Credit of witnesses
42Richard, Stephen, Michael and Ted all provided affidavit evidence to the court. They were each cross-examined. The solicitor who acted for Max for the purpose of drawing his will and preparing documents to effect a mortgage in favour of Max over the Neutral Bay property also gave evidence by affidavit for Richard. He was not cross-examined. Richard's present solicitor, Mr Richard Arthur Schmidt, gave affidavit evidence of the circumstances in which he attempted to secure the agreement of Richard's former solicitor, Mr Fritchley, to give evidence in Richard's case. He also was not cross-examined.
43There are serious issues in contention as to the veracity of the evidence given by Richard on the one hand, and Stephen, Michael and Ted on the other. On some factual issues that are crucial to the determination of the dispute, the evidence given on behalf of each side is entirely inconsistent with the evidence given on behalf of the other. As the resolution of the factual issues that are in dispute is so dependent on the relative credibility of the evidence given by the principal witnesses, it will be convenient to deal with the issue of credibility at this stage in these reasons for judgment. As a result, a number of the factual contentions in issue will consequentially be determined.
44The court is not required in this case to place a great deal of emphasis on the making of a judgment as to the relative, inherent credibility of the witnesses having regard to their demeanour and the way in which they gave their evidence in cross-examination. There are a considerable number of objective factors that assist the court in making a judgment about the credibility of each witness in the present case.
45However, to my observation the manner in which Richard gave evidence was substantially less satisfactory and persuasive, than that in which each of Stephen, Martin and Ted gave evidence. The latter three witnesses appeared to respond to the questions asked of them in a careful, focused and immediate way. Each appeared to understand the proper approach that was expected of them when giving evidence on oath. Their approach was sober and straightforward, as well is being persuasive. Having the benefit of listening to and seeing the evidence that each of them gave being tested in cross-examination, I formed the comfortable view that each witness was reliable, and entitled to be treated as a witness of credit.
46The manner in which Richard gave evidence was not so satisfactory. I did not form the view that he was evasive; rather, he did not appear to react to questions in a direct and focused way. That may simply reflect his general personality and character. The fact remains, however, that I did not find his evidence to be inherently persuasive, and I formed a concern about its overall reliability.
47The court is assisted in this case by a considerable body of evidence that goes principally to the credibility of Richard, and the appropriate course is to examine that evidence before advancing a global view as to the relative credibility of the different witnesses who were parties to the proceedings.
48It is appropriate to start with a consideration of the circumstances in which the debt of $857,953.09, which is at the heart of these proceedings, accumulated. It is clear on the evidence that, at least for the most part, the debt was not made up of straightforward, conventional loans made by Max to Richard. Rather, from time to time Richard committed himself to financial obligations that his circumstances did not permit him to fulfil, or if his circumstances did, he simply did not fulfil his obligations. The evidence was not precise on this issue, and did not explain how the entirety of the debt accumulated.
49The evidence does show that Richard purchased the Neutral Bay property using a loan that was secured by a mortgage over the property, and that Richard was not able to, or in any event did not, meet all of the loan repayments. Max made a substantial proportion of the repayments. At the time, which is considered below, when Max and Richard were discussing the desirability of Richard granting a security over the Neutral Bay property in favour of Max, it is clear that Max contemplated that it would be necessary for him to pay at least a substantial proportion of the subsequent loan repayments. He also made loan repayments before those discussions.
50Indeed, the reason why Max asked Richard to enter into a loan agreement and give Max a second mortgage over the Neutral Bay property was not so much to secure repayment to Max of the existing, and any future, debt, but was to protect Richard's only substantial asset, being his equity in the Neutral Bay property, from Richard's existing and future creditors. The evidence shows that it was Max's sad realisation that Richard was prone to entering into improvident transactions, that he could not help himself, and that he needed to be funded and protected. Max responded to the need out of paternal affection, but it was a substantial burden to him that he needed to do so.
51For example, Richard agreed in cross-examination that in late 2006 possession agents took possession of the Ferrari motor vehicle that Richard had purchased second-hand some time before (T 40.20 -41.1). Richard was "bailed out" by Max. Max was forced to pay $30,000.
52Richard accepted that he was made bankrupt in April 1998 (T 28.20 -29.49). The bankruptcy was annulled on 31 May 1999 (T 33.1). During the course of the bankruptcy, in January 1999, Richard entered into a lease of commercial premises without advising the landlord that he was an undischarged bankrupt. Richard initially denied any understanding that there was any commercial impropriety in his entering into the lease without advising the landlord of his status (T 30.49 - 31.19), although he ultimately appeared to concede that his conduct was not appropriate. Richard agreed (T 35.11), ultimately, that 14 rent cheques were dishonoured between May and June 1999 (T 31.38 - 32.25). Initially, Richard denied that he could recall that he had any difficulty paying the rent. There were proceedings in the Supreme Court before Hamilton J that led to the publication of a number of judgments. Richard initially insisted that the only dispute between himself and the landlord involved rectification of a concrete floor upon which oil had been spilled (T 31.29). Richard had no recollection of his involvement in giving evidence in the proceedings (T 32.25 - 33.21).
53Richard admitted that in August 2005 Citibank sued him to judgment for about $6900 (T 38. 31). He ultimately agreed that he had made an unspecified "list" of financial defaults (T 53.20).
54Richard did not pay council rates due in September 2008 in the amount of $16,698.20 (T 39.7). He said that council rates were not paid for many years (T 39.40). He did not make payments even though in the period between June 2007 and July 2008 he had received $218,000 either from his parents' estates, or from Max's company, Investment Ell Pty Ltd.
55Pressed to admit that he rarely complied with his obligations, Richard conceded that occasionally he did not do what he was asked to do (T 41.5).
56There are a number of important issues that arise out of the way Richard has pleaded his case, and the evidence he has given in support of it, which not only have a significant bearing on the merits of his case and its determination, but also reflect upon his credit.
57First, the 22 October 2007 agreement in plain terms required Richard to put $1,000,000 of his future share in the estate into a managed fund type investment, or other like product under the guardianship of Michael. Richard's principal affidavit, which was sworn on 26 October 2012, contains evidence that shows that Richard clearly appreciated that he had not put the full amount into the required type of investment by the time the other beneficiaries acted to terminate the agreement in January 2009. Richard sought by his evidence to establish that, as of the date of the termination, he had put sufficient money into required investments so that it remained achievable for him to reach the $1,000,000 target, by adding funds from the further distributions from the estate that he expected to receive in the future: see pars 27, 29, 33, 34 and 36.
58Richard set out a table of the company shares that he had received up to January 2009 in par 26, although he described these as "distributions from my parent's Estates". He did not set out the values of those shares at that date. He listed "managed funds" that he had received from his "parents'" estate in par 28. He listed "cash distributions from the estates of my parents" in part 30, that he said were held by the company that was the trustee of his testamentary trust, Neutraliser Pty Ltd. One argument that Richard put was that the holding of shares fell within the description of "other like product" to "managed fund type investment" as set out in the 22 October 2007 agreement. That argument may involve a stretch of the natural meaning of the words of the agreement, but that is an issue to which I will return when I consider how the dispute between the parties should be resolved. Secondly, however, Richard put the case that the value of all of the assets that he referred to in his affidavits could be added towards the achievement of the $1,000,000 target.
59However, in cross-examination Richard admitted that of the six companies in which he held shares listed in par 26, four, being Alinta, BHP, Bluescope Steel and the Commonwealth Bank came from his mother's, rather than his father's estate (T 55.20 - 57.25). He also conceded that the first two distributions listed in par 30, which totalled $128,000, came from Investment Ell Pty Ltd, rather than Max's estate (T 58.26).
60In fairness to Richard, the truth of these propositions was reasonably clearly disclosed in the affidavit. The evidence is more consistent with fuzzy thinking on Richard's part, rather than false evidence.
61Ultimately, Richard accepted in cross-examination that the alleged variation of the agreement took place at a meeting on 5 January 2009 that he attended with Stephen and Michael, and not at a later meeting on 13 January 2009 (T 64.25). Richard gave evidence in his 26 October 2012 affidavit at par 53 that at the relevant meeting, after Richard asked for a variation of the agreement, Stephen said: "We will discuss with the others, but it looks like we don't have an option do we? But until it's back to normal, we will also want (sic) caveat on Neutral Bay." Both Stephen and Michael in their affidavits, each of which was sworn on 5 May 2013, gave evidence that was inconsistent with a variation agreement being reached on 5 January 2009.
62Richard pleaded that not only was the 22 October 2007 agreement varied on either 5 or 12 January, or 13 January 2009, but he performed his side of the varied agreement by signing a deed under which Michael replaced the existing trustee of Richard's testamentary trust, as well as a caveat to secure repayment by him to the executors of any money that they advanced to him for the short term funding of the Norah Head property.
63Richard claimed that he delivered the deed to Stephen at the meeting at Mr Fritchley's office on 13 January 2009 (T 65.7). Stephen denied that claim outright. A signed, but undated, deed is found in the evidence at Exhibit A p 99, but there was no other evidence about the circumstances in which the deed was prepared and executed, or its provenance.
64The caveat that Richard said that he signed was not in evidence. Richard agreed that Mr Fritchley's file had been produced to the court, and there was no evidence in the file of any original or draft caveat (T 65.49).
65Mr Fritchley was not called to give evidence to corroborate Richard's version of events. I will return below to a consideration of the significance of the absence of Mr Fritchley as a witness.
66This is the first occasion, as considered in these reasons for judgment, when Richard gave evidence that is totally inconsistent with the evidence given by one or more of the defendants. I prefer the evidence of Stephen, not only because he was the more apparently credible and satisfactory witness, but also for the additional reasons that I will consider below concerning the probabilities that the variation was made as alleged by Richard.
67One of those reasons, which should be considered in the context of an assessment of the credibility of the witnesses, is that on 9 March 2009 Richard sent an email to Mr Fritchley (Exhibit 4), in which Richard plainly suggested the terms of a letter that the solicitor should write in support of Richard's claim against the executors, and his version of the relevant events. The terms of the letter that Richard suggested showed that it related "to the executors of the Estate of A. M. Ell cancelling the agreement..." Richard ghostwrote for Mr Fritchley Richard's contentions concerning the validity of the termination of the agreement. The email included:
"Our client further contents (sic) that his request to use the distribution from the sale of the Exeter property for a short period while Norah Head was financed is not relevant to this matter."
68The use of the word "request" in the email is more consistent with the defendants' position than that asserted by Richard. In any event Richard did not assert in the email that the agreement was varied in any way.
69A further important issue concerns the time when Richard told the executors that he had already purchased the Norah Head property, using interim financial arrangements. Not only is there a substantial difference between the evidence that the relevant witnesses gave, but the issue is also important to the question of whether the other beneficiaries were justified in terminating the 22 October 2007 agreement, as they purported to do in January 2009.
70In par 29 of his 26 October 2012 affidavit Richard said that, in early January 2009, he advised Michael that he had a short-term loan on his Nora Head property. Richard further said at par 51 that at the meeting with Stephen and Michael on 12 January 2009 (which Richard ultimately accepted occurred on 5 January 2009 (T 64.25)) Richard said that his best option for purchasing the property was a short-term bridging loan. Richard confirmed this evidence in cross-examination (T 53.38, 61.20 and 62.22).
71Stephen's version, as stated in his 15 May 2013 affidavit at par 21, was that Richard only said on 5 January 2009 that he was in the process of buying a property at Norah Head. That evidence was effectively confirmed by Michael in his 15 May 2013 affidavit at pars 22 and 23. Michael said that he did not find out about Richard's short-term loan until after the later meeting at Mr Fritchley's office on 13 January 2009.
72Stephen's evidence was that at the 13 January 2009 meeting Richard's solicitor said: "Richard has already purchased the property and he has signed up with a non-bank lender before Christmas at 2% per month for three months and a default rate of about 5% per month if he doesn't pay the debt back in February." Stephen said that Richard replied to his solicitor: "Don't tell him all that."
73Two other telling evidentiary episodes concerned meetings attended by Richard and Michael. Michael gave evidence in his 5 May 2013 affidavit at par 3 of a meeting that occurred between himself, Richard and Max between February and May 2007. Richard flatly denied in cross-examination that this meeting occurred (T 42.26).
74Of further significance, Michael gave evidence at par 7 of a later meeting that he had with Richard on 27 June 2007, after Max's death. Richard also categorically denied that this meeting occurred (T 43.40).
75Michael's version of what was said at the meeting was:
"Richard said:
'I am thinking about a challenge to paying back my will (sic) monies. Would you join me in this?'
I said:
'No Richard I could not join you in this. There is no documentary evidence to back up my claim and it would be wrong on your part as we both know that dad wanted you to pay back the amounts.'
Richard said:
'I know that dad intended me to pay back the money however I think we would have a good chance.'
I said:
'No it would be wrong and it would cause a lot of fighting in the family which will cause losses to everyone.'
Richard said:
'I think you will side with them and do the arse with me.'"
76If Richard did say to Michael in June 2007 that he understood that Max intended him to repay the debt, that would suggest that Richard is conscious that his alternative case for rectification of Max's will is inconsistent with Richard's understanding of what Max's intention was.
77Michael also gave evidence that, after the written agreement was made on 22 October 2007, Michael made many telephone calls to Richard to try to arrange for the agreement to be implemented. Michael said that on many occasions Richard did not return his calls, and that when Michael did speak to Richard, Richard generally said that he was too busy to deal with the matter. Richard entirely denied the truth of this evidence (T 49. 30).
78The evidence of the circumstances in which Richard ran up the debt of $857,953.09 to Max, and the history of his dealings with the landlord during the period of his bankruptcy, and with other creditors, is sufficient to demonstrate that Richard has at best a casual attitude to the need to honour his obligations to other persons. The manner in which Richard gave his evidence in cross-examination concerning his involvement in the litigation with his landlord shows that Richard was not prepared to concede candidly the lack of commercial integrity in his conduct. In the way that I have discussed above, Richard has put his case in this court in a manner that suggests he must be aware that some of his claims, as well as his evidence, have been 'gilded' to strengthen his prospects of success. I am persuaded that Richard consciously decided on 22 October 2007 to accept the compromise outcome that is inherent in the 22 October 2007 agreement, and to forego the opportunity to argue that clause 5 of Max's will released Richard's debt in its entirety. Richard understood, in any event, that Max intended that Richard should repay the whole of the debt. There is some failure of commercial integrity in Richard's conduct in this respect, which diminishes his credit. Richard made positive claims that he delivered an executed deed to Stephen on 13 January 2009, and that he executed a caveat prepared by Mr Fritchley. Richard made no real attempt to explain the circumstances in which the documents were prepared, and the court can have no confidence as to the veracity of Richard's evidence.
79I have recorded a number of significant issues in respect of which Richard entirely denied the truth of the evidence given by Stephen and Michael, or one of them. These include the conversation between Michael, Richard and Max shortly before the latter's death, the conversation between Michael and Richard as to whether they should challenge the enforceability of their debts to the estate, when Richard told Stephen and Michael that he had actually bought the Norah Head property using interim finance, whether there was an actual concluded agreement to vary the 22 October 2007 agreement at the meeting on 5 January 2009, and whether Richard handed the executed deed to Stephen on 13 January 2009. It is necessary to make a choice as to whether the evidence of Richard, or that given by his brothers, is reliable. In all of the circumstances, including having regard to the manner in which each of the witnesses gave their evidence, I conclude that the evidence of Stephen and Michael is in each case to be preferred to that given by Richard.
80Mr Fritchley was not called to give evidence. Mr Schmidt in his affidavit explained that he made attempts to secure Mr Fritchley's cooperation in the preparation of an affidavit, and provided him with copies of the pleadings. In the end Mr Fritchley advised to Mr Schmidt: "After careful consideration I have decided not to agree to your client's request to give evidence in the proceedings".
81Mr Frichley was obviously in a position to give evidence that could be crucial to resolving diametrically opposed evidence that is highly significant to the resolution of these proceedings. He could have corroborated Richard's version of what happened at the meeting in his office on 13 January 2009, both as to what was said, and whether Richard handed to Stephen the executed deed of replacement of trustee, and whether Richard signed a caveat.
82Richard could have required Mr Fritchley to give evidence on subpoena. There is no reason to believe that Mr Fritchley would not have given candid and reliable evidence. Richard ought to have done so.
83In response to a question from the bench in submissions, counsel for the defendants, Mr Meek SC, declined to make a submission that the court should act upon the principle in Jones v Dunkel (1959) 101 CLR 298, and said that the defendants would rather rely upon the positive evidence that had been led in the proceedings. I will not apply the principle.
84The absence of Mr Fritchley as a witness is not, however, irrelevant. For the reasons given, I prefer the evidence of Stephen as to what was said and what happened at the 13 January 2009 meeting that he had with Richard in Mr Fritchley's office. The absence of any evidence from Mr Fritchley confirming Richard's evidence cannot realistically be ignored, and simply leaves me with a more comfortable persuasion that it is proper to prefer the evidence of Stephen.
85I should add that an additional reason for the court to take that course is that Stephen gave evidence, and Richard accepted, that the 13 January 2009 meeting became acrimonious after Mr Fritchley disclosed to Stephen that Richard had already bought the Norah Head property, and that the meeting ended badly when Stephen stormed out. That evidence is quite inconsistent with Richard's claim that on 13 January 2009 he performed his part of a variation that Stephen had agreed to on 5 January 2009. Richard's version is only consistent with the parties remaining reasonably amicable over this period.