Pirrottina v Pirrottina

Medium Neutral Citation: Pirrottina v Pirrottina [2025] NSWCA 55

Hearing dates: 29 November 2024

Date of orders: 2 April 2025

Decision date: 02 April 2025

Before: Gleeson JA at [1]
Payne JA at [225]
Adamson JA at [226]

Decision: (1) To the extent necessary, grant leave to appeal.
(2) Appellant’s application to adduce further evidence granted.
(3) Make no order as to the costs of the appellant’s notice of motion filed 31 October 2024.
(4) Appeal dismissed, except as to ground 14 which is upheld.
(5) Set aside orders (1), (2) and (3) made by the primary judge on 9 September 2024 and, in lieu, remit the proceedings to the primary judge for reconsideration of the question of costs of the trial at the conclusion of the proceedings.
(6) Appellant to pay 95 per cent of the respondent’s costs in this Court.

Catchwords: ESTOPPEL – proprietary estoppel – encouragement – nature of promise – where parents promised to build house for son on farming property 30 years ago – whether the promise included skirt of land surrounding the house (the Lot) – detrimental reliance – in reliance on the promise the son forewent the parents’ offer to buy him another block of land and father-in-law’s financial contribution to the son’s marriage in favour of expenditure on improvements on the Lot – whether it would have been unconscionable for the parents to resile from the promise
ESTOPPEL – Proprietary estoppel – encouragement – relief – where land jointly owned – where buy-out order made instead of appointing trustees for sale – whether sufficient evidence of value of land – where single joint expert appointed by the parties had valued the Farm and the Lot – whether procedural unfairness in ordering updated valuation after trial
LAND LAW – real property – indefeasible title – in personam exception – whether personal equity in respect of unregistered interest in part of farming property (the Lot) – Farm owned by parents – where parents made promise to older son to build house on the Lot and “it will be yours” – where parents later transferred the Farm to older son and his brother as tenants in common in equal shares for nil consideration – transfer of land subject to conditions that the two sons continue the farming business as partners, not sell the Farm and parents have right of management veto – whether assurances of conduct by the brother that would have preserved older son’s interest in the Lot – where assurances given in knowledge that parents were giving the Farm to both sons subject to older son’s existing rights and interests
COSTS – party / party – exceptions to general rule that costs follow the event – Calderbank offers – where split trial of partnership proceedings – where partnership accounts not yet finalised – whether premature to make special costs order – whether exercise of costs discretion miscarried

Legislation Cited: Civil Procedure Act 2005 (NSW), s 98(1)
Conveyancing Act 1919 (NSW), s 66G
Partnership Act 1892 (NSW), ss 20, 21
Real Property Act 1900 (NSW), s 42
Supreme Court Act 1970 (NSW), s 75A
Uniform Civil Procedure Rules 2005 (NSW), rr 20.14, 28.2, 31.44, 36.16, 42.1, 51.36

Cases Cited: Augusta Pool 1 UK Ltd v Williamson (2023) 111 NSWLR 378; [2023] NSWCA 93
Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16
Barnes v Addy (1874) LR 9 Ch App 244
Bassett v Cameron [2021] NSWSC 207
Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49
Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304
Brand v Christopher Building Co Pty Ltd [1957] VR 625
Breskvar v Wall (1971) 126 CLR 376; [1971] HCA 70
Calderbank v Calderbank [1975] 3 All ER 333
Browne v Browne [2019] WASCA 1
Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149; [2013] HCA 11
Cobbe v Yeoman’s Row Management Ltd [2008] 4 All ER 713; [2008] UKHL 55
Commonwealth Bank of Australia v Gretton [2008] NSWCA 117
Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33
Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84
DHJPM Pty Ltd v Blackthorn Resources Limited (2011) 83 NSWLR 728; [2011] NSWCA 348
Discount & Finance Ltd v Gehrig’s NSW Wines Ltd (1940) 40 SR NSW 598
Donis v Donis (2007) 19 VR 577; [2007] VSCA 89
Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219
Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20
Fifteenth Eestin Nominees Pty Ltd v Rosenberg (2009) 24 VR 155; [2009] VSCA 112
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Frazer v Walker [1967] 1 AC 569
Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10
GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 97 ALJR 857
Hamilton v Geraghty (1901) 2 SR (NSW) Eq 81
Heggies Bulk Haul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312; [2003] NSWSC 851
House v The King (1936) 55 CLR 499; [1936] HCA 40
Kramer v Stone (2023) 112 NSWLR 564; [2023] NSWCA 270
Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126
Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26
Lee v Lee (2019) 266 CLR 129; [2019] HCA 28
Lucas v Lucas [1962] Qd R 205
McNab & Anor (in their capacity as Executors and Trustees of the Will of Colin Wilbur Turner, deceased) v Graham (2017) 53 VR 311; [2017] VSCA 352
Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274
Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30
Morris v Morris [1982] 1 NSWLR 61 Narellan Franchise Pty Ltd v RBME Pty Ltd [2023] NSWCA 139 Ngatoa v Ford (1990) 19 NSWLR 72 O’Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33 Pirrottina v Pirrottina [2024] NSWSC 558 Pirrottina v Pirrottina (No 2) [2024] NSWSC 1053 Priestley v Priestley [2017] NSWCA 155 Q (a pseudonym) v E Co (a pseudonym) [2020] NSWCA 220; (2020) 383 ALR 469 Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068 Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Riches v Hogben [1985] 2 Qd R 292 Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 Snowlong Pty Ltd v Choe (1991) 23 NSWLR 19 Soulos v Pagones [2023] NSWCA 243 The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; (2007) 64 ACSR 31 Turner v O’Bryan-Turner (2022) 107 NSWLR 171; [2022] NSWCA 23 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7 Warman International Ltd v Dwyer (1995) 182 CLR 544; [1985] HCA 18 Whisprun Pty Ltd v Dickson [2003] HCA 48; (2003) 77 ALJR 1598 Williams v Legg (1993) 29 NSWLR 687 Williams v Nicoski [2003] WASC 131 Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685

Category: Principal judgment

Parties: Rocco John Pirrottina (Applicant / Appellant)
Saverio Anthony Pirrottina (Respondent)

Representation: Counsel:
C D Wood SC / J Hart (Applicant / Appellant)
M Ashhurst SC / K Dyon (Respondent)
Solicitors:
Williams The Law Firm (Applicant / Appellant)
Cara Marasco & Co (Respondent)

File Number(s): 2024/211189; 2024/336718

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellant (Rocco) and the respondent (Sam) are brothers. Their parents, Mr and Mrs Pirrottina Snr, acquired a 100-acre farm property at Mangrove Mountain (the Farm) in the 1960s and established citrus orchards and built a homestead. The brothers both commenced working in the family business from a young age; Sam from 1982 when aged 14, and Rocco from 1986 when aged 13.

In September 1994, the parents made a promise to Sam who had been working on the Farm for 12 years for no wages, that they would build a house for him on the Farm on an area of land indicated by Sam to his parents that was bordered by the driveway, a drainage passage and the main orchard, which the parents said “will be yours”. This area of land comprised about one acre and was referred to in the proceedings as the “Lot”. The parents paid for the construction of the house on the Lot. In November 1996, Mrs Pirrottina Snr gave Sam the keys to the house and told him to move into “your house” with his fiancé, Marisa Falvo. In reliance on the promise, Sam acted to his detriment: he turned down his parents’ offer in 1994 to buy him a block of land of his own, and forewent the possibility in 1996 of a financial contribution to his married life with Marisa from her father, Mr Falvo, in favour of Mr Falvo’s contribution to the construction of a driveway, a footpath, and landscaping on the Lot.

In 2002, Mr and Mrs Pirrottina Snr transferred their farming business and the Farm to Sam and Rocco as tenants in common in equal shares for nil consideration. The transfer was made on the express basis that Sam and Rocco agreed that they would run the family business as partners, they would not sell the Farm and the parents would maintain control over the land, its improvements and buildings. In 2022, after both parents had died, Rocco commenced proceedings relating to the dissolution of the farming partnership with Sam and sought relief including, in the alternative, an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) appointing a trustee for the sale of certain partnership property, which he claimed included the Farm. Sam brought a cross-claim asserting a proprietary estoppel against his parents and a personal equity against Rocco as a co-owner of the Farm, and sought (i) declaratory relief that he had an equitable interest in the Lot including the house, and (ii) a buyout order in respect of Rocco’s interest in the Farm.

The primary judge held that (1) the Farm was the separate property of Sam and Rocco, (2) Sam had established an equitable estoppel by encouragement against his parents in respect of the promised Lot prior to the 2002 transfer, (3) Sam had a personal equity against Rocco in respect of his unregistered interest in the Lot which operated as an in personam exception to the indefeasibility provision in s 42 of the Real Property Act 1900 (NSW), and (4) Sam was entitled to equitable relief in the form of a buyout order in respect of Rocco’s interest in the Farm, which her Honour found was 40 per cent.

Rocco’s appeal raised multiple issues, including:

1. whether the promise made to Sam by his parents was limited to an assurance that they would build a house for Sam on the Farm that would be his (which Rocco no longer disputed) or did the promise include an area of land surrounding the house;

2. whether Sam’s reliance on the 1994 and 1996 promises was reasonable or detrimental;

3. whether it would have been unconscionable for the parents to resile from the assurances given to Sam;

4. whether Sam had a personal equity against Rocco;

5. whether the primary judge’s discretion had miscarried in ordering the buyout relief, rather than the appointment of trustees for sale;

6. whether the Farm is the personal property of Sam and Rocco, or property of the partnership; and

7. whether the primary judge erred in making a special costs order in favour of Sam.

The Court held (Gleeson JA, Payne and Adamson JJA agreeing), appeal dismissed, except to the challenge to the special costs order, which is upheld:

1. Rocco’s claim that the 1994 promise did not include an area of land surrounding the house was a new point which could or might possibly have been met by rebutting evidence by Sam at trial. Sam’s objection to Rocco raising this new point on appeal should be upheld: at [48].

Whisprun Pty Ltd v Dickson (2003) 234 CLR 492; [2003] HCA 48; Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33, applied.

2. In any event, Rocco had failed to show that the finding that the 1994 promise included the land indicated by Sam to his parents bordered by the identified physical features was wrong by “incontrovertible facts or uncontested testimony”, or because it was “glaringly improbable” or “contrary to compelling inferences”. There was no error in the primary judge’s finding that the express promises or assurances by the parents were not too vague or lacked specificity: at [50]-[58].

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28, applied.

3. As to reliance, that the promised Lot was incapable of subdivision is immaterial in circumstances where (i) Sam never thought about the fact that there was no separate title, he just relied on his parents’ promise, and (ii) Sam and Rocco had accepted the 2002 transfer on the conditions that the conduct of the family business and the occupation of the land would continue as before, that is, the Farm would not be sold and Sam would remain on the Farm for his lifetime: at [83]-[84].

4. As to detriment, Sam’s detrimental reliance occurred well before 2002 and thus Sam’s interest in the promised Lot had arisen before the 2002 transfer, rendering it unconscionable for the parents to resile from the promise from the time of the detrimental reliance: at [85]-[87].

DHJPM Pty Ltd v Blackthorn Resources Limited (2011) 83 NSWLR 728; [2011] NSWCA 348; McNab & Anor (in their capacity as Executors and Trustees of the Will of Colin Wilbur Turner, deceased) v Graham (2017) 53 VR 311; [2017] VSCA 352, referred to.

5. As to unconscionability, it is not the promise itself that attracts the intervention of equity, but the expectation it creates. There was no suggestion that, by the 2002 transfer, the parents sought to interfere with Sam’s interest in the Lot or Sam’s house, nor did the fact of the 2002 transfer or the impossibility of a separate lot relieve the parents’ conscience: at [96]-[97], [100]-[102].

Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10; Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19; Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126, referred to.

6. As to Rocco’s defence of indefeasible title, the primary judge did not determine the personal equity on a “basis” that was not pleaded. The “basis” was that Rocco had agreed with his parents to accept the 2002 transfer on condition that his parents would maintain control over the land, its improvements and buildings, and that Sam and Rocco would not sell the land. To depart from the basis from which Rocco agreed to accept the transfer of title to the Farm amounted to an unconscionable attempt to deny the unregistered interest of Sam which Rocco undertook to subject his registered title. Sam had established a personal equity against Rocco which operates as an in personam exception outside the indefeasibility provision in s 42(1) of the Real Property Act: at [114]-[120].

Heggies Bulk Haul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312; [2003] NSWSC 851, Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16, The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; (2007) 64 ACSR 31, Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 applied.

7. In declining to appoint trustees for the sale of the Farm, the primary judge carefully weighed the interests of the parties. There was no error in finding that whereas an order for judicial sale would defeat the interest which the parents sought to convey to Sam, permitting Sam to buy Rocco’s interest at fair value did not prejudice Rocco’s rights: at [144].

Warman International Ltd v Dwyer (1995) 182 CLR 544; [1985] HCA 18, applied.

8. Nor did the buyout order overcompensate Sam. The detriment suffered by Sam is of a kind and extent that involved life-changing decisions since 1994 with irreversible consequences of a profoundly personal nature, and is beyond the measure of money. Making good the promise to Sam that the house and the Lot would be his, is the prima facie relief to which Sam is entitled. Permitting Sam to buy Rocco’s interest at fair value did not prejudice Rocco’s rights. Nor did such relief go beyond what was required for the conscientious conduct by Rocco. The preservation of Sam’s interest in the promised Lot is consistent with the basis upon which Rocco accepted the 2002 transfer, namely, that the Farm would remain in the family and would not be sold: at [151]-[152].

Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19; Donis v Donis (2017) 19 VR 577; [2017] VSCA 89; Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126, applied.

Bassett v Cameron [2021] NSWSC 207; Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84, referred to.

9. There was sufficient evidence for the primary judge to make a finding as to the market value of the Farm and the Lot for the purpose of the buyout order, and there was no procedural unfairness in ordering that an updated expert valuation be obtained after the trial from the single joint expert appointed by the parties, being an order sought by Sam in his closing submissions: at [164]-[172].

10. As to ownership of the Farm, that Sam and Rocco gave specific instructions to their accountant that the Farm should not be included in the partnership accounts was highly probative of their intention that the Farm remain their separate property. The Farm was not a partnership asset; it was the separate property of Sam and Rocco: at [184]-[186].

O’Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33; Lucas v Lucas [1962] Qd R 205; Bassett v Cameron [2021] NSWSC 207, applied.

11. As to the special costs order, the exercise of the primary judge’s discretion as to costs miscarried in that her Honour failed to take into account a relevant matter being Rocco’s submission that it was premature to determine the question of indemnity costs before the conclusion of the proceedings following the finalisation of the partnership accounts, or made a material error of fact in finding that the parties did not require her Honour to consider the result of the independent accountant’s report in the context of Sam’s prematurity submission: at [215]-[217].

Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274, referred to.

Judgment

1. GLEESON JA: This appeal concerns a claim of proprietary estoppel relating to a house and surrounding land comprising about one-acre, which is part of a 100-acre citrus farm at Mangrove Mountain in New South Wales (the “Farm”). The Farm was owned by Mr Saverio Pirrottina and Mrs Rosa Pirrottina until 2002 when they transferred their farming business and the Farm to their sons, Saverio (Sam) Pirrottina and Rocco Pirrottina, as tenants in common in equal shares for nil consideration. It is convenient to refer to the two brothers and certain other family members by their first names.

2. In the underlying proceedings commenced in 2022, Rocco sought a variety of relief concerning the dissolution of the farming partnership, including, in the alternative, an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) appointing a trustee for the sale of certain partnership property which he claimed included the Farm. Sam brought a cross-claim seeking declaratory relief based on a proprietary estoppel that (1) he had an equitable interest in the house and surrounding land (which the parties referred to as the “Lot”), and (2) Rocco held his title to the Farm on trust for Sam to the extent of Sam’s equitable interest in the Lot including the improvements thereon. Sam also sought an order that he acquire Rocco’s interest in the Lot.

3. Sam’s estoppel claim relied on a promise made by his parents in 1994 that they would build a house for him on the Farm and that the house and surrounding land would be his, and that this promise was confirmed by Mrs Pirrottina Snr in 1996 when she gave Sam the keys to the house which had been built on the Lot. Sam claimed that in reliance on the promise he stayed working on the Farm, forewent the opportunity of his parents purchasing another block of land for him, forewent other opportunities, and made substantial renovations and improvements to the Lot including to the house.

4. Alternatively, Sam’s estoppel claim relied on representations made by Rocco to the parents shortly before the transfer of the Farm in 2002, and also implied representations by silence in the face of Sam’s continued occupation and improvement of Sam’s house and the Lot, that Rocco would not seek to sell the Farm, the Lot belonged to Sam, and Sam was entitled to occupy the Lot for his lifetime. In reliance on those representations and Rocco’s silence, Sam claimed that he acted to his detriment by continuing to live in the house and carried out further improvements to the house and the Lot at his expense.

5. The primary judge found that the Farm was personal property of Sam and Rocco, that Sam had established his claim to a proprietary estoppel by encouragement against his parents which gave Sam an equitable interest in the Lot before the 2002 transfer, and that for Rocco to depart from the basis on which he agreed to accept the transfer of title to the Farm in 2002 amounted to an unconscionable attempt to deny an unregistered interest which Rocco undertook to subject his registered title: at J[178], [196], [197]. Accordingly, Sam had a personal equity against Rocco which operated as an in personam exception to the indefeasibility provision in s 42(1) of the (NSW).

Outline of the facts

9. The following outline of the facts is based on the findings of the primary judge. Mr and Mrs Pirrottina Snr purchased the Farm at Mangrove Mountain in about 1960 and established citrus orchards and built a homestead on the Farm. The citrus produce was sold at Flemington Markets. In broad terms, Mr Pirrottina Snr did the physical work and Mrs Pirrottina Snr was in charge of the money. The two sons worked in the family business; Sam from 1982 when aged 14 and Rocco from 1986 when aged 13.

The first promise

10. In around September 1994, a promise was made by Mr and Mrs Pirrottina Snr to Sam, who was then aged 26 years and had been working fulltime on the Farm for 12 years for no wages, that they would build a house for him on the Farm on an area of land indicated by Sam to his parents which had old lemon trees on it about 80 metres from his parents’ house that was bordered by the driveway, a drainage passage and the main orchard. Mrs Pirrottina Snr said that the area of land indicated by Sam “where we will build your house … will be yours”. The promise was made in circumstances where Sam had declined his parents’ offer to buy another block of land for him to build a house on when he got married, having indicated to his parents that he preferred to live on the Farm.

11. The following day, Sam told Rocco of his conversation with his parents about the promised Lot and Rocco suggested to Sam that he buy another block. Sam responded that he wanted to build on the Farm, so he did not have to travel to work. Rocco said that he did not want to live on the Farm, and when Rocco asked where Sam wanted to build, Sam indicated the same area as he had pointed out to his parents, being the Lot: at J[31]. Rocco first gave evidence denying this conversation in his oral evidence in chief (at J[32]), albeit his senior counsel incorrectly put the date of the disputed conversation as 1996, not 1994.

12. Angelina Marando (Angelina), the younger sister of Sam and Rocco, gave evidence that in about 1994, at the family dinner table, Sam said that he wanted to build his family home on the Farm “because this is where my life is, and I want to continue to grow the family business”. The parents agreed that this made sense as Sam was going to continue to run the family business. Mr Pirrottina Snr said they had worked hard to build the business and wanted it to stay in the family. They were happy to give Sam the land and to build a house for him to make his home and property so that he could “continue to grow the business” and “hopefully, it [would] stay in the family for generations”. The primary judge noted that Rocco denied this portion of Angelina’s affidavit in his affidavit in reply, albeit his denial appeared to be confined to the words attributed to him, although in cross-examination Rocco also denied that the words attributed to others were said in his presence: at J[33], [35], [193]. The primary judge found that Angelina was a credible witness: at J[22].

13. In 1995, Ms Caterina Deidda visited her sister, Mrs Pirrottina Snr, at the Farm who told Ms Deidda that she and her husband had decided to build a house on the Farm for Sam, “We offered to buy him a house but he told us that he wanted to live on the Farm so, rather than buying a house, we are going to build a second house on the Farm for Sam. This will be where he will be able to raise his family when he eventually gets married”. Ms Deidda added, “She said she was going to build a house for him so that he would have something to leave for his kids, for his children”: at J[34]. Her Honour found that Ms Deidda was a credible witness and generally accepted her evidence, albeit some of the details of events long ago may not have been correct, such as evidence of Ms Deidda recalling that Mr Pirrottina Snr told her that he had bought another farm at Kulnura for both brothers: at J[22].

… It is inherently likely that the Pirrottina family discussed the construction of a second house on the Mangrove Mountain farm at length, from the inception of the idea until completion of construction, this being a substantial endeavour to be undertaken in plain sight of the homestead and for one only of the Pirrottina children. Precisely why this was being done, and for that particular child, was likely discussed on a number of occasions. Where Rocco lived in the homestead with his parents, it is likely that he participated in these conversations.

15. In resolving the competing evidence about the promise made to Sam by his parents, the primary judge attached little weight to Rocco’s late denials, generally preferred Sam’s evidence to that of Rocco in the event of a conflict between them and noted that Sam’s evidence was corroborated by Ms Deidda’s evidence of her conversations with Mrs Pirrottina Snr. Her Honour found that the 1994 conversation between Mr and Mrs Pirrottina Snr and Sam, and then between Sam and Rocco relaying the substance of that conversation, took place as described by Sam: at J[36].

Construction of Sam’s house on the Lot

16. In August 1995 Council approval was obtained for construction of a second dwelling on the Farm as a “workers cottage”, as the Council would not allow two houses on the property. Construction commenced in late 1995 and reached lockup stage in early 1996. Mr and Mrs Pirrottina Snr paid the builder, Meriden Classic Homes, an amount totalling $182,643. Mr Kent Wood, an expert valuer jointly retained by the parties, provided a report in July 2023 which described the cottage and curtilage as having an area of approximately 5,064 m2 (being 1.251 acres), of which the cottage, entertaining area, gazebo and spa and four bay detached garage occupied 543 m2 (being 0.134 acres).

17. In March 1996 Sam became engaged to Ms Marisa Falvo. Around this time, Marisa’s father, Mr Tommaso Falvo, a builder, visited the Farm and walked with Rocco and Mrs Pirrottina Snr near where the new house was being built. Mrs Pirrottina Snr pointed at the house and said, “[t]his is the house we give to Sam and Marisa. Once they get married, they will live in it as their home”: at J[41], [43]. Mrs Pirrottina Snr asked Mr Falvo to contribute towards the house by constructing a driveway from the existing road to the house, a footpath around the house, and landscape the area surrounding the house. Mr Falvo agreed and arranged for this work to be done at a cost of about $70,000. He gave evidence that, had he undertaken this work for a client, he would have charged $94,500. The primary judge accepted Mr Falvo’s evidence of this conversation in preference to Rocco’s denial, which was first made in cross-examination and not in his affidavit evidence: J[43].

The second promise

18. In October 1996 Sam and Marisa eloped. On their return to the Farm in November 1996, Mrs Pirrottina Snr gave Sam the keys to the house and told him to move into “your house” with Marisa. She apologised to Marisa that the house was not fully furnished and stated, “this is your house and you and Sam can finish it off however you like it”: at J[48].

19. Sam and Marisa began living in the house in November 1996. They were married in December 1996, holding their wedding reception in the yard of their house. They had obtained building and contents insurance on the house in October 1996 and paid the insurance premiums from that time. After his marriage, Sam began to receive a wage from his parents of $500 per week. A year later, after the birth of his first child, Sam’s wage increased to $1,000 per week and stayed at that amount for more than a decade: at J[51]. The house was known to all as Sam’s house, and the primary judge found that Rocco’s efforts to suggest otherwise damaged his credibility: at J[53].

Rocco’s farm

20. In September 1999 Rocco purchased at auction a farm in Kulnura for $600,000, which included a house and was planted with citrus trees (Rocco’s farm). The primary judge found, contrary to Rocco’s evidence, that Mr and Mrs Pirrottina Snr paid the deposit on Rocco’s farm: at J[60]. Her Honour also found that the running expenses for Rocco’s farm were paid by Mr and Mrs Pirrottina Snr, and Rocco’s farm and its orchards were effectively deployed in the family business: at J[55], [60].

21. Rocco earned rental income from the house on his farm which he used to make mortgage payments on a $500,000 loan from the National Australia Bank (NAB), as he continued to live in his parents’ home at Mangrove Mountain (until 2016): at J[54], [60]. The primary judge found that by these means, Mr and Mrs Pirrottina Snr provided Rocco with assistance, both directly and indirectly, to acquire Rocco’s farm: at J[60]. The judge did not accept Rocco’s submission that the parents’ only financial assistance provided to Rocco to buy his farm was the provision of a guarantee in respect of the NAB mortgage.

Transfer of business and Farm

22. In 2001 Mr and Mrs Pirrottina Snr decided to transfer the business and Farm to Sam and Rocco because they did not want the business and Farm to be broken up by their siblings. They did so on the express basis that (i) Sam and Rocco would run the family business as partners, (ii) they would not sell the Farm and would keep it running, and (iii) the parents would maintain control over the land, its improvements and buildings. Sam and Rocco agreed to these conditions: at J[61].

23. Mr and Mrs Pirrottina Snr transferred the Farm to Sam and Rocco as tenants in common in equal shares for nil consideration on 1 September 2002. A 50-year registered lease of the homestead, rent free, was granted to the parents until both parents passed away: at J[62].

24. In January 2003 the farming partnership between Sam and Rocco trading as “S & R Pirrottina” obtained an Australian Business Number: at J[63]. Both parents remained involved in the business, but to a lesser extent. Sam and Rocco refinanced their parents’ mortgage over the Farm by a loan from NAB of $495,000, secured by a mortgage over the Farm for which they were jointly liable: at J[62], [63], [64]. The primary judge found that the Farm is owned by Sam and Rocco in their personal capacity and not as partnership property: at J[154].

25. In May 2003, the parents executed mutual wills in which they acknowledged that they had already given the farming business and the Farm property equally to Sam and Rocco: at J[65].

Renovations and improvements to the house and the Lot

26. Commencing in 2004, Sam and Marisa, who by then had four children aged from 2 to 7 years, undertook various renovations to the house and improvements to the Lot, including (i) landscaping the area around the house in October 2004 costing about $28,000, (ii) replacing the kitchen in about 2005 costing about $20,000 to $25,000, (iii) installing air-conditioning in 2008 costing about $10,000, (iv) further extensions and renovations in 2015 to the side of the house to incorporate a games room/family room and a pergola (the primary judge did not make a finding as to the specific cost of renovations), (v) a shed for cars in 2018 costing about $32,000, (vi) renovating the laundry in 2019 costing about $11,000, (vii) repainting the house in 2018 costing about $4,000, and also the installation of stairs in the house costing $3,270 and wardrobes costing about $4,343. The cost of these renovations and improvements from 2004 were funded by Sam and Marisa, although Mrs Pirrottina Snr did make some cash payments to at least one tradesman: J[103].

Breakdown in relations

27. Mr Pirrottina Snr died on 26 December 2018. The working relationship between Sam and Rocco soured thereafter. Sam arranged a family meeting in September 2020 with Rocco, Mrs Pirrottina Snr, Mr Antonio Tisano, the family accountant, and long-time family friends, Mr Frank Lopresti and Mr Pasquale Macri, to discuss his concerns about Rocco’s use of partnership funds. That meeting was held in Mrs Pirrottina Snr’s dining room: at J[109]. Her Honour found that Mrs Pirrottina Snr made statements about “Sam’s house” and what Mr Pirrottina Snr intended:

[115] These gentlemen [Mr Lopresti, Mr Macri, Mr Tisano] were unfamiliar with the precise ownership arrangements of the citrus farms. Their various suggestions as to how the brothers should part ways had the consequence that the brothers’ interest in both farms was elucidated. Initially, it was suggested – either by one of these gentlemen or by Sam – that Rocco’s farm should be valued as forming part of the partnership. This was firmly rejected by Rocco, and endorsed by Mrs Pirrottina Snr, who together made plain that that was Rocco’s farm. Apparently, by way of counter-attack, Rocco suggested that the Mangrove Mountain farm, including Sam’s house, should be valued or sold, which prompted Sam to seek clarification from Mrs Pirrottina Snr that his interest in Sam’s house was also protected. Mrs Pirrottina Snr readily confirmed that this was the case, and Rocco did not demur. I do not accept Rocco’s evidence that Sam did not raise the issue of his house at the meeting; it is likely that Sam did so, where Rocco suggested that Sam’s interest in the house should be ignored for the purposes of a buy-out.

[116] Sam and his family were then living on the Mangrove Mountain farm. Rocco and his family were now living on Rocco’s farm. It likely suited both men to remain in their respective locations. Mrs Pirrottina Snr obviously wanted this too. As Mr Lopresti recalled it, Mrs Pirrottina Snr also made plain that that was what her husband had wanted, that is, that Sam’s house belonged to him. The brothers agreed that Sam would buy-out Rocco’s interest in the Mangrove Mountain farm and the family business but, in calculating a buy-out figure, Sam’s house would be deducted from the valuation of the Mangrove Mountain farm. Rocco’s farm would also be excluded. (Emphasis added.)

28. Mrs Pirrottina Snr died on 12 October 2020.

29. The primary judge found that the partnership was dissolved on 8 January 2022 and that both brothers contributed to the breakdown in the working relationship: at J[140]. There is no challenge to that finding.

Leave to appeal

30. In addition to his notice of appeal filed on 11 September 2024, Rocco earlier filed a summons seeking leave to appeal on 1 August 2024. The stated premise of the leave application was that “leave is likely required because the hearing had been split”, referring to Narellan Franchise Pty Ltd v RBME Pty Ltd [2023] NSWCA 139 at [16]-[18]. Narellan involved the determination of separate questions and leave to appeal was required because the decision in that case was held to be interlocutory in nature.

31. Orders were made in the proceedings on 11 March 2024 pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), rr 20.14 and 28.2 for the determination of certain questions separately from any other question, after the trial in the proceedings, by a referee. As her Honour recorded (at J[2]-[3]), the effect of those orders was that the hearing of the proceedings was expedited to determine essentially five issues, with a referee to be appointed to determine the remaining disputed items of partnership property. Sam did not oppose the grant of leave, although he took the position in relation to the challenge to the special costs order that the judgment below was final, not interlocutory. To the extent necessary, there should be a grant of leave to appeal.

The issues on appeal

32. The notice of appeal contains 15 grounds which raise the following issues:

33. promise: was the 1994 promise limited to an assurance that the parents would build a house for Sam on the Farm that would be his (which Rocco no longer disputes), or did the promise include an area of land surrounding the house (ground 1). There is a related issue as to whether the 1996 promise by Mrs Pirrottina Snr was binding on Mr Pirrottina Snr (ground 5);

34. reliance: whether Sam’s reliance on the promises was reasonable (ground 2). Related to this issue is a factual challenge to the finding that the parents paid the deposit on Rocco’s farm at Kulnura (ground 10);

35. unconscionability: whether it would have been unconscionable for Mr and Mrs Pirrottina Snr to resile from the promises made to Sam (grounds 3 and 4);

36. indefeasible title: whether Sam has a personal equity against Rocco which operated as an in personam exception to the indefeasibility provision in s 42 of the Real Property Act (grounds 12 and 13);

37. Sam’s alternative estoppel claim against Rocco: whether these findings are an independent basis for the relief granted. There is an anterior issue as to whether Rocco’s challenge to these findings is adequately raised by the notice of appeal;

38. the buyout relief: whether the primary judge’s discretion in ordering the buyout relief miscarried (grounds 6, 7 and 8);

39. partnership property: whether the Farm is personal property of Sam and Rocco or property of the partnership (ground 11);

40. access to privileged material: whether the primary judge erred in not granting access to certain subpoenaed material and in rejecting several identified pages of the Court Book (ground 9); and

41. special costs order: whether the primary judge’s discretion in making a special costs order in favour of Sam miscarried (grounds 14 and 15).

42. In addition, Rocco’s UCPR, r 51.36(2) statement challenges eight factual findings made by the primary judge. To the extent that these challenges are material to the outcome of the appeal, they are addressed below in the context of the issue to which they relate.

43. Before addressing the issues and factual challenges, brief reference to some basic principles concerning equitable proprietary estoppel is necessary.

Equitable proprietary estoppel

35. Estoppel by encouragement: In Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126 at [37]-[40]; Gageler CJ, Gordon, Edelman and Beech-Jones JJ refined the six requirements for an equitable estoppel set out by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429; [1988] HCA 7, which the plurality observed had been formulated at a level of generality to include an estoppel by encouragement and an estoppel by acquiescence, into four elements for an equitable estoppel which arises by reason of encouragement from a promise:

36. promise: there must be a “clear and unequivocal” promise made by the party estopped (the promisor) to the party who relies on the promise (the promisee);

37. expectation or intention: a reasonable person in the promisor's position must have expected or intended, or the promisor must have actually expected or intended, that the promisee would rely upon the promise by some action, omission or course of conduct;

38. reliance: the promisee must have relied upon the promise by acting or omitting to act in the general manner that would have been expected; and

39. detriment: the consequence of the promisee's reliance must be that the promisee will suffer detriment if the promise is not fulfilled.

40. The plurality held at [41]:

Once these elements are satisfied, it is commonly said that conscience requires that A redress the detriment suffered by B. As has been repeatedly emphasised by this Court, the description of circumstances as unconscionable "is to characterise the result rather than to identify the reasoning that leads to the application of that description".

citing Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 at [84]-[85], quoting Donis v Donis (2007) 19 VR 577; [2007] VSCA 89 at [34]. See also Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [50]-[51].

37. Importantly, the plurality held at [34] that no subsequent encouragement after the promise is required because estoppel by encouragement is established where, “a reasonable person in the promisor’s position would expect the promisee might rely upon the promise by some action or omission”.

38. Estoppel by acquiescence: The plurality in Kramer v Stone referred with approval at [54] to Discount & Finance Ltd v Gehrig’s NSW Wines Ltd (1940) 40 SR (NSW) 598 at 603, where Jordan CJ described estoppel by acquiescence as a doctrine “which prevents a person, who has knowingly permitted another to act, through mistake, to his own detriment and to the advantage of the former, from profiting by the other's mistake”, and said that when these elements are satisfied, an estoppel by acquiescence can be the source of new rights for the mistaken party, referring to Hamilton v Geraghty (1901) 2 SR (NSW) Eq 81.

39. The plurality referred at [55] to five elements which are required for party B to establish an estoppel by acquiescence against party A, citing Hudson J in Brand v Christopher Building Co Pty Ltd [1957] VR 625 at 628:

(1) B must be mistaken as to his own legal rights; if he is aware that he is infringing the rights of another, he takes the risk of those rights being asserted;

(2) B must expend money, or do some act, on the faith of his mistaken belief; otherwise, he does not suffer by A's subsequent assertion of his rights;

(3) acquiescence is founded on contract with a knowledge of one's legal rights, and hence A must know of his own rights;

(4) A must know of B's mistaken belief; with that knowledge it is inequitable for him to keep silence and allow B to proceed on his mistake;

(5) A must encourage B in his expenditure of money or other act, either directly or by abstaining from asserting his legal right.

40. As to the fourth element, it should be observed that unlike an estoppel by encouragement, an estoppel by acquiescence requires actual knowledge of the other party’s mistaken belief.

41. As to the fifth element, the plurality in Kramer v Stone observed at [57], citing Brennan J in Waltons Stores at 429:

… In cases of estoppel by acquiescence, the defendant might not do anything to induce the plaintiff's action because the defendant's "encourage[ment]", in the language of Hudson J, might involve no more than abstaining, with knowledge, from asserting the defendant's legal rights. Therefore, Brennan J explained that in acquiescence cases although the defendant "has not actively induced the plaintiff to adopt an assumption or expectation", the defendant will "be held to have done so".

42. After noting the significant difference between a person whose promise causes another's detriment and a person who merely omits to act where action could spare the other party from detriment, the plurality said at [59]:

… Any responsibility in the latter case must require the omission to occur with knowledge of that person's rights and of the other's mistake so as to give rise to a duty to speak. By contrast, there is no justification for such a requirement in the former case. As Leeming JA said of estoppel by encouragement in his concurring reasons in the Court of Appeal in this case (with which Kirk JA also agreed):

Why should it be necessary not only to know that the defendant has encouraged the plaintiff to labour under a false belief, but also to know that the plaintiff has relied on the encouragement? The distinction is quite artificial. Further, I can see no reason why two landowners, both of whom make the same representation to their neighbours who act upon it, should be in different positions if one is thereafter absent from the country and has no means of knowing what steps have been taken by the neighbour.

Issue 1: The content of the 1994 promise (Ground 1), and was the 1996 promise by Mrs Pirrottina Snr binding on Mr Pirrottina Snr (Ground 5)

The primary judge’s reasons

43. The primary judge made the following findings as to the content of the promise made to Sam by his parents (at J[168]-[174]):

44. Mr and Mrs Pirrottina Snr made the 1994 representations and Mrs Pirrottina Snr made the 1996 representations, as to which there was no evidence suggesting that Mr Pirrottina Snr then held a different view to that expressed by his wife, and that the representations made by Mrs Pirrottina Snr in 1996 expressed the intentions of both parents;

45. the express representations were not too vague or lacked specificity. Mrs Pirrottina Snr said the area of land indicated by Sam, bounded by the driveway, a drainage passage and the main orchard, on which the parents would build a house, “will be yours”. The focus was on the tangible property which Sam expected to get, and the parties did not stop to reflect whether some further legal transaction was necessary to complete the promised title, referring to Cobbe v Yeoman’s Row Management Ltd [2008] 4 All ER 713; [2008] UKHL 55 at [68], followed in Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105 at [150];

46. the parents and Sam were not then aware that it was impossible to subdivide the Lot from the Farm. Rather, the family became aware, during the course of seeking development approval to construct Sam’s house, that it was not possible to build two houses on the property; but the evidence did not indicate the family enquired as to whether it was possible to subdivide the Farm, nor that they had any interest in doing so, where they intended that the Farm would stay in the Pirrottina family;

47. the fact that the parents made subsequent wills which made no mention of Sam’s equitable interest in the Farm was of no consequence given that the wills were made after the parents had divested their interest in the Farm and it was unnecessary for the parents to address that subject in their wills at all, where the Farm did not form part of their estates; and

48. the parents’ representations were not subject to conditions such as the continuation of the partnership and a harmonious relationship between the brothers, where the partnership had yet to be mooted.

Challenge to content of the 1994 promise

44. It is said that the promise was only for Sam to have a house, not the surrounding skirt of land identified by Sam to his parents, bordered by the driveway, a drainage passage, and the main orchard: at J[30], [36].

45. Sam objected to Rocco raising this point on appeal, arguing that it was not raised in terms at trial. For the reasons which follow, that objection should be upheld. However, against the possibility that others are of a different view, I will address the substance of factual challenge as to the content of the 1994 promise.

New point on appeal

46. It is no answer for Rocco to say, as his senior counsel submitted, that Sam’s evidence on the substance of the promise was tested. Importantly, it was not put to Sam in cross-examination that he was promised something less than the description of the promise that he had given in his evidence: see [10] above. The cross-examination only went so far as to put to Sam in general terms (which he denied) that “it’s possible” that his parents said to him something to the effect of “[t]here’s a place where you can live”, that he had not “remembered the detail of what your mother said”, and that he had “forgotten the finer points of the conversation”. The cross-examination did not squarely put to Sam that the promise did not include the surrounding land, referred to by Sam in his evidence.

47. Nor was Sam challenged on his evidence that he relayed the conversation with his parents in September 1994 to Rocco the following day, and that he indicated to Rocco the same area of land that he had pointed out to his parents, being the Lot: see [11] above. To the contrary, the cross-examiner put to Sam that the proposition that he knew at the time of the 2002 transfer that his parents had “overdelivered” on their promise of “a home, that was about an acre”. The cross-examiner’s reference to “about an acre” was plainly a reference to the dimensions of the Lot, not the footprint of the house. Sam denied that “overdelivered” proposition.

48. Senior counsel for Sam fairly acknowledged that Rocco had submitted in closing submissions that there was a “difficulty” with establishing the boundary of the Lot, and that “the evidence rises no higher than the identification of the vicinity of the proposed building works”. But, as Sam’s counsel also submitted, that is different to the point sought to be raised by Rocco on appeal that the parents’ promise was limited to Sam’s house and did not include the curtilage. If this point had been raised at trial, it could or might possibly have been met by rebutting evidence from Sam at trial: Whisprun Pty Ltd v Dickson [2003] HCA 48; (2003) 77 ALJR 1598 at [51]; Coulton v Holcombe (1986) 162 CLR 1 at 9; [1986] HCA 33.

The content of the 1994 promise

49. Rocco’s submissions challenging the finding as to the content of the 1994 promise can be grouped under five propositions.

50. It is said that there is no evidence that anything was said about the boundaries during the 1994 conversation, nor do the boundaries line up with the Lot 1 diagram annexed to Sam’s cross-summons. These submissions ignored several matters. One is that no objection was taken at trial to the form of Sam’s affidavit evidence that when he spoke with his parents in the kitchen, he indicated the area of land where the lemon trees were that was bordered by the driveway, a drainage passage and the main orchard, and that when he relayed the conversation with his parents to Rocco the following day he indicated the same area of land to Rocco.

51. Another is that, although the “old lemon trees” have been removed since the 1994 conversation, the photograph of the Lot reproduced at J[133] shows, consistent with Sam’s evidence, the driveway, drainage passage and main orchard referred to by Sam in the 1994 conversation. That the survey attached to Sam’s cross-summons was created for the purposes of the litigation is not to the point; Sam never suggested that this document was contemporaneous.

52. Given the favourable credit finding with respect to Sam’s evidence, no error has been shown in her Honour’s finding (at J[36]) that the promise was not too vague or lacked specificity:

I do not accept that the express representations were too vague or lacked specificity. Mrs Pirrottina Snr said the area of land indicated by Sam, bounded by the driveway, a drainage passage and the main orchard, on which the parents would build him a house, “will be yours”. …

53. It is said that there was no evidence that Mrs Pirrottina Snr could see out the window from where she stood in the kitchen at the time of the 1994 conversation, and Mr Pirrottina Snr “may” have had a different view of the window. This submission is not only speculative, but also inconsistent with the physical features of the Lot where Sam’s house was constructed between 1995 and 1996, without any complaint by his parents or Rocco, who all lived on the Farm at that time. That Mr and Mrs Pirrottina Snr understood that Sam had pointed out the area of land during the 1994 conversation where the lemon trees were that was bordered by the driveway, a drainage passage and the main orchard, is also consistent with subsequent events.

54. In 1996, Mrs Pirrottina Snr requested Mr Falvo (in Rocco’s presence) to landscape “all the areas surrounding the house” (at J[42]), and Mr Falvo proceeded to landscape the area that he described as forming part of “Sam and Marisa’s Property”, which was pointed out to him by Mr and Mrs Pirrottina Snr (at J[42], [156]). The photograph reproduced at J[133] shows the landscaping of trees along the driveway. In 2015, the footprint of Sam’s house was extended to incorporate a games/family room and a pergola/barbecue area, beyond the footprint of the existing dwelling: at J[77]. In around 2017, Sam built a shed to accommodate four cars on the Lot about 20 metres from his house: at J[97]. There is no evidence of any suggestion by the parents, Rocco or anyone else, that Mr Falvo was not entitled to landscape the Lot as requested by Mrs Pirrottina Snr, or that Sam was not entitled to extend his house or construct the shed on the Lot.

55. It is said that Sam’s evidence that his mother said “it will be yours” was uncorroborated, except for the September 2020 meeting. But this ignores that the primary judge found that Rocco agreed with Sam and Angelina’s descriptions of the conversation on this topic (at J[35]), and that Sam’s evidence was corroborated by Ms Deidda’s evidence of her conversations with Mrs Pirrottina Snr in 1995 (at J[36]). It must be accepted that insofar as this appeal is concerned with factual findings which are based on her Honour’s assessment of the reliability or credibility of the witnesses evidence, it is necessary for Rocco to show that the finding is wrong by “incontrovertible facts or uncontested testimony” or because it is “glaringly improbable” or “contrary to compelling inferences”: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[29]; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55]. The acceptance of Sam’s evidence that his mother said to him “it will be yours” was reliability and credit based. Rocco’s submissions did not attempt to surmount the Fox v Percy hurdle.

56. It is said that Sam’s version of the 1994 promise was inconsistent with the documentary record contained in (a) the lease in favour of the parents registered on title when the 2002 transfer occurred, and (b) the parents’ wills made in 2003 which make no mention of Sam’s interest in the Lot. As to (a), the registered lease is not inconsistent with the parents’ promise. The lease did not pertain to the area of land where Sam’s house was situated; rather, the lease gave the parents a right to occupy the premises on the Farm known as the “farmhouse”, being the main dwelling on the Farm, and to have complete and uninterrupted access to those premises at all times.

Challenge to the 1996 promise

60. Ground 5 contends that the primary judge erred in holding that any promise by Sam’s mother in 1996 was binding on Sam’s father. This ground challenges the finding (at J[168]) that the representations made by Mrs Pirrottina Snr in 1996 expressed the intentions of both parents:

As to suggested assurances in this case, I have found that the parents made the 1994 representations. I have found that Mrs Pirrottina Snr made the 1996 representations. There was no evidence suggesting that Mr Pirrottina Snr then held a different view to that expressed by his wife. I note also Mrs Pirrottina Snr’s comments in September 2020, as recalled by Mr Lopresti, that Mrs Pirrottina Snr said that the house “belongs to Sam … that’s what my husband wanted”: see [110]. As such, I find that the representations made by Mrs Pirrottina Snr in 1996 expressed the intentions of both parents.

61. In light of the conclusion on ground 1 and given that no subsequent encouragement after the 1994 promise is required (Kramer v Stone at [34]), this ground cannot impact the outcome of the appeal. Nevertheless, I will briefly indicate my view, noting that counsel for Rocco was content to rely on his written submissions.

62. It is said that the pleaded case in respect of the 1996 representations was one of agency, but there was no evidence that the father ever communicated anything about his intentions about the new home or the Lot. That the 1996 representation expressed the intentions of both parents is supported by her Honour’s findings accepting (1) Angelina’s evidence of Mr Pirrottina’s intentions stated at the family dinner table in 1994 that he was happy to give Sam the land and to build a house for him to make his home: at J[33], (2) Ms Deidda’s evidence that in about 1995, Mrs Pirrottina Snr told her that she and her husband had decided to build a house on the farm for Sam: at J[34], and (3) Mr Lopresti’s evidence of the family meeting in September 2020 during which Mrs Pirrottina Snr confirmed that the home that Sam and his family had built on the Farm belongs to Sam, and that this is what her husband wanted: at J[110]. Nor does Rocco challenge her Honour’s finding (at J[168]) that there was no evidence suggesting that Mr Pirrottina Snr ever held a different view to that expressed by his wife.

63. It is said that, even if the 1996 representation embodied the intention of both parents, that does not mean that the mother was capable of binding the father when that representation was made. This submission misunderstands the terms of the finding (at J[168]). Accepting, as her Honour found, that the parents made the 1994 promise in relation to Sam’s entitlement to the house and the Lot, the 1996 representation made by Mrs Pirrottina Snr was a confirmation of the pre-existing, established representation as to Sam’s ownership of the Lot.

64. It is said that her Honour should have given no weight to Mr Lopresti’s hearsay statement concerning what Mrs Pirrottina Snr had said at the family meeting in September 2020 about the husband’s desires that he wanted Sam to own the house, because the case was not pleaded on the basis of a prior agreement between the mother and the father. But this ignores the way the case was run at trial. There was no objection, based on a pleading point, to the admissibility of Mr Lopresti’s evidence concerning what Mrs Pirrottina Snr said at the September 2020 meeting. Nor was there any submission by Rocco in closing argument at trial challenging the weight to be given to Mr Lopresti’s evidence on this topic.

65. Ground 5 is not made out.

Issue 2: Reliance (ground 2)

The primary judge’s reasons

66. The primary judge made the following findings concerning Sam’s detrimental reliance on the promises made by his parents:

[175] As to reliance, Sam said he assumed that the house and the Lot were his. Sam knew from when he moved into his house that there was no separate title or subdivision that gave him the right to the Lot but said “My mother and father’s word was good enough as a contract.” Sam never thought about the fact that there was no separate title; he just relied on his parents’ promise. I accept that Sam relied on his parents’ representations. Sam took his parents at their word and believed that the Lot and the house were his and that the Mangrove Mountain farm would stay in the family. Sam would have acted differently if the representations had not been made, specifically, he would have taken up his parents’ offer to buy him a block of land on which to build his own home.

[176] As to detriment, this element falls to be considered in circumstances where the parents never sought to depart from their assurances. The parents’ professed motivation for transferring the Mangrove Mountain farm to Sam and Rocco was to keep the farm and the business in the Pirrottina family by entrusting these assets to those of their children who were prepared to continue the business and who had agreed not sell the farm. There is no suggestion that the parents thereby sought to interfere with Sam’s interest in the Lot or Sam’s house.

[177] Considering detriment and unconscionability in this hypothetical context, Sam both benefited from, and suffered detriment, as a consequence of reliance on his parents’ assurances. Sam suffered a detriment as he forewent his parents’ offer to buy him a block of land on which he could build a house in favour of a house being constructed on the Lot. Sam and his wife also forewent the possibility of a financial contribution to their married life from Mr Falvo in favour of his contribution to the construction of a driveway, footpath and landscaping around the house. Sam ignored his father-in-law’s offer of a job in Sydney in property development, although there is no evidence that such a career would have been more financially advantageous than continuing to live and work on the Mangrove Mountain farm. Nor is there evidence that, when continuing to work in the family business, Sam was paid at a level of remuneration below the market rate. Against this, Sam received a benefit in the form of rent-free housing, with utilities paid by his parents.

[178] Nonetheless, the detriment suffered by turning down his parents’ offer to buy him a block of land of his own, rather than accommodation attended with the uncertainties of living on someone else’s property, was a substantial detriment. In the circumstances, I consider that the elements of estoppel by encouragement are established such that Sam had an equitable interest in the Lot as a consequence of his parents’ representations, on which he relied to his detriment, making it unconscionable for the parents to go back on their word, if they had chosen to do so.

67. Ground 2 contends that the primary judge erred in holding that the reliance by Sam on the parents’ promises was “reasonable reliance”, however, in writing, Rocco went further and submitted that Sam (i) did not rely on the promises at all, and (ii) if there was reliance, it was neither detrimental nor reasonable.

68. Sam objects to Rocco expanding this ground through his submissions to attack the separate finding of detriment (at J[177]), which was not otherwise the subject of a ground of appeal. It is appropriate to deal with the substance of Rocco’s submissions given that no prejudice was identified by Sam.

69. It is of assistance first to say something further about the elements of reliance and detriment.

70. Reliance: To establish reliance as an element of estoppel, “it is ordinarily necessary for the promisee to show not merely that the promise was one factor taken into account in motivating the promisee’s action or omission, but that the promisee would not have acted or omitted to act in the absence of the promise”: Kramer v Stone at [39]. As Gageler CJ said in Sidhu v Van Dyke at [91]:

To establish that the belief to which she was induced by the appellant’s representations was a contributing cause to the course of action or inaction which she took, the respondent needed to establish more than that she had the belief and took the belief into account when she acted or refrained from acting. She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction: that she would not have so acted or refrained from acting if she did not have the belief.

71. Detriment: In Kramer v Stone at [40], the plurality said of the requirement of detriment:

… the consequence of the promisee's reliance must be that the promisee will suffer detriment if the promise is not fulfilled, in the sense that the promisee will be left in a worse position, as a consequence of reliance upon the promise, than if the promise had not been made … it is the existence of detriment arising from reasonable reliance upon an unfulfilled promise that completes the recognition of the estoppel and moulds the remedial response. …

72. The question of detriment is assessed as at the time a party seeks to depart from the assumption or expectation: DHJPM Pty Ltd v Blackthorn Resources Limited (2011) 83 NSWLR 728; [2011] NSWCA 348 at [72] (Meagher JA, Macfarlan JA agreeing). As Ward P (Leeming and Kirk JJA agreeing) said in Kramer v Stone (2023) 112 NSWLR 564; [2023] NSWCA 270 at [96]:

Detriment may be of a kind that involves “life-changing decisions with irreversible consequences of a profoundly personal nature” (Donis v Donis (2007) 19 VR 577 at [34]; cited approvingly in Sidhu v Van Dyke at [84] (French CJ, Kiefel, Bell and Keane JJ)).

73. To similar effect, in Q (a pseudonym) v E Co (a pseudonym) [2020] NSWCA 220; (2020) 383 ALR 469 at [125], Meagher JA (Leeming and Payne JJA agreeing) said:

Thus, detriment sufficient to support an estoppel by encouragement need not involve expenditure of money on the property the subject of the estoppel or otherwise, or be capable of financial quantification: Walsh v Walsh [2012] NSWCA 57 at [14]. It is well recognised that detriment in the relevant sense may flow from having significantly changed the course of one’s life: see Riches v Hogben [1985] 2 Qd R 292, …

Rocco’s argument that Sam did not rely on the promises

74. Rocco challenges the findings of reliance at J[175] and [177] that (1) Sam forewent his parents’ offer to buy him another block of land of his own on which to build a house, and (2) Sam and Marisa forewent the possibility of financial contribution to their married life from Mr Falvo in favour of Mr Falvo’s contribution to the construction of a driveway, footpath and landscaping on the Lot.

75. With respect to the first act of reliance, it is said that this Court should not accept Sam’s uncorroborated evidence that his mother offered him another house on a nearby block. As indicated, the acceptance of Sam’s evidence concerning the promised Lot is reliability and credit based. Sam was challenged in cross-examination that he got this “bit” of his evidence wrong, and he rejected that suggestion. It was well-open to her Honour to accept, as she did (at J[36]), that the conversation between Sam and his parents took place as described by Sam. Rocco’s challenge to the finding concerning the first act of reliance did not attempt to surmount the Fox v Percy hurdle.

76. Nor is it to the point, as Rocco submits, that Sam did not establish any “antecedent premise” that he was expecting a house on separate title. This first act of reliance in 1994 does not depend upon any “antecedent premise”; it depends on the 1994 promise which the parents made to Sam, and Sam’s evidence of his reliance on that promise when he turned down his parents’ offer to buy him a block of land of his own.

77. Nor is it relevant, as Rocco submits, that one of the siblings did not receive an alternative home, and Sam already had an interest in an investment property. As Sam explained in cross-examination, his parents had spent a significant amount of money on legal fees for Carmelo Pirrottina, another of their brothers (as to which there was evidence that these legal fees exceeded $1 million); and he gave unchallenged evidence that he himself had assisted Carmelo to buy a property. That the parents had purchased an investment property at Mannering Park jointly for Sam and Carmelo in 1982 is unrelated to the subject matter of the promised Lot, being a house on the Farm for Sam and his family when he was married.

78. With respect to the second act of reliance, the proposition that Sam and Marisa would have foregone the possibility of financial contribution to their married life from Mr Falvo, in favour of Mr Falvo’s contribution to the construction of a driveway, footpath and landscaping on the Lot, is entirely speculative. Nor was this proposition put to Sam in cross-examination.

Rocco’s argument that Sam’s reliance was not reasonable or detrimental

79. Rocco advanced a series of related submissions that the acts of reliance were not reasonable.

80. It is said that Sam could not have reasonably relied on the promise (if made) to give him the Lot because that was “impossible”, as her Honour found that the family knew, during the course of seeking development approval for the new house, that it was not possible to build two separate homes on the Farm.

81. It is said that the promise was “replaced” by a gift of half the Farm in 2002, and from that point Sam’s continued reliance on the original promise was “non-sensical”, and his belief that the Lot “was his” was a delusion because he knew that it would not happen; rather, Sam’s ongoing occupation of the Lot depended on the continuous relationship with Rocco.

82. It is also said that once it became clear there could be no subdivision, or at the latest from the 2002 transfer of the Farm, it was no longer reasonable for Sam to rely on his parents’ promise to the extent that it involved occupying the property forever.

83. The asserted impossibility of giving the Lot to Sam is immaterial given the unchallenged findings (at J[170]) that the parents and Sam did not know that subdivision was impossible, and that the evidence does not indicate that the family enquired as to whether it was possible to subdivide the Farm, or that they had any interest in doing so, where they intended the Farm would stay in the Pirrottina family. Nor is there any challenge to the finding (at J[175]) that Sam never thought about the fact that there was no separate title; he just relied on his parents’ promise. That finding was well-open, given the evidence of Sam in cross-examination:

Q. You knew that there wasn't going to be a subdivision from the time construction started on your home, didn't you?

A. I never thought of it.

Q. You just relied on your parents' promise, didn't you?

A. That's right.

84. In addition, whether the Lot was incapable of subdivision does not impact her Honour’s finding (at J[194]) that Rocco and Sam accepted the 2002 transfer on condition that the conduct of the family business and the occupation of the land would continue as before, that is, the Farm would not be sold and Sam would remain on the Farm for his lifetime.

85. Nor does the 2002 transfer negate Sam’s reliance on his parents’ promise made before the transfer. Here, what Sam wanted and expected to get in relation to the Lot was a gift of an interest in immovable property for long term occupation as a home. The parties had no intention of entering into a contract or formalising their expectation: DHJPM Pty Ltd v Blackthorn Resources at [105] (Handley AJA). Sam relied on his parents’ promise in the manner found by her Honour. That reliance did not change with the 2002 transfer. As her Honour found (at J[176]), there is no suggestion that the parents sought by the 2002 transfer to interfere with Sam’s interest in the Lot or Sam’s house.

Challenge to finding of detriment

86. It is said that if the promises had not been made, Sam would have acted in precisely the same way.

87. Again, this submission ignored that Sam’s detrimental reliance, as found by her Honour, occurred before the 2002 transfer. Thus, Sam’s interest in the promised Lot had already arisen before the 2002 transfer, rendering it unconscionable for the parents to resile from the promise from the time of the detrimental reliance: McNab & Anor (in their capacity as Executors and Trustees of the Will of Colin Wilbur Turner, deceased) v Graham (2017) 53 VR 311; [2017] VSCA 352 at [107] (Tate JA, Santamaria JA and Keogh AJA agreeing).

88. One further matter should be mentioned. Rocco challenged the finding (at J[177]) that Sam ignored his father-in-law’s offer of a job in Sydney in property development. It is said that irrespective of this job offer, Sam would have always stayed on the Farm. But the premise of this factual challenge – that her Honour found that this conduct of Sam was detrimental – is incorrect. Her Honour found (at J[177]) that there was no evidence that such a career would have been more financially advantageous than continuing to live and work on the Farm. It is not necessary to address this factual challenge as it cannot affect the outcome of the appeal.

89. Ground 2 is not made out.

Deposit for Rocco’s farm (ground 10)

90. The primary judge made the following findings (at J[60]) concerning Mr and Mrs Pirrottina Snr’s financial contributions to Rocco’s farm, including that they paid the deposit of $60,000 on Rocco’s farm:

Given the non-production of corroborative records by Rocco, together with the evidence of Ms Deidda, Angelina’s affidavit prepared in the family provision proceedings, and the evidence of Angelina and Sam in these proceedings, I find that Mr and Mrs Pirrottina Snr paid the deposit on Rocco’s farm. The running expenses for Rocco’s farm were also paid by Mr and Mrs Pirrottina Snr. Rocco earned rental income from the house on Rocco’s farm, which he was able to deploy to make mortgage payments, where he continued to live in his parents’ home at Mangrove Mountain. By these means, Mr and Mrs Pirrottina Snr provided Rocco with assistance, both directly and indirectly, to acquire Rocco’s farm. I do not accept that the parents’ only financial assistance provided to Rocco to buy his farm was the provision of a guarantee.

91. Rocco challenges the finding that the parents paid the deposit on Rocco’s farm at Kulnura: at J[60]. There is no challenge to the broader finding in relation to direct and indirect assistance provided by the parents to acquire Rocco’s farm.

92. Sam drew attention to the pleadings. The payment of the deposit for Rocco’s farm did not form part of either party’s pleaded case although, as the primary judge recorded (at J[58]), as she understood it, “the extent to which Mr and Mrs Pirrottina Snr paid for Rocco’s farm was relevant to whether Rocco would have agreed to the transfer of the family business and the Mangrove Mountain farm to himself and Sam on the terms proposed”. Nevertheless, her Honour did not rely on the deposit in finding that Rocco agreed to accept the transfer of the Farm in 2002 on condition that his parents would maintain control over the land, its improvements and buildings, and he would not sell it: at J[194]. That finding was consistent with concessions by Rocco in his evidence: at J[193]-[197].

93. It is said that the finding that the parents paid the deposit on Rocco’s farm is relevant to Sam’s reliance on the promise. That is not so. Whilst Sam gave evidence that his father told him that the parents had paid a $60,000 cheque for the deposit on the Kulnura farm (at J[57]), that hearsay evidence was not relied on by her Honour when finding that the parents paid the deposit (at J[60]).

94. In oral argument, counsel for Rocco acknowledged that this ground is only relevant if the Court is “persuaded to look for corroboration of Sam’s evidence” on reliance. But that is not necessary, given that Rocco’s challenge to the findings of detrimental reliance has failed. It is not necessary to address this ground since it cannot affect the outcome.

Issue 3: Unconscionability (Grounds 3 and 4)

95. Ground 3 contends that the primary judge erred in holding that it would have been unconscionable for Mr and Mrs Pirrottina Snr to resile from the promise. Ground 4 contends that the primary judge erred in finding that “Mum’s” promise affected Rocco’s conscience, in circumstances where Sam had been given half the Farm. It is convenient to address these grounds together, reflecting the way in which the parties’ submissions addressed these grounds.

96. It is of assistance first to say something further about equity’s remedial response to detrimental reliance on an unfulfilled promise. What distinguishes the equitable principle from the enforcement of contractual obligations is that there is no legally binding promise: Giumelli v Giumelli at [35], citing Riches v Hogben [1985] 2 Qd R 292 at 300-301. It is not the promise itself that attracts the intervention of equity, but the expectation it creates: Giumelli v Giumelli at [35]. Correspondingly, it is not the breach of promise, but the promisor’s responsibility for actual and detrimental reliance by the promisee that makes it unconscionable for the promisor to resile from the promise: Sidhu v Van Dyke at [58].

97. In Kramer v Stone at [40], the plurality summarised the approach to equity’s remedial response as follows:

Unlike the recognition of a gift, or the enforcement of a testamentary promise under a valid will, or the enforcement of a contractual promise, it is the existence of detriment arising from reasonable reliance upon an unfulfilled promise that completes the recognition of the estoppel and moulds the remedial response. As this Court has repeatedly held, "[i]t is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise". Hence, the relief is "moulded accordingly to prevent th[e] detriment". In cases where the detriment suffered by a plaintiff is "a relatively small, readily quantifiable monetary outlay on the faith of the [defendant's] assurances" then, apart from interest, the likely equitable relief ordered will be compensation in the amount of the monetary outlay. By contrast, where the detriment suffered "involves life-changing decisions with irreversible consequences of a profoundly personal nature", the likely equitable relief will be to require fulfilment of the assumption upon which the plaintiff acted, such as by a conveyance of rights, or an assessment of the monetary value of the assumption. (Citations omitted.)

Rocco’s argument

98. Rocco accepted that equity starts with making good the promise, referring to Priestley v Priestley [2017] NSWCA 155 at [164] (Emmett AJA, McColl and Macfarlan JJA agreeing), but said it cannot always be achieved repeating many of the arguments he had advanced in challenging the finding of detrimental reliance.

99. It is said that there is no basis for making good the promise because the parents gave Sam a different and better gift instead, that the most compelling inference is that the parents no longer considered the second house was Sam’s alone, and that the 2002 transfer replaced any earlier promise. It is also said that it would not have been unconscionable for the parents to resile from a promise that could not be achieved (being a reference to subdivision), and that the circumstances of the gift the subject of the 2002 transfer and the impossibility of a separate lot relieved the parents’ conscience.

100. The assertion that Sam received a “better” or “replacement” gift is not only speculative but also inconsistent with her Honour’s findings as to the circumstances of the 2002 transfer. As already noted, her Honour found (at J[176]) that there was no suggestion that the parents thereby sought to interfere with Sam’s interest in the Lot or Sam’s house. That finding is not challenged.

101. Nor is the “impossibility” of subdivision an answer to her Honour’s finding that, in light of Sam’s detrimental reliance, it would have been unconscionable for Mr and Mrs Pirrottina Snr to resile from their promises to Sam that the Lot and house were his: see [82]-[83] above.

102. It is also said that the 2002 transfer was “inconsistent” with the promise about the Lot, and there is no evidence of the promise being “reaffirmed”. The “inconsistency” submission is answered by her Honour’s unchallenged findings that (1) the express basis of the 2002 transfer was that the Farm would not be sold (at J[202]), and (2) there is no suggestion that the parents sought to interfere with Sam’s interest in the Lot or Sam’s house (at J[176]). Finally, the submission concerning the absence of “reaffirmation” of the promise is inconsistent with Kramer v Stone at [34].

103. Grounds 3 and 4 are not made out.

Issue 4: Indefeasible title (Grounds 12 and 13)

The primary judge’s reasons

104. The primary judge found (at J[191]-[192]) that there was an air of unreality to Rocco’s evidence denying being aware of Sam’s interest in the Lot at the time of the 2002 transfer and asserting that he believed that he was receiving half of the partnership assets equally, of which the Farm was a part, without any encumbrance. There is no challenge to those findings.

105. Her Honour’s dispositive reasons for finding that Sam had a personal equity against Rocco were:

[193] I have found that Sam reported the parents’ 1994 representations to Rocco the following day. I have accepted Angelina’s evidence of conversation on this subject at the Pirrottina family kitchen table, which included Rocco: see [35]. I have also found that Rocco was present when Mrs Pirrottina Snr repeated the substance of the parents’ 1994 representations to Mr Falvo in early 1996: see [1]-[43]. As such, Rocco was aware of the assurances made by Mr and Mrs Pirrottina Snr to Sam in respect of the Lot and the house. Rocco also knew that Sam had relied on those assurances to his detriment, by foregoing the opportunity to have the parents buy him a block of land: see [1]. Over the next six to eight years, Sam’s house was built on the Lot, on which Mr Falvo also constructed a footpath, road and hard landscaping. All of this took place in clear view of Rocco, who was living with his parents in the adjacent homestead. I find that Rocco was aware of Sam’s interest at the time of the transfer.

[194] In 2002, when Mr and Mrs Pirrottina Snr transferred the Mangrove Mountain farm to Sam and Rocco as tenants-in-common in equal shares, Sam’s right to occupy the Lot and house was not re-visited. Nor does the evidence suggest that the parents intended, by the transfer, to defeat or diminish Sam’s interest: see [176]. Rocco understood that he was going to get title to the Mangrove Mountain land but that his parents were going to maintain control over the land, its improvements and buildings. Rocco and Sam promised that they wouldn’t sell the land. Rocco agreed that he and Sam accepted the land on these conditions. The conditions, while not legally enforceable, indicate the parties’ intentions that, apart from the change in registered proprietors, the conduct of the family business and the occupation of the Mangrove Mountain land would continue as before.

[195] Sam contended that Rocco acknowledged or represented by silence that Sam’s interest would be preserved. But is it necessary to find some “superadded” factor, such as some form of acknowledgement of Sam’s interest, or an agreement or undertaking to act in accordance with it, in a case such as this? I think not, where the principles summarised in Presbyterian Church v Scots Church are in respect of property transactions with third parties. Rocco was not a third party, but a family member with intimate knowledge of the arrangements made between his parents and Sam in respect of the Lot and Sam’s house.

[196] Sam’s interest in the Lot and Sam’s house was not discussed at the time of the transfer, as the continuation and preservation of Sam’s interest ‘went without saying’. Each of Mr and Mrs Pirrottina Snr, Sam and Rocco intended and understood that the Mangrove Mountain farm was being transferred from the parents to the sons in order to preserve the status quo, save for the identity of the registered proprietors. Indeed, the only reason the registered proprietors were being changed was to preserve the existing arrangements for the Pirrottina family going forward. This is not a case where Rocco knew something which he did not disclose and, thus, it is not necessary to consider whether he had a duty to say something. Rocco did not think he was getting a half-share in the Mangrove Mountain farm, including a half-share in the Lot and Sam’s house, but kept this to himself. Rocco was of the same mind as his parents and brother. He knew that the parents were giving the Mangrove Mountain farm to himself and his older brother subject to Sam’s existing rights and interests.

[197] To now depart from the basis upon which Rocco agreed to accept the transfer of title to the Mangrove Mountain farm amounts to an unconscionable attempt to deny the unregistered interest which Rocco undertook to subject his registered title. This attracts the intervention of equity. I will return to what relief, if any, should be granted at [224].

106. Ground 12 contends that the primary judge erred in holding that Sam had established an exception to indefeasibility for the purposes of s 42 of the Real Property Act. This ground is directed to challenging the finding (at J[197]) that Sam had a personal equity at the time of the 2002 transfer, and that to now depart from the basis upon which Rocco agreed to accept the transfer of title to the Farm amounts to an unconscionable attempt to deny the unregistered interest which Rocco undertook to subject his registered title and this attracts the intervention of equity.

107. Ground 13 contends, in the alternative, that the primary judge erred in failing to take into account, for the purposes of s 42 of the Real Property Act, that Rocco was not the person who made the promise to Sam about the second residence. This ground is directed to challenging the finding (at J[195], [197]) that Rocco knew that his parents were giving the Farm to himself and Sam subject to Sam’s existing rights and interests.

Personal equity

108. The indefeasibility conferred on a registered proprietor by s 42 of the Real Property Act “in no way denies the right of a plaintiff to bring ... a claim in personam, founded in law or in equity, for such relief as the Court acting in personam may grant”: Frazer v Walker [1967] 1 AC 569 at 585. See also: Breskvar v Wall (1971) 126 CLR 376 at 384-5; [1971] HCA 70. Thus, the Court may recognise such a claim, commonly referred to as a “personal equity”, notwithstanding that an in personam claim is not an exception contained in s 42: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [193]ff; Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149; [2013] HCA 11 at [31]. However, only certain legal or equitable causes of action against a registered proprietor operate as in personam exceptions outside the indefeasibility provision in s 42(1): Farah at [193]-[198].

109. Farah concerned a claim arising under the first limb (knowing receipt) of Barnes v Addy (1874) LR 9 Ch App 244. The High Court held that the in personam exception to indefeasibility under s 42 did not extend to such a claim against a registered proprietor: Farah at [193]-[195]. In Turner v O’Bryan-Turner (2022) 107 NSWLR 171; [2022] NSWCA 23 at [101]-[103], [116]-[120], White JA (Meagher and McCallum JJA agreeing) explained that the reasoning in Farah does not preclude a personal remedy for knowing receipt.

110. In Heggies Bulk Haul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312; [2003] NSWSC 851 at [103]-[104], Austin J contrasted those cases where a personal equity will not be created (those where the registered proprietor merely asserts his registered title after acquiring it with notice of the unregistered interest) with those cases which contain the “additional ingredient” beyond mere notice of a third party’s rights sufficient to create a personal equity against a registered proprietor. After reviewing the authorities, in particular Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16, Austin J described the “additional ingredient” at [103(iii)] as conduct involving some form of acknowledgment of the unregistered interest, or an agreement or undertaking to act in accordance with it, from which the registered proprietor later resiles.

111. This description of the “additional ingredient” beyond mere knowledge of an unregistered interest in land was accepted by Young CJ in Eq in The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; (2007) 64 ACSR 31 at [112], who also observed at [114], that it is necessary to be a little careful with the word “acknowledgement”. His Honour continued at [114]:

Acknowledgement in this type of case means more than the realisation that a right exists. It connotes the case where a person not only recognises the right exists, but also undertakes to respect that right. However, it does not appear necessary that the undertaking need be known to the person whose right is in question at the time when it is made.

112. Both Austin J in Heggies and Young CJ in Eq in Presbyterian Church referred to a number of cases where additional ingredients were found to exist. Austin J at [104], referred to Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 where an unregistered lease and option were referred to in the relevant contract for sale. The purchaser agreed to abide by the terms and conditions of the lease. Wood J held that the purchaser, having acknowledged or agreed to recognise the lease, took subject to it. That decision was based on the existence of an equity in the lessee or alternatively, on the fraud exception to s 42.

Rocco’s argument

113. Rocco challenges the finding that he accepted his share in the Farm from his parents on condition that he recognise Sam’s interest, referring to J[195], [197]. It is said that her Honour did not explain the precise “basis”, or the terms of the agreement by Rocco to accept the 2002 transfer.

114. There is no uncertainty as to the agreed “basis” on which Rocco and Sam accepted the transfer of the land in 2002. Her Honour described this “basis” (at J[193]-[194]), namely, that with notice of Sam’s interest in the Lot, Rocco gave assurances to his parents that he would accept the transfer of the Farm subject to Sam’s existing rights and interests, by agreeing to the conditions of the transfer: that his parents would maintain control over the land, its improvements and buildings, and that he would not sell the land. Those were the circumstances in which her Honour found that to now depart from the “basis” upon which Rocco agreed to accept the transfer of title to the Farm amounted to an unconscionable attempt to “deny the unregistered interest which Rocco undertook to subject his registered title”: at J[197].

115. It is said that her Honour seems to have determined the personal equity on a particular “basis” (at J[197]) that was not pleaded, being, it was said, that “the parents would continue to be in charge of the business”. The pleading objection is without merit. This finding (at J[197]) was a matter which was common ground: see par [24] of Rocco’s affidavit sworn 28 November 2022 and par [40] of Sam’s affidavit of 10 February 2023.

116. It is said that, in any event, the right of management veto being the basis on which the parents transferred the land to Sam and Rocco, did not amount to an acknowledgement of Sam’s interest in the Lot or an undertaking to act in accordance with it. This misstates her Honour’s findings. The finding concerning the parents’ right of management veto is to be read together with the finding that Rocco promised that he would not sell the land. That was important because that would protect Sam’s interest in the Lot.

117. As her Honour found (at J[194]), these conditions, while not legally enforceable, indicated the parties’ intentions that, apart from the change in registered proprietors, the conduct of the family business and occupation of the Farm would continue as before. That is the context in which her Honour found (at J[196]) that each of Mr and Mrs Pirrottina Snr, Sam and Rocco intended and understood that the Farm was being transferred from the parents to the sons in order to preserve the status quo, save for the identity of the registered proprietors. Taken together, that conduct of Rocco amounted to an agreement or undertaking to act in accordance with Sam’s interest in the Lot.

118. It is said that Rocco did not do anything, and he only became aware of the broad substance of the parents’ promise (on the challenged finding) after the event. But Rocco had more than mere notice of Sam’s interest in the Lot at the time of the 2002 transfer. Rocco took his interest in the Farm with assurances of conduct by him that would have preserved Sam’s interest in the Lot. Those assurances by Rocco which are the subject of the findings (at J[193] and [194]), were given in the knowledge that the parents were giving the Farm to himself and Sam subject to Sam’s existing rights and interests: at J[196].

Issue 5: Challenge to findings on Sam’s alternative estoppel claims

The primary judge’s reasons

122. Her Honour summarised Sam’s alternative claim for a declaration that Rocco is estopped from denying Sam’s interest in the Lot based on an estoppel by representation or an estoppel by acquiescence (at J[198]):

Sam said he was induced by the representation made by Rocco to the parents shortly before the transfer (see [61]), together with subsequent implied representations by silence in the face of Sam’s continued occupation and improvement of Sam’s house, that Rocco would not seek to sell the Mangrove Mountain farm, that the Lot belonged to Sam and that Sam was entitled to occupy the Lot for his lifetime. In reliance on Rocco’s representations, Sam continued to live in his house and conduct himself in the manner earlier described (at [156]), and also to carry out further improvements to his home at his expense. Sam would now suffer detriment if there was a departure from the assumptions that he made, induced by Rocco’s representations, from which it would be unconscionable for Rocco to now resile. Alternatively, Sam claims that an estoppel by acquiescence operated, relying on essentially the same material facts.

123. Her Honour found that Sam had established both (1) an estoppel by representation which precluded Rocco from resiling from his express representations to his parents and by silence to Sam, that Rocco recognised Sam’s interest in the Lot, and (2) an estoppel by acquiescence by Rocco’s conduct which made it unconscionable for Rocco to benefit from Sam’s sustained expenditure and improvement of the property over 20 years by insisting on Rocco’s strict legal rights. Those findings were as follows:

[207] There is no dispute that Rocco represented to Mr and Mrs Pirrottina Snr, shortly before the transfer, that he would continue to run the family business with Sam and not sell the farm. Over the next 20 years, Rocco said nothing whilst Sam continued to occupy and improve Sam’s house. The renovations and extensions were substantial. The cost exceeded the initial amount outlaid by the parents to build the house in 1996 (accepting, of course, that building costs likely increased over time). Rocco never suggested that Sam was not entitled to treat the Lot and Sam’s house as his own, and to renovate it accordingly. This amounted to a representation by silence that Rocco recognised Sam’s interest in the Lot. I am satisfied that Sam relied on Rocco’s express representations to the parents, and his implied representation by silence, when Sam continued to outlay substantial funds to improve the Lot and the house. I am also satisfied that Sam would now suffer a detriment if Rocco resiled from those representations. In all of the circumstances, I consider that it would be unconscionable to permit Rocco to do so.

[208] If it be the case that Sam’s understanding of his interest in the Lot and the house was mistaken, and Rocco correctly understood that he had a half-share in the Mangrove Mountain farm unencumbered by Sam’s interest, then I am also satisfied that estoppel by acquiescence has been established. Sam assumed that the Lot, and the house built on it, was his. Rocco was aware of Sam’s assumption. Over a 20 year period, Sam improved the Lot on the basis of that assumption, whilst Rocco chose not to disabuse his brother of that assumption. This gives rise to estoppel by acquiescence, as it would be unconscionable in these circumstances for Rocco to benefit from his brother’s sustained expenditure and improvement of the property over 20 years by insisting on Rocco’s strict legal rights.

Rocco’s argument

124. The parties diverged as to whether these findings are the subject of a ground of appeal. Sam emphasised that there is no express challenge in the grounds of appeal. Rocco responded that the grounds going to reliance, unconscionability and indefeasibility also apply to the findings in respect of Sam’s alternative estoppel claim. In my view, that is not a fair reading of the grounds of appeal, especially given that there is no mention of any challenge to these findings in either Rocco’s written submissions-in-chief or schedule of factual challenges.

125. The parties also diverged as to whether, as Sam submits, these findings provide an alternative basis upon which each of orders 2 and 3 were made. Rocco argued to the contrary; it is said that her Honour did not consider the indefeasible title defence in that context, and that the acquiescence or implied representations would give rise to different orders, such as monetary compensation for the expense of improvements to the Lot by Sam. In writing, Rocco said that if he is wrong in his reading of J[207]-[208], and these findings were intended to be an independent ground to support the orders made, and that challenge is not adequately raised in the notice of appeal, then leave is sought to challenge that conclusion in this appeal.

126. The alternative findings of estoppel were only briefly mentioned in oral argument. Rocco did not advance any substantiative argument at the hearing as to why these credit-based findings should be set aside. Nor did Rocco formulate any amended grounds or pursue his foreshadowed amendment application.

127. I have considered in accordance with Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 at [12], and Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [8] whether the Court should resolve these asserted factual challenges and related issues although they cannot affect the outcome of the appeal, in light of the conclusions on Issues 1-4 above. In my view, the Court should not do so given the absence of a formal application by Rocco to amend the notice of appeal and the further absence of any substantive argument challenging these findings.

Issue 6: Relief (Grounds 6, 7 and 8)

128. Grounds 6, 7 and 8 each challenge the buyout relief.

129. Ground 6, as pressed, contends that the exercise of the discretion by the primary judge in making the buyout order miscarried. The contention that her Honour did not have power to make a buyout order was not pressed. That concession was properly made as the power to order a buyout is recognised in the authorities, such as Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 at 14,701 (Santow J).

130. Ground 7 contends that there was insufficient evidence to make a finding as to the market value of the Farm for the purposes of a buyout order, and that the primary judge erred in ordering that a further expert report be obtained after the trial from the joint expert, Mr Wood.

131. Ground 8 contends that the primary judge erred in arriving at the quantum of equitable compensation following the buyout order.

Nature of the appeal

132. Sam submitted that the House v The King (1936) 55 CLR 499; [1936] HCA 40 standard applies to appellate review of the exercise of the primary judge’s discretion to make a buyout order, the subject of ground 6. Reference was made to Soulos v Pagones [2023] NSWCA 243 at [326] (Ward P, Meagher and Mitchelmore JJA agreeing).

133. The standard of appellate review directs attention to the nature of the decision the subject of the appeal. In accordance with the reasoning of the High Court in GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 97 ALJR 857, the constrained standard in House v The King only applies where there is a range of answers which can be provided, rather than a binary outcome, as to which the “correctness” standard applies. Further, even where there is a binary choice and the binary choice involves an evaluative judgment, the correctness standard applies: GLJ at [16] (Kiefel CJ, Gageler and Jagot JJ agreeing).

134. Prior to Soulos, whether House v The King applied to appellate review of relief for a proprietary estoppel claim on the basis that there is a true discretion as to relief in respect of a claim of equitable proprietary estoppel, or whether a trial judge’s assessment of what conscience requires is instead entitled to no deference on appeal, had been left open by intermediate appellate courts: Fifteenth Eestin Nominees Pty Ltd v Rosenberg (2009) 24 VR 155; [2009] VSCA 112 at [272]; Browne v Browne [2019] WASCA 1 at [96]-[100]; Q (a pseudonym) v E Co (a pseudonym) at [165] (Meagher JA, Leeming and Payne JJA agreeing).

135. In Soulos, Ward P considered the question including what was said by Gageler J in Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [35]-[50]and by Bell CJ in Augusta Pool 1 UK Ltd v Williamson (2023) 111 NSWLR 378; [2023] NSWCA 93 at [2]-[3], [6]. Her Honour concluded at [326] that there is a distinction between review of a finding of detrimental reliance, to which the correctness standard applies, and review of a finding as to the appropriate relief, to which the constrained standard in House v The King applies:

Here, while it is an evaluative exercise to determine whether in a particular case detrimental reliance that has been found to have been suffered is prima facie sufficient for equity to require the relevant representation or encouragement to be made good, I would conclude that such a determination attracted the correctness standard of review. However, the question whether such relief would be disproportionate and inequitably harsh, in one sense is closer to the consideration of what is “just” or “just and equitable” in cases of the kind to which Bell CJ referred and would in my opinion attract the House v The King standard of appellate review (as would the ultimate question as to the appropriate form of relief), this involving potentially a range of views as to the harshness or otherwise in equity of making the representation good. ….

136. Rocco did not submit to the contrary. It is appropriate to proceed on this basis. For completeness, whether the correctness standard or the constrained standard of appellate review applies to review of relief for a proprietary estoppel claim does not impact upon my conclusion on ground 6.

Ground 6

137. Section 66G of the Conveyancing Act provides that where any property is held in co-ownership, the Court may, on the application of one or more of the co-owners, appoint trustees of the property and vest the same in such trustees to be held by them on statutory trust for sale. It is not in dispute that her Honour correctly stated the applicable principles concerning the nature of the discretion to make a s 66G order: at J[242]-[244].

138. The word “may” in s 66G conferring the Court’s jurisdiction is used facultatively. The Court’s discretion is at least wide enough to refuse an order for sale where the order would be inconsistent with some proprietary right, or some contractual or fiduciary obligation but the Court does not have a general discretion to refuse an application on such broad grounds as hardship or unfairness: Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068 (Myers J); Ngatoa v Ford (1990) 19 NSWLR 72 at 75 (Needham J); Williams v Legg (1993) 29 NSWLR 687 at 691G-692A (Handley, Sheller and Cripps JJA); Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd at 14,700-14,701 (Santow J).

The primary judge’s reasons

139. In exercising the discretion to order a buyout by reference to Sam’s interest in the Lot, her Honour gave the following reasons:

[248] I do, however, accept Sam’s submission that the Court may refuse an order for judicial sale where it would be inconsistent with an equitable obligation, namely, Sam’s proprietary interest: Blackwell v Blackwell [2020] NSWSC 1208 at [14] (per Parker J). The fact the Lot cannot be excised from the farm means that Sam’s interest cannot be preserved without preventing the sale of the whole farm. An agreement limiting the manner in which a person may dispose of their interest as a co-owner may also provide a ground for refusal of an application for an order under s 66G: Matsen v Matsen [2008] NSWSC 135 at [63] (per Hamilton J). Rocco accepted transfer of the Mangrove Mountain farm on the condition that he would not sell it but would preserve the status quo, including Sam's interest.

[249] I am not forgetting that Sam was partly responsible for the breakdown of the partnership with Rocco. But Sam’s equitable interest in the Lot pre-dated the partnership by eight years and was not dependent on the continuation of the partnership for its existence. Sam stands ready to buy Rocco’s interest in the farm for fair value and, indeed, has been trying to do so since October 2020. Where an order for judicial sale will defeat the interest which the parents sought to convey to Sam, permitting Sam to buy Rocco’s interest at fair value does not prejudice Rocco’s rights but preserve Sam’s equitable interest. I consider in these circumstances that an order for judicial sale should not be made. Rather, the mechanism adopted in Woodson ought be deployed, requiring Rocco to offer his remaining interest in the Mangrove Mountain farm to Sam at market value. If Sam is not willing or able to acquire Rocco’s share at market value within a prompt timeframe, the farm should be sold.

Rocco’s argument

140. It is said that there should be no grant of equitable relief with respect to Sam’s proprietary claim in the Lot because: (a) the effect of the buyout order is that Sam gets a “windfall gain” because there is no market sale, (b) this error is compounded by her Honour granting the buyout order in addition to equitable compensation, which is the subject of ground 8, (c) it was not unconscionable for Rocco to abandon his mother’s promise to Sam in light of the 2002 transfer because there was always a risk that things may change between Sam and Rocco as joint owners of the Farm, and (d) denying an open market testing of the price of the entire Farm (where both brothers were willing to bid) unreasonably impinged on Rocco’s proprietary interest in the Farm.

141. As to (a), the assertion of a “windfall gain” in the absence of an auction sale ignores that the market value of the Farm was valued by a single joint expert on a basis agreed to by Rocco. The complaint that an independent valuation on an agreed basis will result in a windfall gain is speculative and not the subject of evidence.

142. As to (b), the assertion that Sam is overcompensated by the grant of the buyout order in addition to equitable compensation, is based on a false premise. As explained below when addressing ground 8, there was no award of equitable compensation.

143. As to (c), the submission that it was not unconscionable for Rocco to abandon his mother’s promise to Sam in light of the 2002 transfer has been rejected above when addressing grounds 3 and 4. In short, the risk that things may change between Sam and Rocco as joint owners of the Farm is answered by the assurances of conduct by Rocco, including that he would not sell the Farm.

144. As to (d), contrary to Rocco’s submission, her Honour carefully weighed the interests of the parties and found that, whereas an order for judicial sale would defeat the interest which the parents sought to convey to Sam, permitting Sam to buy Rocco’s interest at fair value did not prejudice Rocco’s rights: at J[249]. There is no error in that approach or conclusion. It accorded with the “cardinal principle” of equity “that the remedy must be fashioned to fit the nature of the case and the particular facts”: Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559; [1995] HCA 18.

Rocco’s alternative argument

145. Rocco’s alternative argument is that Sam should be compensated by an award of equitable compensation for the money he spent, or, at a maximum, for the increase in value caused by the improvements to the Lot, and the Farm should be sold at public auction at which both parties could bid for it. Reference to three cases is of assistance.

146. Morris v Morris [1982] 1 NSWLR 61 involved a claim by a plaintiff who having sold his home unit, had paid some $28,000 towards an extension to the home jointly owned by his son and daughter-in-law to provide accommodation for himself indefinitely as part of his son’s family. There was a subsequent breakdown in his son’s marriage and the relationship between the plaintiff and his daughter-in-law leading to the plaintiff’s departure from the property. After noting that the remedies to which the principle of equitable estoppel by encouragement give rise to are imposed in order to satisfy the demands of justice and good conscience, McLelland J (as his Honour then was) held that rather than the imposition of a constructive trust, the appropriate remedy to reflect the plaintiff’s equity was an equitable charge over the property, together with interest thereon. Those factual circumstances are very different to the present case.

147. Giumelli v Giumelli involved a promise made by parents to a son that a larger property would be subdivided to create a lot which would include a house and the orchard if the son stayed on the property and did not accept an offer from his father-in-law of work elsewhere. The plurality recognised at [50] that whilst the prima facie relief in a case of proprietary estoppel is to make good the promise or representation on which there has been detrimental reliance, the grant of equitable relief must avoid injustice to others and avoid relief which goes beyond what is required for conscientious conduct by the promisors. The High Court held that the circumstances of a still pending partnership action, the improvement to the promised lot by family members other than the son, both before and after his residency there, the breakdown in family relationships and the continued residence on the promised lot by another son and his family, the appropriate remedy was an order for payment of a monetary sum representing the present value of the son’s claim to the promised lot, that sum being charged on the whole of the larger property until payment: at [49]-[51]. Again, those factual circumstances are very different to the present case.

148. S**idhu v V**an Dyke relevantly involved an unsuccessful challenge to an award of equitable compensation for a woman’s detrimental reliance on a man’s promise that he wanted to have a home with her, that he planned to subdivide the property where the woman occupied a cottage, and that as soon as that was done, he would make sure that the cottage was put in her name. The conditions attaching to the council subdivision approval were not all satisfied, and the cottage was later destroyed by fire.

… [H]ere, the detriment suffered is of a kind and extent that involves life-changing decisions with irreversible consequences of a profoundly personal nature, it is in my view beyond the measure of money and such that the equity raised by the promisor’s conduct can only be accounted for by substantial fulfilment of the assumption upon which the respondent’s actions were based.

150. The plurality in Sidhu v V**an Dyke went on to observe at [85]:

… While it is true to say that “the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct”, where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party's detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise. (Citation omitted.)

151. Contrary to Rocco’s submission, the appropriate measure of relief in respect of the promised Lot is not the fixing of a monetary sum to represent the value of Sam’s claim to the promised Lot: cf Giumelli v Guimelli at [51]. This case is of the second type referred to in Sidhu v Van Dyke at [84]. As Ward CJ in Eq observed in Bassett v Cameron [2021] NSWSC 207 at [558], relief is not to be measured by “weighing detriment too minutely in order that it be converted into some equivalent of cash or kind, as if one were measuring the consideration for a commercial bargain” (Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84 at [3] (Allsop P)), and “proprietary estoppel is not a case of quid pro quo” (McNab v Graham at [114(3)] (Tate JA citing with approval the analysis of Nettle JA in Donis v Donis at [56])).

152. The detriment suffered by Sam is of a kind and extent that involves life-changing decisions since 1994 with irreversible consequences of a profoundly personal nature, and it is beyond the measure of money. The equity raised by the parents’ promise can only be accounted for by substantial fulfilment of the assumption upon which Sam’s actions in reliance on the promise to his detriment were based. Making good the promise to Sam that the house and the Lot would be his is the prima facie relief to which Sam is entitled. Permitting Sam to buy Rocco’s interest at fair value did not prejudice Rocco’s rights. Nor did such relief go beyond what was required for conscientious conduct by Rocco. The preservation of Sam’s interest in the promised Lot is consistent with the basis upon which Rocco, with knowledge of the parents’ earlier promise to Sam, accepted the 2002 transfer, namely, that the Farm would remain in the family and would not be sold.

153. Her Honour’s exercise of discretion to make a buyout order did not miscarry.

Ground 7

The primary judge’s reasons

154. The primary judge considered the expert evidence concerning the value of the Farm and the Lot, and concluded that whilst ascribing a value to the Lot is difficult, the problem did not go away whether orders are made for equitable compensation, a judicial sale or a buyout: at J[228]-[234]. Her Honour proceeded to assess the Lot’s value by reference to the evidence of two experts relied on by the parties: (1) the joint expert valuer, Mr Wood’s 14 July 2023 valuation of the Farm and the Lot, and (2) Sam’s “life interest” valuation expert, Mr McBirnie’s 16 November 2023 valuation of Sam’s life interest in the Lot.

155. Mr Wood was cross-examined and no issues of credit arose: at J[23]. Mr McBirnie, an actuarial expert, was not required for cross-examination: at J[23]. Her Honour summarised the findings of the two experts (at J[230]-[231]):

156. Mr Wood valued the Farm at $6.5 million as at 14 July 2023;

157. Mr Wood separately valued the Lot at $1.76 million in total (comprising $1.25 million referable to the land and $509,250 referable to the residence). Mr Wood, as instructed, assumed that the Lot had separate title and right of access to the public road. He agreed in his evidence that he did not take into account the business, goodwill, nor the fluctuations in business conditions, when valuing the Farm; and

158. Mr McBirnie took the value of the Lot as opined by Mr Wood and apportioned 68.6 per cent to the value of Sam’s life interest, being $1,207,000.

159. Her Honour considered that the value of Sam’s equitable interest in the Lot fell within the range of figures provided by the experts, finding that the valuation by Mr Wood was too high and the valuation by Mr McBirnie was too low, giving the following reasons:

[238] … The detriment suffered by Sam as a consequence is the value of that equitable interest at the time of trial. I consider that the value of the equitable interest falls within the range of figures considered by Mr Wood and Mr McBirnie. Using the rate applied by Mr Wood of $10 per square metre for the farm land, the Lot would be valued at $50,640, which is too low given the development of the Lot beyond agricultural land. The value of the residence alone, being $509,250, is also too low as it makes no allowance for the value of the acre of land on which the residence stands.

[239] The valuation of $1.76 million is probably too high, where the Lot does not, in fact, have a separate title to the rest of the farm. The parties never envisaged that it would. The parties did understand, however, that the parents had given Sam the Lot and he owned it. It was also envisaged that Sam would continue to live on the Lot as the Pirrottina family continued to run the farm. However, there was always a risk that things may change, such that the farm would have to be sold, for example, if the citrus orchards proved unprofitable. If things had changed before Mr and Mrs Pirrottina Snr died, then Sam would reasonably expect that his parents would ‘make it up to him’ if they were in a position to do so, by buying him another property for Sam and his family to live.

157. Her Honour ascribed a value of $1.32 million to the Lot after considering two means of discounting the market value of the Lot to take account of the facts of this case (at J[240]):

… I consider that the valuation of $1.76 million should be discounted to take into account the risks inherent in the equitable interest conferred by the parents, where Sam was living on property owned by others, and things may change. The discount should be modest, say 20%, where Mr and Mrs Pirrottina Snr’s generosity to their children would likely have provided a form of insurance against this risk. A rough and ready way of checking this is to take the mid-point between the value of the Lot as agricultural land plus the value of the residence (together some $560,000) and the value of the Lot with separate title. The mid-point is $1.16 million. This is two-thirds of the value of the Lot with separate title, akin to a 33% discount for vicissitudes. Having regard to the figures reached by both experts, and two means of discounting market value to take into account the facts of this case, I consider that the value of the Lot for the purposes of equitable compensation, payment to Sam on sale of the farm or any buy-out is 75% of $1.76 million, being $1.32 million. Such a figure represents 20% of the value of the Mangrove Mountain farm.

158. It is of assistance to unpack the steps undertaken by her Honour (at J[240]). First, her Honour took the value of the Lot proposed by Mr Wood ($1,760,000) and discounted it by 20 per cent, to account for the “risks inherent in the equitable interest conferred by the parents, where Sam was living on property owned by others, and things may change”: J[240]. This gave a figure of $1,408,000.

159. Next, her Honour “check[ed] this” figure by taking the midpoint between (1) the value of the Lot as agricultural land (using Mr Wood’s $10/m2 estimation, multiplied by the estimated size of the Lot being 5,064m2) plus Mr Wood’s value of the residence, and (2) Mr Wood’s value of the Lot as if it had separate title. The midpoint between (1) being $560,000 approximately, comprising the value of the farmland on the Lot ($50,650) plus the value of the house ($509,250), and (2) $1,760,000, yielded a figure of $1.16 million which is approximately two-thirds of the value of the Lot assuming separate title ($1.76 million): 1,160,000/1,760,000 = 65.9 per cent.

160. Finally, her Honour adopted a figure of 75 per cent of Mr Wood’s $1.76 million separate-title valuation being $1.32 million, “having regard to the figures reached by both experts, and two means of discounting market value to take into account the facts of this case”: at J[240]. Her Honour then applied the figure of $1,320,000 to Mr Wood’s valuation of the Farm at large: 1,320,000/6,500,000 = 20.307 per cent, and concluded that Sam’s equitable interest in the Lot represents 20 per cent of the total value of the Property: at J[240].

Further evidence on appeal

161. Rocco sought to adduce further evidence on appeal being the updated valuation of Mr Wood dated 3 June 2024 and the assumptions on which it was based, including emails between the parties’ solicitors, and between the parties’ solicitors and the Associate to the primary judge concerning the basis of the updated valuation.

162. As it relates to matters occurring after the hearing below, it is not necessary for Rocco to show “special grounds” before the Court can receive this further evidence: Supreme Court Act 1970 (NSW), s 75A(9). Sam did not oppose the admission of this further evidence which is relevant to the procedural fairness complaint. The further evidence should be received on appeal.

Rocco’s argument

163. Rocco submits that there was insufficient evidence to make a finding as to the market value of the Farm for four reasons.

164. First, it is said that Mr Wood was instructed to perform his task on the “wrong” basis. I disagree. The orders for the appointment of a single joint expert and the terms of that appointment were made by consent, and the market value of the Farm and the Lot were each valued by the joint expert on a basis agreed to by Rocco; specifically, Mr Wood was instructed to assume that “the Lot does not form part of the Mangrove Mountain Farm but has a right of access”. Mr Wood did not perform his task on the wrong basis.

165. As Sam correctly submits, given the joint instructions to Mr Wood, it was apparent to Rocco that Sam was seeking a buyout of Rocco’s interest so as to preserve the equitable interest in the Lot held on trust by Rocco for Sam, and the separate valuations of the Farm and the Lot would be relied upon by Sam in establishing his interest and that a buyout order was appropriate in all the circumstances.

166. Nor did Rocco assert in advance of the hearing that the valuation of his interest should be conducted on an alternative basis; he did not propose orders for a valuation on an alternative basis; he did not decline to participate in the joint instructions or seek leave to adduce evidence from another expert, pursuant to UCPR, r 31.44; and he did not seek directions from the Court as to a further opinion from Mr Wood (once it had been provided) prior to the hearing on the basis of an alternative assumption. Insofar as Rocco belatedly made several late complaints at trial, Sam correctly points out that Rocco did not propose any solution. Rocco is bound by the way he ran the matter below.

167. Second, it is said that the valuation by Mr Wood is deficient because he did not take into account several matters which her Honour referred to (at J[233]) that Mr Wood did not value the business, nor goodwill, or take into account fluctuations in business conditions such as the price of fruit, when valuing the Farm; nor did he take into account the extent to which the trees would generate revenue from fruit sales. Her Honour correctly observed (at J[233]) that this is unsurprising where Mr Wood was not instructed to do so in the joint letter of instruction.

168. Nor was Mr Wood asked to value the Lot from the perspective of any specific purchaser, including whether the Farm was of a particular value to Rocco and Sam. As her Honour found (at J[233]):

… Apart from criticising Mr Wood’s valuation, Rocco did not proffer an alternate valuation, either on a going concern basis or at all. Nor is it obvious that Mr Wood, or another valuer, would be able to value the Lot on the assumptions proffered by Rocco at trial. Nor do such assumptions strictly align with the parties’ understanding of Sam’s interest in the Lot, being that the parents had given him the Lot and he owned it.

169. There was no error by her Honour in rejecting Rocco’s submission that Mr Wood’s valuation should be put to one side for failing to value the Farm on the basis other than which he was jointly instructed to.

170. Third, it is said that the valuation was “too old” to be relevant. This complaint ignores that recognising the evidence of the upward trend in the value of the Farm over time, her Honour considered the currency of Mr Wood’s valuation, when ordering an updated valuation. Her Honour explained (at J[241]):

The value of the farm appears to have increased from the first valuation obtained in October 2020, to the updated valuation in August 2021 until Mr Woods’ valuation in July 2023. The first and second valuations were not admitted as evidence of value, but I note the upward trend nonetheless. A further 10 months has passed since Mr Woods’ valuation. To ensure that Rocco’s position is not compromised, Mr Wood should provide an updated valuation of the Mangrove Mountain farm, with equitable compensation, any payout to Sam on judicial sale or a buy-out figure to comprise 20% of that valuation. Sam and Rocco share the remaining interest in the Mangrove Mountain farm equally, being 40% each.

171. Counsel for Rocco acknowledged that the effect of the updated valuation is in Rocco’s favour; that is, Rocco would now obtain a higher price on the buyout order for his 40 per cent interest in the Farm. There is no merit in this complaint.

172. Fourth, it is said that no party sought an order for an updated valuation and this order denied Rocco procedural fairness. This complaint overlooked that the order that Mr Wood update his report following judgment to account for market movements was proposed by Sam in his written closing submissions. Rocco did not oppose such an order, nor request to cross-examine Mr Wood on his updated valuation before her Honour delivered judgment, if the Court intended to make such an order. There was no denial of procedural fairness. Ground 7 is not made out.

Ground 8

173. It is said that the combination of the buyout order and the quantum assessed for equitable compensation was to give Sam a windfall gain. The premise of this ground is flawed. As counsel for Rocco acknowledged in oral argument, her Honour did not award equitable compensation.

174. Counsel clarified that this ground used the “handle, equitable compensation” because her Honour had regard to those principles when ascribing a value to the Farm and the Lot. Counsel said that what was intended by this ground is that a buyout order where each of Sam and Rocco obtains 50 per cent of the updated valuation of the Farm is sufficient to make good the promise, but to order a buyout of Rocco’s interest in the Farm after deducting the value of the Lot, amounts to the overcompensation for Sam. I disagree.

175. The deduction of the ascribed value of the Lot from the value of the Farm for the purposes of framing orders as to the terms on which the buyout should take place, reflected the value of Sam’s equitable proprietary interest in the Lot. A buyout order in respect of Rocco’s interest in the Farm which ignored Sam’s equitable interest in the Lot, would not have been sufficient to make good the promise made to Sam by his parents.

176. It is also said that her Honour’s approach was arbitrary because the value ascribed to the Lot was “too high”. This complaint has been addressed above when rejecting ground 7. In short, her Honour had regard to the parties’ joint instructions to Mr Wood, the evidence of the two experts, and two means of discounting the market value of the Lot to take account of the facts of the case. Ultimately, her Honour discounted Mr Wood’s separate title valuation of the Lot by 25 per cent. Her Honour’s approach to ascribing a value to the Lot was reasoned, not arbitrary. Ground 8 is not made out.

Issue 7: Was the Farm a partnership asset (Ground 11)

177. Rocco contends that the Farm was a partnership asset and seeks an order that it be sold with other partnership assets. Counsel for Rocco acknowledged that nothing much turns on this ground and was content to rely upon his written submissions on this ground.

178. There is no dispute as to her Honour’s statement of legal principles: at J[144]-[146]. Her Honour correctly noted that whether the property of a partner becomes partnership property depends on the acts and intentions of the parties, referring to O’Brien v Komesaroff (1982) 150 CLR 310 at 322; [1982] HCA 33, where Mason J said:

…not all the property of each partner used for the purposes of the partnership business can be said to be brought into the partnership. It may in some circumstances remain the separate property of one partner... Whether the property of a partner becomes partnership property depends on the agreement of the parties. …

179. The ultimate test in determining what is partnership property is the agreement of the parties: Lucas v Lucas [1962] Qd R 205 at 207 (Gibbs J). In the absence of an express agreement, a court will imply an agreement that certain property is partnership property where the conduct of the parties towards the property evinces such an intention. In determining whether that inference may be drawn, all of the circumstances surrounding the purchase of the disputed property must be taken into account: Bassett v Cameron at [614] (Ward CJ in Eq). This includes having regard to the source from which the property was obtained, the purpose for which it was used, and the manner in which it has been dealt with, and to the rules laid down in the statute: Lucas v Lucas at [207].

180. Relevantly, by s 20(1) of the Partnership Act 189**2 (NSW), “partnership property” is defined as “[a]ll property, and rights and interests in property, originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business …”. By s 21 of the Partnership Act, absent contrary intention, property purchased with partnership money is deemed to be bought on account of the partnership.

181. Applying these principles, the starting point is that the Farm was not purchased with partnership money; hence, the deeming provision in s 21 of the Partnership Act did not apply. Rather, the source from which the Farm was obtained was the parents, who transferred the Farm to Sam and Rocco for nil consideration. The purpose for which the Farm was used was for citrus production and also a residence for the parents and a separate residence for Sam and his family.

182. The manner in which the Farm has been dealt with was the subject of the primary judge’s unchallenged findings, relevantly:

183. both Sam and Rocco, and also Mr and Mrs Pirrottina Snr, gave specific instructions to their accountant, Mr Tisano, that the Farm should not be included in the partnership accounts of Sam and Rocco, and the same instructions were given with respect to Rocco’s farm: at J[153];

184. consistent with this, Mr and Mrs Pirrottina Snr drew a clear distinction between the farming business and the Mangrove Mountain Farm in their mutual wills made in May 2003, noting that they had already given the farming business and the Farm equally to Sam and Rocco: at J[153], [66]; and

185. by contrast, historically, Mr and Mrs Pirrottina Snr had recorded the Farm as a partnership asset up until 2002: at J[153].

186. Her Honour concluded from the conduct of the partners as recorded in their accounts, that there was an understanding that the Farm remain the property of Sam and Rocco and did not become partnership property: at J[153]. Rocco challenged this finding. It is said that the fact that Rocco and Sam may have agreed for the purposes of accounting treatment that the Farm is not to be listed in the assets of the partnership, is of little significance. I disagree.

Issue 8: Rocco’s privilege complaints (Ground 9)

187. This ground contends that the primary judge erred in not granting access to subpoenaed documents in packet S-4 produced by Penmans Lawyers, and in rejecting court book pages 1338-1342 and 1360-1365. The context of this complaint requires brief explanation.

188. Rocco is the joint executor of both his parents’ estates, whilst Angelina is the co-executor of Mr Pirrottina Snr’s estate, and Sam is the co-executor of Mrs Pirrottina Snr’s estate. At trial, Rocco sought access to the documents produced on subpoena by Penmans, his parents’ legal advisers, relating to the estate file of Mr and Mrs Pirrottina Snr. Penmans had prepared draft wills for the parents in 1997, which were finalised in May 2003. Ms Bianca Gallifuoco, the joint expert appointed by the parties, opined that 21 documents listed in a schedule were subject to Mr and Mrs Pirrottina Snr’s legal professional privilege.

189. In refusing Rocco’s application for access to the privileged documents, her Honour found that an executor cannot waive a testator’s legal professional privilege for their own purposes (at J[6]-[10]), and that it was a breach of fiduciary duty for Rocco as executor of both of his parents’ estates to seek to deploy documents in evidence against Sam (at J[9]). Following the refusal of his access application, Rocco accepted that three apparently duplicated documents should be removed from the Court Book and would not be relied upon.

190. In challenging this ruling, Rocco submits that correspondence between the parents and their solicitor concerning their instructions about their testamentary affairs by their draft wills in 1997 and their finalised wills in 2003 was the only objective evidence of the parents’ intentions. It is said that it was a breach of duty by Sam (as co-executor of Mrs Pirrottina Snr’s estate) to assert the privilege because he was furthering his own interests by excluding documents that did not assist his case. This misstated the position. Sam did not “maintain” the privilege claim. He simply did not consent, in his capacity as joint executor of his mother’s estate, to the waiver of his mother’s privilege in the subpoenaed documents in packet S4.

191. It is also said that maintenance of privilege by Sam is “inconsistent with the case that Sam has pleaded” and the exclusion of the documents “resulted in an unfair trial”. This is a new point on appeal, which counsel for Rocco accepted was not squarely put to the primary judge. In any event, the argument is misconceived for the reasons advanced by Sam.

192. To the extent that Sam put any matter in issue in the proceedings he did so in his personal capacity, and that conduct was incapable of waiving his parents’ privilege in the relevant documents. A waiver of privilege in respect of confidential communications between Mr and Mrs Pirrottina Snr and their solicitors relating to the making of their mutual wills could only occur by Sam acting in his capacity as his mother’s executor.

Issue 9: Challenge to special costs order (Grounds 14 and 15)

194. The primary judge made orders on 9 September 2024 that Rocco pay Sam’s costs (1) on the ordinary basis up to and including 3 April 2023, and (2) on an indemnity basis from 4 April 2023, subject to two exclusions, one relating to the costs incurred in connection with separate questions to be determined by way of reference, and the other relating to the costs in connection with the account to be taken of the partnership.

195. Ground 14 contends that the discretion to make the costs order miscarried because her Honour failed to take into account the fact that Rocco may, when the proceedings are finally determined (upon the taking of the partnership account), be more successful than an offer he made (on 10 March 2023).

196. Ground 15 contends that the discretion miscarried because her Honour made a material error of fact in finding that Rocco acted unreasonably in failing to accept an offer by Sam that did not offer to pay Rocco’s costs.

197. Given the brevity of the parties’ written submissions on these grounds, it is necessary to refer to the background to the judgment on costs in some detail.

198. The primary judge dealt with the issue of costs on the papers following receipt of the parties’ written submissions in June and July 2024 which included evidence of two Calderbank offers (Calderbank v Calderbank [1975] 3 All ER 333). Rocco made an offer to Sam dated 10 March 2023, which Sam rejected. Sam made an offer to Rocco dated 3 April 2023, which Rocco rejected. Both offers followed a mediation on 6 March 2023 which had been unsuccessful.

Rocco’s offer

199. Rocco’s offer to settle the dispute was on the basis that (i) Sam pay Rocco $3,309,000 calculated as $3,100,000 plus certain cash at bank, (ii) Sam retain all plant and equipment of the partnership business, not including specified excluded equipment and stalls at Flemington Markets, and (iii) the parties enter into a deed of release.

200. The parties diverged below as to the significance of Rocco’s offer. Although unsuccessful on the issues determined at trial, Rocco relied on his Calderbank offer for the submission that his rejection of Sam’s offer was not unreasonable because depending on the outcome of matters yet to be determined in the proceedings, Rocco may beat the offer in his 10 March 2023 letter. Rocco submitted that for this reason the question of costs should be determined after the hearing has completed. Rocco said in writing, under the heading “Rejection of offer not unreasonable behaviour”, being a reference to Rocco’s rejection of Sam’s offer:

[15] More importantly, the defendant’s submissions largely ignore the plaintiff’s offer of settlement. As set out from [20]-[23] of the Duong Affidavit, depending on the outcome of matters yet to be determined in the proceedings, Rocco may beat that offer. If he does, it would be an obtuse result if he had been the subject of an order for costs, let alone an order for indemnity costs, in a proceeding where it could be demonstrated that Sam was the one who unreasonably rejected an offer.

[16] In those circumstances, all questions of costs in the proceedings, including questions of which party is entitled to costs on an indemnity basis and for what part of the hearing, should be determined after the hearing has completed. (Emphasis added)

201. Reference should also be made to pars [21]-[23] of the affidavit of Rocco’s solicitor, Mr Hien Duong of 12 July 2024:

[21] Now that the cat is out of the bag, it is appropriate to address this offer in detail. The plaintiff's Calderbank offer of 10 March 2023 was a simple in global offer to finalise the entire proceedings between the parties for the amount of $3,309,000 on the basis the defendant retain all the plant and equipment of the partnership business not including the certain equipment and stalls as set out in the letter (as per the Deed of Dissolution), see pages 4, 5 LM-01.

[22] The parties have provided their reference submissions to the Referee in respect of the disputed chattels on 3 July 2024. The value of the disputed chattels is not insignificant. The Referee's determination may affect the costs order in context of the plaintiffs Calderbank offer (in that, a favourable result to Rocco may mean that he beats the offer of $3,309,000).

[23] I cannot calculate, at this point, whether my client will be more successful than Rocco's offer. Given the strength of Rocco's arguments of the reference, I believe that it is likely that he will be. The plaintiffs Calderbank offer was a global offer. The taking of accounts for the partnership is still to be performed. This may also affect the cost order in context of the plaintiff’s Calderbank offer.

202. Sam’s response to this submission was that Rocco’s offer was irrelevant, save for its disclosure of the fact that Rocco wished to have certain market stands excluded from the parties’ compromise.

Sam’s offer

203. Sam’s offer was more complicated. It contained three offers, which her Honour summarised at J2[11]-[13]:

[11] On 3 April 2023, Sam made a Calderbank offer to Rocco, accompanied by the survey of the Lot and a valuation report from CBRE in respect of the Mangrove Mountain farm as at 27 February 2023. CBRE opined that market value was between $4.89 million and $5.09 million. The mid-point between these figures was $4,998,773.

[12] The format of the Calderbank offer followed the prayers for relief in the Summons. Sam made three offers:

(a) To buy-out Rocco’s interest in all of the suggested partnership assets listed in the Summons plus a new tractor acquired by Sam in October 2022 for $32,353 “at a value to be determined by the Court”.

(b) To buy-out Rocco’s interest in the assets in (a) excluding three of the Flemington Markets stalls “at a value to be determined by the Court”. (These three stalls were later agreed by the brothers to be a partnership asset but leased to a third party.)

(c) To buy-out Rocco’s interest in the assets in (b) for $2,788,243.50, based on the CBRE valuation and the Blue Gum Asset Advisory valuation with some extra thrown in. In short, $2,348,243.50 was attributed to Rocco’s 50% interest in the Mangrove Mountain farm (being the midpoint of the CBRE valuation, halved) less $303,513 for Sam’s house (from the earlier Colliers’ valuation) and thus making no allowance for the land value of the Lot. A further $440,000 was attributed to plant and equipment, being 50% of the Blue Gum Asset Advisory valuation plus $32,353 for the new tractor plus an additional $100,993.50 to bring the total to $440,000.

[13] For each alternative, Sam also offered:

(a) to pay such of Rocco’s costs of the proceedings “that the Court determines is appropriate in the circumstances”;

(b) not to seek any payment on account of partnership assets on Rocco’s farm; and

(c) a final accounting exercise in relation to the partnership to be carried out by Mr Tisano or, as proposed by Rocco, a forensic audit of the partnership accounts.

The primary judge’s reasons

204. Her Honour Honour referred to a number of background matters including the procedural orders which had been made by consent since delivery of the principal judgment, which it is convenient to set out in full:

[27] On 30 May 2024, I also made orders by consent, jointly appointing a valuer to assess items agreed to be partnership property. Each party had the option to purchase any of the assets in their possession at the price assigned by the valuer. If not, the other brother had the option of purchasing the item at the assigned value or, failing this, the items were to be sold at auction, with the proceeds of the auction to be paid to the partnership. Orders were also made for a reference, with the referee’s report to be provided to the Court by 16 August 2024. In addition, an independent accountant was jointly appointed to prepare the final accounts of the partnership and report their findings by 30 August 2024. In the event that citrus trees on Rocco’s farm were determined to be assets of the partnership by the referee, then further orders were made for the taking of accounts in respect of this partnership asset.

[28] On 3 June 2024, Mr Wood provided an updated valuation for the Mangrove Mountain farm in the amount of $6.9 million. On 29 June 2024, Grays Valuations provided a valuation of agricultural plant and equipment, totalling $607,900. On 22 July 2024, I made further consent orders, jointly appointing another valuer to value the partnership assets not valued by Grays Valuations.

[29] On 6 August 2024, referee Anthony Lo Surdo SC provided his report as referee. The referee’s findings were largely in favour of Sam. The additional assets referred to the referee on 18 March 2024 were found not to be the subject of the proceedings and thus not able to be pursued in the reference but, in any event, were not partnership assets. The Iseki tractor and 140 cumquat trees on Rocco’s farm were found to be assets of the partnership. The balance of the assets referred to the referee were not assets of the partnership. The referee concluded that Rocco should bear the costs of the reference. The report of the independent accountant is awaited.

205. Her Honour then addressed Sam’s application for indemnity costs for proving the facts in his notice to admit facts and concluded (at J2[44]) that Rocco should pay Sam’s costs on an indemnity basis of proving these matters, being costs incurred in proving those facts on or after 3 October 2023. There is no challenge to that finding.

206. Turning to Sam’s Calderbank offer, her Honour said (at J2[48]) that “Rocco submitted that, depending on the reference and the taking of the account, Rocco may do better than the Calderbank offer but that it was too early to say”, which seems to be a reference to doing better than Sam’s offer, not Rocco’s offer, which was the submission made in writing by Rocco: see [200] above. That misunderstanding is also apparent from J2[50], where her Honour said:

… Mr Duong said that, even now, he cannot calculate whether Rocco will be more successful than Sam’s Calderbank offer, but expects that Rocco will likely argue that he has ‘beaten’ the offer. (Mr Duong’s affidavit was made before the adverse referee report.)

207. As is apparent from [201] above, that is not what Mr Duong said in his affidavit.

208. Her Honour found that costs should not be paid out of the partnership assets in circumstances where substantive disputes between the brothers required determination. After noting that (i) Sam had succeeded in the proceedings, and (ii) the result of the independent accountant’s report is of no moment for present purposes, where the parties did not require her to consider that matter, her Honour found that Sam is entitled to his costs of the proceedings, together with indemnity costs on and from 3 October 2023 in respect of the costs of proving the facts in the notice to admit facts: at J2[53].

209. Her Honour then addressed Sam’s Calderbank offer and identified two issues for determination. These were: (1) would acceptance of the Calderbank offer have achieved a better outcome for Rocco than has prevailed, and (2) whether Rocco’s non-acceptance of the Calderbank offer was unreasonable in all of the circumstances: at J2[57].

210. On the first issue, her Honour rejected Sam’s submission that his offers were made on the basis that he would pay Rocco’s costs of the proceedings: at J2[60]. Rather, her Honour proceeded on the basis that Sam’s offer to pay such of Rocco’s cost of the proceedings “that the Court determines is appropriate in the circumstances”, might have been nothing in circumstances where the Court had not determined the issues in dispute, referring to the observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; e**x parte L**ai Q**in (1997) 186 CLR 622 at 624-625; [1997] HCA 6, and concluded (at J2[60]):

I have proceeded on the basis that Sam’s offer in respect of costs was the chance, but not the certainty, that Sam would be ordered to pay some of Rocco’s costs. I have treated this aspect of the offer as having no monetary value.

211. Her Honour put aside Sam’s offer (b) and offer (c) for reasons which it is not necessary to refer to: at J2[61] and [62]. Turning to Sam’s offer (a) – to buyout Rocco’s interest in the Farm, minus the Lot, and partnership assets at an amount to be determined by the Court – her Honour found that (i) so far as the Farm is concerned, what will now happen is what Sam offered (at J2[65]), (ii) Rocco would have fared better in respect of the Flemington Markets stalls if he had have accepted Sam’s offer (a) (at J2[66]), and (iii) overall, Sam’s offer in respect of plant and equipment is what will now happen (at J2[67]). Her Honour concluded (at J2[68]):

In addition, whilst Rocco would probably not have received any of his costs if he had accepted offer (a), Sam is now entitled to his costs of these proceedings on a party and party basis, together with indemnity costs in respect of the cost of proving the facts in the Notice to Admit from 3 October 2023 on. I have assumed for working purposes that Rocco will be obliged to pay some $560,000 in costs. On this component of the Calderbank letter, Rocco would have faired better if he had accepted any of the offers. Overall, I conclude that Rocco would have faired better if he had accepted offer (a). Rocco would also not have incurred further legal costs himself since April 2023, which he must now bear.

212. On the second issue, her Honour found that given the safeguards built into offer (a) – asset value being determined by the court plus an account – what Rocco was really giving up by accepting the offer was that he would have to concede Sam’s interest in the Lot, being a subject on which both brothers had intimate knowledge, and Rocco was personally aware of the facts relevant to Sam’s asserted interest in the Lot and did not dispute those facts: at J2[75]. Her Honour found that Rocco’s non-acceptance of Sam’s offer was unreasonable in the circumstances at the time when the offer was made and concluded that an indemnity costs order should be made from the date of the offer, giving the following reasons (at J2[76]):

… Sam’s offer was, essentially, to conclude the arrangement the brothers had agreed with their mother and at a figure which did not compromise Rocco’s right to receive fair value for his interest in the Mangrove Mountain farm or the partnership assets. With the assistance of senior counsel then briefed, I consider that Rocco was able to assess whether Sam’s offer should be accepted or whether he should press on in the hope of achieving a better result. Overall, I consider that Rocco’s non-acceptance of the offer was unreasonable in the circumstances at the time when the offer was made. As I noted in my primary judgment, Rocco ultimately appeared to have taken a particularly dogged stance vis a vis his brother, as Rocco considered that the way things had worked out was “not fair”: at [16]. It follows, that I am satisfied that an indemnity costs order should be made from the date of the offer. Sam’s entitlement to indemnity costs in respect of the Notice to Admit Facts is absorbed within such an order.

Ground 14

213. Rocco’s written submissions in chief and in reply relating to ground 14 were very brief. It is said that it was premature to determine the question of costs before the finalisation of the partnership accounts which is yet to occur, because it remains possible that Rocco might beat the offer he made on 10 March 2023. That possibility is relied upon by Rocco for the related contention that her Honour erred in the exercise of the discretion to order indemnity costs in not considering Rocco’s submission that it was premature to determine whether it was unreasonable of Rocco to have rejected Sam’s offer.

214. Although not conceding the relevance of Rocco’s offer, junior counsel for Sam, who addressed the Court on this issue, acknowledged that her Honour did not expressly deal with this matter. That concession was properly made. As is apparent from J2[48] and [50], which are referred to at [206] above, her Honour seems to have misunderstood Rocco’s submission as referring to doing better than Sam’s offer, when in fact Rocco’s submission was that he might do better than his own offer.

215. The inference is that her Honour failed to take into account a relevant consideration (at J2[48] and [50]) being the submission that Rocco’s rejection of Sam’s offer was not unreasonable because of the possibility that Rocco might beat his own offer and therefore it was premature to determine the question of costs, or made a material error of fact in finding (at J2[53]) that the parties, relevantly Rocco, did not require her Honour to consider the result of the independent accountant’s report, in the context of the prematurity submission.

216. Sam sought to avoid this conclusion by arguing that Rocco’s offer was not relevant to whether Rocco’s rejection of Sam’s offer was unreasonable. It is said that the need for taking of accounts as a result of dissolution of the partnership was and remains a matter not in issue between the parties. But that is no answer to Rocco’s complaint that her Honour failed to address his submission that it was premature to determine the issue of costs. Nor is this Court in a position to evaluate the financial consequences of the yet to be obtained independent accountant’s report for the finalisation of the partnership accounts.

217. For these reasons I am satisfied that Rocco has demonstrated that the exercise of the discretion as to costs miscarried (Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45]). Given that conclusion, it is not necessary to address ground 15. The proceedings should be remitted to the primary judge for reconsideration of the question of costs of the trial at the conclusion of the proceedings upon the finalisation of the partnership accounts. In this regard, two matters should be noted.

218. First, as indicated, there was no challenge on appeal to her Honour’s finding that Rocco should pay Sam’s costs on an indemnity basis of proving the matters in Sam’s notice to admit facts, being costs incurred in proving those facts on or after 3 October 2023. Second, the suggestion in Rocco’s reply submissions cautioning against remitting the matter to the primary judge is unfounded.

Costs in this Court

219. The Court has a broad discretionary power to award costs: Civil Procedure Act 2005 (NSW), s 98(1). The general rule is that costs should follow the “event”, unless it appears to the Court that some other order should be made as to the whole or any part of the costs: UCPR, r 42.1. Generally, the “event” refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15].

220. Underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the Court considers to be the responsibility of each party for the incurring of costs: Commonwealth Bank of Australia v Gretton [2008] NSWCA 117 at [121] (Hodgson JA, Mason P and Beazley JA agreeing).

221. Where the result of the litigation is mixed, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings (see Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]), such an exercise would generally be carried out on a relatively broadbrush basis, and largely as a matter of impression and evaluation by the Court: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22.

222. Rocco’s partial success on appeal concerns a separate and discrete issue to the other grounds of appeal on which he failed (or that were not necessary to determine as they did not affect the outcome of the appeal). Given the mixed outcome on appeal, it is appropriate to entertain the process of apportioning costs as between the different issues. Rocco’s limited success on appeal is substantially offset by his failure on all the other issues. In my view, the appropriate order is that Rocco should pay 95 per cent of Sam’s costs in this Court.

223. In the event that either party seeks a different order, they may exercise the rights afforded by the Rules to apply to set aside or seek a variation of the costs order that I propose, noting the time limit of 14 days in UCPR, r 36.16.

Orders

224. I propose the following orders:

225. To the extent necessary, grant leave to appeal.

226. Appellant’s application to adduce further evidence granted.

227. Make no order as to the costs of the appellant’s notice of motion filed 31 October 2024.

228. Appeal dismissed, except as to ground 14 which is upheld.

229. Set aside orders (1), (2) and (3) made by the primary judge on 9 September 2024 and, in lieu, remit the proceedings to the primary judge for reconsideration of the question of costs of the trial at the conclusion of the proceedings.

230. Appellant to pay 95 per cent of the respondent’s costs in this Court.

231. PAYNE JA: I agree with Gleeson JA.

232. ADAMSON JA: I agree with Gleeson JA.

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