1985 - 2010 (entered into to secure borrowings of the 1984 JG & PD Halford Partnership)

Iris as executrix of Estate of Maurice, and Jeffrey

Iris as executrix of Estate of Maurice, and Jeffrey

Iris as executrix of Estate of Maurice, and Jeffrey

105 In relation to the 1984 JG & PD Halford Partnership:

1. The business carried on by this partnership was not a business carried on by the estate and could not properly be regarded as a business that Maurice owned or was interested in at the time of his death.[129]

2. This partnership farmed Glen Iris from 1984, or, at the latest, February 1985.[130]

3. Iris consented to, or acquiesced in, Jeffrey and Pamela farming Glen Iris via this partnership.[131]

4. Jeffrey and Pamela built up significant personal wealth, including shares and real property, from this partnership.[132]

5. In the period of its operation, from around 1984/1985 ‑ 2016, this partnership paid no rent or other money to the trustee for the occupation of Glen Iris for the conduct of the farming operations.[133]

6. Throughout the period of the operation of this partnership, Iris did not receive any income as a life tenant.[134]

7. Iris, as trustee, used Glen Iris as security for money borrowed by this partnership.[135]

106 The market value of Glen Iris, with vacant possession, was as follows:[136]

1. As at 14 June 1984 (when the 1984 JG & PD Halford Partnership commenced), $700,000, with $645,000 notionally apportioned to land and land improvements, and $55,000 to fixed farm improvements (including buildings, integral plant and equipment).

2. As at 13 May 1999 (when Jeffrey was appointed co‑trustee), $1,330,000, with $1,220,000 notionally apportioned to land and land improvements, and $110,000 to fixed farm improvements.

3. As at 30 April 2010 (when Glen Iris was mortgaged to Bankwest), $4,365,000, with $4,155,000 notionally apportioned to land and land improvements, and $210,000 to fixed farm improvements.

107 The farming and maintenance of Glen Iris by Jeffrey and Pamela since 1984 were important in contributing to the Glen Iris land holding its market value. But there was no evidence that the farming of Glen Iris resulted in an increase in the value of the land.[137]

108 On its proper construction of the Testamentary Trust, the borrowing power conferred on the trustee under cl 3(c) was for the purposes of:[138]

1. paying and discharging the liabilities of the trustee of the Testamentary Trust of and incidental to the carrying on of any business of Maurice and the Estate; and

2. paying and discharging the liability of the trustee of the Testamentary Trust of and incidental to any partnership in which Maurice was, or may, have been interested at the date of his death.

109 The power to mortgage, in cl 3(d) of the Testamentary Trust, was, on its proper construction, limited to the purpose of securing the due payment of any moneys so borrowed by the trustee.[139]

110 The mortgages over Glen Iris, executed by Iris, in the period 1985 ‑ 1999, and by Iris and Jeffrey, in the period 1999 ‑ 2010 (including the Bankwest Mortgages):[140]

1. secured personal borrowings by Jeffrey and Pamela in relation to the operation of the 1984 JG & PD Halford Partnership; and

2. were thereby mortgages granted contrary to the terms of the Testamentary Trust.

1. The Westpac Mortgage of 1985 was granted by Iris in breach of the Testamentary Trust.

2. The Rural & Industries Bank of WA Mortgage of 1986 was granted by Iris in breach of the Testamentary Trust.

3. The Elders Mortgage of 2005 (which was replaced by the Bankwest Mortgages) was granted by Iris and Jeffrey in breach of the Testamentary Trust.

4. The Bankwest Mortgages of 2010 were granted by Iris and Jeffrey in breach of the Testamentary Trust.

112 As Jeffrey and Pamela were personally liable for the debts incurred over the course of the 1984 JG & PD Halford Partnership, Jeffrey had no entitlement to an indemnity as trustee out of the trust assets (Glen Iris) for the repayment of such debts.[141]

113 The judge was not satisfied that there was a limitation issue insofar as Kai's claim related to an alleged breach in failing to pay Kai his proper share of the sale proceeds when the Bankwest Mortgage was discharged in 2016.[142] (There is no finding with respect to any limitation question on the assumption that the relevant breach occurred, as his Honour found, when the Bankwest Mortgages were entered into in 2010.)

114 In relation to Jeffrey's estoppel plea that he was induced to assume that Kai did not object to Glen Iris being used as security for the borrowing of funds for the farming operations:[143]

1. Jeffrey had no relevant expectation or assumption;

2. to the extent that he had any expectation or assumption, it was not as a result of anything said or done by Kai; and

3. Jeffrey and Pamela did not rely on any pleaded assumption.[144]

115 Amongst other things, the judge said:[145]

[Jeffrey and Pamela] allege no direct representation by Kai. There was no direct contact between Jeffrey and Kai from about 1982. Kai's letter to Mr Ball in April 1984 shows that Kai knew or suspected that Jeffrey was borrowing against Glen Iris. But Jeffrey was not aware of that letter.

[Jeffrey and Pamela] rely on the fact that Kai did not indicate that he 'had an issue' with what Jeffrey was doing. That must be considered in the context of Kai's knowledge when he left in 1980 and his complete estrangement from his family. Kai's conduct could reasonably have led [Jeffrey and Pamela] to assume that he knew that Glen Iris continued to be farmed, and that they were farming it. It is not a sufficient basis for Jeffrey to assume that Kai did not object to Glen Iris being used to secure personal borrowings.

... Jeffrey does not assert that he believed he was the beneficial owner of Glen Iris and could deal with it as his own. He does not deny that he knew of Kai's right to one third of the estate on the death of Iris.

Finally, [Jeffrey and Pamela] must show that Kai knew that they were relying on the pleaded assumption from his failure to object. They had no direct contact with him - apart from the limited correspondence in the 1980s. Kai's knowledge of how Glen Iris was being operated was scant. I accept that he had a long standing distrust of Jeffrey, but that is not a substitute for knowledge of the relevant facts. I am not satisfied that the relevant knowledge has been shown. (footnotes omitted) (emphasis added)

116 On the topic of laches, and with respect to delay, the judge found, in substance, that:[146]

1. from the time that Kai left the 1966 Partnership in 1980, he (i) 'would have known' that (ii) 'the practice' of borrowing against Glen Iris and mortgaging it, (iii) 'would continue';

2. Kai knew that Jeffrey was farming Glen Iris from about 1984;

3. Kai did nothing to 'enquire' about Glen Iris in the period after 1984;

4. Kai did nothing to 'assert his rights' in the period after 1984; and

5. Kai's delay in not enquiring or asserting his rights after 1984 was 'gross'.

117 Kai's evidence was that (1) he believed that he had 'no say' in the property until after Iris died, and (2) any borrowing could not be made 'against his share'.[147] The judge made no findings of fact as to Kai's understanding and belief in the period of Iris' life estate, but said that if he believed that his 'share' could not be mortgaged, then he was wrong in law.[148]

118 In relation to prejudice from the delay, the judge said:[149]

One of the possible consequences of delay is the potential loss of evidence. In considering an account of profits since 1980 when Kai left the farm (as in Kai's alternative claim), the potential loss of evidence could be important. (footnotes omitted)

In considering Kai's primary claim, it is tempting to look at the position in 2014, when Iris died, and the level of borrowing then against the value of Glen Iris. [Kai] points to the drawings made in the last years of the [1984 JG & PD Halford Partnership], and the assets accumulated in the previous decade. That, however, is a distorted picture. The level of borrowing was a consequence of repeated refinance over a prolonged period. The borrowing over that period must be assessed against the expenditure on Glen Iris from when Kai left the [1966 Partnership].

There are other potential sources of prejudice. Meagher Gummow and Lehane's Equity: Doctrines and Remedies (5th ed) at [38-025], refer relevantly, to:

(1) the impossibility of granting equitable relief on just terms; and

(2) where a plaintiff seeks to recover profits, but has knowingly stood by while the defendant was making profits.

In the present case, while [Jeffrey and Pamela] have profited from operating Glen Iris, they have done so at their risk, and by their labour. It is true that [Jeffrey and Pamela] profited, and were able to build up off‑farm assets. That was from a lifetime of work. [Jeffrey and Pamela] stood to lose everything should Glen Iris fail. After 1980, Kai contributed nothing and risked nothing.

It is relevant, in considering the equity between Kai and [Jeffrey and Pamela], that Iris, who was the trustee and life tenant, acquiesced in [Jeffrey and Pamela] operating Glen Iris. Kai has criticised the extent to which [Jeffrey and Pamela] operated Glen Iris for their own benefit, rather than for Iris. But there is no evidence that she ever had needs that were not met. More importantly, there is no evidence that her wishes regarding the operation of Glen Iris were not followed.

Having regard to the length of the delay, during which Kai did nothing to either assert his rights, or even to enquire about Glen Iris, and having regard to the nature of the enterprise in which [Jeffrey and Pamela] were engaged, I am not satisfied that making the orders sought by Kai would be just.

On the basis of the gross delay, I would dismiss the primary claim. (emphasis added)

120 Thus, ultimately, the prejudice identified by the judge as arising from the 'gross delay' was that during the period after 1984, when Kai was not making enquiries and not asserting his rights, Jeffrey (and Pamela) farmed Glen Iris, which involved a lifetime of work in the pursuit of a risky business enterprise.

121 There are four grounds of appeal. They fall into two broad categories. First, it is alleged (ground 1) that the judge failed to deal with what Kai describes as his 'Primary Breach' claim - his claim that the relevant breach of trust occurred on the sale of Glen Iris in 2016 when Jeffrey 'utilised' the proceeds of sale to discharge his and Pamela's personal liabilities in respect of the 1984 JG & PD Halford Partnership.

122 Secondly, it is alleged (grounds 2 ‑ 4), relevantly in effect, that even if the relevant breach was the grant of the Bankwest Mortgages in 2010, the judge erred in finding that laches precluded Kai's claim to one‑third of the trust property (Glen Iris) without reduction on account of the mortgage debt on the land, which Jeffrey and Pamela had incurred for the purposes of their partnership.

123 In relation to Kai's first contention, Jeffrey submitted[151] that there was no separate or independent breach of trust at the time that the Bankwest debt was discharged from the sale of Glen Iris in 2016. Rather, the relevant breach, as found by the judge, was in the grant of the Bankwest Mortgages in 2010.

124 In relation to Kai's second contention, Jeffrey submitted, in effect, that the judge was correct for the reasons he gave. In particular, Jeffrey submitted that there was no error in the judge's findings that (1) the delay was 'gross' in circumstances where Kai had not made enquiries or made a claim in the years after 1984 until around 2015, and (2) in the meantime, Jeffrey had suffered significant prejudice in having undertaken the farming of Glen Iris, which involved a lifetime of work in the pursuit of a risky business enterprise.

125 Jeffrey and Pamela also submitted that had they not farmed Glen Iris from 1984 to 2016, 'it is speculative whether [Kai's] one‑third interest in the net proceeds of sale of the asset, whenever such sale may have taken place, would have been any more favourable to [Kai] than the funds he has in fact received'.[152] In a similar vein, Jeffrey and Pamela also submitted, albeit initially in respect of the notice of contention but also evidently as part of their broader response to the appeal, that it 'was uncontroversial that the value of [Glen Iris] unfarmed would have been lower'.

126 By way of notice of contention, Jeffrey and Pamela contended that:

1. The judge erred in fact and in law in finding that 'the whole of the borrowing[s] secured against [Glen Iris] was used by [Jeffrey and Pamela] for personal purposes', in that:

(a) part of that liability was incurred prior to 1984 and 'should have been excluded in determining what part of the net proceeds of sale of [Glen Iris] were used for [Jeffrey's and Pamela's] personal purposes';

(b) liabilities incurred between 1984 and 1999 were incurred at times when Jeffrey was not trustee, ie, not an accounting party, and the relevant funds were not used by a trustee for personal purposes and 'should have been excluded in determining what part of the net proceeds of sale of [Glen Iris] were used for [Jeffrey's and Pamela's] personal purposes';

(c) a significant part of the liabilities incurred between 1999 and 2016 was used with respect to Glen Iris and not for personal purposes, and thereby 'should have been excluded in determining what part of the net proceeds of sale of [Glen Iris] were used for [Jeffrey's and Pamela's] personal purposes'; and

(d) the onus of establishing whether all, or if not all what part, of the net proceeds of sale of Glen Iris were used by Jeffrey and Pamela for personal purposes was on Kai, and Kai failed to discharge that onus.

2. The judge ought to have found that Kai failed to prove the 'Primary Breach', in that Kai failed to prove that all of the net proceeds of sale of Glen Iris were used for the personal purposes of Jeffrey and Pamela. Nor did Kai prove what lesser part (if any) of such assets were used for such personal purposes.

127 A third ground of the notice of contention was abandoned by Jeffrey and Pamela.

128 Jeffrey and Pamela submitted that as at 1984, there was an extant mortgage liability in the sum of $72,834. They submitted that they are entitled to deduct that sum from the proceeds of sale.

129 With respect to the period 1984 to 1999, Jeffrey and Pamela contended that in the absence of a knowing receipt claim (which was abandoned on the filing of the further re‑amended statement of claim on 23 December 2019), there could be no breach of trust by Iris prior to 1999, and it would be inequitable to attribute to Jeffrey, personally, any liability incurred pursuant to Iris' conduct as trustee. The value of Glen Iris at the time of Jeffrey's appointment was $1,330,000 and the extant mortgage liability at the time was $140,000.

130 With respect to the period after 1999, Jeffrey and Pamela submitted (as noted earlier) that without the farming of Glen Iris, its value would have been lower.

131 As a general matter, Jeffrey and Pamela submitted that the judge should have found that the onus was on Kai to establish whether, and to what extent, the sale proceeds of Glen Iris were used for the personal purposes of Jeffrey and Pamela, and that Kai had failed to discharge that onus.

132 Generally speaking, the duties of a trustee under the general law include duties:

1. to become thoroughly acquainted with the terms of the trust and to know exactly what the trustee is required to do with the trust property;[153]

2. to adhere to and perform the terms of the trust - 'perhaps the most important duty of a trustee';[154]

3. not to abuse his or her position by making it a means of profit or benefit personally to the trustee or to any third party;[155] and

4. to exercise the same care and skill in the management of the business of the trust that an ordinary prudent person of business would exercise in conducting that business if it were the trustee's own business.[156]

133 In relation to the last‑mentioned duty, it is not to the point for the trustees to say that they were only dealing with the trust property in a manner previously undertaken by the testator (or settlor). That is because, the testator, with beneficial ownership, could deal with the property as he or she pleased, whereas the trustee is bound to deal with the trust property for the benefit of the beneficiaries in such manner as 'is prudent and right'.[157]

134 Where a trustee has made a profit from a breach of trust, the beneficiary may recover the profit.[158] In that event, it is necessary to determine, as accurately as possible, the true measure of the profit or benefit obtained by the trustee in breach of his or her duty.[159]

135 If the loss suffered by the plaintiff exceeds the profits made by the fiduciary, the plaintiff may elect to have a compensatory remedy against the fiduciary, and that election will bind the plaintiff.[160]

136 In Target Holdings Ltd v Redferns (a firm),[161] Lord Browne‑Wilkinson said:

The equitable rules of compensation for breach of trust have been largely developed in relation to ... traditional trusts, where the only way in which all the beneficiaries' rights can be protected is to restore to the trust fund what ought to be there. In such a case the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss. Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee to restore the trust estate[.]

137 Thus, generally speaking, the obligation of a defaulting trustee is essentially one of effecting a restitution of the trust estate. The trustee is to place the trust estate in the same position as it would have been if no breach had been committed.[162]

138 In a case such as this, where the trustee has mortgaged the trust property in breach of trust, the fact that there is an accrued cause of action as soon as the breach is committed does not mean that the quantum of the compensation payable for breach of trust is ultimately fixed as at the date when the breach occurred.[163] Thus, if, at or prior to the sale of the trust property, the trustee in this situation were (1) to make good the trust estate by discharging the mortgage from his or her personal resources, and (2) account for any profit earned or benefit gained from the grant of the mortgage in breach of trust, the remainderman would have no remedy against the trustee for the anterior breach of trust.[164]

139 Prior to the enactment of the Trustee Act 1888 (UK) (1888 UK Act), no statutory time bar applied to a claim by a beneficiary against a trustee. The practice of equity was to apply statutory limitation periods by analogy to equitable claims, in addition to having its own doctrines of laches and acquiescence. However, by way of exception, statutory limitation periods were not applied even by analogy to claims by a beneficiary against a trustee for breach of trust. Trustees were accountable to their beneficiaries without a limitation of time.[165]

140 Insofar as equity applies a statutory limitation period by analogy, it provides an illustration of the maxim that equity follows the law. In Knox v Gye,[166] Lord Westbury said:

For where the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limiting point of time by the Statute of Limitations, a Court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation ...

Where a Court of Equity frames its remedy upon the basis of the Common Law, and supplements the Common Law by extending the remedy to parties who cannot have an action at Common Law, there the Court of Equity acts in analogy to the statute; that is, it adopts the statute as the rule of procedure regulating the remedy it affords.

141 Where the question is whether equity, in its exclusive jurisdiction, would apply a limitation period by analogy, the equitable rule is that the analogous limitation period applies except where there exists a ground which would make it unconscionable for the defendant to rely on the statute. The defence of laches is not such a ground.[167]

142 An account of profits, and equitable compensation, like other equitable remedies, may be defeated by equitable defences such as estoppel, laches and acquiescence.[168] Laches is a defence and the defendant has the onus of proof.[169]

143 The difference between a defence of laches and an estoppel in pais was referred to by the Privy Council (Viscount Radcliffe, Lord Hodson and Lord Pearce) in Nwakobi v Nzekwu,[170] in the following terms:

Laches involves essentially a personal disqualification on the part of a particular plaintiff: it cannot be treated as a stigma on the title to land which, once impressed, necessarily descends with the title and affects all succeeding owners. In this it is to be distinguished from a defence such as estoppel in pais which, given the words or acts upon which a defendant has relied and altered his position, bars the remedy from that time on, both in the hands of the original actor and in the hands of those who claim title through him.

Laches is not like this. It does not bite at an identifiable moment of time and it can be relied on only when account has been taken of all the circumstances that affect both the immediate plaintiff and the immediate defendant.

144 A distinction has been drawn between circumstances where a specific asset is acquired in breach of fiduciary duty and where a business is acquired and operated in breach of fiduciary duty. In the latter case, the plaintiff's equitable claim must be prosecuted promptly, as, generally speaking, in those circumstances a plaintiff may not stand by and permit the defendant to make profits and then claim entitlement to those profits.[171]

145 In Fysh v Page,[172] Dixon CJ, Webb and Kitto JJ said:

If a plaintiff establishes prima‑facie grounds for relief the question whether he is defeated by delay must itself be governed by the kind of considerations upon which the principles of equity proceed. If the delay means that to grant relief would place the party whose title might otherwise be voidable on equitable grounds in an unreasonable situation, or if, because of change of circumstances, it would give the party claiming relief an unjust advantage or would impose an unfair prejudice on the opposite party, these are matters which may suffice to answer the prima‑facie grounds for relief. See Lindsay Petroleum Co v Hurd and the observation in Lord Blackburn's speech in Erlanger v New Sombrero Phosphate Co.

146 The equitable doctrine of laches comprehends two themes: one is delay implying not just quiescence, but, rather, acquiescence and assent, and the other is delay involving prejudicial change of circumstances.[173] In the former sense, involving acquiescence, the plaintiff's conduct may fairly be regarded as equivalent to the waiver of his or her remedy or right,[174] or the release of the claim in equity.[175] There is force in the suggestion, with respect, that greater clarity of exposition might be served by confining the term 'laches' to the latter sense.[176]

147 The term 'acquiescence' itself has been used in at least two senses. The first is where the plaintiff has stood by whilst his or her right is being violated by the defendant and made no objection whilst the defendant's act is in progress, with the result that the plaintiff is taken to have abandoned the right or is estopped from asserting it.[177] Acquiescence in this context may be understood as requiring calculated (that is, deliberate and informed) inaction by the beneficiary standing by, which encouraged the trustee reasonably to believe that the trustee's omissions were accepted and not opposed by the beneficiary.[178] The second is where an equitable right has been violated and subsequently the plaintiff, after this violation has been brought to his or her knowledge, takes no steps for some time to remedy it - in which case, the lapse of time without bringing proceedings may allow an inference of waiver to be drawn.[179]

148 In the present case, the learned trial judge found, in effect, that there was no acquiescence of any kind. Rather, his Honour found laches in the sense of delay coupled with prejudice to the defendants. In Byrnes, Gummow and Hayne JJ said that where laches is presented in answer to a claim for breach of an express trust such as the one in that case:[180]

[T]he defence would require aggravating circumstances such that the granting of the relief sought by the beneficiary would 'give rise to serious and unfair prejudice to the defendant ...'[.]

149 Their Honours in this regard also referred to the observations of Deane J in Orr, where his Honour said:[181]

Ordinarily, it is difficult to envisage circumstances, falling short of waiver, release, election or estoppel, in which the laches of the beneficiary would produce a situation in which it was inequitable and unreasonable to grant relief in proceedings for the enforcement of an express trust in relation to trust property which remained in the possession of the trustee (or his personal representative).

150 Deane J in Orr referred to two categories of case where that is not so. One is where there is, or has been, a dispute about the existence of the trust or the identity or extent of the trust property - in which case, unreasonable delay in instituting proceedings might give rise to serious and unfair prejudice in that it may bring about a situation in which the defendant's means of resisting the claim, if it be unfounded, have perished. The second is where there is prejudice to third parties, such as other beneficiaries. His Honour observed that the two categories of case are not necessarily mutually exclusive.[182]

151 To somewhat similar effect, in Patel v Singh,[183] Mummery LJ (Keene LJ & Sullivan J agreeing) observed that in the case of an ordinary express trust, it would be 'extremely rare for laches and delay on the part of the beneficiary to make it unconscionable for that beneficiary to assert his claim to the beneficial interest, or for the trustee to claim that he has been released from the equitable obligations that bind his conscience'.

152 Whilst the plaintiff's knowledge of his or her rights may not in all cases be an essential ingredient in the establishment of a defence of laches involving delay coupled with prejudice,[184] the presence or absence of such knowledge is nevertheless a factor to which regard may be had in the assessment of all the circumstances. 'Ordinarily', what is required is that the plaintiff had sufficient knowledge of the facts and his or her rights to justify the commencement of proceedings at some earlier time.[185] Ultimately, however, the question is whether equity would regard it to be 'practically unjust', to give relief 'which would otherwise be just'.[186]

153 In this context, delay is the period of time beyond that within which, 'in ordinary expectation', the act in question should have been done.[187]

154 In determining what constitutes unreasonable delay, regard must be had to all the circumstances, including the nature of the claim and the conduct of the parties.[188] The degree of knowledge, the type of transaction and the prejudice to the defendant caused by the delay are all matters which need to be evaluated when assessing whether a defence of laches has been made out. It is 'an unrewarding task' to search for some formula as to just what degree of knowledge must exist in any particular case.[189]

155 The appropriate starting point for a consideration of the defence of laches is the precise identification of the plaintiff's claim to which laches is said to constitute a bar.[190] The significance of identifying the precise nature of the claim is illustrated by In re Jarvis. In that case, the plaintiff beneficiary sued the defendant trustee for effectively (1) one half‑share of the trust estate (a leasehold which the trustee had, in effect, taken for her own benefit, rather than for the benefit of the trust estate), and (2) an account of profits of the business which the defendant trustee carried on from the leasehold premises which belonged to the trust estate. There was no suggestion that the former claim, effectively as to one half‑share of the trust estate, was barred by laches. The latter claim, was, however, of a different character, and was barred by laches. Upjohn J said:[191]

The second question is as to the position with regard to the business carried on by the defendant [at the trust estate premises]. ... In this case, where the defendant reincarnated the testator's own business on the same premises as formerly and obtained supplies, so far as she was able, from the suppliers of the former business, I think that ... subject to laches, acquiescence and delay, the defendant is accountable as constructive trustee of the business opened by her at [the trust estate premises] in 1944, subject to all just allowances for her own time, energy and skill, for the assets she has contributed, and the debts of the testator which she has paid, and for her mother's annuity.

Then as to laches, acquiescence and delay for six years before the issue of the writ, the plaintiff has stood by and observed her sister running the business, incurring debts and liabilities, paying her mother [an annuity], and in 1948 transferring assets and business...

...

The plaintiff is seeking to say that the defendant has been a trustee for her of one moiety of this highly successful business, although she has never been at risk for one penny. ... [I]n this realm of law each case depends so much on its own facts ... I do not overlook the circumstance that the plaintiff has said she could not afford a solicitor; but I have to try to do justice to both sides. In my judgment, on the whole of the circumstances of this case, in relation to the business the plaintiff by waiting until 1951, has not been sufficiently prompt in seeking her remedy, and this part of the action fails.

156 It is evident that in the present case the subject of this appeal, Kai's claim is of the former kind, rather than the latter kind. Kai's claim is for the value of his share of Glen Iris, not for an account of the profits of the 1984 JG & PD Halford Partnership obtained from the benefit of the Bankwest Mortgages granted in breach of trust.

157 A remainderman whose interest is not vested in possession may acquiesce in the breach of an express trust, but where the trust is definite and clear, the remainderman cannot be said to have acquiesced in the breach by mere knowledge of it and non‑interference before his or her interest has come into possession. In Life Association of Scotland v Siddal,[192] Turner LJ (Lord Campbell LC & Bruce Knight LJ agreeing) said:

A cestui que trust whose interest is reversionary is not bound to assert his title until it comes into possession, but the mere circumstance that he is not bound to assert his title does not seem to me to bear upon the question of his assent to a breach of trust. He is not, so far as I can see, less capable of giving such assent when his interest is in reversion than when it is in possession. Whether he has done so or not is a question to be determined on the facts of each particular case. ... It is the duty of the trustee to observe the trust and to preserve the property for the benefit of those entitled in remainder, and I am not prepared to hold that he can be permitted to escape from the liability incident to that duty by simply informing the cestui que trust that he has committed or intends to commit a breach of it. He cannot, as I apprehend, where the trust is clear, throw upon the cestui que trust the obligation of telling him what his duty is, and of cautioning him to observe it, thus involving the cestui que trust in the burthen and expense of those duties which he has undertaken himself to perform. ... I am not prepared to say that where the trust is definite and clear a breach of trust can be held to have been sanctioned or concurred in by the mere knowledge and non‑interference on the part of the cestui que trust before his interest has come into possession. The case of March v Russell (3 M & C 31), seems to me to be a strong authority against such a proposition. I need hardly add, that in cases in which the cestui que trust has encouraged the trustee to commit the breach of trust he must of course be bound by it, nor need I add that the observations which I have made are meant to apply to cases of express trust, and not to affect the question how far, if at all, they may apply to constructive trusts.

Another question which arises in cases of this description is, what amounts to acquiescence. Acquiescence, as I conceive, imports knowledge, for I do not see how a man can be said to have acquiesced in what he did not know, and in cases of this sort I think that acquiescence imports full knowledge, for I take the rule to be quite settled that a cestui que trust cannot be bound by acquiescence unless he has been fully informed of his rights and of all the material facts and circumstances of the case. (emphasis added)

158 In a similar vein, in Roberts v Tunstall,[193] the Vice‑Chancellor (Sir James Wigram) accepted that the passage of time, for the purposes of laches, would not include in that case the period prior to the beneficiary's interest coming into possession. However, his Lordship said, this earlier period was not to be 'wholly disregarded' in considering the delay in commencing proceedings after that point in time (in that case, the further period being approximately 15 years).[194]

159 Roberts was decided prior to the 1888 UK Act. Section 8(1)(a) of the 1888 UK Act provided, in general terms, that in any action against a trustee (except where the claim was founded upon fraud or fraudulent breach of trust to which the trustee was party or privity, or to recover trust property or its proceeds still retained by the trustee or previously received by the trustee and converted to his use), the trustee enjoyed all the rights and privileges conferred by any statute of limitations in like manner and to like extent as he would have enjoyed if he had not been a trustee. Section 8(1)(b) provided, however, that time:

shall not begin to run against any beneficiary unless and until the interest of such beneficiary shall be an interest in possession.

160 This proviso was reflected in s 47(1)(b) of the Limitation Act 1935 (WA) (1935 WA Act). It also appears in s 62 of the Limitation Act 2005 (WA), being the relevant limitation statute potentially applicable to Jeffrey's breach of trust in granting the Bankwest Mortgages in 2010:

A cause of action of a beneficiary relating to a future interest in trust property accrues when the beneficiary becomes entitled to immediate possession of the property.

161 Section 3(1) of the Limitation Act 2005 defines 'future interest' as:

future interest means an estate in reversion or remainder or other vested or contingent interest in property which is yet to entitle immediate possession of the property[.]

162 In in de Braekt v Powell,[195] Buss JA (as his Honour then was) said, with respect to the proviso in s 47(1)(b) of the 1935 WA Act:[196]

[A]lthough, in general, a beneficiary's cause of action for breach of trust accrues on the date of the breach, and not the date on which the beneficiary suffers loss ..., time does not begin to run against a beneficiary with a future interest until the interest becomes vested in possession.

163 The purpose of such a provision was explained by Millett LJ (as his Lordship then was) in Armitage v Nurse:[197]

It is not that a beneficiary with a future interest has not the means of discovery, but that he should not be compelled to litigate (at considerable personal expense) in respect of an injury to an interest which he may never live to enjoy.

164 In general terms, under the Limitation Act 2005, the effect of s 13, read with the definition of 'action' in s 3(1), is that, subject to div 3, a claim in equity cannot be commenced if six years have elapsed from the date the cause of action accrues. Division 3 includes s 27, which applies to 'equitable actions'. In general terms, s 27(2) defines 'equitable action' as an action where relief is sought in equity and for which, had no limitation period been so provided, equity would not otherwise have applied a limitation period by analogy. In such cases, the 'equitable action' must be commenced within six years 'since the cause of action accrued or, if later, three years since time started running, on equitable principles, before commencing the action'. The term 'equitable principles' in this context would at least refer to concealed fraud, as that doctrine is understood in equity.[198]

165 Section 80 of the Limitation Act 2005 provides:[199]

Nothing in this Act affects any equitable jurisdiction to refuse relief on the ground of laches, acquiescence or otherwise.

166 The operation and effect of s 62 and s 80 of the Limitation Act 2005 were raised by the court in the appeal in the context of the debate as to laches. It was not addressed by the parties below, nor in the appellant's case or respondent's answer as filed. Although the parties subsequently filed written submissions, it remains the position that the issues have not been adequately explored and the following observations are preliminary in nature only.

167 There is authority for the proposition that laches other than acquiescence in the first sense referred to in [147[200] above,200 (including acquiescence in the second sense referred to in [[[201]](2022_1.html#_Ref8941<a name=)] above201) has no application as a defence to limit equitable claims in respect of which a statutory limitation period applies and has not expired. It has been said however that acquiescence in the first sense referred to in [147] ab[202] may apply to such a claim.202

168 There is authority, however, to the effect that laches involving delay coupled with prejudice may apply as a defence to an equitable claim commenced within the statutory limitation period (ie, in the statutory period after the relevant cause of action has accrued), at least where the limitation period applies by analogy.[203] In the present case, there is no finding that Kai's claim was defeated by laches occurring within the statutory period of limitation commencing when his interest vested in possession on Iris' death in September 2014.

169 One case identified by the court's researches, Re Taylor,[204] involved the question of whether, in the context of trustees being entitled to avail themselves of the statute of limitations, any time should count against a beneficiary, for the purposes of laches, in not bringing proceedings against the trustee prior to the beneficiary's claim coming into possession. The facts of that case were unusual.

170 In Re Taylor, the testator gave his estate to be held on trust for his daughter for life and then for her children or issue. In 1868, the daughter married Mr Atkinson. The daughter, Mrs Atkinson, made a will in 1880, appointing her husband, Mr Atkinson, residuary legatee and sole executor of her estate. She died in 1892 without having a child. Mr Atkinson's interest in the testator's estate accrued in possession upon the death of his wife in 1892.

171 The testator's estate included valuable securities in the United States which were kept in a box in a safe. The trustees of the testator's estate passed away, and a Mr Lord and a Mr Simonson were the executors of the last‑surviving trustee of the testator's estate. In 1879, Mr Lord gave the keys to the safe containing the US securities to Mr Simonson.

172 In 1883, Mrs Atkinson, by her next friend and husband, Mr Atkinson, obtained orders for the appointment of new trustees of the testator's estate. It was evident from the application that Mr and Mrs Atkinson 'were perfectly aware' of the US securities. The orders also contained a vesting order as to the property the subject of the testator's will, and made provision for Mr Lord and Mr Simonson to hand over any securities and other assets in their control.

173 No steps were taken to have Mr Simonson deliver up the US securities. Rather, from 1883 up to her death, Mrs Atkinson regularly received from Mr Simonson the income of the US securities. She also corresponded with him at various times in that regard between 1886 and 1892. It subsequently appeared that the US securities were misappropriated by Mr Simonson at some time between 1889 and 1892. Mr Simonson became insolvent and the new trustees of the testator's estate, and Mr Atkinson, sued Mr Lord to make good the loss which had been sustained by reason of the default of his co‑trustee, Mr Simonson.

174 Mr Lord contended that if steps had been taken between 1883 and 1889 to obtain the transfer of the US securities to the trustees appointed by the order of 1883, Mr Simonson would not have been able to misappropriate them as he did. Mr Lord contended that the plaintiffs were precluded from obtaining relief against him, either by virtue of the limitation period in s 8 of the 1888 UK Act or by the doctrine of laches.

175 Stirling LJ found that the current trustees' claim against the former trustee, Mr Lord, was barred by the statute as their title to sue, or their predecessors' title to sue, accrued on the making of the orders in 1883. However, the limitation period did not avail Mr Lord against Mr Atkinson's claim, as Mr Atkinson's title did not accrue in possession until the death of Mrs Atkinson in 1892. Nevertheless, his Lordship found that laches precluded Mr Atkinson's claim.

176 Stirling LJ held that Mrs Atkinson, during her life, had an interest in the corpus of the testator's estate in the event, which happened, of her death without issue. Such an interest would have carried with it a right to have the trust fund vested in trustees and properly secured. Having regard to the legal interests of married women at the time, Mr Atkinson could, at any time after 1883, have commenced proceedings in the name of his wife for the purpose of compelling Mr Simonson to transfer the US securities to the custody of the new trustees appointed in 1883. Nevertheless, Mr and Mrs Atkinson had done nothing, although their position had been considered by their legal advisers. The correspondence between Mrs Atkinson and Mr Simonson indicated that she gave up all idea of displacing Mr Simonson and accepted him as sole trustee. It was inferred that Mr Atkinson took the same view, and that from 1883 to 1892, both Mr and Mrs Atkinson assented to the US securities remaining under the sole control of Mr Simonson, who was treated as trustee. If an action had been brought at any time between 1883 and 1889, the defendant, Mr Lord, 'could really have been under no liability' and even if an order had been made against him, as between him and Mr Simonson, primarily the liability would have fallen on Mr Simonson.

177 The omission on the part of Mr and Mrs Atkinson to take such proceedings prior to 1889 meant that the defendant Mr Lord had been deprived of 'this right' and, in the circumstances, the defence based on laches succeeded against Mr Atkinson. Thus, the proceedings were dismissed on the basis that the current trustees' claims were statute‑barred against Mr Lord (the former trustee), and the claim by the beneficiary (Mr Atkinson) against Mr Lord was barred by laches. With respect to Mr Atkinson's claim, the court evidently regarded it as significant that he could, in effect, have caused Mrs Atkinson to bring proceedings at an earlier time. The decision might also be seen as a case of acquiescence in the first sense.

178 Re Taylor does not appear to have been followed, or even considered, in Australia or England. Mr Lightwood, in his book 'The Time Limit on Actions',[205] considered, in effect, that Re Taylor was wrongly decided and said that '[t]he doctrine of laches ... is confined to equitable claims which are subject to no statutory bar either expressly or by analogy' (emphasis added).

179 A consideration of the above authorities would suggest that, at least in respect of breach of express trust where the trustee retains the trust property, even if the claim of a beneficiary, within the meaning of s 62 of the Limitation Act 2005, whose interest is not vested in possession at the time of the breach might theoretically be amenable to a defence of laches in the sense of delay coupled with prejudice for not bringing proceedings in the period prior to the interest vesting in possession, the defence would only be made out in exceptional circumstances. However, it is unnecessary to form a final view on these general questions because, in any event, for the reasons which follow, there could not be a finding, on the particular facts of this case, that Kai was guilty of 'delay' in any relevant sense prior to his interest falling in possession.

180 Kai's contention that the relevant breach of trust occurred when the Bankwest mortgage debt was discharged on settlement of the sale of Glen Iris cannot be accepted. Bankwest had a registered legal mortgage operating as a statutory charge on the land,[206] giving it indefeasibility of title in accordance with the provisions of s 68 of the Transfer of Land Act 1893 (WA).[207] Any equitable interest in Glen Iris or in the sale proceeds of Glen Iris held by Jeffrey and Kai as beneficiaries of the Testamentary Trust yielded to Bankwest's registered mortgages. If the grant of the Bankwest Mortgages was not a breach of trust, the application of the sale proceeds in the discharge of the mortgages was not a breach of trust either. If the grant of the Bankwest Mortgages was a breach of trust, the breach occurred when the mortgages were granted. As noted in [138] above, Jeffrey could have remedied the breach by discharging the Bankwest Mortgages from his personal resources and accounting for any profits or benefits earned from the grant of the mortgages over the trust property. But the failure to do so on settlement of the sale of Glen Iris was the occasion of an omission to remedy a breach of trust, rather than a new and separate breach[208] trust.208 It is the grant of the Bankwest Mortgages in breach of trust in 2010 to which any consideration of laches is relevant. Ground 1 should be dismissed.

181 As noted earlier, grounds 2 ‑ 4, which are overlapping, essentially raise the issue of whether the judge erred in finding laches on the assumption that the relevant breach of trust was the grant of the Bankwest Mortgages in 2010. The appeal should be allowed on this issue.

182 The question of laches in this context - delay with prejudice - is to be considered in the broader context that (1) Kai's interest as remainderman, although vested in interest, was not vested in possession until upon the death of Iris, in September 2014, (2) Jeffrey, from 1999, was a trustee under an express trust in respect of valuable real property - Glen Iris, although Kai did not know that Jeffrey was trustee until after Iris died, in September 2014, (3) Jeffrey, as trustee of the property, retained Glen Iris at the time of sale, (4) the breach of trust in granting the Bankwest Mortgages, whilst not involving any conscious wrongdoing or dishonesty by Jeffrey, was nevertheless not benign: in substance, it involved Jeffrey's 'active pursuit of personal interest in disregard of fiduciary duty or a misuse of fiduciary power for personal gain',[209] (5) Jeffrey had not established waiver, release, election or estoppel in the defence of Kai's claim to his beneficial interest in the trust estate,[210] (6) Jeffrey did not bring himself within the two categories of case mentioned by Deane J in Orr referred to in [150] above, and (7) in the circumstances of this particular case, ultimately in the proof of laches the onus was on Jeffrey to show aggravating circumstances such that the granting of the relief sought by Kai would give rise to 'serious and unfair' prejudice t[211]effrey.211 Both words ('serious and unfair') contribute to the complexion of the prejudice to be identified and established by the defendant in this context, although in some, perhaps many, cases the same circumstances will be relied on to point to prejudice which is both unfair and serious.

183 As noted in [116] and [120] above, the key findings of the judge are relevantly to the effect that:

1. At the time that Kai left the 1966 Partnership in 1980, he (i) 'would have known' that (ii) 'the practice' of borrowing against Glen Iris and mortgaging it, (iii) 'would continue'.

2. Kai knew that Jeffrey was farming Glen Iris from about 1984.

3. Kai did nothing to 'enquire' about Glen Iris in the period after 1984.

4. Kai did nothing to 'assert his rights' in the period after 1984.

5. Kai's delay in not enquiring and not asserting his rights after 1984 was 'gross'.

6. During the period after 1984, when Kai was not making enquiries and not asserting his rights, Jeffrey (and Pamela) farmed Glen Iris, which involved a lifetime of work in the pursuit of a risky business enterprise.

184 In our respectful opinion, none of these findings demonstrated laches in the present case. With respect to point 1 of the preceding paragraph, Jeffrey did not know until after Iris' death the fact of the actual grant of the Bankwest Mortgages in 2010 nor, for that matter, of the fact of the actual grant of the mortgages over Glen Iris in 1985, 1986 and 2005.[212] The 'practice' of which Kai 'would have known' prior to then was the practice of using Glen Iris as security for borrowings for farming operations conducted by the testator (prior to his death), and subsequently by a partnership which included Iris as trustee of the Testamentary Trust. When Kai left the 1966 Partnership, its assets and liabilities were taken over by the 1980 Partnership, of which Iris (as trustee) continued as a member. There was no finding that the grant of the mortgages for the purposes of the 1966 Partnership or the 1980 Partnership was in breach of trust, and, moreover, the judge evidently accepted that those mortgages were not granted in breach of trust. When Kai left the 1966 Partnership in 1980 there was no 'practice' of Glen Iris being used as security for borrowings in breach of trust.

185 With respect to the second matter in [183] above, it provides a context in which other findings were made, but unless the other findings support a defence of laches, on its own it has no significance.

186 With respect to the third and fourth matters in [183] above, as a remainderman whose interest was not vested in possession prior to September 2014, Kai had no obligation to enquire about the performance of the Testamentary Trust. Nor was he bound to assert his interest until it came into p[213]ession.213 Prior to the termination of Iris' life estate, Kai's interest in possession was one that he might never live[214] enjoy.214 The nature and degree of Kai's knowledge has been noted in [184] above. Looking at the matter prospectively, he had no notice of the extent of any potential borrowings, nor any indication that, by the time of the termination of Iris' life estate, any mortgage debt would not be repaid by the borrowers with no ultimate loss to the Estate and no diminution in value of Kai's int[215]st in possession.215 Also, although Iris, in her personal capacity as life tenant, no doubt consented to or waived the breaches she committed, there was no finding that Kai would have known that Iris, in her capacity as trustee, would not require Jeffrey and Pamela to discharge the mortgage debt from their personal resources when the time came to sell the land. Nor was there a finding that Kai would have known that any replacement trustee, on Iris' death, would not require Jeffrey and Pamela to discharge the mortgage debt from their personal resources.

187 The mere non‑assertion of Kai's rights in the period prior to his interest becoming vested in possession did not constitute acquiescence in the sense of waiver or release of his rights. Even if a beneficiary with a future interest to whom s 62 of the Limitation Act 2005 applied might hypothetically be regarded as guilty of 'delay' for the purposes of laches involving delay coupled with prejudice by not commencing proceedings until their interest is vested in possession (a question which it is unnecessary and inappropriate to decide in the abstract), in the circumstances of this particular case the absence of proceedings by Kai before Iris' death could not be said to constitute 'delay' in any relevant sense. On the judge's findings of primary fact, there was nothing that would take the case out of the 'ordinary expectation'[216] that any proceedings against Jeffrey, as trustee, should be commenced after Kai's interest fell into possession. Accordingly, as to the fifth matter referred to in [183] above, in the above context, there could, with respect, be no finding that Kai's 'delay' was 'gross'.

188 But even if there were delay by Kai prior to the termination of Iris' life estate in September 2014, for the reasons explained in [189] ‑ [191] below, Jeffrey had not established prejudice of the kind which would bar Kai's claim.

189 As to the sixth finding in [183] above, the 1984 JG & PD Halford Partnership was no doubt a venture carrying significant commercial risks, but, on the judge's (unchallenged) findings, the business was operated profitably, as a result of which Jeffrey and Pamela built up significant personal wealth, including in shares and real property. Relevantly for present purposes, Kai has not sought to hold Jeffrey liable to account for the profits of the partnership business. Further, although there is no suggestion that this was known to Kai, Jeffrey and Pamela occupied Glen Iris and used it for the purpose of their partnership without paying rent. Kai has not sought orders for the account of that benefit, or equitable compensation in an amount equivalent to commercial rent for the use of Glen Iris over (approximately) 30 years, with interest. In this context, Jeffrey has not demonstrated that his farming of Glen Iris constituted a prejudice which was 'serious', or at least sufficiently serious, to preclude Kai from asserting his entitlement as a beneficiary to one‑third of the corpus of the trust estate without regard to the Bankwest mortgage debt.

190 In relation to the question of whether any such prejudice was 'unfair', Jeffrey and Pamela emphasised, in oral submissions, that both Jeffrey and Kai made incorrect assumptions. Jeffrey assumed (wrongly) that the granting of the mortgages to secure the borrowings of his partnership with Pamela was 'permissible', and Kai assumed (incorrectly) that his portion of the trust estate was 'safe'.[217] However, it was Jeffrey, in contradistinction to Kai, who had an obligation[218] to acquaint himself with the terms and operation of the Testamentary Trust. In fact, prior to the grant of the Bankwest Mortgages, Jeffrey had sworn a statutory declaration to the effect that the mortgage was authorised by Maurice's will. Kai was entitled to look to Iris, and later Jeffrey, to undertake the performance of the trust in accordance with its terms on their proper construction. Insofar as Jeffrey's profitable use of the trust property for his own purposes was a form of prejudice, as between the beneficiary (Kai) and the trustee (Jeffrey), in the circumstances of this case, the prejudice is not appositely characterised as 'unfair'. Nor was this a case where it could be said that Kai would be given an 'unjust advantage'[219] by obtaining orders to the effect that he is entitled to his share of the corpus of the trust estate undiminished by Jeffrey's breaches of trust in the grant of the Bankwest Mortgages.

191 Jeffrey contended that without the farming of Glen Iris, its value 'would've been lower', and that it would be 'speculative' as to whether Kai would have been better off had Jeffrey and Pamela not farmed Glen Iris. The judge's findings were (1) the farming of Glen Iris contributed to the land holding its market value in the period (relevantly) 2010 to 2016, and (2) there was no evidence that the farming of the land resulted in an increase in the value of the property.[220] Assuming (without deciding) that the trustee of the Testamentary Trust was not obliged to sell Glen Iris once the trustee ceased to be a member of the partnership that farmed the property, a trustee (Iris, or subsequently Jeffrey) would prima facie be entitled to an indemnity in respect of expenses incurred in preserving the value of the property in a manner involving no breach of trust. The trustee would not be entitled to be indemnified against expenses incurred in breach of trust. Thus, for example, if there was an authorised lease of the farm to a third party for farming purposes, which preserved the value of the trust estate, the trustee would be entitled to an indemnity in respect of any expenses incurred in the leasing of the property. But that was not this case. Jeffrey farmed Glen Iris for personal gain, and mortgaged the trust property to support his borrowings in that regard. If an incidental effect of that was to preserve the value of the trust property, it meant that the breach did not result in a diminution in the value of the property and thereby cause a separate and additional loss to the trust estate.

192 The respondents' notice of contention does not assist them for two fundamental and related reasons. One is that, on the unchallenged findings of fact, the mortgages on Glen Iris after 1984 were used to secure the borrowings of the 1984 JG & PD Halford Partnership, and the trustee of the Estate was not a member of that partnership. Secondly, there is no relevant sense in which the Bankwest Mortgages in 2010 somehow secured the borrowings either of the testator in the Halford Bros Partnership before his death, or the borrowings of the 1966 and 1980 Partnerships after his death. In each case, the debts of the former partnership were taken over by the successor partnership, and became the debts of the successor partnership. They no longer remained the debts of the former partnership.

193 Although this might be thought to be a hard case, the conclusion that the partnership borrowings of Jeffrey (and Pamela) should not be cast on the trust estate, reflects the policy of the law and the stringent standards of conduct to which trustees are held.

194 The appeal should be allowed and the notice of contention should be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

Research Associate to the Honourable Justice Murphy and the Honourable Justice Mazza

[1] Consistently with the primary decision, the parties will be referred to by their first names, with no disrespect intended.

[2] Halford v Halford [No 3] [2020] WASC 207.

[4] Agreed chronology, item 30; WB 71.

[9] Primary decision [4]; further re‑amended substituted statement of claim dated 23 December 2019 (SC), par 41; prayer for relief E, H; BB 68, 72.

[11] Primary decision [163] - [164].

[12] Primary decision [196] - [202].

[19] These background matters are primarily drawn from the primary decision (BB 3 - 49) and the agreed chronology in the appeal (WB 68 - 71).

[20] Primary decision [74]; GB 2103 - 2107.

[21] Agreed chronology, item 2; WB 68.

[24] Agreed chronology, item 3; WB 68.

[26] Primary decision [29]; GB 2110 - 2112.

[27] Agreed chronology, item 4; WB 68.

[29] Section 50 of the Partnership Act 1895 (WA) (Act) provides that on the dissolution of a partnership, every partner is entitled, and all persons claiming through them in respect of the interest as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm and to have the surplus assets applied in payment of what may be due to the partners, respectively. Section 57 of the Act provides for the rules to be applied in the settling of accounts between the partners after a dissolution of partnership.

[30] Primary decision [34]. The respective shares are referred to in the 1980 Deed referred to in [32] below.

[35] Primary decision [38]. The judge also appeared to find that Iris then held the Estate's assets, including Maurice's right to a surplus in the winding up of the Halford Bros Partnership 'on the trusts [sic] created by the will': primary decision [38]. That finding is inconsistent with the finding that Iris, as trustee of the Testamentary Trust, joined in a new partnership agreement by way of the 1966 Partnership, the effect of which was to effect a notional winding up of the Halford Bros Partnership: Atwell v Roberts [2013] WASCA 37; (2013) 43 WAR 507 [11(c)], [122], [307]; Fazio v Fazio [2012] WASCA 72 [59], [65], [71] ‑ [74]; In re F [1940] VicLawRp 48; [1941] VLR 6, 10 ‑ 13.

[36] Agreed chronology, item 6; WB 68.

[37] Primary decision [74]; GB 2116 - 2121.

[38] Primary decision [74]; GB 2122 - 2129.

[39] Described in the primary decision as 'B57172'.

[40] Primary decision [74]; GB 2130 - 2137.

[45] Primary decision [74]; GB 2138 - 2145.

[46] Primary decision [42]; agreed chronology, item 10; WB 69.

[47] Primary decision [42]; GB 2231 - 2237.

[55] Primary decision [49]; GB 3906 - 3907.

[56] Agreed chronology, item 15; WB 69.

[57] Primary decision [51]; agreed chronology, item 14; WB 69.

[60] Primary decision [74]; GB 2146 - 2155.

[62] Primary decision [53]; agreed chronology, item 13; WB 69, referring to primary decision [5].

[64] Primary decision [56]; GB 3909 - 3910.

[66] Primary decision [74]; GB 2173 - 2180.

[79] Primary decision [64]; agreed chronology, item 21; WB 70.

[83] Primary decision [74]; GB 2181 - 2191.

[87] Primary decision [76]; GB 3944 - 3951.

[89] Primary decision [74]; GB 2192 - 2197.

[92] Primary decision [83]; GB 3952 - 3962.

[94] Primary decision [74]; GB 2198 - 2207.

[97] Primary decision [85]; agreed chronology, item 26; WB 70.

[100] Primary decision [86]; GB 3983 - 3994.

[101] Primary decision [87]; GB 3995 - 4005.

[102] Primary decision [88]; GB 4006 - 4015.

[103] Primary decision [89]; GB 4016 - 4025.

[104] Primary decision [90]; agreed chronology, item 27; WB 70.

[105] Primary decision [105]; agreed chronology, item 28; WB 70.

[112] Primary decision [111]; agreed chronology, item 29; WB 71.

[117] Primary decision [1]; agreed chronology, item 30; WB 71.

[119] Primary decision [115]; agreed chronology, items 30 and 31; WB 71.

[122] Primary decision [118]; agreed chronology, items 30 and 31; WB 71.

[124] Primary decision [143] - [145].

[125] Primary decision [141] - [146], [156].

[132] Primary decision [97] - [104].

[136] Primary decision [121], [126].

[137] Primary decision [124] - [126].

[138] Primary decision [158] - [159], [161].

[139] Primary decision [160] - [161].

[140] Primary decision [161] - [164].

[141] Primary decision [161] - [164].

[143] Minute of re‑amended substituted defence dated 24 January 2020, par 40; BB 99 - 100.

[144] Primary decision [196] - [202].

[145] Primary decision [199] - [202].

[146] Primary decision [113], [205] - [211].

[150] Primary decision [215] - [220].

[152] Respondents' submissions, par 52; WB 41.

[153] Hallows v Lloyd [1888] UKLawRpCh 144; (1888) 39 Ch D 686, 691; Harvey v Olliver (1887) 57 LT 239, 241.

[154] Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 [32] ‑ [33]; Wilden Pty Ltd v Green [2009] WASCA 38; (2009) 38 WAR 429 [166].

[155] Commonwealth and the Central Wool Committee v Colonial Combing, Spinning & Weaving Co Ltd [1922] HCA 62; (1922) 31 CLR 421, 470; Stuart v Kingston [1924] ArgusLawRp 52; [1924] 34 CLR 394, 401. See generally, Jacobs' Law of Trusts in Australia (8th ed, 2016) [17‑42].

[156] Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187, 235; see also Jacobs' Law of Trusts in Australia [17‑18].

[157] Khoo Tek Keong v Ch'Ng Joo Tuan Neoh [1934] AC 529, 536 ‑ 537.

[158] Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 557 ‑ 558.

[161] Target Holdings Ltd v Redferns (a firm) [1995] UKHL 10; [1996] AC 421, 434, cited with approval in Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 469.

[162] Re Dawson [1966] 2 NSWR 211, 214 - 216.

[164] Slade v Chaine [1908] UKLawRpCh 13; [1908] 1 Ch 522, 533, 535.

[165] Williams v Central Bank of Nigeria [2014] UKSC 10; [2014] AC 1189 [12].

[166] Knox v Gye [1872] UKLawRpHL 16; (1872) LR 5 HL 656, 674 ‑ 675.

[167] Gerace v Auzhair Supplies Pty Ltd [2014] NSWCA 181; (2014) 87 NSWLR 435 [70] ‑ [75], [79].

[168] Warman International (559); Nocton v Lord Ashburton [1914] UKLawRpAC 31; [1914] AC 932, 958.

[169] Savage v Lunn [1998] NSWCA 203.

[170] Nwakobi v Nzekwu [1964] 1 WLR 1019, 1024.

[171] Warman International (560 - 562); In re Jarvis (deceased) [1958] 1 WLR 815, 820 ‑ 821.

[172] Fysh v Page [1956] HCA 13; (1956) 96 CLR 233, 243 ‑ 244.

[173] Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17; (2011) 278 ALR 291 [635].

[174] Lindsay Petroleum Co v Hurd [1874] UKLawRpPC 1; (1874) LR 5 PC 221, 241, cited in Hourigan v Trustees Executors & Agency Co Ltd [1934] HCA 25; (1934) 51 CLR 619, 651.

[175] Du Boulay v Worrell [2009] QCA 63 [56]; In re Pauling's Settlement Trusts [1962] 1 WLR 86, 115; Wassell v Leggatt [1896] UKLawRpCh 25; [1896] 1 Ch 554, 558 ‑ 559.

[176] P G Turner, J D Heydon and M J Leeming, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015) [38‑020] (Meagher, Gummow & Lehane); J Edelman, 'Money Awards for the Cost of Performance', 2010, 4(2) J Eq 122, 129.

[177] Duke of Leeds v Earl of Amherst (1846) 2 Ph 117, 123; De Bussche v Alt [1878] UKLawRpCh 107; (1877) 8 Ch D 286, 314; Glasson v Fuller [1922] SAStRp 8; [1922] SASR 148, 161; Autocaps (Aust) Pty Ltd v Pro‑Kit Pty Ltd [1999] FCA 1315; (1999) 46 IPR 339, 357.

[178] Orr (340); Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [79].

[179] De Bussche (314); Glasson (161 - 162); Autocaps (357 ‑ 358).

[183] Patel v Singh [2005] EWCA Civ 157 [33].

[184] Meagher, Gummow & Lehane [38‑070].

[185] Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218; Orr (343); Gerace [55].

[186] Lindsay Petroleum Co (239 ‑ 240); Gerace [73].

[187] Nowell v Palmer (1993) 32 NSWLR 574, 580.

[189] Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 [180].

[192] Life Association of Scotland v Siddal [1861] EngR 300; (1861) 3 De GF & J 58, 73 ‑ 74. See also Spellson v George (1992) 26 NSWLR 666, 672.

[193] Roberts v Tunstall [1845] EngR 576; (1845) 4 Hare 257; (1845) 67 ER 645.

[195] in de Braekt v Powell [2007] WASCA 55; (2007) 33 WAR 389.

[196] in de Braekt [17]. See also In re Blow; Governors of St Bartholomew's Hospital v Cambden [1913] UKLawRpCh 127; [1914] 1 Ch 233, 241, 246; How v Earl Winterton [1896] UKLawRpCh 128; [1896] 2 Ch 626, 637; In re Fauntaine [1909] UKLawRpCh 87; [1909] 2 Ch 382, 392.

[197] Armitage v Nurse [1998] Ch 241, 261.

[198] As to which see, generally, Meagher, Gummow and Lehane [36‑095] - [36-105].

[199] Section 80 has, or had, a counterpart in s 36(2) of the Limitation Act 1980 (UK): Re Loftus (deceased) [2006] EWCA CIV 1124; [2007] 1 WLR 591 [33].

[200] In re Pauling's (115) (Wilberforce J); In re Pauling's Settlement Trusts [1964] Ch 303, 353; Re Loftus [35] - [41]; Gerace [30].

[202] Archbold v Scully [1861] EngR 510; (1861) 9 HL Cas 360; (1861) 11 ER 769, 383; In re Pauling's (115) (Wilberforce J); In re Pauling's Settlement Trusts (353); Re Loftus [35] ‑ [41].

[203] Amaca Pty Ltd v CSR Ltd [2015] VSC 582 [468] ‑ [474], affirmed on appeal: CSR Ltd v Amaca Pty Ltd [2016] VSCA 320; (2016) 62 VR 359 [259] ‑ [262]; Comlin Holdings Pty Ltd v Metlej Developments Pty Ltd [2018] NSWSC 761 [247].

[204] Re Taylor (1900) 81 LT 812.

[205] J M Lightwood, The Time Limit on Actions, (1909), page 255; see also Meagher, Gummow & Lehane [36‑090].

[206] English, Scottish and Australian Bank Ltd v Phillips [1937] HCA 6; (1937) 57 CLR 302, 321; Deputy Federal Commissioner of Taxation v Chant (1991) 24 NSWLR 352, 365.

[207] Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407, 418 ‑ 419.

[208] See, for example, Buckland v Ibbotson [1902] VicLawRp 107; (1902) 28 VLR 688, 700 ‑ 702.

[209] Adopting the language of Deane J in Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 199. See also Doneley v Doneley [1998] 1 Qd R 602, 608; Hagan v Waterhouse (1991) 34 NSWLR 308, 354.

[210] cf the observations of Deane J in Orr (341).

[212] The judge's findings with respect to Kai's knowledge are discussed in [115] ‑ [116] above.

[213] See Siddal in [157] above.

[215] Although that would not preclude an account of profits if Jeffrey had made any profits from the misuse of the trust property.

[218] From 1999 when he became co‑trustee.

[220] See primary decision [124] - [125].