The defendants' factual summary
169The foregoing represents a review and characterisation of the facts upon which George King seeks to establish his case. Much of the material is documentary and to a certain extent speaks in an unambiguous way. As might be expected, however, and as will by now have clearly emerged, the context in which the current dispute finds expression is of a family riven by competing influences, fears and loyalties. The defendants have in those circumstances conducted a similar review of the facts with emphasis upon the findings for which they respectively contend. It is convenient at this stage to set out a consideration of that competing approach.
170The factual findings that the defendants say should be made (in addition to, or instead of, the findings sought by George King) are grouped under sub-headings below in roughly chronological order. The defendants submit that, as a general matter, in the circumstances of this case where the events in question occurred many years ago, the objective contemporaneous documentation, supported by inherent probabilities, provides the most reliable guide as to what in fact occurred: Watson v Foxman (1995) 49 NSWLR 315 at 318-319; ACN 070 037 579 Pty Ltd v Larvik Pty Ltd [2008] QCA 416 at [6]-[7].
Acquisition of Berkeley King's Somers shares
171It appears from the hard copy minute book and register of members for Somers that Berkeley King's Somers shares were acquired by him in about July 1960. However, until the trial of this matter in August 2012, it would appear to have been understood by everyone involved in the dispute that those shares (as well as those of Peter King and Patricia Bellamy) were not acquired until sometime after 1994, when Berkeley King prevailed upon his mother to distribute the Somers shares to her children before she died.
172George King deposed to the following matters:
"ES King [George King's grandfather] over a period of approximately 20 years, acquired ownership of the shares in WPC and hence [majority] ownership and control of Coombing Park...
My father, Berkeley...had a falling out with his father and left the property in 1978.
ES King managed the property until his death in 1994. He was survived by his wife Audrey Emmiline King who divided the shares in WPC, Esk Pty Limited and Somers Investments Pty Limited between their children, being my father Berkeley, my uncle Peter King and my aunt Patricia Bellamy."
173As appears from George King's 22 June 2006 letter set out in full earlier in these reasons, "Ewart ... bought out most of the other shareholders except for his brother...Berkeley held his one third shareholding for less than three years." Berkeley King's letter prepared for the facilitated meetings before Mr Adamedes in 2006 contained the following:
"When my father died [1994]...I took my mother over to Orange to read my father's will...She quickly made a new will as she had always wanted it: equal three ways...
I then approached my mother and told her that I could not continue with the WPC unless I lived there and I would not do that unless I had security in my position...I asked mother to distribute all her shares equally between her three children (as per her will) which she agreed to with the proviso that I put Patricia on the board... This I agreed to."
174In assessing how the parties would have behaved, Mr Benecke contended that it should be accepted that they understood Berkeley King's shares to have been acquired by him sometime after 1994 and to be subject to CGT. Mr Benecke submitted that I should therefore find that the probability is that the records of Somers are in error and that Berkeley King acquired his shares sometime after 1994 because the history of leaving and returning to Coombing Park would not otherwise make sense. He contended that both he and George King understood Berkeley King to have acquired his Somers shares sometime after 1994, that they were therefore subject to CGT, and that on the instructions given and in having regard to the family history, a reasonable and competent solicitor would not have formed the view that the shares were a pre-CGT asset.
The relationship between George King and his family from 1996 to 2002
175George King agreed in cross-examination that his relationship with his father was a close and loving one, characterised by trust, up until about 2006 or 2007. He gave forceful evidence in re-examination that until June 2007 he and his father had "the best relationship".
176George King was prepared to come to work at Coombing Park in 1996 on the basis that his father would leave his Somers shares to him in his will, even though at the time he was aware that his father could change his mind about his will and even though he was conscious that there had been disputes between family members concerning property in the past. He said the following:
"Q. He promised to leave you his Somers shares in the will, correct?
A. Correct.
Q. You were happy with that promise?
A. Yes.
Q. You knew, though, that he could change his will, didn't you?
A. Yes.
Q. But you trusted him at the time; correct?
A. Exactly.
Q. And you did not need any more from him at that time; correct?
A. Correct."
177George King's evidence is that he and his father agreed that the Somers shares were to be transferred to him in "early August 1999". The agreement was not put into effect until November 2000 when George King took a transfer of the one Weander share from his mother and two from his father. He was evidently in no hurry to see his father's Somers shares transferred to him. Mr Benecke argues that George King has not given any reasonable explanation for why it took so long for the transaction to be effected and that the delay is again consistent with a close and trusting relationship between them at this time: George King was prepared to accept his father's promises without requiring any further legal assurance or security.
The plaintiff's knowledge and understanding of trusts
178Mr Benecke also submitted that George King consistently and deliberately understated what he knew about trusts and their operation as at 1999-2002. At one point during his cross-examination he said this:
"Q. You had previously read trust deeds, hadn't you?
A. No.
Q. Never previously read trust deeds?
A. No.
Q. Do you recall reading the trust deed in relation to the Brumby Trust?
A. No, I've never read it."
179He then went on to deny that he had read the Brumby Run Trust Deed when he signed it on about 12 September 1997 and that he doubted that he read or understood the deed of variation of the Brumby Run Trust Deed when he signed it on about 1 September 1998. The deed of variation significantly removed Audrey Emeline King as appointor under the Brumby Run Trust. Mr Benecke asserted that George King's denials that he read the trust deeds when he signed them in 1997 and 1998, and that he had not read any trust deeds prior to 29 January 2001, were false. This is said to follow because a document subsequently tendered by him, being his letter to Mr Benecke on 17 July 2000 enclosing "the trust documents for Charmdew Pty Ltd", also stated "[t]his document is verbatim of the Weander Pty Ltd trust document".
The instructions given to Mr Benecke in relation to Berkeley King's will in 1998
180The facts in relation to Mr Benecke's preparation of Berkeley King's will in 1998 are not in dispute. There is no allegation of breach in respect of them. Mr Benecke, however, contends that they are important.
181In or about early June 1998 Mr Benecke was contacted by Berkeley King who requested him to prepare his will. Mr Benecke prepared the will, which was duly executed. Mr Benecke gave uncontested evidence that he received all instructions from Berkeley King or his wife as applicable. He was not informed by Berkeley King or George King of any agreement they had reached in relation to George's inheritance or control of the family's assets. He was not asked by either of them to provide advice as to the options available to Berkeley King to give effect to any such agreement or to his testamentary intentions. Berkeley King was certain about his testamentary intentions and Mr Benecke's instructions were to prepare documentation rather than give advice.
182Because of privilege and confidentiality obligations, Mr Benecke was not able to give evidence of the nature of the will he prepared for Berkeley King in 1999, what instructions he received in respect of it, or what bequests (if any) were made to George King under it. However, the following may comfortably be inferred from evidence given by George King (and are not understood to be in dispute). In about late 1996, Berkeley King invited his son to return to Coombing Park and promised that if he did so "I will leave all shares in Somers owned or controlled by me to you in my will". George King subsequently saw his father's will and noted that it recorded that "all of his Somers shares" were bequeathed to him.
The agreement between George King and Berkeley King in 1999
183The defendants do not dispute that Berkeley King and his son had a discussion in about August 1999 and reached an agreement that Berkeley King would transfer his Somers shares to George King and resign as CEO, and that in return he would pay "fair value" for his father's remaining shares in Whitney (including those shares attributed to him through his interest in Brumby Run) and Esk. The defendants therefore do not dispute that Berkeley King agreed to give George King ownership and/or control of Berkeley King's Somers shares. Large parts of George King's submissions are directed towards establishing that Berkeley King accepted that his son was "the major shareholder in Whitney". That is not in dispute.
184However, the defendants do dispute what was meant by "fair value" in the agreement concerned. Although the defendants complain that it is not pleaded or addressed, it is apparent that George King's case is that "fair value" meant the value of Berkeley King's Somers shares (and the sisters' shares, which together form the Minority Shares) assessed by reference to the net asset value of Whitney and Esk and subject to a 20 percent "minority discount". That is the approach taken by Mr Ivey in his report dated 19 July 2012 on which George King relies.
185George King has given no evidence of any discussions with his father in support of his case on the meaning of "fair value". Its only "justification" is by analogy with the Patricia Bellamy buy-out. According to the defendants, the suggestion that George King's family could have been bought out on the same basis as Patricia Bellamy, or that Berkeley King would have agreed to that course, is fanciful. It is obvious from the various position papers that Berkeley King prepared that he wished to provide for his daughters but had little regard for his sister, who he described in consistently unfavourable terms. George King's case assumes that his father would have wanted the same result for both. In any event, Berkeley King cannot have had the Patricia Bellamy buy-out in mind because it occurred after the 1999 agreement.
186The defendants' case is that "fair value" meant whatever value was needed to achieve a rough equality in the division of Berkeley and Penny King's assets among their children. That position is said to be supported by the following matters. Consideration of surrounding circumstances and post contractual conduct is permissible when what is in issue is the existence or terms of a wholly oral contract: Colyer Fehr Tallow Pty Ltd v KNZ Australia Pty Ltd [2011] NSWSC 457 at [47] ff, referring primarily to County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [20].
187As to the surrounding circumstances at the time of formation, George King accepted that his parents loved him and his sisters equally and wanted to treat all three of them equally "as far as possible" and that he knew this at the relevant time. He gave the following evidence about his understanding when he returned to Coombing Park in 1996:
"Q. I think you agreed with me yesterday the discussions that you had with your father and your uncle in 1996 were had in the context of you coming back and working the farm with a view to ultimately getting it to carry on the generation of Kings running it; correct?
A. Correct.
Q. You would get the land as a result of that; correct?
A. No, the shareholding.
Q. But the effect of it would be that you would get control of the land and the pastoral operation?
A. Yes.
Q. And that would be, as you understood it, your inheritance; correct?
A. Yes.
Q. And you understood at the time in 1996 that your sisters would therefore have to get their inheritance in some other way?
A. Yes.
Q. As far as possible to achieve equality between the three of you; correct?
A. If possible, yes.
Q. As far as possible?
A. As far as possible."
188In terms of post-contractual conduct, there are numerous statements by George King and Berkeley King to the effect that the agreement was to make George King responsible for evening up the inheritance of his sisters. For example, in the course of the initial mediations in April and June 2006, George King wrote a letter to Mr Adamedes in which he stated, under the heading "Agreement of Somers", that "[t]he agreement that was in place was that it was my responsibility to even up the dollar value of inheritance." At those mediations he made an offer based on calculations designed to achieve equality among himself and his sisters.
189In Berkeley King's 23 July 2006 document, he referred to his goal that George King should have unfragmented control of Whitney and that his daughters should be made "as close as possible to $ equal". He went on to say in that document that:
"I verbalised again [when I signed over the Somers shares] at this time very clearly that while I was giving him control I was also giving him the responsibility of looking after his sisters' interests. There cannot be one iota of misunderstanding about this."
190Later in Berkeley King's statement in September 2007, for the purposes of the Sykes mediations, he said:
"At this time [1996] I made my goals known re children inheritance to all my family. I wanted George to have unfragmented control [o]f WPC and I wanted my two daughters to have as close as possible to $ equal without putting Coombing at Risk, knowing and saying that $ equal was no possible unless all was sold up the $ divided equally."
191Shortly thereafter, in a letter from Deacons dated 22 September 2008 it is noted that:
"It is our client, Berkeley's view that the terms of the agreement reached were as follows ... the above two items were to be conditional upon George providing for his two sisters' inheritance being as dollar value equal as possible."
192Lastly in this respect, Mr Benecke's unchallenged evidence was that in the dispute between George King and his family in 2007-2008, Berkeley King's intention was:
"to procure a situation where he could have his daughters paid some sort of equal inheritance value ... in line with promises which the plaintiff had apparently made to Berkeley."
193As is particularly apparent from Berkeley King's statement dated 23 July 2006, the negotiations occurred against an historical background, known to both George King and his father, that George King's grandfather had not treated his children equally in terms of inheritance but, following the grandfather's death, Berkeley King had prevailed upon George King's grandmother to divide the estate equally among her children. The defendants contended that this historical context makes it very unlikely that Berkeley King would have said anything that departed from a principle of equal distribution.
194George King also admitted at various points that his understanding of "fair value" (being the position now asserted in these proceedings) was not clear. For example, in his email to Ms Sykes dated 22 October 2007 he stated: "the unclear part [of the deal in 1999] was that I had to buy Berkeley's remaining shares at 'fair value'." George King's letter to his father on 22 January 2008 stated "I have never asked to be released from my obligation to pay 'fair value' for your shares in the WPC group. What is 'fair value' has not been clear".
195Notwithstanding this background, and George King's admissions that the meaning of "fair value" was not clear to him, he refused to accept in cross-examination that he and his father had agreed that in return for transfer of Berkeley King's Somers shares, he was to make a payment that would achieve, as near as possible, money equality among him and his sisters. However, he accepted that this was the intent behind what was agreed:
"Q. And at this time as you understood it your parents' intention was still, as far as possible, to ensure that the three of you got an equal inheritance, correct?
A. As far as possible, correct.
...
Q. And the intent of that as you understood it was that each of you and your two sisters would, as close as possible, receive an equal dollar share of your parents' wealth, correct?
A. Yes.
...
Q. You would agree with me that you undertook a responsibility to buy your father's WPC and Esk shares at fair value, correct?
A. Yes.
Q. And the intent behind that was that each of you and your two sisters would, as close as possible, receive an equal dollar share of your parents' wealth?
A. Yes."
196Mr Benecke submitted that this evidence was telling. George King accepts that the intent of what was agreed between him and his father is consistent with the defendants' case. He has not given any evidence that his father did or said anything that would have the effect of departing from that intent or that he and his father understood "fair value" to mean something different. When negotiations with his family commenced in 2006, George King was initially prepared to calculate what he had to pay in accordance with that intent.
197The defendants accept that George King appears to have formed a different view of what was meant by "fair value" after 2006, in the course of the dispute with his family in 2007-2008 and that he maintains that position in these proceedings. However, the defendants assert that that position is improbable in light of the circumstances and commonly known expectations of the parties at the time the agreement was made, contrary to numerous and consistent statements by Berkeley King about his intentions and contrary to George King's subsequent admissions about the meaning of "fair value" not being clear to him.
The instructions given to Benecke in relation to the transfer of Berkeley King's shares in 2000
198There is a factual contest about whether George King asked Mr Benecke to give him advice in respect of the transfer of Berkeley King's Somers shares and whether any such advice was given. The only advice the he claims to have been given was oral advice on 30 August 2000, as deposed in his first affidavit at [72], as follows:
George King: "Are there any issues with the transfer of dad's shares to me via Weander?"
Ian Benecke: "No. You will have full and total control of all the shares in the Berkeley King Share Trust so long as you own the majority of the shares in Weander. Also, due to the stamp duty costs it would be better for Berkeley to hold the 15 Somers equity shares in trust for you and leave them in his will as stamp duty could be as much as $90,000."
George King: "Are the 15 Somers equity shares that Dad is holding in trust for me safe so that my control is secure?"
Ian Benecke: "There is more than enough evidence to prove that your father is holding these for you if he ever goes back on his word."
199Mr Benecke has denied that a discussion in these terms took place. The starting point for that denial is that George King did not expressly retain Mr Benecke in relation to the transfer of his father's shares. Instead, the true position is said to be that the steps taken in relation to the transfer of the shares occurred pursuant to the retainer with or instructions provided by Berkeley King himself. The evidence is as follows.
200In 1998 Mr Benecke was retained by Berkeley King to prepare his will. George King does not suggest that, in relation to preparation of that will, Mr Benecke was retained or instructed by anyone else.
201In mid-2000 George King had a conversation with his parents about how the Somers shareholding would be transferred to him. In his first affidavit at [68] he deposed to a conversation that occurred in "mid to late" 2000 but he said in cross-examination that he had revised the date to "mid 2000" after reviewing documents with his wife who had "helped him". In cross-examination he also accepted that the discussion with his father was more extensive than the one he had deposed to:
"Q. I want to suggest to you that your father said to you, consistent with the deal in 1996 and 1999, that he would transfer three of the four shares in Weander to you; correct?
A. Yes.
Q. He would leave the other shares in Somers to you in his will; correct?
A. Yes.
Q. And the reason that he gave to you for doing it that way was because of stamp duty consequences in relation to the remaining shares; correct?
A. Mr Benecke told me about the stamp duty consequences.
Q. I want to suggest to you that your father also told you about the stamp duty consequences; correct?
A. Correct.
Q. So as you understood it, you were getting three of the four shares in Weander because that could be done without stamp duty consequences?
A. Yes."
202George King later accepted that the reason he was happy with that arrangement was because he trusted his father, although he later sought to qualify his acceptance by reference to the advice he claims he received from Mr Benecke.
203On 28 July 2000 Berkeley King phoned the offices of Garland Hawthorn Brahe and left a message for Mr Benecke. The file note of the message records:
"Berkeley King phoned.
He knows that his son, George, is seeing you this morning and wanted you to know that he has asked George to ask you some questions regarding Berkeley's affairs. Berkeley King wanted you to know that it is okay to talk to George about Berkeley's affairs."
204That file note treats Berkeley King as the sole client and is consistent with there being no retainer with George King in relation to the Somers shares. As George King points out, Mr Benecke had other dealings with him at this time, in relation to Peter King's shares and the dispute with Patricia Bellamy. The file note arguably makes it quite clear that "Berkeley's affairs", including the transfer of his Somers shares, were treated as a distinct matter on which Mr Benecke acted for Berkeley King.
205George King met with Mr Benecke on 28 July 2000. Significantly according to Mr Benecke, George King does not give any evidence that there was any discussion with him about Berkeley King's affairs or about any agreement or dealings with him.
206On 22 November 2000 Mr Benecke sent a letter to Berkeley King referring to a meeting with him in late August 2000, and a telephone discussion on 21 November 2000. Mr Benecke enclosed various documents including share transfers in Weander from Berkeley and Penny King to their son. Mr Benecke's evidence is that he was not asked by Berkeley King "to provide advice as to the options available... to give effect to his intentions at that time."
207Mr Benecke's maintains that there is no evidence that George King (or anybody else) ever informed him in about 2000 or 2001 that an agreement (referred to as the Berkeley Transaction) existed between George King and his father. Mr Benecke's answers in cross-examination, upon which George King relies, establish only that as at 2001-2002 Mr Benecke understood that Peter King intended his nephew to have his Somers' shares and Berkeley King intended him to have his Somers' shares (by transfer in the case of the shares held by Weander/Deerslayer and by bequest in the case of the shares he held personally). Further, by reason of the transfers from Peter King and Berkeley King, George King would obtain control of Somers and consequently Whitney, and that this was his objective.
208What evidence there is on the matter indicates that Mr Benecke was not aware of the terms of the agreement between Berkeley King and his son. George King only informed Mr Benecke of the terms of the agreement he had reached with his father by letter dated 20 July 2006, stating "Berkeley gave a condition on the transfer of his shares that I 'look after' the girls..." Mr Benecke emphasises that George King would have had no reason to do this if he had informed him on an earlier occasion. There is no evidence or any suggestion that George King (or anybody else) ever requested Mr Benecke to act for him in relation to the so-called Berkeley Transaction or in estate planning matters generally.
209George King's claim that he sought and received advice on his options for transferring his father's Somers shares to him rests wholly on the alleged discussion on 30 August 2000 referred to earlier. Even if there had been a meeting between George King and Mr Benecke at that time (and there is some documentary material supporting that conclusion), Mr Benecke contended that I should find that no such discussion occurred. That submission is based upon the following circumstances.
210First, having regard to the previous dealings between George King and Mr Benecke, it is objectively unlikely that the advice of the nature described was sought or given. Berkeley King had told his son what his clear views were as to how his Somers shares were to be transferred. Although there had been previous (and ongoing) dealings between Mr Benecke and George King in relation to other matters, no advice had been sought on the transfer of Berkeley King's Somers shares (even though the agreement had been reached over a year before). The transfer of those shares was a matter upon which Mr Benecke acted for Berkeley King and occurred in the context of an earlier, express retainer under which Mr Benecke prepared a will that bequeathed the very same shares to his son.
211Secondly, George King plainly had no genuine recollection of any meeting. He accepted that he had given three different versions as to the time at which the advice was allegedly given.
212Thirdly, in the context of the close and trusting relationship between George King and his father, and in circumstances where he had been prepared to proceed without legal assurance or security, it is highly unlikely that he would have asked the questions he claims to have asked.
213Importantly according to Mr Benecke, George King's evidence is also inconsistent with a later written statement made by him. On 20 July 2006 he wrote to Mr Benecke concerning the dispute with his family, saying:
"My thoughts are that if this is to continue it will destroy family relationships. I also see it as unwinnable by me on the emotional grounds it appears to be played on at the moment. If I were to do nothing my legal position with all this is extremely clear and I do not think I require advice on that front. My position is I would like to return to Berkeley the equivalent amount of shares he transferred to me in 1999." [Emphasis added]
214George King would not have written the emphasised words above if he had already received advice on the security of the transfers from Mr Benecke or, if he really could recall such advice being given, he would have referred to it.
The so-called "lost invoice" for work done in 2000
215There is a dispute in these proceedings about whether Mr Benecke issued an invoice to George King for work performed relating to the transfer of Berkeley King's shares in 2000. Mr Benecke's position is that no such invoice exists because no such invoice was issued. George King has pursued this issue extensively in correspondence and by notices to produce. No invoice has been produced. There is no suggestion that Mr Benecke's firm has not taken all required steps to comply with the notices to produce and related correspondence. Mr Benecke has sworn that after receiving the notices to produce, his accounts department conducted searches of the electronic and physical records kept by the firm in order to locate documents covered by the notices to produce. Electronic copies of invoices dating from the period of the alleged "lost invoice" were located.
216Mr Benecke was cross-examined extensively about his billing practices. It was not put to him that he or someone else at his firm had destroyed or falsified records in relation to the invoice so that the searches in response to the notices to produce would not have found it if it existed.
217Mr Benecke submitted that George King's evidence on this issue, on which he was also cross-examined, was inherently implausible. He said that he looked at the invoice several times, understood it to be important and yet provided his only copy of it to his accountants in 2007 (when it related to the 2000-2001 financial year). He has given no evidence through his accountants as to what happened to it or how they kept their files. He accepted that he was uncertain whether it was addressed to him personally or not, even though his affidavit states: "the lost invoice was issued by [the firm] and addressed to me personally".
218What emerges is that the accounts department of a law firm has conducted a thorough search for the invoice. Its record-keeping systems appear to be such that if the invoice existed it would have been located. It has not been located and there is no suggestion that the law firm's records were manipulated to conceal its existence. Mr Benecke submits that I should find that the so-called "lost invoice" was not issued and does not exist.
The settlement with Patricia Bellamy in 2006
219Patricia Bellamy appears at all relevant times to have resided in Melbourne. There does not seem to have been much, if any, friendly interaction between her and George King's family. She does not appear to have been involved at all in the Whitney farming operations.
220Patricia Bellamy started negotiations to sell her one-third interest in Somers and her interest in Esk in about 1997. Proceedings were commenced in this Court and ultimately settled. This has already been referred to above in some detail. Those facts are not contentious. However, the nature of the settlement is in issue because George King seeks to establish causation on the basis that, had there not been any issue in relation to his ownership of Berkeley King's Somers shares and Peter King's shares, he would have obtained a settlement or resolution with his family on the same terms as the Bellamy settlement. His evidence is that Patricia Bellamy settled for total consideration of $975,000 (the water licence being valued at $850,000).
221The defendants' position is that each of the settlements turned on their particular circumstances and that George King's attempt to establish causation and quantum of loss by a comparison with the Bellamy settlement should be rejected. This is referred to later. However, the relevant evidence in relation to it is as follows.
222The amount for which Patricia Bellamy was ultimately bought out was significantly less than the amounts that had previously been offered to her and which George King and other family members were prepared to pay her. For example, in December 2000 George King proposed purchasing her interests for $1,164,000. In March 2002 he had telephone discussions in which it was proposed that Whitney would offer her $1.6M to buy out her interest.
223There is also evidence that George King regarded the Bellamy settlement as extraordinarily favourable to Whitney. On 24 March 2006, very shortly after the Bellamy settlement, George King recorded in a note he sent to Mr Benecke that Patricia Bellamy's Whitney shares had been purchased at a cost of $5 per share in circumstances where Whitney's notional value on a winding up was $21.38 per share. George King's evidence in this case is that, as at January 2009, it is properly valued at about $18 per share or $14 per share with a minority discount.
224George King stated in his 2005/2006 Managing Directors' Report for Whitney that "Mrs Bellamy sought mediation to close what was described by [Whitney's] QC as a 'hopeless' case".
225Other family members also regarded the Bellamy settlement as extraordinarily favourable to Whitney. Katie King wrote to her brother on 31 July 2006 saying, "Just another notch on your belt so you could say: 'I can't believe that Katie and Shish were stupid enough to sell out for $300k each' just like you did for Tricia".
226Berkeley King set out his thoughts on the topic in the paper he prepared and provided to his son for the mediation in October 2007:
"Because George was the controlling shareholder he elected to run the case, which went through all the usual stages of discovery etc. As the case came closer to the courtroom Bellamy sued us for mediation. (Our legal team said that there is no such thing as an unlosable case but if there was one, this would be it.) During the mediation Bellamy accepted the water licence from Gobabla and $150,000 as payment for all her shares and entitlements. George deserves credit for how he ran the case and the outcome was excellent."
227George King also seeks to rely on the Bellamy settlement to establish that there was a practice within Whitney of applying a 20 percent minority discount where minority interests were bought out as a matter of course. He calculates his damages on that basis. He relies on two transactions to establish the "practice", being the payment to Whitney King in 1998 and the Bellamy settlement. Mr Benecke argues that these two instances are insufficient to establish a practice that provides any reliable guidance on what the family would have been prepared to accept. George King did not apply any such discount when he negotiated with his family in 2006 (when, on his own admission, he was not under any pressure). In any event, there is no evidence that Patricia Bellamy agreed to any such discount. There is, on the contrary, evidence that she was unwilling to do so when on 7 August 2003 George King wrote to Brenden Miller saying, "Mrs Bellamy has had no intention whatsoever of selling her shares for anything under their full asset backing price, she will not even discuss minority discounts".
228As to the position of Whitney King, there is no probative evidence that he agreed to a 20 percent discount. The document George King points to does not refer to any such discount and there is otherwise no evidence about the wider circumstances in which Whitney King agreed to sell his shares.
229The Bellamy settlement was extraordinarily favourable to Whitney. The terms of the settlement must have turned on the particular circumstances, including the parties' respective legal costs (proceedings had been on foot for over three years) and the prospects of the oppression suit succeeding (which, of course, turns on the particular quality of the alleged oppressive conduct). Patricia Bellamy was also far more removed from Coombing Park and its operations and less close to George King personally than his immediate family.
George King's attempt to have Patricia Bellamy's shares transferred to himself personally in March-April 2006
230Mr Benecke contends that the timing of the Bellamy settlement is significant. The settlement deed was executed on about 16 March 2006. George King deposed that negotiations with his family commenced "[a] week or so after the Bellamy dispute was resolved in March 2006" when he had a discussion with his parents in which they said words to the effect "we need to get some money out for the girls so that we can give them a start".
231That affidavit evidence has to be compared with what George King said in cross-examination when he accepted that the topic of his sisters' inheritance had been discussed prior to March 2006. Indeed, he and his sisters had met in January 2006 and the issue was on the agenda for the meeting. The agenda sets out a number of sub-issues under the heading "Inheritance" including "Timing", "Money value" and "Esk". George King later asserted that he had "started the talk about getting assets out to Katie and Shish early in their lives so they [could] be responsible for their own circumstance[s] and to begin their own capital growth as [he had] done".
232On 24 March 2006 (that is, about a week after the Bellamy settlement deed was executed) George King sent an email to Mr Benecke as follows:
"Dear Ian,
Attached is the shareholder movements from 1998-2006.
Will need the PEB shares into Deerslayer to keep everything together - before the next generation split happens.
Look forward to seeing you 3.00pm Tuesday.
Regards,
George"
233The documents attached to the email are also significant. They treat Patricia's Bellamy's shares as being already transferred to George King. They state that he had "purchased" Patricia Bellamy's shares notwithstanding that the consideration was paid by Whitney. They also attribute 111,234 shares in Whitney to George King via Brumby Run (that is, two-thirds of the 166,867 Whitney shares held by Brumby Run) and state "purchased rights from PESK and PEB". This confirms George King's view that the Whitney shares held by Brumby Run were to be attributed to the shareholders of Brumby Run in accordance with their holdings. It is also curious that George King gave himself the benefit of those shares when he did not purchase Peter King's Brumby Run share until 2007 and Patricia Bellamy never held a Brumby Run share.
234George King was cross-examined on these matters as follows:
"Q. So as far as you were aware all of the settlement monies or value in relation to the Bellamy settlement was coming from WPC, correct?
A. Yes.
Q. Notwithstanding that you wanted to get the shares that Mrs Bellamy was transferring as part of the settlement, I want to suggest to you, into your name or into companies that you control. That is correct, isn't it?
A. Correct. It was my understanding that I was the majority shareholder.
Q. But you wanted to get those shares into your name or into the companies that you controlled, correct?
A. Correct.
Q. Notwithstanding that WPC was providing the consideration for the settlement?
A. Yes.
Q. You wanted to do that, in other words get the transfer of shares into your name, before there was any discussion about the paying out of money to your sister. That is correct, isn't it?
A. To finish the transaction first, yes."
235By an email dated 27 March 2006 Mr Benecke confirmed that as Whitney had funded the proceedings against Patricia Bellamy and paid the consideration for her shares, George King could not take a transfer of her shares without giving some consideration to Whitney's other shareholders. He also said that there would be complications in Whitney funding him to purchase its own shares. George King then appears to have accepted that the Bellamy shares should be extinguished. At the Whitney Annual General Meeting on 23 June 2006 it was resolved that Patricia Bellamy's shares in Whitney and Somers should be extinguished, and that Whitney purchase her shares in Esk. George King attended the meeting and he is recorded as voting in favour of the resolutions. There may have been some doubt about the efficacy of the resolution (of Whitney) to extinguish Patricia Bellamy's Somers shares. In any event, on 28 July 2006, George King asked Mr Benecke whether Patricia Bellamy's Somers shares could be extinguished "without affecting my position".
236Notwithstanding these events, George King represented to his family in negotiations with them that he had acquired Patricia Bellamy's interests in Whitney and Esk. In a letter to them dated 22 June 2006 he said:
"As majority shareholder I began negotiations with Tricia to purchase her 33% shareholding. This was within my legal, moral and logical right to do so. This purchase does not affect Katie's and Shish's inheritance as they have no right to inheritance from Tricia.
...
WPC has always been a family Company, from Gran Whitney to her five daughters, to Ewart (75%) and Whitney (25%), to Tricia (33%), Berkeley (33%) & Peter (33%). I have received by way of inheritance 24.5% and have purchased both Tricia's and Peter's shareholding to bring my ownership in the WPC Group to just over 90%."
237George King was cross-examined on this material as follows:
"Q. I suggest to you that you were attempting to create in those two paragraphs a false position, weren't you?
A. No. When her shares were extinguished in Somers I went from owning 66 per cent of that to a hundred per cent.
Q. The situation was, was it not, there had been proceedings commenced by Ms Bellamy against WPC and others, correct?
A. Yes.
Q. The defence of those proceedings had been paid for by WPC?
A. Yes.
Q. The outcome of which was to be paid for by WPC?
A. Yes.
Q. And what I suggest to you is in those circumstances you personally had no entitlement to those shares at all, did you?
A. That is why I got advice from Mr Benecke to see if I could take them in my name, how it could be done and we realised there was no difference at all time to my position if I had them either transferred to me or extinguished.
Q. The advice that Mr Benecke gave is that you could not put them simply into your name without giving value?
A. Yes.
Q. To the other shareholder. That is correct, isn't it?
A. Yes.
Q. What I want to suggest to you is that in the letter of 22 June 2006 you were putting a contrary position to that to your father and sisters, weren't you?
A. It is not contrary because the shares were extinguished.
Q. The shares not been extinguished by 22 June 2006 had they?
A. No."
238Mr Benecke contends that George King's claim that the treatment of Patricia Bellamy's shares affected all shareholders "proportionately" is false. The fact is that Whitney had funded a buy-out that had the effect of disproportionately increasing the shareholdings of those persons who held Whitney shares through Somers. That is because Patricia Bellamy held almost all of her shares in Whitney through Somers. It is common ground that George King owned, or was entitled to (pursuant to the promises made to him by his father) the whole of Somers at the time. He benefited significantly from Whitney's buy-out of Patricia Bellamy. By reason of the extinguishment of her Somers shares, his holding in Whitney through Somers increased from 43.8 percent, or 327,783 shares (two-thirds of Somers' holdings), to 65.7 percent, or 491,676 shares (100 percent of Somers' holdings). The shareholdings of George King and his family were not correspondingly increased. They increased only marginally by reason of the extinguishment of Patricia Bellamy's 2.64 percent interest in Whitney that was directly held.
239Further, if George King had acquired Patricia Bellamy's shares, he would have been even better off, because he would have acquired her 2.46 percent direct interest in Whitney and her 33 percent interest in Esk. His claim that it made no difference whether Patricia Bellamy's shares were extinguished or acquired by him is also false.
240The purchase of Patricia Bellamy's shares in Esk by Whitney also gave George King (for the first time) an interest in that company through Whitney. Once again, he paid no consideration for that interest.
241George King's family expressed concerns about his attempted treatment of the Bellamy shares and what it suggested about the management of Whitney. On 25 July 2006 Berkeley King wrote to his son as follows:
"Re your purchase of Bellamy shares.
This is not clear and there are some unanswered questions. You did not pay the costs of running the case, WPC did. You did not provide the capital or the cash to pay for her shares. WPC did. What deal you did with the coy to justify putting those shares in your name I have zero information. As far as I know it has not been approved at a board level."
242Although he used the word "purchased", Berkeley King's concerns seem to relate not only to George King's unsuccessful attempt to have Patricia Bellamy's shares transferred into his name, but also to the general issue about the disproportionate benefit that in fact accrued to him as a result of the Bellamy settlement. That is, the increase in his interest in Whitney through Somers from 43.8 percent to 65.7 percent, in circumstances where the other Whitney shareholders did not get a corresponding increase.
243That is confirmed by later documents, such as the email exchanges between George King and the mediator, Ms Sykes, where George King states that the question of "who paid the aunt" is "the main point of contention" between him and his family. Ms Sykes replied, accurately:
"I think you are correct this is probably the contentious bit I would suspect and that is all it is that maybe they would think aunts shares would not be yours alone as WPC paid the price!"
244Unsurprisingly, George King's family had difficulty accepting that, without paying any consideration of his own, his share in Whitney had increased so dramatically as a result of the treatment of Patricia Bellamy's shares. That treatment significantly influenced later negotiations.
Negotiations between George King and his family in January-July 2006
245Negotiations appear initially to have been conducted with the assistance of Mr Adamedes. Facilitated meetings were held on 22 June 2006 and 31 July 2006.
George King's offer on 22 June 2006
246At the facilitated meeting on 22 June 2006 George King made an offer of $1.294M. The offer was calculated on the basis that each share in Whitney was worth $5, being the amount George King considered Patricia Bellamy had received. He later accepted far higher per share values for Whitney and he accepts for the purposes of these proceedings, in accordance with the Ivey report dated 19 July 2012, that as at January 2009 Whitney was valued at about $17.67 per share or $14.14 per share with the 20 percent minority discount.
247Importantly, the offer made was not for all of the Minority Shares or the other benefits ultimately obtained by George King under the settlement. It was to purchase only the family's remaining shares in Whitney (not Berkeley King's shares in Esk, which were to remain with the family). This is apparent from the terms of the offer as described by George King in his 20 July 2006 letter to Mr Benecke referred to earlier. There is also no suggestion that he would have become entitled to occupy the homestead, a right he later valued at $500,000.
248In his opening, George King's counsel conceded that the offer of $1.294M made on 22 June 2006 was put "before Mr George King started to have doubts about the legal position that he was in as a result of what we say is the negligence of Mr Benecke". In light of that concession, Mr Benecke submitted that it becomes important to consider the offer in some detail. A number of aspects of it are significant.
249First, George King set out his calculations of what he was prepared to offer in a document that became annexure "A" to a letter he sent to Mr Benecke on 20 July 2006. The annexure stated:
"Assumptions: GK returns all inherited shares to BK and Bellamy's shares are extinguished by the Company. BK's shares are divided equally three ways."
250This suggests that George King was negotiating with his family, and was prepared to resolve the dispute, on the basis that there would be, as far as possible, an equal division of his parent's wealth, among his sisters and him. He was cross-examined on this material as follows:
"Q. Anyway, the essence of the payout plan that is set out in annexure A was this. Tell me if you agree. You treat Berkeley's shares as going back to him; correct?
A. Correct.
Q. You treat the Bellamy shares as cancelled?
A. Yes.
Q. In effect it gives Berkeley holding 52 percent of WPC, which we then split three ways?
A. Yes.
Q. Seventeen or so to you, 17 to each of your two sisters?
A. Yep.
Q. And that was the basis upon which you were prepared to resolve the matter then; correct?
A. That was what they were wanting. If you go to the handwritten notes of the March meeting of my sister's, that's what she was trying to undo.
Q. That's what you put forward at the meeting of 22 June, wasn't it?
A. Yes.
Q. It's what you were prepared to offer; correct?
A. 1.2, yes.
Q. An offer on the basis of treating Berkeley's shares as going back to him?
A. Yes.
Q. And Bellamy's shares being cancelled and then a three way split?
A. This is what I put in the meeting, yes."
251George King recorded elsewhere that this approach was taken "[i]n the interests of fairness to both the existing shareholder[s] and future beneficiaries of Penny & Berkeley's estate." On the same page, in a set of documents prepared by George King for provision to the family in mid-2006, he set out the effect that the cancellation of Patricia Bellamy's Somers shares had on his and his father's shareholdings in both Somers and Whitney on the assumption set out above:
"The end result is that neither George [nor] Berkeley [has] purchased any more shares, the number of shares they hold remains the same, but the fact that there are only 2 major shareholders instead of 3 now means [their] percentage shareholding has changed from approx 33% each to approx 50% each. So both have benefited equally as a result of their existing 1/3 shareholding [in Somers] and neither [has] used [his] position to the detriment of the other."
252Unless it is assumed that Berkeley King's shares "go back to him" and there is then a division of his 52 percent interest in Whitney among his children (17 percent each) then the above comment does not apply. Far from "benefiting equally" from the extinguishment of Patricia Bellamy's shares, George King's shareholding in Whitney would increase from 43.8 percent to 65.7 percent whereas the other Whitney shareholders (including Berkeley King) would obtain only a marginal increase (less than one percent), as explained above. Mr Benecke contends that is another reason for inferring that equal division with his sisters was acceptable to George King at this time. Otherwise, by reference to his own explanation to his family, the extinguishment of Patricia Bellamy's shares would be grossly unfair to them and favourable to him.
253George King's preparedness to resolve the dispute with his family on the basis of an equitable division between him and his sisters is readily explicable. Apart from obvious notions of fairness, it is also consistent with the evidence he gave on the intent of the agreement between him and his father and would otherwise see him take a disproportionate benefit from the cancellation of Patricia Bellamy's Somers and Whitney shares.
254Moreover, the offer is revealing about George King's attitude towards the 166,867 Whitney shares held by Brumby Run. George King said in his 20 July 2006 letter to Mr Benecke that:
"Berkeley gave a condition on the transfer of his shares that I 'look after' the girls ... with respect to purchasing the WPC & Esk shares from his and Penny's estate. It was never expected to be dollar equal (Please refer to annexure marked C.) This is Katie and Kristen's actual legal position."
255Annexure "C" records under the heading "Current Actual Situation" that 87,610 shares in Whitney were held by "Penny & Berkeley King & Assoc Companies". These are the shares George King told Mr Benecke he was required to purchase from his parents' estate. The 87,610 must include an amount attributable to Berkeley King's share in Brumby Run. As a matter of arithmetic, the 87,610 appears to comprise:
(a) the sisters' direct holdings of 12,505 Whitney shares;
(b) Berkeley King's direct holding of 1,983 Whitney shares;
(c) the Grand Children Trust shareholding of 17,500 Whitney shares; and
(d) Berkeley King's holding through Brumby Run of 55,622 Whitney shares (being 1/3 of the total number of such shares held by Brumby Run).
256These amounts add up to exactly 87,610. Mr Benecke contended that it was somewhat surprising that George King did not include the 17,500 Whitney shares held by Weander/Deerslayer, which he accepted in later negotiations he was required to purchase (i.e., they were not given to him with Berkeley King's Somers shares and are treated as part of the Minority Shares). But even if these are included, the number of Whitney shares that he considered himself bound to purchase could not be anything like 87,610 unless it included a quantity of Whitney shares held by Brumby Run. In any event, George King clearly included a one-third interest in Brumby Run (equated to 55,622 Whitney shares) in his calculations when determining what he should offer his family. He also acknowledged in a handwritten letter to them at about this time that he was required to purchase "Brumby and Esk" (although he did not think it was achievable at that time). It is clear that in making the 22 June 2006 offer, George King attributed one-third of the Whitney shares held by Brumby Run to his father (being 55,622 shares), and considered himself obliged to purchase them.
257The offer made on 22 June 2006 is also important for what it reveals about George King's understanding of "pressure". As noted above, his counsel conceded in opening that the offer was made without any pressure attributable to the alleged negligent structuring of the share transfers. That concession was obviously correct: he could have had no inkling at this time of any legal issues about the security of his control over Berkeley King's Somers shares. However, he repeatedly asserted in cross-examination that he was under pressure at this time:
"Q...You accept, don't you, that this offer was made by you at a time when, if your evidence be accepted, you were not concerned about your father going back on his promise to transfer the 15 Somers shares to you?
A. The concern was straight away because my sister wanted to undo the deal and she exerts a lot of pressure over him and influence. There are handwritten notes from the March deal.
Q. As at 22 June, I want to suggest to you, you had no concern that your father was contemplating changing his mind in relation to the 15 Somers shares being left to you. That's correct, isn't it?
A. That he had no contemplation? I'm not sure. I don't know what he was thinking at the time. I know my sister was contemplating.
...
Q. I just want to put to you there was no pressure at all on you on 22 June to reach a resolution
A. Not at all.
Q. ...of the kind that you say arose later. That's correct, isn't it?
A. The pressure was beginning. It was already there."
258That evidence was contrary to the concession made by George King's counsel in opening and to his affidavit evidence that it was only in July 2006 or later, after the 22 June 2006 mediation, that he began to form the impression that his father might change his mind about the 15 Somers shares left to him in his father's will. Mr Benecke submitted that this evidence was "plainly false". The very next month, on 20 July 2006, George King wrote to Mr Benecke saying that he regarded his "legal position" to be "extremely clear".
259Mr Benecke emphasised that George King's evidence in cross-examination, that he was under pressure in June 2006, was demonstrative of the way that his case has shifted so as progressively to bring forward his discovery or suspicion of the weakness said to have been caused by the negligent structuring of the share transfers. That suspicion or discovery is then used to explain high offers made by him well before October 2007 (when the will was changed) or February 2008 (when the power of appointment was exercised).
Facilitated meeting on 31 July 2006 and George King's subsequent offer of $1.761M
260After the further facilitated meeting on 31 July 2006 George King made an offer to purchase the Minority Shares for $1.761M. He prepared a "calculation" of the terms of the offer for submission to his family. That calculation indicated that he arrived at that figure by increasing the value of each Whitney share from $5 to $7.50, still well below the $14.14 per share he now accepts, even with a minority discount.
261Even though it is based on an unrealistically low per share value, the offer of $1.761M is still higher than the amount for which George King now says he would have purchased the Minority Shares but for the alleged negligence of Mr Benecke, which is $1.429M. Mr Benecke has submitted that it presents even more of a difficulty for him when the other benefits he received under the settlement, such as his father's Esk shares and a right to live at Coombing Park, which were not part of the offer made after 31 July 2006, are taken into account.
262According to Mr Benecke, George King attempts to get around this difficulty by maintaining that he was under pressure by reason of Mr Benecke's negligent structuring of the share transfers before he made the offer. The only basis for that contention, according to Mr Benecke, is to be found at [139] in George King's first affidavit as follows:
"Either at the mediation or shortly afterwards Berkeley said words to me to the effect of: 'You need to agree to pay us what we are asking or it will get difficult for you.' These comments together with the fact that Berkeley was wanting much more than the value of the remaining WPC and Esk shares made me concerned about Berkeley's intentions regarding the 15 Somers shares he was to leave me in his will. I formed the impression he was suggesting that he would change his mind about those shares if I did not agree to the payments being requested."
263George King was cross-examined about this evidence in these terms:
"Q. I just want to put to you there was no pressure at all on you on 22 June to reach a resolution
A. Not at all.
Q. of the kind that you say arose later. That's correct, isn't it?
A. The pressure was beginning. It was already there.
Q. What I want to suggest to you is that the words that you say your father said to you at paragraph 139 of your affidavit were not said?
A. I believe they were said.
Q. And you did not have the concern or the impression that you set out in paragraph 139?
A. I had that concern.
Q. Do you accept that at no stage shortly after it being said did you express that concern to anyone?
A. This letter to Mr Benecke is before that date. I don't recall expressing it."
264Mr Benecke also submitted that it was highly improbable that Berkeley King made the threat attributed to him for several reasons. First, at the time the words were allegedly said, Berkeley King had affirmed in writing, on several occasions, that it had been agreed that his Somers shares would be transferred to his son. These have been referred to earlier: "I signed over to him all my shares in Somers"; "George would then have an asset of approximately $19M less debt which would be his totally without any obligations to anyone" and "George has the legal right to not give any part of the WPC to anyone...". Nowhere does Berkeley King suggest that there is any uncertainty about his son's rights in that respect. Berkeley King also wrote to his son on 25 July 2006 saying:
"All I have ever done for you has been done with love and with absolute faith in you. I do not understand when you say that I have misled you and used you (to suit my own end) when you now own in effect the WPC. Where you are now is where I have always wanted you to be."
265Mr Benecke emphasised that it is highly unlikely that Berkeley King would have made an oral threat that contradicted his numerous contemporaneous written statements.
266Additionally, George King did not report the supposed threat to anyone or write it down. There is no documentary evidence supporting the making of the threat and much documentary evidence inconsistent with it.
267George King's evidence is that when he did raise the security of the 15 Somers shares with his father over a year later in August 2007, he was told, "If you don't trust me I will sign them across to you now". On 21 June 2007 Berkeley King had said to his son, "I have promised to give you all of my Somers shares". Berkeley King had no intention not to honour his promise to transfer the 15 Somers shares to his son as at June and August 2007. It is highly improbable that he had a different attitude in July 2006, when his relationship with his son was still relatively good.
268Mr Benecke submitted in any event that even if I were to find that the words were said, George King did not form the "impression" that he claims he formed. That is for the following reasons.
269First, Berkeley King only said "it will get difficult for you". There was no reference to the 15 Somers shares left by him in his will. There was no reference to any shares at all. Berkeley King could have meant any number of things. George King had no reason to think his father was implying that he would change his will. Whether the recollection is honest or not, it is arguably influenced by hindsight.
270Secondly, when Berkeley King is alleged to have said "it will get difficult for you", George King had just read a number of written statements from his father affirming that his son had been given his Somers shares. George King's evidence is that Mr Benecke told him that there was sufficient written evidence to enforce his father's promise to leave him the 15 Somers shares and that he was content to proceed on that basis. Nothing in what his father said could reasonably have upset his confidence on that issue. George King considered written evidence of the promise to be sufficient assurance before July 2006 and it remained in place.
271Thirdly, on 20 July 2006, only a couple of weeks before the threat is said to have been made, George King told Mr Benecke that "my legal position with all this is extremely clear" and said that he did not "require advice on that front". Hearing his father say "it will get difficult for you" could not reasonably have shaken his conviction that his legal position was "extremely clear". It would not have shaken it sufficiently to prompt him, without seeking any legal advice, to increase his offer from $1.21M to $1.76M.
272Finally, even if George King did increase his offer from $1.21M to $1.76M because he formed the impression that his father "might change his mind" about the 15 Somers shares, that impression could not logically have been caused by any negligence on the part of Mr Benecke. There was always a possibility that his father would come to regret, and attempt to resile from, his promise. Mr Benecke could have done nothing about that. On his own evidence, George King had an assurance that there was enough documentary evidence to enforce the promise if his father resiled from it. He regarded his legal position as "extremely clear". On his own case, he thought he was in as good a position as if he had taken an outright transfer of the 15 Somers shares. He gives no evidence that he was concerned that his father might change his mind or that he began to doubt the advice he says he received from Mr Benecke about enforcement.
273Mr Benecke drew attention to a number of other matters of note concerning the July 2006 facilitated meeting and offer. First, it is naïve to suggest, as George King does, that the dispute could have been resolved in July 2006 by valuation of the Minority Shares. If that was the way it could have been resolved, it was curiously never raised at the time. It was never a simple matter of getting a valuation done with which everyone would agree: this was a family inheritance dispute with all of the complications and conflicts that involves. Given the lack of detail in the agreement between George King and his father, and the different views expressed from 2006 onwards on the meaning of "fair value", it was always going to involve significant controversy and dispute. In any event, if a valuation had been carried out as at July 2006 and George King had bought out his family on the basis he was then prepared to accept, he would have had to pay more than he ultimately settled for in December 2008.
274Secondly, the calculation he prepared when he made the offer after the 31 July 2006 mediation also stated: "I have offered 111,245 BR shares I have purchased from Peter and Tricia to be given to Katie and Shish. 14.8% of WPC". This seems to have been an alternative offer. It is noteworthy for two reasons. George King was still misrepresenting to his family on or after 31 July 2006 that he had "purchased" his aunt's shares. In fact, he had not paid anything to her and her shares had not been transferred to him. He had, however, benefited substantially, and disproportionately, from the extinction of her shares. Furthermore, George King plainly treated the Whitney shares Brumby Run held as being held proportionately to the Brumby Run shareholding (i.e., he claims to have "purchased" two of three Brumby Run shares, thus giving him an entitlement to 111,245 of the 166,867 Whitney shares held by Brumby Run).
275Thirdly, George King's submission that his father was prepared to accept $2M in the 2006 negotiations, as if to set a ceiling on what the family was seeking at this time, is contrary to the evidence. The amounts that Berkeley King and the other family members sought in 2006 varied significantly. George King recorded in a letter to Mr Adamedes on 4 September 2007 that his father "started last year at a payout of $4.5M for the girls without reference to his total shares having an asset backing of $2.6 million".
Resumption of negotiations from June 2007
276Mr Benecke perceives George King's submissions to give the impression that when negotiations resumed in June 2007 he was already in a position of weakness and the "dynamics of the negotiations" had changed. That submission telescopes events from June 2007, confuses the chronology, and thus incorrectly gives the impression that he had reasons to be concerned about the security of his position from that date. The sequence of events from June 2007 was as follows.
277In late June 2007 there was correspondence between George King and his father regarding division of inheritance, apparently sparked by them sharing a bottle of whiskey together on about 16 or 17 June. Berkeley King confirmed in his 21 June 2007 letter that he had given his son all of his Somers shares in these terms:
"I have promised to give you all of my Somers shares which would include those I receive from the distribution of the Bellamy shares. Unless of course the board decides to extinguish all of her shares."
278There also appears to be a falling out between father and son, primarily in relation to George King's attitude towards his sisters. Nonetheless, George gave unhesitating evidence that he believed his father when he read on or about 21 June 2007 that he would give him all of his Somers shares:
"Q. Can I direct your attention to the paragraph numbered 5, 'I promise to give you all of my Somers shares.' Do you see that?
A. Yes.
Q. You received this letter of 21 June 2007, correct?
A. Yes.
Q. You read it?
A. Yes.
Q. You understood that what your father was saying to you in paragraph 5 was that he reiterates his promise to give you all of his Somers shares. That's correct, isn't it?
A. Yep.
Q. You believed him when he wrote that, didn't you?
A. Yep.
Q. And you were in no doubt at this time that he would honour that promise?
A. This is the whole area there's a bit missed out on in my affidavit.
Q. There's a bit missed out
A. Just the whole history and the order of these things, it needs explanation."
279On 1 August 2007 George King instructed Mr Benecke to prepare a "valuation" of his father's net equity in Whitney (which he considered he was obliged to purchase). In early August George and his father discussed the 15 "ordinary" or "equity" Somers shares that his father had left him in his will, and his father said he would sign them across immediately.
280What happened next is contested. George King's evidence is that Mr Benecke told him that he had advised Berkeley King not to transfer the shares because "[a]s his solicitor I could not advise him to sign them". Mr Benecke's evidence is that he informed George King that the transfer would have significant tax consequences. He later informed him that Berkeley King had not signed the share transfers but that:
"He has promised the remaining Somers Investments shares to you under his will. There is more than enough evidence about that promise. He said that he did not want to sign the transfers given the promise."
281On 13 August 2007 Mr Benecke provided share flow-charts and calculations to George King and noted that he was meeting with his parents the next day "to discuss matters generally relating to WPC equity and entitlements, and estate division". That same day George King wrote to Mr Benecke and asked him to raise certain things at the meeting he was to have the next day with his family. He also proposed that a facilitated meeting (referred to in subsequent correspondence as a mediation) be conducted as follows:
"...I will no longer stand to be the brunt of their personal insults. This is beyond just putting a line under things and continuing, the relationships will need to be rebuilt. ...
It is my opinion that this will be even more damaging to everyone if it is allowed to proceed any further ... I will not discuss any of these matters with them outside of a facilitated meeting. I am proposing that we have a mediated meeting within the next month where I will bring bank cheques to pay out all of Berkeley's, Katie's and Kristen's shares and the Esk loan account.
I want the meeting to be facilitated by an independent mediator, you to be there to provide facts and oversee the transfers, Michael Adamedes ... Berkeley, Penny, Katie, Kristen and myself. Could we organise this meeting to be held in your board room please..."
282The meeting occurred on 17 October 2007 almost exactly as George King proposed, save that Mr Adamedes was not present. In particular, Mr Benecke attended to "provide facts".
283In early September 2007, position papers were exchanged ahead of the mediation or family meeting. Berkeley King's position paper reaffirms in clear terms that his son had been given his Somers shares and specifically reaffirmed the promise of the 15 ordinary or equity Somers shares in his will. His references to "unfragmented control", "absolute control in his own right", and similar statements have been referred to earlier in these reasons.
284Mr Benecke's paper, entitled "Statement of Position" also affirms, consistently with his own understanding, that George King held 85.5 percent of Somers.
285The "family meeting" was held on 16 October 2007. It was agreed, as a basis for further discussion, that George King would pay $3.5M to his parents and sisters, to be funded from sales of properties, and that his parents would continue to have a right to occupy Coombing Park.
286George King's submissions give the overall impression that he was not on the front foot at this time. Mr Benecke disputes that. George King proposed the mediation and its format and on a fair reading of the documents was the driving force behind the negotiations.
The treatment and valuation of the Brumby Run shares in August 2007 and afterwards
287George King's submissions include an allegation that Mr Benecke was negligent by reason of attributing value to certain Whitney shares held by Brumby Run in the "valuation" he performed in August 2007. The defendants contend that such a case is not pleaded and should not be permitted. If it is, the defendants seek the following findings in relation to the calculation exercise carried out by Mr Benecke in August 2007.
288Exhibit "O" shows that Brumby Run was established on 13 August 1997. Three shares were allotted: one to Berkeley King, one to Peter King and one to George King. His evidence is that Brumby Run was established in 1988 when Whitney King was bought out: his shares were transferred to Brumby Run as trustee for the Brumby Trust.
289Until late in these proceedings (possibly until the trial) it appears to have been assumed by all parties that Brumby Run held its Whitney shares either for the benefit of the persons who held the Brumby Run shares, in equal proportions (so that one Brumby Run share was equivalent to 55,622 Whitney shares) or held its shares on behalf of Berkeley King and his siblings in equal one-third shares. There appears to have been some dispute about which of these views is correct. However, no-one has suggested that Brumby Run could be controlled in the manner George King now suggests. It was always accepted, as Berkeley King had one Brumby Run share, that he was to be attributed one-third of Brumby Run's shares (on the first theory) or one-half of Brumby Run's shares (on the second theory), following the extinguishment of Patricia Bellamy's interests.
290The instructions given to Mr Benecke in relation to the August 2007 valuation confirm the position. On 1 August 2007 George King wrote to Mr Benecke requesting the valuation of "Berkeley's realisable assets in WPC". The letter stated:
"Assuming Brumby Run was up for the benefit of AE King's three children; effectively I have purchased Peter ES King's one third share, Berkeley wishes to sell his one third share and Bellamy's one third share is extinguished.
For the purposes of share valuations can you please assume the following shares are extinguished:
PE Bellamy: 19,724
KP King: 3,000
Brumby Run Pty Limited (33%): 55,622"
291Thereafter followed some correspondence between Mr Benecke and George King about how Brumby Run should be treated. George King wanted to make it clear that his aunt's interest had been extinguished. The Whitney shares held by Brumby Run were therefore held in equal shares for him (by reason of his purchase of Peter King's Whitney holdings) and his father. However, the correspondence is consistent with Brumby Run holding Whitney shares on behalf of Berkeley King and his siblings.
292Although described in George King's submissions as a "valuation", the work done by Mr Benecke in August 2007 was really only preparation of a share flow-chart and a calculation. Mr Benecke described the documents he produced, accurately, as a "flow chart indicating the position in relation to WPC land ownership and shareholding" and a statement entitled "WBS King: WPC/Somers/ESK Net Equity (Consolidated)". He later described the second document as a "Statement of Equity held by your father". It is apparent from the correspondence that the purpose of that document was merely to identify the Whitney shares held by Berkeley King or his associated companies, which George King had said he was required to purchase, and to attribute value to them by reference to valuations carried out by Yates Baker McLean. The work could not fairly be described as a valuation or as Mr Benecke being retained by George King to advise him as to what shares should be included.
The mediation before Ms Sykes on 16 October 2007
293The mediation occurred at Mr Benecke's offices before Ms Sykes, a mediator from Dubbo, apparently under the auspices of the NSW Farmers Association, and in accordance with George King's proposal.
What was Mr Benecke's role at the mediation?
294George King had requested Mr Benecke to attend the mediation "to provide facts and oversee the transfers". George King's evidence is that in the week prior to the mediation his father told him that "Ian Benecke will be present in the meeting" and that George King then asked for Brenden Miller to be there. Nothing is made of that evidence in George King's submissions. Mr Benecke says that there is an obvious reason for that, which is that it is false. Contemporaneous documents make it clear that Mr Benecke attended the meeting at George King's request.
295Mr Benecke's evidence on this issue is confused. In cross-examination he described his role at the mediation as follows:
"Q. George went off to see Cheney & Wilson after the facilitated meeting or mediation or whatever one calls it
A. Correct.
Q. that was held at your offices?
A. Correct.
Q. The one that you had prepared the valuation when acting for both of them?
A. Correct.
Q. The time at which you had attended at the facilitated meeting representing both of them?
A. I was asked not to represent either party. I was asked to be in attendance to explain any historical information or holding structure."
296By the time of the mediation Mr Benecke had acted for both George King and members of his family on different matters. It is apparent from his role at the mediation that he did not give legal advice and was not acting for any party. Rather, he was providing historical information at what was hoped to be a relatively informal facilitated meeting to resolve a festering family dispute. The statements that Mr Benecke made at the mediation about preserving family harmony and unity were even handed (he noted that George was "an outstanding manager and operates with the full trust of his parents") and were consistent with this role. Mr Benecke contended that he could not be criticised for his participation in the meeting on 16 October 2007.
297George King was in any event well aware that Mr Benecke was not acting exclusively in his interests at this time and was nonetheless happy for him to continue in the role he had asked him to perform. That is particularly apparent from George King's cross-examination on this topic as follows:
"Q. You continued from 13 August 2007 onwards instructing Mr Benecke to continue acting on your behalf in negotiating a payout figure with your parents, didn't you?
A. Yes, I did.
Q. And this is the same Mr Benecke that you say you formed a view on or about 13 August 2007 that he wasn't acting on your behalf?
A. Yes.
Q. Or acting in your interests?
A. Yes.
Q. If you had the view you say you had, why did you continue to instruct him to continue to acting on your behaviour?
A. Because it was a black and white transaction in relation to shares."
298George King gave evidence at [163] of his first affidavit that Mr Benecke also described the content of the "agreement" at the mediation. Mr Benecke submitted that that evidence should not be accepted having regard to what emerged in his cross-examination as follows:
"Q. If we then go to 163 of your affidavit. You are dealing here with, aren't you, something that you say occurred at the mediation session on 16 October 2007?
A. Yes.
Q. What I want to suggest to you is that the words that you have set out at 163 were not said at the mediation by Mr Benecke. What do you say to that?
A. I don't believe that's correct.
Q. What I want to suggest to you is at the commencement of the facilitated meeting the mediator, Ms Sykes, with the assistance of Mr Benecke plotted the WPC Group ownership structure on a whiteboard noting details of the shares held and the percentage interest of the various parties or entities. Do you recall that occurring?
A. Yes.
Q. And in the course of the discussion duration the facilitated meeting Mr Benecke indicated that Berkeley's historical instructions involved the transfer of some shares to George so long as adverse duty and GST consequences were not triggered. That is correct, isn't it?
A. That is not correct.
Q. And that Berkeley had promised to leave certain other shares being shares on which a transaction would generate tax revenue consequences to you under your will?
A. That is not correct. That is not how he said it.
Q. Under his will. Now, minutes were prepared of this mediation session. That is correct, isn't it?
A. Yes.
Q. Those minutes contain no reference, do they, to the effect of what you set out at paragraph 163?
A. Can you point me to the minutes please?
...
Q. The minutes don't record, do they, anything to the effect of what you said at 163?
A. They do in the table on page 700. 'Result after promise showing Berkeley's net assets at $2.388 million'.
Q. That is the bit you rely on, is it?
A. Yes."
299Mr Benecke therefore submits that I should find that George King requested Mr Benecke to calculate the value of his father's net equity position, and to attend the mediation before Ms Sykes, knowing that Mr Benecke was not acting exclusively in his interests. He also asks that I find that the work he performed before the mediation, and his role in it, was merely to conduct calculations and provide background or historical information. It was not a controversial role or one in which he could adversely affect George King's interests.
What did George King agree to at the 16 October 2007 mediation?
300Mr Benecke submitted that the best evidence of what was discussed and agreed at the 16 October 2007 mediation is what is recorded by Ms Sims, of the NSW Farmers Association, who attended and took notes as a recorder. She was wholly neutral and there is no suggestion that she had any reason to do other than accurately record what took place. Under the heading "Suggested Action" she recorded the following:
"It was agreed that the following will form the basis for further discussion:
1. Coombing Park South will be sold (see above) and proceeds will go to Berkeley and Penny.
2. Berkeley's share of Esk will be sold to [Whitney] on vendor finance - loan provided by Berkeley and Penny to WPC.
3. The total amount owing to Berkeley and Penny from 1 and 2 above will be $3.5 million.
4. $2 million of the amount in 3 will be distributed equally to Katie and Shish, with Berkeley and Penny retaining $1.5 million.
5. Berkeley and Penny have the right of occupancy of the Coombing Park main homestead rent [free] for their lifetime.
6. Berkeley confirms his Will bequest of Somers Investments shares to George."
301The agreed "basis for further discussion" expressed in these paragraphs is less favourable to George King than the deal he ultimately obtained in December 2008. It involves a payment of $3.5M (rather than $3.55M) in exchange for obtaining the Minority Shares, but it reserves to his parents a right to occupy the homestead. He valued that right at $500,000.
302George King's evidence in his first affidavit was broadly consistent with what was recorded by Ms Sims. He said he "agreed to investigate whether the company could obtain finance to pay $3.5M". He sought later to "clarify" that evidence, saying that "[a]t that meeting my parents and sisters agreed that I was to go away and do that. I didn't answer them."
303According to Mr Benecke, that attempted "clarification" reflects badly on George King's credit. It is part of the shifting case he has had to develop to explain offers consistent with the December 2008 settlement made at a time when he was not under any pressure by reason of the changing of the will and removal of the trustee. Mr Benecke insists that it should be rejected for the following reasons.
304First, and critically, George King's "clarification" is falsified by the email he sent to Ms Sykes on 19 October 2007, three days after the mediation. Mr Benecke submitted that that email is of critical importance in this case. It was sent in a context where, shortly after the mediation, it was reported to George King that his mother and sister Katie then wanted $4M instead of $3.5M. The plaintiff stated:
"G'day Lyn,
Absolutely positively and definitely the best thing to do is to stay with our original agreement we made last Tuesday. I need the time to get everything in order, including contracts of sale and they need time to settle down. Every meeting we have had over the past two years it has been agreed what is fair, everyone leaves and then within 12-24 hours Katie has changed her mind.
...
The figures you did up last Tuesday for WPC assets [were] for 100% of the assets ... Berkeley only ever owned 33%.
...
I wouldn't have though Berkeley was going to go back on his word about the transfer of the asset side of our deal from 1999. If you do a deal and give shares away; logically you would not include it in your statement of assets for distribution (he had to keep them in his assets because Penny & Katie told him to - wouldn't have been worth his life!!!!).
Katie kept trying to go back to Peter's shares because she wants them included in Berkeley assets. If I agree to $4M today Katie will have it at $4.5M tomorrow (bet you half a mill). And then she won't be happy at $4M or $4.5M and the family relations will still be dead in the water.
Sorry for the barrage of frantic phone calls you are going to get from the big house mob. You may like to mention to them that they have pushed me over the edge."
305The email contains a number of important admissions. Importantly, George King admits that an "agreement" was reached. It is plainly, in context, the agreement to investigate payment of $3.5M. Mr Benecke contends that George King's "clarification" is false and reflects adversely on his credit.
306Secondly, the supposed "clarification" is contrary to Ms Sims' notes, which use the word "agreed". George King was sent these notes on 22 October 2007. He did not query the accuracy of the notes with anybody.
307Thirdly, it is contrary to George King's evidence in his first affidavit. He swore several further affidavits but only sought to "clarify" the evidence at trial. Mr Benecke contended that the so-called "clarification" is nothing of the kind. In his affidavit he said that he "agreed" to investigate a payment of $3.5M. He is now seeking to withdraw an admission about what he agreed.
308Fourthly, on 6 February 2008 George King wrote a managing directors' report in which he described the meeting as follows:
"We got to the meeting ... and it was disclosed that Berkeley thought I should pay out $3M, Penny thought $3.5M and Katie though $4M. They argued amongst themselves and compromised on $3.5 ... I was set the task by the mediator to work out if and how we could raise this amount of money to pay them out completely, to organise contracts of sale for the transfer and I was asked to consider this amount of money and bring all the details to the next meeting. The meeting finished and we all went home. The mediator phoned me the next day to tell me that Penny & Katie now wanted $4 million."
309This report makes clear that George King was prepared to consider and investigate payment of $3.5M. Read as a whole, it is consistent with the evidence in his first affidavit and the other material. There is no reference to, or any complaint about, pressure or a threat. George King does not state to the Melbourne shareholders that $3.5M was out of the ballpark or, as he now says, over 2.5 times greater than was reasonable for him to pay, or that he did not agree to investigate it. Consistently with his email to Ms Sykes, his gripe is only that the next day his mother and sister changed their minds and sought a higher amount.
310Finally, George King said this in the position paper he prepared for the mediation:
"I have subsequently sold Gobabla which equated to approximately our debt. Dad has said for the last year that he thinks the girls should get $1M each as a fair payout which I have been working towards. The asset valuation of all the remaining shares is $2.6M. Two million dollars for the remaining 14.5% is nearly six times the value we paid for Bellamy's 33%."
311Two million dollars was the same amount recorded as being agreed at the mediation as an appropriate payout to George's sisters: $2M for his sisters and $1.5M for his parents. He indicates that it is a payment he is "working towards". That supports the defendants' case that the notes of the meeting are accurate and that George King was prepared to consider or investigate a payment of $3.5M along the lines recorded.
Did Berkeley King threaten George King at or after the 16 October 2007 mediation?
312George King's evidence is that "after the mediation" his father made a threat to him along the following lines: "You don't realise the value of the 15 Somers shares. You could lose them." He deposed to the fact that it was after this threat was made ("subsequently") that his family proposed, and he agreed, to investigate payment of $3.5M. George King now seems to accept (somewhat inevitably, given what is recorded by Ms Sims as "Suggested Action" referred to earlier) that the proposal to investigate the feasibility of a $3.5M deal was made at the mediation, not afterwards. It must therefore have been made before the alleged threat. Mr Benecke submits in these circumstances that the threat cannot have had a bearing on George King's state of mind at the mediation on 16 October 2007, at which he agreed to investigate and consider a $3.5M payment. Indeed, given the terms of his 19 October 2007 email to Ms Sykes set out above, it cannot have been made before that email was sent either.
313In any event, Mr Benecke submitted that George King's evidence that he was threatened by his father in this way should not be accepted. It is inconsistent with his father's numerous affirmations of his promise in respect of the 15 Somers shares. It is also inconsistent with the "confirmation" in point 6 of the Ms Sims' "Suggested Action" section of her notes and with the 6 February 2008 managing directors' report prepared by George King, where he gave a quite different account of his discussions with his father and his state of mind at this time as follows:
"I said to Berkeley before the meeting that if he goes back on his word about the Somers shares he is holding in Trust for me it would be devastating to our relationship. Berkeley replied to me to have some faith."
314George King could not give any reason why he did not report the supposed threat in the letter, when he did take his time to report a different conversation about the Somers shares in the will. His cross-examination about this included the following:
"Q. You make no mention in here of the threat that you refer to in your affidavit at 165, do you?
A. No.
Q. That's because it never occurred. That's correct, isn't it?
A. That's not correct. It did occur.
Q. If it occurred why didn't you put it in the report to these people?
A. I don't know. I didn't think it was relevant to them.
Q. It was relevant to them, was it, to tell them before the meeting that if he goes back on his word about the Somers shares it would be devastating and that he replied to have some faith. That was relevant, was it?
A. Yes.
Q. If that was relevant, a statement that you don't realise the value of the Somers shares, you could lose them, would also be relevant?
A. That had been going on for months and months at that stage.
Q. It surely would be relevant, wouldn't it?
A. It might have been but I didn't put it in."
Was George King under pressure at the 16 October 2007 mediation because of some perceived lack of security in his legal position?
315George King's case is that if he was prepared to contemplate a payment of $3.5M in October 2007, it was only because of the pressure he was then under by reason of concerns about the security of his legal position. Mr Benecke contended that such an analysis should not be accepted. He proffered several reasons for this.
316First, George King has given no evidence about it. The only evidence is that he was prepared to agree to investigate the $3.5M payment "to avoid the consequences of Berkeley's threat". He now apparently accepts that the threat was made after the mediation, and therefore after he agreed to investigate payment of $3.5M.
317Secondly, there is no suggestion in any of the evidence that there was, as at 16 October 2007, any uncertainty about his ownership of the shares held by Weander/Deerslayer. George King's case must be that he was prepared to contemplate a payment of $3.5M because of his worries about losing the 15 Somers shares left to him by his father in his will. That is highly doubtful. He gave evidence that he was not particularly concerned about the shares the subject of the bequest because of his control over the voting shares. He responded as follows when questioned about whether he was happy with his father leaving him the shares in his will:
"Q. And you were happy with that arrangement; correct?
A. Yes.
Q. Again because you trusted your father at the time; correct?
A. No, because I had control of Somers then and the voting shares and no one could force me to buy the other ones, the shares that were left in his will.
Q. Are you saying that the promise that was made to you by your father at that time to leave shares to you in his will was of no moment to you?
A. Sorry, was of-
Q. No moment to you, no concern to you at the time?
A. It was a concern, but because he had transferred the voting shares and he had given me them by Weander and the Berkeley King trust, combined with the Peter shares I controlled the company. By a majority shareholding, if he said at X later date I want you to give me X for these Somers shares, he couldn't have forced me because I owned the majority of the voting shares."
318This attitude makes perfect sense, according to Mr Benecke. The shares held by Deerslayer/Weander were what gave George King control. The 15 "ordinary" or "equity" Somers shares were only of significance in a winding up.
319Thirdly, from a legal point of view, George King had no more reason to be concerned about the security of the 15 "ordinary" or "equity" Somers shares in October 2007 than he did when his father first promised them to him in 1999. As already mentioned, his evidence is that Mr Benecke told him that there was sufficient written evidence to enforce his father's promise to leave him the 15 Somers shares and that he was content to proceed on that basis. Nothing that occurred before 16 October 2007 could reasonably have shaken his confidence in that issue. He always knew there was a risk of his father changing his mind. He considered written evidence of the promise to be sufficient assurance before July 2006 and he still had that assurance.
320Moreover, there was now significantly more written evidence of the promise than there had been previously. For example, there were statements made by Berkeley King in the position paper he prepared for the mediation before Ms Sykes, including the statement "These Somers shares I have promised to leave to George in my will." The revised statement Mr Benecke prepared recorded that Berkeley King held only a 13.32 percent interest in Whitney. The replacement letter and "Equity Statement/Chart" Mr Benecke forwarded on 16 August 2007 similarly recorded that the Minority Shares comprised 14.5 percent of Whitney. The Statement of Position prepared for the mediation also recorded George King owning 85.5 percent of Whitney and his father holding 14.5 percent.
321Fourthly, George King sent numerous emails and letters at the time of the mediation and there is no reference to any "pressure" arising from a fear that he would not be able to enforce the promise with respect to the 15 Somers shares. None of them suggests he was under any particular pressure. That includes in particular the "Wild Ride" sequence of emails with Ms Sykes throughout October 2007. His 19 October 2007 email says, "I wouldn't have thought Berkeley was going to go back on his word".
322What George King did not like was the way his family continued to calculate the division of assets on the basis of notionally "returning" the Berkeley King Somers shares and then dividing the parents' estate three ways. Yet this was exactly the approach he had developed and applied "in the interests of fairness" in 2006. He did not like the potential for his father to "go back on his word" but critically did not express any doubt that if he did so, there were not sufficient documents recording the promise to enforce it. His emails suggest he was very confident of his legal position and he never put anything in writing that could be taken to indicate otherwise.
323The reality is, as he recorded in his 19 October 2007 email to Ms Sykes, that George King regarded payment of $3.5M as within the range of "what is fair". He was not perfectly happy with it, but then neither was his family. That would appear to have provoked his comment that they needed to "settle down". Ultimately he was prepared to accept it, in circumstances where he did not have any doubts about the security of the shares held by Weander/Deerslayer, which were the voting shares and therefore most important to him. On his own evidence, he did not find out about the appointor issue until mid-November 2007. Furthermore, he did not have any doubt that if his father changed his mind about the 15 "ordinary" or "equity" Somers shares, there was sufficient material in evidence to enforce his promise.
324There were a number of matters that Ms Sykes raised with George King that, sensibly, should have caused him to realise that what he was proposing was not fair. For instance, she raised with him the benefit he had obtained by reason of having use of the family's wealth before his sisters and, most importantly, the very significant and unpaid-for benefit he obtained by reason of Whitney paying to extinguish his aunt's Somers shares, thus increasing his holding by about 20 percent. Mr Benecke submitted that the suggestion that "fair value", in this context, meant nothing more than net equity value less a minority discount was highly artificial and self-serving.
Events of November 2007
325George King's evidence is that he learned that his father had changed his will, removing the bequest of the 15 Somers shares to him, on 6 November 2007. He had by then already retained Cheney & Wilson to act for him in the dispute with his family.
326His evidence is that in about mid-November he found out from his wife about a possible issue regarding the appointor to the BKST. It appears from Cheney & Wilson's file note to have been raised by him with them on 10 December 2007. He then had Cheney & Wilson draft a deed of variation that would have had the effect of changing the appointor for the BKST from his father to his wife.
327The deed of variation and other transaction documents prepared for George King by Cheney & Wilson were reviewed by him and went through a number of drafts. He forwarded the documents (including the draft deed of variation to change the appointor of the trust) to his father on 12 December 2007. There is no reference in any of the documents or the affidavit evidence to George King's family raising the appointor power to the BKST until the plaintiff did so in December 2007.
328George King described the suite of transaction documents he had Cheney & Wilson prepare in November-December 2007 as "Company Restructure" documents. His correspondence with his solicitors reflects that. There is no suggestion in the correspondence of any pressure. The fact that he commissioned the documents speaks to his confidence that he and his family were about to reach agreement. He was cross-examined on this topic and was in Mr Benecke's submission unable to give any reasonable explanation why he instructed Cheney & Wilson to prepare such documents if he did not think that agreement was close. His evidence included the following:
"Q. You also, in the lead up to the meeting on 17 December, caused Cheney & Wilson to prepare draft settlement documents, correct?
A. Yes.
Q. What you had called a company restructure; correct?
A. Yes.
Q. You asked them to do that because you were hopeful of getting the matter settled at the next meeting on 17 December; correct?
A. Hopeful, yes.
Q. The preparation of those documents by Cheney & Wilson was assisted by work done by Yates Baker McLean, correct?
A. Yes.
Q. It was done at some significant cost, correct?
A. Yes.
Q. You wouldn't have done it if you thought it was not a worthwhile endeavour; correct?
A. Yes.
Q. That's because you knew that settlement was close. That's correct, isn't it?
A. I didn't know. How was I to know that? This had been going on for two years.
Q. Because you knew you weren't very far away on the figures. That's correct, isn't it?
A. Who knows? The figures kept on changing.
Q. And at the time you instructed Cheney & Wilson to prepare the documents, I want to suggest to you you knew your father had changed his will, correct?
A. Yes.
Q. And you knew about the appointor power, correct?
A. Yes.
Q. And you knew or you thought that he was going to exercise it, correct?
A. Yes.
Q. But notwithstanding all of those matters, you still instructed your solicitors to prepare the restructure documents?
A. Yes.
Q. And that was because you knew that agreement was not far away?
A. That was part of my instructions from the 16 October meeting, was to prepare them and have them ready for the next meeting.
Q. Is that reflected in the minutes?
A. No, it's not."
329The treatment of Brumby Run by Cheney & Wilson is also of significance. Mr Cheney's file note records: "Brumby Run - purchase BK' (one) 1 share which is valued at 55,622 shares". That is, the Whitney shares held by Brumby Run were attributed in equal shares to the owners of the three Brumby Run shares. That was consistent with the approach taken by Mr Benecke. The only dispute was whether George King's initial share entitled him to one-third (so that, together with Peter King's share, he had two-thirds) or whether the Whitney shares held by Brumby Run were properly divided equally between George King and his father.
330It was never suggested by Cheney & Wilson that George King could control Brumby Run without purchasing his father's single share. It appears that Cheney & Wilson forgot to include provision for transfer of the Brumby Run share from Berkeley King to his son in the first draft of the contracts but did so after he reminded them.
George King's attempt to falsify the Deerslayer's share register in December 2007 and its consequences
331Upon retaining Cheney & Wilson, George King sought to have them take steps to have the share register of Deerslayer fraudulently altered to record that Deerslayer held Peter King's shares beneficially rather than as trustee for the BKST. George King's evidence was as follows:
"Q. You then instructed Cheney & Wilson to change the register for Deerslayer. Do you recall that?
A. Vaguely.
...
Q. You did ask Cheney Wilson to change the register, didn't you?
A. Yes.
Q. So that Peter's shares were recorded as being beneficially owned by Deerslayer?
A. That's correct.
Q. That was something that you knew at the time was false, didn't you?
A. Yes.
Q. You knew at that time that they were not beneficially owned by Deerslayer, didn't you?
A. Yes.
Q. And you had no right whatsoever to have caused the share register to be changed, did you?
A. They were my shares. I had bought then on vendor finance organised by Mr Benecke and I could see he was about to sack me as trustee. I was doing it to protect the property from being sold.
Q. You had no right to do it?
A. I had full right to sell the shares. I had no right to do the ASIC modification.
Q. Notwithstanding that, you were prepared to instruct your solicitors to do it; correct?
A. Yes."
332This was another matter that was picked up by the family and arguably influenced later negotiations.
The mediation before Ms Sykes on 17 December 2007
333A second mediation was held before Ms Sykes on 17 December 2007. On the following day George King sent an email to Mr Cheney which included the following:
"My guess from the meeting yesterday is that they (Dad & Katie) are going to start legal action. I suspect they will start with dismissing Deerslayer Pty Ltd as Trustee for the Berkeley King Share Trust. Are we certain everything is closed there?
I offered $3.5 million for the three respective share groups, they had previously been demanding $4.0 and in yesterday's meeting changed their demand to $5.2. The mediator has had it with them changing their minds constantly and they are not happy with her take on the matter so I think she will be out."
334Mr Cheney replied the same day recommending mediation:
"Sorry to hear you didn't resolve it. Given that there are offers being tabled a good mediator should be able to settle it..."
335Ms Sims again circulated a set of notes of the mediation but they do not record any offer ($3M or $3.5M) being made by George King.
What amount did George King offer at the 17 December 2007 mediation?
336George King denied in cross-examination that he had offered $3.5M, despite the terms of his email to Mr Cheney. He claimed that he had only offered $3M. He was cross-examined about it:
"Q. What I want to suggest to you is you were feeling better at the end of the meeting than when you went into it. That's correct, isn't it?
A. Yes.
Q. That's because it was heading in the right direction, isn't it?
A. No.
Q. What offer did you make?
A. $3 million equivalent.
Q. Sure of that?
A. Yes.
Q. It wasn't $3.5 million?
A. Absolutely, three.
Q. Have you ever written down anywhere that the offer you made on this occasion was $3.5 million?
A. Yes."
337Mr Benecke urged me to find that George King made an offer of $3.5M, not just $3M. It is hardly likely that it was a typographical error in his email. It appears amongst other figures that are also expressed to one decimal place. They are all accurate and $3.5M was the same as the amount George King had agreed to investigate at the mediation on 16 October 2007. He expressed annoyance to Ms Sykes that his family had apparently gone back on the agreement to investigate payment of $3.5M
338Whether it be $3M or $3.5M, it is apparent that George King and his family negotiated on the basis of the transaction documents he sent through. Those documents provided for a right to life-long accommodation in the main homestead for his parents as he had asked for. He later valued that right at $500,000. Even if the offer was only $3M, it was therefore roughly equivalent to what George King ultimately settled for in December 2008, including a right to occupy the homestead.
Was George King under pressure at the 17 December 2007 mediation because of perceived lack of security in his legal position?
339Mr Benecke submitted that George King was not under pressure by reason of any perceived vulnerable legal position when he made the offer of $3.5M on 17 December 2007. He was certainly by then aware that his father had changed his will and he was also aware of a potential issue relating to the exercise of the power of appointment. However, despite the protestations in his affidavit and in the witness box, none of the contemporaneous documents gives the impression of any pressure or vulnerability. Indeed, on 19 December 2007 he wrote to his mother and offered to help her purchase a unit in Avoca.
340Mr Benecke submitted that George King in fact occupied a dominant position over his family that is discernible in the tone and content of his correspondence with Ms Sykes. In an email sequence on 19 and 20 December 2007 he referred to a "one dollar bet" between the mediator and him. That was obviously a bet on the outcome of the mediation, although George King denied during his cross-examination being able to remember what it was about. He also referred to himself as a "hard negotiator". He was cross-examined on that self-description as follows:
"Q. You had negotiated very hard at the 17 December meeting, correct?
A. No. I just had a top offer and I couldn't move from it.
Q. Threatened to walk away and they would get nothing. That is correct, isn't it?
A. I did not say that, at all.
Q. You say in your email to Ms Sykes, 'I wasn't meaning to be a hard negotiator in the meeting' correct?
A. I went there with the highest possible offer I could make.
Q. But you accept, don't you, having written what you wrote there that you were a hard negotiator in the meeting?
A. No. I just said this is the highest offer we can do. The 3 million. And they said if that's all you've got, that's all you've got.
Q. This is at a time when you had a $7 million total facility with the bank?
A. Yes.
Q. WPC was debt free?
A. Yes.
Q. The only money that it owed to the bank was the money that it on lent to Wellness House?
A. Yes, which the Wellness House was servicing.
Q. And you had on lent to Wellness House the residue from the sale of Gobabla from earlier in the year?
A. Yes. It needs clarification, though.
Q. And the Wellness House property at this time was not encumbered at all, was it?
A. No.
Q. Owned by a company that was jointly controlled by you and your wife?
A. Yes.
Q. It was a property that once completed, I'm sorry, as at December 2007 it was due to be completed in a matter of months, correct?
A. Yes.
Q. And the centre was to be opened in about March, correct?
A. Yes.
Q. Once opened the property was to be worth several million dollars, correct?
A. Yes.
Q. All of which was unencumbered?
A. Yes.
Q. But you maintain, do you, that you went in there with the highest possible offer that you could make?
A. Yes, that is correct. It needs explanation though."
341It was submitted by Mr Benecke that George King evidently regarded the negotiations as a game at which he considered himself to be skilled and that there is simply no suggestion of the helplessness or vulnerability that is central to his case.
342George King has given no evidence that he reported to Mr Cheney that he was under pressure or was paying considerably more than he thought he should be paying to acquire his family's shares. There are no contemporaneous documents recording that he was under pressure. Mr Benecke emphasised that this was precisely what might have been expected that he would have told his lawyer at this time. He has not called Mr Cheney and no explanation has been provided for failing to do so. Mr Benecke submitted that I should infer that Mr Cheney's evidence would not have assisted George King and that I can more confidently conclude that at this time he was not under the pressure that he now claims he was under.
The mutual undertakings not to take prejudicial action
343George King argues that the dismissal of Weander/Deerslayer as trustee of the BKST on 8 January 2008 altered the very foundations of the negotiations with his family so that they were then able to extract from him an offer that was 2.5 times the amount he would otherwise have paid and that he regarded as reasonable. Mr Benecke says that one of the reasons that case should be rejected is that shortly afterwards, mutual undertakings were exchanged that had the effect of preserving the status quo and of allowing George King, in effect, to continue to act as majority shareholder and manager of Whitney.
344On 25 January 2008 Berkeley King gave an undertaking not to take any steps whatsoever to sell any shares or assets of any company of which he was a director or shareholder without seven days' written notice. On 1 February 2008, noting that both parties were amendable to mediation, Berkeley King sought an undertaking from his son in similar terms. On 6 February 2008 George King agreed to pursue mediation and advanced a further undertaking.
345These undertakings were reaffirmed from time to time. For example, Cheney & Wilson's letter dated 13 March 2008 indicated that:
"...our client understood that the parties had effectively given mutual undertakings not to take any action prejudicial to the other party pending completion of the mediation process without giving seven days notice ... Our client's understanding [is] that both parties still desire mediation to proceed."
The family's discovery that George King had transferred $2.5M without authority from a Whitney loan account to The Wellness House and its consequences
346The Wellness House is a company owned by George King and his wife in equal shares. On or about 22 November 2006 he instructed Mr Benecke that he wanted to put certain arrangements in place in respect of The Wellness House, including loans to it by Whitney and by Whitney to a trustee of The Wellness House as part of his "off-farm investment portfolio". He initially sought to characterise these matters as "advice" given to him by Mr Benecke, but later conceded that they reflected his instructions to Mr Benecke.
347On 8 January 2007 at a meeting attended by George and his parents, Whitney unanimously resolved in the following terms:
"...to establish a loan facility of one million dollars with the The Wellness House (TWH); the transaction is to be at an arms length distance, on commercial terms, and will not [compromise] the financial interest of WPC or be at any cost to WPC.
...
Any money loaned is to be secured by a Deed of Loan with supplementary first or second mortgages over the security."
348George King accepted that as at 8 January 2007 the plan was for the loan to be limited to $1M, to be on commercial terms, to be in the form of a deed, and to be secured in the form set out in the resolution above. However, George King went on knowingly to breach every one of those stipulations.
349George King never established a loan as envisaged by the resolution of 8 January 2007. No deed was drawn up and no security was ever put in place, although a property in Orange and a property in Bathurst were purchased with the funds by George King and his wife. The business at Orange and the property at Bathurst, purchased and established with Whitney's funds, were substantial: George King valued the business at Orange at $3M as at January 2009. His evidence was as follows:
"Q. There was no deed of loan ever drawn up setting out a loan by WPC to the Wellness House, was there?
A. That is correct.
Q. You are agreeing with me?
A. Yes, I am.
Q. And there was no registered first mortgage taken over the Orange property, was there?
A. No.
Q. And a subsequent property was bought in Bathurst, correct?
A. Yes.
Q. That had a prior ranking mortgage to the Commonwealth Bank, correct?
A. Yes.
Q. But there was no second mortgage ever taken out in favour of WPC over that property?
A. Correct."
350George King then proceeded completely to ignore the $1M limit that had been imposed. He admitted that he did so. By February 2008 he had caused $2.5M to be withdrawn from the Whitney loan account and paid to The Wellness House, apparently to fund development of the Orange property. He was cross-examined on these matters. He admitted that what he was doing was wrongful and in breach of his director's duties, and that he knew it to be such. The relevant passage of transcript is as follows:
"Q. So as at 15 February over $2.5 million had been paid out by you to the Wellness House in respect of this $1 million loan?
A. Yes.
Q. Which, contrary to the minutes of 8 January 2007, was an unsecured loan as far as WPC was concerned?
A. That is correct.
Q. That is correct, isn't it?
A. That is correct.
Q. I want to suggest to you that you never told at any time after 8 January 2007 until the end of January 2007, you never told your fellow directors or shareholders of WPC that the million dollar limit had been exceeded, did you?
A. No.
Q. And they, they being your father and mother, did not become aware of that until the middle of February 2008. That is correct, isn't it?
A. Correct.
Q. You were aware once you hit the $1 million mark that in causing WPC to pay out money to the Wellness House, you were well aware that there was no authority for to you do that. That is correct, isn't it?
A. Correct.
Q. And you were well aware that what you were doing was in clear breach of your duties to WPC. That is correct, isn't it?
A. Correct. It needs explanation though."
351George King's explanation was, in essence, that after the $1M loan was approved, he decided to "double the size of the project" and that this required more funds. He did not seek an increase in the authorised loan because he knew his parents would not approve it, given the deterioration in the relationship between them. However, Mr Benecke contended that that was no explanation at all. The explanation was also wrong in point of fact insofar as it suggested that as soon as George King settled with his parents, The Wellness House was separately refinanced. The settlement in fact enabled George King to continue to fund The Wellness House against Coombing Park assets, and it appears still to be funded on that basis.
352George King later asserted that Whitney made a profit from the unauthorised The Wellness House loan arrangement. Mr Benecke described that assertion as self-serving and unsubstantiated. It was an attempt by George King to justify his admitted wrongdoing. He did not point to any documents supporting his assertion that Whitney made a profit. Nothing to that effect is disclosed in its accounts insofar as they are in evidence. The only documentary evidence on the point is that The Wellness House loan attracted interest at the same rate as was charged to Whitney by Elders in respect of its operating overdraft. The lending costs were therefore passed through and no profit would have been made.
353George King also later sought to justify The Wellness House payments on the basis that he could have "ratified them" as majority shareholder. It is far from clear that, without breaching his duties or committing some form of oppression, he could have exercised his majority voting power to commit Whitney's funds to an untested business in which he had a personal interest: the terms of the loan (unsecured) would hardly have satisfied the arms-length transaction exception for related party transactions in Chapter 2E of the Corporations Act 2001, so it appears most likely he would not have been able even to vote. In any event, after some questioning from me, he withdrew this explanation and confirmed that he understood what he had done to be wrongful.
The effect of George King's conduct on negotiations with his family
354On 1 February 2008 Garland Hawthorn Brahe sent a letter to Cheney & Wilson referring to Mr Benecke's concerns about The Wellness House loan and seeking information about it. By this stage the amount withdrawn by George King and paid over to The Wellness House had exceeded $1M. Mr Benecke submitted that this issue influenced George King's approach to the dispute with his family. On 27 January 2008 George King instructed Mr Cheney "to organise for me/us to meet with Simon Kerr this week to seek advice to organise court action to recover my shares". Mr Kerr had earlier been briefed by Mr Cheney to act for George, who met with Mr Kerr on the afternoon of 1 February 2008, after receiving Garland Hawthorn Brahe's letter raising questions about The Wellness House loan. He accepted in cross-examination that the 1 February 2008 letter put him on notice that if the matter did not resolve itself "these would be issues that could be ventilated by [his] father in any litigation". He accepted that he was "very concerned" about those issues, and about completing The Wellness House development. Mr Kerr advised him that he should go to mediation and not respond in detail to the allegations in the 1 February 2008 letter. That advice was followed.
355On 4 February 2008 George King sent a letter to Mr Cheney that disguised the extent of his wrongdoing in relation to The Wellness House by stating that the balance of the loan was $731,000 when it was well over the $1M limit. George King had no reasonable explanation for why he had misstated the position to his own lawyer:
"Q. You don't in those paragraphs, would you agree, tell Mr Cheney that the current balance of the loan was well above the $1 million approved limit?
A. Are you saying I didn't say that?
Q. Yes.
A. No, I haven't said that there yet.
Q. You tell him that the balance in the 2007 financial statements was $731,000; correct?
A. Yes.
Q. And you didn't tell him that you had wrongly taken out money above the $1 million limit; correct?
A. Correct.
Q. Why is that?
A. I was answering the yeah, I don't know why I didn't put it in there, but still, taking it above that limit was within my right as majority shareholder. It could have been ratified at the next shareholders' meeting and it would have been. It's about this time in January I was trying to call shareholders meetings to ratify it which kept on getting blocked.
Q. Do you suggest you could have voted at that meeting, do you?
A. Yes, absolutely. I should have been able to if I hadn't been removed as trustee of my shares.
Q. You agreed with me yesterday that you appreciated at the time that you did it that taking out money above a million dollars was wrong?
A. Yes."
356In his letter of 4 February 2008 George King included a section at the end headed "The way forward". His instructions were not to engage with the detailed allegations but instead to seek to mediate the matter. He gave this evidence:
"Q. I want to direct your attention to page 1009. The matters that you there set out in subparagraphs 1 to 6 essentially confirmed or are in line with the advice that Mr Kerr had provided to you; correct?
A. Yes.
Q. Don't engage on the detail of the allegations but then move forward with valuations and the like, and then have a mediation to try and agree a figure; correct?
A. Yes, correct.
Q. And that is how you saw it heading; correct?
A. Yes.
Q. In line with the advice that had been provided to you by Mr Cheney back in December. That's correct, isn't it?
A. The advice not to litigate, do you mean?
Q. The advice that a good mediator should be able to resolve it?
A. Yes.
Q. Because of the offers that were on the table?
A. Yes. That was Mr Cheney's and Mr Kerr's advice."
357On 8 February 2008 Berkeley King sought to convene a Whitney directors' meeting, in part to discuss "concerns about money owed by TWH, security, amounts etc". On advice from Mr Cheney, George King did not attend that meeting. He agreed that it was in part because of concerns about exposure of The Wellness House issue.
358On 11 February 2008 Garland Hawthorne Brahe sent a letter to Cheney & Wilson again requesting information about The Wellness House loan. The letter stated, "our client now holds grave concerns regarding a misappropriation of funds... on the part of George". It referred to various preliminary investigations that had been carried out which revealed that the loan had not been made in accordance with the 8 January 2007 resolution (for instance, there were no registered mortgages for The Wellness House properties). The letter sought further information about the amount of the loan and the nature of Whitney's security.
359On the same day Berkeley King also contacted Stuart Morrow, Whitney's bank manager, to find out what the balance of its account was. That was a perfectly proper enquiry for a director to make. Mr Morrow telephoned George King and reported that his father had contacted him. Berkeley King then arranged to have withdrawals from Whitney's bank accounts capped at $200,000. Before the cap took effect, George King withdrew a further $800,000 from Whitney's loan account and transferred it to The Wellness House. George King explained his actions in an email to Mr Cheney. He said: "If this transfer had not taken place Berkeley would have been able to hold me to ransom to either save Coombing Park or The Wellness House / Melinda".
360On 15 February 2008 there was a Whitney board meeting. George King did not attend. A schedule of loan drawdowns was presented showing that $2,538,832.01 had been drawn down from Whitney by The Wellness House. It appears to have been about this time that Berkeley King learned of the extent of George King's wrongdoing.
George King's evidence that some pressure to settle was attributable to The Wellness House
361George King gave evidence conceding that some of the pressure he was under in 2008 was because of The Wellness House issues. He also said that Berkeley King's capping of Whitney's accounts in February 2008 (which was done in response to his concerns about The Wellness House payments) was one of the reasons he agreed to the settlement in December 2008.
362Mr Benecke submitted that George King's evidence that he was under pressure because of Berkeley King's actions in capping Whitney's account was false. As his email to Mr Cheney made clear, because he had successfully withdrawn the last $800,000, his father could not "hold [him] to ransom". He was cross-examined about what he said to Mr Cheney on this issue as follows:
"Q. I'm asking you. Do you recall having a conversation with Mr Cheney on 12 February 2008?
A. I had lots of discussions with Mr Cheney.
Q. You said to him that you had got out all the money you needed to finish Wellness House and you were not worried about caps to finish Elders finance. Do you recall saying that to him on or about that date?
A. I can't recall."
363Mr Benecke submitted that whether or not Berkeley King's actions on 11 February 2008 in seeking to prevent further unauthorised withdrawals from Whitney's account placed George King under pressure, his evidence on this issue is extraordinary now that the extent of his misconduct in relation to The Wellness House is known. The plaintiff said this at [195] of his first affidavit:
"At this time the final payment for construction of TWH was due in four weeks time. Restrictions on our cash flow could prevent us from being able to complete the project. The immediate threat was that TWH would go into receivership ... fortunately, fifteen minutes before Berkley had faxed the bank I had arranged for the transfer of the remaining money required to complete the project..."
364George King has now admitted that he withdrew the funds in breach of his director's duties and that the "cash flow" referred to in his affidavit is a reference to cash that properly belonged to others. His complaint, in effect, is that he was almost stopped from completing his breach of duty because of his father's actions.
George King's instructions in relation to Court proceedings and mediation
365As noted above, in January 2008 George King had initially proposed to commence proceedings against his family. In February 2008, after The Wellness House issue was raised and the undertakings were given, he determined not to do so. He was cross-examined as follows on these matters:
"Q. Can I then direct you to page 5 of the letter, 985 of the bundle, where there's a heading 'the way forward'. As you understood it at the time you read this letter, what was being sought, all the allegations having been set out, was that you respond and then we go off to a mediation; correct?
A. That's what they're suggesting, yes.
Q. And reciprocal undertakings were being made as set out on page 986; correct?
A. Correct.
Q. You went and saw Mr Kerr on the afternoon of 1 February?
A. Yes.
Q. The advice you received was that you should go to mediation; correct?
A. Yes.
Q. That you should not respond in any detail to the letter that had been sent on 1 February?
A. Correct.
Q. And not engage with them on the substantive issues; correct?
A. Correct.
...
Q. Is it your evidence that you were anxious at this time to get the matter resolved?
A. Yes.
Q. So you would deny the proposition, would you, that you wanted to slow things down?
A. Sorry?
Q. You would deny the proposition that at this stage you wanted to slow things down?
A. Fairly soon after here I wanted to slow things down.
Q. Will you go, please, to page 1001 at tab 361.
A. Yes, that's what I recall, trying to slow it down.
Q. 'It would definitely be in our favour to delay/slow this process until after that date', which was after 8 March?
A. Yes.
Q. You wanted to slow things down?
A. Yes.
Q. Until after The Wellness House had opened?
A. Yes.
Q. You were conscious at this time, were you not, that you wanted money from WPC to finalise The Wellness House?
A. Yes."
George King's assault of his father in March 2008
366It is not in dispute that George King hit his father on 12 March 2008 and that he was subsequently convicted of assault. He said that he assaulted his father because, amongst other things, he was threatened with the loss of Coombing Park and he had "no assets outside the company". Mr Benecke disputes that. Mr Benecke contends that George King had substantial assets outside the company and tailored his evidence to give the impression that he was under pressure and in a desperate situation when he was not.
367One of Mr Cheney's file notes stated that he advised George King: "Assault matters significantly complicate broader WPC matter and must be taken into account in planning". Mr Benecke submitted that I should find that the assault was not caused by any breach of duty on the part of Mr Benecke (as George King apparently submits) but was George King's voluntary and independent action that by itself prejudiced the strength of his negotiating position with his family.
The offer made by George King in July 2008
368Until about June or July 2008 both parties appear to have intended to resolve the dispute through a structured mediation. Then in about June 2008 George King started negotiating directly with his mother. On 17 June 2008 he offered to purchase the Minority Shares ("all your shares in the group") for $3.25M. The breakdown of shares makes express reference to his father's single share in Brumby Run, which George King values at $1,080,822 (on the basis that it represents one-third of the value of the Whitney shares held by Brumby Run). Mr Benecke submitted that this was further confirmation that George regarded Brumby Run as amongst the Minority Shares and/or was prepared to purchase it in any event. Certainly Cheney & Wilson do not appear instead to have advised him to take the course he now says could have been taken (that is, to disregard his father's Brumby Run share and control Brumby Run with his majority interest).
369In July 2008 George King made an offer to his mother to purchase the remaining shares for $3M or $3.5M if his parents agreed to vacate the homestead. He agreed that he had made this offer. He was plainly prepared to pay $500,000 more to acquire an immediate right to occupy the Coombing Park homestead, rather than have his parents as life-tenants as had previously been contemplated.
370George King met with his mother on 20 July 2008. Following the meeting he drafted heads of agreement that provided for a total payment of $4M for him to acquire the remaining shares, including sale of certain land. The heads of agreement made specific provision for furniture at the Coombing Park homestead, which George King agreed he regarded as valuable and wanted to make sure he received under the settlement. His mother took the view that the heads of agreement were not consistent with what they had agreed upon and they did not proceed. George King stated that his mother had agreed to "$4M for settlement and did not care how it was made up". The remaining issues in dispute concerned grazing rights. By 11 August 2008 it appears that structured mediation was back on the cards.
371Mr Benecke argued that I should therefore find that George King was prepared to purchase the Minority Shares for $4M in July 2008 and to pay $500,000 for the benefit of an immediate right to occupy the Coombing Park homestead.
Business opportunities pursued by George King in August and September 2008
372George King was cross-examined on documents showing that in August and September 2008, when he claims to have been under pressure and financially vulnerable due to his compromised legal position, he was in fact contemplating expanding the separate business he operated with his wife using finance that he hoped he could obtain against Whitney assets. One of the documents was a Bank Review he prepared in September 2008. The plaintiff was cross-examined on it as follows:
"Q. Then if you go on to page 93 and following you provide a detailed outline in relation to the Wellness House operation, correct?
A. Yep.
Q. Indeed over at page 97 you talk about the Wellness House GP super clinics?
A. Yep.
Q. And point out you would be '...tendering on all of the clinics which had a Federal government contribution of more than $5 million per clinic with the aim of securing 10 sites'. See that?
A. Yes.
Q. You were then at this stage contemplating quite a significant expansion, were you not, of the operations of the Wellness House?
A. Yes, subject to yes.
Q. What did you wish to say?
A. It was only subject to the Federal government funding which needed to be available. I had to get the $5 million per site because you had to pay tax on that so it was 3.5. So I needed that equity.
Q. In any event you were contemplating at this time quite a significant expansion of the Wellness House operations, were you not?
A. Yes."
373Mr Benecke submitted that this showed, and I should find, that George King was actively pursuing off-farm business opportunities in August and September 2008, which would require significant investments of capital, at a time when he claims he had no funds to spare and was extremely anxious about the dispute with his family. His objective conduct, as evidenced by the contemporaneous documentation, is said to be starkly inconsistent with that of a man under pressure as George King asserts he was.
The mediation in December 2008
374John Brownie QC conducted the mediation on 5 December 2008. George King had earlier written at length on 28 September 2008 to Mr Cheney saying, "I believe Berkeley King is in a weak position to commence and succeed in any action". He accepted at one point in his cross-examination that he continued to have that view at the December 2008 mediation, although he later denied it. He also refused to accept the obvious implication that what he wrote meant that he considered he was in a relatively strong position to defend any action. In his first affidavit at [212] he said that he considered himself to be in a "weak legal position" as at December 2008, and set out extensive reasons for that view. Mr Benecke submitted that that evidence should now be rejected as it is flatly contradicted by a document under his own hand.
375Mr Cheney and Mr Kerr represented George King at the mediation. His family made six successive bids against themselves starting at $6M and concluding at $3.55M. George King was cross-examined on his approach in the December 2008 mediation. Mr Benecke submitted that George King's view on the acceptability of the settlement reached is "telling":
"Q. I want to suggest to you that when you went to the mediation in December, you gave Mr Kerr instructions to take a very hard line at the mediation; that is correct is it not?
A. May have done, yes.
Q. And the instructions that you provided to him which he then conveyed at the mediation were that there were no offers on the table from your side, correct?
A. Initially, yes.
Q. And it was up to them to make an offer if they wish to settle?
A. Yes.
Q. What they did is make a series of offers, bidding against themselves, didn't they?
A. The offers kept on reducing yes.
Q. Without you making any offer at all; that is correct is it?
A. I don't recall. There may be counter-offers that...
Q. Have a look at your affidavit please Mr King. What I want to put to you is that, having regard to what is in your affidavit, or affidavits if you need to refer to any other ones, no offers were made by you at the mediation?
A. Not that I recall.
Q. They just kept bidding against themselves, didn't they?
A. Yes.
Q. Started above $6 million?
A. Yes.
Q. You continually rejected the offers that were made?
A. Yes.
Q. And until we got to the 3.55 offer that was accepted?
A. Yes.
Q. You accepted the $3.355 million offer because you were happy with that figure, weren't you?
A. No.
Q. It was the same offer in effect that you had made to your mother in June?
A. Yes.
Q. To form part of the heads of agreement; correct?
A. Yes.
Q. And if you take out the $500,000 sweetener for moving out of Coombing Park, which was in the June offer, it was the same offer in effect that you put to your father in early January; correct?
A. The $3 million offer in early January?
Q. Yes?
A. Yes.
Q. It was the same offer as you had in fact put in the December mediation; that is correct is it not?
A. $3 million?
Q. Yes?
A. Yes.
Q. I want to suggest to you that you were happy with the figure because looked at in terms of the quality of inheritance as between you and your two sisters, it was a good outcome for you?
A. No.
Q. In settling the case you also got rid of any suggestion of any litigation regarding your conduct in relation to The Wellness House line; correct?
A. Yes.
Q. You also got rid of any suggestion of litigation in relation to your conduct to the Deerslayer shares; correct?
A. Yes.
Q. You also got lid of any litigation in relation to your conduct in relation to the Bellamy shares; correct?
A. Yes.
Q. You did in the settlement deed that was ultimately executed, you got certainty in relation to the furniture that was in the homestead; correct?
A. No.
Q. They agreed that it would stay with you; correct?
A. Yes, but it didn't happen.
Q. In terms of the deed?
A. Oh the deed, yes you're right.
Q. Certainty as to the furniture?
A. Yes.
Q. Because as you knew it, prior to that time, that was a potential issue; correct?
A. Yes.
Q. It was something that you wanted clarified?
A. Yes.
Q. And certainty in relation to?
A. Yes.
Q. And at least in terms of the legal obligation, you got certainty in the deed that was entered into. That is correct is it not?
A. Correct.
Q. What I want to put to you again is that you were happy with the outcome that was achieved at the mediation. That is correct is it not?
A. No.
Q. I want to suggest to you, you told your solicitor that you were happy with the outcome, didn't you?
A. I told him I was happy that it was over. The fight was over and we certainty. That's what I was happy about, that we certainty.
Q. Go to tab 694 of the bundle please. Mr King, it's an email that Mr Cheney sent to you a few days after the mediation; correct?
A. Yes.
Q. Records that: 'I am pleased that you and Lindy are happy with the outcome of the mediation'?
A. No I remember that, and that was about us not having the threat all the threats that we had hung over our head. The closure to them. That's what that is referring to.
Q. You had told Mr Cheney that you were happy with the outcome; correct?
A. Yes."
George King could have taken formal steps to remedy any disadvantage he was under (subject to his own wrongdoing)
376The defendants have pleaded at some length the formal steps that they say George King could have taken in 2008 to remedy any disadvantage he was under. Those steps included:
(a) Prior to 8 January 2008 (when Deerslayer was dismissed as trustee):
(i) seeking a written undertaking from Berkeley King not to remove Deerslayer as trustee of the BKST; and
(ii) in the event such an undertaking was not provided,
commencing proceedings against Berkeley King and seeking interim relief to allow negotiations to proceed without the alleged bargaining imbalance or seeking final relief, including in the form of an injunction to prevent Berkeley King from acting in a manner inconsistent with the alleged terms of the Berkeley Transaction.
(b) After 14 January 2008 (once George King was aware that the trustee had been dismissed):
(i) seeking written undertakings from Berkeley King or the new trustee of the BKST that would preserve George King's interests while the ultimate issue was being resolved;
(ii) in the event such undertaking were not obtained, commencing proceedings against Berkeley King and seeking interim relief to allow negotiations to proceed without the alleged bargaining imbalance or seeking final relief to enforce the 1999 agreement.
377As already discussed, George King did obtain an undertaking along the lines described in subparagraph (b)(i) above.
378The defendants do not submit that George King should necessarily have litigated the proceedings to their conclusion, or preferred litigation to mediation. His case is that he was sent into negotiations under a grave disadvantage and therefore had to pay well over the odds. The defendants' submission is that he could have taken legal steps to relieve or to remove that disadvantage (including, most importantly, interim legal steps) so that he did not have to pay a premium to settle.
379George King did not take any of the other steps set out above. The only explanation put forward by him as to why he did not take those steps is given at [197] of his first affidavit as follows:
"During this time [February 2008] I sought legal advice about my options for recovering my shares in Coombing Park and what the time and cost implications would be. Based on the legal advice I received I understood that taking the matter to Court was likely to be complex and protracted. I understood it would take about 2 years and cost me about $500,000. I did not have the time or money to take that course because I depended on Coombing Park for my livelihood. In those circumstances I decided my best option was to pursue a mediated settlement."
380George King gives no evidence of the content of the legal advice he actually received, only his conclusions based on it.
381Mr Benecke contends that George King clearly had enough money at his disposal to pursue litigation. He decided not to do so, but instead to proceed with mediation, because he had the benefit of the reciprocal undertakings, because the parties were close to reaching a settlement and because he did not wish to expose himself, amongst other things, on the issue of The Wellness House payments. He later deliberately slowed down negotiations towards a mediation to accommodate The Wellness House.
George King's financial position in 2008 and whether he had money to commence litigation
382Apart from saying that he did not have the money to commence litigation, George King also said at [199] of his first affidavit that as at March 2008 he did not have any assets outside the company. Mr Benecke contends that that evidence should be rejected. By subpoenas that George King sought to set aside, the defendants obtained, amongst other documents, statements of assets and liabilities prepared by him for an application to the National Australia Bank, including a joint statement of assets and liabilities dated January 2009. He was cross-examined about his financial position in 2008 by reference to that joint statement as follows:
"Q. Now, go to paragraph 199 of your affidavit, please?
A. Yes.
Q. The suggestion that you had no assets outside the company was not correct, was it?
A. My wife's assets weren't up for, for splitting in this.
Q. You had a half interest in the Wellness House Pty Ltd, correct?
A. We had no equity in that, not one dollar of equity.
Q. You owned a $3 million property at Orange, which was unencumbered at this stage?
A. We had debt to the Whitney Pastoral Company and Elders Bank, it was fully encumbered.
Q. It was unencumbered?
A. There was no security on it at all. We had an undertaking to pay that back, which we did.
Q. You had a $7 million facility with the Elders Bank, correct?
A. Yes.
Q. You had an unencumbered property at Orange, which was worth in the order of several million dollars?
A. Incorrect.
Q. You had a property at Bathurst owned by the Wellness House Pty Ltd which had a mortgage on it to the Commonwealth Bank?
A. Correct.
Q. But it still had some equity in it?
A. I'm not sure how much.
Q. There were a number of investment properties in Queensland, correct?
A. Belinda owned from her first husband with very little equity in it.
Q. You said to the bank in January 2009, did you not, I can take you to it. If you go to the small bundle at page 142.
A. 142?
Q. Yes. Do you have that?
A. Yes.
Q. Statement of joint assets of liabilities, which you provided to the bank in about January 2009, correct?
A. Correct.
Q. It discloses, does it not, that there are three properties in Queensland. Do you see those?
A. Yep.
Q. Totalling in excess of about $2.4 million?
A. Yes.
Q. The value of those properties as at March 2008 was roughly the same as what it was in January 2009, correct?
A. Yes.
Q. The debt in respect of those two properties was in the order of $500,000, correct?
A. Yes.
Q. Net equity of about $1.9 million in relation to those properties?
A. Inflated values for the purpose of the bank obtaining finances, not realising it.
Q. Are you suggesting by that answer that the values that you gave to the bank at page 142 in relation to the Queensland properties were inflated?
A. They always are when you put it to the bank. That is how they ask for them.
Q. So the bank asks, is that your evidence, the bank asks for inflated values?
A. Yes. They always say put it at the highest level you can get it.
Q. That is simply false. What I want to suggest to you is in dealing with the bank as at January 2009 as at any other time, you were seeking to be open and honest. That's correct, isn't it?
A. Yes.
Q. And give to the best of your ability your best estimate of your assets and liabilities, weren't you?
A. Yes.
Q. That is what you did in January 2009 at page 142?
A. Yes.
Q. And in respect of the three Queensland properties and the amounts owing in respect of those, what I want to suggest to you is the position was not materially different in March 2008, was it?
A. Probably not.
Q. What I want to suggest to you is it is simply false for you to suggest, as you do at paragraph 199 of your affidavit, that you had no assets outside the company?
A. I don't consider my wife's assets from her first husband and her two children from him to be part of my assets, then or now, to give to my family.
Q. I want to suggest to you that as at March 2008 you could well afford to litigate if had you to?
A. No."
383George King's claim that he did not consider the Queensland properties to be his assets is belied by the fact that they appear in the statement under the heading "George & Melinda King". He and his wife operated a business together (supported by his Whitney assets) and were obviously prepared to treat their assets as common property when it suited them to do so.
384Mr Benecke submitted that George King deliberately understated his financial position in his affidavit evidence in order to give the impression that he was vulnerable and under pressure. He had unencumbered properties and properties with significant equity in them outside Whitney. The real reasons he did not litigate to protect his position are because the parties were close to settlement anyway through mediation, he had the benefit of the undertaking, and there was the complicating issue of his known serious wrongdoing in relation to The Wellness House.
Potential disentitling conduct
385A question was raised during the course of the hearing about whether George King's wrongful conduct in relation to The Wellness House might have amounted to conduct that would, or may, have prevented or somehow disentitled him from obtaining equitable relief. The Wellness House issue was one factor that influenced him not to take steps to remedy his position in Court. Mr Benecke argued that he should not be held responsible for the indirect consequences of George King's own wrongdoing: but for his independent wrongful conduct, George King was in a position to remedy any consequences of Mr Benecke's negligence.
The benefits obtained by George King by reason of the settlement in December 2008
386In return for his agreement to pay $3.55M, George King has received more than just the Minority Shares. It is necessary to set out what benefits he obtained by reason of the settlement, as he has not brought them to account either in his valuation evidence or in his account of his reasoning for deciding to settle for that sum.
Direct benefits under the settlement deed
387The settlement was embodied in Heads of Agreement dated 5 December 2008 and later in a formal deed styled "Deed of Release and Settlement" dated 30 January 2009. As is apparent from those documents, in consideration for payment of $2.55M in cash on or before 1 February 2009 and $1M in cash on or before 31 December 2010, George King received the following benefits:
(a) Berkeley, Penny, Katie and Kristen King to vacate the Coombing Park homestead on or before 30 June 2009.
(b) The furniture and contents in the homestead belonging to Whitney, Peter King and/or George King were to "remain in the Homestead after 30 June 2009". The value of the furniture in the homestead was not insignificant. Much of it was antique. George King agreed it was important to him and something he specifically wanted Whitney to retain under the settlement. It was obviously something potentially subject to dispute. John McPhee Pty Ltd had performed a joint valuation in May 2008 and the furniture was valued at $263,050.
(c) Transfer to George King or his nominee all of the shares held by the family in any Somers, Whitney, Esk, Deerslayer, Brumby Run and Coombing Pastoral Co. This amounts to all of the Minority Shares (as George King defines them) together with his father's single Brumby Run share.
(d) Comprehensive mutual releases by the parties to the deed from all claims arising out of or connected with the companies referred to above and "the issues arising out of the correspondence between any and all of the parties and/or their legal representatives". The wording of the release provision is significant. It is plainly wide enough to capture George King's wrongful conduct in relation to The Wellness House payments. This was a significant benefit for him.
Benefits by reason of refinancing with NAB
388The settlement gave George King almost 100 percent ownership of the Whitney group. It enabled him to borrow against the assets of Whitney and Esk. According to the calculations performed by Mr Ivey (in his report dated 19 July 2012), their assets totalled over $18.3M.
389In January 2009 (that is, at the same time as he was settling with his parents) George King entered into new loan arrangements with NAB. The NAB made facilities totalling $5.5M available to Whitney and $2.538M available to The Wellness House, secured only by real property held by Whitney and Esk.
390George King was cross-examined on the Whitney facility as follows:
"Q. Go to [Ex 1, p 143] please?
A. Yep.
Q. That is a facility that was offered to WPC which had three components; is that correct?
A. Yes.
Q. $3 million market rate facility, firstly; correct?
A. Yes.
Q. Farmers Choice Overdraft of 500,000?
A. Yes.
Q. And a market rate facility, two million?
A. Yes.
Q. Now in relation to the market rate facility for two million, it was your intention at the time, was it not, to use that money to invest in blue chip high yield stocks?
A. Yes.
Q. Which at that stage were currently yielding 10 percent?
A. Yes.
Q. The letter of offer that is at 143 was accepted; is that correct?
A. Yes.
243. As to the TWH facility, the plaintiff said (T245.4-36):
Q. Then if you go please to 149, a separate facility was offered by the bank to TWH Services Pty Limited as trustee for the Wellness House Trust; correct?
A. Yes.
Q. And that was for the amount of 2.538 million; correct?
A. Yes.
Q. Which is the quantum of the money that had been advanced by WPC to the Wellness House prior to this in connection with the construction; is that correct?
A. Yes.
Q. The intent being that this money would be used to pay the WPC facility?
A. Yes.
Q. Now can I just ask you in relation to the Wellness House offer at 149, that was accepted; correct?
A. Yes.
Q. And that facility was not, however, secured in any way over the Orange property from which the Wellness House was conducted; correct?
A. Correct.
Q. That remained owned by the Pty Limited company that was jointly owned by you and your wife, and was unencumbered; correct?
A. The Orange one?
Q. Yes?
A. Yes.
Q. And in relation to the other property, the Bathurst property, that remains subject to a mortgage to the CBA; correct?
A. Correct."
391George King obtained through the December 2008 settlement a $2M facility (secured by Whitney assets) for personal share trading and a $2.538M loan (similarly secured) so that he and his wife could continue to fund The Wellness House business, which had up until then been funded by a series of wrongful and unauthorised payments from a Whitney loan account.
The settlement in December 2008 was one George King could comfortably afford
392George King has insisted throughout that the December 2008 settlement was one he had difficulty affording. His account is that he did so because he felt he had "no option" but to settle at $3.55M having regard to what he considered to be his weak legal position. Mr Benecke submitted that that evidence must be rejected. George King was able to find capacity in the financial arrangements he made at the time of settlement for a $2M share trading facility and a $2.538M facility to fund unrelated business interests. Further, he was able to do so without even encumbering the Bathurst or Orange properties owned by The Wellness House. The settlement was one he could comfortably afford. Mr Benecke urged that I should so find.
George King was able to pay the $1M instalment due under settlement deed on 31 December 2010
393George King also gave evidence that he had not been able to pay the $1M instalment due under the settlement deed on 31 December 2010. Mr Benecke submitted that that evidence should also be rejected. It is allegedly inconsistent with the following objective evidence:
(a) A statement of assets and liabilities for George and his wife signed by him on 21 April 2011, which discloses assets of over $25M and equity of over $15M.
(b) George King informed the NAB that he proposed to fund the $1M instalment by selling two "back" blocks. There is no evidence that he was not, or would not reasonably have been, able to do so.
(c) George King has established an extensive share portfolio for him and his wife and has sought to purchase land adjoining the Coombing Park property.
394In this last regard Mr Benecke draws attention to the fact that George and his wife made a request to the NAB in December 2009 for an additional $1.5M credit facility for the purchase of listed shares on the ASX. They reported that they commenced placing funds of $1.5M in the stock market around mid-August 2009. In May 2011, George King applied to the NAB for a loan to purchase a property known as "Rockville" adjoining the Coombing Park property. He expected it to sell "somewhere about or above the one million dollar mark". He applied for and received a loan of $1.1M and the cancellation of an undrawn market rate facility of $500,000, giving an overall net increase of $600,000. It appears the property was withdrawn from auction, but he continued to have approval to borrow the necessary funds and was "looking for another property".
395Mr Benecke submitted that I should find that the benefits gained by George King under the 2008 settlement included the following:
(a) The Minority Shares, giving him 100 percent ownership of Esk and close to 100 percent ownership of Whitney.
(b) A right to occupy the homestead (rather than have his parents as life tenants) which he valued at $500,000.
(c) A right to furniture in the homestead, which he was otherwise concerned might be taken by his family, valued at $263,050.
(d) A comprehensive release from any liability arising from his misconduct in relation to The Wellness House.
396Mr Benecke also submitted that I should find that the 2008 settlement was one that George King could comfortably afford and suited his wider business interests, by enabling him to obtain a bank loan against Whitney and Esk assets which he has used to continue to fund The Wellness House, purchase a blue-chip share portfolio and attempt to purchase neighbouring properties. I was also asked to find that George King was able to afford to pay the $1M due on 31 December 2010 and that his reasons for not doing so remain unexplained.
Influence of family context on settlement
397George King's case on causation requires that the settlement be treated, essentially, as an arms' length business transaction. Mr Benecke argued that that was wholly unrealistic. The negotiations between George King and his family occurred against a background of, and were influenced by, personal relationships and emotional considerations. There is an enormous volume of material in evidence supporting that proposition. It comes through in addressing the other factual matters to which reference has already been made.
398Treatment of the settlement as a business transaction is also inconsistent with George King's evidence at trial. He referred in re-examination to a note addressed to him by his father dated 17 June 2007 which states:
"George,
No matter what happens I will always have a bond and a love for you that will be in my heart till my dying breath.
Dad."
399George King gave evidence that the note was written after he and his father had shared a bottle of whisky during a period when his mother and sisters were away. He was visibly emotional when giving that evidence. His response to the note also refers to a number of personal issues between family members and concludes by restating the debt he felt he owed to his father for "laying the foundations".
400Although George King said that his father's note was the "turning point" after which "in the negotiations... everything got really nasty", it appears that there were at least moments when cordial relations resumed between particular family members. For instance, there was apparently some reconciliation in the aftermath of George King's assault on his father, even if only short lived.
401There are also numerous references in the evidence to George King's "responsibilities" and to the family members' bonds and personal obligations to one another. For example, Berkeley King's statement dated 23 July 2006 contained this:
"I was also giving [George] the responsibility of looking after his sisters' interests. There cannot be one iota of misunderstanding about this...
This I believe an inappropriate offer and not in the spirit of the trust I have given George...
I believe George also has a moral obligation which if he chooses to ignore will have disastrous consequences for our family."
402George King's own emails to Ms Sykes in October and December 2007 also contained these references:
"Every time I disagreed to something they have told me ... that I am treating this as a business transaction and not as family ... What do I have to do in this process to limit the damage to relationships?"
"I wasn't meaning to be a hard negotiator. ... I went there with the highest possible offer I could make that satisfied the moral obligation to BK."
403It is also apparent from some of the material in evidence that personal animosity and anger between family members intruded into the negotiations. In any event, it is plain that by reason of the negotiations occurring between members of a once close-knit family, which had been the subject of a serious falling out, there were more than financial considerations at stake. The other considerations plainly influenced the terms of the settlement.
404Mr Benecke argued for findings that the negotiations between George King and his family occurred against a background of, and were influenced by, personal relationships and emotional considerations and that he regarded himself as owing moral obligations to the other family members.