[2000] FCA 1084
Fulton v Fulton [2014] NSWSC 619
Muschinski v Dodds (1985) 160 CLR 583[1985] HCA 78
Queensland v Masson (2020) 94 ALJR 785[2020] HCA 28
Rosebanner Pty Ltd v Energy Australia (2009) 223 FLR 406[2009] NSWSC 43
SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd (2017) 345 ALR 633[2017] NSWCA 132
Sangha v Baxter [2009] NSWCA 78
Steinberg v Commissioner of Taxation (Cth) (1975) 134 CLR 640[1975] HCA 63
Warner v Hung, in the matter of Bellpac Pty Ltd (In liq) (No 2) (2011) 297 ALR 56
Judgment (38 paragraphs)
[1]
Summary
Francis Michael (Frank) Forde served as Prime Minister for the shortest term in Australia's history. He held that office from the death of John Curtin on 6 July 1945 until 13 July 1945 when Forde lost the Australian Labor Party leadership to Ben Chifley. His brief occupation of Australia's highest political office may be contrasted with a more enduring architectural legacy. Although he was a Queenslander, for many years the Forde family lived in Sydney in a grand 1906 Federation home called "Virginia" in Strathfield (the Property). This case concerns a dispute about alleged beneficial interests in the Property among the family of its current owners.
By 1986, the Property was in a very dilapidated state. In that year, it was bought for $300,000.00 by the first defendant, Emanuel Pavlis, and his wife, the second defendant, Koula Pavlis. Without disrespect, I shall refer to the members of the Pavlis family by their Christian names. Emanuel and Koula have three sons: the first plaintiff, George (born 1962); the second plaintiff, Chris (born 1963); and Garry (born 1969).
Regrettably, this is a type of dispute with which the Court is all too familiar. It appears that, for many years, the Pavlis family got along well. However, by 2017, disagreements had split the family in two. On one side are George and Chris. On the other side are Emanuel (now 89) and Koula (now 88), supported by Garry. Although Garry is not a party to the proceedings and claims no present interest in the Property, he has given evidence in his parents' case and is funding their legal costs. The rancour between the two sides is so great that they disagree completely on almost all of the essential facts.
Over what fell into two broad phases of work (1988 to 1990 and 2001 to 2008), the Property was restored to its former Federation style glory with great attention to matters of period detail. "Restoration" may be a more apt description than "renovation" for what was done. There was uncontradicted evidence that the Property now has a market value of $5.5 million.
George and Chris' case is that George, assisted by Chris, supervised, physically assisted with, and funded a very large part of the renovations in the expectation, encouraged by Emanuel and Koula, that he and his brother would receive a majority interest in the Property when their parents died. It was not in dispute that under Emanuel and Koula's current wills, they will receive nothing, although there is some benefit to their children. Their brother Garry is the principal beneficiary.
George and Chris allege, among other iterations, an express representation by Emanuel and Koula that they (George and Chris) would each have a 40% interest in the Property in return for their direct and indirect contributions to the renovations. Alternatively, they submit that their interest in the Property arises by reason of a joint undertaking that has failed without attributable blame. Their case is one of proprietary or promissory estoppel, a constructive trust, or at the very least an equitable lien. They accept that Emanuel and Koula are entitled to reside in the Property for their lifetimes and that Emanuel and Koula should have access, if necessary, to the Property as an asset for the purposes of their maintenance in life, including matters such as medical and nursing home expenses should they arise.
Emanuel and Koula deny any express representations were ever made. Their case is that everyone in the family helped as they were able with the renovations (supporting the various tradespeople involved) as family members, for the benefit of the family as a whole, so that they would have a beautiful home in which to live. That object has been achieved. Their case is that George and Chris have exaggerated their contributions to the renovations.
The Court has concluded that, with the exception of Garry, none of the parties' evidence on critical matters can be relied on unless it is inherently likely, against interest, or supported by contemporaneous records or other independent evidence. Previous litigation in which the family was involved has informed the Court's conclusion that George, Chris and Emanuel will give whatever evidence suits the case they wish to make. Therefore, the Court does not accept George and Chris' evidence that Emanuel and Koula expressly represented that George and Chris would receive a precisely identified interest (40%) or any other interest in the Property.
However, the Court does accept that George and Chris contributed substantially in time, effort and funds (much of which appears to have been reimbursed to them) to the renovation. They did so not on the faith of a promise of a share of the Property or any other encouragement from their parents, but for two reasons. First, they were receiving a significant commercial benefit (with no corresponding benefit to their parents) of using the Property as security for their business ventures. Second, they had their own expectation that after their parents had enjoyed the benefit of the Property, George and Chris, as sons, would receive a "fair" share of their parents' estate.
George and Chris' claim fails because that expectation does not give rise to an interest in the Property or an entitlement to any other form of equitable relief. Nor have they persuaded the Court to the level of actual satisfaction that there was any "joint enterprise" in relation to the Property between George and Chris and their parents. Instigated entirely by George, what was done to the Property was done for the reasons identified in the preceding paragraph and incidentally to the benefit of Emanuel and Koula, but not as part of an enterprise which the evidence permits to be characterised as "joint". The Court accepts the submission made for the defendants that these proceedings are in truth about George and his activities (undertaken with Chris) and are an attempt to achieve something akin to a property settlement from their parents while they are still alive.
Mr H Insall of Senior Counsel appeared with Mr P Horobin of Counsel for George and Chris. Mr G Waugh of Senior Counsel appeared with Ms K Hopper of Counsel for Emanuel and Koula.
[2]
Structure of these reasons
What follows is divided into these sections:
1. Dramatis personae
2. The plaintiffs' pleaded case
3. The defendants' response
4. Facts not in dispute or independently established
5. The legal principles in relation to credit and fact finding
6. Credit findings
7. Findings as to disputed facts
8. Whether the pleaded representations were made
9. Whether the case based on contributions is made out
10. Miscellaneous matters
[3]
Dramatis Personae
It is convenient to begin with an uncontroversial description of each of the members of the Pavlis family and other witnesses.
[4]
Emanuel Pavlis
Emanuel was born in Leros, Greece in 1931. He is the husband of Koula and the father of George, Chris and Garry. Emanuel moved to Australia in 1955. He speaks sufficient English for basic conversational purposes but does not read it. He communicates with his children in Greek. After running a delicatessen and working in the family hardware business, Emanuel retired in 1991. Since 1996 his only income has been the aged pension. His cross-examination was conducted with the assistance of an interpreter, but at various times Emanuel answered in both English and Greek.
[5]
Koula Pavlis
Koula was born in Sparta, Greece in about 1932. Koula is the wife of Emanuel and the mother of George, Chris and Garry. Koula moved to Australia in 1956. Koula and Emanuel were married in 1958. Koula has been a homemaker. She speaks very little English and does not read English. She communicates with her children in Greek. Her very brief cross-examination was conducted through an interpreter.
[6]
George Pavlis
George was born in Australia in 1962 and is the eldest son of Emanuel and Koula. George is a builder and company director. He lived in the various Pavlis family homes, including the Property, until he married.
[7]
Chris Pavlis
Chris was born in Australia in 1963 and is a company director. He lived in the various Pavlis family homes, including the Property, and moved in and out of the family home until he married.
[8]
Garry Pavlis
Garry was born in Australia in 1969 and is the youngest son of Emanuel and Koula. Garry is not a party to the proceedings but has been paying for Emanuel and Koula's legal representation. Garry attended university and obtained a Bachelor of Business (Land Economy). He is a licensed real estate agent and valuer and owns a real estate business. Until he married in 2014, he had always lived in the various Pavlis family homes, including the Property.
[9]
Nick Pavlis
Nicholas (Nick) Pavlis is a younger brother of Emanuel. Nick was born in 1946 in Greece. Nick gave evidence on behalf of George and Chris, by audio visual link from Queensland. Nick deposed that he had not had any meaningful contact with Emanuel for over 20 years, save for seeing Emanuel at their brother Tony's funeral four years ago. His cross-examination revealed that he was not close to Emanuel as they grew up. He made no secret of his animosity towards Emanuel, which dates back to the time they were both children. Nick was close to both George and Chris from the time they were children and gave evidence intended to corroborate that Emanuel had been a domineering father.
[10]
Jason Field
Jason Field is a valuer and the Managing Director of National Property Valuers NSW Pty Ltd. Mr Field prepared two reports for George and Chris. For the first report, dated 16 December 2019, annexed to his affidavit of 10 February 2020, Mr Field was asked to assess the Property's current and retrospective market value. In his second report, issued on 23 July 2020, Mr Field was asked to assess the retrospective market rental value of the Property between 1 January 2010 and 5 July 2014.
[11]
The plaintiffs' pleaded case
The case falls into two parts: a case brought on express representations said to have been made, and one which depends on the contributions to the restoration of the Property said to have been made by George and Chris.
The proceedings were commenced by statement of claim filed on 21 September 2018. Relief was purportedly sought in relation to George, Chris and Garry. However, the plaintiffs' claim was amended during the course of the hearing on 9 November 2020 to take account of the fact that Garry was not a party. The amended relief (including the deletions) includes:
"1. A declaration that the Defendants hold [the Property] on constructive trust:
a. for each of the Plaintiffs as to a 40% share alternatively as to such proportion as would prevent the unconscionable retention of property by the Defendants; alternatively
b. for each of the Plaintiffs as to a 40% share alternatively as to such proportion as would prevent the unconscionable retention of property by the Defendants, subject to the Defendants' right to reside at the property for life.
2. Alternatively, a declaration that the Defendants are estopped from denying
a. that [the Property] is held for the benefit of the Plaintiffs and Garry Pavlis with each of the Plaintiffs' share in the property being 40%, alternatively for the benefit of the Plaintiffs as to a one third share each and Garry Pavlis; alternatively
b. that [the Property] is held for the benefit of the Plaintiffs and Garry Pavlis with each of the Plaintiffs' share in the property to be 40%, alternatively for the benefit of the Plaintiffs as to a one third each and Garry Pavlis, subject to the Defendants' right to reside at the property for life.
3. A declaration that the Defendants hold [the Property] on constructive trust for the Plaintiffs in accordance with the terms referred to in paragraph 2.
4. Alternatively, a declaration that the Defendants hold [the Property] subject to an equitable charge or lien in favour of the Plaintiffs to the extent to which their contributions as pleaded in the Statement of Claim have contributed to or increased the value of [the Property].
5. An order that the Defendants be restrained from dealing with or encumbering [the Property] in any manner inconsistent with the interests of the Plaintiffs as set out in the above paragraphs.
6. Equitable compensation. …"
What follows is a summary of the facts alleged by the plaintiffs drawn from their amended statement of claim.
George and Chris claim that, at all material times, the relationship between Emanuel as their father, and George and Chris as his sons, was one whereby Emanuel exercised an authoritarian and domineering influence over them.
They allege that Emanuel established what I will refer to as the South Granville Hardware Business in about 1981 and began operating it as manager, however his poor English and lack of skill and experience meant he could not operate the business and relied heavily on the plaintiffs. Emanuel required George and Chris - then in their early twenties - to work in the business for no remuneration whenever they were not at TAFE, including on weekends and during holidays.
In 1983, Emanuel required George to leave the latter's employment in an accounting firm to work full time in the South Granville Hardware Business.
In mid-1983, Emanuel purchased the land on which the South Granville Hardware Business was operated, substantially with borrowed funds through the Pavlis Family (No 2) Trust. An extension to the business' premises was required in order to obtain a Mitre 10 Franchise. Emanuel required George, with the assistance of Chris, again without remuneration, to perform the labour and engage appropriate tradespeople to undertake the construction of the extension.
In or about January 1984, Emanuel required George and Chris to establish a new company known as Pavlis & Sons Australasia Pty Ltd (P & S Aust) for the purpose of acquiring a new Mitre 10 hardware business in Blacktown (the Blacktown Hardware Business). P & S Aust was incorporated on or about 7 February 1984 with George and Chris being sole shareholders and directors.
On or about 6 October 1984, P & S Aust established and operated the Blacktown Hardware Business with borrowed funds secured by a third party personal guarantee from friends of Emanuel's, being Anthony and Mary Peris of Ashfield. Mr and Mrs Peris provided their property as security. Emanuel required George to work full time in the business, without remuneration save for payment of personal expenses from time to time on an "as needs" basis.
From about the beginning of 1985, Emanuel required Chris to give up his career as a dental technician in order to assist Emanuel on a full time basis at the South Granville Hardware Business.
Chris contended that, from 1985 to 1991, he was required by Emanuel to work seven days a week at the South Granville Hardware Business, without remuneration save for payment of personal expenses from time to time on an "as needs" basis.
In about June or July 1985, Emanuel and Koula purchased a house in Albyn Road, Strathfield (the Albyn Road Property) for $191,000.00 with a $50,000.00 mortgage.
George and Chris allege that they contributed, through their unremunerated work at the South Granville Hardware Business and the Blacktown Hardware Business, towards both Emanuel and Koula's ability to acquire the Albyn Road Property and Emanuel and Koula's ability to obtain a mortgage over that property and to make mortgage repayments.
In or about 1985, Emanuel and Koula created or contributed to an assumption on the part of George that the Albyn Road Property was to be held by Emanuel and Koula as a "nest egg" for the whole family, including George and Chris. This allegation was supported by these particulars (the 1985 Conversation):
"In or about July 1985, [George] had a conversation with [Emanuel and Koula] in Greek in which [George] said to [Emanuel and Koula] words to the effect:
"We are all in this together. I am building this up as a family nest egg. I can do this work. In this way we are saving money and building up equity in the property the same way we did at the South Granville hardware shop."
[Emanuel and Koula] said:
"Good boy. Keep going. Everything is okay. Yes that is great.""
Over the period from about September 1985 to mid-1986, George says that he expended substantial time and effort, without assistance or remuneration from Emanuel and Koula, on renovating the Albyn Road Property.
George claims that the renovations undertaken by him at the Albyn Road Property increased the value of the property by about $100,000.00. The Albyn Road Property was sold in November 1986 for $365,000.00 and George asserts that he made a substantial contribution to the capital gain that was achieved by his work in renovating the Albyn Road Property.
In about late 1986, George obtained an opportunity, through a friend who was the executor of a deceased estate, to acquire the Property for $300,000.00. The Property was then in need of substantial renovation and George and Chris contend that the purchase price was substantially under its then market value of between $550,000.00 and $650,000.00.
George contends that he offered Emanuel and Koula the opportunity to acquire the Property on the basis that George and Chris would renovate the Property and that the Property would be held by Emanuel and Koula as a nest egg for George, Chris and their brother Garry. He alleges he had a conversation to this effect with Emanuel and Koula in Greek in late 1986 (the 1986 Conversation):
"[George]:
"We are getting this property at half price. You have only got the property through my connections. You have got to agree that this is a nest egg for me and my brothers for the future. Also what a great image to own a home that was built by a former Prime Minister of Australia, Mr Frank Forde. "
[Emanuel and Koula] each said words to the effect:
"Everything is all okay. Everything is good. Yes of course it is.""
The parties subsequently discussed, at the Albyn Road Property, that the Property required renovation in order to maximise the capital gain.
By reason of the matters in [38] and [39] above, the plaintiffs allege that Emanuel and Koula created an assumption on the part of George that the Property was to be acquired and held by Emanuel and Koula as a nest egg for George, Chris and their brother Garry.
In or about November 1986, Emanuel and Koula purchased the Property using the net proceeds of sale of the Albyn Road Property and a mortgage of $90,000.00 from the Commonwealth Bank of Australia (CBA).
George says that he contributed, through his work in renovating the Albyn Road Property and by providing to Emanuel and Koula the opportunity to acquire the Property at a price which was substantially under market value, both to Emanuel and Koula's ability to acquire the Property, and to Emanuel and Koula's ability to obtain a mortgage over the Property and make repayments thereon.
George and Chris also say they contributed, through their unremunerated work at the South Granville Hardware Business and the Blacktown Hardware Business, towards both Emanuel and Koula's ability to acquire the Property, and to Emanuel and Koula's ability to obtain a mortgage over the Property and make repayments thereon.
In about 1987, George commenced planning and preparatory work in relation to the renovations to the Property, including lodging Council applications for extensions, a swimming pool and a grand sandstone wrought iron boundary fence.
In about 1987, the home loan relating to the Property was refinanced together with other loans relating to the South Granville Hardware Business into a single facility, initially with Natwest Bank and later with Citibank Savings Ltd (Citibank), in the name of Pavlis & Sons Pty Ltd (P & S). George and Chris became guarantors for the facility and, thereby, guarantors in relation to borrowing relating to the Property.
George and Chris allege they became guarantors of the loan relating to the Property on the basis that the Property was held for the benefit of them and Garry, and that due to the fact that George and Chris were making a substantial contribution towards the acquisition and improvement of the Property, each of George and Chris' share in the Property was to be greater than Garry's share. In support of this allegation, the plaintiffs particularised these conversations (the 1988 Guarantee Conversations, which were sometimes referred to during the hearing as the 40:40:20 Conversation):
"[George] had a conversation with [Emanuel and Koula] at a time shortly before signing the guarantee in which he said, in Greek, words to the effect:
"We are signing this because of our interest in the Property. We are protecting our interest in the Property which you said we could have."
[Emanuel and Koula] said words to the effect:
"Yes, it is all okay, that is what you are doing.''
[George] said words to the effect:
"Because Chris and I are working hard for the Property all of the time, we should have a major interest in the Property as opposed to Garry's interest."
[Emanuel and Koula] said words to the effect:
"Yes of course. Garry is seven years younger. He cannot contribute to the Property the way you are."
On a separate occasion at about this time, [George] said to [Chris]:
"Without signing the guarantees, we can't get any loans and we won't be able to run the business and build the house because our parents do not have enough income or security to do it by themselves."
Shortly after this, [Chris] had a conversation with [Emanuel and Koula] in which he said to [Emanuel and Koula]:
"We are signing the guarantees because the house will one day be ours."
[Emanuel and Koula] said to [Chris]:
"Yes that's right.""
By reason of the matters in the preceding paragraph, the plaintiffs allege that Emanuel and Koula created an assumption on the part of George and Chris that the Property was to be held for the benefit of George, Chris and Garry with each of George and Chris' share in the Property being approximately 40%, alternatively for the benefit of George, Chris and Garry, alternatively to be held on either of the aforementioned bases subject to Emanuel and Koula's right to reside at the Property for life.
In the period between 1988 and 1990, George undertook what came to be referred to as Stage One of the renovations of the Property and George and Chris paid for the cost of those renovations. The particulars included:
"[George] attended on a full time basis. [Chris] and Garry Pavlis did some labouring work on weekends. [George] undertook project management and physical labouring tasks and other labouring tasks by assisting other trades during the day to reduce labour costs. [George] carried out demolition, excavation, concreting, steel fixing, and scaffolding. Items that were paid for and installed were….
In January 1988 a personal friend of [George], Mr Joe Merlino advanced the sum of $50,000 to [Emanuel and Koula] for the purpose of the renovations which amount was expended on renovations and repaid by [George and Chris] over the period up to 1994. In the period from about 1987 to 1990, [George] commenced undertaking property development in his own right and contributed profits from these developments towards the cost of renovating [the Property], namely $40,000.00 in 1989, $93,328.78 in 1989 and $45,000.00 in 1990 from property development sales and $250,000.00 during 1989/90 from a banking credit facility."
In 1987, the Blacktown Hardware Business was closed down and the assets sold. The third party loan from Mr and Mrs Peris (see [29] above) was repaid.
In 1991, the South Granville Hardware Business was sold as a going concern. The net sale proceeds went to pay trade creditors, being the Mitre 10 franchisor.
After the sale of the South Granville Hardware Business, Emanuel ceased working and, since that time, has had no income other than the age pension which he started receiving in 1996 (which he has expended on his personal living expenses).
Koula's annual income from 1981 to 1991 was limited to the tax free threshold of $4,000.00 to $6,000.00 and thereafter limited to the aged pension.
In or about 1992, the CBA commenced proceedings against Emanuel and Koula in relation to a loan of $275,439.34 in the name of P & S.
The litigation continued until 1999 when a judgment was issued against Emanuel for the sum of around $385,000.00. Koula was discharged from any liability.
George and Chris funded Emanuel and Koula's costs in the litigation.
Emanuel and Koula had no cash to pay the judgment referred to in [54] and no ability to borrow any money to pay the judgment.
As at about 1999, Emanuel and Koula also owed $155,000.00 to Citibank. They had no cash or income from which to make repayments or to discharge that debt.
In or about 1999, George and Chris organised both the payment of Emanuel's judgment debt, which was paid by Chris and Garry, and the refinancing by St George Bank of the debt owed to Citibank with Chris and Garry as guarantors.
At the time the steps referred to in the preceding paragraph were undertaken, the plaintiffs allege that George, in the presence of Chris and Garry, had a conversation with Emanuel and Koula in Greek in words to the following effect (the 1999 Conversation):
"[George]:
"Without Chris, Garry or I being guarantors, we would have to sell the house because you are not earning any income and you are both on pensions. Because the house isn't finished, we would not get good money for it either. You now need to honour the agreement that Chris and I get most of the property because there is still a lot more work to be done."
[Emanuel and Koula] said words to the effect:
"Yes of course. We will sort this out later. Who else will get it? Of course it will go to you boys.""
By reason of the 1999 Conversation, the plaintiffs allege that Emanuel and Koula contributed to the assumption on the part of George and Chris that the Property was to be held for the benefit of George, Chris and Garry with each of George and Chris' share in the Property being approximately 40%, alternatively for the benefit of George, Chris and Garry, alternatively, was to be held on either of the aforementioned bases subject to Emanuel and Koula's right to reside at the Property for life.
Thereafter, in the period from about 2001 to 2008, George expended substantial work, effort and moneys, without any remuneration from Emanuel and Koula, in carrying out and completing what came to be referred to as Stage Two of the renovations to the Property. Chris also contributed substantial sums of money in funding Stage Two of the renovations.
Relying on the foregoing facts, the plaintiffs allege an entitlement to a constructive trust in their favour because there existed between George, Chris, Emanuel and Koula a joint relationship whereby:
1. George and Chris made substantial contributions of money and in kind towards the acquisition, financing of the acquisition, retention and improvement of the Property;
2. George and Chris pooled their entitlement to remuneration with cash available to Emanuel and Koula to enable the payment of expenses in relation to the acquisition, financing of the acquisition and improvement of the Property;
3. George and Chris acted in the manner referred to in (1) and (2) on the basis that the Property would be held by Emanuel and Koula for the benefit of George, Chris and Garry, with George and Chris' shares being larger than that of Garry, or for the benefit George, Chris, Garry, Emanuel and Koula and, on the death of Emanuel and Koula, for George, Chris and Garry, with George and Chris' shares being larger than that of Garry.
The joint relationship terminated in about 2013 when the relationship between George and Emanuel and Koula irretrievably broke down, or alternatively in 2017 when the relationship between Chris and Emanuel and Koula irretrievably broke down.
Emanuel and Koula have disavowed any obligation towards George and Chris in relation to the Property and asserted that they are able to deal with the Property without regard to any interest on the part of George and Chris. This is said to be unconscionable with the result that Emanuel and Koula hold the Property subject to a constructive trust in favour of George and Chris as to a 40% share each, or alternatively a constructive trust in favour of George and Chris "as to such proportion as would prevent the unconscionable retention of property by Emanuel and Koula".
Further and in the alternative, the plaintiffs rely on an estoppel. This is said to arise because George, or George and Chris, acted to their detriment in reliance on the assumptions created by Emanuel and Koula. In those circumstances, Emanuel and Koula are said to be estopped from denying the assumptions pleaded by the plaintiffs.
Further and in the alternative to the claims for a constructive trust or in estoppel, by reason of the contributions made by George and Chris in the circumstances set out in their claim, the plaintiffs contend that Emanuel and Koula hold the Property subject to an equitable charge or lien in favour of George and Chris to the extent to which their contributions have contributed to or increased the value of the Property.
It is convenient to conclude this section by recording how these claims were ultimately put by Mr Insall SC in final address.
First, he made clear that this was not a case where the plaintiffs said they were owed any money (Tcpt, 10 November 2020, p 506(44-47)):
"We are certainly not putting forward any case that we're owed anything. Our case is that we understood that this property was initially to be held for the three boys, that it morphed into the larger share, but on that basis, we did the work, we paid the money. We are not making a claim [in] debt."
However, if the Court was not satisfied, as a matter of discretion, that a constructive trust should be ordered, the plaintiffs sought an equitable charge over the Property if the Court did not accept any other part of their case. Assuming the Court did not accept the 40:40:20 Conversation, the charge would reflect the amounts the plaintiffs said they had contributed to the renovation of the Property and for which they had not been reimbursed. The quantum secured by the charge would have to be referred out to an accountant to be ascertained.
In relation to the constructive trust, it was submitted that the parties were engaged in a joint endeavour. The significant size of the task of renovating the Property, the requirements of work and sacrifice on the part of George and Chris, all pointed to the conclusion that they were not to be taken as making a gift to their parents. What they expected was an interest in the Property subject to their parents' life interest.
It was also accepted that the plaintiffs had made no direct contribution to the purchase price of the Property and that, for want of proof, no case was advanced that they had contributed to paying the mortgage over the Property.
Mr Insall SC ultimately accepted that the plaintiffs' case was that everything they had done had been done in the expectation that the Property would be theirs one day, that expectation being derived from express representations or common intention, with a fallback of entitlement by reason of the failure of a joint venture. The plaintiffs also sought to do equity, so that they would submit to whatever conditions properly accommodated Emanuel and Koula as, in effect, life tenants. In final submissions, Mr Insall SC informed the Court that he had instructions that, depending on the form of relief the Court might propose, his clients would accept a condition not to press any subsequent claim for a family provision order under the Succession Act 2006 (NSW).
[12]
The defendants' response
With limited exceptions, the defendants put the plaintiffs' version of events entirely in issue. In particular, the four conversations critical to the plaintiffs' case were denied.
I should record that in practical terms it was Emanuel's evidence that was deployed to meet the plaintiffs' allegations. Koula swore a very short affidavit in which she denied the critical conversations particularised in the statement of claim and denied she had ever agreed, or been present when it had been agreed, that the Property was to go to her sons in accordance with the 40:40:20 division alleged by the plaintiffs. It was clear from Koula's brief cross-examination that she now remembers very little and that she left discussions about business to her husband and sons. In final submissions, no one suggested that Koula's evidence was of assistance to the Court.
Emanuel said he had been running businesses in Australia since 1955. Each of George and Chris had left, respectively, his accounting work and dental technician role of his own volition to work in the South Granville Hardware Business, and George and Chris had set up P & S Aust of their own volition to run the Blacktown Hardware Business.
Emanuel denied that George and Chris in any way contributed to or worked on the Albyn Road Property. He denied the 1985 Conversation. Similarly, he contended that the Property had been purchased at the price offered without any suggestion it was at an undervalue. While the plaintiffs were not guarantors in relation to the Property, Emanuel accepted that George had assisted with Stage One of the renovations, but said that all the family had done so. However, all of the costs were paid by him and Koula. He denied the 1986 Conversation and the 1988 Guarantee Conversations had ever occurred and that he and Koula had ever agreed to hold the Property for their children.
In relation to the litigation with the CBA, Emanuel denied that the plaintiffs funded his and Koula's litigation expenses. He also denied the 1999 Conversation. However, he accepted that he could not pay what was owing under the settlement of that litigation and contended that Garry had paid $453,000.00 of that amount and that the plaintiffs had paid $22,000.00.
Emanuel also denied that the plaintiffs had contributed to Stage Two as they said they had done.
The defendants also pleaded three special defences:
1. Laches based on the plaintiffs knowing from 2008 or 2013 that they were not going to receive the Property but had not done anything to press their claim until 2018, during which time they had suffered Garry to pay $560,000.00 for the benefit of the defendants, including towards the costs of the Property.
2. The defendants had received the commercial benefit of their companies' debts being secured by the mortgage over the Property and the benefit of the outcome of the CBA litigation limiting their or their companies' liabilities.
3. To the extent that the plaintiffs had contributed to the improvements to the Property, they had done so through their companies and had received taxation benefits because those contributions were treated as company expenses for tax purposes.
[13]
Facts not in dispute or independently established
It will be apparent from the foregoing that all of the critical factual matters are in dispute between the parties. As a first step in resolving those disputes, I will next set out the Court's findings of fact about matters which were admitted in the pleadings, were supported by independent, contemporaneous documents or were not otherwise seriously in dispute. These facts provide essential points of reference for the Court in making findings about the matters in dispute. As is often the case in matters such as this, I also record at this point that it is neither possible nor legally necessary for the Court to attempt to resolve specific disputed matters of family history going back to the childhood of the plaintiffs.
Emanuel and Koula were married in 1958.
George was born in 1962.
Chris was born in 1963.
In 1967, Emanuel and Koula bought a house in Queen Street, Ashfield for $13,600.00 which was rented out until the family moved into the house in 1974.
Garry was born in 1969.
In 1975, Emanuel and Koula bought a supermarket in Enfield called the Scoop Supermarket Food Store which was open six days a week.
In or about February 1981, at the age of 19, George commenced a course at Sydney TAFE and, thereafter, obtained an Accounting Certificate and a Real Estate Certificate.
While he was studying, George had a job in 1981 for about five months as a bookkeeper in an accounting firm. At the same, he undertook his first property development transaction, participating in a syndicate of five people from the accounting firm to purchase a property.
At some point in 1981 or 1982, Emanuel and Koula leased premises in Guildford Road, South Granville and established the South Granville Hardware Business with Emanuel as the manager.
In or about February 1982, at the age of 19, Chris commenced a Dental Technician course at Randwick TAFE and, thereafter, obtained a Dental Technician qualification.
On 21 June 1982, Pednap Pty Ltd was registered with Emanuel and Koula as the sole directors and shareholders.
By a deed made on 25 July 1982, Pednap Pty Ltd became the trustee of the Pavlis Family (No 2) Trust and, at some point around this time, became the operator of the South Granville Hardware Business.
While there was a dispute about whether George and Chris received remuneration for their work, Emanuel and Koula did not dispute that once the South Granville Hardware Business had commenced, Emanuel required George and Chris to work at the business on Saturdays and Sundays, any free weekdays when not at TAFE and during TAFE holidays.
On 10 November 1982, Emanuel and Koula purchased the land on which the South Granville Hardware Business was operated for $145,000.00.
On 25 November 1982, Pednap Pty Ltd changed its name to Pavlis & Sons Pty Ltd (P & S).
During 1983, the South Granville Hardware Business became a Mitre 10 Franchise.
On or about 7 February 1984, Kangal Holdings Pty Ltd was incorporated.
On 24 May 1984, Kangal Holdings Pty Ltd changed its name to Pavlis & Sons Australasia Pty Ltd (P & S Aust), with George and Chris being sole shareholders and directors. Its purpose was to acquire a new Mitre 10 hardware business in Main Street, Blacktown (the Blacktown Hardware Business) and to undertake property development.
The Blacktown Hardware Business was officially opened by a State Member of Parliament, Mr Ron Mulock, on 6 October 1984. The business received an advance from the CBA supported by a third party mortgage from Anthony and Mary Peris of Ashfield, friends of Emanuel.
On 12 August 1985, Emanuel and Koula purchased the Albyn Road Property for $191,700.00 subject to a $50,000.00 mortgage to the CBA.
On 14 July 1986, a company was incorporated which on 2 February 1987 became Pavmac Enterprises Pty Ltd (Pavmac) with George and Chris as the directors and shareholders with the object of undertaking property development. A company search discloses that Emanuel ceased to be a director and secretary of that company on 14 November 1988, but does not list a start date for him in respect of either of those roles.
On 13 October 1986, Emanuel and Koula completed a home loan application with the CBA to borrow $90,000.00 to purchase the Property for $300,00.00. Among their assets they listed "Equity in 2 hardwares [$]400,000".
In November 1986, the Albyn Road Property was sold for $365,700.00.
In the same month, Emanuel and Koula purchased the Property for $300,000.00 using the net proceeds of sale of the Albyn Road Property and $90,000.00 from the CBA secured by a mortgage to the CBA. There is no suggestion that any party, other than Emanuel and Koula, either contributed to the purchase price of the Property or to mortgage repayments in respect of the Property.
Emanuel and Koula have lived at the Property since it was purchased by them, now a period of nearly 35 years.
The Blacktown Hardware Business was closed in 1987. In that same year, George said he undertook his first property development in his own right.
On 14 May 1987, a company was incorporated which on 28 July 1987 became Ideal Enterprises Pty Ltd (Ideal) with George and Chris as directors and shareholders to undertake the business of importing and distributing locks and door fittings from Greece.
P & S Aust, described in those documents as a "development company", made loan applications to CBFC Ltd (CBFC) dated 21 January 1988, 9 March 1988, 27 April 1988 and 26 July 1988. In the interim, finance was provided by Natwest Australia Bank.
By a letter of approval dated 18 February 1988, Citibank agreed to advance funds to P & S as Trustee for the Pavlis Family (No 2) Trust.
On 21 March 1988, Emanuel and Koula (in their personal capacity and as trustees of the Pavlis Family (No 1) (sic) Trust), Pavmac, Ideal, P & S Aust, George and Chris all signed, as guarantors, an all moneys guarantee in favour of Citibank in respect of P & S as trustee of the Pavlis Family (No 2) Trust in respect of funds to be advanced pursuant to the agreement referred to in the preceding paragraph.
On 29 April 1988, there was a settlement whereby Citibank advanced $560,000.00 to pay out Natwest Australia Bank.
On or about 6 May 1988, Emanuel and Koula mortgaged the Property to the CBA in respect of advances to be made to P & S (the CBA Mortgage).
By letter dated 6 July 1988, CBFC confirmed a loan of $310,000.00 to be advanced to P & S Aust, subject to Emanuel and Koula giving CBFC a registered third mortgage over the Property "on the understanding that the principal amounts owing under the prior mortgages over this property do not exceed $610,000" (the CBFC Mortgage). This is the mortgage referred to in [115].
By letter dated 19 July 1988, CBFC had told Emanuel and Koula that their "present maximum liability" under the CBFC Mortgage was "$792,830 plus interest, costs, charges and expenses".
On or about 26 July 1988, Emanuel and Koula granted a mortgage over the Property to CBFC to secure funds to be advanced to P & S Aust and two individuals, Vasilios Skembes and Suresh Choudhary. By letter of the same date, CBFC informed Emanuel and Koula that their liability to CBFC secured by, among other things, the CBFC Mortgage "has increased to $1,069,305.00 plus interest, costs, charges and expenses".
In October and November 1988, Emanuel and Koula executed other loan, guarantee and loan related documents in relation to CBFC's advances to P & S Aust.
Stage One of the renovations to the Property was organised and overseen by George and Chris between 1988 and 1990.
On 9 January 1989, Chris and Koula gave unlimited personal guarantees to the CBA in respect of P & S, P& S Aust and Ideal.
In late 1988 or early 1989, CBFC agreed to consolidate P & S Aust's loans into what was described as a "Revolving Credit Facility which will eventually replace the current 7 Commercial Loans". CBFC's memorandum of this decision, which referred to the CBFC's mortgage over the Property as part of a "core" of security, includes:
"Pavlis & Sons Australasia Pty Limited (PSA) is one of a family group of companies having various interests which include:
"Pavlis & Sons Pty Limited" - owner/operator of a "Mitre 10" Hardware business at South Granville.
"Ideal Enterprises Pty Limited" - importer and wholesale/retailer of door furnishings and NSW distributor of Yale locks.
"GBC Developments Pty Limited" and "PSA" - residential (mainly cottages) property developments.
CBFC's involvement has been with "PSA" in the financing of land acquisition and construction of medium quality/size homes for resale. These activities are only small although there is an outstanding approval for construction of 5 townhouses at Blacktown. Current facilities of $1,474,598 (partially drawn), detailed below, have been conducted within arrangements.
Director, George Pavlis, has sought an increase of approximately $140,000 to construct two cottages on sites already financed by us. To date individual site purchases and constructions have been financed as separate loans although securities are generally interlocked. This has been brought about partially due to the growth of this activity and the company's practice of introducing 'partners' from time to time to spread their risk. The result is we now have some 7 commercial loans to the group in various stages of drawings etc making control, while not really difficult, time consuming.
Accordingly, it has been suggested, and agreed with Mr Pavlis, to incorporate the increase now sought into a Revolving Credit Facility which will eventually replace the current 7 Commercial Loans.
…
This Company has proven to be reasonably successful in its property purchases and constructions to date VIZ:
• Purchase of sites at Edgeware Road, Prospect, thence subdivision into 2 blocks with immediate sale of 1 to virtually clear that debt.
• Purchase of sites at Cannon Street, Prospect thence subdivision into 2 blocks again with immediate sale of 1 to virtually clear that debt.
• Construction of cottages or residue blocks at Cannon Street and Edgeware Road. Edgeware Road has been sold for approx. $160,000 (profit of approx. $60,000 after interest costs). Cannon Street was a better price - now looking at approx. $160,000 (which would realise profit in the order $80,000).
• Property at Beenleigh QLD to be sold for approx. $500,000 - purchased for $395,000 mid 1988.
Security available has provided us more than adequate comfort, even allowing for the progressive nature of some of the projects, and it is considered servicing may be accepted."
By letter dated 16 February 1989, George (on behalf of P & S Aust) accepted CBFC's offer of the $1,600,000.00 Revolving Credit Facility (the RCF).
By letters dated 27 March 1989, Emanuel and Koula acknowledged that the CBFC Mortgage secured the RCF.
On or about 5 April 1989, Chris and Koula signed acknowledgements that the CBA would be extending up to $237,162.00 to P & S, P& S Australasia and Ideal, secured against the Property and the guarantees referred to in [118] above.
By a letter dated 29 May 1990 to the General Manager, Building Services Corporation, then NSW Magistrate G C Glass wrote this reference in respect of George:
"This is to certify that I have known Mr George Pavlis of XX Redmyre Road, Strathfield as a neighbour, for about five years. I have found him to be a person of good character. The Pavlis' home is a magnificient (sic) Federation-style two storey residence, but at the time of purchase by the Pavlis family, it had been run-down for many years and at one time fire had damaged part of the building. Mr. George Pavlis has basically assumed responsibility for restoring this home, and is performing a very difficult task with considerable care and attention to detail. The residence itself is of real significance in our heritage, in that it is the former home of an Australian Prime Minister, the late Mr. Frank Forde. As you will appreciate, proper restoration work takes time, but George Pavlis is very conscious of the Federation period in home decoration, and of the need to be careful in the blending of the character of the individual rooms.
As a consequence he is very particular as to the qualifications of any tradesman employed on this site, ensuring that the residence when fully restored will be the subject of considerable pride for the residents of the district. I understand the local Municipal Council and the Strathfield Historical Society are extremely pleased with the progress made to date. The Australian Government is also aware of what is occurring with this building and the Speaker of the House of Representatives, the Honourable Leo McLeay M.P. has indicated a desire to inspect the building in due course. He comments "I am always pleased to hear that historical Australian buildings are being given the care which they deserve. Please keep me informed of progress on the Forde home."
I therefore express the view that Mr George Pavlis appears to be very thorough in his knowledge of the building industry, and in this regard he may be of considerable assistance in your Organization.
(G C Glass)
Magistrate for the State of New South Wales"
On 18 June 1991, describing himself as "George Pavlis REI, MBSC, HIA, JP, Manager", George wrote a five page letter to Citibank headed "Re: Pavlis Family Financial Situation" putting a refinance proposal to Citibank. This referred to selling "some of our property developments", listed a number of properties (unrelated to Emanuel and Koula) as assets, foreshadowed a sale of the land on which the South Granville Hardware Business operated and included this reference to the Property: "Private residence valuation as at current stage $1.2 million. A further cost of $50,000 to complete with a completion valuation of $1.5 million valued by CBFC Limited in July 1990". The letter describes "our sources of income" as coming from:
"1) Mitre 10 hardware store outlet
2) Importation exquisite door furniture/handles
3) Building maintenance; insurance work; factory maintenance
4) Rentals from some cottages"
On 9 July 1991, the South Granville Hardware Business was sold for $57,231.00 (goodwill) and $138,282.00 (stock) as a going concern.
After the sale of the South Granville Hardware Business in 1991 Emanuel ceased working and, since that time, has had no income other than the aged pension which he started receiving in 1996 and which he has expended on his personal living expenses.
Koula's annual income from 1981 to 1991 was limited to the tax free threshold of $4,000.00 to $6,000.00 until 1991 and thereafter limited to the aged pension.
By letters dated 26 September 1991, CBFC demanded $1,604,069.66 from Emanuel and Koula pursuant to the CBFC Mortgage.
An invoice from Pope & Spinks Solicitors dated 4 November 2021 is addressed to Emanuel and Koula, and George and P & S Aust, and is entitled "Re Financial Arrangements with Commonwealth Bank and CBFC". It refers to "conference with you on 8.10.91, letter to CBFC of 11.10.91, perusal of voluminous documentation provided by Mr G Pavlis in relation to the history of this matter…" (emphasis added).
Subsequent invoices from Pope & Spinks Solicitors from 1991 and 1992 are addressed solely to Emanuel and Koula. However, nearly all of the attendances recorded are on George, including in relation to preparation of an affidavit from him, and there are further references to documents being provided by George. The first mention of a demand upon Emanuel, Koula and P & S by the CBA is for the period between December 1991 and February 1992.
On 17 February 1992, the CBA issued notices to Emanuel and Koula under s 57(2)(b) of the Real Property Act 1900 (NSW) in relation to the Property pursuant to the CBA Mortgage for them to repay $275,439.34.
By 17 July 1992 (being the date of notices to occupier that are in evidence), the CBA had commenced proceedings No 13165 of 1992 against Emanuel and Koula in the Common Law Division of this Court. The summons sought possession of the Property, I infer in reliance on the CBA Mortgage (the CBA Proceedings).
In an affidavit sworn on 2 December 1992 in the CBA Proceedings (George's 1992 Affidavit), George deposed to a numbers of matters:
1. He described himself as a "self-employed building contractor";
2. He gave information about three companies of which he and Chris were the shareholders and directors:
1. Pavmac, incorporated in about 1986, and described as a property developer;
2. Ideal, incorporated in about July 1987, and described as an importer and distributor of locks and door fittings; and
3. P & S Aust, incorporated in about 1984, and described as a property development company.
1. He referred to P & S, incorporated in about 1982 or 1983, as a company that ceased carrying on its business as a hardware retailer in July 1991.
Because of its importance to the view I have formed about George's credit, it is necessary to set out extracts from George's 1992 Affidavit at some length:
"13. In early 1981, my father and I established a hardware shop in Guildford Road, South Granville. My father and I were granted a franchise by Himaco Pty Limited ("Himaco") to operate the hardware store under the name "True Value Hardware" ("The Granville shop").
14. I performed the following tasks in obtaining the franchise and setting up the Granville shop:
a. I negotiated with the franchisor to meet its requirements.
b. I arranged for all documents to be produced to satisfy Himaco's requirements.
c. I arranged for all meetings with Himaco representatives.
d. I made all representations and presentations on behalf of my family at all meetings.
e. I wrote and answered all correspondence.
f. I maintained all communications with Himaco including ordering supplies of stock and making payments.
15. My father assisted me in setting up of the Granville shop by performing the following tasks:
a. He attended meetings with me.
b. He signed correspondence and documents at my request.
My father made no decisions without my advice. He invariably acted as I instructed him. I was setting up a family business which would employ him and provide family income.
16. We opened the Granville shop for business in about November 1981. I managed the shop and looked after the books and records. I made all of the decisions about the management and administration of the Granville shop. My father's duties included:
a. Stacking shelves.
b. Occasionally serving customers.
c. Cleaning.
d. Customer surveillance.
e. Making deposits at local branches of banks.
f. Making petty cash withdrawals.
17. In late 1981, I had a conversation with my father to the following effect:
I said: "It's about time we set up a family company for legal and tax reasons."
He said: "Whatever you think. It's probably a good idea and if Richard Bobb (our accountant) said it's a good idea you should go ahead and organise it."
I said: "No problems."
18. I caused Pavlis and Sons to be incorporated in late 1982. I decided that my mother and father should be the shareholders and directors. In 1983 I negotiated with Himaco for the Granville shop to be changed from a "True Value" hardware franchise to a "Mitre 10" franchise. It started operating under the name "Mitre 10" in about April 1983.
19. I was responsible for the day to day management and administration of the Granville shop. My father worked in the shop, his duties included:
a. stacking the shelves.
b. Watching out for shop-lifters.
c. Assisting with shop maintenance, cleaning etc.
d. Serving customers.
He did not make any of the administrative or management decisions. My brother, Christopher Pavlis, assisted me in managing and administering the shop.
20. In late 1982, I had a conversation with my father to the following effect:
I said: "The landlord for the (Granville) shop has died. His children want to sell the property. I think we should look into buying it."
He said: "It's a good idea but where will be get the money."
I said: "We could try the bank or maybe Uncle Con could organise some finance."
He said: "I'll talk to your uncle."
I said: "I think we should buy it if we can, so that we can be secure."
21. In 1983, Pavlis and Sons purchased the property in Guildford Road, Granville from which the Granville shop operated for $145,000.00. Finance for the purchase was arranged by my uncle, Constantine Pavlis.
22. In late 1984, I made arrangements for Pavlis and Sons Australasia to open a hardware store in Main Road, Blacktown ("the Blacktown shop"). That hardware shop was operated under the name "Pavlis and Sons Hardware" between October, 1984 and October, 1987 when it was closed following a downturn in turnover after the Blacktown Mall was opened in Blacktown. I arranged for the leasing of premises and the fitting out of the shop.
23. I was responsible for the day to day management and administration of the Blacktown shop. I was assisted by my brother, Christopher Pavlis.
24. My father worked in the Blacktown shop. His responsibilities continued to be the same as before. He played no active part in the day to day management and administration of the Blacktown shop. He made no management decision. He was not involved with any of the important financial decisions. I told him very little about the financial administration and management of any of the hardware shops. I was responsible for borrowing money, financing the operations of the two shops, purchasing stock and pricing policies etc.
25. After about October, 1987, I began my property development business through Pavlis and Sons Australasia. I conducted this business with my brother, Christopher Pavlis. Thereafter, Christopher Pavlis took a greater responsibility in the management and administration of the Granville shop.
26. During the first few months of 1988, I decided that Pavlis and Sons should have an overdraft to enable it to increase stock levels at the Granville shop.
…
29. In about April 1988 I took my father to the North Ryde branch of the Commonwealth Bank. We were accompanied by Bill Mason. My father and I were introduced to Ron Griffin by Bill Mason and we discussed the family businesses and our need for an overdraft. I do not recall any particulars of this introductory conversation. I recall that I answered questions about the businesses and our need for an overdraft.
30. In late April 1988 I had a telephone conversation with Ron Griffin to the following effect:
He said: "I have the documents prepared. I will send them by bank courier to the Guildford branch."
A few days later I attended the Guildford branch of the Commonwealth Bank and picked up the documents. I took them to the family home. These documents included the mortgage, the subject of these proceedings. My mother and father signed the mortgage at the family home at different times. At the time they signed I showed them where the mortgage had to be signed. I had no conversation with them about the meaning of the mortgage or its effect on them.
…
32. Towards the end of 1988, I had a telephone conversation with Ron Griffin (the manager, of the Commonwealth Bank branch at North Ryde) to the following effect:
I said: "I want to arrange some overdrafts for my building company, Pavlis and Sons Australasia, and for Ideal Enterprises, a company which buys and sells locks."
Griffen said: "How much do you need?"
I said: "Pavlis and Sons Australasia needs $50,000.00 and Ideal Enterprises needs $40,000.00."
Griffen said: "What work is Pavlis & Sons Australasia doing at the moment?"
I said: "We are building houses financed through CBFC."
Griffen said: "I'll check with CBFC. Who's your contact there?"
I said: "Ron Bragg."
Griffen said: "And Ideal Enterprises? What does it need the money for?"
I said: "Ideal Enterprises needs the money to import some locks from Greece for sale in Australia."
Griffen said: "I don't see any problems organising that."
33. In about January 1989 some Commonwealth Bank documents were sent to the family home. Those documents may have included a guarantee for signature by my parents. Some time shortly after the documents arrived my brother and I signed guarantees for the companies. My brother signed the documents at my request where I indicated and the company seals were affixed. I approached my parents individually and had conversations with each of them to the following effect:
I said: "The bank wants you to sign these papers so that Chris and I can borrow money. Please sign here."
I pointed to the relevant parts of the documents and asked them to sign. I did not say to my mother or father anything about the documents or their effect on them.
34. Apart from the conversation referred to in the preceding paragraph, I did not tell my mother and father anything else about the guarantee, the purpose for which it was required or its potential effect on them. I did not tell my mother and father anything about the financial status of the companies:
a. Pavlis and Sons
b. Pavmac
c. Ideal Enterprises; or
d. Pavlis and Sons Australasia.
I did not tell them that they were guaranteeing the four companies.
35. I did not think that it was necessary to give my mother and father any further information because I did not believe that they would ever have any liability under the guarantee or the mortgage. I believed that I was asking them to sign the guarantee and the mortgage simply so that the Commonwealth Bank would lend my companies money.
36. After January 1989, I periodically had discussions with bank officers from the North Ryde branch of the Commonwealth Bank. Most of these discussions were with Paul Barnett and Derek Smith and later Tim Kennedy. During these discussions I periodically asked the Commonwealth Bank to increase the overdraft limits for the companies or to grant or roll over commercial bills. I did not tell my mother and father anything about these conversations. I did not advise my mother and father that the companies were increasing their borrowings from the Commonwealth Bank.
37. Periodically the Commonwealth Bank would send letters to the family home. Because this correspondence came from the Commonwealth Bank it was given to me to look after. I would take whatever action was required by the Commonwealth Bank. I seldom, if ever, told my parents about the contents of the correspondence or the actions which were being taken by me in relation to the companies and their borrowings from the Commonwealth Bank.
38. If the Commonwealth Bank sent documents which required the signature of my parents, I would take those documents to them and have a conversation to the following effect:
I said: "Here are some papers that the bank requires you to sign. They relate to the bank overdraft. Would you sign here please?"
39. I have only a limited command of the Greek language. I cannot read or write Greek. I speak to my mother in basic Greek. She has very little understanding of spoken English. She cannot read or write English.
…
41. My mother has never played any part in the management and administration of the companies."
In 1993, Emanuel and Koula commenced proceedings No 11209 of 1993 in the Common Law Division of this Court against CBFC (Emanuel and Koula's Proceedings). The relief sought in those proceedings was not in evidence. I will refer to the CBA Proceedings and Emanuel and Koula's Proceedings together as the "Bank Litigation".
On 30 March 1993, Koula swore an affidavit in Emanuel and Koula's Proceedings which included:
"7. George Pavlis is our son. He was born on 27th March 1962. I know that he is involved in several businesses. We spoke about these businesses in a very general way during family discussions. I do not play any part in the management or administration of any of these businesses. I know that my husband assists our son with these businesses. I did not know I was a director of any of my son's companies. I do not really understand what this means. I have never been to a formal directors meeting, although periodically I am asked to sign documents which are never explained to me.
8. Some time in about July 1988, our son, George Pavlis, brought some bank documents to our home which I believe may be the mortgage which is the annexure "A" hereto ("the mortgage"). At the time, I recall having a conversation with him, in the Greek language, to the following effect:
He said: "I want you to sign these documents."
I said: "What are they?"
He said: "The Bank wants them."
I said: "Where do I sign?"
I recall signing the documents and given them back to our son. I could not read the documents.
9. I signed the documents because my son asked me to. I had no idea that by signing the mortgage I was putting our family home at risk. Nobody explained to me that if my son's company, Pavlis & Sons Australasia Pty Limited ("the company"), got into financial difficulty I may be called upon to pay its debts to CBFC. It was never explained to me that any of the documents which I signed was a mortgage over our home which could be seized if the company's debts were not paid. If someone had explained this to me I would not have signed the mortgage. Nobody suggested that I obtain any legal or other advice before signing. It never occurred to me that I should. I trusted my husband or son to advise me.
10. Some time in March 1989, my son brought some documents to our house which I believed to be the application for loan which is annexure "B" hereto ("applications for loan"). At the time I recall having a conversation with him, in the Greek language, to the following effect:
He said: "I need you to sign these documents."
I said: "What are they?"
He said: "The Bank needs them before it will give me any more money."
I said: "Where do I sign?"
I recall signing the documents and giving them back to my son. I could not read the documents.
11. Prior to the commencement of proceedings against my husband and me by the Commonwealth Bank earlier this year:
(a) I did not understand what was meant by the term "mortgage". Although I believe I may have signed similar documents in the past when my husband and I borrowed money to purchase properties I did not know they had the effect that if the bank or lending institution was not paid, it could seize our house. I thought mortgages were formal documents people signed when they borrowed money to buy a property.
(b) I have never received any advice about signing mortgages.
(c) I had no idea that our family home could be taken by CBFC and sold if the company did not pay its debts to CBFC.
(d) I did not know what debts the company had to CBFC.
If I had been aware of these matters, I would not have signed the mortgage.
12. By signing the application for loan, I had no idea that I was somehow making myself liable for advances made by CBFC to my sons or their companies. It was never explained to me that if the company could not pay its debts to CBFC, CBFC may call on my husband and me to pay off those debts. I thought I was simply signing a document to help my sons get a loan. I had no idea that $1,600,000 was involved. I had no idea what the loan was going to be used for. I did not know the loan application had anything to do with any earlier documents signed by me.
13. Prior to signing the application for loan:
(a) its effect was not explained to me,
(b) the financial circumstances of the company was not explained to me;
(c) I did not obtain any independent legal or other commercial advice about the financial circumstances of the company or of me signing the application for loan."
On 30 March 1993, Emanuel swore an affidavit in Emanuel and Koula's Proceedings. Again, because of its importance on the issue of credit, it is necessary to reproduce an extensive extract:
"14. During the past ten years or so, George Pavlis has conducted a number of businesses. I have not been involved to any significant degree and have not been involved in any of the management decisions.
15. My wife was a director of Pavlis & Sons Pty Limited only, and was not involved in any other of George Pavlis' companies. She has never participated in the management or control of any of those companies. She is not consulted on business matters. She does not attend formal directors meetings and she does not give any advice about the management and control of those businesses. My sons and I rarely inform her in any way as to how the businesses are doing.
16. In 1983, Pavlis & Sons Pty. Limited ("Pavlis & Sons") a company established by George Pavlis in 1983 purchased a property at XX Guildford Road, South Granville, for $145,000. Pavlis & Sons contributed about $15,000.00 towards the purchase of this property. The balance of the purchase price was borrowed from Barclays Finance. The mortgage was organised by my brother, Constantine Pavlis, a Solicitor. I recall that I signed the mortgage when asked to do so by my brother.
17. In September 1985, my wife and I purchased a property, XX Albyn Road, Strathfield, for $192,000. Part of the purchase price came from the sale of the four units at X Queen Street, Ashfield, which we sold at about this time for $165,000. We borrowed the part of the purchase price. I recall that we signed a mortgage at the time. I do not recall that the mortgage was explained to us in any way.
18. In September 1986, we sold XX Albyn Road, Strathfield, for $365,000. At the same time we purchased our present family home, XX Redmyre Road, Strathfield, for $300,000 ("our home"). We borrowed about $90,000 from Commonwealth Bank of Australia, Strathfield branch. I recall that the money was borrowed through a housing loan. My wife and I signed a mortgage over our home, although I cannot recall the effect of the mortgage being explained to us by anyone.
19. Our home is the subject of these proceedings.
20. The mortgage over our home to the Commonwealth Bank, Strathfield Branch, was discharged in 1987. We borrowed about $360,000.00 from Natwest Bank. This money was used to pay back the Commonwealth Bank. A few months later we borrowed about $560,000 from Citibank which was used, in part, to pay back Natwest Bank. We gave a mortgage over our home to Citibank. All of these transactions were arranged and put into place by our son, George Pavlis. We played almost no part in the negotiations. I think that George Pavlis used some of the proceeds from these transactions for his businesses.
21. In 1988, Pavlis & Sons had been conducting a hardware business for about five years from shop premises at XX Guildford Road, South Granville. The business was conducted under the name Pavlis & Sons Hardware. I was employed by the business and my duties included filling up the shelves with stock, keeping a watch for shoplifters, and occasionally serving customers.
22. In about July 1988, my son, George Pavlis, came to our home. He gave me wife and me some documents. We had a conversation to the following effect:
He said: "I have to get these papers signed so that the bank will lend me some money to do my building work with Pavlis & Sons Australasia."
I said: "Why should I sign?"
He said: "Don't worry, there are already two loans over the house and the bank manager told me to get you to sign the papers."
The conversation was in the Greek language. My son did not use the word "guarantee" or "mortgage". I signed the mortgage document which is annexure "A". Nobody signed as a witness to my signature. I do not recall whether my wife was present when I signed the mortgage document. I had no idea what the mortgage secured. I did not know whether CBFC Limited had already advanced any money to my sons or their companies. I did not know anything about the terms of any such loans.
23. The person, R. Ackley, who is said to have witnessed my signature was not present when I signed the mortgage, and I think he may be a person by the name of Robert Ackley who, at the time, was employed by Pavlis & Sons Mitre 10 Hardware of Granville.
24. In March 1989, my son, George Pavlis, came to our home with a document from CBFC Limited. I had a conversation with him to the following effect:
I said: "Why do I need to sign this document?"
He said: "Because the Bank needs these documents signed."
I said: "Why do they want more documents signed?"
He said: "I have bought some more land and am building some more houses, and the Bank needs these additional documents signed."
I then signed the documents in the presence of my son only. At the time of signing the document entitled "application for loan", which is annexure "B" I did not understand that it was a request that $1.6 million be advanced to Pavlis & Sons Australasia Pty Limited. If I had known that there was this much money involved in the application for loan I would not have signed.
25. My wife and I did not attend at the offices of CBFC to sign any of the documents referred to in paragraphs 22 and 24 above. My wife and I signed the documents because our son, George Pavlis, asked us to do so. He did not explain to us the nature of the documents or the effect of us signing them. We signed because he is our son and he asked us to do so. I believed that I was signing documents so that his company could borrow money from CBFC. I thought that signing the documents was a mere formality. I did not suspect that my signing the document I was putting our home at risk. If I had, I would not have signed the documents.
26. At the time I signed the CBFC documents, I did not receive any legal or commercial advice about them. My son did not tell me that I was taking any risk with our home. He did not tell me that his businesses sere in any financial difficulty. I believed that his companies ran profitable businesses. I had no reason to believe that they may not be able to pay their debts to CBFC. I had no idea that by signing the document I was guaranteeing the debts of my son's companies to CBFC. I had no idea that I could be liable to CBFC for $1,600,000.00.
27. I was only ever generally aware of the financial dealings of my son's companies and businesses. I was not familiar with the details of their financial transactions of their obligations to CBFC. Nobody, including my son, George Pavlis, ever explained to me that our home would be at risk if one of the businesses failed and CBFC called on my wife and me to pay their debts.
28. At no time did anybody from CBFC, or my son, advise me that any part of the money advanced by CBFC would be lent to Ansatasios, Stavroula and Parris Anastasakis. No one ever sought my permission to these advances being made. I first found out about this in 1991 when my son George told me."
On 27 May 1994, Emanuel swore a further affidavit in Emanuel and Koula's Proceedings which included:
"13. During July and August 1988 my sons Christopher and George Pavlis lived in the family home. They saw me regularly and spoke to me constantly during this time about my upset and depressed state. My symptoms were obvious, manifesting themselves in the following way:
(a) I was saddened and my family, including George, were readily able to observe my sadness and my demeanour which exhibited itself in my posture, expression and tone of voice;
(b) I was listless and lacked energy; my family and George were able to observe that during this period I was inactive and spent long periods of time sitting in quiet seclusion.
(c) I did not want to work; my family, including George, were readily able to observe that I declined all offers and encouragement for me to return to work;
(d) I was constantly tired; my family, including George, were able to observe that I was easily exhausted and spent an unusual amount of time in bed resting;
(e) I was constantly distracted; my family, including George was able to observe that I was unable to concentrate on one thing for any period of time and was easily distracted by any interruption.
(f) I was grief stricken, given to bouts of tears, anger, irritability and withdrawal.
14. I refer to paragraph 22 of my first affidavit. I now recall that my son George said the following words, when asking me to sign the documents referred to in that paragraph:
"I need $100,000.00 to fund the last project. Ron Bragg said to me to get you to sign this so I can get the $100,000.00".
15. In about July 1988 I had been diagnosed as suffering from a carcinoma. I was in constant fear that I would die in the near future. Annexed hereto and marked "B" is a copy of a report dated 29 November 1993 from John Boulas.
16. During this period, my family doctor was Dr Bonovas. Annexed hereto and marked "C" is a copy of a report dated 29 March 1994 prepared by Dr Bonovas. That report summarises accurately my mental and physical state during July and August 1988.
17. I refer to paragraph 22 and 23 of my first affidavit. At the time that I signed the mortgage in July 1988 I was suffering from the physical and emotional symptoms referred to in this affidavit. In summary, at the time that I signed the mortgage, I was unable to concentrate, read or understand long complicated documents or to comprehend the affect of any business transactions then being conducted by my sons. My symptoms were obvious. I had discussed them many times with my son George."
George swore an affidavit in Emanuel and Koula's Proceedings on 18 May 1995 which was in similar terms and to substantially the same effect as George's 1992 Affidavit, that Emanuel and Koula were unknowing and unwitting pawns in George's financial relationship with CBFC, signing bank documents at his request without any explanation or understanding of what they were signing as a result of their blind trust in George. In relation to the RCF, George deposed:
"86. Apart from the conversation referred to in the preceding paragraph [being to the effect that the bank was giving him a "birthday present"], I did not tell my mother and father anything else about the loan form or its affect on them. I did not tell my mother and father anything about the financial status of the companies at the time. I did not explain to my mother and father the various property developments to which the application for loan form related. I did not point out to my parents that the loan referred to on page 2 was for $1,600,000. I did not tell them that the application for loan form had anything to do with the mortgage of the family home which they had earlier signed. …
93. My mother and father were not aware of the transactions referred to in the preceding paragraphs, nor that they had increased their obligations to CBFC under the application for loan form."
On 13 July 1995, George obtained a painter's licence, which he continues to hold.
On 22 September 1998, the Court made orders disposing of both Emanuel and Koula's Proceedings and the CBA Proceedings. The relevant effect of those orders was that the CBA and CBFC obtained orders for possession of Emanuel's interest in the Property, Emanuel had to pay $2,321,010.55 to CBFC and $478,977.87 to the CBA, and Koula had to pay $79,772.81 to the CBA. Emanuel and Koula had neither the cash nor any ability to borrow money to pay these amounts. This paragraph is based on the Court's record of proceedings that was in evidence. No party (or the Court) was able to locate any reasons for judgment.
On 26 January 1999, the CBA sent a "without prejudice" letter to George (addressed to him at the Property), making a conditional offer under the heading "Re: Settlement of XX Redmyre Road, Strathfield" and which included: "We refer to your telephone conversation this morning with the writer and confirm that the Bank will accept the amount of $475,000 in full and final settlement".
On 17 June 1999, a unit in Maroubra (the Maroubra Unit) was transferred from the Public Trustee to Garry for $310,000.00. On 2 July 1999, Garry sold the Maroubra Unit for $380,000.00. The argument about these transfers is set out in [200] and [201] below.
On 28 June 1999, a Deed of Settlement was entered into between CBA, CBFC, Emanuel and Koula which resolved the parties' liabilities arising from the Bank Litigation. Under that deed Emanuel had to pay $475,000.00 on or before 5 July 1999. Koula was, in effect, discharged from any liability.
A series of bank cheques in favour of the CBA dated in late June or early July 1999 was in evidence which had been arranged by Garry (with some small amounts contributed by George) and used to pay the $475,000 (including from the proceeds of sale of the Maroubra Unit).
In 1999, in addition to owing the money referred to in [144] above, Emanuel and Koula owed $155,000.00 to Citibank and had no cash or income from which to make repayments or to discharge the loan owed to Citibank.
George, Chris and Garry funded Emanuel and Koula's costs of the Bank Litigation because Emanuel and Koula did not have the means to do so. George and Chris refinanced the Citibank loan through a loan with the St George Bank for which Chris and Garry were guarantors.
On 17 November 1999, Emanuel and Koula made mirror wills drawn by Emanuel's relative and solicitor Constantine Pavlis. Each left their estate to the other and appointed the other as executor, or in default, Garry. If the other predeceased, then the gifts were:
1. The Property to Chris and Garry as tenants in common;
2. All property in Greece to George;
3. The residue to George, Chris and Garry equally.
Each will concluded with this clause:
"I have given a greater share of my Estate to my sons, CHRIS PAVLIS AND GARRY PAVLIS due to the fact that during my life time GEORGE PAVLIS was the cause of expensive litigation concerning the property at XX Redmyre Road, Strathfield without just cause or excuse."
On 21 June 2001, George obtained a builder's licence, which he continues to hold.
During the period from about 2001 to 2008, George and Chris oversaw and completed Stage Two of the renovations to the Property.
On 1 October 2010, Emanuel and Koula made mirror wills drawn by Mr John Maitland of the firm Teece Hodgson & Ward. Each left their estate to the other and appointed the other as executor, or in default, two non-family members, and in ultimate default, George. If the other predeceased, then the gifts were somewhat complex. In broad terms, Garry was to receive 60% of the estate (including the Property, of which he was devised 60% with an option to purchase the other 40%). George and Chris received nothing. Trusts were established for the benefit of George's children and grandchildren (receiving 10% of residue) and for the benefit of Chris' children and grandchildren (receiving 30% of residue).
Over a period of some years commencing in 2010, the relationship between Chris and his parents, and later between George and his parents, gradually broke down.
On 19 April 2017, Emanuel and Koula made mirror wills drawn by Mr John Maitland of the firm Teece Hodgson & Ward. Each left their estate to the other and appointed the other as executor, or in default, Garry and the two non-family members mentioned in the 2010 wills (see [152]). If the other predeceased, the entire estate fell into residue, with nothing being given to George and Chris and otherwise to be divided:
1. 60% to Garry;
2. 30% to Chris' children who attain the age of 25;
3. 5% to George's children who attain the age of 25; and
4. 5% to Garry's children who attain the age of 25.
On 28 June 2017, Emanuel prepared a document (in the nature of a testament or explanation and in part addressed to Garry and his family) that Garry passed on to Mr Maitland at Emanuel's request. In that document, Emanuel blamed George for the Bank Litigation, stating that George "thought of forging his mother's signature and taking out a loan of one million dollars and with the then situation the bank took us to court" and describing George as "the protagonist of my financial disaster".
On 18 July 2018, George and Chris each lodged a caveat on the title of the Property in relevantly identical terms (what follows is taken from Chris' caveat) (the Caveats):
"CAVEAT…
(D) REGISTERED PROPRIETOR AFFECTED BY THIS CAVEAT
EMANEUL PAVLIS & KOULA PAVLIS XX Redmyre Rd Strathfield NSW Postcode: 2135
(E) CAVEATOR …
CHRIS PAVLIS …
(H) The caveator claims to be entitled to the estate or interest in the above land specified in Schedule 1 by virtue of the facts set out in that schedule and prohibits the Registrar General from taking, with respect to the above land, the action specified about unless the caveator has consented in writing or this caveat has lapsed or been withdrawn.
(I) SCHEDULE 1 Estate or interest claimed
Particulars of the estate or interest in the abovementioned land
See Annexure A …
By virtue of the facts stated below
See Annexure B …
THIS IS ANNEXURE A TO CAVEAT
TORRENS TITLE: FOLIO IDENTIFIER XXXX
REGISTERED PROPRIETOR: EMANUEL PAVLIS & KOULA PAVLIS
CAVEATOR: CHRIS PAVLIS
An equitable interest as beneficial owner, alternatively beneficial owner of a one third interest, under a constructive trust, of an estate in fee simple, or in the alternative, an equitable interest in the land alternatively a one third interest in the land arising by reason of promissory estoppel.
…
ANNEXURE B
Pursuant to a constructive trust arising by reason of monetary and non-monetary contributions to the acquisition, renovations and improvement of the said land, the payment of mortgage and loans secured over the said land and the payment of legal expenses to achieve the discharge of loans secured over the said land with the intent of the Caveator and Caveatees that the land was to be acquired for and/or held for the benefit of the Caveator and/or for or for the benefit of the Caveator and his brothers. In the alternative, the Caveator relies upon his assumption induced by the representations of the Caveatees that the said land was held for or would be transferred to the Caveator and/or the Caveator and his brothers and the fact that the Caveator acted to his detriment in reliance on those representations."
George and Chris filed their Statement of Claim on 21 September 2018. That pleading did not refer to the 40:40:20 Conversation.
[14]
Fact finding and credit - Legal principles
In approaching the task of fact finding, particularly where credit is a significant issue, the Court has applied nine principles.
First, at the forefront of the Court's approach has been the oft cited statement of McClelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-9:
"Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not … attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712."
Second, the concept of actual persuasion was elucidated by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (in liq) (No 2) (2011) 297 ALR 56; [2011] FCA 1123 at [48]:
"Under s 140(2) of the Evidence Act 1995 (Cth) (the Evidence Act), the Court must, in deciding whether it is satisfied that a case has been proved to the requisite standard, take into account:
• the nature of the cause of action or defence;
• the nature of the subject matter of the proceeding; and
• the gravity of the matters alleged.
When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-2)."
Third, there is the statutory successor of the rule in Briginshaw v Briginshaw (1938) 60 CLR 336 in s 140 of the Evidence Act 1995 (NSW):
"140 Civil proceedings: standard of proof
(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:
(a) the nature of the cause of action or defence, and
(b) the nature of the subject-matter of the proceeding, and
(c) the gravity of the matters alleged."
Fourth, evidence is to be preferred which is inherently probable in the circumstances or is given by a witness against their interest.
Fifth, evidence of independent witnesses (i.e. persons who have no reason to be partisan) may be decisive in resolving the conflicting evidence of interested parties.
Sixth, where a witness has been found to be lying about one thing that does not automatically mean that they are to be disbelieved about everything else. The Court is not bound to accept or reject a witness' evidence in its entirety. This approach was expressed by O'Loughlin J in Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1; [2000] FCA 1084:
"118 Before commencing a detailed analysis of the evidence in this case, I desire, in the first instance, to make clear the approach that I have taken to the evidence of a witness where I have found some, but not all, aspects of the evidence of that witness to be unreliable. Simply because I find against a party or a witness on one issue and reject some part of the evidence of that person, it does not mean that what remains is tainted, or otherwise lacks probative force, with the consequence that I should dismiss all the evidence of that person. The principles enunciated in the cases indicate that the trial judge is entitled to believe part of the evidence given by a witness and to reject the rest. After making an assessment of the evidence, after utilising the advantage of having seen and heard all the witnesses, and after forming an impression of each, the confidence that the judge reposes in a particular witness is assessed accordingly. Where evidence has a logical probative value, a judge will rely on it; where it contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force, the judge will, in all probability reject it or, at least, not rely on it. I mention some authorities that support those propositions.
…
121 A trial judge is not restricted in his or her assessment of a witness. By this I mean that if, on peripheral issues, the trial judge reaches conclusions adverse to the credibility of a party, it does not necessarily follow, consistently with such conclusions, that these must be findings adverse to that party on the issues that are central to the determination of the matter. There is no rule of law or practice that states that an adverse finding on any aspect in the evidence of a witness means that the whole of that witness' evidence must be rejected."
Seventh, and closely related to the preceding point, in Sangha v Baxter [2009] NSWCA 78 Basten JA (with whom Handley AJA agreed) cautioned against global credibility findings:
"155 There are risks in making global findings about credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.
156 Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, King v Collins [2007] NSWCA 122 at [44]."
Eighth, disbelieving a witness that "X" was the case does not mean that "not X" has been proven. The Court respectfully adopts what fell from Gibbs J (as his Honour then was) in Steinberg v Federal Commissioner of Taxation (Cth) (1975) 134 CLR 640 at 694; [1975] HCA 63 (citations omitted):
"The fact that a witness is disbelieved does not prove the opposite of what he asserted. It has sometimes been said that where the story of a witness is disbelieved, the result is simply that there is no evidence on the subject, but although this is no doubt true in many cases it is not correct as a universal proposition. There may be circumstances in which an inference can be drawn from the fact that the witness has told a false story, for example, that the truth would be harmful to him; and it is no doubt for this reason that false statements by an accused person may sometimes be regarded as corroboration of other evidence given in a criminal case. Moreover, if the truth must lie between two alternative states of fact, disbelief in evidence that one of the state of facts exists may support the existence of the alternative state of facts."
Ninth, the Court can only do the best it can on the evidence which it has. Some issues may need not be resolved or should not be resolved. It may be that they cannot be resolved given the nature of the evidence which the parties have adduced. This case has many similarities to the family dispute considered by Robb J in Ak-Tankiz v Ak [2014] NSWSC 1044. Of the evidence in that case, his Honour said at [187]:
"The principal evidence relating to these issues consisted of the uncorroborated evidence of the witnesses, or alternatively the only corroboration available was the testimony of other witnesses. The evidence distilled into the word of one witness against the word of one or more other witnesses. Most of the events relevant to the issues occurred many years ago. The evidence relevant to the issues generally consisted of a series of assertions, and counter-assertions by various witnesses. Evidence of the objective context was generally not available, so it has not been feasible to test the versions of events that were in contest by reference to the objective probabilities, based upon uncontroversial contemporary circumstances. Though the issues are not entirely irrelevant, their significance is limited, and their resolution has not been necessary for the purpose of determining the real issues in the case. Any attempt to resolve the issues by making judgments about the relative credibility of the individual witnesses on an issue-by-issue basis was likely to be based on illusory foundations."
[15]
Fact finding and credit - Submissions and conclusions
For the reasons that follow, the Court has concluded that Koula's evidence can carry no weight, and that in relation to George, Chris and Emanuel, each of them is a witness whose evidence cannot be considered reliable on any contested matter unless it is inherently probable, against interest or corroborated by independent witnesses or contemporaneous documents.
[16]
George's credit - Defendants' submissions
The defendants' submissions concerning George's credit were based on two fundamental criticisms. The first was to highlight the difference between George's evidence in the CBA Proceedings and Emanuel and Koula's Proceedings, and how he sought to present his relationship with his parents, especially Emanuel, in these proceedings.
The second criticism focussed on the alleged 40:40:20 Conversation, but on the basis that the same considerations reflected adversely on George's credit generally. This criticism relied on three elements: the absence of any reference to a 40% interest in the Caveats; the absence of any particularisation of the 40:40:20 Conversation in the statement of claim filed only a few weeks after the Caveats; and the almost identical versions of that conversation in the affidavits filed by George and Chris. It was submitted that this last matter was sufficient in itself for the Court to find that George and Chris had colluded to make up that evidence.
[17]
George's credit - Plaintiffs' submissions
In answer to the criticism of the differences between George's past and present evidence, Mr Insall SC submitted that the "different impression" given in George's earlier evidence was explicable, in words which I had used, as evidence of a family "circling the wagons" to fend off the banks.
As to the differences between the Caveats and George and Chris' subsequent evidence, the defendants sought to minimise these issues by referring to objective circumstances (primarily the substantial work and expenditure undertaken by the plaintiffs) as supporting their case. The defendants' approach was criticised for not engaging with "George and Chris's broader evidence as to the representations or the objective circumstances supporting their case" (Plaintiffs' Closing Submissions in Reply, at [2]). The essence of the plaintiffs' answer was set out in [5] of their submissions in reply:
"Against these objective circumstances, the differences between expressions in the caveats and the Plaintiffs' evidence are of little import. They are, in any event, explicable by reason that they appeared in documents obviously settled by lawyers and that "understandably deferential" lay clients and witnesses were unlikely to avert to the precise differences in language between such documents (cf. Masson at [112]). Caveats are documents typically prepared by lawyers as a holding exercise, describing a claim in a summary form and prior to the solicitors taking full instructions from clients."
The reference to Masson is to this observation of Nettle and Gordon JJ in Queensland v Masson (2020) 94 ALJR 785; [2020] HCA 28 (Masson) at [112], which, for important context, I set out with its preceding paragraph (citations omitted):
"[111] Possibly, if Mr Peters had been a judge or a lawyer or someone else whose education and experience has more to do with semasiology than the applied science of critical emergency care, he might have chosen an expression such as "not recommended" or "not appropriate". But it is neither surprising nor at all unlikely that a paramedic whose day‑to-day business is one of making life and death decisions should conceive and speak of a "not recommended" or "not appropriate" course of initial treatment as one that is "not permitted". Common sense and ordinary experience dictate that, just as a paramedic's initial treatment must be immediate and unhesitating, a paramedic is likely to be inclined to conceive and speak of actions in perfunctory and unqualified terms. Of course, exceptionally, such a person might be so particular in his or her choice of language as to convey that, by stating that something is "not permitted", he or she means that all choice is excluded. But whether that was the case here could only be decided by seeing and hearing the witness give his oral evidence.
[112] The oft unspoken reality that lay witness statements are liable to be workshopped, amended and settled by lawyers, the risk that lay and, therefore, understandably deferential witnesses do not quibble with many of the changes made by lawyers in the process - because the changes do not appear to many lay witnesses necessarily to alter the meaning of what they intended to convey - and the danger that, when such changes are later subjected to a curial analysis of the kind undertaken in this matter, they are found to be productive of a different meaning from that which the witness intended, means that the approach of basing decisions on the ipsissima verba of civil litigation lay witness statements is highly problematic. It is the oral evidence of the witness, and usually, therefore, the trial judge's assessment of it, that is of paramount importance."
In the course of oral submissions it was argued that, in any event, the fact that their accounts were identical in their affidavits is not a reason to find that the representations were not made. They were inherently likely because why would two young men at the start of their careers take on such a major project without assurances of that kind?
In relation to the Caveats, while there was no evidence to this effect, Mr Insall SC also submitted that the Court would find, as a matter of judicial notice, that caveats sometimes have to be prepared quickly without the benefit of a full statement from the client of the circumstances.
[18]
George's credit - Conclusion
For the following reasons the Court does not accept George as a witness whose evidence can be relied upon in relation to controversial matters. His evidence will only be given weight if it is inherently probable, against interest or corroborated by independent witnesses or contemporaneous documents.
First, and foremost, is the complete contrast between George's evidence in the Bank Litigation (see [134] and [139]) and the picture he has sought to paint in these proceedings. This contrast is far more than a matter of a "different impression" (see [171]). In the former proceedings, George presented himself as the driving force, assisted by Chris, in all of the commercial undertakings affecting the Pavlis Family and the Property, with Emanuel and Koula as passive and innocent dupes. In these proceedings, George has sought to present himself and Chris as pawns in the hands of a domineering father, forced into helping their father for no reward and having to rely on representations of future entitlement to the Property.
George's evidence in the earlier proceedings is even more damaging to his credit than because of mere inconsistency. If it is true, it is an admission of disreputable and dishonest conduct by George towards his vulnerable parents. If it is false by reason of its inconsistency with the evidence George now advances, then the Court does not know which evidence is true. On either view the Court is left in the position that it must conclude that George's uncorroborated evidence cannot be relied upon. The Court concludes that George is a witness who will give whatever evidence suits his cause.
The Court also accepts the defendants' second criticism (see [170] above). I deal with this in [206] to [214] but it is convenient at this point to set out why I do not accept Mr Insall SC's submissions on this point:
1. As to the Caveats not mentioning the alleged 40% interests: there is no evidence of urgency or incomplete instructions to lawyers. George and Chris both accepted in cross-examination that they knew the Caveats were important, that there was no rush, that they had been careful to tell their solicitor the full story and that they had the benefit of legal advice. The Caveats were prepared by the same solicitor who two months after the Caveats were lodged filed the plaintiffs' statement of claim as solicitor on the record. If a conversation referring to 40% interests had occurred and been relied upon by the plaintiffs, it is inconceivable that it would not have been referred to in the Caveats.
2. Masson does not assist the plaintiffs. It is clear from [111] (set out at [173] above) that the High Court was referring to a description of one or two words. As I set out in [206] and [207], George's and Chris' affidavit accounts of the 1988 Guarantee Conversations are virtually identical. I accept the defendants' submission that it is inconceivable that some thirty years later George and Chris would recall a conversation in Greek and produce an English version in almost identical terms. As I discuss in [214] below, this bespeaks collusion which renders the evidence of both George (and Chris) unreliable. At the very least it demonstrates that there has been no genuine, independent attempt to recollect critical evidence so as to give the Court a truthful rather than reconstructed account. As it goes to such a fundamental matter in their case, it is a proper foundation for the Court to conclude (as it does) that their uncorroborated or otherwise not independently verifiable evidence on any controversial matter of importance should not be accepted.
[19]
Chris' credit - Defendants' submissions
The defendants' primary attack on Chris' credit was to the same effect as the attack on George by reason of their substantially identical affidavit evidence as to the 40:40:20 Conversation. They also submitted that Chris was not being careful to tell the truth (citing his confident, but plainly wrong, answer as to in what country he had verified the statement of claim); that he was evasive about critical conversations being in the statement of claim; and that when asked to identify the most important conversation, he did not refer to the 40:40:20 Conversation (see [238] for this evidence).
[20]
Chris' credit - Plaintiffs' submissions
The plaintiffs' response to these criticisms was identical to their response in relation to George set out in [172] to [175]. It was submitted that the other miscellaneous criticisms of Chris were commonplace issues for lay witnesses unfamiliar with cross-examination and did not warrant a finding of lack of credibility.
[21]
Chris' credit - Conclusion
There are two reasons why the Court does not accept Chris as a witness whose evidence can be relied upon in relation to controversial matters. His evidence on such matters will only be given weight if it is inherently probable, against interest or corroborated by independent witnesses or contemporaneous documents.
First, throughout the relevant history of the Pavlis Family, Chris appears to have played a supporting role to George. As such, the Court's doubts about George's veracity necessarily inform the Court's approach to Chris' evidence insofar as it corroborates George's evidence. While it is not Chris' evidence, George's evidence in the Bank Litigation about Chris as George's willing assistant in the family businesses is at odds with Chris' evidence in these proceedings, which seeks to corroborate George's evidence in these proceedings that they were both victims of their domineering father.
The second reason is that referred to in [170] and [179] above in relation to George.
[22]
Nick's credit
Only brief submissions were ultimately made by any party about Nick's credit and his evidence, to which I have referred in [19]. That evidence was intended to be corroborative of George and Chris' evidence about, among other things, their early work for, and relationship with, their father and did not go to any of the central factual disputes in the case. Nick's evidence was too peripheral, and his animosity towards Emanuel too obvious, for the Court to place any reliance on Nick's evidence.
[23]
Emanuel's credit - Plaintiffs' submissions
Mr Insall SC submitted that the beginning and end of the question of Emanuel's credit was to be found in this evidence, being his own admission that he tells the story that suits him (Tcpt, 6 November 2021, p 421(41)-423(36)):
"INSALL: Are you saying you swore an affidavit in the Commonwealth Bank proceedings and are you saying this is a mistake? Is that what you would like his Honour to believe?
WITNESS: Yeah, yes, because this actually got nothing to do with this case here, to me. Well, I..(not transcribable)..because this is truth in here, and not in there, I mean to say--
HIS HONOUR: The "in here" -
WITNESS: Because too many things -
HIS HONOUR: Just pause there. The "in here" refers to the affidavit of, the current affidavit of the current proceedings, the "there" is a reference to the affidavit of the Commonwealth Bank proceedings.
WITNESS: Yes.
INSALL: So, what I suggest to you is, you make up evidence to suit whichever case you're running at the time, is that correct?
WITNESS: At this time yes, that's right.
INSALL: Now, just if you go up to paragraph 14 on the same page, you say "during the past ten years or so, George Pavlis has conducted a number of business. I have not been involved to any significant degree and have not been involved in any of the management decisions." Do you see that?
WITNESS: Yes.
INSALL: Was that correct?
WITNESS: This is correct. I didn't get involved in any sort of a business with George, or in companies with George, or in companies with Chris. I never get involved in not one of them.
…
HIS HONOUR: I propose to go back a step, because I'm concerned about whether Mr Pavlis understood something you put to him Mr Insall.
INSALL: May it please the Court.
HIS HONOUR: Madam Interpreter, would you please interpret the question that I'm about to ask to Mr Pavlis.
INTERPRETER: Yes, your Honour.
HIS HONOUR: I'm just going to repeat a question that Mr Insall asked you a moment ago. The question was to this effect, that you made up the evidence in - you make up the evidence in your affidavits to suit whatever case you want to make at the time.
…
INTERPRETER: Okay. I just told him that what you said to me.
HIS HONOUR: Yes.
INTERPRETER: That he actually makes up the evidence for each case that he is actually -
HIS HONOUR: Yes. That's right, and I understood that you drew attention to each of the two affidavits?
INTERPRETER: Yes. Okay.
HIS HONOUR: What is your answer to that question? Do you agree or disagree that that is what you have done?
WAUGH: Your Honour, he's being distracted by looking at the affidavits. He's not answering your Honour's questions.
HIS HONOUR: I think he understands my question. Do you agree or disagree that that is what you have done?"
WITNESS: Well, your Honour, I'm agree.
HIS HONOUR: You agree?
WITNESS: I agree."
Mr Insall SC submitted that, on the basis of that evidence, the Court should not accept any of Emanuel's evidence where it favoured himself. This included his various denials about George's evidence, including of having made the various representations he was alleged to have made by George and Chris.
[24]
Emanuel's credit - Defendants' submissions
Mr Waugh SC submitted that Emanuel was a credible witness whose evidence had the "ring of truth", not least his denials of ever making any promises to George and Chris about the Property. It was submitted that the Court should be cautious about making adverse findings based on demeanour where a witness gives evidence, as occurred here, with the assistance of an interpreter. Insofar as there were matters adverse to Emanuel in his evidence, and even accepting that it was inescapable to conclude that Emanuel understood what he was saying in his evidence set out in [186], the Court should understand that Emanuel was a suggestible witness. Insofar as he may have accepted that evidence he had sworn in the Bank Litigation was false, it went to peripheral matters and was not to be compared to central issues about which the plaintiffs were said to have lied. Furthermore, at least one of the affidavits in those proceedings that was now in question had been prepared by George's solicitor at the time.
[25]
Emanuel's credit - Conclusion
The Court accepts Mr Insall SC's submission that by Emanuel's own admission his evidence on critical matters cannot be relied upon. As the transcript set out in [186] demonstrates, I was concerned that something may have gotten lost in translation when it came to Emanuel's understanding of what was being put to him. However, he adhered to his admission after he had had the benefit of clarification through the interpreter. Despite his best efforts to minimise the effect of Emanuel's answers, Mr Waugh SC properly accepted in oral argument that it was "inescapable" that Emanuel understood what was being put to him.
Emanuel presented in the witness box as a proud and stubborn man who wished to resist at every turn the case brought by the plaintiffs rather than attempt to address the evidence in a truthful way to the best of his ability. I accept Mr Insall SC's submission that many of Emanuel's strenuous denials were simply unrealistic in the light of common sense and the practical likelihood of what had occurred.
I am also fortified in the conclusion I have reached by the contrast in the pictures which Emanuel sought to paint of himself in these proceedings (independent, patriarchal, "in charge") with his affidavits in the Bank Litigation. In the face of the contrast, the Court has no basis on which to determine which is closer to the truth.
The Court therefore concludes that Emanuel is a witness whose evidence cannot be considered reliable on any contested matter unless it is inherently probable, against interest or corroborated by independent witnesses or contemporaneous documents
[26]
Koula's credit - Plaintiffs' submissions
The plaintiffs submitted that Koula had no real recollection of events and that the Court should accept her evidence that "she left it to the men" and her evidence that she had just signed whatever had been put in front of her for the purposes of these proceedings. In short, her evidence was of no assistance to the Court at all.
[27]
Koula's credit - Defendants' submissions
The defendants submitted that Koula had given her evidence truthfully and to the best of her recollection. She understood that the work was being done to the Property so the family could live in it.
[28]
Koula's credit - Conclusion
Koula presented, both in the witness box and in her affidavits, as having no real recollection of events. Koula identified herself as a traditional Greek wife and mother who looked after the household, and the Court accepts her evidence that she had no input into monetary or business affairs. Her lack of English also meant she could not read contracts or assist with any accounting or invoicing matters in the various businesses of her husband and sons. Given her lack of recollection and very limited role outside domestic matters, with no disrespect intended, the Court accepts that her evidence is of no assistance on any of the questions central to the resolution of these proceedings.
[29]
Garry's credit - Plaintiffs' submissions
Mr Insall SC submitted that Garry's role in the proceedings was somewhat peripheral. As Garry had not been challenged in cross-examination on this point, Mr Insall SC did not submit that Garry's evidence should not be accepted to the effect that he had made cash contributions to the renovations of the Property of approximately $150,000.
However, he submitted that Garry's evidence should be approached with caution and a recognition of at least the likelihood of exaggeration for three reasons:
1. Garry was now the principal beneficiary under Emanuel and Koula's wills to the exclusion of the plaintiffs so that, while not a party to the proceedings, he had a real interest in ensuring the plaintiffs failed. His partisan interest was further demonstrated by the fact that he was paying the defendants' costs of these proceedings.
2. Garry had given evidence in his parents' interest of events which was implausible because he would have been very young when they happened.
3. Garry's evidence about the Maroubra Unit was not credible.
[30]
Garry's credit - Defendants' submissions
The defendants submitted that Garry's evidence had not been seriously challenged in cross-examination, with the exception of the issue of the Maroubra Unit. Garry frankly accepted that he has a financial interest in the outcome of the proceedings. He continues to contribute to his parents' finances and is paying their legal expenses. However, none of this is a reason to find that he was not a credible witness.
[31]
Garry's credit - Conclusion
The attack on Garry's credit, such as it was, was essentially based on Garry having a financial interest in the outcome, but the same could be said of the plaintiffs. Garry presented in the witness box as a frank witness who was endeavouring to tell the truth. The Court accepts him as a witness of truth. However, with the exception of the 1999 Conversation, much of his evidence was peripheral to the essential factual matters genuinely in dispute.
In reaching this conclusion, it is necessary to say something briefly about the dispute between the parties concerning the Maroubra Unit. Garry's evidence was that he had bought the Maroubra Unit in March 1999 and had sold it "to free up funds" to assist in paying the settlement with CBA and CBFC. Chris' affidavit evidence was that he (Chris) "in May 1999, …sold the unit which I owned" (being the Maroubra Unit) and applied the proceeds to the settlement. Chris said he was the building manager of the relevant unit block, became aware of the Maroubra Unit and brought it to Garry's attention so he could "flip" it for a quick profit to apply to the settlement. Garry accepted that Chris had drawn the Maroubra Unit to his attention but otherwise denied Chris' version of events.
The Court accepts Garry's version of events and rejects Mr Insall SC's criticism of Garry on this point for two reasons: first, that the only contemporaneous records available (the transfers of the Maroubra Unit) on their face contradict Chris' assertion that the Maroubra Unit was his; and, second, because of the general view I have taken about Chris' credibility in the absence of independent evidence (see [182]).
[32]
Were the various alleged representations made?
Having set out the Court's findings as to credit, it is convenient to turn next to the question of whether the Court accepts the plaintiffs' case in relation to the various representations pleaded. In doing so, I pass over the 1985 Conversation because Mr Insall SC made clear that his clients did not contend that any rights which they now asserted arose from the alleged conversation. However, I note for completeness that applying the Court's findings as to credit has the result that were a finding necessary, the Court would not accept that the 1985 Conversation occurred as alleged.
[33]
Did the 1986 Conversation happen?
George's affidavit evidence of the 1986 Conversation was:
"63. In about early July, 1986 I had a conversation with both Defendants. I said to both of the Defendants:
"We are getting the property at half price. You have only got the property through my connections. You have got to agree that this is a nest egg for me and my brothers for the future. Also what a great image to own a home that was built by a former Prime Minister of Australia, Mr Frank Forde."
The Defendants each said words to the effect:
"Everything is all okay. Everything is good. Yes of course it is."
In late 1986, I said to the Defendants:
"It is going to take a lot of work to renovate the Redmyre Road Property. Everything will need to be replaced and there needs to be extensive landscaping in due course. I will have to sell a property to help fund the renovations."
The First Defendant said words to the effect:
"Yes of course you will but you are doing it for all of us and you have an interest in the property."
64. As a result of the conversation in the last paragraph, I assumed that the Redmyre Road Property was to be acquired and held by the Defendants as a nest egg for me and my brothers and that we had an interest in the Redmyre Road Property."
Emanuel's affidavit response to this evidence was:
"77. I deny the conversations in paragraph 61 to 63 of George's Affidavit. George never negotiated the purchase of Redmyre Road. The discussions were always between Mr Zion and me."
It is not necessary for the Court to resolve the dispute in the evidence about how the Property was brought to the attention of Emanuel and Koula or whether the purchase price represented the market price. The 1986 Conversation is completely uncorroborated. As such, given the Court's findings as to George's credit, the Court is not satisfied on the balance of probabilities that the 1986 Conversation actually occurred. Because of the Court's findings about Emanuel's credit, the Court's conclusion about the 1986 Conversation does not depend on giving any weight to Emanuel's denial.
[34]
Did the 1988 Guarantee Conversations happen?
George's affidavit evidence of the 1988 Guarantee Conversations was:
"70. At the time of executing the Guarantee dated 21 March, 1988 at Tab 18 of Exhibit "GP1" and just before the settlement referred to at Tab 19 of "GP1", I had a conversation with the Defendants and said words to the effect:
"We are signing this because of our interest in the property. We are protecting our interest in the property which you said we could have."
The Defendants said words to the effect:
"Yes, it is all okay, that is what you are doing."
I said words to the effect:
"Because Chris and I are working hard for the property all of the time, we should have a major interest in the property as opposed to Garry's interest."
The Defendants said words to the effect:
"Yes of course. Garry is seven years younger. He cannot contribute to the property the way you are."
I said to the Defendants:
"Chris and I should get 40% and Garry 20%."
The First Defendant said:
"Yes, everything is OK. I know what I am doing."
I repeated to the Defendants:
"40:40:20 to Chris, me and Garry, right?"
The Second Defendant then said:
"Yes, all is good. I trust you because you have a lot of talent in building and you did a good job at Albyn Road, Strathfield."
On a separate occasion at about this time in my presence, the Defendants said to the Second Plaintiff:
"Without signing the guarantees, we can't get any loans and we won't be able to run the business and extend the house because we do not have enough income or security to do it by ourselves."
Shortly after this, the Second Plaintiff in my presence had a conversation with the Defendants in which he said to the Defendants:
"We are signing the guarantees because the house will one day be ours."
The Defendants said to the Second Plaintiff:
"Yes that's right."
71. As a result of the conversation in the last paragraph, I assumed that the Redmyre Road Property was to be held thereafter by the Defendants for me and my brothers and that the Second Plaintiff and I would thereafter have a 40% interest each in the property, with our younger brother Garry having a 20% interest in the property."
Chris' affidavit evidence of the 1988 Guarantee Conversations was:
"34. At the time of executing the Guarantee, the First Plaintiff had a conversation with the Defendants at a time shortly and in my presence before signing the guarantee in which he said words to the effect:
"We are signing this because of our interest in the property. We are protecting our interest in the property which you said we could have."
The Defendants said words to the effect:
"Yes, it is all okay, that is what you are doing."
The First Plaintiff said words to the effect:
"Because Chris and I are working hard for the property all of the time, we should have a major interest in the property as opposed to Garry's interest."
The Defendants said words to the effect:
"Yes of course. Garry is seven years younger. He cannot contribute to the property the way you are."
I recall the First Plaintiff speaking to the Defendants in my presence in the kitchen around this time. The First Plaintiff said to the Defendants:
"40 for me, 40 for Chris and 20 for Garry. That is how it should be."
Both Defendants then said separately:
"Yes of course. That is how it should be."
On a separate occasion at about this time, the First Plaintiff said to me:
"Without signing the guarantees, we can't get any loans and we won't be able to run the business and extend the house because our parents do not have enough income or security to do it by themselves."
Shortly after this I had a conversation with the Defendants in which I said to the Defendants:
"We are signing the guarantees because the house will one day be ours."
The Defendants said to me:
"Yes that's right."
On the basis of this conversation, I assumed that the Defendants would hold Redmyre Road Property for me and my brothers and that the First Plaintiff and I would have the major interest in the property as opposed to Garry's share. On the basis of this conversation I entered into the Guarantee."
Emanuel's affidavit response in evidence was:
"87. I refer to paragraph 70 of George's Affidavit and say that:
(a) I deny the conversation set out therein. I deny ever saying to George or Chris that they had an interest in Redmyre Road. I deny ever saying that George and/or Chris had any entitlement to the property;
(b) The conversation set out there in purports to be in the presence of Koula and myself. At no time do I ever recall Koula saying the words:
"Yes, all is good. I trust you because you have a lot of talent in building and you did a good job at Albyn Road, Strathfield."
(c) I deny Koula (in my presence) or I ever saying to Chris:
"Without signing the guarantees, we can't get any loans and we won't be able to run the business and extend the house because our parents do not have enough income or security to do it by themselves."
(d) … I deny ever being in Koula's presence when she allegedly said the words "yes, that's right" as set out therein.
88. I refer to paragraph 34 of Chris' Affidavit and the conversation thereto. I deny making those statements attributed to me in the conversation set out in that paragraph."
The Court does not accept these conversations occurred for the following five reasons.
First, there is no independent corroboration of these conversations. Conformably with the view that I have set out at [176] and [182] above in relation to the credit of George and Chris, the Court does not accept their evidence. Because of the view I have taken about Emanuel's credit, this conclusion does not depend on Emanuel's denials.
Second, there is no reference to the 40% interests in the Caveats. The Caveats are set out in [156] and I repeat the reasoning set out in [179(1)].
Third, the particulars given in the statement of claim for the 1988 Guarantee Conversations are reproduced in [46]. The first conversation particularised does not include any reference to 40% being discussed. The Court does not accept that it is credible that this would have been omitted if it had occurred and was of any importance to the plaintiffs. Curiously, the next paragraph of the statement of claim alleges the plaintiffs assumed their interest in the Property was "approximately 40%". This appears to be an inference from the particularised conversation about George and Chris having a larger share than Garry, but again the word "approximately" would have been unnecessary if the actual conversation was as ultimately alleged by the plaintiffs in their affidavits. This same point can be made about [47] of the statement of claim, which also refers to "approximately 40%" after the 1999 Representation.
Fourth, while there are minor differences of expression in the accounts given by George and Chris set out in [206] and [207], they are largely identical. Most significantly, their versions of the critical conversations are in identical terms, with the exception of slight variations in how the 40:40:20 interest is expressed. Putting it another way, the 40:40:20 aspect of the conversations appears to have been inserted into what are otherwise identical accounts of the conversations reproduced in the particulars. Given that apparent insertion, the absence of a reference to 40% in the Caveats and the absence of that part of the conversation in the particulars, I find the 40% references in the alleged 1988 Guarantee Conversations set out in the affidavits to be, literally, incredible and that they were concocted by George and Chris at some time between when the statement of claim was filed and when they filed their affidavits. I am fortified in that conclusion by what follows in the next paragraph.
Fifth, the Court's serious doubt about any of this evidence is compounded to the extent it is identical in the two affidavits. As I have already said in [179(2)], I accept Mr Waugh SC's submission that the Court cannot accept that two people recalling conversations in Greek after 30 years would remember them identically not only in Greek, but then also produce identical interpretations of them into English. Based upon just how similar those two accounts are, the Court finds that George and Chris have colluded in this evidence such that it cannot be satisfied that the account of either of them can be relied upon as true. It is uncontroversial that such a finding is open to a Court when confronted with otherwise unexplained (as is the case here) identical evidence of conversations: see, for example, Rosebanner Pty Ltd v Energy Australia (2009) 223 FLR 406; [2009] NSWSC 43 at [326] to [327] per Ward J (as her Honour then was). Furthermore, because it goes to such a critical part of their case, it casts doubt upon the reliability of their evidence generally on any controversial matter of importance.
[35]
Did the 1999 Conversation happen?
George's affidavit evidence of the 1999 Conversation was:
"89. The Defendants had no cash to pay the judgment referred to in paragraph 86 above and no ability to borrow money to pay the judgment. As of 1999, the Defendants owed, in addition to monies for the judgment, the sum of $155,000.00 to Citibank. I along with the Second Plaintiff organised a payment of the First Defendant's judgment debt and refinanced the Citibank loan through St George Bank with the Second Plaintiff and Garry Pavlis becoming guarantors. I did not become guarantor because I had by this time married Iris and I did not want her to know that I was going to guarantee the Redmyre Road Property. I did not want to create tension in my marriage. I continued to work on the Redmyre Road Property despite this also causing tension in the marriage.
90. At the time of paying the First Defendant's debt in early 1999, I had a further conversation with the First Defendant in the presence of the Second Plaintiff and Garry Pavlis. I said to the First Defendant words to the effect:
"Without Chris, Garry or I being guarantors, we would have to sell the house because you are not earning any income and you are both on pensions. Because the house isn't finished, we would not get good money for it either. You now need to honour the agreement that Chris and I get most of the property because there is still a lot more work to be done."
The Defendants said words to the effect:
"Yes of course. We will sort this out later. Who else will get it? Of course it will go to you boys."
91. As a result of the conversation in the last paragraph, I assumed that the Defendants would honour the agreement made in 1988 under which the Redmyre Road Property was to be held by the Defendants for me and my brothers and that the Second Plaintiff and I would thereafter have 40% interest each in the property, with our younger brother Garry having a 20% interest in the property."
Although George says the 1999 Conversation was in the presence of Chris, Chris' affidavits made no mention of it.
In his affidavit evidence, Emanuel does not deny George's account of the 1999 Conversation although nothing turns on this. He does say: "These proceedings are the first time I have heard that George and Chris are claiming an interest in" the Property. The 1999 Conversation is denied in the amended defence and Emanuel denied it in cross-examination (Tcpt, 9 November 2020, p 468(8-20)).
In his affidavit evidence, Garry said of the 1999 Conversation:
"55. I refer to paragraph 90 of George's Affidavit and deny being present when the conversation occurred and deny the conversation took place as set out therein. I was not present during any such conversation. Further, George was not a guarantor of the loan from St. George."
The 1999 Conversation is uncorroborated. Conformably with the Court's findings as to credit, the Court is not satisfied that the 1999 Conversation ever occurred. In reaching this conclusion, the Court accepts, and is fortified by, Garry's evidence that he was not present for any such conversation, but for reasons already set out, gives no weight to Emanuel's denial.
It follows from the foregoing that the plaintiffs' case, insofar as it relied on any pleaded representation, fails on the facts. It is therefore unnecessary to set out the parties' detailed submissions on the law.
[36]
The plaintiffs' case based on their contributions
The same outcome applies to the plaintiffs' case based upon the contributions which they made to the improvement of the Property by reason of the further factual and legal conclusions which follow.
Viewed in its totality, the evidence makes clear that George was the driving force behind everything that has led to this litigation, including on his version (although the Court does not find it necessary to resolve) being the person who introduced the Property to his parents. His dominant role was neatly expressed in his self-description of "manager" in the document set out in [124] of what he represented to banks to be the "Pavlis Family Business" which was centred around property development but included the importing business of Ideal. He was assisted in this by Chris. That dominant role also appears in what evidence there is about the conduct of the Bank Litigation (see [129], [130] and [142]).
This conclusion of George's dominance is consistent with, but for obvious reasons does not depend upon, George's version of each of the representations asserted by him on behalf of the plaintiffs. They have not been accepted as fact by the Court. Nevertheless, it is revealing that George, on his own version of those alleged conversations, portrays himself as their unequivocal instigator, with Emanuel and Koula's alleged responses barely amounting to more than acquiescence or passive agreement. George's versions of these alleged representations are at least insistent and could reasonably be viewed as aggressive or bullying.
Not least because of their limited formal education and English language ability (with no disrespect intended), Emanuel and Koula were, at best, passive participants in and indirect beneficiaries of George and Chris' activities. At worst, if George's evidence in the Bank Litigation is to be believed, they were the victims of being used and disgracefully deceived by George - but it is not necessary for the Court to make any finding about this and no such finding is made.
While George and Chris may have represented, and even persuaded themselves, that they were engaged in the "Pavlis Family Business", they were the immediate beneficiaries of that business through the activities of P & S Aust and, to a lesser extent, P & S. Emanuel and Koula had no legal entitlement to any benefit from George and Chris' development activities and, as George admitted in cross-examination, none of the financial transactions which actually precipitated the Bank Litigation were for the benefit of Emanuel and Koula. Whatever Emanuel and Koula may have received was literally in the gift of George and Chris.
There can be no real doubt that George and Chris (and, for that matter Garry) contributed financially and physically to the renovation of the Property, but not to its acquisition or paying the CBA Mortgage. However, a critical feature of the present case is that having the Property available as security to fund the activities of P& S Aust and P&S was an essential element of George and Chris' activities, as appears, for example, from CBFC's memorandum at [119]. By undertaking and funding the renovation of the Property they received the benefit of the Property's enhanced value as security. For example, George's effort to use that improved value appears in the letter to Citibank referred to at [124].
Their business activities put the Property at risk. George sought to minimise this in his evidence, in particular by saying that the CBA Proceedings were based on the debts of P & S secured by the CBA Mortgage. That is true, but ignores the fact that demands were first made on Emanuel and Koula under the CBFC Mortgage (which secured the debts of P & S Aust) and only later on them under the CBA Mortgage (see [128], [130] and [131]). The various securities in evidence make clear that they were cross-collateralised and the Court is satisfied that the likely order of events was failure to meet demands under the CBFC Mortgage triggering a default under the CBA Mortgage.
It is also apparent from the judgments set out in [141] that Emanuel and Koula were ultimately found liable for amounts that could only be referable to amounts borrowed by George and Chris for their property development and other business interests. George's pivotal role was only demonstrated rather than diminished by his evident pride in telling the Court on more than one occasion in his cross-examination that neither he nor Chris ever went bankrupt, ever had any legal action against them and that his companies were never wound up: he had successfully avoided any personal liability.
In addition to being motivated by the commercial benefit to them of being able to use the Property as security, I will assume in George and Chris' favour that they also perceived themselves to be fulfilling a filial obligation to their parents and the Pavlis family generally in renovating the Property as the family home. However, based on the contemporaneous evidence of their business activities which I have set out in [98] to [125], the Court concludes that such filial munificence was incidental to their commercial ambitions.
George was the instigator of the renovation of the Property for the commercial and filial motives which I have identified. On the evidence which the Court has accepted, and contrary to the submission put on behalf of the plaintiffs (see [70]), the only legal conclusion which the Court can make, and makes to the extent it is necessary, is that the funds and personal exertion George and Chris expended on the renovation of the Property constituted gifts to Emanuel and Koula. (However, I do not think that finding is strictly necessary because the onus at all times was with the plaintiffs to establish the legal character of their claim, not upon the defendants to prove an alternative legal character.) There is no evidence that they were sought or initiated by Emanuel and Koula, and there is no suggestion consideration was given by Emanuel and Koula. As is sometimes the case with generosity of children to parents, they would be no less a gift because they were made in the expectation purely by reason of their status as children that the plaintiffs would one day benefit from their efforts because they would inherit the Property in a fully renovated condition.
By reason of their status as sons and because of the funds and work they expended on the Property, George and Chris at all times expected and continue to expect that they are entitled to a "fair share" of the Property, subject to what emerged in the evidence as a vaguely defined right of Emanuel and Koula to reside in and use the Property (or its monetary equivalent) for their benefit and maintenance during their respective lifetimes. That expectation, the Court readily infers, was also why George and Chris funded Emanuel and and Koula's legal costs of the Bank Litigation; why George arranged and Chris contributed to the settlement of the Bank Litigation to ensure the Property was not lost; and why they continued with Stage Two after the Bank Litigation had been concluded.
However, while it may be accepted as inherently likely that, as parents, Emanuel and Koula enjoyed and expressed gratitude for what was done to the Property by George and Chris, George and Chris have failed to prove any knowledge, action or inaction (including representations or encouragement by words or other conduct) on the part of Emanuel and Koula that would affect Emanuel and Koula's consciences so as to attract any kind of equitable relief.
Nor have Chris and George established any "joint endeavour" in relation to the renovation of the Property which has failed, as opposed to what the Court is satisfied was really in the nature of unilateral action undertaken for the reasons set out in [226], and [229] to [231] above. The Court accepts Mr Waugh SC's submissions that the plaintiffs' error was to equate a joint undertaking with a family relationship and that to be "joint" there had to be more than just an open ended expectation that when parents die the children will get a share.
The plaintiffs, with respect correctly, submitted that the essence of the equity identified in cases such as Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 and Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 is the making of contributions for the purposes of a joint endeavour or relationship, and the retention by one party of those contributions when the relationship fails without blame where that retention is unconscientious because it was not intended that the other party alone should enjoy them. This last element generally follows from the fact of the endeavour being "joint".
In this case the defendants criticised the plaintiffs' case because it was submitted the plaintiffs had not identified what the "joint endeavour" was. For example, was it no more than to renovate the Property so that Emanuel and Koula could live there and all the family could enjoy it? In the end, the Court finds, given the conclusions about the plaintiffs' motives set out in [226], and [229] to [231] above, that the plaintiffs have failed to make out the more basic element that whatever was done was a "joint" endeavour so as to render Emanuel and Koula's retention of the benefit unconscientious, as opposed to what was unilateral and, to a large degree, self-interested conduct by the plaintiffs. In other words, the Court cannot infer that they were not intended to retain the benefit if the alleged endeavour should fail. It is not enough, for example, for the plaintiffs to submit (as they do) that from 2000 to 2009 Emanuel and Koula accepted the plaintiffs' monetary and non-monetary contributions to the Property "without protest".
[37]
Five miscellaneous matters
In reaching these conclusions, and for completeness, I record five other matters.
First, I am fortified in these conclusions by what I consider to be very telling - and the Court accepts as truthful - evidence given by George at the conclusion of his cross-examination (Tcpt, 4 November 2020, p 252(47)-254(6)):
"WAUGH: I'll try and break it down, sorry, thank you. I want to ask you about when you were doing the stage 1 renovation works at Redmyre Road, when you were involved in doing work there, all right?
WITNESS: Yeah.
WAUGH: What I want to suggest to you is, had you stopped to think about then why you were doing that work and what you expected to get out of it, it would have been this - do you follow me so far?
WITNESS: Little bit.
WAUGH: What don't you follow?
WITNESS: Keep going.
WAUGH: It would have been this, that you thought, and it would have been in your own private thinking, all right, something like this: you might have expected it was that one day you would inherit a share of your parents' estate; do you agree with that?
WITNESS: That's why we're doing it.
WAUGH: And that's all you expected when you were doing that work at that time, wasn't it?
WITNESS: Inheritance, like, not the two and a half per cent.
WAUGH: Inherit a share of your parents' estate, that's what you were expecting?
WITNESS: That's correct, yeah, expect to share, that's right.
WAUGH: The same applies for the work you did on stage 2 of the renovations; is that right?
WITNESS: Correct. The scenario's very easy. After death it was always promised. Three brother, being the elder brothers, that extra percentage extra and that's it. It's very simple mathematics and that's what everyone else done in, with his brothers and sisters.
HIS HONOUR: Would you be fighting if the will simply divided the estate one third, one third, one third?
WITNESS: With respect, your Honour, if Garry was a similar age I'd say, look, we were in the brunt of things. We all copped it one way or another our grievances and costs whatever. Being the eldest brother I feel that we've, we've got to get that extra bit, not out of greed but out of principle, out of the hierarchy system, and that's why, which I believe that's where the equity is in our culture, first son in particular, but because Chris and I were one year apart we've really copped a lot of the brunt and, as I said, I don't see anything - because we've paid for it. If we never did anything and never worked -
HIS HONOUR: I understand.
WITNESS: Yeah.
HIS HONOUR: I'll stop you there, because I think you're going to tell me things you've already told me.
WITNESS: Yeah, I'm sorry about that but - yeah.
HIS HONOUR: Is it then not so much expecting a share of the estate but expecting what you consider to be a fair share of the estate?
WITNESS: A fair share, because any, part of an estate could be 2%. Yeah, you're given a state (as said) but that's - I didn't do this for two and a half per cent. Well, actually I never got even anything in that will. It's passed to my son at 25, like three years -
HIS HONOUR: Yes, thank you."
Chris gave similar evidence (Tcpt, 5 November 2020, p 300(38)-301(25)):
"WAUGH: If you look through to the next page, that's when your brother George's caveat starts, so we're now at the end of your caveat on page 745. There's no mention in this caveat of you claiming a 40% interest in Redmyre Road is there?
WITNESS: No, I know that.
WAUGH: And there's no mention in this caveat of your parents promising or representing to you that you could have a 40% interest is there?
WAUGH: No, where, where it says - if you look at it, if, if you look at the interest, it doesn't mention about percentage, but it's my interest. It could be anything. It's the interest that I have, that I - imposing.
HIS HONOUR: What interest do you think you have in the property?
WITNESS: After what's gone through in all the years and I deserve, I deserve a majority interest.
HIS HONOUR: What does that mean, a majority interest in what, and what's a majority interest?
WITNESS: Well if, if you put it in those terms it's 40% but you know, it's, it's from the time when all this started that I'm looking for that.
HIS HONOUR: Is the 40% just what you think is a fair thing?
WITNESS: Your Honour whatever it is, if it's - things are negotiable. I'm not -
HIS HONOUR: Part of your case seems to be a promise by your parents. Now, is it 40% or is it a fair thing or is it negotiable or what is it?
WITNESS: I think it's a fair thing because of what we've been through, particularly myself and my older brother at the beginning, putting everything together and the promises, continual promises since I was a kid and, you know, this, this was going on all, all the time.
INSALL: I'm not sure the witness fully understood what your Honour was asking.
HIS HONOUR: I think he did, but you can re-examine if you wish in due course."
There was no re-examination. Chris also gave this evidence about the "continual promises", being unable when asked by Mr Waugh SC to identify the most important conversations upon which he relied (Tcpt, 5 November 2020, p 303(6)-304(13)):
"WAUGH: You'd agree with me wouldn't you that the statement of claim has been prepared in such a way as to set out what you and your brother say are the critical conversations upon which your case is based, is that right?
WITNESS: No, it's what we believe in.
HIS HONOUR: What do you mean by that answer, it's what you believe in? Is that what you said?
WITNESS: Yeah, I believe in, in our, in our share.
WAUGH: I was asking you about the conversations that are set out in the statement of claim which I've just taken you through.
WITNESS: Yes.
WAUGH: Those conversations are in the statement of claim because you and your brother George thought they were the critical conversations upon which your case was based, isn't that right?
WITNESS: It's not only - it's - that's not just the critical, there's, there's many parts of my affidavit that's critical. It's not just one point.
WAUGH: You knew that in the statement of claim there were being set out conversations, correct?
WITNESS: That's correct.
WAUGH: You read the statement of claim very carefully before you did your affidavit verifying didn't you?
WITNESS: No, it's not like that.
WAUGH: You agreed with that a little while ago.
WITNESS: My affidavit is based on my interpretations of the discussions.
WAUGH: Your affidavit is based on interpretations of what discussions in particular?
WITNESS: With the defendants.
WAUGH: Which ones in particular?
WITNESS: Many of them. There's not - there's plenty of them, about the promises.
WAUGH: What promises?
WITNESS: About the property and all the work that we put into this place.
WAUGH: Which ones in particular do you say - can you choose one that was most important to you?
WITNESS: To me, even back in 2010 when I confronted both defendants and I told them, I said "We need to get something in writing". This was going on all the time.
WAUGH: Do you think that's the most important conversation from your point of view?
WITNESS: No, but plus even the other one when, when I was there with my brother in the kitchen. The kitchen is like the sanctuary for my mother there. This is where - it, it had to happen there. Everything was there. So, this is in there. She, she was driving it, my father was driving it. They want everything. When my brother said - because in Greek, "..(foreign language)..", this and that in Greek, I can, I can saying anything. You want me to say it in Greek? I'll tell you everything. I can't forget this."
The plaintiffs have been unable to satisfy the Court that the specific representations pleaded by them were ever made. As I have noted in [232], it is inherently probable that Emanuel and Koula expressed words of gratitude and encouragement to their sons in relation to what was being done to the Property. George and Chris undoubtedly now, to use Chris' word, "interpret" what was said to them as promises. But that is not sufficient to make out a basis for the intervention of equity. My overall impression of their evidence is that it is not that of men who had done what they did in reliance on specific representations about what they would receive. Instead, it was the evidence of men who had a strong expectation, by reason of what they had done and their status as sons in a traditional Greek family, that they should receive their "fair" or "majority" share of their parents' estate (comprising largely the Property), but that what that might be was a matter for negotiation, even through the medium of these proceedings.
Second, I have given careful consideration to Mr Insall SC's submission, emphasised several times, to this effect: why would George and Chris have put all that work and money into the Property if they had not been given the assurances they alleged they had received from their parents? He submitted that the only other conclusion - that what they did was a gift - defied common sense, given the size and scope of the undertaking. The answer as to why they did that, entirely consistently with there having been no representations of the kind alleged, is in the conclusions I have set out in [226], and [229] to [231] above.
Third, the plaintiffs submitted that while George and Chris were cross-examined on the 1988 Guarantee Conversations at length, there were many other matters, including conversations, that were not challenged in cross-examination, such that the defendants could not submit to the contrary. Reference was made to the decision of the Court of Appeal in SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd (2017) 345 ALR 633; [2017] NSWCA 132, in which McColl JA said (Gleeson JA and Sackville AJA agreeing) (citations omitted):
"136 The rule in Browne v Dunn is an obligation of procedural fairness which counsel has when cross-examining a witness who counsel intends to submit should not be accepted. It is an obligation "to put to an opponent's witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of [the witness's] evidence". It applies both to party witnesses and witnesses generally.
137 The rule in Browne v Dunn is both "a rule of practice or procedure designed to achieve fairness to witnesses and a fair trial between the parties … [and also] a rule relating to weight or cogency of evidence". It "facilitates the tribunal's assessment of the reliability and accuracy of the witness." Even where, for example, the inference on which a party may intend to rely to impeach a witness is clear from the exchange of witness statements or affidavits or reports, "such notice … does not absolve the party who seeks to impugn the witness's credibility, from cross-examining as to those issues that the party intends to ultimately submit are of significance [so as to] provid[e] the basis upon which the tribunal of fact can make the necessary assessment of the witness in relation to those issues". If "matters in controversy are not 'put' to the witness in cross-examination the tribunal's capacity to assess the merit of the allegation subsequently to be made and the credit of the witness is likely to be impeded".
138 Thus, the parties "cannot by an agreement to which the court has acquiesced, authorise a course which denies elementary procedural fairness to a witness".
139 It might be accepted, as Mr George submitted, that the rule in Browne v Dunn is of less importance where pleadings, affidavits or pre-trial preparation, have already made clear that the particular assertion or evidence will be disputed. However, "[e]ven when there has been an exchange of affidavits or statements, the rule in Browne v Dunn will require a cross-examining counsel to put to a witness the implications which counsel proposes to submit can be drawn from the evidence, if those implications are not obvious from the evidence, or from other pre-trial procedures, or the course of the case."
140 One consequence of a failure to comply with the rule in Browne v Dunn on any particular point, is that cross-examining counsel may be taken to accept it and may not be permitted to address in a fashion which asks the court not to accept it. It may also "be a very good reason for accepting that witness's evidence, particularly if it is uncontradicted by other evidence" and "can affect the weight of the evidence called against the witness".
141 Further, on appeal the court will be inclined to disregard a submission which was not tested by putting it to the party best able to deal with it.
142 Nevertheless, the fact that "evidence was not cross-examined on … does not necessarily mean that the judge was obliged to accept it … if, for example, it was inconsistent with other evidence that he accepted, or if it was inherently incredible." It is apparent that the primary judge did not regard Shaye's witnesses' evidence as in that category."
Furthermore, in the plaintiffs' closing submissions in reply, twelve "key" matters were identified upon which it was said the plaintiffs had not been challenged.
The Court does not accept the plaintiffs' criticism in relation to any matter of importance for the purposes of its decision, even if it is assumed in the plaintiffs' favour that the twelve matters were not cross-examined upon. The pleadings, affidavits and the course of the case made it obvious that the defendants denied the conversations pleaded to have been relied upon by the plaintiffs had ever happened (the 1985 Conversation, 1986 Conversation, the 1988 Guarantee Conversations and the 1999 Conversation). Those matters, together with the extent to which they were cross-examined upon (either specifically or by reference to general propositions), satisfy the rule in Browne v Dunn (1893) 6 R 67. There is no procedural impediment to the defendants submitting that the plaintiffs' evidence of those conversations should not be believed.
Of the unchallenged matters identified specifically by the plaintiffs, they are either peripheral (so as not to require the Court to make specific findings) or were matters that it became obvious could not, as general propositions, be disputed. The latter category included matters such as George being the prime mover in organising the renovations to the Property, George and Chris undertaking physical work (although how much was disputed) or the fact that the plaintiffs contributed financially to the renovations (although, again, the amounts were disputed and, as I have noted, it was accepted that if a precise determination were required, it would have to be referred out).
Fourth, while the court book included a great deal of material said to evidence the contributions various parties made to the costs of renovating the Property, the parties resisted my invitation to make any detailed submissions about how the Court should assess those respective contributions as a matter of dollars and cents. As I have noted in [69], the plaintiffs' position was that if the Court reached the position that all the plaintiffs were entitled to was a charge or similar relief reflecting their contributions to the improvement of the Property, that detailed exercise would have to be referred out to an accountant.
The Court has not reached that position, so I expressly refrain from making any findings about the timing and quantum of the contributions any party made to the improvement of the Property (it being accepted that the plaintiffs did not contribute to the purchase price or, given the difficulty of the calculation, towards the mortgage). Nor is it necessary to determine whether in this case the amount of any lien or charge is limited to the extent the plaintiffs' efforts improved the value of the Property.
There is a second reason for this approach. Without wishing any further litigation on what is now, most unfortunately, a deeply divided family, there appears to be a real prospect of family provision proceedings being brought by one or both of the plaintiffs after the death of either of the plaintiffs (unless there is a reconciliation or further agreement in the meantime). The extent of the parties' contributions to the improvement of the Property will inevitably be a central issue in any such proceedings. Given the result of these proceedings, that issue can and should be left to another day.
Fifth, were it necessary to decide, the Court would not have accepted that the defence of laches had been made out so as to disentitle the plaintiffs to any relief. There was no relevant delay in bringing these proceedings and, even if there had been a delay, no credible suggestion that there had been any prejudicial change of position or other detriment on the part of the defendants or Garry that would not have occurred but for the delay.
[38]
Conclusion
The proceedings will be dismissed. Subject to any application any party may wish to make, the plaintiffs will be ordered to pay the defendants' costs.
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Decision last updated: 02 September 2021