Harpur v Levy & Ors [2011] VSC 653

EVIDENCE - claims against deceased estate - general requirement for scrutiny and caution - particular circumstances dictating a cautious approach discussed.

EVIDENCE - opinion evidence - valuation of land - methodology - direct comparison method using an unaccepted offer to sell or asking price - whether opinion admissible - Evidence Act 2008 s 76, 79.

1 This proceeding is the latest chapter in the litigious history of the estate of Peter Thomas Evan Rand, now in its 14th year. Rand died on 7 October 1997. Rand inherited a substantial estate from his parents and was, apparently, an astute investor. Rand owned and operated a brothel in South Yarra. Apparently, he preferred to minimise, even avoid, his obligations to pay tax. Rand left an estate declared in the probate application at $19 million, comprising Victorian real estate: $13,725,000, personal estate in Victoria: $6,075,915, liabilities: $844,920 and real and personal estate elsewhere: nil.

2 The defendants, as named executors, obtained probate of Rand's last will dated 8 September 1997. Numerous specific devises and bequests were made by the will with the residue held on trust principally for, as to income for life, Douglas Claiborne and Michael Aquilina, each of whom had an intimate personal relationship with Rand. Mr Aquilina lived with Rand in South Yarra. Mr Claiborne, who abused drugs and could not responsibly look after money and property, then lived in Hawaii.

3 On 31 August 1992, Rand declared and settled The Peter Rand Trust, providing that during Rand's lifetime the net income and the principal of the trust estate be disposed of as Rand, who was trustee, directed. On Rand's death, the trustee, now the plaintiff Mr Harpur, holds the residuary estate of the Peter Rand Trust as The Claiborne Trust, for the benefit of Doug Claiborne during his lifetime.

4 During the 1990's, Rand acquired real estate outside Victoria: apartments in Hawaii and Thailand. Rand acquired the apartments in Hawaii partly with his own funds and partly with borrowed moneys. The borrowings, from the Bank of Hawaii, were by Adjustable Rate Notes secured by mortgages over the properties purchased. Rand purchased the apartments in Thailand without borrowing any part of the price paid. The parties to the proceeding sue, or are sued, in their representative capacity in respect of dealings involving these apartments in Hawaii and Thailand.

5 The dispute has arisen because the Hawaiian apartments, which were trust assets, have all been sold, one by Rand, two by Mr Harpur and two by the mortgagee exercising power of sale. The capital of the trust has been dissipated. Its current financial position was not clearly explained. It seems to consist of an asset in the form of an unsecured loan of about AU$400,000 to a private company related to Mr Harpur and liabilities of at least that value in the form of legal costs and expenses. The condominium in Thailand was, Mr Harpur contends, gifted to the trust by Rand shortly prior to his death, which intervened to prevent completion of the transfer of title. The Thai condominium not only has not returned any income to the trust, but title to it was lost out of Rand's name to an adverse possessor by the judgment of a Thai court in 2010. The condominium has since been sold. Where, between the estate and the trust do these losses lie?

6 Mr Harpur now claims, in his capacity as trustee and for the benefit of the trust, recoupment of the amount paid to discharge the Notes together with consequent expenses of the sales and foreclosure processes in Hawaii. That sum totals US$305,256.64. Further, Mr Harpur claims the market value of the Thailand condominium assessed at AU$200,000 or TB6.4M.

7 Each of the claims made by Mr Harpur have failed and will be dismissed. In order to determine Mr Harpur's claims, the following issues arise, and are distinct, depending on the location of the properties.

1. How did Rand, as settlor/transferor, constitute the assets and liabilities of the trust?
   • First, after establishing the Peter Rand Trust in 1992, when he transferred to the trust the title to the five apartments; and
   • Later, on 27 August 1997, when he executed the third declaration of the trust.

In particular, in the relation between Rand as settlor and Rand as trustee, that is, as between his personal assets and the assets of the trust, where did the obligation to repay to the Bank of Hawaii the funds advanced by the Notes lie?

1. What was the property of the Claiborne Trust when Mr Harpur became its trustee? In particular:
   • Did the assets of the Claiborne trust include an enforceable entitlement against Rand personally that the debt created by the Notes and secured by the mortgages would be discharged or, alternatively, serviced?
   • Did Rand state to Mr Harpur that if he agreed to assume the trusteeship, Rand would pay out the Notes to ensure the trust was self-financing?
2. Following the sale, whether by the owner or the mortgagee of the Hawaii apartments and repayment of the Notes by the trust, did the trust have a right of recoupment from Rand's estate?
3. Is the quantum of the sum necessary to restore the trust US$305,256.64 or if it is some other sum, how is it calculated?

1. Prior to his death, what property in Thailand, if any, did Rand transfer to Mr Harpur as trustee of the Claiborne Trust?
2. What is the law of Thailand in relation to the requirements to complete transfer of title to property and in respect of revocation of wills?
3. Was the transfer a completed gift? Did Rand do all that he could to transfer to the trust title to the Thailand condominium or the proceeds of its sale?
4. Does the court have jurisdiction to determine Mr Harpur's claims?
5. What is the current market valuation of the Thailand condominium? Is it 6.4 million Thai Baht (AU$200,000)?
6. Assuming Mr Harpur lost the opportunity to recover the title to and possession of the Thailand condominium, was that loss of trust property or loss of a valuable opportunity to recover trust property? Is that lost opportunity correctly valued at the current market valuation of the Thailand condominium, or at some discounted assessment?

The circumstances giving rise to Mr Harpur's claims

8 Over a period of approximately 12 months, commencing in January 1989, Rand acquired a two-bedroom apartment and four single-bedroom apartments in Hawaii. Three of these apartments, 2301, 2205 and 1405, were in Aloha Towers at 1, 430 Lewers Street, Honolulu. The other apartments were 1815 at Aloha Lani, 2211 Alawai Boulevard, Honolulu, and 1810 at 444 Nahua Street, Honolulu. For convenience, I will refer to these properties by their apartment number.

9 Rand outlaid approximately $1.189 million purchasing the five Hawaiian apartments. He borrowed a total of $482,000, from the Bank of Hawaii, at the time of purchase by loan agreements called Adjustable Rate Notes with security by mortgage registered on title to the apartments. Rand probably provided the balance of the funds necessary to complete those purchases, approximately $707,000, but the evidence did not reveal the precise source of those funds.

10 Rand engaged a local realtor, Terry Hand to assist in the purchase and management of the apartments. Rand retained Apartment 2301 for personal use and only rented it out occasionally. Doug Claiborne used an apartment. Rand rented out the other apartments.

11 Upon the declaration of The Peter Rand Trust by Rand as settlor, he transferred the Hawaiian apartments to himself in his capacity as trustee of the trust. The mortgages to the Bank of Hawaii encumbering the properties were transferred to the trust. Hawaii has a Torrens system of title by registration. Rand was not released by the bank from either his obligations under the Notes or his personal covenants by the mortgages to repay the loans. During Rand's lifetime, Rand applied the net income of the trust estate towards paying the outgoings and maintenance of the apartments and in servicing the loans from the bank of Hawaii. Rand never directed distribution of any of the trust principal.

12 Rand did not keep financial records for the trust. There were no tax returns. There were no minutes of trustee's directions. There was no file or separate collection of correspondence or other papers evidencing the conduct of the trust's affairs. While an object of the trust was to provide accommodation for Mr Claiborne, and otherwise assist with his financial security, and Rand directed its activities to that end, Rand was accumulating assets for his own purposes.

13 Rand also acquired two condominiums in the Jomthien Complex Condotel in Thailand. He acquired condominium 348 on 21 December 1992, and the adjacent condominium 349 on 19 May 1993. They were renovated into a single large condominium ("the condominium"). It appears that these Thai purchases were for cash. The amount paid for these condominiums, and the source of those funds, was not revealed in evidence. At about this time Rand, as trustee of The Peter Rand Trust, borrowed further funds from the Bank of Hawaii on mortgage security over the Hawaii apartments, but the evidence does not suggest those further advances were applied in Thailand. Rand was registered at the local district Thailand land court as the owner of the condominium. He was in possession of the title deeds, which he had deposited in a security packet with his solicitor Frank Levy, the first defendant. There was no evidence that Rand ever rented out the condominium, although it appears that he permitted his friends to use it. I cannot say how the maintenance and outgoings associated with it were paid. Mr Harpur did not produce to the court any accounting records in relation to the purchase, ownership, use or maintenance of the condominium.

14 Rand set up an operating account with the Bank of Hawaii. He had a relationship manager at the bank, one Heidi Emory. There were some statements of account in evidence, but there was not a complete picture of the transactions passing through it. This account was the only account operated by Rand in Hawaii. The account was in his name personally, not as trustee. However, from August 1992 the account was only used for the trust. All transactions related to the apartments or, occasionally, small payments made to Mr Claiborne. Mr Hand collected the rents of the tenanted apartments. Except for loan repayments, Mr Hand paid all outgoings, including outgoings incurred on the apartments that were not tenanted, and deposited the net proceeds into the account. Mr Hand no longer had records of the transactions through his trust account, having disposed of the records after seven years. The funds that accumulated in the bank account in this way were insufficient to meet the monthly repayments to the Bank of Hawaii secured on the five apartments. Rand regularly sent funds, by deposit into the bank account, to meet the shortfall in income. He also supported Mr Claiborne financially. It was unclear whether Rand regularly provided that financial support through the bank account or by direct payment to Mr Claiborne.

15 In 1994, Rand suffered significant health issues, including a cancer diagnosis. By late 1996, anxious about Mr Claiborne's future welfare, Rand sought advice from American attorneys about his Hawaiian affairs. The affairs of the trust were not in a satisfactory state. The trust had never lodged tax returns. Mr Harpur assisted Rand with these inquiries, which were ongoing. The American attorneys inquired about the assets and value of the trust and Mr Harpur replied for Mr Rand in terms that recognised that the:

• net value of the trust's US assets was about US$675,000;
• debts secured by mortgage totalled about US$400,000;
• mortgage secured debts were the responsibility of the trust; and
• Thai Condominium was thought to be worth about AU$300,000.

Correspondence at the time reveals that Rand wanted to gift the Thailand condominium to the Peter Rand Trust and that Rand was contemplating selling the condominium to use the sale proceeds to discharge, or pay down, the Hawaiian mortgages.

16 I find that Rand was, by late 1996, proposing to gift the Thai Condominium to the trust and his expectation was that including the condominium, the net worth of the trust would be at least US$500,000 (depending on his understanding of the prevailing exchange rate). There is no evidence as to what capital sum he considered adequate for the welfare of Mr Claiborne.

17 In April 1997, American attorneys advised that the trust was exposed to Federal and Hawaiian income and general excise taxes on the commercial use of the apartments. The structure of the trust exposed Rand's personal estate on his death to tax liability in the form of gift, estate and 'generation skipping' taxes. To minimise this impost, one option was for a trust company associated with the Bank of Hawaii to accept the trusteeship but there was reticence in that quarter because of compliance and management issues, a lack of solvency and the personal exposure of Rand to the bank on the Notes. Another recommendation was to move the trust offshore, appointing as trustee a company resident in the Bahamas. The American attorneys advised Rand that complying with US revenue laws would come at a substantial cost.

18 In May 1997, Rand's doctor informed him that he only had a short time left to live. The witnesses described one of his pressing concerns at this time was Mr Claiborne's welfare. The issues arising on the advice of his American attorneys concerning the restructure of his affairs in Hawaii presented difficult choices. In early May, when the Bank declared its reluctance to accept administration of the trust, Rand asked Mr Harpur to accept the role of trustee of the Claiborne Trust. The executors contested the substance of this and a later conversation as recent invention. Mr Harpur said he stipulated that he would agree to act as the trustee if Rand paid out the loans over the Hawaii apartments, so the trust would be self-financing. Rand replied, according to Mr Harpur, that he intended to discharge the Notes and to contribute more money to the trust - he wanted the trust to expand in Honolulu. Inferentially, Mr Harpur invites the conclusion that Rand then intended the trust would keep the apartments as assets.

19 Mr Harpur was contemplating, not that Rand discharge a personal obligation to the Bank of Hawaii but rather, that Rand make a gift to the trust of the funds necessary to clear the mortgage repayments that prevented the trust from being self-funding. Nothing in the evidence suggests that at any time after he transferred the apartments to the trust, Rand recognised that he retained the ultimate obligation to repay the Notes. The evidence is consistent with Rand, at least by May 1997 if not at a much earlier point in time, viewing the debt obligation to the Bank of Hawaii to be held by him as a trustee, payable primarily out of the assets of the trust. Rand's view in this respect did not, I think, preclude a prospect of further advances of capital to the trust if warranted by Mr Claiborne's circumstances, but it was that latter consideration, not any personal obligation to the bank, that was likely to motivate any payments by Rand to or on behalf of the trust.

20 At this stage in May 1997, assuming Mr Harpur's recollection of his conversation with Rand, Rand had not acted upon his intention to gift the Thai condominium to the trust and may have had that gift in contemplation as the source of a contribution to the trust.

21 Either Rand did not agree to pay out the Notes in May 1997 from funds sourced elsewhere within his assets or he changed his mind. What he intended cannot now be determined. He may have prevaricated about how to resolve these difficult issues or he may have decided on a different course. It is possible Rand intended to solve the issues with US regulatory authorities by converting the trust to cash and exiting Hawaii, perhaps leaving behind a single apartment for Mr Claiborne. It is probable that he had not decided on a complete plan to resolve all issues. I approach this evidence with suspicion, in the sense that it warrants very careful scrutiny, and I will say more about my approach to the evidence shortly. In part, events as they unfolded reveal what Rand decided.

22 Rand never paid out the Notes. He immediately decided, in May 1997, to sell the Hawaiian apartments and the Thai condominium. On Rand's behalf, Mr Harpur instructed Richard Ellis (Thailand) to sell the Thai condominium. What became of the instructions to Richard Ellis (Thailand) was not revealed. There was some evidence of communications between Rand and a Mrs Chollada, apparently a solicitor in Thailand, about a quick sale of the condominium. If instructions were given, Mr Harpur did not know what became of them.

23 Rand personally instructed Mr Hand to list all the Hawaiian apartments for sale. Mr Hand responded that the apartment market was depressed - it was not a good time to sell. Mr Hand obtained the mortgage balances from the bank and reported to Rand, in US$ as follows:

24 Rand's copy of Mr Hand's fax is annotated with the word 'Agreed!' Rand was unconcerned with Mr Hand's advice about the timing of the sales, which is consistent with other factors including his health and the advice of his American attorneys. He was agreeing that the listings of the apartments for sale proceed at Mr Hand's suggested listing prices. It seems probable that Rand anticipated a net value of his trust, on conversion to cash, and with the Thai condominium added, of about US$750,000, less expenses. I am satisfied that Rand intended that the mortgages were to be paid out of the proceeds of sale of the apartments.

25 On 23 June 1997, Rand gave Mr Harpur a Power of Attorney, predominately to authorise Mr Harpur to deal with his Hawaiian affairs. The Power is an enduring power in a common form and includes the power and authority to act as 'my said attorney in all countries, states, and jurisdiction in this world.' At the same time, Rand made a new will appointing Mr Harpur as his executor. That will was not in evidence. While it would not be his last will, it is significant that Mr Harpur did not learn of the later will until after Rand died.

26 Mr Harpur described a second discussion in early August 1997 with Rand about the trusteeship. Rand again asked Mr Harpur to take on the trust and Mr Harpur said he would, if 'we fix up this liquidity problem'. Mr Harpur said Rand said he did not expect him to get involved in a trust in that situation and Mr Harpur stated that Rand undertook to fix the liquidity problem. Rand also offered to include Mr Harpur's sons as remaindermen in the trust.

27 In late August 1997, The Peter Rand Trust was amended and restated, although the amendments are not material to any issue in this proceeding. At the same time, Mr Harpur was appointed, in place of Rand, as the trustee of this trust. On Rand's death in October 1997, being survived by Doug Claiborne, Mr Harpur now held the residuary estate of The Peter Rand Trust as The Claiborne Trust to pay to, or apply for the benefit of, Mr Claiborne all of the net income of the trust during Mr Claiborne's lifetime. Mr Claiborne also had the right to live rent-free in apartment 2301, or such substitute apartment as Mr Harpur in his sole discretion determined. All expenses incurred by Mr Claiborne, including real property taxes, maintenance fees, insurance and utilities were to be paid out of the trust estate. On Mr Claiborne's death, the trust estate then remaining would be distributed outright and free of trust to Adam Paul Rand Harpur, Ryan Henry Rand Harpur and Guy Edward Peter Rand Harpur, who are the sons of Mr Harpur and his wife, Pamela Faye Rand Harpur.

28 The restatement of the trust in August 1997 gives some insight into Rand's intentions, as it states:

I direct that the Trust estate be invested in real estate. I suggest and recommend that the trustee sell all apartment properties at a favourable time except the apartment used by Douglas Joseph Claiborne, the beneficiary, while he resides there and invest the proceeds in fee simple commercial property with or without a mortgage with strong long-term tenants in the Pearl City area.

By the time of this statement, Rand was better informed of the values of the properties and the amounts owing under the mortgages. Rand instructed Mr Hand to list the apartments for sale in the knowledge that the timing was not favourable. There was reasonable prospect, on the advice of Mr Hand, that the sale of four apartments might pay out the mortgages and provide proceeds for investment.

29 When Mr Harpur consented to act as trustee, the Notes had not been paid out. Despite the importance to Mr Harpur of Rand's undertaking to pay out the Notes, as he would now have the court accept, Mr Harpur did not document this obligation when other obligations were documented. His explanation was revealing:

Counsel: Yes, and I suggest that it [a desire to avoid any responsibility for an illiquid trust] was such an important factor that if it had occurred you would have insisted that it be included in the documentation?

Mr Harpur: I don't agree with that. I saw no reason to include it in the documentation at all. There are a number of reasons for that. Firstly, I was an executor. It was a debt, in my view, of Peter and a debt of the estate. While I was executor there was going to be no-one arguing about it, or I didn't think there would be, and I had his power of attorney. Unfortunately everything accelerated and he died before anything more could be attended to, and that was the end of my power of attorney.

30 What did happen in August 1997 was that Rand then took steps towards gifting the Thai condominium to the trust. This conduct is not inconsistent with the intention attributed to Rand by Mr Harpur that Rand provide funds to the trust because the condominium was on the market. Rand also made a further will. As I have noted above, Mr Claiborne was an income beneficiary for life by this will. Whether this was a different benefit for Mr Claiborne to that provided by earlier wills, I cannot say. It is plainly a means of providing income support for Mr Claiborne that does not involve relocating the capital underpinning that benefit to an environment where there are significant regulatory compliance issues with risks of penalties and taxes.

31 It cannot be discounted that in 1997, Mr Harpur may have been satisfied with Rand's response to his request that, as a condition of accepting the trusteeship, the financial position for the trust and Mr Claiborne be improved rather than simply paying out the Notes. This might explain why, when he discovered to his disappointment that he was not the executor of Rand's estate, Mr Harpur did not demand that the estate pay out Rand's personal liability on the Notes.

32 Immediately after Rand's death, in a brief letter, Mr Harpur informed Mr Claiborne that Rand's express wish was for all of the apartments to be sold.

33 Mr Harpur also maintained that Rand decided, before he died, to transfer the Thai condominium into the trust. Mr Harpur documented this decision in a deed. Rand executed the deed before the Consul General for Thailand to transfer 'all my rights, title and interest in the [Thai condominium] and/or the proceeds of sale' to Mr Harpur, to be held pursuant to the terms of the Claiborne Trust. This deed recognises that the condominium was on the market and was, in essence, a cash contribution to the trust. Rand also signed a power of attorney written in the Thai language. This power of attorney empowered a Thai national to sell the condominium. Mr Harpur believed that he was the appointed attorney. Rand also contacted his solicitor instructing him to release the original title deeds, which came into Mr Harpur's possession. The power of attorney would lapse on Rand's death.

34 The Thai condominium was neither sold nor its title transferred to Mr Harpur. After Rand died, Mr Harpur made some inquiries about the condominium but at no stage did he actually take possession of it, collect any rent from it, or pay any of the outgoings associated with it.

35 It subsequently emerged that one Peter Richardson was probably in possession of the Thai apartment, paying the outgoings but not paying rent. Not revealed in evidence was whether Richardson had any agreement, arrangement, or understanding with Rand. Mr Richardson made contact, in Melbourne, with Mr Tesoriero, one of Rand's executors, telling him that he had the keys to the condominium, was paying its outgoings, and had been negotiating with Rand to buy it. Mr Tesoriero told Mr Richardson to contact Mr Harpur. He did not tell Mr Harpur that Mr Richardson had made contact. Later in January 2001, Mr Tesoriero travelled to Thailand to meet with Mr Richardson and his Thai attorney. Mr Tesoriero described Mr Richardson as pestering, aggressive in his dealings. Mr Tesoriero considered he had no role as executor in relation to assets not situated in Australia.

36 There was an earlier will made in 1992 in Thailand and in the Thai language. Why that will mattered was unclear since Mr Tesoriero referred Mr Richardson to Mr Harpur, presumably because of the knowledge of his co-executor, Mr Levy, of Rand's intention to transfer the condominium to the trust. On the other hand, Mr Richardson's Thai attorney advised him that the later Australian will revoked the Thai will and, in order to complete his negotiations to purchase the condominium, Mr Richardson should deal with the Australian executors.

37 The executors did not take possession of the condominium. They did not ask Mr Richardson to pay rent nor has the estate ever made any payment towards the condominium's outgoings. The executors did not notify Mr Harpur of their dealings with Mr Richardson in relation to the condominium. Mr Richardson's Thai attorney provided evidence to Mr Tesoriero that Rand was still the registered owner of the condominium.

38 Much later, in about October 2003, by powers of attorney in the Thai language, the executors appointed Mr Tesoriero as their attorney to conduct civil law suits in all Thai courts, including applications to become inheritance manager of Rand with the Pattaya Provincial Court. I am satisfied that at this time the executors intended to deal with the Thai condominium, probably by completing a transaction with Mr Richardson. To the extent that the executors suggested otherwise in evidence, I reject that evidence. In particular, I am not satisfied that the executors honestly believed Mr Harpur had abandoned the Thai condominium, as they stated in evidence. They were aware that Rand had directed the release of the title deeds to Mr Harpur and had signed the transfer deed.

39 The evidence is inconclusive about the negotiations between the executors and Mr Richardson except in this respect: the executors did not complete any negotiation. On Mr Richardson's application in May 2010, the Pattaya Provincial Court declared that Mr Richardson had acquired the ownership of the condominium by adverse possession. In October 2010, Mr Richardson sold the condominium at a price of 5.5 million Thai Baht.

40 Thus, neither the trust through Mr Harpur, nor the estate through the executors, has since Rand's death in 1997 taken possession of the condominium, received any income, or paid any expenses. The asset is now lost. There was evidence, to which I will later refer, that the market value of the condominium as at 26 July 2011 was 6.4 million Thai Baht.

41 Returning to the Hawaiian apartments, the sale of apartment 1810 was negotiated by Rand before he died. He agreed with the tenant in July 1997 to part with the apartment on the basis that the tenant took an assignment of the mortgage and the loan. When the transaction closed, the loan was paid out with the adjustments and the expenses of the transaction being paid by the trust.

42 In October 1997, apartment 2205 sold for US$220,000. When the sale was completed, US$108,688 remained in an escrow account to the benefit of the trust.

43 About this time, Mr Harpur faced new difficulties. Mr Claiborne was dissatisfied with Mr Harpur's management of the trust and complained. Mr Harpur told Mr Claiborne that Rand left the trust in a dreadful state because it was negatively geared and the bank was insisting upon repayment of its loans. Mr Harpur contemporaneously stated:

When Peter passed away the ongoing funding of the negative gearing ceased. Until apartments other than the one you live in are sold the trust has no income to pay you an annual distribution.

Mr Harpur's response, curiously, makes no mention of the obligation upon Rand's estate, that Mr Harpur now asserts, to pay out the Notes. This was the very circumstance that Mr Harpur now contends that he discussed with Rand, leading to Rand's agreement to pay out the Notes to adequately fund the trust. Yet there was no suggestion that the conditional event for a distribution to Mr Claiborne was discharge of the Notes by the estate.

44 Mr Claiborne appears to have found this explanation unsatisfactory. He petitioned the court in Hawaii for Mr Harpur's removal as trustee, an accounting, and damages. The court dismissed two of the petitions and the third petition has been inactive for more than nine years. However, there were consequences from the existence of these proceedings. A lis pendens prevented the sale of apartment 1405 for US$185,000. Mr Harpur negotiated with Mr Claiborne for its release in return for a payment of US$25,000. Mr Harpur made that payment but Mr Claiborne did not honour the bargain by lifting his lis pendens. Mr Harpur also incurred legal expenses defending these proceedings, which he paid out of trust assets. A third matter was that Mr Harpur became concerned that he might need to call on the trustee's right of indemnity from the trust fund and that right appeared to him to be under threat from inadequate solvency.

45 The sale of apartment 2301 resulted in net proceeds of US$224,008, disbursed directly to Mr Harpur in Australia. He opened a bank account in Australia for the trust with those funds. Mr Harpur lent the funds in the Australian bank account on an unsecured loan to Flemalle Pty Ltd, a private company controlled by Mr Harpur, at an interest rate of 7% per annum.

46 In October 1998, the amount secured to the Bank of Hawaii on the two remaining unsold apartments was $177,386. The trust had available to it $274,464 arising from the sale of apartments 2301, 2205 and 1810 (less the amounts paid in expenses, taxes and servicing mortgages). By the first anniversary of Rand's death, Mr Harpur could have paid out all mortgages. The trust could have held unencumbered title to apartments 1405 and 1815, and cash reserves of US$97,000. Further, as Mr Harpur asserts, the trust would have a claim against Rand's estate to recoup approximately US$348,352 paid in discharge of the Notes contrary to the agreement he alleged he had reached with Rand shortly prior to his death.

47 By August 2000, the maintenance fees that are payable in multiple dwelling structures were in arrears and the mortgages were in default. In July 2001, foreclosure proceedings commenced. There was no defence other than to remedy the default, and Mr Taylor, then representing Mr Harpur, advised that course. Mr Harpur told Mr Taylor there were no funds.

48 Shortly after Rand's death, the executors wrote to Mr Harpur informing him of their appointment and inquiring whether assets owned by Rand in the United States of America and Thailand had been disposed of during Rand's lifetime or whether there were assets to be detailed in the application for probate. Mr Harpur's response was that the United States and Thailand assets of Rand were transferred to the Claiborne Trust on 27 August 1997 and did not form part of Rand's estate. Mr Harpur made no mention to the executors of the agreement or arrangement he now alleges - that Rand would pay out all debts owed to the Bank of Hawaii, secured over the Hawaii apartments. The executors made no inquiry to verify Mr Harpur's statement.

49 On 19 December 2003, when Mr Harpur's solicitors first made demand that the estate pay to the trust the amount paid to the Bank of Hawaii in discharge of Rand's liability under the Notes, the agreement or arrangement between the trust and Rand, which Mr Harpur now asserts, was again not mentioned. In fact, it was not to be mentioned at all until Mr Harpur filed and served a further amended reply on 29 July 2011, about 14 years after the conversation on which it is based. The demand first made of the estate was in the sum of US$426,630, which was the amount that had been recovered, by December 2003, through sales by Mr Harpur and the mortgagee sales of apartments 1405 and 1815. It is remarkable that no such demands had been made of the executors of Rand's estate at any earlier point in time, particularly as there were several occasions when the impact of the obligations of the Notes on the solvency of the trust was stark.

50 By the same letter, Mr Harpur's solicitor raised the issue of the Thai condominium. The solicitors asserted that Rand had completed the gift of the condominium to the trust prior to his death and that the executors held title as a bare trustee. Mr Harpur sought the co-operation of the executors by completing the power of attorney to enable the registration of title. Apart from acknowledging receipt of the letter, the executors made no substantial response. They did not inform Mr Harpur of their dealings with Mr Richardson. The executors were aware of the basis of the claim by the trust to the Thailand condominium. I do not accept the explanation of Mr Tesoriero that they thought Mr Harpur had abandoned the trust's claims to that property.

51 Mr Harpur commenced this proceeding but neither party did anything in relation to the Thai condominium and Mr Richardson's successful claim of title to the condominium by adverse possession was only discovered in preparation for the trial of this proceeding. In fact, for that reason, a trial date was vacated. There was no satisfactory explanation given of the failure to secure possession of a condominium with disputed title, despite a claim to mesne profits.

Caution is required in evaluating the evidence of Messrs Harpur, Levy and Tesoriero

52 As Rand is dead, I approach the evidence of Rand's statements and intentions with caution. Were Rand alive and able to state his position, the court could test Mr Harpur's proofs and the executor's defences in the ordinary way. The court must guard against the possibility of a false claim against the interests of a deceased person who cannot give evidence about that claim. The opportunity, where evidence cannot be contradicted, to favour self-interest can be taken without necessarily presenting a false claim. A witness with the best of intentions may sub-consciously favour self-interest. I need to sift through the evidence presented to me with great care and with a mindset of initial suspicion that is amenable to persuasion where the truth and reliability of the evidence satisfies the standard of proof required. Although this approach tends to focus attention on contemporaneous documents, care is still required, as those documents may not be placed in proper context in the relevant dealings, absent tested oral evidence of the whole course of the communications between the actors involved. Statements in documents, which may have been clearly understood at the time, may be interpreted differently when read by, or to, a court by those not involved in the original communication. Another issue is whether all available evidence has been presented. On the one hand, is the question whether there is other evidence of which the deceased might have been aware? On the other hand, any failure of the claimant to bring forward corroborative evidence which was, or ought to have been, available will bear particular significance. It may often be necessary to discern the apparent logical probability of events carefully and cautiously for the fallibility of judicial certainty so dictates, hence, the need for careful scrutiny.

53 Plunkett v Bull[1] involved an action for debt against a deceased estate. Isaacs J noted that the plaintiff bore the burden of establishing 'the original creation' of the deceased's indebtedness and stated:

Undoubtedly it is established in cases of this sort the Court scrutinizes very carefully a claim against the estate of a deceased person. It is not that the Court looks on the plaintiff's claim with suspicion and as prima facie fraudulent, but it scrutinizes the evidence very carefully to see whether it is true or untrue.

Here, Mr Harpur contends for Rand's retention personally of the debt obligation to the Bank of Hawaii on the Notes when disposing of the apartments that secured that obligation and for the acquisition of which the obligation was accepted - an obligation of proof that resembles the burden on the plaintiff considered by the High Court in that case.

54 Stick-On Signs Pty Ltd v Sign Gear Pty Ltd,[2] raised an issue of an oral agreement with a deceased person that was uncorroborated. Osborn J said:

It is clear that a court may accept uncorroborated evidence of an interested party as to conversations or arrangements with a deceased person,[3] however the attitude a court should take to such evidence is explained in Plunkett v Bull ... This principle is applicable even where, as here, the claim is not made against the estate of the deceased - the important point being that the deceased is no longer able to confirm or deny any claim made against his or her (prior) interests... One factor which is important in the court's scrutiny of such evidence is whether the claimant has brought forward all available evidence.

55 In Nolan v Nolan,[4] the plaintiff sought a declaration that she was the full beneficial owner, and entitled to possession, of three paintings by the late Sir Sidney Nolan. The plaintiff needed to prove the necessary elements of a perfect gift of artworks to her, an obligation that resembles the onus that Mr Harpur must discharge in this proceeding concerning the Thai condominium. Dodds-Streeton J identified her approach to be:

In the present case, both the alleged donor and the alleged donee are dead, the donee for nearly 30 years. In seeking to discharge the onus of establishing the necessary elements of a perfect gift, the plaintiff must rely on documents, rather than on oral testimony which may be tested by cross-examination. Where the alleged donor is dead, the authorities require the claimant donee's account of events to be approached with caution. Where both the alleged donor and donee are dead, and reliance is placed on documents, caution is particularly necessary.

Her Honour added that in addition to the caution generally appropriate to claims against the estate of a deceased person, there might be additional circumstances that may independently dictate a cautious approach.

56 The executors urged careful assessment of several further circumstances relevant to Mr Harpur's evidence. Mr Harpur admitted that, owing to a stroke that he suffered in 1999, he had and continues to suffer problems with his memory. That he had a poor memory could be one explanation of his answers given under cross-examination. There were many occasions when he made that concession. Mr Harpur did not help his cause by a late commencement of the proceeding, a little under six years after probate was granted. Then for a variety of reasons, it has taken 7½ years for the trial to get underway. Such a dilatory attitude to litigation by a wronged plaintiff, himself a solicitor, is inexplicable, particularly where the recall of conversations and events from the period 1993 to 1997 was critical. Mention was made of other litigation running, but I see no justification in that quarter.

57 The executors contended Mr Harpur was not a truthful witness. The executors referred to two prior decisions in other earlier litigation involving unconnected matters where adverse credit findings had been made against Mr Harpur.[5] Initially, this reference was in the context of an application that Mr Harpur give his evidence-in-chief orally rather than by his witness statement standing as his evidence-in-chief. It was unnecessary to read these decisions to resolve that issue and I have not done so since that time as the reasons why another judge in another dispute may have made adverse credit findings is not only irrelevant, but might be seen as unfairly prejudicial. I have not taken any account of whatever observations were made in those decisions in resolving this proceeding.

58 I ruled that all lay witnesses should give their evidence-in-chief orally for two reasons. By reference to the principles that I have set out governing my obligation to scrutinise carefully the evidence where claims are made against the estate of a deceased person, observed oral evidence, not witness statements, was appropriate, indeed necessary. The other matter was that the statement of Mr Harpur was not in proper form, being inordinately lengthy and containing much irrelevant and inadmissible material. In its form, Mr Harpur's witness statement revealed a great deal of reconstruction and counsel contended that because of Mr Harpur's memory difficulties it would be unfair to him not to permit him to rely on his statement. I did not accept this submission.

59 Having carefully observed Mr Harpur in the witness box, I have concluded that he was an unsatisfactory witness. His poor memory of relevant matters exposed the degree to which he reconstructed events, and a tendency to proffer either a reconstruction or a lack of memory was evident when he was cross-examined. The parties had been involved in other proceedings arising out of Rand's affairs, bitterly fought over a long period, commencing with a caveat lodged in late 1997 against a grant of probate to the executors and ending in the Court of Appeal. The animosity, if not already felt from an earlier point, had plainly developed throughout the course of that dispute; it was apparent in the evidence on both sides. I will deal separately with the evidence of the executors but record now that what resulted from the attitude of the witnesses was a curious sense of advocated self-interest despite each party, and Mr Harpur and Mr Levy are solicitors, presenting in a representative capacity as a trustee or an executor. In Mr Harpur's case, I am not satisfied that he was an impartial trustee because that description, being inapplicable to his conduct in the management of the trust for reasons that are discussed elsewhere in this judgment, was inappropriate to describe his conduct in this litigation.

60 Mr Harpur's answers to interrogatories in a related matter were tendered against him as a prior inconsistent statement on the peripheral topic as to whether he gave legal advice to Rand.

61 I do not accept the submission that Mr Harpur was lying, as I think he was doing his best. The matters that I have set out are the reasons why I do not accept his evidence as reliable, and I have only taken his evidence into account when corroborated by a contemporaneous document or where matters are common ground.

62 Importantly, my finding affects Mr Harpur's evidence of his conversations with Rand in 1997. There were two critical conversations between Rand and Mr Harpur. I have dealt elsewhere with these conversations in context but it is appropriate to note now two further considerations that militate against accepting Mr Harpur's evidence of these conversations. Mr Harpur did not initially plead the conversations with Rand. It was not until Mr Harpur filed an amended reply in March 2011, about 14 years after the event and about 8 years after the proceeding was commenced, that it was first alleged that Rand had promised to pay out the Notes.

63 Mr Harpur's alleged conversations with Rand concerned the solvency of the trust, yet the first occasion when Mr Harpur contended for a right of recoupment was by a letter from his solicitors to the executors dated 19 December 2003. Mr Harpur is a solicitor. He was actively involved in litigation with the executors virtually from the time of Rand's death and legally represented. There was no suggestion that Mr Harpur was ignorant of relevant principles, or poorly advised, and no basis to so conclude. The solicitor's letter did not mention that Rand had, or had assumed, any responsibility to pay the Notes in conversations with Mr Harpur. Rather, the solicitors asserted that responsibility for the Notes followed because Rand was the original borrower who had failed to service the liabilities owed to the bank, resulting in the enforcement of the mortgages. The amount of US$426,630.48, with interest, was demanded 'under ordinary restitutionary principles' from the estate to recoup the loss. The solicitors also claimed recoupment under a clause of the trust deed, a basis not advanced in this proceeding.

64 The context of this letter is significant, for it follows virtually all of the dealings and events that define this dispute. During the course of those dealings, Mr Harpur, as trustee, confronted more than once the precarious solvency of the trust. Examples include his transfer of funds to Australia to protect the value of his personal right of indemnity from the trust, litigation with Doug Claiborne in Hawaii, and the mortgagee sales of two apartments because the trust failed to service the debts secured by the mortgages. In this context, Mr Harpur's failure to assert the agreement of Rand to pay out the Notes, had such an agreement been reached, is unexplained and, if it were true, improbable.

65 For the executors, both Mr Levy and Mr Tesoriero gave evidence. Each of them was on many occasions unable to recall events or explain contemporaneous documents when the lack of such recall or explanation appeared surprising. Pressed under cross-examination, as each of them was about the improbable explanation they presented concerning their dealings with Richardson, this type of response became markedly more frequent. Less inclined than Mr Harpur to reconstruct events, I consider they each sought refuge from the cross-examiner in a lack of recall or an inability to explain. True it is that they have waited a long time to present their defence, and their counsel urged that excuse, but like Mr Harpur, in giving their evidence they displayed in their attitude the battle scars of earlier litigation. I doubt that, during the 11 years since Rand's death, in bitterly fought litigation there has not been occasion to recall and remember the events in dispute. I consider that, on at least some occasions, Mr Levy and Mr Tesoriero were prevaricating or were presenting an inability to recall as a defence against a cross-examination that by its lack of penetration permitted that strategy.

66 Although both Mr Levy and Mr Tesoriero readily conceded that answers to interrogatories sworn in 2005 were inconsistent with Mr Tesoriero's evidence at trial, that inconsistency arose in the explanation of their dealings with Richardson. I found this evidence unsatisfactory, in part because of the inconsistency with the answers to interrogatories. The prompt concession of inconsistency in their sworn responses on aspects of their dealings with Mr Richardson, while it persuaded me that they were not lying to me from the witness box, did not persuade me that either Mr Levy or Mr Tesoriero gave reliable evidence.

67 I consider that the antagonistic adversarial mentality that the disputes over Rand's affairs seem to have engendered also infected Mr Levy and Mr Tesoriero. I do not find their evidence to be reliable and I have only considered their evidence where corroborated by a contemporaneous document or where it is common ground. Their limited involvement in the circumstances of the dealings with the Hawaiian properties was documented mostly by acceptable contemporaneous documents. It is in relation to their dealings with the Thai condominium that I largely reject their evidence, except where corroborated by contemporaneous documents or common ground.

68 The view that I have taken of the principal lay witnesses is that none of Mr Harpur, Mr Levy or Mr Tesoriero has given reliable evidence on key events. In the result, the careful scrutiny of the claims in the proceeding has required reliance on the contemporaneous documents, the money trail when evident, and, drawn from these sources and the matters that are common ground, the apparent logical probability of events.

69 I can make one further observation about my approach to the contemporaneous documents. One category of such documents is important transactional documents, such as the trust declarations, Notes, assignments and the like. As Gummow and Hayne JJ recently affirmed in Byrnes v Kendle,[6] the fundamental rule of interpretation of [a trust] Deed is that the expressed intention of the [settlor] is to be found in the answer to the question, 'What is the meaning of what the [settlor has] said?', not to the question, 'What did the [settlor] mean to say?' Gummow and Hayne JJ added:[7]

There is good sense in such a rule. Issues of the construction to be placed upon the words or actions of alleged settlors are apt to arise long after the event. For example, the dispute in Kauter v Hilton [1953] HCA 95; (1953) 90 CLR 86 arose between the executors of the will of Mr Hickey (who had died in 1950) and his niece, and concerned the construction to be placed upon his words and acts respecting certain bank accounts in the last five years of his life. Further, trusts give rise to proprietary interests, dealings which may engage third parties who are strangers to the original actors.

There was, in the course of evidence, an attempt to bring a certain focus on what Rand meant to achieve, what he intended, particularly in relation to the welfare of the principal beneficiary of the trust, Doug Claiborne. Such evidence is irrelevant and inadmissible on the interpretation of the meaning of these transactional documents. However, I have had limited, carefully confined, regard to such considerations in other contexts, particularly the assessment of probabilities and the logical context of events.

70 I will now turn to the issues arising in respect of the Hawaiian properties.

How did Rand, as settlor/transferor, constitute the assets and liabilities of the Peter Rand Trust?

71 The first issue involves a particular question whether Rand, as a necessary consequence of his dealings, retained the ultimate obligation as between his personal assets and the assets of the trust to repay the Notes to the Bank of Hawaii. The trust's claim is for recoupment, not contribution. Either that liability arises in equity or from the agreement reached with Rand when Mr Harpur accepted the office of trustee. For the trust to succeed, it must be clear that in the circumstances of the relationship between the trust and the estate, to do justice as between them equity demands recoupment by the trust from Rand's estate of the payment of Rand's debt on the Notes. I will consider this issue before returning to Mr Harpur's alternative contentions based on an agreement or an estoppel.

Statement of the applicable rules for recoupment

72 Rights of recoupment, like rights of contribution, arise from the injustice of the defendant having its burden relieved by the plaintiff.[8] There are three possible outcomes: the plaintiff's satisfaction of its obligation discharged the defendant's obligation, the plaintiff is entitled to indemnity or recoupment from the defendant for satisfaction of the obligation or the defendant must contribute to the plaintiff's satisfaction of the obligation. Recoupment and contribution are closely related doctrines and the same principles underpin the doctrines of marshalling.

73 In Caledonia North Sea Ltd v London Bridge Engineering Ltd,[9] to distinguish between cases where payment by one obligor discharges another obligor, and cases where it does not, Lord Hoffman explained that, as a general principle, a person who has more than one claim to indemnity is not entitled to be paid more than once. There are two different ways of giving effect to this principle. One is to say that the person who has paid is entitled to be subrogated to the rights against the other obligor, the solution ordinarily adopted when the liability of the person who paid is secondary to the liability of the other party liable. The other is to say that one payment discharges the liability, the solution adopted when the liability of the party who paid was primary or the liabilities are equal and co-ordinate. The appropriate question to pose was 'Who is first liable?'

74 Lord Bingham explained that question:[10]

When, in Mason v Sainsbury (1782) 3 Dougl 61, 64, Lord Mansfield CJ asked "who is first liable?" his question was directed not to any issue of chronology but to establishing where the primary responsibility lay to make good the loss. The terms of the Riot Act 1714 made plain that the primary responsibility lay with the inhabitants of the hundred, and it mattered not that the insurer had indemnified the insured. So in the present case: the contract between the parties and the commercial scheme of which it was part make it plain that primary liability was to fall on the contractor, just as in North British and Mercantile Insurance Company v London, Liverpool and Globe Insurance Company (1877) 5 ChD 569, on very different facts, it was held that a loss should be borne by the wharfinger's insurer because "the primary liability" (per Baggallay JA at p.587) was that of the wharfinger.

75 Lord Mackay considered that similar principles in the field of suretyship, provided by the decision of the Privy Council in Scholefield Goodman & Sons v Zyngier,[11] are helpful in considering whether a particular liability under a contract is primary or secondary. His Lordship concluded:

There is no reason in the present case why the contract between the operator and the insurance company should be construed as placing the insurance company on an equal footing with the parties to the contract, and I think the analogy of the relationship in this case between the contract and the indemnity insurance and that between the bill of exchange and the surety in the Zyngier case would suggest that similar reasoning would apply. There is no reason, as it seems to me, why the operator and the insurer should have the intention that the insurer should put himself on an equal footing with the contractor in respect of the indemnity which the contractor has given under the contract.

76 Mr Harpur does not contend that this is a case for contribution and does not seek that remedy.[12] Mr Harpur contends that Rand bore the primary obligation to pay the Bank of Hawaii on the Notes. The obligation of the trust, as mortgagor, was secondary. Mr Harpur submits that having satisfied that obligation, it is inequitable to deny the trust recoupment of the costs of doing so. Mr Harpur submits the trust is a guarantor who has paid the principal's debt. He relies on Brook's Wharf & Bull Wharf Ltd v Goodman Brothers,[13] an indemnity case, where Lord Wright MR explained that:

The essence of the rule is that there is a liability for the same debt resting on the plaintiff and the defendant and the plaintiff has been legally compelled to pay, but the defendant gets the benefit of the payment because his debt is discharged either entirely or pro tanto, whereas the defendant is primary liable to pay as between himself and the plaintiff. The case is analogous to that of a payment by a surety which has the effect of discharging the principal's debt and which, therefore, gives a right of indemnity against the principal.

77 In Armstrong v Commissioner of Stamp Duties,[14] a contribution case, Walsh JA applied the principle deriving from Brook's Wharf, which he stated as:

Where complete indemnity is sought on the ground that, although both plaintiff and defendant were liable to pay the debt, the defendant was, as between himself and the plaintiff, primarily liable, such a claim can be sustained where the debt is created by a revenue law.

78 In Balkin v Peck,[15] Mason P, with Priestley JA and Sheppard A-JA agreeing, said in a different context that I need not pause to describe:

The notion of a right to contribution, recoupment or indemnity is not peculiar to equitable relationships. Such rights, unless grounded in contract or statute, derive from the unfairness of a person who gets all or part of the benefit of property or a legal transaction not bearing all or the proportionate part of the burden associated with it. Lord Lindley described this concept of correlative benefit/burden as "the plainest principle of justice" in Hardoon (at 123). In Causley v Countryside (No 3) Pty Ltd (Court of Appeal, 2 September 1996, unreported) this Court approved the statement of McGarvie J in J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VicRp 88; [1985] VR 891 at 936 that "... the basis of the principle is that the beneficiary who gets the benefit of the trust should bear its burdens unless he can show some good reasons why the trustee should bear the burdens himself": see also Mahoney v McManus [1981] HCA 54; (1981) 180 CLR 370 at 388; Paul A Davies (Australia) Pty Ltd v Davies [1983] 1 NSWLR 440 at 450. Many later authorities have preferred to use the concept of unjust enrichment to describe the same basal principle: cf Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 at 256- 257. Whatever its label, it is a concept that informs doctrines of equitable and legal contribution (Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184; Albion Insurance Co Ltd v Government Insurance Office of New South Wales [1969] HCA 55; (1969) 121 CLR 342 at 350-352), marshalling (Ramsay v Lowther [1912] HCA 68; (1912) 16 CLR 1 at 23-24) and recoupment by varieties of sureties against those principally liable (Moule v Garrett (1872) 7 Ex 101 at 104).

The President cited with approval the earlier decisions of Brook's Wharf and Armstrong.

79 In two recent cases, the High Court has considered equitable contribution.[16] Aspects of the doctrine of equitable contribution assist in identifying the principles applying to Mr Harpur's claim to recoupment. Equity will relieve, by contribution, where there is common exposure of the obligors (or 'debtors') to the obligee (or 'creditor') and the equality of burden is disturbed or defeated by the accident or chance that the creditor has selected or may select one or some, rather than all, for recovery. Charging one surety with the common obligation discharges the other when 'each therefore ought to contribute to the onus'.[17]

80 In the context of a common burden, to determine the remedy equity inquires whether obligations can be characterised as 'of the same nature and to the same extent'.[18] The same question arises when courts examine whether the liabilities of two obligors are hierarchical, that is, the liability of one obligee is primary, or ultimate, and that of the other obligee is secondary. The plurality observed in HIH Claims Support Ltd v Insurance Australia Ltd:[19]

As the requirement of coordinate liabilities is essential for the operation of the doctrine of equitable contribution between obligors, the duty to contribute is not based on "some general principle of justice, that a man ought not to get an advantage unless he pays for it."[20]

Where the liability is hierarchical, and the secondary obligor relieves the common exposure of the obligors, that obligor is entitled in equity from the ultimate obligor, not contribution, but indemnity or recoupment.

81 Where a guarantor's liability to the principal creditor has accrued, the guarantor has a right in equity to require the principal debtor to exonerate him from his liability by paying off the creditor. The equitable right to mitigate the hardship that the common law imposed upon a guarantor, by requiring him to pay the principal debt before pursuing his right of indemnity against the principal debtor, is a quia timet action in equity. Such relief might have protected the trust from first having to pay the mortgage debt by requiring Rand, or later his estate, to take appropriate steps to discharge the Notes.

82 In Abigroup Ltd v Abignano,[21] following a review of the cases, the Full Federal Court restated the principles applying on a quia timet action in equity for contribution or indemnity. In the context of this proceeding, the trust would assert a right in equity to a declaration for recoupment before actual payment is made as mortgagor or loss sustained by mortgage enforcement, provided that the payment or loss is imminent.[22] The court explained the right in these terms:

It is well and long established in equity that a person entitled to an indemnity may obtain relief from the indemnifying party as soon as the person's liability to the third person arises and before he has made payment himself, except where the contract otherwise provides or certain exceptional circumstances exist: see National Financial Co; Ex parte Oriental Commercial Bank (1868) LR 3 Ch App 791; Wooldridge v Norris (1868) LR 6 Eq 410 Wolmershausen v Gullick [1893] 2 Ch 514 and other cases conveniently collected in Halsbury's Laws of England, 4th ed, vol 20, para 315. The person may therefore, where appropriate, obtain an order to compel the person who has given the indemnity to set aside a fund from which liability may be met (Re Richardson; Ex parte Governors of St Thomas's Hospital [1911] 2 KB 705 per Cozens-Hardy MR at 709) or to pay the amount due directly to the third person (Ascherson v Tredegar Dry Dock and Wharf Co Ltd [1909] 2 Ch 401) or where the giver of the indemnity is under no liability to the third person, in some circumstances even to pay the amount to himself (ie the person entitled to the indemnity: Lacey v Hill, Crowley's Claim (1874) LR 18 Eq 182 per Jessel MR at 191). But, as is noted correctly, in the passage mentioned above from Halsbury, the equitable right to enforce an indemnity does not constitute a debt (see the cases cited in Note 12 to para 315 of Halsbury which support the proposition for which they are cited).

83 In another contribution case, Willis v Teparyl Pty Ltd,[23] the Court of Appeal rejected, in the context of assignment of guaranteed lease obligations, a contention that the assignee's guarantors were released from liability to the lessor under their guarantee by the lessor's release of the original lessee's guarantor from all liability under his guarantee and therefore under the lease. The primary basis of the argument was that the assignee's guarantors had a right of contribution vis-à-vis the original lessee's guarantor that they had lost from the release in his favour by the lessor. The Court of Appeal held that the liability of the original lessee's guarantor and the liability of the assignee's guarantors were not 'co-ordinate liabilities' because the respective liabilities did not arise from a 'common obligation' and because the liabilities were not 'of the same nature and the same extent'.[24] Accordingly, there was no entitlement to contribution as between them.

84 Although the present proceeding does not raise this issue, I am, with respect, assisted by Mandie JA's careful restatement of the basis for a right of recoupment in an assigned lease context. His Honour identified the following principles:

(a) For the purpose of contribution, co-sureties must be guarantors of the same principal debtor or the same debt;[25]

(b) The general proposition applicable to a right of recoupment in equity, as against a subsequent assignee who is ultimately responsible for the relevant default, is that where one person is compelled to pay damages by the legal default of another he is entitled to recover from the person by whose default the damage was occasioned the sum so paid;[26] and

(c) The court will take into account the ultimate responsibility of a party for the default in question.[27] It has also been recognised that the question of culpability is relevant to determining whether particular liabilities are to be treated as 'coordinate liabilities' for the purposes of contribution.[28]

85 Mandie JA also quoted, with apparent approval, what McNeill J said in Becton Dickinson UK Ltd v Zwebner[29] about terminology. He said:

McNeill J noted that Pennycuick V-C found ambiguity in the phrases 'primary' and 'secondary' liability and preferred 'ultimate' to 'primary'. He said that there was no question but that the assignee was 'ultimately' liable for the rent etc and that the defendant had the prior liability as the assignee's guarantor. He further referred to what was said by Pennycuick V-C that 'this right of reimbursement, which carries with it the right of subrogation is not confined to the case of a guarantee, but applies in any case where there is a primary and secondary liability for the same debt'. [citations omitted]

86 The distinction between ultimate and secondary liability is a critical link in the contentions for Mr Harpur, as he submits the trust was a secondary obligor and that the ultimate responsibility to repay the Notes remained with the settlor, Rand.

87 This characterisation of the obligations is the nice question in this case. As will become clear, Rand is identifiable as first liable, chronologically, to the Bank of Hawaii. He was borrower and mortgagor, the mortgage including a covenant to pay. Thus, Rand, as borrower and as mortgagor, was liable to the same principal creditor for the same debt. Afterwards, when he settled the apartments on the trust, he voluntarily disposed of the asset acquired using the proceeds obtained by the Notes and mortgage security. Rand probably could not, and in any event did not, seek or obtain exoneration of his personal obligation on the Notes to the Bank of Hawaii. Mr Harpur contends that Rand intended, as obligor to the Bank of Hawaii in his capacity as borrower and also in his capacity as mortgagor, that he would retain ultimate or primary liability to repay the Notes when he, as settlor, created the trust and settled on it the property charged by the mortgages. Attention necessarily focuses on the circumstances of the settlement rather than the initial creation of the liability.

88 In another contribution case, Street v Retravision (NSW) Pty Ltd,[30] Retravision obtained judgment against each of the applicants on guarantees of the indebtedness of Terry's Sound Lounge Pty Ltd (Terry's), which was in liquidation. When it incurred the debts to Retravision that were the subject of the guarantees, there were reasonable grounds to expect that Terry's would not be able to pay all its debts as and when they became due. Gummow J determined a preliminary question whether the respondents, persons who took part in the management of Terry's ("the obligors"), were jointly and severally liable pursuant to s 592 of the Corporations Law for the debts. Gummow J held that the effect of s 592(1) of the Law was to render the obligors jointly and severally liable to the creditor as a matter of primary obligation. The liabilities of the guarantors under the instrument of guarantee were not primary obligations. As a matter of legal principle, the obligations were conceptually distinct. His Honour observed:[31]

That the obligation of the class is not in the same degree as the obligation of those who have given an indemnity or guarantee is emphasised by s 592(5). I have set out the text of that subsection earlier in these reasons. Persons who had given an indemnity or guarantee would have a right of exoneration by the debtor company. At law the action was one for money paid: Rowlatt on the Law of Principal and Surety (4th ed, 1982), p 134. The common law right of exoneration was supplemented by equity in the manner discussed in Firma C-Trade SA v Newcastle Protection and Indemnity Association [1991] 2 AC 1 at 28 and in Abigroup Ltd v Abignano [1992] FCA 567; (1992) 39 FCR 74 at 81-3 ; [1992] FCA 567; 112 ALR 497. However, if liability to pay a debt incurred by a company has been imposed by s 592(1), payment by a person so liable of the whole or any part of that debt does not render the company liable to recoup that person: s 592(5).

Later, Gummow J determined, on examining the source of the suggested obligation of the obligors to keep the guarantors harmless against their loss in suffering the judgment against them on the guarantees, that there was no equity to contribution.

Plainly there is no contract to that effect. Nor, on the agreed facts, is there a relationship between them, an incident of which, implied by law or equity, is an obligation upon the respondents to indemnify the applicants. The obligation of the applicants on their guarantees to Retravision was not an obligation for the discharge of which the respondents were in a relevant sense ultimately liable. This is not the sort of case for application of the principle illustrated by such authorities as Moule v Garrett (1872) LR 7 Ex 101. That case illustrates the proposition that as between the lessor and the original lessee and subsequent assignees of the lease, each is liable to the lessor on the covenants to pay rent, but nevertheless as between the lessees the ultimate liability falls on the current assignee: see generally Halsbury's Laws of England, 4th ed Reissue, 1993, vol 20, paras 345-50. The applicants guaranteed the obligations to Retravision of Terry's. They did not undertake to Retravision to answer for the obligation imposed upon any parties pursuant to s 592(1) of the Law. Therefore, they did not enjoy, in addition to any right of exoneration by Terry's, a right of exoneration by any other party rendered jointly and severally liable with Terry's by s 592(1). Essentially, the issue is one of contribution or no contribution, and indemnity is not an alternative any more than it was in Commercial and General Insurance Co Ltd v Government Insurance Office of New South Wales (1973) 129 CLR 374.[32]

89 In Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd,[33] an issue was whether a contractual liability in Speno to indemnify Hamersley was co-ordinate with a liability in Zurich to indemnify Hamersley under a liability policy. Speno arranged the policy naming Hamersley as an insured as required by the contract. Zurich claimed to be entitled to contribution from Speno in respect of its liability to indemnify Hamersley. The WA Full Court held that the two liabilities were intrinsically different in character; a conclusion founded in an analysis of the nature of the liabilities, and thus refused to order equitable contribution. Delivering the leading judgment on this issue, Wheeler J examined the terms of the particular indemnity provision in context for whether the contract intended to allocate primary responsibility by the indemnities created. Wheeler J described the works and services contract, there in issue, as a document dealing, in detail, with all of the rights and liabilities of the parties arising in relation to the work of Speno. In the context of that contract, the indemnity clause allocated primary responsibility. The insurance clause, protecting against the possibility of non-recovery from Speno under the indemnity clause, cannot affect the contractual obligations. Wheeler J noted that the Victorian Court of Appeal took a rather similar view of the relationship between indemnity and insurance clauses in the context of a lease. In Buller Ski Lifts Ltd v Mount Buller Alpine Resort Management Board,[34] the court observed that the need for insurance cover recognises 'the commercial possibility of insolvency or some other obstacle standing in the way of the lessee meeting the call for an indemnity, when made.'

90 In Zurich Australian Insurance Ltd v CSR Ltd,[35] an issue was whether an indemnity provided by a self-insuring employer in respect of a work injury involving a truck was co-ordinate with an indemnity provided by the insurer of the truck. Applying Street v Retravision (NSW) Pty Ltd,[36] the NSW Court of Appeal refused to order equitable contribution as there was no common interest and no common burden with joinder to a common end and purpose by the several obligations. Zurich had no obligation to the worker at all and although its obligation to CSR was quantified by reference to CSR's obligation to the worker, it was a secondary, not a primary, obligation.

91 The course of the proceedings in HIH Claims Support Ltd v Insurance Australia Ltd[37] involved both a recoupment claim that failed followed by a contribution claim that also failed. The litigation involved the activities of one Steele, who had an unresolved claim on an HIH insurer at the time of the financial collapse of the group. Steele was also a defined insured under another policy, but that insurer wrongly denied that its policy responded. Steele accepted assistance from the HIH Claims Support Scheme in defending proceedings in, and then satisfying, an adverse judgment obtained from the New South Wales Supreme Court. In the first Victorian proceeding, the Scheme, in Steele's name, claimed an indemnity from the insurer in respect of its payment of the damages and costs from the NSW proceeding after the insolvency of the HIH group. Steele was successful at first instance.[38] The Court of Appeal overturned the judgment, on the ground that the Scheme's payments in respect of Steele under the contract between them discharged the insurer's obligation to indemnify Steele.[39]

92 The Scheme then sought contribution from the insurer in a second proceeding and the Scheme's central submission was that it 'effectively stood in the shoes of HIH', thus replicating the circumstances where two insurance policies responded to a shared liability. Thus, orthodox principles of equity imposed a duty of contribution between the two insurers.[40] The Court of Appeal did not find it necessary, for reasons that I need not explain, to decide whether the parties' liabilities were not coordinate because the Scheme's liability was primary and the insurer's liability was secondary. The Scheme failed in the High Court.

93 The Scheme's circumstances were different from those of Mr Harpur, but the approach of the High Court shows the approach to be followed in resolving Mr Harpur's claim for recoupment. Whether equity should intervene to assist the Scheme required careful examination of the nature of the Scheme and of the rights and obligations created by participation in it. The High Court concluded that the obligations of the Scheme to Steele are not 'of the same nature and to the same extent' as the obligation of the insurer in its capacity as coinsurer of HIH in respect of the insured's liability[41] for three reasons:

94 There was no common interest or common burden between the Scheme and the insurer, tested by examining the consequences that would have ensued had Steele claimed first on the insurer;

95 Since the Scheme undertook no enforceable obligations until a payment or the first in a series of payments was made, the insurer, had it responded first, would never have had an opportunity to bring a claim for contribution against the Scheme; and

96 The risk undertaken by the Scheme could not be described as the same risk undertaken by the insurer, notwithstanding that the claim made under Steele's HIH policy was the factum upon which payment was made in respect of him under the Scheme.

97 Importantly for the issues in this case, the plurality stated:[42]

The [insurer]'s ability to claim the benefit of satisfaction based on the [Scheme]'s payments in respect of Steele, when sued by Steele in the first Victorian proceeding, is not sufficient to substantiate a common burden on the [Scheme] and the [insurer]. A "community of interest" between obligors is not a sufficient condition for the operation of an equity to contribute in circumstances where the obligations in question are qualitatively different, as they are here.

The Court did not need to deal with an amended notice of contention that raised the issue that the parties did not have a common burden or obligation at the time of the 'insuring clause event', and that the Scheme's indemnity obligation was primary whereas the insurer's was secondary.

98 Each of the obligations that now rest, respectively, with the estate and the trust had a common origin as a liability to the Bank of Hawaii. Rand accepted the liability in two ways, a personal covenant to repay the Notes and security over the property granted by him as mortgagor, with a personal covenant to pay the secured debt. Those obligations only give rise to two separate obligations to repay the debt when Rand, as settlor, severed the covenant to pay as borrower from the covenant to pay as mortgagor by the act of settling or gifting the latter by the declaration of trust. The circumstances in which the obligations were severed raise two issues to be resolved by careful analysis of the transactions and dealings. Are the two obligations of the same nature and the same extent? In the circumstances in which the several obligations arose, are they characterised as co-ordinate or hierarchical? Whether, and how, equity should intervene depends on that analysis.

Analysis of what occurred concerning obligations to the Bank of Hawaii

99 The circumstances requiring careful analysis are:

• the initial borrowing by Rand, creating the Notes and the mortgages;
• the settlement of The Peter Rand Trust;
• the assignment of the apartments to the trust; and
• aspects of the conduct of the trust by Rand.

100 When first created, Rand personally accepted the obligations under the facility documents for the loans and mortgage securities. Where did the obligations under the facility documents lie when Rand alienated the beneficial interest in the properties by transferring title to the properties to himself in his capacity as trustee of the Peter Rand Trust?

101 The convenient starting point is the initial creation of the Notes and the mortgages. The circumstances of purchase of each of the Hawaiian apartments, discounting some immaterial features, were similarly structured. Generally, conveyancing law and practice in Hawaii is not materially dissimilar in some respects from Victorian conveyancing law and practice. I heard evidence, which I accept in this respect, from Mr Carroll Taylor, who has practiced as an attorney in Hawaii since 1969. Although Mr Taylor acted on instructions from Mr Harpur, and gave evidence of events in relation to the apartments and litigation by Mr Claiborne against Mr Harpur, his evidence about aspects of Hawaiian law and practice touching on those events was uncontroversial. Hawaii has a Torrens system of title by registration. Each of the Hawaiian apartments was registered land. Bank financing for land purchase was broadly similarly structured to Victorian banking practice. The purchaser would enter into a loan contract secured by a registered first mortgage security.

102 The Hawaiian loan contract,[43] called an Adjustable Rate Note, contains a promise to pay the principal advanced to the Note holder, being the Bank of Hawaii or any assignee, and interest payable charged at a variable rate. The loan is to be repaid by monthly instalments. Failure to pay a monthly instalment on the due date is a default that can, if the default continues after notice has been given, result in acceleration of the liability to repay the full amount of the loan. Rand not only covenanted to repay the moneys due by the Notes, he covenanted not to transfer any interest in the properties without the prior consent of the Bank of Hawaii. Two particular clauses in the Note can be emphasised. Clause 9 provides:

9 Obligation of persons under this Note

If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in the Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obliged to do these things. Any person who takes over these obligations including the obligations of a guarantor, surety or endorser of this Note, is also obliged to keep all of the promises made in this Note. The Note holder may enforce its rights under this Note against each person individually or against all of us together. This means that anyone of us may be required to pay all of the amounts owed under this Note.

...

11 This Note secured by a security instrument

In addition to the protections given to the Note holder under this Note ... a mortgage ... dated the same date as this Note protects the Note holder from possible losses which might result if I do not keep the promises which I make in this Note. That Security Instrument and Rider describes how and under what conditions I may be required to make immediate payment in full of all amounts that I owe under this Note. Some of these conditions are described as follows:

Transfer of the property or a beneficial interest in borrower. If all or any part of the property or an interest therein is sold or transferred (or if a beneficial interest in borrower is sold or transferred and borrower is not a natural person) without lender's prior written consent, lender may, at lender's option, declare all sums secured by this Security Instrument to be immediately due and payable ... If lender exercises such option to accelerate, lender shall [give notice of default and] if borrower fails to pay such sums prior to the expiration of such period, lender may, without further notice or demand on borrower, invoke any remedies permitted by [the mortgage]. Notwithstanding a sale or transfer, borrower will continue to be obligated under the Note and this security instrument unless lender has released borrower in writing.

103 The mortgage defines Rand as the mortgagor and borrower. It recites that borrower owes lender the principal sum, being the amount evidenced by the Adjustable Rate Note. For example, on the purchase of apartment 2205 Rand borrowed US$86,000. The mortgage provides:

Borrower owes lender the principal sum of $86,000. This debt is evidenced by borrower's Note dated the same date as this security instrument which provides for monthly payments with the full debt, if not paid earlier due and payable on February 1, 2019. This Security Instrument secures to lender:

(a) the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modifications;

(b) the payment of all other sums, with interest, advanced under ... this Security Instrument; and

(c) the performance of the borrower's covenants and agreements under this Security Instrument and the Note. For this purpose, borrower does hereby mortgage, grant and convey to lender, with power of sale, the following described property ...

104 The mortgage includes covenants by the borrower:

(a) to promptly pay when due the principal of and interest on the debt evidenced by the Note;

(b) extension of the time for payment or modification of amortisation of the sums secured by the Security Instrument granted by lender to any successor in interest of borrower shall not operate to release the liability of the original borrower or borrower's successors in interest;

(c) if all or any part of the property or any interest in it is sold or transferred ... without lender's prior written consent, lender may, at its option, declare all the sums secured by this Security Instrument to be immediately due and payable.

105 While there was no direct evidence that Rand obtained the prior written consent of the Bank of Hawaii, the inference was clearly open that the relationship manager at the Bank of Hawaii, Ms Heidi Emery, knew of the transfer of the apartments to the trust. I will come to this evidence in due course.

106 Rand settled the trust by a declaration of trust on 31 August 1992. During Rand's lifetime, he amended and restated the trust, but nothing turns on those variations. In the third amendment to and complete restatement of the Peter Rand Declaration of Trust on 27 August 1997, the settlor's intention is found. No inquiry into the subjective state of mind of Rand was necessary, despite Mr Harpur's invitation to explore Rand's intention or desire to provide adequately for Doug Claiborne.

107 The declaration of trust does not specifically identify the assets or liabilities of the trust. It declares that the trust estate shall consist of the property in the trust at the date of the restatement, any property that the settlor may add to the trust estate at any time and any income on such property. The trustee's basic duties are to hold, manage and invest the trust estate, collect the income and profits, pay the expenses and distribute the net income and principal as provided. During Rand's lifetime, the net income and principal could be disposed of at his direction, or if he ceased to be trustee, in his best interests. As I have noted, Rand appointed Mr Harpur as trustee in his stead on 27 August 1997. On Rand's death, the trust converted to the Claiborne Trust, benefiting Mr Claiborne.

108 During Mr Claiborne's lifetime, he is entitled to all of the net income of the trust estate and the right to reside in Apartment 2301 or such other apartment as the trustee in his sole discretion may determine free of all expenses incurred in respect of such residence. The settlor granted to the trustee discretion and complete power to administer the trust estate, expressing his desire, as I have already noted, that the trust estate be invested in real estate. In support of the trustee's powers and duties, the declaration of trust provided extensive specific powers including the power to borrow and the power to pledge or encumber the trust estate, or a part of it, as security for loans.

109 On the same date, Rand and Mr Harpur executed a document recording Rand's resignation as trustee and Mr Harpur's acceptance and assumption of the trusteeship of the trust. This document identifies that the current trust assets include the real property identified in an attachment. The attachment identifies the five Hawaiian apartments, in each case identified by its reference number in the Office of the Assistant Registrar of the Land Court, State of Hawaii as the land described in a particular transfer certificate of title. The attachment identifies real property that is encumbered with mortgages to the Bank of Hawaii. In the circumstances, that fact would not have surprised Mr Harpur.

110 Although the restatement does not expressly do so, the appointment of trustee does expressly identify that the property forming the trust estate is mortgaged. In neither document is there any indication that Rand intended to retain the ultimate obligation to repay the Notes. First, the terms of the restatement of the trust envisaged the existence and use of mortgage securities in the management of the affairs of the trust. Second, in the context of a Torrens title system, the identification of the properties by reference to the registered title must include reference to such encumbrances as are registered on the title.

111 In the instruments transferring the properties into the trust when, or soon after, it was settled, there is no evidence of any intention on Rand's part to reserve to himself the ultimate responsibility to repay the Notes. Apartment 2301 was transferred to the trust on 31 August 1992. Rand held a leasehold interest.[44] The assignment of the lease to Rand as trustee of the remaining portion of the lease is absolute 'with all the powers set forth in the said trust declaration including ... full powers and authority to ... mortgage ... the said lease according to the sole judgment and discretion of the trustee. Peter Rand accepts said leases in his capacity solely as trustee and is not assuming any personal liability in his individual capacity'. That statement is to be properly attributed to a personal liability to pay the rents reserved by the leases. The estate, right, title and interest of Peter Rand as assignee in the properties is described in exhibit 'A' to the assignment. Exhibit 'A' identifies the lease by its title particulars including its reference number in the Office of the Assistant Registrar of the Land Court of the State of Hawaii and its transfer certificate of title number. It further records that the lease is subject to the terms and provisions of the mortgage dated 17 January 1991, in favour of the Bank of Hawaii.

112 The assignment of apartment 2205 is in the same terms. The instrument of transfer of apartment 1815 is a quitclaim deed, which is to the same effect using the same language, although a different instrument. The assignment of apartment 1810 is also by quitclaim deed to the same effect.

113 For each of these apartments, notwithstanding the terms of the Notes and the mortgage, title has been transferred to Rand as trustee of the trust subject to the existing mortgage and upon the acknowledged receipt of an unidentified valuable consideration. Each of these transfers occurred contemporaneously with the settlement of the trust by the transfer of the sum of $10 'and all other property hereafter added to the trust estate'. Although the American Trust Co of Hawaii Inc held apartment 1405 between its original purchase by Rand and its later assignment to the trust, the instruments of that assignment are to the same effect.

114 Given that the instruments of assignment nominate consideration of $10, I am satisfied that the expression 'other good and valuable consideration' refers to the acceptance by the trust of the obligation to satisfy the debt obligation secured by the mortgages over the properties. Further, the circumstances of Rand's settlement show that obligation to be, for the trust, the ultimate obligation to repay the Notes. There is no injustice or unfairness, against which equity might grant relief, in the trust assuming and retaining the primary or ultimate liability to discharge the Notes secured by the mortgages over the properties effectively gifted to it, subject to those mortgages. The trust was solvent in a balance sheet sense and the trustee had an unfettered discretion to manage the assets and liabilities of the trust estate. It is the contrary proposition that the necessary inference is that Rand retained that obligation that strikes me as absurd.

115 As Luxmoore LJ, with Lord Greene MR and MacKinnon J agreeing observed in Cunningham-Reid v Public Trustee:[45]

The substantial point in this case, however, on which the plaintiff is bound to fail, is that he has acquired, by reason of the death of Sir Ernest Sanger, the full beneficial interest in the lease. In those circumstances, it could hardly be suggested that he, having the full benefit of the lease, could be equitably entitled to call on the executors of his co-covenantor, whose estate has no beneficial interest in it, to pay half the rent. It seems to me that in equity the claim to contribution in these circumstances must, of necessity, fail.

116 Although the evidence did not explain the provenance of the copy documents evidencing the assignments, the executors did not dispute their authenticity. On their face, they appear to have been obtained by a registry search at the Hawaii Land Court. No witness gave evidence concerning these assignment transactions.

117 Notwithstanding references to the Bank of Hawaii, the Bank of Hawaii as mortgagee has not endorsed its consent on the assignments or otherwise provided that consent in a formal way. However, I do not accept this as conclusive. It is probable that the Bank of Hawaii was aware of and did consent to the assignment of the apartments to the trust. Two matters warrant drawing this inference. The first is that the Bank of Hawaii made further advances to Rand as trustee of the trust, secured by mortgage and the documents in respect of the further advances acknowledge the assignment. The second is that, after the assignment, Rand continued to service the Notes in his capacity as trustee and not personally. Rand continued to operate the Bank of Hawaii account as a management account, servicing the management of all properties. That is to say that from the settlement of the properties on the trust, it took both the benefit and the burden of the properties.

118 In the absence of definitive accounting records, I make the following findings about the management of the apartments.

119 No tax returns were ever prepared or lodged either in the USA or in Australia in respect of apartment rental. No financial statements exist in relation to the trust. No source accounting records were produced. There was evidence from Mr Harpur that an accountant, engaged after Rand's death on instructions to reconstruct the accounts of the trust, was unable to do so. There was no evidence of the recording or accounting treatment, by either Rand personally or by the trust, of the gifts of property into the trust at the time it was declared or of any subsequent payment made into the Bank of Hawaii account by Mr Rand prior to his death. I shall say more later about these matters.

120 In the following tables, I summarise my findings about the state of the mortgage accounts for each apartment. I will deal firstly with apartments 2205 and 2301, as on these two apartments the Bank of Hawaii made further advances to Rand in his capacity as trustee of the trust, on mortgage security as discussed above.

Between 1993 and 1998, the sum owing under the Note was reduced by about $74,000. When ultimately sold by Mr Harpur in January 1998, the proceeds available to the trust were US$108,688. These funds were retained in an escrow account. Of the funds held in escrow from this sale, $44,000 was paid out, mostly to the Bank of Hawaii to service remaining mortgages and $19,458 was paid into the escrow account on the sale of apartment 1810. A further $25,000 was paid to Mr Claiborne for the release of a lis pendens that prevented a sale of apartment 1405 for $185,000.

Between 1993 and 1998, the sum owing under the Note was reduced by about $120,800. When ultimately sold by Mr Harpur in October 1998, the proceeds available to the trust were US$224,008, paid directly to Mr Harpur in Australia and loaned to Flemalle Pty Ltd.

The amount owing under the Note was reduced by about $37,000 when it was repaid. There was no return to the trust following the mortgagee's sale in January 2002.

124 In respect of each of these apartments, the Bank of Hawaii made a further advance to Rand, as trustee of the trust, secured by a mortgage. These further advances, totalling about $135,000, were not explained by Mr Harpur or any witness called by him. The evidence did not reveal the application of the funds received by the trust. The contemporaneous documents tendered concerning these further advances were limited to a Bank of Hawaii 'Home Owner Mortgage, Security Agreement and Financing Statement', apparently obtained by search of the Hawaii Land Court for each apartment. This instrument is between the Bank of Hawaii and Rand, as trustee of the trust. However, the documents recite the original Notes, between Rand personally and the Bank of Hawaii on initial purchase of the apartment, which were secured by the original mortgage dated 4 January 1989. The mortgage is identified as the first mortgage. The assignment of the apartment by Rand to Rand as trustee of the trust is also recited. Rand, as trustee, is referred to in this document as 'you' and the prior Notes are described as 'your loans'.

125 The evidence suggests an ongoing harmonious relationship between the Bank of Hawaii and Rand until his death, characterised by open acknowledgement of the trust as the owner of the properties and the primary entity responsible for the debt to the Bank of Hawaii. That relationship operated consistently with the three categories of transactional documents, the declaration of trust, the assignments that effected the transfer of the properties into the trust and the further mortgage advances.

126 However, Mr Harpur claimed recoupment from the estate, not just of the amount owing under the Notes borrowed prior to the settlement of the trust, but also of these additional sums lent directly to the trust on the security of apartments 2301 and 2205, in respect of which Rand had no personal repayment or security obligation to the Bank of Hawaii. Neither Mr Harpur, when cross-examined, nor his counsel, in submissions, could explain the basis for recoupment of this sum. Ultimately, at the end of submissions, Mr Harpur abandoned that claim.

127 Concerning the mortgages on all apartments, the evidence about the mortgage accounts generally is unrevealing. There were no statements of account. However, what can be gleaned from transactions affecting each mortgage account shows that, at least on the accounts for apartments 1810, 2205 and 2301, there must be other transactions, unexplained and incomprehensible without proper accounts, which reduced the debt owing to the Bank by the time of sale from the amount advanced plus interest to the payout sum.

The amount owing under the Note was reduced by about $12,000 when it was repaid. When ultimately sold by Mr Harpur in April 1998, the proceeds available to the trust were UD$5,227, the sum remaining after expenses of this sale were deducted from proceeds of $19,458 from the sale of apartment 2205, which were transferred into this escrow account.

The amount owing under the Note had increased by about $10,600 by the time it was repaid. Following the mortgagee's sale in May 2003, the proceeds available to the trust, US$3,586 were paid into court. Mr Harpur has only recently sought an order for payment of these moneys to the trust.

130 Between the initial loan and repayment, collectively about $232,400 was applied to the sums owing on the Notes. There are two possible sources identifiable for the funds that reduced the debts, the leasing of the apartments or contributions from Rand. The evidence of Rand transferring funds to Hawaii was sketchy. Mrs Pamela Faye Rand Harpur gave evidence that on seven or eight occasions she was either in Rand's presence when he made a transfer from a Western Union office or herself made transfer payments on Rand's behalf of amounts of about $4,500 to an unidentified Hawaiian account. It is likely Doug Claiborne received these funds or perhaps the transfers reflected Rand's responsibility as trustee to service the mortgage debts during times of shortfall in the rent receipts. Probably Rand, whether as trustee or settlor, was simply keeping the trust solvent. Without accounts, one cannot say whether these amounts were loans or capital contribution. I am not satisfied that these occasional payments indicate either that Rand was primarily liable on the Notes or that he contributed funds that reduced the debts.

131 Mr Hand told me that his duties included advertising for tenants, collecting rent, paying outgoings, and depositing remaining rent into the Bank of Hawaii account after deducting outgoings and commission. On occasions, Doug Claiborne damaged the apartment in which he was staying and repair costs were deducted from rent receipts. Mr Hand did not make the mortgage payments. Mr Hand also directly made some payments to Mr Claiborne. Possibly, Rand personally paid money into the account but I am not satisfied of this. Probably, the net effect of the rents received over time through the efforts of Mr Hand in managing the rental of the apartments was, over time, applied to the debts with occasions of shortfall requiring Rand to contribute. I accept the receipt of rents through Mr Hand's activities as the probable explanation for the funds that reduced mortgage balances.

132 Thus, the manner in which Rand conducted the mortgage accounts as trustee is consistent with the ultimate obligation for the mortgage debts, as between Rand personally as settlor and Rand as trustee, lying with the trust from the time of the settlement of the trust.

133 Once the claim by Mr Harpur to recoup the further advances by the Bank of Hawaii to Rand as trustee are abandoned, I am satisfied that Rand personally and the trust were each liable to the Bank of Hawaii for the same debts. Those debts are the repayment of the sums advanced, interest and other expenses incurred according to the terms of the facility documents for each apartment. As between Rand personally and the trust, the obligations were hierarchical. Ultimate responsibility for the debts was borne by the trust. When solvency became an issue, Rand as trustee decided to sell the properties and repay the mortgages from the proceeds of sale. Rand did not fully implement his decision before his death.

134 When Rand first transacted with the bank and created the Notes and the mortgage security, Rand personally bore sole responsibility for any default in repayment of the debts, a responsibility secured for the benefit of the bank by the mortgages. As settlor of the trust, Rand divided this obligation. He transferred the apartments and the mortgages to the trust and in so doing, I am satisfied that he intended to and did transfer to the trust the ultimate responsibility, as between himself and the trust, for repayment of the Notes. He did not obtain a discharge from the Bank of Hawaii of his liability as the borrower under the Notes. Nevertheless, that liability was secondary to the obligation accepted, and discharged, by the trust. There is no commercial imperative, as discussed in Speno or Buller Ski Lifts, which creates a context where the remaining obligation of a settlor of a trust, as a borrower who has parted with the benefit of the security, must be taken to be the ultimate obligation to repay the Notes reserved to him.

135 This hierarchy is evident from the documents for the reasons discussed. Another reason why the ultimate responsibility for the debts was intended to, and did, pass to the trust was that the trust controlled the apartments, receiving the rents, paying the expenses and determining in what form the assets comprising the trust fund were held. Undoubtedly, the trust had balance sheet solvency at all times when Rand was alive. Other than the Thai condominium, there was no basis in the evidence to infer that Rand intended to settle further property on the trust by a payment to discharge the mortgages. It was a matter for the trustee whether the assets of the trust continued to be five apartments, each subject to a mortgage, with four apartments earning rent or, for example, as only one unencumbered apartment available to Mr Claiborne, and a fund invested either with or without a mortgage in property in Hawaii. Upon the assignment of the mortgages and the ultimate responsibility for any debt arising from default in observing the terms of the Bank of Hawaii facilities to the trust, the culpability of the trust in compelling a mortgagee's sale becomes relevant requiring that I say more about the circumstances of Mr Harpur's administration of the trust.

136 When the trust paid the debts, it discharged the obligation of the estate of Rand to the Bank of Hawaii for the Notes. Because the obligor with ultimate responsibility satisfied the Notes, no right arises, whether by subrogation or other equitable principle, to recoupment from a secondary obligor. That is not because the Bank of Hawaii was entitled at law to recover from either obligor or because the estate (Rand) was first liable chronologically. A 'community of interest' between obligors is not a sufficient condition for an equity of recoupment. The circumstances in which Rand divested himself of the apartments and the trust acquired the mortgage obligations are determinative because Rand as settlor was both entitled to and able to structure the obligations to the Bank of Hawaii as he did, determining priority or hierarchy between the obligors. For the reasons I have given, on analysis, those circumstances show that the obligations to the bank were intended to be hierarchical with the trust bearing the ultimate obligation. Payment by the trust as the ultimate obligor discharged the estate as the secondary obligor from the obligation. No occasion arises for equity to intervene.

137 For these reasons, the claim to recoupment fails.

138 Mr Harpur submitted that unjust enrichment of the estate of Rand occurred through payment of Rand's debts by the trust under compulsion of law, founding in the circumstances the right to recoupment. For the reasons I have given, the estate was not unjustly enriched. I would add that the concept underlying Mr Harpur's claim, that a settlor is unjustly enriched where the trust is created that has a net asset position of approximately US$500,000, having had income producing assets settled upon it together with encumbrance liabilities and the power to borrow and mortgage, seems misconceived. No authority was cited to support that concept. It is a concept that sits uncomfortably with a basic notion of equity, he who derives the advantage ought to sustain the burden, and with the principles stated in the cases.[46]

139 For reasons that I will explain in due course, the trust did not pay the debt to the Bank of Hawaii in consequence of any default by Rand, either personally or as trustee. I am satisfied that Rand determined, as trustee and in accordance with the powers under the trust, to sell the apartments and pay out the Notes. There was no compulsion, in the relevant sense, in that determination. It was the product of personal circumstances for Rand and commercial circumstances for the trust. In this context, I am referring to the matters documented in the advice of the American attorneys that required a commercial decision from Rand about his affairs. Mr Harpur submitted that the mortgagees compelled the sales. While it is true that in respect of two of the apartments the sales were mortgagee sales, the defaults that caused the mortgagee sales were those of the trust when Mr Harpur was trustee.

140 Put another way, I am satisfied that when Rand transferred the apartments and mortgages to the trust it was not an incident of the relationship between Rand as settlor, and Rand as trustee, that a right of exoneration or an entitlement to an indemnity was either implied or arose in equity. Rand retained no benefit personally as settlor. Had Rand received and applied to his private purposes the funds advanced, with the trust volunteering mortgage security over its properties, equity might intervene. Different considerations might also prevail if the trust had purchased the apartments for value. The circumstances as I find them are more analogous with the position of the guarantor of an assigned lease, illustrated by cases such as Moule v Garrett and Willis v Teparyl. That each is liable to the bank is not the point for, as between them, ultimate responsibility falls on the trust on a proper analysis of the relationship and the transactions.

141 It follows that had the estate paid the Notes, a claim by it against the trust for indemnity would have succeeded.

142 It was not asserted that the obligations of Rand personally and the obligations of the trust to the Bank of Hawaii were co-ordinate obligations. There was no claim for contribution and Mr Harpur made it clear he made no such claim. Rather, Mr Harpur asserted that the ultimate obligation to repay the debt lay with Rand, and hence, with the estate, entitling Mr Harpur as trustee to recoupment of the whole of the sum paid to settle Rand's debt. As a matter of equitable right, I am satisfied that this claim fails. Mr Harpur's assertion bears some analogy with aspects of the subrogated claim of HIH Claims Support Scheme Ltd to a full indemnity, which failed in the Court of Appeal first time around.[47]

Did the assets of the Claiborne Trust include a right of indemnity from Rand when Mr Harpur became its trustee?

143 On the resolution of the first issue, the next issue becomes - did the assets of the Claiborne trust include an enforceable entitlement against Rand personally that the debt created by the Notes and secured by the mortgages would be discharged or, alternatively, serviced? If yes, what is that enforceable entitlement? Was it at all material times enforceable against the executors?

144 As I have determined that such entitlement cannot arise in equity as an incident of the relation between Rand and the trust, the legal basis must lie in contract or actionable estoppel by representation that precludes the estate from denying the entitlement to recoupment. The basis for such claims is the conversations in May and August 1997 between Rand and Mr Harpur. Did Rand state to Mr Harpur, as he now alleges, that if he agreed to assume the trusteeship, Rand would pay out the Notes, to ensure the trust was self-financing free of mortgages on the apartments?

145 For the reasons that I have already given,[48] I reject Mr Harpur's evidence of the conversations in May and August 1997 that found such claims. Mr Harpur's evidence was that he stipulated to Rand that he would not agree to assume the trusteeship unless the Notes were discharged. Rand replied that he would discharge them. Rand said he not only intended to discharge them but he was actually going to contribute more money to the trust from Australian funds. He wanted the trust to actually expand in Honolulu.

146 I consider that Mr Harpur's evidence of these conversations recalls snatches of their discussions, mostly out of context. The context now put by Mr Harpur is unreliable reconstruction. I accept it is probable that the two men discussed the capacity of the trust estate to provide adequate support for Mr Claiborne. To the extent that the response of Rand to these concerns is evident from circumstances other than the conversations alleged by Mr Harpur, I am satisfied that Rand was motivated in what he did by two factors. Rand's prime concern was genuine - to provide adequately for Mr Claiborne - but his other concern was the regulatory and commercial reality for the trust on his death that his American attorneys identified.

147 I consider that what both Rand and Mr Harpur did later reveals Rand's probable response to Mr Harpur when balancing these factors in their conversations and his decisions as trustee in 1997. For his part, Rand decided to sell off the apartments and pay out the Notes/mortgages, converting the trust estate either wholly or partly into cash. He gave those instructions to Mr Hand and commenced that process, despite suggestions from Mr Hand that, in Hawaii, the timing was not ideal for selling the portfolio of apartments. This approach by Rand to his perceived problems was, it appears, not completely formulated. Probably Rand, had he not died, would have eventually decided whether to retain one or more of the apartments for Mr Claiborne's use and decided whether to reinvest the funds in commercial property or repatriate the balance of the trust estate out of Hawaii. I cannot make a finding about this, but it matters not for it is clear that Rand did not agree to contribute money from Australia into the trust to discharge the Notes.

148 It seemed agreed between the parties that Rand was commercially astute. I cannot say what the witnesses thought that compliment meant. It would make no commercial sense to pay out the mortgages on properties then offered for sale, rather than settle the mortgages out of the proceeds of sale. Neither does it appear likely that a person with Rand's apparent sense of commercial astuteness would transfer additional funds, to support an income beneficiary, into a trust the capital of which was exposed to a significant risk of substantial taxes and penalties, which was the advice from the American attorneys being contemplated by Rand.

149 Rand did decide to sell the Thai condominium and gift the sale proceeds to the trust, which would have provided additional capital. Mr Harpur gave the instructions to the selling agent. Mr Harpur does not refer to that decision in the two disputed conversations. Rand also made ample provision for Mr Claiborne by his last will. That provision, coming from his Australian estate, was unaffected by tax and other regulatory issues that Rand's attorneys advised may have affected the Hawaiian-based assets.

150 I reject Mr Harpur's contention that Rand agreed with him that if he accepted the trusteeship of the trust, Rand would pay out the Notes. I find that Rand expected that the trust estate had an existing approximate net worth of US$500,000 and that Rand decided on two matters in order to balance the objectives that governed his decisions on the question of Mr Claiborne and the trust. He would make or retain the existing provision for Mr Claiborne in his Australian will and he intended to sell the Thai condominium. Rand did not agree, contrary to what Mr Harpur now contends, to pay off the Notes. Not only would such an agreement involve accepting the unsatisfactory evidence of Mr Harpur, it finds no support in the contemporaneous documents or in the logical probability of events. It is probable that Mr Harpur understood and agreed with that approach at the time, but for the reasons I have already set out, is unable or unwilling to recall that this is what happened.

151 In any event, for his part, Mr Harpur accepted the trusteeship without requiring the Notes to be paid out and knowing Rand's decision about the factors I have mentioned. As I have noted, immediately after Rand's death, Mr Harpur informed Mr Claiborne that all of the apartments were to be sold, that being Rand's express wish. The glaring omission from the letter is any reference to Rand's agreement to pay out the Notes. It could be said Mr Harpur was not obliged to tell Mr Claiborne that information, but I am in no doubt Mr Harpur understood and respected Rand's affection for Mr Claiborne, as well as his motivation to see him adequately provided for. Mr Harpur wrote the letter to inform Mr Claiborne of the circumstances of the trust following Rand's death.

152 I also take into account in this context Mr Harpur's conduct generally after becoming trustee, elsewhere discussed, which is inconsistent with the agreement he now alleges. If, as Mr Harpur contends, the trust assets included a right to indemnity or recoupment, he never asserted its existence while the financial position of the trust collapsed without Rand's financial support. Mr Harpur's conduct as trustee is not consistent with the fact, or his belief, that the trust was entitled to enforce such a right. Despite his evidence to the court that prior to his appointment as trustee he was concerned about and discussed with Rand the solvency of the trust, he did not seek to enforce the agreement to pay out the Notes by a claim for recoupment until 19 December 2003. Even then, as I have elsewhere noted, Mr Harpur did not seek recoupment as a contractual right arising from conversations with Rand.

153 Having failed to establish Rand's agreement or representation to Mr Harpur that Rand would pay out the Notes to induce Mr Harpur to accept the trusteeship, no basis has been established to conclude that the assets of the trust included a right of recoupment against Rand. It is unnecessary to consider further the claim that the estate is estopped from denying that Rand induced Mr Harpur to assume that Rand would pay out the Notes to restore solvency to the trust. I add that I do not accept that Mr Harpur, either personally in accepting appointment as trustee or as trustee in the management of the trust, suffered detriment as would make it unconscionable for the executors to resile from the assumed state of affairs that Mr Harpur alleges.

154 I am satisfied that Mr Harpur accepted appointment out of a genuinely held desire to assist Rand in his hour of need. He did not accept the trusteeship relying on or induced by any statement about the repayment of the Notes or the contribution of further funds from Australia to the trust. Mr Harpur recognised the most important provision for Mr Claiborne, in Rand's view, was an appropriate trustee to continue the existing trust. Mr Harpur had already been providing assistance with the affairs of the trust for some time before he assumed the trusteeship. He was open to accepting this obligation for Rand because of the close relationship between Mr Harpur's family and Rand, evident in many ways. I will mention three of them. Mr Harpur is the only member of his immediate family not to have added 'Rand' to his name. Members of Harpur's family received, or might have received, financial provision not only from Rand in death but also during his lifetime. Rand had been unable to persuade any independent commercial trustee to accept the trust.

155 I am satisfied that the present financial position of the trust, to the extent that it is apparent on the evidence, has deteriorated from its financial position when Mr Harpur became trustee largely as a result of his management of the trust.

156 The issues in this proceeding did not directly require an inquiry into Mr Harpur's conduct as trustee. He did not come to court to answer for his management of the trust. Nonetheless, as Mr Harpur raises the question of detriment, a number of matters are pertinent. On any view, however, Mr Harpur's management of the affairs of the trust has been poor. As I have noted, during 1998 - 2002, either Mr Harpur or the bank sold the apartments and Mr Harpur became embroiled in litigation with Mr Claiborne. Mr Harpur became so concerned about the solvency of the trust that he applied moneys out of trust assets, available to discharge the remaining Notes, to an unsecured personal loan to a related private company to protect his own personal right of indemnity as trustee.

157 Mr Harpur might have called on the executors to honour the trust's right of recoupment that he now alleges by quia timet action in equity.[49] It was clear to Mr Harpur that the trust was in financial difficulty from the outset of his involvement with its affairs. Therefore, if Rand personally bore or accepted ultimate responsibility for the Bank of Hawaii debts, the colourful metaphor of Lord Keeper was apt: that the trust might remove 'the cloud hanging over his head before it starts to rain.'[50] Mr Harpur would have it that it was precisely this sentiment that flavoured his conversations with Rand about taking over as trustee of a solvent trust for Mr Claiborne's benefit before Rand died.

158 The remedy, were it established as Mr Harpur asserts, may have been available to him virtually from when he became trustee in 1997, certainly well before December 2003. That he was dilatory in seeking enforcement of it was the basis of a defence of laches and a defence pursuant to s 5 of the Limitation of Actions Act 1958 (Vic). In view of the decision I have reached, I need not consider whether these defences are established.

159 During the period 1997 - 2003, the conduct of Mr Harpur in his administration of the trust is inconsistent with the fact, or a belief on Mr Harpur's part, of a right to require Rand or his estate to pay out the mortgage secured debts of the trust. During Mr Harpur's trusteeship, he continued to implement what Rand decided before he died. He continued to sell the apartments, with the Notes/mortgages discharged from the proceeds of sale. Mr Harpur made no demand on the estate that the executors pay out the Notes, indemnify the trust against liability for the Notes or pay to the trust the amounts paid in the Notes.

160 It is clear on the evidence that there was an opportunity for Mr Harpur to have discharged the liabilities of the trust, subject to a rider that Mr Claiborne's behaviour may have compromised that outcome. I set out the position as it appeared in October 1998 above.[51] At that time, Mr Harpur had sufficient cash reserves in the trust to have paid out the mortgages and retained apartment 1405 and approximately US$300,000. In addition, there was the Thai condominium to provide additional capital. Broadly speaking, Rand's wishes, as I find them expressed to Mr Harpur, were then achievable. Mr Harpur's explanation of his failure to achieve that outcome was that he was concerned that Mr Claiborne's unpredictable, irrational behaviour and his propensity to litigate in Hawaii would occasion Mr Harpur significant personal expense. Mr Harpur considered that he was justified in transferring US$224,008 to Australia and lending it, unsecured, to Flemalle Pty Ltd, a private company that he controlled.

161 Whether that conduct is proper for a trustee is not an issue to be resolved in this case and I will not examine it. As an explanation for his management of the trust, it is unsatisfactory. First, Mr Harpur did not prove the expenses that he had incurred as trustee that might have been properly satisfied by a call on his right of indemnity. Second, had he entertained legitimate concern for the financial position of the trust in relation to the value of his indemnity, Mr Harpur might have made a demand on the estate for the indemnity in respect of the Notes to which he asserts the trust was entitled. Third, I would have expected that Mr Harpur might have taken possession of the Thai condominium and either sold it or collected rent from it. He did not take this step either.

162 In the result, Mr Harpur's management of the trust saw the mortgagee's sales of the remaining apartments and the debts due to the Bank of Hawaii swollen with interest and enforcement expenses, leaving neither an apartment for Mr Claiborne to live in nor, it would seem a solvent trust estate. The assets remaining either do not exist, in the case of the right of recoupment, or are contingent, in the case of the Thai condominium, on the outcome of this proceeding. Mr Harpur has not accounted in this court for the asset represented by the Flemalle loan. It is probably spent on legal costs or charged to secure them or set aside by Mr Harpur against his right to indemnity.

163 For these reasons, I can find no explanation for the current financial position of the trust in any failure by the estate to pay out the Notes and I do not accept that the trust has relevantly suffered detriment for that reason.

Conclusions on the claims in respect of the Hawaiian apartments

164 For the reasons I have given, the plaintiff's claim to recoup the sum of US$305,256.64 fails. It is unnecessary to consider the further matters of defence alleged by the executors.

165 I turn now to the issues arising in respect of the Thai condominium.

Prior to his death, what property in Thailand, if any, did Rand transfer to Mr Harpur as trustee of the Claiborne Trust?

166 I have described above how Rand executed, on 23 September 1997, a deed to transfer to Mr Harpur as trustee of the trust 'all my rights, title and interest in the [Thailand condominium] and/or the proceeds of sale'. That this might occur had been previously discussed. Richard Ellis (Thailand) was instructed to sell the condominium by letter dated 27 May 1997. When the deed was executed, the property was on the market but not yet sold. At about the same time, Rand provided a power of attorney, in the Thai language, in favour of one Sompol Piromyotee. It appears that Rand also spoke to Mr Levy and asked for documents concerning his affairs in Thailand from Mr Levy's deed custody service, and that following that request Mr Levy provided the original title deeds to Mr Harpur. It was in these circumstances that Mr Harpur came to believe that Rand had done all that was needed to be done to transfer legal title to the condominium to the trust.

167 Mr Harpur misunderstood this power of attorney. Mr Harpur believed, not having had it translated, that he was the donee of the power, enabled to act as Rand's attorney in completing the transfer of title to himself as trustee. Mr Harpur was advised that under Thai law the power of attorney ceased to be operative on Rand's death. Mr Harpur contended there was nothing Rand or his executors could do to defeat the gift, but Rand's death had terminated the operative effect of the power of attorney, giving rise to a need for co-operation from the executors. Thus, Mr Harpur contended that equity should intevene to compel the executors to assist the final stage of registration of the gift to the trust at the Pattaya Land Court in Thailand.

168 There was no evidence of any communications with Mr Piromyotee, who was not called. Mr Piromyotee's relation to Richard Ellis Thailand, if any, was unexplained. What became of the instructions to either Richard Ellis or Mr Piromyotee (if any) also remained unexplained, save for the obvious inference that the property was not sold and by December 1997, Mr Hand had inspected the condominium and found it dirty and, apparently, not being marketed for sale. I have already described what later occurred.

169 There were two issues that raised questions about Thai law, one issue concerned the procedures by which title to land is registered and conveyed or transferred, and the second issue was whether Rand's 1993 Thai will was operative.

170 Thad Somporn Patradoon, a NAATI accredited translator, translated into English the Thai power of attorney dated 29 September 1997, signed before the Honorary Consul General for Thailand, and the will dated 22 January 1993. Mr Patradoon's evidence showed that by that power of attorney Rand appointed Sompong Piromyotee to be his representative in managing the sale of the condominium (the two units comprising the titles are particularly identified) 'at the cost of $4.4 million Baht' as well as giving all statements 'to the officer ... on behalf of me, until finalisation'.

171 That translation was confirmed by Mr Apivut Thongkam, a Thai lawyer called by Mr Harpur for other reasons. When shown the Thai power of attorney, Mr Thongkam explained that it authorised Mr Piromyotee to act on behalf of Rand in selling the Thai condominium. Mr Thongkam explained the power of attorney was in a form suitable for use in the Land Office and would permit Mr Piromyotee to act on behalf of Rand and sign any required document at the Land Office to transfer the title to the condominium.

172 Picharn Sukparangsee, a Thai lawyer, also gave expert evidence about the dealings with the property. Mr Sukparangsee informed me that he requested from the Chonburi Land Office, Bang Lamung branch where the properties are situated, certified true copies of the sale agreements and title deeds relating to the condominium. He examined the documents. Those records confirm that Rand purchased the two units on 21 December 1992 and 19 May 1993 and Rand remained the registered proprietor until an order was made by the Land Court. Mr Sukparangsee also provided a translation of the order and reasons for judgment on 27 May 2010 of the Pattaya Provincial Court. Apparently proceeding ex parte, the court ordered that Peter Gordon Richardson acquired ownership of the condominium by possession, by virtue of s 1382 of the Civil and Commercial Code of Thailand, an analogous process to a claim by adverse possession under Victorian law.

173 I think Mr Sukparangsee's evidence was, in some respects, confused because of the extent of his grasp of English. It requires careful evaluation. Mr Sukparangsee stated that while Rand was still alive, and without Rand's further assistance, Mr Harpur with the original condominium title deeds, the declaration of trust, the transfer deed of 23 September 1997 and the Thai power of attorney could have become registered as the owner of the condominium because Mr Rand appointed his attorney to sell the Thai propeties under the Thai power of attorney dated 29 September 1997.

174 Mr Sukparangsee was cross-examined on this statement and the role of the power of attorney. He agreed that Mr Piromyotee was empowered to sell the apartments. Contrary to what he appeared to be saying in his report, the power of attorney did not permit transfer of the property into the name of Mr Harpur. Mr Sukparangsee said the power of attorney authorised the sale of the property by Mr Piromyotee and enabled Mr Piromyotee to give his evidence to an official of the Land Office. Mr Sukparangsee considered that the sale and purchase agreement of the property might be made separately from the power of attorney but the power did authorise Mr Piromyotee to sell the property at the nominated cost. What it did not do was empower Mr Harpur to deal with the property. The power did not nominate a transferee of the property and it appointed Mr Piromyotee, not Mr Harpur, to administer the sale process.

175 The evidence of each of Mr Sukparangsee and Mr Patradoon was not in conflict. The power of attorney was not the power that Mr Harpur believed it to be. I am satisfied that, under Thai law, the documents fell short of constituting the means to achieve an effective transfer of title to the property to Mr Harpur. So much is clear simply from the terms of the power of attorney. However, even if there was a valid power of attorney, while the authenticity of the title deeds was not an issue, I am not satisfied that Mr Harpur's transfer deed was a document that, even in certified Thai language translation, might satisfy Thai land officials.

176 Mr Harpur told me that he drew the transfer deed of 23 September 1997. Rand, of course, signed it but it is in its terms equivocal evidence as to Rand's intention to transfer the title to the condominium to Mr Harpur. Equivocation arises from the words 'and/or the proceeds of sale'. In these circumstances, it is permissible to have regard to the surrounding circumstances to construe Rand's true intention as expressed in the transfer deed.[52] Had Rand truly intended to transfer title to the condominium to Mr Harpur, further documents were required. That clearly emerges from the evidence of the expert witnesses on Thai law. Ideally, a sale and purchase agreement or other instrument of transfer in favour of Mr Harpur in a form commonly accepted by Thai land officials, and a power of attorney from Rand to Mr Harpur would be required, along with production of the title deeds.

177 The evidence of the Thai lawyers, Mr Sukparangsee and Mr Thongkam, referred to sale and purchase agreements as being the common transaction document for a transfer. It was not suggested that the transfer deed that Mr Harpur had drawn could readily operate as a sale and purchase contract of the condominium. None of the experts in Thai law opined specifically on the enforceability of the transfer deed in isolation. Mr Sukparangsee refers to it in his report as part of a bundle that might achieve registration of Mr Harpur as owner. In the same reference, he appears to misunderstand the purport of the power of attorney that is also part of that bundle of documents. I have only accepted what he said about the power of attorney as it was clarified in cross-examination and is consistent with Mr Patradoon's translation.

178 Mr Sukparangsee's statement about the efficacy of the bundle of documents to which he refers is qualified by the inapplicable pre-condition 'were Rand still alive and without Rand's further assistance.' Whether the ambiguity inherent in the words of transfer expressed by Rand in the transfer deed would be significant in a Thai context has not been considered by either witness. I am not prepared to assume that the transfer deed would operate as an effective instrument of transfer in Thailand. In the same way as I would not accept, for the purposes of the rule in Milroy v Lord, the completeness of a gift of land in Victoria without an instrument of transfer in registrable form, I am not satisfied that Mr Harpur has established that registration of a transfer of title to him would probably have been obtained without other documents being completed.

179 Accordingly I am satisfied that, notwithstanding the reference in the transfer deed to the transfer of right, title, and interest, all that Rand effectively did was to appoint Mr Piromyotee to complete the sale of the apartment, while intending by the deed to transfer to Mr Harpur, as trustee, the proceeds of the sale of the apartment and presumably provide Mr Harpur with some authority to assist Mr Piromyotee, including gaining possession of the titles.

180 Mr Sukparangsee told me that, by Thai law, the power of attorney dated 29 September 1997 became ineffective on Rand's death. It follows that the authority for Mr Piromyotee to sell the condominium then terminated. Both of Messrs Sukparangsee and Thongkam informed me that, under Thai law, Rand's estate devolved on his heirs as determined by his last will.

181 A further disputed issue arose at this point. The executors contended that the will admitted to probate only affected Australian assets and the condominium, if not an asset of the trust, passed under the Thai will.

182 Evidence about the law of wills and succession in Thailand was given to the court by Mr Apivut Thongkam. Mr Thongkam informed me that Rand's Thai will, dated 22 January 1993, complied with the formal requirements of Thai law and would be considered binding unless changed or revoked under Thai law. A later valid will revokes an earlier will. Under Thai law, where there are different declared testamentary intentions, the intention under the later will prevails. Mr Thongkam's opinion was that the statement in the Australian will dated 8 September 1997 in the first paragraph that it 'hereby revokes all wills and codicils heretofore made by me and declares this will made 8th day of September 1997 to be my last will' was a form of statement of revocation of a prior will that was recognised to have that effect by Thai courts. Assuming that the Australian will is legally binding, in Mr Thongkam's opinion in Thai law, that will effectively revokes the will made by Rand in the Thai language dated 22 January 1993.

183 The validity of the Australian will dated 8 September 1997 is not in issue - it has been admitted to probate by this Court. Accordingly, I find that under Thai law, Rand's will dated 22 Janaury 1993 in the Thai language was revoked by him and is of no effect. The question of whether the condominium formed part of Rand's estate under the will admitted to probate by this court therefore turns on whether the purported transfer to Mr Harpur as trustee was effective, in equity, prior to Rand's death.

184 Before turning to that question, Mr Sukparangsee informed me that under Thai law the executors, as nominated in Rand's last will and appointed by order of this court, could transfer the registration of the condominium into their names. Formalities for registration, as prescribed in s 82 of the Thailand Land Code, involved filing the following documents:

• condominium title deed; and
• a certified, notarised and translated (by a certified Thai translator) copy of the probate parchment.

Mr Sukparangsee described this process as an administrative application. The process described seems broadly equivalent to registration by transmission in Victoria under s 49 of the Transfer of Land Act 1958. Mr Sukparangsee added that the land officials may be reluctant to register the executors, not being Thai nationals, as the owners of the condominium but practical difficulties could be avoided by the executors obtaining a court order from a competent court in Thailand for appointment as administrators of the Thai property. Such an order could be obtained upon the same documentation.

185 I am satisfied that what Rand did was to set up the sale of the condominium, most probably in order that the proceeds of sale could assist to capitalise the Claiborne Trust. I am not satisfied that he went any further with that planning. Rand signed the transfer deed presented to him by Mr Harpur and he asked Mr Levy to provide him with documents that were in the custody of Mr Levy's firm. At this point in time Rand did not consult with Mrs Chollada, the Thai solicitor to whom he had spoken some months earlier about a quick sale of the condominium. The glaring omission from these arrangements for the sale is the terms for the payment of the proceeds. There is simply no evidence of any instruction to Mr Piromyotee or anyone else, as to how the proceeds were to be held and disbursed.

186 Whether there was a completed gift of the condominium would seem a straightforward application of the rule in Milroy v Lord,[53] the application of which, in Australia, has been considered in a line of cases in the High Court, culminating in Corin v Patton.[54] I note the marked similarity between the facts of Milroy v Lord and those of this case. In Milroy v Lord, one Medley executed a voluntary deed purporting to assign certain shares to Lord, to be held by him on trust for Milroy and his wife. Transfer of the shares required appropriate entries in the books of the company, which had not been done before Medley died. Lord held a general power of attorney from Medley authorising Lord to transfer the shares, and a further power of attorney authorising him to receive the dividends on the shares. Lord received the dividends for the following three years until Medley's death. The issue for decision was whether Medley had effected a gift of the shares in equity prior to his death. The Court held that the gift was imperfect; the instrument of transfer was insufficient to constitute Lord a trustee of the shares. It was not a specifically enforceable contract. Medley left imperfect and incomplete that which he might have perfected and completed by making a transfer of the shares to confer legal ownership upon Lord.

187 Two propositions are evident from Milroy v Lord. First, the donor must have done everything necessary to be done according to the nature of the property in order to transfer the property and render the gift binding. Second, if the donor intended to effect the gift by one means, the court will not give effect to it by another means.

188 Mr Harpur contends that Rand did all that could be done to complete the settlement of the Thai condominium on the trust, and equity would have compelled the executors to assist in the registration of title in Thailand in Mr Harpur's name. Mr Harpur must now so contend, as the deed, power of attorney and delivery to him of the title deeds is, as I have found, ineffective under Thai law to transfer title to the condominium to Mr Harpur. It cannot constitute a declaration of trust nor an enforceable contract. In order to make it operative in equity, Mr Harpur contends that the rule in Milroy v Lord applies. Mr Harpur further contends the additional complication - that the opportunity was lost to Mr Harpur to compel the executors to act when the Thai court granted title by adverse possession to Richardson, who has on sold the condominium for value - is not fatal to his contentions, although amendment of the pleadings was required after 6½ years to claim equitable compensation.

189 The inability to register the transfer of title in Thailand is analogous to the facts of Anning v Anning.[55] There, the donor executed a voluntary deed conveying real and personal property to his wife and children, including mortgages of land under the Torrens system and a Crown lease. Although the deed was executed and delivered, the mortgages were transferable only by registration of a transfer instrument in the prescribed form. No such transfer was executed. Nor did the donor execute a prescribed form instrument of transfer of the lease, the registration of such an instrument being necessary to transfer title to the Crown lease. Each member of the Court held that the transfers of the donor's estate and interest in the real property were void because they were not in the forms prescribed by statute. However, in this and subsequent cases, divergent views of the content of the first of Turner LJ's propositions in Milroy v Lord emerged.

190 In Corin's case,[56] which concerned severing a joint tenancy, Deane J explains the established principle to be that an intended gift by voluntary assignment will be effective in equity only if the overall circumstances of the case are such that the stage is reached where equity regards the gift as complete.[57] That is to say, as having been actually made. Until that stage is reached, equity will neither recognise the existence of a trust nor protect the donee from the donor exercising any legal rights remaining in him. The reason why that is so is that, in the absence of special circumstances giving rise to particular doctrines such as the doctrine of equitable estoppel, equity does not recognise an obligation in conscience that requires a person who remains the owner of property to adhere to or to give effect to an intention to give it away: 'a man who forms an intention to make a gift is under no conscientious or other obligation to complete the gift.'[58] However, if the stage is reached where equity regards a gift of specific property as having already been made, it will necessarily treat the beneficial interest in that property as having passed to the donee.

191 Mason CJ and McHugh J stated the applicable principle in like terms:[59]

192 Accordingly, we conclude it is desirable to state that the principle is that, if an intending donor of property has done everything which it is necessary for him to have done to effect a transfer of legal title, then equity will recognise the gift. So long as the donee has been equipped to achieve the transfer of legal ownership, the gift is complete in equity. "Necessary" used in this sense means necessary to effect a transfer. From the viewpoint of the intending donor, the question is whether what he has done is sufficient to enable the legal transfer to be effected without further action on his part.

193 The question is whether Rand did all that was necessary for him to do in order to effect a transfer of the legal title to the condominium to Mr Harpur under Thai law. I find that Rand did not and that the gift to the trust, being incomplete, fails. I identify several obstacles to contending for a completed gift.

194 First, although Mr Harpur was armed with a delivered deed of transfer of 'all my rights, title and interest in the [Thailand condominium] and/or the proceeds of sale', there was no evidence that this deed was in a form that was acceptable to Thai officials for the reasons I have given. Rand had not done all that he could to complete the gift nor had he put it beyond his power to recall the gift.

195 Second, assuming the transfer deed was operative under Thai law and noting that Mr Harpur was in possession of the title deeds, he had no authority from Rand to register a transfer in Thailand. The power of attorney that Rand provided did not authorise Mr Harpur to act as Rand's attorney in effecting a transfer of the title to the condominium. It was to different effect, as I have discussed. Rand had not authorised Mr Piromyotee to transfer title to Mr Harpur.

196 In submissions, Mr Harpur, perhaps in desperation, pointed to a power of attorney in his favour executed on 23 June 1997, plainly directed to the Hawaiian assets. I was informed that by s 26 of the Provision of Administrative Procedure Act B.E. 2539 in Thailand, a document submitted to an official must be in Thai and in the case of documents in a foreign language, a certified Thai translation is necessary. Although it would, I expect, be possible for a certified translation of that power to be obtained, there was no evidence that it had ever been translated. Nor was it put to the Thai law experts for their opinion of whether the power was in a form acceptable to the Thai land officials or the Thai Land Court. Both Mr Sukparangsee and Mr Thongkam had commented in evidence on the enabling reference in Mr Piromyotee's power of attorney to giving evidence to land officials. I say in desperation, as it appeared that submissions were based on this power of attorney, because Mr Harpur wrongly believed he was the donee of the power in favour of Mr Piromyotee. Assumption founds his belief. I am unable to find that the power of attorney, executed 23 June 1997, would have enabled Mr Harpur to become registered as the owner of the Thai condominium. Again, Rand had not done all that he could to complete the gift nor had he put it beyond his power to recall the gift.

197 Third, although the transfer deed purported to transfer the proceeds of sale and Mr Piromyotee was empowered to sell, there was no evidence of Mr Harpur's entitlement to the proceeds of a sale by Mr Piromyotee. Rand did not empower Mr Piromyotee to pay the proceeds to Mr Harpur. Presumably, under Thai law, Mr Piromyotee would be obliged to account to Rand, or if he had died, to his executors, but there was no evidence of what Thai law is on this point.

198 Fourth, the rationale for refusing to complete an incomplete gift is that a donor should not be compelled to make a gift, the decision to give being a personal one for the donor to make. Mason CJ and McHugh J explained in Corin v Patton[60] that process of doing all that needed to be done in the context of the underlying principle. They said:

The rationale for refusing to complete an incomplete gift is that a donor should not be compelled to make a gift, the decision to give being a personal one for the donor to make. However, that rationale cannot justify continued refusal to recognise any interest in the donee after the point when the donor has done all that is necessary to be done on his part to complete the gift, especially when the instrument of transfer has been delivered to the donee. Just as a manifestation of intention plus sufficient acts of delivery are enough to complete a gift of chattels at common law, so should the doing of all necessary acts by the donor be sufficient to complete a gift in equity. The need for compliance with subsequent procedures such as registration, procedures which the donee is able to satisfy, should not permit the donor to resile from the gift. Once the transaction is complete so far as the donor is concerned, he has no locus poenitentiae. Viewed in this light, Griffith CJ's approach has the advantage that it gives effect to the clear intention and actions of the donor rather than insisting upon strict compliance with legal forms. It is a reflection of the maxim "equity looks to the intent rather than the form". By avoiding unnecessarily rigid adherence to the general rule and endeavouring to give effect to the donor's intention, the law avoids unjust and arbitrary results. See Zines, "Equitable Assignments: When Will Equity Assist a Volunteer?", (1965) 38 Australian Law Journal 337.

199 Here, the need for compliance with the subsequent processes of registration is not a procedure that the donor can satisfy. In my view, it cannot be described as a matter of insisting on strict compliance with legal form. Rand's acts of transfer of legal title fell well short of sufficient, as I have stated. Had the condominium sold before he died, Rand might have insisted that Mr Piromyotee remit the proceeds of sale to him in Australia and applied them to another use. Mr Harpur could not have prevented that remittance or that application. On the other hand, the executors could have applied for transmission of the title to themselves following Rand's death, but had they done so they had no obligation to complete the gift. Their obligation was to collect in the deceased's assets and administer the testamentary estate in the terms of the will. There is nothing unjust or arbitrary in that result, at least not until a light is focussed on the manner in which the executors attended to their duty, but that is a separate question. Their duty was not owed to Mr Harpur.

Conclusions on the claim in relation to the Thai condominium

200 That Mr Harpur has not been able to obtain the legal title to the condominium is not consequent on any rejection by me of an attempt by him to do so. Apart from a faint suggestion of an inquiry, unsupported by documents, there was no evidence before me that Mr Harpur ever instructed Thai attorneys to seek to register a transfer of the title to him. Neither did Mr Harpur take possession of the condominium. He gave evidence of some faint efforts to obtain possession of it; Mr Harpur asked Mr Hand, who regularly spent time in Thailand, to check on the condominium, and Mr Hand did so on two occasions. On the first occasion, Mr Hand inspected the property, describing it as being in a dirty condition. On the second occasion, in December 1998, Mr Hand could not gain access as the locks had been changed and someone was obviously occupying the apartment. It is probable that Richardson was in possession of the apartment by this time, as his possession of it would fit chronologically with the statements attributed to him by the executors. Neither Mr Hand nor Mr Harpur followed up on this discovery. Mr Harpur's approach has been to demand that the executors assist him.

201 It follows that I have decided for the reasons I have expressed, that Mr Harpur's contention that Rand did all that could be done to complete the settlement of the Thai condominium on the trust and that equity would have compelled the executors to assist in the registration of title in Thailand in Mr Harpur's name fails. There was no opportunity to obtain title to the condominium that was lost to the trust. I do not accept that the executors might be registered on title to the condominium as bare trustees, obliged to complete the gift, the condominium formed part of Rand's estate.

Does the court have jurisdiction to determine Mr Harpur's claim?

202 The executors contend that Mr Harpur's claim involves a determination of the trust's possessory or proprietary rights to the Thai condominium and that this court has no jurisdiction to determine that question.[61] I accept, for the purposes of considering the submission that, in certain situations, there is a common law rule denying jurisdiction to this court in respect of possessory or proprietary rights to land situated abroad. I do not accept the submission that the rule has any relevant application in this proceeding. Neither title to nor possession of the condominium are in issue. Both have been irretrievably lost. Moreover, Mr Harpur's claim is one where he contends the conscience of the executors is affected by their failing or refusing to assist him to obtain that title. At its highest, Mr Harpur can contend that he has lost the opportunity to obtain title to and possession of the property, that such loss was occasioned by the unconscionable conduct of the executors, and he is entitled to equitable compensation for the loss of the property from the trust. At best, the question of title to or possession of the condominium has become incidental.

203 In Dagi v The Broken Hill Proprietary Co Ltd (No 2),[62] the plaintiff's claims included causes of action in trespass, nuisance and negligence asising from discharge of certain by-products of a copper mine into a river in Papua New Guinea. Applications to strike out the statement of claim succeeded in part. Byrne J applied the Moçambique rule. In his analysis of the rule, Byrne J identified three exceptions to the rule that would permit the court to entertain actions affecting the title to or the right to possession of foreign land:

• The defendant's conscience is affected by some contract, trust or breach of fiduciary duty. Thus, where the action depends on the existence of some personal obligation arising out of contract or implied contract, fiduciary relationship or fraud, or other conduct that, in the view of a Court of Equity, would be unconscionable and does not depend for their existence on the law of the locus of the immovable property, the court may assume jurisdiction.[63]
• The issue as to title arises incidentally.
• The issue arises in the Admiralty jurisdiction.

After reviewing the cases, Byrne J identified as relevant the distinction between claims where the plaintiff must show title or possessory right to foreign land and claims that did not essentially concern that issue.

At common law, the court will refuse to entertain a claim where it essentially concerns rights, whether possessory or proprietary, to or over foreign land, for these rights arise under the law of the place where the land is situate and can be litigated only in the courts of that place. The claim must, not merely concern those rights; it must essentially concern them. This is because the rights must be the foundation or gravamen of the claim.

204 Not ever having the legal title to the condominium, Mr Harpur had to first show a completed gift by Rand to him, as trustee. The jurisdiction of the court to determine this question is not constrained by the Moçambique rule.

205 Numerous other issues arose during the trial and were the subject of submissions. In view of my conclusions, it is unnecessary to consider them all. The executors have wrongly maintained that the condominium did not form part of Rand's estate governed by the terms of the will that they proved in this court. It will be apparent that I would prima facie consider the loss by adverse possession of the Thai condominium to Richardson to be a loss for which the executors are responsible. At least as between Mr Harpur and the executors, that is the conclusion I have reached. Once that conclusion is reached, there are serious issues about the conduct of the executors in relation to the circumstances in which that asset was lost to the estate. As I have stated, I have formed an unfavourable view about the evidence given by the executors concerning their dealings with Richardson and their defence that the condominium was vested in one Donald James Scott, the executor named by the Thai language will of 22 January 1993. I will say no more about it, as it is unnecessary now to explain that view, and why I have formed it, to resolve any issue between the parties to this proceeding; there may be a prospect of further litigation.

206 I cannot let the moment pass without recording that, frankly, the profligate attitude of the parties regarding the use of the court's resources is extraordinary. It defies belief that litigation was commenced in this court in December 2003 between practising solicitors claiming title to the condominium and mesne profits, when neither party made sufficient enquiry about possession of the property that was in issue. That the parties have continued their dispute until May 2011 without realising that an ex parte claim to adverse possession was not only made but also succeeded a year earlier, reflects poorly on the litigants and their advisers. A trial date was vacated as a result. When the matter finally came on for trial, the task of the court in assessing the evidence of events in 1997 scarcely benefited from the oral evidence led by the parties. It has only been during the last months of this long and sorry saga that the overarching obligations under the Civil Procedure Act 2010 have applied.

A postscript - if the Trust lost an opportunity for a completed gift, what was its value?

207 In case it later becomes relevant, I will deal with a further matter.

208 Mr Harpur sought to establish the current market value of the condominium in Thailand by evidence of an assessment by a valuer from Sallmanns, in Bangkok. Ms Chanvimol Rakanantachai gave evidence that in her opinion the 'estimated indicative' market value of the condominium was 6.4 million Thai Baht, the equivalent of which is AU$200,000. I reject this evidence for a number of reasons. The primary reason for its rejection is the inappropriate methodology adopted by the witness, and I shall return to that.

209 Prima facie, by operation of s 76 of the Evidence Act 2008 (Vic) Ms Rakanantachai's evidence was inadmissible for use to prove that the current market value of the condominium was AU$200,000 as at 22 July 2011 and that the loss to the trust was in that sum. Mr Harpur needed to establish that the exception under s 79 applied. Ms Rakanantachai provided no evidence of her qualifications, training or experience as a land valuer by her report. Further, she did not say that she had read, understood and agreed to be bound by the Expert's Code of Conduct. No letter of instruction was produced and I infer that her failure to express adherence to the Code of Conduct was attributable to the conduct of Mr Harpur's solicitors. This was never rectified. However, I granted leave to Mr Harpur to adduce evidence of the witness' qualifications, training and experience as a land valuer.

210 Evidence was taken by video link. Mr Harpur's solicitors had not made arrangements for an interpreter and it readily became apparent that Ms Rakanantachai's grasp of English was inadequate for the task. Initially, she was assisted by a Mr Langdon, but he was not an interpreter. He told me he was a former managing director of Sallmanns. Upon forming the view that Mr Langdon was helping Ms Rakanantachai give evidence rather than interpreting, I intervened. The only process that was convenient was to swear in Mr Sukparangsee who was waiting to give evidence over the same video link, and whose grasp of both English and Thai enabled him to perform the task satisfactorily.

211 Counsel led evidence from Ms Rakanantachai that she is the director of the valuation department of Sallmanns Thailand, has more than 20 years experience in valuation, is a Fellow of the Thai Valuers Association (FTVA), a Fellow of the Valuers Association of Thailand (FVAT) and a member of the Royal Institute of Chartered Surveyors (MRICS) in the UK. That was the extent of Ms Rakanantachai's evidence and on the basis of that evidence I do not accept that the witness has the necessary qualifications, training and experience as a land valuer to enliven the exception under s 79 of the Evidence Act. Presumably, if the witness had relevant qualifications, training and experience, counsel could have led that evidence. On that ground, Ms Rakanantachai's evidence is rejected as inadmissible under s 76 of the Evidence Act 2008 (Vic).

212 It is probable that someone else prepared Ms Rakanantachai's report, given her limited command of English on display over the video link. She stated that she adopted the 'Market Comparison Valuation Approach'. She described this approach to involve a comprehensive market survey of residential condominiums in the Jomthien Condotel to identify properties for comparison, market conditions and 'perception'. There are about 450 apartments in the complex. Ms Rakanantachai refers to a range indicated by the survey of both 'asking' prices and 'sale/transaction' prices for apartments of like size, floor, type and location. The range was based on six selected apartments. She adjusted the range for dissimilarities in location and other factors when arriving at an assessment for the condominium. On analysis, it became clear that Ms Rakanantachai's opinion was based wholly on a survey of 'asking' prices for comparable apartments and that, at its highest, her evidence amounted to an opinion of the indicative asking price at which an estate agent might list the condominium for sale.

213 Under cross-examination, Ms Rakanantachai agreed that agreed sales are usually discounted from the asking price and she nominated 10% as the approximate discount. I could not assess whether her opinion was reliable; it was unsupported by any data or transparent reasoning process. Ms Rakanantachai rejected the relevance of the sale by Richardson in October 2010 as, possibly, not an arms-length transaction. Again, no data or inquiries were advanced in support of this suggestion. For example, evidence of sales showing the trend between July 2010 and July 2011 might have shown that the market was flat or declining.

214 A very similar approach to valuation of land in China was proffered before Byrne J in China Construction Realty Ltd v Sino Business Services Pty Ltd.[64] The issue was whether the balance sheet entry for the value of land in China varied from the true value, so that the accounts did not disclose a true and fair view of the affairs, financial position, assets and liabilities of the company at the relevant dates. In that case, the court was informed that in China the sale prices of property are not publicly available. This makes a direct comparison valuation very difficult as a valuer must make enquiries of parties to a contract of sale in the hope that they will accurately disclose the sale price. An alternative strategy adopted is to obtain a copy of the sales material showing the price being asked by a vendor of a potentially comparable property. This price is then taken as being an achievable price and, after sale, the price actually achieved.

215 In McDonald v Deputy Federal Commissioner of Land Tax (NSW),[65] evidence of an offer made by a vendor of land to a prospective purchaser was not admitted as evidence of the value of the land. Justice Isaacs pointed out the difficulties in inferring from this evidence what price the suppositious purchaser might pay for the land, this being the legal test of value.[66] Byrne J acknowledged there were circumstances in which evidence of an offer to sell land has been admitted,[67] none of which are relevant here. I accept, as his Honour did, that evidence of an unaccepted offer to sell comparable land at a particular price is not admissible as direct evidence of the value of the subject land. Ms Rakanantachai, unsurprisingly, did not give evidence that from her experience or understanding of valuation theory and practice, there was any basis that warranted reliance on such evidence as a legitimate exercise in direct comparison valuation method.

216 For these reasons, I am not satisfied that Ms Rakanantachai's evidence satisfies the criteria for admissibility under s 79 of the Evidence Act. Those criteria are, first, that the witness who gives the evidence 'has specialised knowledge based on the person's training, study or experience'; and second, that the opinion expressed in evidence by the witness 'is wholly or substantially based on that knowledge'.[68] I reject Ms Rakanantachai's evidence as admissible.

217 Were it necessary to assess the loss of opportunity to the trust to sell the property and for that purpose arrive at a valuation of the property at the date of the trial, the only acceptable basis would be the evidence of a single direct sale by Richardson to Mellor in October 2010 at 5.5 million Thai Baht. That evidence was found in the searches of the Land Office records conducted by Mr Sukparangsee. There was no evidence that the sale to Mellor was other than an arms-length sale at market value. Starting with that figure as the current market value, a discount is necessary as the trust lost, not the property itself, but the opportunity to obtain title to, and possession of, the property. I accept the evidence of the executors that Richardson was making demands of the executors based on an asserted agreement with Rand made prior to Rand's death, and payment of money by Richardson in respect of the property. Assessment on the impact of Richardson's demands was a matter affecting the value of this opportunity that was not explored in evidence. Given that litigation in Thailand, or a sale to Richardson at a significantly discounted price, might have been necessary for the trust to recover anything, a substantial discount from the assumed market value would have been warranted.

218 Doing the best that I can with the evidence as it stands, I would have assessed the discount at 60%: comprising 10% for the uncertainty in the assessment of the market value as at the time of trial, 50% for the prospect of dispute in Thailand or negotiation as to competing entitlement with Richardson, and a further 10% for the prospect of litigation or other expense. On this basis, I assess the value of the opportunity alleged to have been lost by the trust at the date of trial at 2.2 million Thai Baht. At the exchange rate apparently adopted during the trial,[69] this equates to AU$68,685.00.

219 There will be judgment for the defendants and I will hear further from counsel on the question of costs.

[1] [1915] HCA 14; (1915) 19 CLR 544, 548.

[2] [2002] VSC 320 (12 August 2002).

[3] Citing Tone v Brolly [1891] VicLawRp 100; (1891) 17 VLR 467, 470; Re Garnett; Gandy v Macaulay (1885) 31 Ch D 1, 9 and 16; Re Hodgson; Beckett v Ramsdale (1885) 31 Ch D 177, 183.

[4] [2003] VSC 121; (2003) 10 VR 626, 650-652 [146]-[160]; see also Stick-on Signs Pty Ltd v Sign Gear Ltd [2002] VSC 320 (12 August 2002); and Richardson v Armistead [2000] VSC 551 (22 December 2000) and the cases cited therein.

[5] Valoutin Pty Ltd v Furst [1998] FCA 339 (6 April 1998); Harpur v Ariadne Aust Ltd [1996] QCA 483 (29 November 1996).

[6] [2011] HCA 26; (2011) 243 CLR 253, 273 [53], 263 [18] (French CJ), 286 [105], 289 [113] (Heydon & Crennan JJ).

[8] Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 (17 November 2000) [239].

[9] [2002] UKHL 4; [2002] Lloyds Rep IR 261, 280 [89]-[92].

[11] [1986] AC 562, 574-575.

[12] Precisely how the claim was put was initially unclear, later clarified by express concession from Mr Harpur's counsel in final submission.

[13] [1937] 1 KB 534, cited with approval by Walsh JA.

[14] (1967) 69 SR NSW 38, 47; 86 WN (NSW) (Pt 2) 259, 267. See also Balkin v Peck (1998) 43 NSWLR 706, 712.

[16] Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129, 148 [38]-[39] (French CJ, Gummow, Hayne and Bell JJ); HIH Claims Support Ltd v Insurance Australia Ltd [2011] HCA 31 (22 August 2011).

[17] Reflecting the maxim qui sentit commodum sentire debet et onus - he who derives the advantage ought to sustain the burden - which merges in equity's more comprehensive rule 'equity is equality', as to which, see Herbert Broom, A Selection of Legal Maxims (Sweet & Maxwell, 10th ed, 1939) 482-485, cited by the plurality in HIH Claims Support Ltd v Insurance Australia Ltd [2011] HCA 31 (22 August 2011), 13 [37].

[18] BP Petroleum Development Ltd v Esso Petroleum Co Ltd (1987) SLT 345, 348 (Lord Ross), employing the expression of Lord Chelmsford in Caledonian Railway Co v Colt (1860) 3 Macq 833, 844.

[19] [2011] HCA 31 (22 August 2011) 15 [42].

[20] Citing Ruabon Steamship Company v London Assurance [1900] AC 6, 12 (Earl of Halsbury LC) and Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624, 634 [42]-[43].

[22] Citing Starke J in McLean v Discount and Finance Ltd (1939) 64 CLR 312, 341 and Gibbs CJ in Mahoney v McManus [1981] HCA 54; (1981) 180 CLR 370, 374.

[23] [2010] VSCA 318 (26 November 2010).

[24] Citing Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 and HIH Claims Support Ltd v Insurance Australia Ltd [2010] VSCA 255 (29 November 2010) [24].

[25] Applying Deering v The Earl of Winchelsea [1787] EngR 40; (1787) 2 Bos & P 270; 126 ER 1276; Ellesmere Brewery Co v Cooper [1896] 1 QB 75, 79; and McLean v Discount and Finance Ltd (1939) 64 CLR 312.

[26] Citing Moule v Garrett (1872) LR 7 Ex 101; and Becton Dickinson UK Ltd v Zwebner [1989] QB 208.

[27] Citing Becton [1989] QB 208, 210; Re Downer Enterprises Ltd [1974] 1 WLR 1460, 1468; Kumar v Dunning [1989] QB 193, 201: and Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 (17 November 2000).

[28] Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282, 293.

[29] [1989] QB 208.

[30] [1995] FCA 1197; (1995) 56 FCR 588 (11 April 1995).

[33] [2000] WASCA 408; (2000) 23 WAR 291, 300 [24], 312 [92]-[93], 325-327 [158]-[170].

[34] [2000] VSCA 31 (9 March 2000) [8] (Phillips JA).

[35] [2001] NSWCA 261; (2001) 52 NSWLR 193, 210-212 [88]-[98].

[36] [1995] FCA 1197; (1995) 56 FCR 588 (11 April 1995).

[37] [2011] HCA 31 (22 August 2011). The history of the proceedings is explained in the judgment of the plurality at [19]ff.

[38] HIH Casualty & General Insurance v Insurance Australia Ltd [2006] VSC 128; (2006) 14 ANZ Insurance Cases 61-685.

[39] Insurance Australia Ltd v HIH Casualty & General Insurance Ltd (In liq) [2007] VSCA 223; (2007) 18 VR 528, 531 [9], 558-559 [172]-[178], 561 [191]. Steele's application to the High Court for special leave to appeal that decision was refused. Steele v Insurance Australia Ltd [2008] HCATrans 210.

[40] HIH Claims Support Ltd v Insurance Australia Ltd (2010) 16 ANZ Insurance Cases 61-863 at 78,500 [11].

[41] HIH Claims Support Ltd v Insurance Australia Ltd [2011] HCA 31 (22 August 2011) 18 [51].

[43] The Adjustable Rate Notes in respect of each apartment were in evidence and were, materially, in the same terms.

[44] It was later converted into a freehold interest, in circumstances that are not relevant.

[45] [1944] KB 602, 605.

[46] I refer, too, to the judgment of Mason P in Balkin, cited earlier (fn 15) at paragraph [78].

[47] Insurance Australia Ltd v HIH Casualty & General Insurance Ltd (In liq) [2007] VSCA 223; (2007) 18 VR 528, see above at [91].

[48] At [61] above.

[49] As he would have done administratively as executor but for the later will of which he was unaware - see [29] above.

[50] This metaphor was first used by Lord Keeper in Ranelaugh v Hayes [1680] EngR 235; (1683) 1 Vern 189; 23 ER 405. See also Thomas v Nottingham Inc Football Club [1972] Ch 596; Henry A de Colyar, A Treatise on the Law of Guarantees and of Principal and Surety (Butterworths, 3rd ed, 1897) 299-300; Rowlatt, Rowlatt on the Law of Principal and Surety (Sweet & Maxwell, 4th ed, 1982) 136-8; James O'Donovan and John Phillips, The Modern Contract of Guarantee (Law Book Co, 4th ed, 2004) 429; and Abigroup Ltd v Abignano [1992] FCA 567; (1992) 39 FCR 74, 82.

[52] Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 (28 October 2011).

[53] [1862] EngR 951; (1862) 4 De GF & J 264; 45 ER 1185.

[54] [1990] HCA 12; (1990) 169 CLR 540.

[55] [1907] HCA 13; (1907) 4 CLR 1049.

[56] [1990] HCA 12; (1990) 169 CLR 540.

[57] Ibid 580. Deane J was, in large part, in agreement with the joint judgment of Mason CJ and McHugh J (at 571).

[58] Anning v Anning [1907] HCA 13; (1907) 4 CLR 1049, 1080 (Higgins J).

[59] Corin v Patton [1990] HCA 12; (1990) 169 CLR 540, 559.

[60] [1990] HCA 12; (1990) 169 CLR 540, 558.

[61] British South Africa Co v Companhia de Mocambique [1893] AC 602, 625; Dagi v The Broken Hill Proprietary Co Ltd (No 2) [1997] 1 VR 428.

[62] [1997] 1 VR 428, 441.

[63] Citing Deschamps v Miller [1908] 1 Ch 856, 863-4 (Parker J).

[64] [2004] VSC 91 (26 March 2004).

[65] [1915] HCA 54; (1915) 20 CLR 231, 237.

[66] Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418, 432, 441; Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd [2002] HCA 43; (2002) 209 CLR 651.

[67] China Construction Realty Ltd v Sino Business Services Pty Ltd [2004] VSC 91 (26 March 2004) [46].

[68] Dasreef Pty Ltd v Hawchar [2011] HCA 21 (22 June 2011) [32].

[69] AUD 1 = Thai Baht 32.03, as at 22 July 2011.