Yet some five days later he readily acknowledged in cross-examination that he knew that Mistirose, which bought the properties in which he lived from time to time, was the trustee of the Bergers' superannuation fund and that he, therefore, had to pay rent to Mistirose. He agreed that he knew that the rent was paid by being debited to his loan account with Fifteenth Eestin.
124 I accept, however, that basically Mr Rosenberg was an honest witness who had a clear view of what he considered had been said by, and agreed or understood between, him and his daughter and son-in-law on the critical occasions in the past. I consider that in giving his evidence Mr Rosenberg was attempting to faithfully reproduce those discussions. Obviously, given the difficulties he was labouring under, it is not surprising that he was unable to recall many things and sometimes became confused when in the unfamiliar and stressful situation of giving evidence from the witness box. I reject any suggestion that he tailored his evidence about these matters to suit his claims in this proceeding.
125 Mr Berger was a most unimpressive witness. He was often evasive when answering questions. The best example of this was his prolonged reluctance to state that one of the reasons for the backdating of the documents in 1993 was that, if the distributions had to be reversed because they were in breach of trust, there would be taxation issues. Another example was his unwillingness to respond to the question of whether PHA would buy back Mr Rosenberg's shares in that company.
126 On a number of occasions he was eventually forced to concede that what he had initially said, either in an affidavit or in the witness box, was not correct. One example was his claim that in making distributions to Rosekay/Project Hardware after 1992 he had relied on the fact that distributions had been made to Rosekay by Mr Rosenberg some years earlier. As he subsequently agreed, he in fact relied on the backdated documents. Another example was his initial denial that he did not know whether a trustee was permitted to make distributions of income only to a beneficiary. Eventually he agreed that he did know that. A third example was his denial that in his fifth affidavit he had intended to convey the impression that Mrs Berger had given consideration to the capital distribution and chosen to have it credited to the account in joint names. Subsequently, he conceded that that was what he had been trying to convey, whereas the choice had been made for her.
127 On yet other occasions he gave evidence which I have the greatest difficulty in accepting. For example, Mr Berger maintained that he had forgotten about the preparation of the backdated documents when he swore his affidavit. Given the importance of these documents and the care taken to make sure that they did not unwittingly disclose that they had been backdated, this claim is on its own inherently implausible. But it was not simply a case of oversight. Mr Berger positively asserted that he had relied on the earlier distributions to Rosekay and produced the Deed which he said Lionel Rosenberg had signed on 19 June 1989. In these circumstances, I find it quite unbelievable that he would not have recalled the backdating episode.
128 I also cannot accept Mr Berger's evidence about the capital distribution. As counsel for the plaintiffs pointed out, in his affidavits and at the commencement of cross-examination, Mr Berger asserted that the capital distribution had been made to Mrs Berger alone. Yet as the August 2004 emails between him and Mr Same showed, Mr Berger had no recollection at that time as to the details of the asset revaluation and capital distribution to Mr and Mrs Berger jointly, which had been arranged by Mr Same.
129 The result of these criticisms is that I have serious reservations about Mr Berger's credibility as a witness,. When it comes to the critical issues of fact, therefore, I am not confident that I can place much reliance on what Mr Berger said occurred.
130 Mrs Berger was also a witness who did not inspire confidence in her credibility. Her recollection of past events was poor. One example was that during cross-examination she said that her father had told her in 1990 that the Delf Brass business was making "a large loss", whereas in her first affidavit she had said that it was "making little or no profit" at that time. A more recent example was her evidence that she could not recall receiving substantially more than $2 million for the buyback of her D class shares in PHA in 2003.
131 The main criticism of Mrs Berger's evidence was that she appeared to be simply sticking to her well rehearsed lines about what she maintained her father and she and her husband had said and done in 1990 and 1994 rather than giving her evidence from actual recollection and belief.
Consideration of the Issues
Estoppel and Constructive Trust
132 I deal first with my findings about what promises or representations were made or assumptions created in 1990 and 1994. When considering these issues it is important to keep in mind, in my opinion, the type of person Mr Rosenberg was at the relevant times. I consider that Mr Rosenberg would have seen himself as the person unquestionably in charge of the family's affairs. What he said should happen, did happen. Dissent would not have been readily tolerated. During cross-examination, Mr Rosenberg showed glimpses of the forceful and dominant person that I consider he would have been in his prime. Despite his memory and hearing problems, he demonstrated on occasions that his mind was still sharp by, for example, correcting errors in counsel's questions. Moreover, Mr Rosenberg was justifiably proud of his rags to riches story and the assets he had accumulated. However, like many lay people, he had difficulty distinguishing between what he personally owned and what was owned by legal entities such as companies or trusts. Although Mr Rosenberg acknowledged in cross-examination that Fifteenth Eestin was the trustee of a trust in which there were beneficiaries other than himself, he said that he regarded the corner properties as his, to do with as he pleased. He said: "If my money purchased it, it's my property." He said that he had owned those properties for "20 odd years".
133 I find that what Mr Rosenberg said to Mrs Berger in July and October 1990 was that he was arranging for a split of the family assets between Barry and his wife Sara, on the one hand, and himself, his wife Bloom and his daughter, Sabrina, on the other. Mr Rosenberg told Mrs Berger that the purpose and effect of the Dissolution Agreement was to ensure that she would be looked after financially in the future after the parents' deaths so that she would not be reliant on Barry, and there would be no dispute between them over the division of the family assets. As far as the Investment Trust was concerned, Mr Rosenberg wanted Mrs Berger to assist him by participating in the management for the benefit of her father and mother and herself, whilst they were all alive, and for the benefit (but not sole benefit) of Mrs Berger after her parents' deaths.
134 I do not accept that Mr Rosenberg told Mrs Berger in July or October 1990, or Mr Berger in October 1990, that the Investment Trust was to be, and remain, managed and controlled by Mrs Berger or by Mr and Mrs Berger. I consider that in 1990 the idea that the Investment Trust would be managed and controlled, or even simply managed, by Mrs Berger, or by Mr and Mrs Berger, would have been a complete anathema to Mr Rosenberg. The corner properties (despite being owned by the Investment Trust) were "his properties" and he would have wanted to continue managing them. No doubt Mr Rosenberg was keen to have Mrs Berger participate in the management by becoming the second director in place of her brother, particularly given his health problems, but that was as far as it went. I do not accept that prior to the Dissolution Agreement Mr Rosenberg asked Mr Berger to become involved in the management of the Investment Trust. If he had done so, then one would have expected Mr Berger to have become a director of Fifteenth Eestin in November 1990, as Mrs Berger did, and not in May 1991.
135 Further, as pointed out by the plaintiffs' counsel in their submissions, the alleged promise that the Investment Trust was to be managed and controlled by Mrs Berger, or by Mr and Mrs Berger, was inconsistent with the alleged promise that Mr Rosenberg would take steps to ensure that the assets of the Investment Trust would be used for the benefit of the parents and Sabrina, while the parents were alive, and then for the sole benefit of Sabrina, because Mr Rosenberg could not ensure anything once he had handed management and control of the Investment Trust to the Bergers.
136 I reject the allegation that as part of the third promises, Mr Rosenberg represented and promised Mr Berger that, in addition to the assets of the Investment Trust, all other assets under his management and control would be, and remain, managed and controlled by Ian and Sabrina and would be for the benefit of the parents and Sabrina during the lifetimes of the parents, and thereafter for the sole benefit of Sabrina. Elsewhere, and significantly in the actual pleading of the assumption and expectation itself in the defence and counterclaim, the management and control allegation is limited to the Investment Trust/Fifteenth Eestin, and its assets. As counsel for the plaintiffs submitted, the claim that Mr Rosenberg represented and promised Mr Berger that his assets would be managed and controlled by Ian and Sabrina bore the appearance of something thought up by him after the event, probably in order to seek to catch Mr Rosenberg's shares in PHA.
137 I also do not accept that in July or October 1990 Mr Rosenberg told Mrs Berger, or that in October 1990 he told Mr Berger, that he was then splitting up his wealth between Barry and Sabrina. I say this for the obvious reason that at this time Bloom Rosenberg was still alive and it was clearly Mr Rosenberg's intention at that time to leave his wealth to his wife, if he died first, which was then the most likely outcome.
138 Moreover, if Mr Rosenberg had intended to make such a division of his wealth between his son and daughter, in late 1990, then he could and would have done so through the Dissolution Agreement. Clearly the effect of that agreement was not to split up Mr Rosenberg's wealth between Barry and Sabrina. Rather, it was to divide the family's assets into two parts - one for Barry, his wife (and family) and the other for Mr and Mrs Rosenberg, Mrs Berger (and her family). Mrs Berger stated in both cross-examination and re-examination that she believed that the Dissolution Agreement was putting into effect what had been discussed between her father and herself in the preceding months. That was clearly correct, in my opinion, and shows that Mr Rosenberg did not tell Mrs Berger or her husband that he was then splitting up his wealth between her and her brother. This is particularly the case given that the Dissolution Agreement contained, amongst other provisions, recitals, a warranty regarding the truth and correctness of the recitals, and clause 29, in which the parties acknowledged that the Dissolution Agreement contained the entire agreement and understanding of the parties and declared that there was no collateral agreement, understanding, warranty or representation with respect to the parties' dissolution which in any way qualified or altered the effect of the Dissolution Agreement.
139 Virtually the only piece of evidence supporting the claim that there had been a gift of all of Mr Rosenberg's "wealth and businesses" to his son and daughter equally was the statement to this effect in his 1997 memoirs. I consider this to be an example of the tendency of some old people to "cry poor". This rather silly statement was not correct in 1990, when Mr Rosenberg at the very least retained ownership of the matrimonial home at 2/371 Toorak Road, South Yarra, and was still not correct in 1997, when Mr Rosenberg at the very least retained ownership of the shares in Project Hardware left to him by his wife. In any event, Mr and Mrs Berger cannot claim this statement in the memoirs in 1997 played any part in them relying on the alleged assumption or expectation created by Mr Rosenberg as from about November 1990 and in them acting to their detriment since then.
140 Mr Fisher said in his first affidavit that Mr Rosenberg had told him on many social occasions at the Bergers from the mid-1990's onwards that he "had been clever, by distributing his wealth to his children before he died", that his son Barry had taken over the business of Provans Timber and the properties associated with that business, and that "the rest was for Sabrina", and that Sabrina had agreed to look after him. Mr Fisher said that Mr Rosenberg jokingly referred to himself as being "a pauper", because he had given everything away. Mr Rosenberg denied telling Mr Fisher that "the rest was for Sabrina". He also said that he could not recall using the word "pauper". My comments in the previous paragraphs about Mr Rosenberg's statement in his memoirs apply equally to whatever he said to Mr Fisher on these social occasions.
141 If, on the other hand, the defendants' case is that Mr Rosenberg told Mr and Mrs Berger in 1990 that he would, during his life, split his wealth between Barry and Sabrina, or that following the Dissolution Agreement all of his wealth would, during his life, be left to his daughter, then these claims also do not survive close examination. Once again, it must be remembered that in 1990 Mrs Rosenberg was still alive and it was anticipated, given Mr Rosenberg's uncertain health, that she would survive him. In that case, she had to be looked after, which was why his residuary estate was left to her in his 1988 will. Although Mrs Rosenberg had made a similar will, so that in the normal course of events, on her husband's death and then her death, everything would have been left to Mrs Berger, there could be no claim that Mrs Rosenberg could not have changed her will if she subsequently chose to do so.
142 The assertion that Mr Rosenberg had made such representations or promises in 1990 is also contradicted by the fact that there was no complaint from Mrs Berger, or her husband, in 1994 when Mr Rosenberg told them that he was proposing to give the proceeds of the sale of his apartment to his five grandchildren. Although two of the five were, of course, Mrs Berger's children, three were Barry's children. Thus, Mr Rosenberg's proposal meant that the majority of the asset in question was not going to be received by Mrs Berger, when it was supposedly hers or promised to her, or even by her children, but by members of Barry's family which had supposedly already received its share of the Rosenberg family wealth.
143 The question that then arises is what was intended by Mr Rosenberg, and what was understood by Mr and Mrs Berger, when he said that the Investment Trust was to be for the benefit of his daughter after her parents' deaths. I do not consider that in 1990 Mr and Mrs Berger understood that Mr Rosenberg was intending by this statement that the corner properties were inevitably to become owned by Mrs Berger or that the assets of the Investment Trust were to be for her sole benefit. First, there is the fact that these properties were owned by Fifteenth Eestin as the trustee of the Investment Trust and that there were other beneficiaries of that trust apart from Mrs Berger, including her own children. Secondly, Mrs Berger agreed in cross-examination that Mr Rosenberg made no promise about the nature of the assets of the Investment Trust into the future, and that he did not say that they would be retained at a certain value. Thirdly, Mrs Berger accepted the proposition that it was possible that the use of the trust funds during the lifetime of her parents could have involved all of the trust funds being used up. Fourthly, as Mrs Berger agreed in cross-examination, Mr Rosenberg had never said that the corner properties would always remain trust property and the sale of them was never ruled out. Although Mrs Berger said in re-examination that there was no discussion about a possible sale of the three properties, she conceded that being "the dealer" that he was, "he could have done what he wanted to do with them." Finally, and very importantly in my opinion, Mrs Berger agreed that just as her father had decided in 1990 that, in making the arrangements he had through the Dissolution Agreement, he had provided sufficiently for her brother Barry, a time might come when Mr Rosenberg was satisfied that he had provided sufficiently for her. His immediate concern in July and October 1990 was that he might die, leaving Sabrina financially dependent on her brother's goodwill.
144 Changing the trustee of the Investment Trust in 2004 would not necessarily mean, in my opinion, that the Investment Trust was no longer to be for the benefit of Mrs Berger after Mr Rosenberg's death. It simply meant that the discretionary decisions as to the distribution of the income or capital of the Investment Trust would not be made by Mr Berger, relying on the advice of Mr Same. A new trustee, just like Fifteenth Eestin was required to do, has to exercise its discretion in the interests of all beneficiaries, including Mrs Berger and Mr Rosenberg, in good faith, upon real and genuine consideration, and for proper purposes.[20]
145 I also find that Mr Rosenberg never said that he would not revoke his 1988 will. Indeed, there was really no suggestion that he did. This does not matter because a promise to leave property to a person by a will is to be understood as the promise of a gift by will taking effect on death.[21] But here, as I have found, there was no promise by Mr Rosenberg to leave all of his property by his will to Mrs Berger, only that he would ensure that she would be looked after financially in the future after the parents' death so that she would not be reliant on Barry. Moreover, Mrs Berger accepted that her father might one day decide that he had provided sufficiently for her. In that case, deciding to change his will would have been a natural step for Mr Rosenberg to take.
146 Further, if as claimed, Mr and Mrs Berger assumed and expected that Mr Rosenberg would, during his life, give his entire wealth to Mrs Berger, then the 1988 will became quite irrelevant. I therefore reject the allegation that Mr and Mrs Berger assumed and expected that Mr Rosenberg would not revoke his 1988 will.
147 A similar situation exists with respect to the alleged assumption or expectation that Mr Rosenberg would not exercise his power of appointment and remove Fifteenth Eestin as trustee. It was not suggested that this was ever spoken about in the second half of 1990. Further, the conduct of Mr and Mrs Berger in involving Mr Fisher in attempts to have Mr Rosenberg resign as the appointor of the Investment Trust is not consistent with the claim that they assumed or expected that he would not exercise his power of appointment.
148 The allegation that Mr Rosenberg had gone back on his promise to leave all of his assets by his will to Mrs Berger really only related to the claims that Mr and Mrs Berger had been told that the Delf Brass business was Mrs Berger's or that one day it would be. Of course, Mr Rosenberg did not own any shares in Rosekay in 1990, although his wife did. Moreover, it is instructive to note what Mr Rosenberg said, when asked in cross-examination what he meant by saying that he had given Mrs Berger the Delf Brass business. Mr Rosenberg replied that he had given Mrs Berger "control" of the Delf Brass business because "she's a big shareholder there now". Although not all of the shareholding in PHA is now owned directly or indirectly by the Bergers there is no doubt that they control PHA and, through it, Project Hardware.
149 The result is, therefore, that, in my opinion, the defendants have failed to establish the factual basis of the alleged assumption or expectation on the part of Mr and Mrs Berger and each of them, as from about 1990.
150 The only representation or promise which I find Mr Rosenberg made to Mr and Mrs Berger in July and October 1990 was, as previously stated, that he would ensure that his daughter would be looked after financially in the future after the parents' deaths so that she would not be reliant on her brother Barry. Mrs Berger was, of course, at this time newly married to a man with limited assets but who was looking to invest in a business, whilst she had just become a mother and was not likely to resume employment. Having made his 1988 will and having arranged for the Dissolution Agreement, Mr Rosenberg would have thought that he had done all that he could to see that his daughter, and most importantly, his wife, were financially secure in the event that he died in the near future. He would have believed that, in that event, Mrs Rosenberg, Mrs Berger and her children (if she had more than Antony) would benefit from the assets of the Investment Trust, and that the Delf Brass business would be owned directly and indirectly by Mrs Rosenberg and Mrs Berger, in both cases free of any claim by, or entitlement of, Barry and his family to those assets.
151 Given that by 2004 Mr Rosenberg had survived for a further 14 years and that in that time the financial position of Mr and Mrs Berger had improved dramatically, it is hardly surprising that Mr Rosenberg concluded that he no longer needed to be concerned about his daughter's financial situation after his death and that he could be satisfied that he had provided sufficiently for her. One only has to state that by 2004 the Bergers owned a luxury home, which Mrs Berger estimated to be worth between $7 and $10 million, plus a majority shareholding in PHA which owned the multi-million dollar Delf Brass business and that their limited liabilities were outweighed by their other assets, to see that these views would have been justified.
152 Moreover, it seems to me that Mr Rosenberg had become disgruntled by the failure of his daughter and son-in-law to wait for his death before attempting to obtain the full benefit of the assets which he had built up. Even on the defendants' case, these assets were for the benefit of Mr Rosenberg and Mrs Berger during their lifetimes, and as he said rather plaintively on one occasion during cross-examination: