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[2025] QCA 252
respondent. Appeal dismissed; paragraphs 25 and 26 of Crow J’s order stayed pending further order of the trial judge; matter remitted for directions or other orders addressing the interests of other trust...
The Court of Appeal upheld the central trial findings that Neville and David were each beneficially entitled to an equal share of Durrandella, the Croydon Properties and relevant family business assets, despite some legal titles being in only one brother's name. It also upheld judgment for $395,177 owed to Hinrichsen Pastoral and the finding that Neville breached his statutory duties as a director, resulting in a compensation award. The appeal was dismissed. However, because other people were potential beneficiaries of the discretionary trust, the Court stayed the provisions directing distribution of trust assets and sent that issue back to the trial judge for directions.
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2,348 words · generated 07/10/2026
This appeal arose from a dispute between brothers Neville and David Hinrichsen about the ownership and management of three cattle properties and the assets used in their grazing businesses. The Court of Appeal's reasons were delivered by Doyle JA, with Mullins P and Brown JA agreeing: [1]-[3].
No linked legislation citations have been extracted yet.
The family succession arrangements began in 1997. The brothers' parents had conducted a cattle business at Durrandella. In June 1997 Hinrichsen Pastoral Pty Ltd was incorporated and the Hinrichsen Pastoral Trust was settled, with the company as trustee. The parents transferred partnership assets, including stock, plant and equipment, to the trustee. In October 1997, the father granted Neville and David a joint option to acquire Durrandella's leasehold for $1. The trial judge found that the parties shared an intention that the brothers would ultimately hold the property beneficially in equal shares: [28]-[32], [42]-[43].
The family later concluded that Durrandella could not generate enough income to support the parents and both brothers' families. They acquired Yappar River and Ella Vale Stations, described collectively as the Croydon Properties. The leasehold interests were placed in David's name. David also assigned to Neville his interest under the option to acquire Durrandella. The trial judge accepted evidence that these title arrangements were chosen for practical reasons, including avoiding double stamp duty, and did not represent a decision to abandon equal beneficial ownership: [33]-[39].
The brothers eventually disagreed about the arrangement. Neville claimed Durrandella beneficially for himself and David the Croydon Properties. David maintained that all three properties and relevant business assets were to be held equally. Hinrichsen Pastoral also pursued a claim for $395,177 in drawings and diverted funds, and for compensation arising from Neville's conduct of the Durrandella operation: [12]-[16].
The trial judge rejected Neville's ownership case, found an equal beneficial ownership arrangement, and made orders concerning sale and distribution of assets. The judge also found Neville owed the company $395,177 and had breached his duties as a director, assessing compensation at $3,548,440: [42]-[47], [70]-[87]. On appeal, those main findings were upheld. The Court made one important qualification: it stayed the provisions directing distribution of assets and remitted the matter so other trust beneficiaries' interests could be considered: [104]-[113].
The Court treated the appeal as raising three main merits issues: the constructive trust, the debt, and director-duty breaches: [13]-[16]. A separate question arose about whether the orders properly dealt with the interests of other discretionary beneficiaries.
On the constructive-trust issue, the Court relied heavily on the trial judge's assessment of the witnesses. The trial had run for six days. The judge preferred David's evidence and accepted evidence from the accountant, Mr Houlihan, and the brothers' sister, Ms Sanders. The judge also criticised Neville's reliability, identifying inconsistencies and deliberate falsehoods: [21]-[24]. The Court of Appeal did not have the same opportunity to observe the witnesses. It reiterated that appellate interference with factual findings is constrained, and identified the relevant threshold as findings shown to be wrong by incontrovertible facts or uncontested testimony, glaringly improbable, or contrary to compelling inferences: [25]-[27].
The documents relied on by Neville did not satisfy that threshold. The 1997 option contained an entire-agreement clause, but the Court held that it had evidentiary weight rather than an automatic effect preventing equitable relief. David did not seek to enforce a prior contract; he relied on equitable rights said to arise from common intention and detriment: [59]-[60]. The Croydon purchase contract did not mention a trust, but the Court observed that a constructive trust can affect beneficial entitlements differently from legal title: [62]. The correspondence after settlement was, in the Court's view, not inconsistent with the trial judge's finding: [63]. The father's 2005 will referred to having assisted each son with different properties, but the Court considered that this could be understood as referring to his dealings with legal title, rather than as a complete account of the brothers' ultimate beneficial interests: [64].
The Court described the common-intention constructive-trust approach by reference to Galati v Deans and Nathan v Williams. The claimant must establish a common intention that they have an interest in property owned by another and detrimental action on that basis: [48]-[49]. The judgment also referred to the proposition in Imam Ali Islamic Centre that it must be an equitable fraud to deny the interest: [50]. It noted a possible distinction between detrimental reliance and a separate requirement for unconscionable denial, but did not decide it. In this case the proceedings included Neville's claim to hold Durrandella free of David's interest, and David's detrimental reliance was closely connected to the asserted denial: [51]-[53].
The evidence accepted at trial included David's assignment of his option interest to Neville and his long operation of the Croydon Properties. The trial judge found those acts were undertaken in reliance on the common intention of equal beneficial ownership: [43], [53]. The Court concluded that the documentary challenges did not displace those findings: [65].
The debt issue turned in part on the way the company's accounts recorded the brothers' drawings. Neville argued that the money deposited in his personal account was not a loan, but was held to protect trust funds from possible misapplication. The Court noted that, even if the money were held on trust, an account or equitable compensation could require payment to Hinrichsen Pastoral. The amount was not disputed as mathematically inaccurate: [71]-[78]. The company accounts and Neville's own evidence described a practice of reconciling drawings against distributions, with deficits carried forward as loans. The Court considered that sufficient to support the primary judge's conclusion: [80]-[82].
For the director-duty issue, the factual findings were that the trust herd on Durrandella fell from 1,559 cattle in 2014 and 2015 to nine in 2020 and then nil, while Neville's partnership herd increased. The trust also paid expenses associated with Durrandella while Neville ran cattle there for his own partnership: [86]. The Court held that the appellant did not successfully challenge the underlying factual findings: [88]. It rejected the argument that the company's pleaded case depended only on breach of an implied contractual term, pointing to the pleadings, statutory compensation claim and way the case was presented: [89]-[91]. The relationship breakdown, asserted consent or acquiescence, failure to send cattle from the Croydon Properties, and quantum arguments were also rejected on the facts and pleadings: [92]-[103].
The judgment presents the common-intention constructive trust as a doctrine applied to evidence of shared intention, detrimental reliance and, in this case, unconscionability. It draws on Galati v Deans and Nathan v Williams for the common-intention and detrimental-reliance formulation: [48]-[49]. It refers to Imam Ali Islamic Centre for the additional equitable-fraud formulation: [50]. It also notes that Staatz v Berry (No 3) questioned whether unconscionable assertion of title must be separately established once detrimental reliance has occurred: [51].
The Court did not resolve that doctrinal question. Nathan v Williams had left it open, and Doyle JA said the present case was not a suitable occasion to decide it because detrimental reliance and unconscionable denial were closely connected on the facts: [52]. Accordingly, the judgment confirms the application of the doctrine to this family property dispute without finally deciding whether every common-intention constructive trust requires a distinct unconscionability element.
The judgment also applies the approach in Robinson Helicopter to appellate review of factual findings. It stresses the importance of trial-level credibility assessment and the demanding standard for appellate intervention: [25]-[27]. In this appeal, the trial judge's credit findings were not challenged, and the Court declined to infer error from documents that might be weighed differently at trial.
On the director-duty issues, the Court applied ss 181 and 182 of the Corporations Act as set out in the judgment, and considered compensation under s 1317H: [85], [91], [95]. It held, on the pleaded claim and facts found, that acquiescence, waiver and laches did not bar the company's statutory compensation claim: [95]. The case therefore illustrates how a company claim for statutory compensation was distinguished from an equitable cause of action to which those asserted defences might be directed.
The judgment does not announce a general rule about all directors' duty cases, nor does it determine the scope of directors' duties in the abstract. Its conclusions concern the pleaded claim, the specific findings about cattle numbers and expenses, and the evidence supporting the calculated loss: [86]-[103].
At [48], the judgment quotes the common-intention trust formulation: a claimant must show an agreement or common intention that they have an interest in property, and detrimental action on that basis. In plain English, the claimant must connect the shared understanding to something they did or gave up to their disadvantage.
At [52], Doyle JA says the possible distinction between detrimental reliance and a separate unconscionability requirement need not be decided in this appeal. In plain English, the Court applied the principles needed for this dispute without settling the broader doctrinal question.
At [60], the Court says the entire-agreement clause had “forensic weight” but no more. In plain English, the clause was relevant evidence when deciding what the parties intended, but did not automatically block an equitable claim based on the evidence as a whole.
At [73] and [76], the Court explains that the label attached to the funds did not decide the company's ability to recover them. If Neville held money for the company, an account or equitable compensation could require payment. In plain English, the court looked to the substance of the obligation, not only whether the transaction was called a loan.
At [95], the Court agrees that acquiescence was no bar to the company's claim for statutory compensation under s 1317H for breach of ss 181 and 182. The Court also found no factual basis for fully informed consent or relevant delay on the record before it.
At [112]-[113], the Court defers implementation of the distribution provisions and remits the matter to the trial judge. In plain English, the appeal did not reopen the main findings, but the proceeds could not be distributed under those provisions until the potential interests of other trust beneficiaries had been considered.
The decision is particularly relevant to disputes where property is legally registered in one person's name, but another person claims a beneficial interest based on a shared family or business understanding. Its facts involved family succession planning, a joint option, later acquisitions in one brother's name, and an argument that those legal-title arrangements did not change the intended equal beneficial ownership: [8]-[11], [28]-[39].
The case may be relevant where a claimant relies on detriment such as assigning an option, contributing to an arrangement, or operating property on the footing that beneficial ownership is shared. The trial finding of David's detriment included the assignment of his option interest and operation of the Croydon Properties: [43], [53]. Whether comparable conduct amounts to sufficient detriment depends on the evidence and the applicable principles.
The decision also concerns appeals seeking to displace trial findings built on witness credibility and a substantial documentary record. It demonstrates that pointing to inconsistent documents is not, by itself, enough to overturn factual findings. The appellate court examined the documents but assessed them against the Robinson Helicopter standard: [25]-[27], [58]-[65].
For corporate and trust disputes, the case may be relevant where a director allegedly transfers business benefits or uses company resources for their own benefit, while the company seeks statutory compensation. The findings here involved depletion of company cattle, growth of a personal partnership herd, and company payment of expenses: [86]. The judgment also addresses the distinction between a disputed loan label and an accounting or compensation obligation for funds held for another: [73]-[82].
Finally, the orders demonstrate a distinct issue where a discretionary trust has beneficiaries beyond the litigating parties. Even after the main dispute is decided, distribution orders may need to account for those beneficiaries' potential interests: [104]-[113].
The supplied judgment does not identify any later decisions considering or applying Hinrichsen v Hinrichsen. It was delivered on 10 December 2025, and the material provided contains no subsequent treatment. It is therefore not possible from this source to say whether later courts have followed, distinguished or developed its reasoning.
The judgment itself discusses earlier authorities. It applies Robinson Helicopter on appellate review of facts; refers to Galati v Deans, Nathan v Williams and Imam Ali Islamic Centre on common-intention constructive trusts; considers Staatz v Berry (No 3) on the possible role of unconscionability; and applies authorities concerning joint-endeavour trusts and recovery of funds: [25]-[27], [48]-[52], [67]-[75]. Those are the authorities' treatment within this judgment, not evidence of how later courts have treated Hinrichsen.
The clearest expressly open doctrinal question is whether a common-intention constructive trust always requires proof of an unconscionable assertion of title in addition to detrimental reliance. Doyle JA left it unresolved because the two were connected on the facts: [51]-[52]. The judgment should not be read as deciding that detrimental reliance alone is sufficient in every case.
The order remitting the distribution issue also leaves practical matters for the trial judge. The Court directed consideration of beneficiaries other than Neville and David and allowed for directions or other orders concerning the stay or modification of paragraphs 25 and 26: [112]-[113]. The supplied reasons do not record what directions were subsequently made, or how the trust's assets were ultimately distributed.
The judgment does not provide a universal method for calculating loss in director-duty cases. It upheld the particular calculation based on lost cattle sales, saved expenses and a personal-herd allowance, with no successful challenge to the relevant evidence: [99]-[102]. It also does not settle the broader question whether the trial judge's alternative joint-endeavour constructive-trust analysis was correct; Doyle JA said it was unnecessary to express a concluded view after reaching a conclusion on common intention: [66]-[69].
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Source: Queensland Judgments (Supreme Court Library Queensland) (www.queenslandjudgments.com.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF QUEENSLAND
CITATION: Hinrichsen v Hinrichsen [2025] QCA 252
PARTIES: NEVILLE WILLIAM HINRICHSEN / (appellant) / v / DAVID BAILEY HINRICHSEN / (first respondent) / HINRICHSEN PASTORAL PTY LTD / ACN 079 049 773 / (second respondent) / ANTHONY JAY EDWARD MISKIEWICZ AND ROBERT WILLIAM HUTSON AS TRUSTEES OF THE HINRICHSEN PASTORAL TRUST / (third respondents/not parties to the appeal)
FILE NO/S: Appeal No 2528 of 2025 / SC No 565 of 2020
DIVISION: Court of Appeal
PROCEEDING: General Civil Appeal
ORIGINATING COURT: Supreme Court at Rockhampton – [2025] QSC 108 (Crow J)
DELIVERED ON: 10 December 2025
DELIVERED AT: Brisbane
HEARING DATE: 5 November 2025 / Further submissions: 13 and 20 November 2025
JUDGES: Mullins P and Brown and Doyle JJA
ORDERS: The Order of Crow J made 6 June 2025 is varied by providing that paragraphs 25 and 26 of that Order are stayed pending further order of the trial judge. The matter is remitted to the trial judge to make such directions or other orders as may be appropriate to take account of the interests of beneficiaries of the Hinrichsen Pastoral Trust (other than the appellant and the first respondent) in relation to the lifting of that stay or for modification of the provisions of paragraphs 25 and 26 of the Order. Appeal dismissed. The appellant is to pay the respondents’ costs of the appeal on a standard basis.
CATCHWORDS: EQUITY – TRUSTS AND TRUSTEES – CONSTRUCTIVE TRUSTS – COMMON INTENTION – where the appellant and first respondent grew up on Durrandella, being a cattle grazing property once owned by their father – where in 1997, the appellant, first respondent, their parents and a chartered accountant sought to implement a succession arrangement – where the terms of that arrangement are disputed between the parties – where at that time, the assets of the partnership between the parents for the conduct of the cattle grazing business were transferred to the second respondent – where it was proposed that the leasehold of Durrandella would in due course be acquired by the appellant and first respondent jointly pursuant to an option to be granted to them – where the appellant and first respondent were in turn largely excluded from their father’s will – where it subsequently emerged that Durrandella would not earn sufficient income to support three families living on the property – where two properties were acquired to be used for cattle grazing activities to be conducted by the second respondent – where those properties were acquired only in the name of the first respondent – where the first respondent concomitantly assigned his entitlement under the option to the appellant – whether an arrangement was reached in 1997 concerning the succession to and future management of Durrandella – whether there was a common intention subsequently that all three properties and the assets used to conduct the businesses on them, were beneficially owned equally between the appellant and the first respondent / EQUITY – EQUITABLE REMEDIES – ACCOUNTS AND INQUIRIES – OTHER MATTERS – where the appellant had drawn funds from the trust in excess of his distribution entitlement – where those funds were diverted into his own bank account – where the appellant claims that those funds were not a loan to him – where the appellant contends that he held the funds as a bare trustee to secure the funds from feared misapplication by the first respondent – where the second respondent urges that judgment for a debt is a remedy available to it – where it is otherwise not controversial that the appellant would be obliged to pay the funds to the second respondent – where the primary judge found that the appellant was indebted to the second respondent – where the primary judge rejected the contention that the money was not a loan – whether the appellant owed a debt of $395,177 to the second respondent / CORPORATIONS – MANAGEMENT AND ADMINISTRATION – DUTIES AND LIABILITIES OF OFFICERS OF CORPORATION – FIDUCIARY AND RELATED STATUTORY DUTIES – where the appellant and first respondent are directors of the second respondent – where for many years all the cattle properties were conducted by the second respondent in a cooperative manner – where the primary judge found that the appellant was liable to the second respondent for losses suffered as a result of contravening his director’s duties – where the primary judge concluded that since 2018 the appellant had conducted the grazing operations on Durrandella for the profit or benefit of himself or alternatively allowed parties other than the second respondent to conduct such operations for their benefit without accounting to the trust – where the appellant contends that the second respondent’s pleaded case was one for damages for breach of an implied term under the Durrandella Succession Arrangement in circumstances where no such contract was made and no term could be implied – where the appellant contends that he ought not be found in breach because the first respondent failed to cooperate to terminate the trust at the appellant’s request, the first respondent gave informed consent to the asserted breaches or alternatively acquiesced in them and the first respondent failed to send cattle to Durrandella – where the appellant contends that the second respondent had not proved the quantum – whether the appellant breached his duties as director to the second respondent / Corporations Act 2001 (Cth), s 181, s 182, s 1317H / Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59, applied / Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407, applied / Galati v Deans [2023] NSWCA 13, applied / Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271; [1988] FCA 699, cited / Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413, applied / Moses v Macferlan (1760) 97 ER 676; [1760] EngR 713, considered / Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78, applied / Nathan v Williams [2020] QCA 138, applied / Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; [1987] HCA 5, applied / Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd [2021] QCA 138, cited / Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679; [2016] HCA 22, cited / Staatz v Berry (No 3) [2019] FCA 924, considered
COUNSEL: D R Cooper KC, with W A Seewald, for the appellant / R N Traves KC, with D T Forbes, for the first and second respondents
SOLICITORS: Edgar & Wood Solicitors for the appellant / Connie Navarro Legal for the first and second respondents
MULLINS P: I agree with Doyle JA.
BROWN JA: I agree with Doyle JA.
DOYLE JA: These proceedings arise out of a breakdown in the relationship between two members of the Hinrichsen family. The appellant, Mr Neville Hinrichsen (Neville), was the plaintiff below. The respondents (the defendants below) are Mr David Hinrichsen (David) and a trustee company Hinrichsen Pastoral Pty Ltd (Hinrichsen Pastoral). The case principally concerned the question whether various properties in the names of David and Neville and the businesses conducted on them were to be held on constructive trust to be divided equally between those men.
The primary judge dismissed the appellant’s claim1 and made orders2 on the respondents’ counterclaims. In effect, all of the primary judge’s findings and Orders so far as they prejudice Neville are the subject of this appeal.
General Background
The grandfather of Neville and David acquired the leasehold of a rural property in Central Queensland, called Durrandella. In turn their father (commonly referred to as Mr Hinrichsen Snr) became the leaseholder and together with his wife Joan conducted the cattle grazing business on Durrandella in partnership.
Mr Hinrichsen Snr and Joan had five children, Neville, David, and their three sisters, Jennifer, Carolyn and Heather (Ms Sanders), all of whom were raised on Durrandella.
In due course Neville and David, after completing their education, returned to and worked on the property.
In 1997 Mr and Mrs Hinrichsen Snr, in consultation with Neville, David and a chartered accountant, Mr Houlihan, embarked upon a course of what might be described as the implementation of a succession arrangement. The terms of the arrangement are the subject of the central dispute in the appeal.
In 1997:the assets of the partnership business were transferred by Mr and Mrs Hinrichsen Snr to Hinrichsen Pastoral as trustee for the family;it was proposed that the leasehold of the property would in due course be acquired by Neville and David jointly pursuant to an option to be granted to them;as a result, they would be largely excluded from any benefit under Mr Hinrichsen Snr’s will, which would make provision for the three daughters.
It emerged subsequently that Durrandella would not earn sufficient income to support both Neville and David with their families as well as their parents. Two other properties were located and acquired. They are Yappar River and Ella Vale Stations (collectively referred to as the Croydon Properties), which properties are located in Far North Queensland over 1,000 kilometres from Durrandella.
Those two properties were to be used for cattle grazing activities also to be conducted by Hinrichsen Pastoral as trustee. In circumstances to which I shall return to below, the leasehold of those properties was acquired in David’s name alone and in combination with that, David assigned to Neville his entitlement under the option which had been granted to them jointly to acquire Durrandella.
For some years the two cattle properties were conducted by Hinrichsen Pastoral without incident and in a cooperative manner. Ultimately disputes between the brothers arose as a result of which Neville commenced proceedings seeking a determination that he alone was entitled beneficially to Durrandella (with David to be entitled to the Croydon Properties). That was met by denial and a counterclaim by David for a determination that all properties were held beneficially equally for David and Neville. In addition, David commenced derivative proceedings in the name of Hinrichsen Pastoral seeking repayment of a sum said to be owed to it as a debt by Neville, plus damages for what it contended to be breaches of Neville’s obligations to it as director.
The Issues
The issues in the appeal fall into three categories.
First, it is necessary to determine what the true nature of the arrangements between the members of Hinrichsen family were in connection with the ownership of Durrandella, and the Croydon Properties.3 The competing positions are:David contends that an arrangement was discussed and agreed upon in 1997 and implemented by various steps taken thereafter. These included: the establishment of the trust of which Hinrichsen Pastoral was trustee; the transfer to it of the assets of the partnership between Mr and Mrs Hinrichsen Snr; initially the grant of an option by Mr Hinrichsen Snr to Neville and David jointly to acquire the leasehold; and the making by Mr Hinrichsen Snr of a will in favour of his daughters. In later years there was an adaptation or variation of the arrangement to extend it to the Croydon Properties. This was implemented by: Hinrichsen Pastoral acquiring the business conducted on those properties; a decision made not to acquire the leasehold in the joint names of Neville and David but rather in David’s name alone for the purposes of avoiding potential additional stamp duty; for similar reason David assigning to Neville his interest under the option to acquire Durrandella; but that otherwise there was no departure from the previously held common intention that the properties (all three of them) and the assets used to conduct the businesses on them, were beneficially owned equally between Neville and David.Neville on the other hand, whilst accepting that some arrangements were discussed in 1997, contended that there was no concluded or binding agreement beyond the steps which were actually taken in 1997 (identified above). In any event the steps taken in relation to and consequent upon the acquisition of the Croydon Properties represented a departure such as thereafter Durrandella was to be beneficially owned solely by Neville with the Croydon Properties to be beneficially owned solely by David.
The second broad issue concerns whether Neville owed a debt of $395,177 to Hinrichsen Pastoral.4
The third broad issue concerns whether it was right to conclude that Neville had breached his duties as director to Hinrichsen Pastoral in relation to the conduct of Durrandella by reducing to nil or virtually nil the cattle owned by the trust on that property and instead using Durrandella to run cattle in partnership with his wife for their benefit.5
Issue 1 - The Constructive Trust - “Common Intention”
The primary judge concluded that a common understanding or arrangement was reached in 1997 concerning the succession to and future management of Durrandella. This has been referred to as the “Durrandella Succession Arrangement”. For convenience I shall adopt that latter expression save where quoting from the Reasons.
After an extensive consideration of the evidence his Honour concluded:
“[166] I consider that by the above actions taken by Mr Hinrichsen Snr, Mrs Hinrichsen, Neville and David confirm that those four persons did form a common intention that upon the exercise of the option and registration of Neville and David as the lessees of Durrandella, they would hold the title on Trust for themselves in equal shares.
…
[190] In my view, the Durrandella Succession Agreement and steps taken pursuant to the agreement confirms the common intention of Mr Hinrichsen Snr, Mrs Hinrichsen, Neville, and David that there would be an equal ownership between David and Neville of all Hinrichsen Pastoral assets. In my view, that common intention was, in part, manifested in the deed of the Hinrichsen Pastoral Trust, that option agreement, and Mr Hinrichsen Snr’s 1997 will.
[191] That common intention did not abate prior to, at the time of, and subsequent to the acquisition of the Croydon properties described above. I find the acquisition of the Croydon properties did effect a variation of the Durrandella Succession Arrangement by including the Croydon properties within the Durrandella Succession Arrangement. That is, I find that the common intention of Mr Hinrichsen Snr, Mrs Hinrichsen, Neville, and David was that the Croydon properties would be included in the Durrandella Succession Arrangement, such that Durrandella and the Croydon properties would run Hinrichsen Pastoral Trust cattle for the benefit of the Hinrichsen Pastoral Trust and subject to the trust provisions, and with Durrandella and the Croydon properties being equally beneficially owned by Neville and David.”
The appellant in these proceedings challenges those conclusions.
It was submitted below for the appellant, and in my view correctly, that the resolution of this issue “will be determined by whether the Court accepts the evidence of the plaintiff or defendant”: R [23].
The Primary Judge’s Reasons
Credit Finding
The primary judge expressed his conclusion that he “was impressed by the evidence of David”: R [27]. Where there was conflict between the two, he preferred David’s evidence to that of Neville: R [28]. This was informed by the evidence they each gave and the manner in which it was given, but reinforced by his Honour’s view of some objective evidence (particularly the transactions that were entered into) as well as the evidence of Mr Houlihan and to a lesser extent Ms Sanders.
His Honour accepted the evidence of Mr Houlihan: R [37]-[38] and also, as mentioned, that of Ms Sanders: R [32]-[33].
On the other hand, his Honour was critical of the credibility and reliability of Neville. This in part was due to inconsistencies in his evidence: R [40]; inaccuracies: R [49]; deliberate falsehoods: R [50], [110], [111], [116], [117] and [118]; as well as his Honour’s view of the conduct by Neville which amounted to “an egregious breach of director’s duties”: R [122] and other like references.
I mention these matters at the outset because this Court does not enjoy the advantages which the trial judge had of forming views as to the reliability and credibility of witnesses by consideration of the evidence as a whole over a six day trial, and observing the witnesses as they give their evidence, including the manner and tone in which that evidence was given: see Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679 per French CJ, Bell, Keane, Nettle and Gordon JJ at [54].
Further as stated in that case, at [43] (citing other decisions of that court):
“… If the court of appeal concludes that the judge has erred in fact, it is required to make its own findings of fact and to formulate its own reasoning based on those findings. But a court of appeal should not interfere with a judge’s findings of fact unless they are demonstrated to be wrong by ‘incontrovertible facts or uncontested testimony’, or they are ‘glaringly improbable’ or ‘contrary to compelling inferences’. In this case they were not. The judge’s findings of fact accorded to the weight of lay and expert evidence and to the range of permissible inferences. The majority of the Court of Appeal should not have overturned them.”
The Facts and Findings
There were discussions in 1997 pleaded as being the Durrandella Succession Arrangement. The primary judge rightly pointed out that on the pleadings there was very little difference between Neville and David as to what transpired: R [28], [40]. In any event David gave evidence, which the primary judge accepted, of discussions between Mr and Mrs Hinrichsen Snr, Neville and David.6 On 24 June 1997 Hinrichsen Pastoral was incorporated with Mr Hinrichsen Snr its sole shareholder and he and his wife as its directors. Three days later, on 27 June 1997 the Hinrichsen Pastoral Trust was settled by deed with Hinrichsen Pastoral its trustee. Each of Mr and Mrs Hinrichsen Snr, Neville and David were identified as appointors, and they were also identified as primary and fixed beneficiaries.
The Trust Deed contemplated that 5 per cent of the net income was to be held each year for the fixed beneficiaries and if more than one, for them equally.7 Beyond that, there is a discretion to distribute the balance net income to the primary secondary and tertiary beneficiaries (with secondary beneficiaries not to receive more than 39 per cent of the net income of the fund). Those classes of beneficiaries would capture an extensive list of relatives and related or associated entities. The trustee has similar powers and discretions in relation to the corpus (with a like limitation on what percentage may go to secondary beneficiaries).
Mr and Mrs Hinrichsen Snr transferred all of their partnership assets, station stock, plant and equipment to the trustee.
On 25 October 1997 an option deed was executed by which Mr Hinrichsen Snr granted Neville and David jointly an option to acquire the leasehold of Durrandella for one dollar, exercisable during a period 1 July 2002 to 30 September 2012.
The same day Mr Hinrichsen Snr executed a will leaving Durrandella to Neville and David. That will was later revised on 3 January 2005, leaving his estate to his three daughters. Each daughter was to receive a sum of $100,000 and, if Mrs Hinrichsen failed to survive him, the estate, title and interest in his Bribie Island unit, jewellery and residue of his estate.8
At some point, and probably towards the end of 1999, there was discussion about the acquisition of another station. The primary judge rejected Neville’s evidence that this came about due to David’s dissatisfaction with Durrandella: R [51]-[52]. His Honour accepted David’s evidence, supported by that of Mr Houlihan, that the discussion “for the purchase of another block arose out of the financial necessity to purchase another block because Durrandella could not support three families”: R [53].
“[62] In my view, it is plain that Neville understood that the placing of the Croydon properties in David’s name was a step taken to reduce stamp duty, but not to deny Neville an equal beneficial interest in the Croydon properties, just as David had an equal interest in Durrandella. In my view, this was clearly known to, accepted and understood by Neville.”
The discussion then turned to what to do with the Durrandella leasehold, and for like reason, to avoid double stamp duty in the (likely) event that upon the divisions of the properties Neville would receive Durrandella, it was decided that Durrandella should be acquired in Neville’s name alone: R [63]-[64].
To implement this, on 11 September 2000 David and Hinrichsen Pastoral entered into a contract to purchase the Croydon Properties. The leasehold was acquired for $850,000 and all other assets for $650,000, funded largely from borrowings. The contract settled in November 2000.
On 7 November 2000 David executed a deed of assignment assigning his rights under the option deed to Neville.
Neville exercised that option on 13 December 2004 and on that day Mr Hinrichsen Snr signed a transfer of the leasehold of Durrandella to Neville.
On 3 January 2005 Mr Hinrichsen Snr executed a will which excluded Neville and David from his estate.
The primary judge accepted the evidence of Ms Sanders. She had had a series of conversations with her father concerning the future of Durrandella. In particular in February 2012 (that is after the acquisition of the Croydon Properties) she said that her father told her “that the family understanding and agreement was that the boys would receive everything equally”.10 The primary judge saw this as constituting:
“[33] …evidence of Mr Hinrichsen Snr’s acceptance of a family agreement or arrangement in 2012, which was some dozen or so years after the deed of assignment of the option on 7 November 2000. This evidence does support David’s case that the execution of the deed of assignment of the option agreement from Neville and David to Neville solely was not intended to deprive David of a beneficial interest in Durrandella. That is, the common intention was that Neville and David would equally own all the rural properties continued after the Deed of Assignment was signed on 7 November 2000.”
From these facts as found, the primary judge made the findings of common intention in the passages of his Honour’s reasons which I have set out above. Those facts, his Honour concluded, established a constructive trust of the properties such that the beneficial interests in the leasehold of all three properties were held equally for Neville and David: R [200].
The reasoning for this appears from the following passages of the Reasons:
“[197] It seems to me that in the present case, there is no precise evidence of an explicit declaration of trust. In this case, there were a series of discussions and oral agreements concluding in August 2000, so that now, some 24 years later, no witness to the conversations appears to have a precise memory of the exact words used in those conversations and discussions. It seems to me, however, that the best evidence comes from the independent witness Mr Houlihan.
[198] There is evidence of the effect of the language used and the oral agreement being reached concerning the future of the activities of the Hinrichsen family in its conduct of rural enterprises.
[199] Importantly, the nature of the transaction and the circumstances attending the relationship between the parties, in my view, all lead to the conclusion that the intention of the parties was to create a trust in respect of the rural properties was clear, the property the subject of the trust, being Durrandella and the Croydon properties was certain and there was certainty as to who were the beneficiaries of the rural land trust, and that was Neville and David in equal shares.
…
[213] On the findings of fact made above, I conclude that Mr Hinrichsen Snr, Mrs Hinrichsen (acting through Mr Hinrichsen Snr), Neville and David agreed and formed a common intention that Durrandella and the Croydon properties would be owned beneficially equally by Neville and David, and I find as a fact that David has acted to his detriment by signing the Deed of Assignment on 7 November 2000 in reliance of the common intention and by operating the Croydon properties, which were over three times the size of Durrandella and with more than three times the number of cattle over the last 24 years.”
The findings made by the primary judge also were that the common intention extended to Neville and David being entitled at some indeterminate time to equal ownership of the assets of the businesses conducted on those properties, namely the stock and other assets associated with the properties.
David had pleaded that the Durrandella Succession Arrangement extended to those assets: R [19], [24]. The primary judge noted that in important respects Neville accepted that the discussions which had taken place in 1997 extended to those assets: R [29]. However, at R [34] the primary judge recorded:
“[34] I accept the evidence of Francis John Houlihan, a retired accountant of HHH Partners. Mr Houlihan’s evidence was that he could recall conversations with Mr Hinrichsen Snr about succession planning for Durrandella, in which Mr Hinrichsen Snr said that he wanted the property to go to his two sons, David and Neville. Mr Houlihan confirmed that the property was never going to be transferred into the Trust, but rather the land was always going to go to Mr Hinrichsen’s two sons, and the intention was for the Trust to own only the plant, equipment, and cattle. That is the way in which the partnership and the Trust accounts were conducted.”
“[38] I accept Mr Houlihan’s evidence that Mr Hinrichsen Snr, Neville, and David attended in his office and they had discussions and reached an agreement concerning their affairs. Although Mr Houlihan recommended that the agreement be documented, that did not occur. After the discussions were had about how the properties would be managed, discussion was held as to what was to occur with respect to the ending of the relationship. Mr Houlihan's evidence was:
‘That when both of them were comfortable with the level of debt, and that’s in relation to - so the whole process was all the assets were then owned, either in individual names, in the trust or still in Mr Hinrichsen’s name, would be all added up, the debt taken off, division of property 50/50, and if the debt level was too high, then an adjustment would have to be made between the two parties so that they ended up with a similar amount of net assets.’
…
[92] It is a clear inference, and I do infer, that the placing of the Croydon properties in David’s sole name and the assignment of the option agreement on 7 November 2000 were all carried out pursuant to the agreement between Mr Hinrichsen Snr, Mrs Hinrichsen, Neville and David, and with the continued family common intention, and as expressly agreed, that Neville and David would share equally in the Hinrichsen family rural assets, which were Durrandella, the Croydon properties and the assets of the Trust.”
The Test and its Satisfaction
“… A common intention constructive trust arises where the parties have agreed, or it was their common intention, that a claimant should have an interest in property owned by the other and the claimant has acted to his or her detriment on the basis of that agreement or common intention…”
This Court expressed the test in largely similar terms in Nathan v Williams [2020] QCA 138 per Brown J at [24]-[25] (Sofronoff P and Philippides JA agreeing) citing Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413 at [402]-[405].
In Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc, it was stated that it was also necessary to show that “it would be an equitable fraud on the claimant to deny his or her interest in the property”: at [402(c)].
In Staatz v Berry (No 3) [2019] FCA 924, Derrington J suggested at [170]:
“… It may not be necessary in the case of a common intention constructive trust that any unconscionable assertion of title need occur. The foundation for equitable intervention in relation to that type of trust is the suffering of detrimental reliance by the party asserting the interest. Once that has occurred there is no reason why a court should not recognise the vesting of the beneficial interest in the asset or assets in question. In any event, this is not the occasion on which that interesting issue needs be determined.”
This Court left that point open in Nathan v Williams (at [25]). There may perhaps be situations where the difference between establishing detrimental reliance (on the existence of the common intention) by the party claiming the beneficial interest and the need to establish the unconscionable assertion of title and denial of that beneficial interest will be significant. This is not one of them. In this case, the issue arises for determination in proceedings in which Neville sought a declaration that he holds “the legal interest in Durrandella free from any interest claim by” David. This would be the usual case. What makes the assertion of title unconscionable is or at least includes the established detrimental reliance by David. The two are so connected that at least for this case the need to resolve the issue concerning the possible distinction adverted to in Staatz v Berry (No 3) does not arise.
The facts as found by the primary judge established:The common intention that, despite the titles being in the names of Neville and David separately, the leasehold interests in each of Durrandella and the Croydon Properties were to be held beneficially for them equally: R [166], [190], [191];David acted to his detriment at least by his assignment to Neville of this interest in the Option to acquire Durrandella: R [213];It was unconscionable for Neville now to deny that interest to David: R [223].
The Appellant’s Contentions
A number of other things are advanced on Neville’s behalf in relation to this first topic.
First, it is asserted that the case pleaded by David and as found by the primary judge was of a binding contractual agreement and that for various reasons such a conclusion is misplaced.
This is not correct. The case as pleaded did not depend on the Durrandella Succession Arrangement being a contractually binding agreement. While the language of an ‘agreement’ having been reached is employed in David’s pleadings and indeed in the Reasons, it is not used to plead a contract or (as the appellant would have it) exclusively a contract as the source of rights. Indeed, it is principally employed to describe named persons agreeing about the course to be followed, which is language apt also to be relevant to the identification of a common intention that that course be followed: Counterclaim [14].11
Nor did the primary judge find there was a final contract to create a trust of the Durrandella or the Croydon Properties. His Honour found, as set out above, the common intention (being something representing the agreement of, arrangement or understanding between, the participants) formed in 1997 that the legal interest in Durrandella was to be held beneficially for the boys equally, and that this was extended to the Croydon Properties in 2000.
Second, the appellant urged that the primary judge’s conclusions as to the existence of the Durrandella Succession Arrangement and more particularly its continuation after the acquisition of the Croydon Properties was wrong because it was inconsistent with certain documents and uncontroverted evidence (and thus being contrary to “incontrovertible facts” or the like). It is necessary to deal with each of these in turn.
The Option Agreement: This was executed on 25 October 1997. By it Mr Hinrichsen Snr granted the option to purchase Durrandella for $1 to each of Neville and David jointly. It contains an entire agreement clause which records that it constituted “the entire agreement as concluded between the parties, notwithstanding any prior negotiations, representations warranties covenants understandings or agreements made or entered into before” it was made: cl 12. The primary judge dealt with this at R [231]-[232] where his Honour stated:
“[231] Neville also raises Clause 12 of the option agreement, an ‘entire contracts clause’ to defeat David’s claims. In McDonald v Schinko Australia Pty Ltd [1999] 2 Qd R 152, Macpherson JA described a similar entire contracts clause as a ‘contractual merger provision’ and said at 155:
‘In excluding material outside the four corners of a written instrument, the parol evidence rule, at least on one view of its operation, arises from the inference that a document which appears on its face to be a complete record of the parties’ contract is conclusively presumed to be so … Once that presumption applies, it is doubtful if a merger clause like cl. 28.1 adds much if anything to the parol evidence rule. Yet, as the passage from Story makes clear, the equitable remedy of rectification operates outside the contract and despite the rule. Indeed, it may well be impossible for the parties by means of any contractual provision, however artfully drawn, to escape the court’s jurisdiction to order rectification in a matter calling for its exercise…’
[232] David does not seek any relief based on any antecedent contractual agreement. Rather, he seeks relief in equity. It is also plain that equity will not permit an entire agreement clause to stultify the operation of equitable doctrine.”
The existence of the clause is of forensic weight when considering whether there was an ongoing common understanding between the parties, but no more. As the primary judge rightly concluded such a clause will not preclude the conclusion that a constructive trust should be recognised based on a common intention if that common intention is established by the evidence, despite the terms of that clause. Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at [554].
The Requisitions for Finance: In making his application for finance to acquire the Croydon Properties David responded ‘No’ to a question from the financier whether “any party (borrower, guarantor, landowner etc)” was a trustee. This, it is contended by the appellant, is inconsistent with the case now urged of the existence of a constructive trust for the benefit of both Neville and David. The primary judge did not refer to this in his Reasons.It is something which might be seen as adverse to David’s credit. He candidly accepted in cross-examination that while he couldn’t recall the document consistent with his case he should have answered “Yes” on the form.12 However, it is not such as to rise to the level that this Court should disturb the primary judge’s findings of the common intention as being contrary to “incontrovertible facts or uncontested testimony”, or as “glaringly improbable” or “contrary to compelling inferences”.In fact, Mr Hinrichsen Snr was a party who was to guarantee the borrowings of both respondents and was also a constructive trustee of Durrandella for Neville and David at the time this form was completed. Hinrichsen Pastoral itself was a trustee and was contracting to acquire the business assets at the Croydon Properties (though it is unclear on the material whether it being a trustee was separately disclosed to the financier). The answer seems therefore not to have been completed with such care as the appellant’s submission requires. In any event, the circumstances which establish the constructive trust do not depend upon the putative trustee being able to identify himself or herself as a trustee. The primary judge’s findings were as to the making and continuation of the Durrandella Succession Arrangement and those findings are not displaced (as contrary to compelling inferences) because David, assuming he carefully considered the questions asked of him in that finance questionnaire, did not identify that his and Neville’s respective entitlements involved the title to the leasehold being held as constructive trustee.
The Contract for the Sale and Purchase of the Croydon Properties:The Contract in anodyne form records that David is acquiring the leasehold and Hinrichsen Pastoral is purchasing the stock and other assets. It does not refer to the Durrandella Succession Arrangement.There is nothing in the form of this transaction which assists Neville. It is the nature of the constructive trust that it affects entitlements in a way not merely reflective of the legal title to assets: eg (1987) 164 CLR 137.
“In compiling this my will I have considered what provision should be made for my sons Neville William Hinrichsen and David Bailey Hinrichsen and I have made the provisions for them on the basis that I have assisted them during my life, first for my son Neville by gifting to him my property ‘Durrandella’ and secondly for my son David by assisting him to purchase the properties, ‘Yappar River Station’ and ‘Ella Vale’. Other than as provided in this my will I make no further provision for them.”
I accept the submissions made by Mr Traves KC for David. The paragraph is literally accurate if understood as limited to Mr Hinrichsen Snr’s involvement in dealings with the legal title to the properties. If it is relied on as reflecting his then understanding of the ultimate beneficial right of Neville and David, then it is inaccurate and evidently one sided. On such a view of the paragraph Neville was to be given (at nominal cost) the beneficial interest in one valuable property, while David acquired the other less valuable property by the assumption of significant financial burden.
The view that the Croydon Properties were (in 2005) likely to be less valuable than Durrandella is supported (at a high level at least) by reference to the contract of sale of the Croydon Properties,13 David’s evidence as to the value of the property next to Durrandella (Tarago),14 and the admitted facts at trial.15 That evidence collectively shows the following:The land only value of the Croydon Properties in 2000 was $800,000.16Tarago had sold for $3,450,000 million on 23 February 2001 and $3,800,000 excluding stock on 22 March 2002.17Durrandella and Tarago were very similar, though the area of Durrandella is slightly bigger.The value of Durrandella as at 13 December 2004 was $4,200,000.18
The better view of the paragraph of the Will is that its purpose was self-evidently to seek to deflect a possible challenge by either son to the testamentary dispositions in favour of the daughters by adverting (albeit incompletely or inaccurately) to inter vivos dealings in favour of the sons.
Additionally, that the primary judge did not advert to the claimed significance of paragraph 14 of this Will is explicable on the basis, as pointed out by Mr Traves KC, that no submission to that effect was made at first instance on behalf of Neville.
Conclusion
The “Joint Endeavour” Constructive Trust
As an alternative, his Honour discussed what he referred to as a “joint endeavour” constructive trust and concluded it had been established: R [221].
In Baumgartner v Baumgartner (1987) 164 CLR 137 at 147-8, the majority of the High Court adopted the reasoning of Deane J in Muschinski v Dodds, where his Honour stated:
“… where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do…”19
The requirements for the identification of such a constructive trust accordingly are:The existence of a joint relationship or endeavour in which the parties pool resources;The premature failure of the joint endeavour without attributable blame; andUnconscionability by one asserting his or her legal interests against the other.
The primary judge concluded that each of the above elements had been satisfied: R [222]-[223]. These included findings of the failure of the joint endeavour without blame attributable to David and also without attributable blame at all: R [223]. Given the view I have reached as to the common intention of the brothers, it is unnecessary to express any concluded view as to this finding.
Issue 2 - The Debt Claim
The primary judge found that, as a result of drawings in excess of entitlement to distributions from the trust, Neville was indebted to Hinrichsen Pastoral in an amount of $395,177 (rounded down) as at 30 June 2023.
Paragraph 45 of the counterclaim by Hinrichsen Pastoral sets out the calculation of this amount.A figure of $1,108.68 represents the balance of a sum held by Neville in a separate bank account in his name. This, the evidence shows, is what is left of money diverted from the trust and paid into Neville’s own account. It is claimed by Neville that the money he diverted in this way was not a loan to him. Rather, he asserts, it was taken by him from the trust bank account and deposited into an account in his own name as bare trustee to secure the funds from feared misapplication by David: his witness summary paragraph [81].The rest of the money the subject of this claim is identified in the counterclaim as drawings by Neville in excess of his share of the distributions from the trust. This totals $394,008.41.
The primary judge recorded that there was no challenge to the mathematical accuracy of the sum claimed: R [240]. This was confirmed by Mr Cooper KC, for Neville on the appeal. This is despite a passage of Neville’s witness summary suggesting that all money which he had taken and deposited to his personal account had been returned to the trust’s account: paragraph 87.
As to the sum claimed by Neville to be something he holds as bare trustee, if that is made out, Neville would have an obligation to pay the money to the party for whom he claimed to hold the funds as bare trustee: Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271, 281 (Gummow J); Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd [2021] QCA 138 at [51]. It must be doubtful whether it is right to call Neville a bare trustee even if otherwise his evidence was accepted. He took the role on himself. He was withholding the money from the trustee (albeit he maintains for good reasons) and he maintains he was expending it in the conduct of the trust’s business. He is perhaps more accurately to be called a trustee de son tort.20 Nothing turns on this as he would remain liable to account or for equitable compensation.
Counsel for Hinrichsen Pastoral urged on us that the remedy of judgment for a debt was available to it and relied on Moses v Macferlan (1760) 97 ER 676 at 679. The circumstances of that case bear little resemblance to those at issue here. Moses indorsed onto Macferlan certain promissory notes given by Jacobs. Before doing so Macferlan told Moses that he would not, by that indorsement, become liable on the notes, but inconsistently with that, later claimed and recovered in an inferior court against Moses as a result of which the money was paid into an account by Moses and taken out by Macferlan. On the issue of whether by proceedings lay to recover the money from Macferlan, Lord Mansfield (for the Court) stated at 678:
“If the defendant be under an obligation, from the ties of natural justice, to refund; the law implied a debt, and gives this action, founded in the equity of the plaintiff’s case, as it were upon a contract.”
To the extent that this suggests the right to recovery is based on the law implying a contract to repay between the parties, that approach no longer represents the law: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 227 (Mason and Wilson JJ), 256-7 (Deane J).
In the end nothing turns on this. If Neville holds the money on bare trust, the Court could at least order that Neville account to Hinrichsen Pastoral for the amount or pay equitable compensation for taking it and the amount of that compensation would be the balance held in the personal account. The facts as pleaded would support that contention (even noting that the counterclaim of Hinrichsen Pastoral uses the language of loan). That Neville would be obliged to pay the money to Hinrichsen Pastoral is also uncontroversial on the appeal.21
The orders made by the primary judge were:
“4. Declare that the plaintiff is indebted to the second plaintiff by counterclaim in the sum of $395,177.
Judgment for the second plaintiff by counterclaim against the plaintiff in the sum of $395,177 accordingly.”
As to the component presently under consideration (the amount of $1,108), Neville is indebted to Hinrichsen Pastoral for that sum and judgment be entered for its payment, the former being a recognition of the obligation to pay that sum by way of accounting for it or as compensation (not as repayment of a loan) and the latter being a judgment for the uncontroversial amount of the compensation required to be paid.
Putting that component aside, the primary judge reached his conclusion that Neville was indebted to Hinrichsen Pastoral for the sum the subject of the judgment by reasoning as follows: Neville took from the trust funds, money which had to be accounted for as a loan or drawings: R [260].In either event his Honour said it constituted a debt owing by Neville to the trust (if it is a drawing in excess of the beneficiary’s distribution entitlement): R [259]-[260].It may also give rise to a bare trust which meant Hinrichsen Pastoral may also have available equitable remedies: R [260]. The reasoning for this was not fully exposed in the judgment and it is one about which I have some reservations. However, this was not the basis upon which the primary judge decided the issue.His Honour rejected the contention that the money was not a loan and was merely taken by Neville: R [261].
This last conclusion was supported by the primary judge principally (but not exclusively) from the financial records of the trust which his Honour relied upon as sufficient evidence of the debt: R [244]-[246].
It is sufficient to point to only part of that material.At a relatively early stage of the dispute Neville’s lawyers wrote to lawyers for David recording, initially, that Neville did not claim the money in the separate account as his but then noting that the balance had always been accounted for by Mr Houlihan in the accounts as a debit to Neville’s account (his loan account with Hinrichsen Pastoral): Exhibit 72. The 2020 accounts22 were prepared on the same basis and signed off by Neville: R [240], [243].The later accounts supported this. Each year the balance sheet of the trust includes as a receivable from Neville (a current asset). The primary judge relied on Exhibit 28 (the financial statement for the year to 30 June 2023) which was tendered by Neville, as prima facie proof of the sum payable in the amount of $395,177.The primary judge was critical of the contention advanced by Neville that the accounts were prepared in this way by the accountant “of his own volition… [and] were not made on instructions or with the agreement of” Neville: R [241]-[242].Neville’s witness summary stated:
“78. It has always been the practice each year for HHH Partners to provide to the directors of Hinrichsen Pastoral a document called ‘Issues & Recommendations’. This document provided information as to how the cattle business had been performing during the preceding financial year, as well as the assets and liabilities of the Trust as at 30 June. Included in that information was the amount of profit available for distribution to the beneficiaries of the Trust as well as a reconciliation of ‘drawings’ paid to the directors. The drawings were amounts that the beneficiaries would receive from the Trust during the preceding financial year and included a monthly sum of $4,000.00 to each of David and I plus any other such amount paid to us by the Trust excluding profit distribution. These ‘drawings’ were taken in lieu of David and I being paid a wage at Frank Houlihan’s advice so as to save on tax and was the system in place from the time that the Trust commenced in 1997.
The process of ‘reconciling’ the drawings was done by comparing the amount received by the respective director in a given financial year with the amount of distribution to be paid to that director as beneficiary from profits of the Trust for the same period. In some of the years since 1997, the profits available for distribution to each of David and I were less than the amounts that we had received as drawings. As such, Frank Houlihan classed the amount of drawings we each had received in excess of the amount of profit available for distribution as a ‘loan’. If in one year there was such a ‘loan’, then that amount carried forward to the following year and would be included in the reconciliation for that following year. As such, if there was a loan created by a deficit in distribution versus drawings in one year, and then a surplus of distribution over drawings in the following year, then that surplus was applied to the deficit that had occurred in the previous year (exemplified in FY 2018…). Over time, and in particular over the years 2019 to 2023, that deficit grew as the Trust was not profitable but David and I continued to take drawings.”
Conclusion
Issue 3 - Breach of Director’s Duties
The final issue concerned the primary judge’s conclusion that Neville was liable to Hinrichsen Pastoral for losses suffered as result of contravention of his duties as director.
It was accepted on the pleadings that at all relevant times Neville has been a director of Hinrichsen Pastoral. It was asserted that he contravened the duties imposed upon him pursuant to s181 and s182 of the Corporations Act 2001. Those provisions state:
“181 Good faith—civil obligations
Good faith—directors and other officers
A director or other officer of a corporation must exercise their powers and discharge their duties:
in good faith in the best interests of the corporation; and
for a proper purpose.
…
182 Use of position—civil obligations
Use of position—directors, other officers and employees
A director, secretary, other officer or employee of a corporation must not improperly use their position to:
gain an advantage for themselves or someone else; or
cause detriment to the corporation.
…”
“[278] The effect of Neville’s activities is more clearly observed from the particulars in paragraphs 52(a) and (b). What the figures show is that the trust had 1,559 cattle on Durrandella as at 30 June 2014 and 30 June 2015, before slowly reducing the herd through 2016, 2017, 2018 and 2019, at which point the herd had decreased to 438 cattle, i.e. was less than a third of the size.
[279] The trust cattle were then all sold in the 2020 financial year, with the exception of nine head, which perhaps were not able to be mustered. There were no trust cattle on Durrandella in 2021. Whilst the trust cattle herd on Durrandella was being reduced from a significant herd of cattle, Neville, in partnership with his wife, increased their partnership herd from 221 cattle in the 2013 financial year, up to 976 cattle in the 2018 financial year (during the supposed period of the wipeout drought) and the closing stock number of 672 beasts on Durrandella in the 2020 financial year. Neville has not disclosed his closing stock levels since that point.
[280] Not only did Neville run down the trust cattle upon Durrandella from a sizeable herd of 1,559 cattle on 30 June 2014, essentially to no cattle by 30 June 2020 and in that time having built up his own partnership herd, Neville also caused the trust to pay for his partnership expenses in doing so. As discussed above Neville caused the trust to pay all of the rates for Durrandella until 2019, all of the lease payments for Durrandella until 2017, considerable regrowth control, repairs and maintenance expenses as admitted in paragraph 33A(b) of Neville’s amended reply. In addition to this, the partnership accounts showed that the partnership of NW and AL Hinrichsen did not pay fuel expenses for 2014, 2015, and 2016 and I infer from this that the trust paid for all of the fuel expenses and activities upon Durrandella during those years.
[281] Neville, as a director of the company, having his statutory duty under section 181(1) of the Corporations Act to act in good faith and in the best interests of the company, and for a proper purpose, and having the duty under section 182(1) of the Corporations Act 2001 not to gain an advantage for himself or someone else or cause detriment to the second plaintiff, has, in my view, deliberately done so by running down the trust herd on Durrandella supplanting them with the herd that Neville owned, in partnership with his wife. There could not be a clearer breach of the statutory duties under sections 181(1) and 182(1) of the Corporations Act 2001.”
Having determined that the contraventions had occurred his Honour assessed damages in an amount of $3,548,440: R [283]. That was the figure which his Honour said was established by the evidence and further that there was no suggestion that it was inaccurate: R [284].
The findings of the facts which the primary judge identified as breaches of Neville’s obligations under ss 181 and 182 of the Corporations Act are not challenged on appeal. Other than to identify as a ground of appeal that the primary judge was wrong to find that Hinrichsen Pastoral had proved its quantum, there is no specific finding of fact challenged in relation to the quantum of the assessed compensation payable.
The appellant’s first contention in submissions in relation to this aspect of the appeal was that the case pleaded and run by Hinrichsen Pastoral was one for damages for a breach of an implied term of the Durrandella Succession Arrangement that Durrandella would be used ‘exclusively’ to run cattle of Hinrichsen Pastoral, and that no such contract was made out nor could such a term be implied.
This is based on a particular reading of paragraphs 49 and 53 of the counterclaim which state:
“49. It was a further term or part of the Durrandella Succession Arrangement that:
the second plaintiff by counterclaim would occupy Durrandella exclusively, save and except for the homestead blocks upon it;
until the perpetuity date of the Hinrichsen Pastoral Trust or such earlier date as may be agreed between:
Mr Hinrichsen Snr or his successor in title as registered lessee of Durrandella; and
the second plaintiff by counterclaim or any party appointed in its place as trustee of the Hinrichsen Pastoral Trust; and
for the purpose of carrying on the cattle grazing operations of Durrandella as trustee of the Hinrichsen Pastoral Trust.
Particulars
The term is implied. The implication arises from (a) the fact that the Durrandella Succession Arrangement as varied in unworkable without it and (b) the facts pleaded at sub-paragraph 14.a)i) and 16 (e) above.
…
The plaintiff’s actions pleaded in paragraph 52 above:
were contrary to the Durrandella Succession Arrangement pleaded in paragraph 49 above; and
constituted breaches of the plaintiff’s duties pleaded in paragraph 50 above including for the reason that the said actions diminished the exercise by the second plaintiff by counterclaim of its powers and duties pleaded in paragraph 49A above.”
This contention is unsustainable.It is inconsistent with the terms of the pleaded counterclaim: paragraphs 50 to 52.Paragraph 53 does not plead that the alleged conduct was only a breach if it contravened both the implied term in the Durrandella Succession Arrangement and the provisions of the Corporations Act as is the essence of the appellant’s contention.It cannot be reconciled with the form of the relief claimed which explicitly included compensation under s 1317H of the Corporations Act.It is not the way the respondents opened their case: Opening Submissions by Defendant and Plaintiffs by Counterclaim at [39].The primary judge rightly recognised that contravention of the term pleaded in paragraph 49 was not claimed to have caused any part of the loss Hinrichsen Pastoral sought to recover: R [268]-[269].
The second contention advanced by the appellant was that in some way Neville ought not to have been found in breach because: David unreasonably failed to cooperate in 2014 in the termination of the trust when requested by Neville;David had given his informed consent to the conduct found to be breaches by Neville, or alternatively had acquiesced in it or is to be denied relief due to waiver and laches; andDavid failed to send cattle to Durrandella and that this explains the reduction in the trust’s cattle on that property.
As to the first point:Neville stated in his witness statement that in mid-2014 there was a relationship breakdown between him and David. David gave oral evidence to similar effect, stating that the relationship started to breakdown in 2014 when Neville asserted that “Durrandella had nothing to do with [David]”.23Neville sought to terminate the trust because the 15 year “All-in-One” finance facility with Rabobank was to expire in 2015 and the entire permitted overdraft, viz $2,380,000 remained outstanding.24Neville and David disagreed as to how trust assets were to be distributed. Accordingly, Neville contacted a solicitor for preliminary advice who, although was never formally retained on an ongoing basis, contacted David’s solicitor in about November 2014.25Neville asserts that David was offended by this course and in turn conveyed to Neville during a telephone call in about November 2014 “to only speak with him in future through a lawyer”.26In cross-examination, when questioned on this telephone call, David rejected the correctness of that statement.27 He stated that they simply did not communicate, and that the phone operates both ways.David acknowledged the lack of cooperation between him and Neville from about 2014 in his witness statement. Notwithstanding, David maintained that he had always conducted the trust operations at the Croydon Properties for Hinrichsen Pastoral’s benefit. He accepted in cross-examination that he took over such operations in 2014 and made all the management policies without input from Neville.
“The defendant has, by his silence in failing to complain about the matters of which he and the second plaintiff by counterclaim now complain, constitutes acquiescence, waiver and latches by the defendant and the second plaintiff by counterclaim which precludes their claims because they knew that the matters were in fact occurring at the time when they occurred…”
David’s pleaded response is the same.
It is not alleged that the content of the statutory duty owed by a director to Hinrichsen Pastoral was affected by those matters. There is no allegation of the solvency of Hinrichsen Pastoral (which may bear upon the scope of the duty). No case of fully informed consent is pleaded.
The primary judge (albeit when discussing aspects of the money taken from Hinrichsen Pastoral by Neville) referred to Neville’s submission that the company ought to be denied relief because of acquiescence (waiver and laches). The primary judge dismissed that at R [303] stating:
“The problem with this submission is firstly, that the company is not suing on any equitable cause of action, but rather for a statutory cause of action pursuant to section 1317H of the Corporations Act, to which acquiescence, waiver and laches are not a defence. Secondly, I do not consider that, if it were a defence, David would be guilty of acquiescence, waiver and laches. It has to be recalled that the cause of action is held by the company and not David. The company has two directors, namely Neville and David, both of whom would appear to have ‘sat on their hands’ and did not act to attempt to sue each other or attempt to bring the company to sue each other until Neville sued David.”
The primary judge was correct to conclude that acquiescence is no bar to a claim for compensation by a company under s 1317H for breach of s 181 and s 182 of the Corporations Act.
There is no finding of fact that David was aware of the pleaded facts prior to 2019. These proceedings were commenced (by Neville) in 2020. The activities the subject of the compensation claim concern Neville’s conduct after the ending of the drought in 2018. The table of herd numbers in the counterclaim (accepted at R [278]) show the cattle numbers owned by Hinrichsen Pastoral at Durrandella being reduced from 438 in 2018/2019; to nine the next year and then nil the succeeding years while the herds of Neville increased. There is no factual foundation for a contention that fully informed consent was given to this conduct or that David acquiesced in it. Nor can it be said (if relevant) that there was any relevant delay or conduct amounting to waiver.
As to the third point:Neville submitted below that Durrandella’s trust operations depended on receiving cattle from the Croydon Properties to maintain the number of trust cattle at Durrandella and to maximise trust income from sales.31 In other words, Neville could not develop and sell Hinrichsen Pastoral cattle, irrespective of the size of his personal herd, if David did not supply Durrandella with Hinrichsen Pastoral cattle.32David accepted in cross-examination that he did not send any cattle from the Croydon Properties to Durrandella after 2014.33Notwithstanding, David gave evidence that from 2014, Neville stopped asking him to send cattle, having communicated to David “that he was not happy with the breed, style and temperament of cattle sent down to Durrandella or the results achieved from the sales of those cattle”.34David maintained in cross-examination that Neville did not ask him to send cattle down to Durrandella.35 Neville accepted in cross-examination that no communications were ever sent between their lawyers by which Neville asked for more cattle from the Croydon Properties.36
The primary judge found at R [146] that in circumstances where Neville had control of Durrandella “it was impossible for David, even if he wished to forward cattle to Durrandella to achieve that purpose without Neville’s consent and without Neville having put into place arrangements to receive the cattle”.
His Honour ultimately did not accept that David was at fault for not sending any cattle from 2013 to 2018 from the Croydon Properties to Durrandella: R [292]-[293]. Indeed, he found that “Neville [ran] down the trust cattle upon Durrandella from a sizeable herd of 1,559 cattle on 30 June 2014, essentially to no cattle by 30 June 2020”: R [280]. No error is shown in the primary judge’s conclusions.
The third contention was that the quantum had not been proved by Hinrichsen Pastoral. This contention should be rejected.
Hinrichsen Pastoral called another accountant, Mr Wilkes.In his witness summary he exhibits communications from Neville that showed that the levels of Hinrichsen Pastoral cattle on Durrandella fell from 1,559 in 2013/14 to nine in 2019/20, then to nil or at most one, in each of the following years including 30 June 2024: paragraphs 27, 34 and 36.He stated (as was obvious) this led to reduced sales by Hinrichsen Pastoral but also reduced some expenses. He calculated and verified those saved expenses: paragraphs 39 to 57; 59 to 63.
Conclusion
The Orders Made
The primary judge delivered reasons and invited submissions as to the orders to be made in consequence. They included:Declarations as to the beneficial ownership of Durrandella and the Croydon Properties;Judgment against Neville for the debt discussed above and also for compensation for his breaches of director’s duties;The appointment of trustees for the sale of Durrandella and the Croydon Properties;The appointment of trustees of the Hinrichsen Pastoral Trust for the purposes of winding it up and realising its assets;Then, subject to any further order of the court, upon the sale of Durrandella and the Croydon Properties “and/or assets of” the trustee, orders were made for the distribution of the proceeds to pay various expenses and charges with the balance to be “divided equally between” Neville and David: Orders [25]-[26].
The only submissions made to the primary judge concerning the forms of these Orders were as to matters of detail (including the identity of the trustees). No submissions were directed to the ultimate disposition of the balance.
But the Hinrichsen Pastoral Trust is a discretionary trust. Both as to net income and the distribution of the corpus, all beneficiaries have a potential right to be considered: Trust Deed clauses 5.03 and 7.01.
The Orders do not seem to have been made in recognition of the possible impact on the interests of these other persons.
The parties have made supplementary submissions dealing with what should be done in this regard.
The submissions made on behalf of Neville were:That the net trust money must be paid to the trustee and held by it subject to the terms of the Trust Deed;The only necessary parties to this action are the appellant and the respondents; andThat (at least inferentially) as concerns the Trust, paragraphs 25 and 26 of the Orders made by the primary judge should be set aside and the trust essentially be left unaffected by the dispositive effect of these Orders.
This represents a departure from the case up to that point urged by Neville. The further amended notice of appeal did not seek to appeal from Orders 25 and 26 (save to the extent they applied to the Durrandella property).
It may be that what the appellant proposes is adopted by the Court. But it seems to me the trial judge, seized of the matter as a whole, is best placed to consider this. The Orders affecting the trust extend beyond Orders 25 and 26, including the orders for sale of the leasehold interests. The costs of this need to be satisfied in some way which presently is accommodated by Orders 25 and 26.
Accordingly, I agree with the submission made for the respondents that directions should be made with a view to permitting the interests of the beneficiaries other than David and Neville to be considered. This may be able to be done through the voice of the appointed Trustees or by someone else. This is a task best undertaken by the trial judge. Accordingly, to facilitate that, the implementation of present orders for the making of disbursements from the assets of the trust and the distribution of the balance should be deferred pending further order of the Court.
Conclusions on Appeal
The Order of Crow J made 6 June 2025 is varied by providing that paragraphs 25 and 26 of that Order are stayed pending further order of the trial judge;
The matter is remitted to the trial judge to make such directions or other orders as may be appropriate to take account of the interests of beneficiaries of the Hinrichsen Pastoral Trust (other than the appellant and the first respondent) in relation to the lifting of that stay or for modification of the provisions of paragraphs 25 and 26 of the Order;
Appeal dismissed;
The appellant is to pay the respondents’ costs of the appeal on a standard basis.
Hinrichsen v Hinrichsen [2025] QSC 108 (Reasons or R). ↩
Order made 6 June 2025 (Order). ↩
This first issue is raised by Grounds 1 to 9 and 14 of the Notice of Appeal (noting that Ground 8 was abandoned by the appellant in its written submissions). ↩
This second issue is raised by Ground 13 of the Notice of Appeal. ↩
This third issue is raised by Grounds 10, 11 and 12 of the Notice of Appeal. ↩
Transcript of Proceedings before Crow J T2-6 l 37 to T2-7 l 27; T2-12 l 39 to T2-13 l 15. ↩
However, that provision was removed by Deed of Variation of Trust dated 29 September 2005: Exhibit 54. ↩
Exhibit 15; Transcript of Proceedings before Crow J T2-33 ll 19-37. ↩
Transcript of Proceedings before Crow J T4-18 l 28; R [57]-[59]. ↩
Transcript of Proceedings before Crow J T3-10 ll 43 to 44. ↩
That said, paragraph 49 which seeks to identify an implied term does so in a manner reminiscent of terms of a concluded and binding contract. That, however, is pleaded in a different context. ↩
Transcript of Proceedings before Crow J at T2-38.
Hinrichsen
Hinrichsen [2025] QCA 252
(1985) 160 CLR 583
(1987) 162 CLR 221
(2016) 90 ALJR 679
(1987) 164 CLR 137
(2009) 76 NSWLR 603
(1988) 84 ALR 271
Appeal dismissed; paragraphs 25 and 26 of Crow J’s order stayed pending further order of the trial judge; matter remitted for directions or other orders addressing the interests of other trust beneficiaries; appellant to pay respondents’ appeal costs on a standard basis.
Thereafter, both David and Neville inspected a number of properties in the company of agents and in the end jointly made the decision to acquire the Croydon Properties. An oral offer was made of $1,500,000, which was agreed to.
The primary judge found that the identity of the purchase of the leasehold and of the business came about as a result of advice taken by Mr Hinrichsen Snr, Neville and David, from Mr Houlihan. The property was to be in David’s name because it was at that stage proposed that David would move to the Croydon Properties, with Neville remaining on Durrandella. When there was an ultimate division of the properties between the sons, with David likely to get the Croydon Properties, it was said to make sense to put the Croydon Properties in David’s name from the beginning. Neville accepted this was a decision which they jointly made “just to avoid double stamp duty”.9 As a result, the primary judge concluded:
David’s solicitors correspondence of 28 November 2000:The solicitors who acted on the purchase of the Croydon Properties wrote (after settlement) to each of Neville and David. The letter is said to be significant because it does not record the terms of any trust of the leasehold held by David, but otherwise refers to the signed documents as instruments of significance.The letter is of no probative weight. It is not inconsistent with the common intention as found by the primary judge and is at best, for Neville, anodyne. The primary judge considered its terms and by reference to parts as set out in his Honour’s Reasons at [100]-[101] concluded that its terms supported David’s evidence as to the Durrandella Succession Arrangement continuing and not being displaced by the acquisition of the Croydon Properties. I do not draw much support for either party’s position from the terms of the letter.
Mr Hinrichsen Snr’s 2005 Will, paragraph 14:In submissions for Neville it was urged that the primary judge failed to have regard to a piece of evidence which did bear upon Mr Hinrichsen Snr’s intention in 2005, but which was inconsistent with the common intention persisting after the purchase of the Croydon Properties. That was the terms of paragraph 14 of his last Will.It stated:
His Honour concluded at R [294] the relationship breakdown did not provide any lawful excuse for Neville’s breach of director’s duties. I agree.
As to the second point:By the further amended answer to the counterclaim Neville alleges at paragraph 52 that:he had raised cattle owned by him on Durrandella from time to time both before and since 2013 for reward;Mr Hinrichsen Snr had approved of his doing so when Durrandella was owned by M Hinrichsen Snr; andDavid and Hinrichsen Pastoral had knowledge of those matters and raised no objection.The amended answer does not assert that David was aware of the extent of Neville’s activities or the reward derived from them. What David admits is knowledge limited to a small personal herd of cattle until 2019 when he became aware that Neville was increasing the herd at Durrandella not owned by Hinrichsen Pastoral whilst simultaneously decreasing the herd owned by Hinrichsen Pastoral.Neville’s pleaded case is expanded to some extent in paragraph 59(x) which states:
The lost sales were the subject of David’s evidence. He explains the basis of his calculation. The sales lost each year are taken to be the levels of sales in fact made of cattle from Durrandella less those which represent sales of cattle of Hinrichsen Pastoral and also less a notional allowance of 5 per cent as a personal herd allowance.37 This gives the number of lost sales which is multiplied by the average sales per head in that year.
The only challenge to the calculation was to dispute the allowance David made to account for what he referred to as a personal herd allowance. David described his allowance as a conservative approach38 and there is no basis to dispute that.
Exhibit 6. ↩
T2-14 l 27 to T2-16 l 7. ↩
Exhibit 33. ↩
Exhibit 6. ↩
Exhibit 193. ↩
Exhibit 33. ↩
Muschinski v Dodds (1985) 160 CLR 583, 620. ↩
Evans, Power and Power, Equity and Trusts (5th ed) at [51-103]. ↩
Appeal Transcript at T1-22 ll 8-27. ↩
Exhibit 45. ↩
Transcript of Proceedings before Crow J T2-34 ll 21-23 and T2-78 ll 9-17. ↩
Witness Statement of Neville William Hinrichsen at [11]. ↩
Witness Statement of Neville William Hinrichsen at [12]. ↩
Witness Statement of Neville William Hinrichsen at [14]. ↩
Transcript of Proceedings before Crow J T2-80 l 10 – T2-81 l 34. ↩
Amended Witness Statement of David Bailey Hinrichsen at [20]. ↩
Amended Witness Statement of David Bailey Hinrichsen at [30]. ↩
Transcript of Proceedings before Crow J T2-82 ll 31-35. ↩
Plaintiff’s Closing Outline of Argument below at [89]. See also Witness Statement of Neville William Hinrichsen at [17]. ↩
Witness Statement of Neville William Hinrichsen at [33]. ↩
Transcript of Proceedings before Crow J T2-101 ll 4-5. ↩
Amended Witness Statement of David Bailey Hinrichsen at [91]. ↩
Transcript of Proceedings before Crow J T2-103 ll 16-22 and T2-104 ll 20-21. ↩
Transcript of Proceedings before Crow J T5-21 ll 4-9. ↩
The primary judge expressed the view that in principle it was wrong to discount the compensation by this notional allowance: R [290]. Nonetheless doing so is favourable to Neville. ↩
Amended Witness Statement of David Bailey Hinrichsen at [78]. ↩