Shoalhaven Sand Pty Ltd v Kennedy & Ors

The plaintiff's business operations and use of Burraga Island

1. Mr Stephen McCormac is the Managing Director of the plaintiff. In his primary affidavit, Mr McCormac deposed to Shoalhaven Sand having operated a sand mining business in the Shoalhaven River. His evidence was not contested in these respects. Its business involved it extracting sand from the bed of the Shoalhaven River by means of a dredge. Sand was pumped from the riverbed to a sand washing plant located at the Depot at 125 Terara Rd, Terara. There, the dredged stand was washed and stockpiled for sale. When the dredged sand was washed at the depot, water, mud and other alluvial fines (the 'Spoil') were separated from the sand. The spoil was then pumped through a pipe, across the bed of the river and into a siltation drain and pond (the Siltation Area) located at the southern edge of the Burraga Island.
2. Part of those business operations were conducted on the nearby Burraga Island. It is an alluvial Island within the middle of the Shoalhaven River. At the siltation area on the island, the spoil is allowed to settle in a long trench. The water content of the spoil permeates through the alluvial soil of Burraga Island where the company removes the mud and the alluvial fines from the siltation area.
3. To gain access to the siltation area on the Burraga Island, the plaintiff's employees used a vehicular ferry. The ferry traversed the south arm of the Shoalhaven River, between a ferry landing at the northern end of Bryant Rd, Terara and a ferry landing site located on the southern edge of Burraga Island. The ferry was powered by a diesel motor and hydraulic drive mechanism. It moved back and forth across the river along a designated part, attached to a steel cable or guide wire. One end of the guide wire was attached to the ferry landing upon Burraga Island. The other end was anchored to the Shoalhaven riverbank at the end of Bryant Road, Terara. Mr McCormac said that the plaintiff had used the island from about the 1990s.
4. It is not disputed that up until about December 2010, Mr and Mrs Kennedy and the plaintiff shared the use of an old vehicle ferry to gain access to Burraga Island from the Bryant Rd ferry landing at Terara. Mrs Kennedy accepts that, to that time, the plaintiff carried out the repairs on the old ferry.

Mrs Kennedy's background evidence

1. At all material times up until 14 June 2011, the deceased, Mr Kennedy, was the registered proprietor of the land comprising Burraga Island.
2. In her evidence, Mrs Kennedy said that she and her husband arrived on the island in about 1995. She said that her husband had built the old ferry. But in contrast to the registration of the island, which was in Mr Kennedy's name, registration of the old ferry was put in her name. Registration of the old ferry occurred in about the time they arrived on the Island.
3. In her affidavit Mrs Kennedy deposed that she and Mr Kennedy were partners in a dairy farm that operated on Burraga Island. She explained in her evidence, under cross-examination, that with the exception of that part of the Island specifically leased to the plaintiff, the entire balance of the Island was utilised by her and her husband for farmland purposes.
4. By the middle of 2008, Mr Kennedy was not working properly and the Kennedys were beginning to experience financial difficulty. In cross-examination, Mr McCormac said that he was aware, even before 2008, that the Kennedys were intending to retire.
5. From 1 May 2008, the plaintiff, at that stage using its former registered name (Terara Sand Pty Ltd), was the registered lessee of the siltation area. There had been earlier leases and, indeed, Mrs Kennedy said in her evidence that smaller rental amounts had progressively increased by the plaintiff to the Kennedys over the years.
6. Under the 1 May 2008 lease, however, the plaintiff paid annual rent of $50,000 (plus GST). The plaintiff and the Kennedys had negotiated for three 5 year leases, which conferred the right to possession of the demised part of Burraga Island until 2023. Mr McCormac accepted that the acquisition of these leases, for the aggregate term of 15 years, was intended to provide some security for the plaintiff's business; faced with the prospect of a new owner of Burraga Island. This was the maximum number of leases that could be procured (Mr McCormac would have preferred five leases for 5-year periods).
7. Article 3.01 of the lease was in the following terms: "The Lessee shall have the right to the shared use of the existing ferry and any replacement ferry. The Lessee must in addition to the rent hereby agree to pay one half of the cost of upkeep and maintenance and repair of the shared use of the ferry and the landings which I used to gain access from the mainland to the island for the purposes of gaining access to the demised land for the purposes of this lease only, provided that it damages caused by the Lessor or Lessee that party must repair the damage. The lessor must, if the existing ferry requires replacement within a reasonable time, replace the existing ferry with a ferry of at least the same capacity." (emphasis supplied)
8. Mr McCormac accepted that the plaintiff's lease interest over part of Burraga Island was useless without access to the ferry. This being so, it was put to Mr McCormac in cross-examination that, for the plaintiff, faced with the prospect of new owners of the island, it was also important to secure the right to use the ferry. Mr McCormac recognised that if the plaintiff could convert the right of use to the ferry under the lease to a right of (partial) ownership over the ferry, it could confer 'leverage' upon the plaintiff, as time approached 2023 against the then incumbent owners of the island: he anticipated that if the owners of the island did not wish to extend the lease over the island, in order for them to secure full control over the ferry, they would need to buy out the plaintiff's ownership interest in the ferry.
9. It was put to Mrs Kennedy in cross-examination, and I understood her to accept that, given the sometimes unprofitable nature of their farming operations on the island, the annual rental that she and her husband received from the plaintiff brought about (at least) a mutually advantageous economic benefit to the Kennedys and the plaintiff.

The deterioration of the old ferry

1. From about 2007, Mr McCormac deposed that the old ferry had significantly rusted and had fallen into a state of disrepair. He said in cross-examination that, by 2008, its capacity was such that it could take 20 tonnes across, but at this point, the ferry had badly rusted and was always moving. He had constructed a flotation device as a means of providing some safety.
2. It was common ground that by at least 2009, the condition of the old ferry had further deteriorated and was in need of replacement.
3. Mr McCormac also deposed that until 2009 and 2010, he had a business relationship with Mr John Clifford, an employee of NSW Ferries with whom, he deposed, he used purchase ferry parts. Ms Kennedy disputed Mr McCormac's evidence in this last respect; deposing that he only purchased second-hand steel.
4. It emerged through Mr McCormac's cross-examination that the situation regarding the state of the ferry came to a head when Mr Clifford had mentioned to Mr McCormac that, in his view, the old ferry represented a 'death trap'. He had mentioned that some NSW ferries of the relevant type were coming up for tender.

Mrs Kennedy takes over the management of Burraga Island

1. Through 2009, Mrs Kennedy deposed, it was becoming increasingly apparent that Mr Kennedy was experiencing difficulties functioning with his mental faculties. He received testing for Alzheimer's disease before receiving that diagnosis in February 2010. Mrs Kennedy deposed to informing Mr McCormac of his diagnosis in late 2009, in which, she said, she notified him that it was her intentions to: clean up the farm, receive a payout from some Dairy Farmers shares before getting a new ferry; and thereafter to sell Burraga Island. By way of emphasis, Mrs Kennedy said that she and her husband were waiting upon the payout of the shares before making any decision for a replacement of the old ferry.

Conversations to replace old ferry from 2009 through to 2010

1. There are significant differences between the parties even as to the lead up to the alleged verbal agreement. In effect, Mr McCormac and Mrs Kennedy claim that they were the ones who had 'discovered' the availability of a replacement ferry for the existing ferry that had fallen into disrepair.

Mr McCormac's account

1. Mr McCormac deposed that he had many dealings with Ms Kennedy for many years up until 2009 and 2010. Ms Kennedy disputed this.
2. Mr McCormac deposed to mentioning to Ms Kennedy in late 2009 through 2010 that he had spoken to Mr Clifford, and that the latter had informed him that there were three ferries coming up for sale, by tender, soon (this evidence was admitted only for proof of the conversation; not for the truth of its content). Mr McCormac expressed the view that any one of those could suit as a replacement for the old ferry. He mentioned that Mr Clifford had told him that the cost of replacing the old ferry with a brand-new one would be more than $3 million. He recalled Ms Kennedy indicating that she would keep an eye on advertisements in the newspapers. Ms Kennedy did not recall this conversation in her affidavit evidence. She did recall Mr Kennedy regularly being in contact with Mr Clifford to discuss RTA ferries that were being replaced.
3. Mr McCormac deposed in his primary affidavit to receiving a telephone call from Ms Kennedy a few weeks later, informing him that she had seen an ad published by NSW Ferries calling for tenders for the sale of three ferries. Mr McCormac deposed to suggesting that she (and Mr Kennedy) take Mr Trevor Mackie with them; as he was a diesel fitter, by trade and would know what to look for when he inspected the very. Ms Kennedy disputed that this conversation took place.
4. Mr McCormac deposed that in about March or April 2010, he had a further telephone conversation with Ms Kennedy, in which he informed her that Mr Mackie had told him that the best of the ferries looked to be in good condition and that he and Mr Mackie were going back to Sydney with a sonic metal thickness detector, to check on the thickness of the hull; so as to see whether there was any corrosion. Ms Kennedy denies such conversation occurred. She deposed that she or her late husband had told Mr McCormac that they were going to the Mortlake Shipping Yard to look over the Sackville ferry and that Mr McCormac had responded by suggesting that Mr Mackie attend with them.
5. Mr McCormac deposed that a few days later, he and Mr Mackie travelled to Sydney and looked over the condition of the ferries that were being offered for sale. He determined that the best of the ferries was in a partially dismantled state. He deposed that upon his return to Terara he had a further phone conversation with Ms Kennedy, to the effect that there was no evidence of any corrosion and recommending that "we" should put in a tender for the ferry. He wanted to meet with her to discuss this recommendation the next day. Ms Kennedy says this conversation did not occur.

Mrs Kennedy's account

1. Mrs Kennedy deposed in the affidavit that from about late 2009 and with the assistance of some friends, including John Henry, she was making enquiries as to whether a new ferry should be built. She deposed to being aware that her husband had been speaking to Mr John Clifford, from the RTA, about keeping an eye out for a ferry that could be purchased.
2. In her affidavit, Mrs Kennedy deposed that just before Easter in 2010, she and Mr Kennedy had stayed with their daughter and her partner in the Hunter Valley when they received a telephone call from Mr Clifford. She deposed that on the way home, they had driven via Sackville, and had done a return trip on the 'Sackville ferry'. She says that she and her husband had discussed whether this particular ferry could be a suitable replacement for the existing ferry. She deposed to her husband saying that he thought that Mr McCormac would be interested in it. Mrs Kennedy made it plain that any business dealings concerning the ferry needed to be discussed with her.
3. After her return home, she deposed to having a telephone conversation, with either Mr Clifford or Mr Karunaratne (project manager, ferries) from the RTA. She deposed to being informed that the Kennedys would need to wait for the Sackville ferry to be decommissioned and transported to the Mortlake Shipping yards. She deposed to driving to the shipyards to inspect the ferry (with her husband and Mr Trevor Mackie). She deposed to being 'horrified' about the size of the new ferry.
4. Under cross-examination, it became evident that Mrs Kennedy was not favourably disposed to acquiring this 'Sackville' ferry: she said it was too big to look after. Indeed, she went further and added that she only agreed to acquiring this model 'under duress'. This was duress exerted upon her by her late husband.

Mr McCormac's affidavit evidence

1. In May 2010, Mr and Mrs Kennedy met with Mr McCormac at the Bryant Rd ferry landing at Terara. The content of the meeting is disputed. (Mr McCormac also did not refer to the presence of Mr Hilzinger at this meeting). Mr McCormac deposed that Mrs Kennedy had said to him that they have to tender as high as they could for the ferry; and that the Kennedys had $80,000 that they could put towards it; and that they had asked Mr McCormac whether he was prepared to meet half the price if the tender was won. Mr McCormac's response was that the plaintiff could contribute $50,000 cash towards the purchase: they could make up the balance of that share, by doing up the ferry landings and by doing the work to install the new ferry if they got it. He deposed that Mrs Kennedy agreed to this. When he asked Mrs Kennedy how she proposed to go about tendering for the ferry, her response was that they should put a tender in in the range of $130,000 and that if they won the tender, the plaintiff could upgrade the landings and install it.
2. To this, Mr McCormac deposed he responded that the plaintiff could contribute $50,000 cash but if they got the ferry, then the plaintiff would do the installation and the upgrades when the ferry was delivered. Mr McCormac also deposed that during this conversation, Mrs Kennedy foreshadowed that the Kennedys were going to sell the island in the near future and retire to Nowra; and that they wanted the new ferry to make the sale more attractive to a buyer. Mr McCormac deposed to agreeing to this and asking Mrs Kennedy when they wanted the $50,000; to which Mrs Kennedy responded, that they would put in the tender to the RTA and that if they won the tender, they would let Mr McCormac know when the plaintiff needed to put in its share of the money.
3. To his point, it may be observed, there was no reference in Mr McCormac's account to the ownership rights to the new ferry. According to him, this occurred in June 2010 (see below).

Mrs Kennedy's affidavit evidence

1. Mrs Kennedy's account of this conversation in her affidavit noted that Mr Bill Hilzinger was privy to the conversation, along with Mr and Mrs Kennedy and Mr McCormac. She deposed in the affidavit to saying that the Sackville Ferry (aka 'Ferry No.40') was coming up for sale, by tender, and that Mr Kennedy had told her that Mr McCormac was very interested in contributing to the cost. She deposed to informing Mr McCormac that the Kennedys had $100,000 that they expected to receive from a share-sale payout but that this would not be enough to purchase the ferry. It would need to be transported from Sydney to Terara and she had been informed that it would cost around $20,000. The Kennedys could build one with the very same size as the old one but that if Mr McCormac wanted the bigger ferry, he would need to contribute. To this, she deposed, Mr McCormac (and Mr Hilzinger) had responded that they would contribute to the tender price. Mrs Kennedy then told them that they "will never have ownership of it. The ferry will always belong to the island. The island is being sold and the new owners will over the ferry." To this, she deposed, Mr McCormac and Mr Hilzinger responded "yes of course".
2. Under cross-examination, Mrs Kennedy was asked why she mentioned the need for the plaintiff to contribute to the purchase price. Her response was that that her husband had previously informed her that the plaintiff were willing to contribute; and that (in view of his health condition and her earlier requests to Mr McCormac that dealings only be transacted through her) she wanted to make the position clear.
3. Continuing on with her account of this conversation in her affidavit, Mrs Kennedy deposed to saying that the Kennedys would sometimes need a hand, as "all of this" would fall on her shoulders. The Kennedys would need to upgrade the riverbanks to accommodate the new ferry and they (the Kennedys) would pay for everything. She deposed that Mr McCormac and Mr Hilzinger agreed to this. She also deposed to asking Mr McCormac to drive to the shipyards so as to have a good look over the ferry and that she provided a contact number for her RTA contact at the shipyards, Mr Russell Taylor.
4. After giving this account of what was said during this conversation, Mrs Kennedy emphatically deposed that at no stage did Mr McCormac mention that the plaintiff would be part owners of the ferry. She deposed that had he suggested this, she would have had the smaller ferry built. She deposed she would never agree or compromise that the only access to the island through any joint ownership of the ferry.

Preparing the tender

1. Mrs Kennedy deposed that in May 2010 Mr McCormac (with Mr Mackie, Mr Ikan and Mr Kennedy) drove to the Mortlake shipyards to inspect the ferry. Mr Kennedy and her husband had had a number of conversations with Mr McCormac about the new ferry, some of which involved Mr Hilzinger and Mr Karunaratne. She did not recall who it was, but recalled a suggestion that 'we' could win the tender if a bit was put for the sum of $130,000. She deposed that Mr Kennedy had returned one day from visiting the plaintiff and informing her that the plaintiff was willing to contribute $50,000. On the basis that initial quotes for transporting the new ferry from Sydney to the Shoalhaven River were around $20,000, Mrs Kennedy calculated that this would limit her and her husband's contribution to the sum of $80,000 for the purchase of new ferry. She noted that there were no other means of finance. (In her cross-examination, she indicated that the Kennedys' bank would not lend more).
2. Mrs Kennedy deposed that at the point that the tender was about to be sent, she was in the plaintiff's office. She also deposed to being persuaded by Mr Hilzinger (at that point, the managing director of the plaintiff) to pitch the tender offer at the sum of $131,555.60. Mr Hilzinger had asked whether he could sign the tender even if it was made (in her mind) in Mr and Mrs Kennedys' names. She recalled being caught off guard and not thinking that this would make any difference. Under cross-examination, she accepted that Mr Hilzinger applied his signature to the tender. Mrs Kennedy sent the tender by registered post.
3. In his affidavit in reply, Mr McCormac denied the part of Mrs Kennedy's account of the conversation where she deposed to having informed him that the plaintiff would never have ownership of the ferry was said, or that he (or Mr Hilzinger) agreed with it.

Mr Hilzinger's affidavit evidence

1. The plaintiff read an affidavit of Mr Hilzinger, who gave affidavit evidence in reply to Mrs Kennedy's account of the conversation in May 2010.
2. During the hearing, it emerged that Mr Hilzinger's wife was unexpectedly taken very ill and was subject to emergency medical treatment (see T73). Although Mr Hilzinger had been originally required to attend for cross-examination, this requirement was, in the circumstances, released by Counsel for the Mr and Mrs Kennedy upon the understanding that no point would be taken against the first and second defendants arising from their failure to cross-examine him [1] .
3. Mr Hilzinger is now 79 years old. He is a retired director of the plaintiff. Until his retirement, in the latter part of 2010, he generally administered the plaintiff's business affairs with his wife, Janice and Mr McCormac. He deposed that Mr McCormac, although a director of the company, mainly attended to physical work tasks.
4. He deposed to his recollection of the old ferry had fell into disrepair over many years and that he had had a number of discussions with Mr McCormac about replacing it. He thought he probably would have spoken to Mrs Kennedy about this; and this was particularly so by 2010, by which point Mr Kennedy was losing his mental capacity.
5. The most important part of Mr Hilzinger's evidence was what he had to say about a conversation in May 2010 at the Bryant Street ferry landing which he heard between Mr McCormac and Mrs Kennedy. Mr Hilzinger had a limited recollection of the actual words that were used, but recalled that Mr McCormac had offered to pay the sum of $50,000 towards the purchase price and proposed that the plaintiff would do work upgrading the ferry landings. He deposed that Mrs Kennedy had 'accepted' that offer.
6. More importantly, after reading Mrs Kennedy's affidavit, he deposed that he did not agree that she had asserted that the plaintiff would "never" have ownership of the ferry and (or) that the ferry would always belong to the island such that one of the island was sold the new owners would own the ferry. He deposed that those words were "at odds with" the other things that he recalled being said.
7. Mr Hilzinger also responded to Mrs Kennedy's evidence about the preparation for the tender. He recalled suggesting that the tender price be "something like" $131,000.
8. Mr Hilzinger deposed that in May 2010, his wife had become unwell; and from that time, he was focused on her illness. He said that in July of that year he and his wife travelled overseas. He left the plaintiff in the later part of 2010 and has, since then, taken no interest in the plaintiff's affairs, or in the replacement of the old ferry.

The successful tender for the new ferry

1. Mr McCormac deposed in his primary affidavit that shortly before 10 June 2010, he received a telephone call from Mrs Kennedy who requested that the plaintiff provide $50,000 now for the new ferry; given that the Kennedys had been successful with the tender. He deposed to her informing him that they would have to pay a little bit more than $130,000 as soon as they received a letter from RTA confirming acceptance of the tender. To this, Mr McCormac deposed, he responded by saying that they needed a record of the agreement as to ownership of the new ferry; but she had said that the "we" had got the ferry at such a good price that they couldn't wait for a solicitor to prepare a (written) contract between them: they had only seven days to pay money and if "we don't get on with it, we might lose the ferry". Because of this, Mr McCormac deposed he agreed to put $50,000 into the Kennedys' account the next day but told her that we would have to come back to this (the matter of proof of ownership) later and make a record of the agreement. She accepted this.
2. Mrs Kennedy denied this conversation occurring. She deposed that, at that stage, they did not know who would be the winning tenderer so there was no reason for her to request the payment as was alleged by Mr McCormac. In her affidavit, Mrs Kennedy deposed that it was only after being informed that the tenderer was successful that she rang Mr McCormac to inform him of that fact and that "we" were the winning tenderer and that they would have seven days to finalise the payment. She deposed that it was Mr Hilzinger with whom she spoke to make the necessary arrangements for the plaintiff's contribution to the purchase price.
3. In cross-examination, Mrs Kennedy accepted that her reference to 'we' (the successful tenderer) might reasonably have been interpreted by Mr McCormac as including the plaintiff.
4. The tender itself was not put into evidence. None of the parties had a copy in their possession.
5. On 15 June 2010, the RTA sent a letter to the Kennedys (and not to the plaintiff) advising that the tender for the purchase of Ferry 40 was successful. The tender amount was $131,555.60 (incl GST). Payment was requested within seven days.
6. On 18 June 2010, Mr McCormac said it was he who arranged for the transfer of $50,000 into the Kennedys' bank account (the same one into which the plaintiff had paid its rent). Mr McCormac deposed that he did so on the faith of, or in reliance upon, the conversations he said he had with Mrs Kennedy in May and shortly before 10 June 2010. Shortly after this, he received an invoice which recorded the following: "Reference: RTA Vehicle Ferry No.40 Being for part payment of tender bid for the above ferry. Total due (GST Inclusive $45,454.45) $50,000."
7. Mr McCormac also deposed to relying upon the invoice as explanation for why he did not pursue Mrs Kennedy for the preparation of a separate document recording ownership of the new ferry.
8. A number of financial documents or statements of the partnership between Mr and Mrs Kennedy, as well as personal income tax returns for the Kennedys, for the financial year ended 30 June 2010, do not record receipt by the partnership of income for $50,000 in the manner described by Mr and Mrs Kennedy in their Defence (ie that the $50,000 was received only as consideration for the plaintiff's use of the new ferry). The financial statement for the partnership did not record the contribution at all.
9. Mrs Kennedy deposed that she had instructed their accountant to prepare the tax returns and informed him of the plaintiff's payment. By that stage, however, the Kennedys had left the island and were renting: she said that she was at that time "emotionally spent and incapable of doing anything further in relation to the island".

Arrangements to towing the new ferry

1. Mr McCormac deposed in his primary affidavit this in July or August 2010, Mrs Kennedy rang to inform him that she had arranged for a time to tow the new ferry down from Sydney. He responded that he could meet the tug, at Greenwell point, and guide it up the river to Terara. He recalled Mrs Kennedy telling him the date on which she had arranged for the tugboat to deliver the new ferry.
2. Mr McCormac deposed to constructing a site for the new ferry in the river. He took a two tonne block of concrete from the depot and attached a floating buoy to it, by means of the cable. He then placed the concrete block between two pontoons and pushed the pontoons into the South arm of the Shoalhaven River at Terara. When he reached the position of the proposed boring, he allowed the concrete block to fall to the riverbed. The buoy floated to the water surface where it continued to fight and serve as a mooring point for the new ferry. Mrs Kennedy did not dispute this activity; though she said that Mr McCormac did not have any discussion with her about installing a mooring. In any event, she deposed that the new ferry was only tied to the mooring for a few days after the plaintiff had installed the flaps and used it to transport their excavator over to the island to clean out the trench in January 2010. She deposed that Mr Kennedy and Jordan moved the ferry back to the side of the island and retrained it up to where it stayed until it was commissioned.
3. The new ferry was towed by a tugboat into the mouth of the Shoalhaven River in July or August 2010. Mrs Kennedy deposed that Mr McCormac did not help when the new ferry was towed up the river nor did he pilot the new ferry upstream to a mooring. It was the local marine rescue which guided the tugboat and towed the new ferry to the bottom end of the island. In his affidavit in reply, Mr McCormac said that he did not recall the Kennedys moving the new ferry near from its mooring near the Bryant Street landing to Burraga Island for a few days.
4. Mr McCormac's evidence was apparently corroborated by the affidavit evidence of Mr John Ikin, who recalled, (although he could not date) an occasion when he tugged a boat to deliver a ferry from the mouth of Crookhaven River (near Nowra) to Burraga Island. He recalled seeing both Mr Kennedy's boat and Mr McCormac's boat. Mr Ikin said that the process, in effect, of transporting the new ferry could not have occurred but for Mr McCormac's presence. Mr Ikin was not required to attend for cross-examination on this evidence.
5. In her affidavit, Mrs Kennedy deposed that she had contacted Ausbarges to tow the new ferry from Sydney into the Shoalhaven River; for which it was paid (separately) the sums of $12,750 and $1,220. She also deposed to having arranged marine insurance coverage; in respect to which the payment was made from her bank account.
6. Mrs Kennedy deposed that it was through the involvement of Mr Kennedy, her son (Jordan), and his friend (Lewis McCall) and John Ikin (on the Marine Rescue vessel) who were responsible for the escort and conveyance of the new ferry to the island. By implication, the evidence was that the plaintiff had nothing to do with this process.
7. In his evidence in reply, Mr McCormac deposed that Mrs Kennedy was not present when the new ferry was being towed from the mouth of the Crookhaven River to Burraga Island.

The plaintiff's description of its works to commission the new ferry

1. Mr McCormac deposed that after the new ferry had been moored at Terara, employees of the plaintiff and Mr McCormac carried out various works, at the plaintiff's cost, in order to upgrade the ferry landings. This was to reassemble the new ferry and to install it so that it was operating as an effective replacement for the old ferry. He deposed to his recollections of the specific works done by the plaintiff so as to facilitate the commissioning of the new ferry. He was not cross-examined on his account of the steps that the plaintiff had undertaken in this regard.
2. He deposed that the first task was the construction of a work platform to support the 60 tonne crane which was required to assist in the installation of the ferry. This consisted of the attachment of an 18 tonne steel 'landing flap' at each end of the ferry (at each end, the flap would extend out form the deck of the ferry and form a bridge between the deck and the shore). Mrs Kennedy deposed that the plaintiff did nothing in relation to the new ferry until January 2011 at a point when the plaintiff wanted to use the ferry to transport a huge excavator to clean out the trench on Burraga Island. She deposed that the landing flaps weighed approximately nine tonnes.
3. Mr McCormac explained that since the Shoalhaven riverbank at Terara was made of soft alluvial soil that would not support the weight of a 60 tonne crane, it was necessary for the plaintiff to construct a 'landing pad' on which the crane could rest without becoming bogged; whilst it lifted the landing flaps and moved them from the ferry to the shore. He deposed that the plaintiff owned a stockpile of 120 kg sandstone blocks, located at the depot. 200 of those blocks were transported by the loader from the depot to the site of the landing pad on the riverbank - being a distance of about 1 km. He estimated that it took Michael McCormac and himself about one week to construct the landing pad for the crane, using the plaintiff's materials.
4. Mrs Kennedy says that this description of the work was a 'gross exaggeration'. She said that the plaintiff could easily have used its loader to transport any sandstone block in one or two loads and the distance from the riverbank at the depot in order to pick up the blocks would be only 100 to 200m distance. In his affidavit in reply, Mr McCormac maintained that the steel landing flaps from the new ferry each weighed 18 tonnes. The large crane was required to lift the landing flaps off the deck of the new ferry. A smaller crane could not be used.
5. Mr McCormac went on to depose that after constructing the landing pad, the plaintiff retained the civil engineering firm, Allen Price and Associates, to prepare an engineering design plan to upgrade Bryan Street ferry landing and roadway. Such upgrade was required by Shoalhaven City Council as a condition of the construction certificate issued by the Council. For these services, the plaintiff paid a tax invoice in the sum of $3,333. Mrs Kennedy disputes this evidence. She deposed in her affidavit that Council did not issue a construction certificate for the upgrade of the ferry landing and that she had lodged a separate application for consent for works and structures on a public road; which had been approved by Council. She deposed that it was she who engaged Allen Price to assist with the preparation of plans submitted with a DA to upgrade the ferry landing and the separate application lodged on 4 January 2011. Council had approved the plan in July 2011 after the Kennedys has left the island. She accepted that Mr McCormac was involved with the preparation of DA - she had asked him to have a look at it to ensure there were no omissions. A week later the DA was lodged with the Council.
6. Mrs Kennedy deposed that months later, she read Council's letter approving the DA and, at this time, she had a conversation with Mr McCormac, in which the latter asked her what she was going to do about building up the road from the levy bank into Bryant Street; and also asked her what she was doing about the plaintiff's trucks bottoming out on top of the levy bank. She informed Mr McCormac that she was unaware of this and she reminded him of the opportunity he had to look at the DA. She indicated that after all those months she had no intention of holding up the works and suggested that Mr McCormac work things out with the Council. She also deposed that in February 2011 Mr McCormac indicated that he wanted to get across the island to take Mr Ernie Panucci from Allen Price across, to do some work. These particular parts of Mrs Kennedy were not responded to by Mr McCormac in his affidavit in reply.
7. Whilst waiting for the design plan, the plaintiff deposited 20 tonnes of hot mix bitumen upon the Bryant Street riverbank area where the old ferry docked. This was for the purpose of filling in potholes that had developed over the years where vehicles were driven on and off the old ferry. Mrs Kennedy recalled Mr McCormac informing her that Michael Nelson had been contracted to supply and pour hot mix to the new runways at HMAS Albatross. She also recalled Mr McCormac using the plaintiff's loader, at the end of 2010, to push a load of bitumen down the hill to the landing, then lowering the bucket and dragging it back up the hill.
8. Whilst waiting for the preparation of the engineering design plan, Mr McCormac also procured a civil construction company, Jirgins Civil, to carry out works upgrading the Bryant Street ferry landing area and raising the area by about 300 ml, as required by the Council and by the engineers design plan. For this, the plaintiff paid Jirgins the sum of $13,820. There was a dispute as to who retained Jirgins Civil to do the civil construction work on the levy bank: Mrs Kennedy said that it was the plaintiff and that that had occurred after the Kennedys that sold and left the island; Mr McCormac said that it was the Kennedys, but that they had left the island without paying Jirgins their bill (he said that the plaintiff had paid it).
9. Mr McCormac deposed that after Jirgins Civil had completed its upgrade of the Bryant Street ferry landing, the Kennedys supplied a winch for attachment to the concrete pad on the mound that had been supplied by the plaintiff. Steven and Michael McCormac placed the winch and concrete pad at the top of the mound, ready to be connected to the new cable. Mrs Kennedy deposed that Mr McCormac had brought the winch and left after dropping it off. She deposed that there were no concrete pads under the winch. In his affidavit in reply, Mr McCormac maintained that the concrete pad remains in place beneath the winch.
10. Mr McCormac also deposed to work being performed to upgrade the Burraga Island ferry landing prior to the new ferry being installed. This, he explained, was because of the circumstance that the new ferry was considerably wider than the old one. That meant that the new ferry landing site needed to be widened. Mr McCormac took an employee of the plaintiff to Burraga Island, together with the company's loader and excavator; and they carted quantities of rock from the plaintiff's stockpile over to the island; depositing the rock upon the approaches to the ferry landing. They reconstructed and widened the Burraga Island ferry approaches.
11. In her affidavit, Mrs Kennedy curtly deposed that there was no upgrade on the Burraga Island ferry landing. She adhered to this position under cross-examination, subject to repeating, in effect, what she had deposed in her affidavit; that sometime in the past she recalled that a very small section of bitumen was on the roadway down to the river landing.
12. Mr McCormac also deposed that after the ferry landings had been upgraded, he and Michael McCormac set about the task of reassembling the new ferry and getting it ready for installation. This required a number of steps, including: cleaning the body of the new ferry and removing any surface rust; manufacturing replacement steel brackets to reattach the landing flaps to each end of the new ferry; manufacturing stainless steel pins to reattach the landing flaps to the new ferry; 'beaching' the new ferry on the riverbank at high tide, so as to attach the landing flaps; pushing the new ferry back into the river and beaching it again, so that the landing flaps at the other end of the new ferry could be attached; servicing the diesel motor of the new ferry (including replacing the hydraulic lines and refilling the hydraulic system with fluid); and purchasing and installing a solar panel to charge the battery to start the diesel engine as well as fitting remote control devices to the new ferry so as to enable the motor to start from a distance.
13. In her affidavit, Mrs Kennedy disputed that this work was done. She deposed that the new ferry was in good condition and that the only work needed to be done was the attachment of the landing flaps. She denied, in particular, that any servicing was done to the new ferry by the plaintiff. The Kennedys had hired South Coast Track Repairs to repair the hydraulics and replace the grease lines. They also hired Watson's Auto Electrics to fix problems with the charging of the new batteries on the ferry. The new ferry did not have a solar panel attached to it at the time of the Kennedys had left the island and it was Jordan Kennedy who had connected the remote controls.
14. Mr McCormac deposed that when the new ferry was ready for installation he and Mr Kennedy detached the old ferry from its guide wire. Using two boats, they towed and pushed the old ferry to the northern side of Burraga Island and beached it there for wrecking by a scrap metal merchant. He then used the plaintiff's work boat to push the new ferry into place; where it could be connected to the guide cable formally attached to the old ferry. With the assistance of Michael McCormac, Mr McCormac connected a second guide wire cable to the new ferry so that was capable of running between Terara and Burraga Island inside to guide cables. They tested the new ferry to ensure that it was operating properly.
15. In her affidavit Mrs Kennedy also disputed this account. She said that it was Mr Kennedy and Jordan Kennedy who towed the new ferry around and attached the old cable to the new ferry. She recalled that her son, Jordan, had had an argument with Mr Kennedy and this caused her to ring Lewis. It was Lewis and Jordan who attached both cables to the new ferry. She denied that Mr McCormac or anyone else from the plaintiff provided any assistance to connect the new ferry to the cable.
16. Mr McCormac deposed that it was the plaintiff who bore the cost of the works described, with the exception of Mr Kennedy's help in moving the old ferry and the roadworks of Jirgins Civil. He deposed that the plaintiff had supplied all of the labour, all the plans and equipment and the materials that were used in those works as well as all the parts and fuel used in those works. He deposed that he did these things in reliance upon the verbal agreement he asserts had been entered into. In her affidavit, Mrs Kennedy denied all of this; and said that it was the Kennedys who paid for all the work that had been done.
17. It was specifically put to Mrs Kennedy in cross-examination that the following steps had been carried out by or on behalf of the plaintiff (followed by Mrs Kennedy's responses):

• The plaintiff had constructed a mooring site: Mrs Kennedy said that she had not asked the plaintiff to do this; and that she and her husband had never used it;
• The plaintiff constructed a work platform: Mrs Kennedy accepted that they used flaps, but the plaintiff had not built the platform and the Kennedys had paid for the crane;
• Michael McCormac transported sandstone blocks: Mrs Kennedy accepted this, but said that the Kennedys had paid for this
• The plaintiff retained engineers to design plans: Mrs Kennedy said that if this occurred, it was well after the Kennedys had left the island.
• The plaintiff repaired the ferry landing: Mrs Kennedy said that it was at the behest of the Kennedys that all of this work was done
• The plaintiff had undertaken extensive works to assemble the ferry: save for the flaps, Mrs Kennedy disputed this and in respect of the flaps, the Kennedys had paid them for this work.

Jordan Kennedy's affidavit evidence

1. Jordan Kennedy deposed to his involvement in bringing the new ferry onto the island. He noted the assistance from marine rescue. He deposed that Mr McCormac had nothing to do with the process. Mr McCormac, he deposed, did no more than observe the process. He also deposed, generally, to seeing the plaintiff (or at least unidentified persons on its behalf) install the two flaps of the new ferry.
2. Jordan Kennedy was not required to attend for cross-examination.

Lewis McCall's evidence

1. Mr McCall's affidavit was to very similar effect as Jordan Kennedy's affidavit.
2. As with Jordan, Mr McCall was not required to attend for cross-examination.

John Ikin's affidavit evidence

1. John Ikin gave affidavit evidence explaining his involvement in delivering the new ferry to Burraga Island. The gist of this was to say that he relied upon the involvement of Mr McCormac.
2. Mr Ikin was not required to attend for cross-examination.

Registration of the new ferry

1. On 14 March 2011, Mrs Kennedy registered ownership of the new ferry (with NSW Maritime) in her own name. This, according to Mr McCormac, was contrary to the content of his conversations with the Kennedys and the content of their invoice. He said that neither of the Kennedys had told him, prior to the purchase and installation, that it was they who proposed to purchase the new ferry, or that they had purchased it without recording the plaintiff's interest in the transactional records.
2. Although the Roads and Maritime Services website indicated that motor vehicles can only be registered in one name, it was unclear to me whether the same constraint applied to ferries. [2]
3. There was no dispute that Mrs Kennedy had not informed Mr McCormac of her registering the ferry solely in her name.
4. Mr McCormac was asked, in cross-examination, about several of what might be called the usual consequences that would follow from the 'gentleman's agreement' he alleged had been entered into. The plaintiff's name was not jointly inserted in the registered title to the ferry: Mr McCormac thought this would follow. He had not asked Mrs Kennedy to register the plaintiff's name. He accepted that he had not.

Sale of Burraga Island

1. In late November 2010, the third defendant, Mr Campbell was approached to auction Burraga Island. The Kennedys retained the solicitors, Fox and Staniland, to act on their behalf in relation to the proposed auction.
2. The agency agreement between the Kennedys and the auctioneer was entered into on 29 November 2010. The agent was identified as 'Campbell Holdings (NSW) Pty Ltd' - not Mr Campbell. The document was executed, in handwritten signature, by Mr Kennedy. The signature of Mrs Kennedy had been scribbled out. Mrs Kennedy said she held a power of attorney in relation to her husband at this time.
3. In his affidavit, Mr Campbell deposed that on 29 November 2010, he listed the property for auction. The initial date was 5 April 2011, but in the events that occurred, it took place on 3 May 2011.
4. Mr Campbell deposed that in December 2010, Mr Kennedy had instructed him that the ferry was to be inserted as an 'Inclusion' and therefore part of the sale of the island. This was, he said, solely the decision of Mr and Mrs Kennedy. When she gave evidence in cross-examination, Mrs Kennedy admitted that she had provided the instruction for the ferry to be included with the other 'Inclusions'. She said she also mentioned to Mr Campbell that the plaintiff had contributed the sum of $50,000 to the purchase of that ferry (T. 111 - 112).
5. The contract for sale at the auction recorded that, the (typed) "List of Inclusions" offered for sale, along with the land comprising Burraga Island, chattels which included: "Ferry: Ferry No. 40 and all associated winches, cables etc. Row boat attached to ferry. Spare winch and spare set of wire cables:- these are located at Terara Sands depot."
6. Mr McCormac deposed in his affidavit that in late April or early May 2011, he read advertisements for the auction of Burraga Island published in newspapers in Nowra. He became aware, then, that Mr Kennedy had offered to sell the new ferry by public auction, together with Burraga Island. He deposed to speaking to Mrs Kennedy and asserting to her that the plaintiff owned half of that ferry and that he wanted a document prepared to record its ownership of that interest. To this, Mr McCormac deposed, Mrs Kennedy said that she was too stressed to talk about; at which point she ended the telephone conversation. In her affidavit Mrs Kennedy disputed this conversation.
7. A few days later, in April or May 2011, Mr McCormac also deposed to making a further telephone call to Mrs Kennedy. Mrs Kennedy informed Mr McCormac that she had spoken to Neil Campbell who had told her that they had to sell the ferry with the island - it would scare buyers away from the sale if the Kennedys could only offer to sell half of the ferry at the auction. To this, Mr McCormac recalled telling her, this was not the plaintiffs problem but it would become their problem if the issue could not be sorted out. He deposed that Mrs Kennedy had told him that the plaintiff would just have to sort it out with the new owners.
8. In cross-examination, Mr McCormac was asked about what steps he took to protect the plaintiff's asserted ownership interest in the ferry. Mr McCormac indicated that they were limited to the telephone calls to Mrs Kennedy. He accepted that he was 'furious' with Mrs Kennedy after she had rebuffed him, a second time, in the recent telephone conversations. He acknowledged his belief that once the island was sold, the plaintiff may never have the right to the ferry again. But he recalled that he did not consult lawyers until 2014.
9. In cross-examination, Mrs Kennedy denied that she received telephone calls from Mr McCormac inquiring why the ferry had been listed as part of the sale. She said that she recalled him asking about another 5 year lease.

The RMB Lawyers letter

1. On 8 April 2011, and three weeks before the scheduled auction of the island, the plaintiff's solicitor, Mr Grant Gleeson, of the firm RMB Lawyers, sent a letter to the Kennedys solicitors, Fox & Staniland, noting that that firm acted for Mr Kennedy and the subject matter of the correspondence was the Kennedys' property which was shortly to be offered for sale at the auction. The main thrust of the letter was to enquire whether the Kennedys were minded to agree to broaden the area for the plaintiff to access on the island. But for relevant purposes, the more immediate forensic significance of the correspondence was Mr Gleeson's reference to the new ferry. In this regard, Mr Gleeson wrote as follows: "if the property is to be sold, then my client believes that it may be appropriate to properly document the (funding) arrangements which may have been entered into in relation to the use and operation of the (ferry)" (emphasis supplied)
2. No reference was made in this letter to discussion, much less any assertion made on the plaintiff's behalf, about the ownership of the ferry. The letter invited discussion of the Kennedys' position so the plaintiff could take further instructions.
3. Mr McCormac said, in cross-examination, that he had not spoken to Mr Gleeson; although he had heard of his name. A fellow director (and the plaintiff's accountant), Mr Penkaitis, had been left to take control of matters to do with Burraga Island (T. 39.49). Mr McCormac tentatively said that he did have something to do with the content of Mr Gleeson's letter of 8 April 2011 - he had had a short conversation with him; although could not recall its content; other than to say that he did not speak with him about the ferry.
4. Mr Keith Gibson, another director of the plaintiff, whose evidence I will return to shortly, said in cross-examination that he had not spoken to Mr Penkaitis.
5. Mrs Kennedy said in cross-examination that she had not seen this letter prior to her giving evidence at trial, but understood that a response to it would be provided by her solicitor.

Mr Gibson's inquiry of Mr Campbell

1. In May 2011, Mr Keith Gibson became a director of the plaintiff. Mr Gibson deposed to having a telephone conversation with the third defendant, Mr Neil Campbell. Mr Gibson deposed that a day or two later, he confronted Mr Campbell (by telephone call) with his advertising the auction of the new ferry with the island. He deposed to informing Mr Campbell that 'he' had a "financial interest" in the plaintiff's business and asserted his understanding that the plaintiff had an "interest" in the ferry. He deposed that Mr Campbell said that this had "nothing to do" with him and that Mr Gibson should talk to Mrs Kennedy. Mr Gibson told him that Mr McCormac had spoken to Mrs Kennedy, but had been 'fobbed' off by her. He indicated his understanding that Mr Campbell had advised the Kennedys would have to sell the ferry with the island. Mr Campbell reputedly said that Mr Gibson should talk to Mrs Kennedy about that side of the deal, as it had nothing to do with him. That was the end of the telephone conversation and Mr Gibson recalled mentioning the conversation to Mr McCormac.
2. The legal representative for the third defendant questioned Mr Gibson whether he might have been 'mistaken' in recalling that he had told Mr Campbell about the plaintiff's "interest" in the ferry. Mr Gibson answered that emphatically in the negative.
3. In cross-examination, by Counsel for the Kennedys, Mr Gibson said that the decision to call Mr Campbell, the auctioneer, was his personal initiative. Mr Gibson himself was a licensed real estate agent and retired valuer. It would not surprise me if he had known Mr Campbell. He reiterated that he simply wanted to inform Mr Campbell of the plaintiff's interest in the ferry and urged that this be advertised. Aside from making this call to Mr Campbell, Mr Gibson took no other step to protect the plaintiff's asserted interest in the ferry. When challenged why not, Mr Gibson rhetorically asked what (more) would he do? He was not aware that the plaintiff had engaged lawyers.
4. In response, Mr Campbell deposed in his affidavit that he did not recall having this conversation with Mr Gibson. Mr Campbell deposed that the Kennedys had approached him in December 2010 regarding the listing of Burraga Island for sale. He had been informed in about the first week of December 2010 that the ferry, and all of its associated equipment, would be an inclusion part of sale. In other words, the decision to include the ferry in the sale the property was solely that of the Kennedys, which he 'supported'. He deposed at no stage during the sale process to the Kennedys mention to him that the plaintiff was part owner of the ferry.

Mrs Kennedy's instructions to Mr Campbell

1. Under cross-examination from the legal representative for Mr Campbell, Mrs Kennedy accepted that at the time when she and her husband had engaged Mr Campbell's firm, she had mentioned to him that the inclusions for the sale of the island should include the ferry. This was premised upon her understanding that the partnership owned the ferry and that she and her husband were entitled to sell it.
2. She also agreed that, up to the point of sale on 3 May 2011, she had not informed Mr Campbell about the plaintiff's assertion of an ownership interest in the ferry. This evidence, to reiterate, was after she had earlier said accepted that she had informed Mr Campbell of the plaintiff's contribution to paying the purchase price for the ferry.

Variation of the lease

1. On 2 May 2011, a Variation of Lease was executed by the plaintiff and Mr Kennedy. The only variation was to substitute the names of guarantors of the lease. No alteration was made to Article 3, referred to above.
2. Mr McCormac said he was not aware of the variation, although accepted that he had executed it. The handwriting under his signature was not his. So far as he could recall, he signed it only because he was asked to, he thought, by Mr Hillzinger.
3. Mr Gibson said he thought he was involved in the variation of the lease and thought he might have spoken to solicitors about this.

Sale of Burraga Island and the 'new' ferry

1. On 3 May 2011 Mr Kennedy entered into a contract to sell Burraga Island, together with the new ferry and other items, to the entity 'Burraga Islands Pty Ltd'. The sale was completed on 14 June 2011 and the Kennedys retained the whole of the proceeds of the sale of the ferry.
2. Mr McCormac did not speak with the new purchasers, at least up to 16 May.
3. On 16 May 2011, Mrs Kennedy had sent an email to Craig Lockhart, apparently on behalf of the new purchasers. Amongst other things, she referred to problems that the plaintiff were having and asserting that the plaintiff wanted the old ferry which the Kennedys were going to scrap. When shown this email in cross-examination, Mr McCormac said he had not spoken with the new purchasers before 16 May.

ISSUES

1. The parties did not present the Court with schedules of issues prior to or at the commencement of the hearing. The plaintiff's Amended Statement of Claim, though obscure in parts, appeared to bring claims for damages for breach of an oral agreement, unconscionable conduct and restitution and made assertions of misrepresentations. Nevertheless, it became apparent in her opening address that Counsel for the Plaintiff based her claim solely upon the tort of conversion, and the central premise for that claim was that by reason of entering into an oral agreement, the plaintiff acquired a half share in the new ferry, and that this generated the right to possession capable of protection under the tort of conversion.
2. Although there was significant dispute on issues such as who had identified the replacement ferry and how the new ferry had been conveyed and installed at Burraga Island, I do not regard those issues as being necessary to decide.
3. There was also a substantial dispute about whether the plaintiff had performed works to upgrade the ferry landing area. This was part of the consideration, or contribution, on the plaintiff's case, for receiving partial ownership. Ultimately, however, the Kennedys did not contend that unless the plaintiff could establish that it performed the works Mr McCormac had said that it had performed, then it could not make out its case on the oral agreement the plaintiff alleged. They did not say that because of any non-performance of its promise to upgrade the landings and install the ferry, the plaintiff was not entitled to partial ownership of the new ferry.

Mr McCormac

1. Mr McCormac presented as a practical man, and not especially sophisticated. I considered him generally reliable as a witness; although sometimes he gave non-responsive evidence. I did not regard that as deliberate, but more a function of his (verbally) trying to interpret the questioning. On the whole he tried to give his evidence truthfully and he was quite deliberative in answering each question raised of him.
2. Two points were raised against Mr McCormac in the submissions of Mr and Mrs Kennedy. First, it was noted that he had not identified Mr Hilzinger as being privy to his discussions with the Kennedys at the Bryant Road ferry landing in May 2010; when both Mrs Kennedy and Mr Hilzinger had, separately, deposed to his being part of the discussions. That being so, I accept that Mr Hilzinger was indeed present. But I do not regard that omission as being so material as to cast doubt upon Mr McCormac's general reliability. Because of the nature of the claim, and the timing with which it was brought, all deponents laboured under the disadvantage of the passage of time. What was truly material was the accuracy of his recollection of the content of what was said and whether what was asserted to have been said was aligned with the background context.
3. The second point put against Mr McCormac was suggested discrepancies in his evidence as to how much the plaintiff cared about obtaining additional leases in relation to the Island. I think it stood to reason that for a business operation like the plaintiff's, it would naturally try to acquire as much protection of its leasehold interest as it could. But in 2010, it had, in prospect at least another 12-13 years' worth of protection, even if there was a sale of the island. What could not necessarily be assured was the status of the licence to use the ferry. I did not see that there was any material inconsistency between a lack of concern, in 2010, about the adequacy of the number of leases the plaintiff had with an abiding concern to try to augment the protection that could be obtained in respect to the ferry, for the reason Mr McCormac mentioned (at T 51.17 - 51.21).
4. I do not accept that that the two matters identified by Mr and Mrs Kennedy materially cast doubt upon Mr McCormac's reliability.

Mr Gibson

1. No one suggested that Mr Gibson was other than a reliable witness.

Mrs Kennedy

1. Mrs Kennedy impressed me as an intelligent and determined woman. Generally, I thought she tried to tell the truth. But I have a reservation as to her reliability and I consider that this derives from some underlying circumstances of some misfortune to her. The content of her affidavit and the tenor of her evidence conveyed the impression that she was struggling in the period when her late husband was manifesting what came to be diagnosed as Alzheimer's disease: it appeared as though he continued to be active, continued to 'talk' freely and she had to try to not only rein him in, but needed to emphasise to all who dealt with her husband that they could only conclude business arrangements with her. Supporting her husband would have been emotionally draining even in the best of times, but Mrs Kennedy also noted (at paragraph 15 of her affidavit), the general difficulties of daily life on the farm. The content of her affidavit, and the tenor of her evidence, also made it plain that the plaintiff's partnership on the farm was struggling financially - she accepted that the farming activities were very unprofitable at times. It would have been no surprise if, throughout late 2009 through to May 2011 she was in a frazzled state.
2. I mention these background circumstances, as context for why, it appeared to me, that Mrs Kennedy was sometimes determined, when she gave evidence about matters (in retrospect), to stick to entrenched positions which, I thought, reflected a consciousness of how her evidence might affect her interests. This was illustrated, for example, when she gave somewhat conflicting evidence as to ownership of the old ferry - she fluctuated between saying that she owned it; towards the partnership owing it (once the contrast had been made with ownership of the island being put in her late husband's name). When she was cross-examined on why the $50,000 contribution that she accepted had been made by the plaintiff towards the purchase of the new ferry had not been declared as income, her evidence also veered from reading the statement to not reading it; whilst implying that it was all the responsibility of her accountant. She deflected responsibility again to her accountant when asked why the financial statements for the partnership did not record the contribution. In the circumstances, I regarded it as being disingenuous for her to say that the accounting treatment was all the work of her accountant (who was not called) without any constructive input on her part. In the circumstances, I formed the strong impression that Mrs Kennedy was acutely aware of the financial stakes for her throughout the litigation in circumstances where (although her present position was not clearly indicated) her affidavit evidence clearly evinced regret as to financial difficulties that she and her husband had faced during the events the subject of this proceeding.
3. Further, on at least one occasion, I regarded her evidence as implausible. When it was put to her that Mr McCormac had rung her to inquire (if not protest) why the ferry had been included within the 'List of Inclusions' in the contract for sale of the island, Mrs Kennedy not only denied this, but positively asserted that Mr McCormac was only pressing her about obtaining another 5 year lease. Although this was a matter that she had referred to in her affidavit (paragraph 84), this assertion was not put to Mr McCormac under cross-examination by Mrs Kennedy's counsel and it appears highly implausible that Mr McCormac could think that he would likely be able persuade an outgoing lessor, with whom he was in dispute about documenting an agreement for ownership of the ferry, to enter into an additional lease, 11 years ahead of the expiry of the final lease, when, on the plaintiff's case, he could not even cajole Mrs Kennedy to sign a piece of paper admitting that the plaintiff had an ownership interest in the ferry.
4. It followed that I regarded her evidence with caution and, in any contest on material issues, I would be disposed to preferring the evidence of Mr McCormac.

Principles

1. The tort of conversion involves the intentional dealing with a good which is substantially inconsistent with the possession, or right to immediate possession of another person [3] . It is a tort of strict liability: it is unnecessary to establish an intention on the part of the defendant to deny the plaintiff his, her or its rights, or even negligent interference with such rights. Contributory negligence is not a defence. [4]
2. To sustain the tort, the plaintiff must establish either possession or a right to immediate possession. Ownership itself is not essential, but an owner who has parted with possession cannot maintain an action [5] .
3. The act of conversion classically arises through sale. It is no answer that a person, such as an agent or auctioneer, has acted under authority from someone who had no right to dispose of a chattel, so that a sale by the agent or auctioneer constitutes conversion against the true owner; even if made in the honest belief that his or her principal had title to the good [6] .

Plaintiff's submissions

1. Counsel the plaintiff cited various contextual circumstances to support the existence of the agreement. These included: the terms of Art 3.01 of the lease; the consensus, as between the plaintiff and the Kennedys, that the old ferry had fallen into a state of disrepair and a new replacement ferry was required; the Kennedys did not have the funds to purchase the replacement ferry outright and sought funding from the plaintiff to enable it to meet their responsibility under the lease to acquire a replacement. She submitted that the plaintiff was significantly involved in the tender process necessary to acquire the replacement ferry. She submitted that because of the terms of Art 3.01, the plaintiff had no real incentive to contribute a substantial amount of money to acquire a new ferry, when the responsibility for the replacement fell upon the Kennedys, if all that the plaintiff stood to obtain was continued use of the ferry.

First & Second Defendants' submissions

1. The first and second defendants generally submit that the plaintiff has not discharged its onus of proving the existence of the oral agreement. That being so, it fails to prove that it had a 50% ownership interest in the new ferry. Accordingly its claim must fail. This result, they say, is attributable to surrounding circumstances which militate strongly against the possibility of such verbal agreement being entered into. Those circumstances are: 1. the absence of a written contract for a commercial transaction involving expensive chattel used for transport; 2. there is no objective proof of the plaintiffs seeking to protect its interest after learning of the sale of the island. This was evidenced by the letter of their solicitors to the Kennedys' solicitors of 8 April 2011; 3. the plaintiff could have taken the opportunity afforded by the variation of the lease (on 2 May 2011) to insist upon a recording of its putative ownership interest in the ferry; 4. the new ferry was beneficial for the plaintiff - it did not need any ownership interest as an inducement for contributing to its purchase; 5. there were practical problems for the Kennedys that would be consequential from split ownership of the ferry - this makes it implausible that they would agree to such a state of affairs; 6. such documents as exist do not support the oral agreement propounded by the plaintiff; 7. the version of the oral agreement propounded by the plaintiff was so one-sided as to make it unlikely that Mrs Kennedy would agree to enter into such a bad bargain. 8. I should prefer the evidence of Mrs Kennedy over Mr McCormac;
2. The first and second defendants concede, however, that if the plaintiff can establish the shared ownership of the new ferry prior to its sale, then it is liable for the tort of conversion (T138.15). He submitted that it is unnecessary for the plaintiff to actually establish a breach of contract by Mr and Mrs Kennedy.

The Third Defendant/Cross - Claimant's submissions

1. The Third Defendant essentially adopted the arguments of the First and Second Defendant as to why they say that the plaintiff did not establish an interest in the ferry sustaining protection of the law against conversion. Initially, in its written submissions, he also submitted (with reference to equitable principles) that the plaintiff did not establish that he was liable, as an accessory, for any notice that the Kennedys had for the plaintiff's interest.
2. If, however, it was found that the third defendant was also liable in conversion, Mr Campbell submits that the Kennedys were in breach of their agreement with him, and/or that they engaged in misleading or deceptive conduct in trade or commerce by making certain representations that they had an entitlement to sell the new ferry without reference to the plaintiff's interest.
3. On the former action, Mr Campbell says that the Kennedys were in breach of an express term of the agreement, being in the nature of a warranty, that the Kennedys had the authority to enter into the agreement. They also say that the contract included an implied term, apparently another (implied) warranty, that the Kennedys had legal title to sell the 'land, improvement and appurtenances' and that this included the new ferry.
4. On the latter count, Mr Campbell says that the conduct of the Kennedys in signing a contract, and making the alleged representations, constituted conduct in trade or commerce. He sought to distinguish the decision of Williams v Pisano (2015) 90 NSWLR 342 on the basis that in this case, unlike the factual situation in Williams v Pisano, there was a written agency agreement entitling the cross-claimant to commission.
5. Mr Campbell says that the remedy he seeks, under either count, is the same: damages for such sum as would represent an indemnity for any order for damages (including interest and costs) it is liable to pay to the plaintiff.

Cross-defendants' submissions

1. The Kennedys say that the plaintiff has no claim against the Third Defendant save as to the tort of conversion and submit that, in the circumstances, the Third Defendant did not commit any tort of conversion. They add that, at all material times, to the extent that he acted at all, it was only in the capacity of agent or employee for a corporate employer. They submit he should never have been joined.
2. This point of joinder, though pleaded, was not embraced by Mr Campbell in his closing submissions (written or oral).
3. This reasoning, the Kennedys say, equally applies in their defence to Mr Campbell's pleaded cross-claim that the Kennedys breached express or implied terms of an agreement: they simply say there never was any agreement entered with Mr Campbell personally. Their agreement was with Campbell Holdings (NSW) Pty Ltd.
4. They also say that the statutory count does not lie. They say that the facts here are virtually on all fours with the Court of Appeal's decision in Williams v Pisano: the Kennedys were simply selling their residential home. Even though the home had been used to earn income, the purpose of the sale was that the Kennedys no longer intended to operate the business; that they were, in effect, winding down such operations. Anything they may have said could not have amounted to conduct in trade or commerce.

Consideration of plaintiff's claim to interest in the ferry

General conclusion

1. I am persuaded, that it is more probable than not, that the oral agreement articulated by the plaintiff was reached. I do not reach that view free from all doubt. Speaking generally, I consider that most of the objective circumstances that existed before or at the putative agreement was entered into support the plaintiff's case. Where there is doubt, and where there is force in the defendants' arguments, most of that derives from the plaintiff's conduct after the putative contract was entered into. But in relation to this, although the plaintiff did not act as one might have expected a reasonable entity in its position to act to safeguard the interest it asserted, there was not much that the defendants could point to indicate that it acted positively inconsistently with its assertion of an ownership interest. Whether or not the plaintiff acted prudently in the protection of its interests, and notwithstanding that an absence of prudence might make the task of proof of an asserted oral agreement more difficult, an absence of prudence in acting to protect a possessory interest in a chattel does not amount to any defence. On balance, the probabilities favour the plaintiff's case.
2. In terms of sequence, I will initially address the circumstances as they existed before entry into the alleged agreement before turning to the parties' 'post-contractual conduct'.

Existing rights in the old ferry

1. In my opinion, upon entering the lease for part of Burraga Island, in 2008, what the plaintiff acquired, viz a viz the ferry was a licence to use the 'existing' ferry. It was plainly not a lease, since Art 301 of the lease, by its terms, did not express a legal right to exclusive use of possession to the ferry. That would have been an intolerable position for the landlord, and owner of Burraga Island to be in. The plaintiff's right could also not be regarded as akin to a bailment, since possession of the ferry was not actually transferred to the plaintiff [7] . The license was only personal to the plaintiff - it was only enforceable in contract, but not in an action for trespass. [8]
2. Often, licensees of goods are bailees; although, as I have said, that was not the plaintiff's position. The plaintiff did not contend that the plaintiff held any interest in the existing ferry and I consider that it was correct not to do so.

Construction of Article 3 upon purchase of the new ferry

1. The only reference to a ferry in the lease was in Article 3.
2. Article 3 generally recognises that use of the ferry is integral to the proper use and enjoyment of Burraga Island. Article 3 was premised upon the existence of an 'existing' ferry, but contemplated its replacement. It was the lessor that bore the obligation to "replace" it (and to do so with a vessel that had at least equivalent capacity). This obligation appears to have cast the financial burden for replacement solely upon the lessor.

Objective circumstances prior to and at the time of purchase of the new ferry

No offer and acceptance?

1. I reject the submission of Counsel for the first and second defendants that, if the plaintiff's version of what was said was accepted, it would still not be sufficient to manifest a common intention to enter into a transaction. First, there would be mutual promises: the plaintiff agreed to contribute part of the purchase price to enable the first and second defendants to finance the acquisition of a replacement ferry; in consideration for which the Kennedys agreed to transfer partial, joint ownership. If it was necessary to formulate the arrangement in 'offer and acceptance' terms, the 'offer' could be seen as an equal ownership of the new ferry in consideration for an agreement to contributing $50,000 (and providing work services) towards a successful tender bid. Once the tender bid had succeeded (and there was no evidence to suggest that the tender could have been made without the plaintiff's contribution), by transferring payment of $50,000 to the Kennedys, the offer was 'accepted'.
2. There was no legislative requirement for such contract to be in writing (unlike a lease over part of Burraga Island). If a right of partial ownership was obtained in respect to the ferry (rather than a mere licence), this would sustain an interest in the plaintiff capable of protection by the tort of conversion.
3. The issue, then, is whether I should find that an oral agreement was entered into in the terms propounded by the plaintiff.

Why the plaintiff made its contribution to the purchase price

1. First, I consider it inherently unlikely that the plaintiff would have agreed to pay the very substantial sum [9] of $50,000 (with a promise of providing certain services) if that was only to preserve the status quo - namely, a right to hold a licence over the replacement ferry. Article 3.01 cast the entire financial burden upon the Kennedys to pay for the replacement ferry. If the Kennedys were unwilling or unable replace the ferry they would have been in breach of their obligation under the lease; and exposed to damages to the plaintiff (which, in prospect, might have been very substantial).There needed to be a strong inducement to the plaintiff to financially contribute anything to a replacement ferry in such circumstances. Subjectively, a prospect of partial ownership could amount to such inducement since it could serve to protect (if not enhance) the plaintiff's security over its rights to use the ferry in the event of a sale of the Island.
2. I do not accept the argument that the benefits to the plaintiff, identified by the Kennedys, would themselves have provided sufficient reason for the plaintiff to agree to contribute $50,000. True it may be that the ferry had greater capacity, but there was no evidence to suggest that the business operations of the plaintiff, at that time, necessitated a much greater capacity. The plaintiff wanted something serviceable, to replace the 'death trap' identified by Mr Clifford. Under cross-examination Mr McCormac said, and I accept, that what was of primary concern to the plaintiff about the need to replace the old ferry was its safety risk (T 25-27). Beyond accepting that the 'Ferry No.40' had two and a half times greater capacity than the old one, he was not probed at any real length about the particular economic benefits the plaintiff would derive from this feature of the replacement. His affidavit evidence in chief (paragraph 26) suggests his main concern was the physical condition - especially the thickness of the hull - and the absence of corrosion and it was after his inspection of the ferry had satisfied himself of these concerns that led him to agree to tendering for this particular ferry. On the other hand, Mrs Kennedy's affidavit evidence, in this respect (paragraph 12) was that it was Mr Kennedy who wanted the bigger ferry.
3. Nor do I consider that, adopting the arithmetic of Counsel for the Kennedys, the plaintiff would have thought that it an advantageous commercial arrangement whereby, to get the benefit of a ferry with greater capacity, it would be willing to pay the Kennedys, on average (until the expiration of all the leases in 2023) an extra annual sum of about than $3,500; in addition to its annual rent.

The witnesses

1. I have already noted my general preference for believing Mr McCormac in relation to any disputed issue over the evidence of Mrs Kennedy. In this case, Mr Hilzinger's evidence specifically corroborates Mr McCormac's denial of Mrs Kennedy's assertion that any ownership rights might attach to any contribution by the plaintiff to the purchase price for the new ferry.
2. I also consider that Mr Gibson's evidence assists Mr McCormac. It was what Mr McCormac said to Mr Gibson in 2011 which prompted the latter's communication with Mr Campbell. It does not strike me as plausible that Mr McCormac would lie to Mr Gibson about his belief in the existence of a partial ownership interest.
3. Accordingly, I prefer Mr McCormac's account of the conversations with Mrs Kennedy in May and June 2010, as set out in paragraphs 27 and 28 of Mr McCormac's primary affidavit. This is so notwithstanding that I consider that Mr Hilzinger was present on the occasion of the first of those conversations, at the Bryant Street ferry landing.

The significance of the plaintiff's involvement in the tender for purchase of the new ferry

1. The plaintiff's $50,000 contribution was not merely a contribution to the purchase price of a new ferry. It was, specifically, a contribution towards an ultimately successful tender bid to a government instrumentality made, jointly, on behalf of both the plaintiff and the Kennedys. If it was a joint tenderer, then absent unusual circumstances, it would be natural to expect that a joint tenderer would acquire an ownership interest in what was being tendered for. The contribution to the tender was evidenced by the receipt issued by Mrs Kennedy to the plaintiff [10] . Although, curiously, the actual tender was not produced in evidence, Mrs Kennedy accepted (T 104.37) that a reasonable bystander might think that when she informed Mr McCormac that 'we' had won the tender, she was, not using the word in the 'royal' sense, but in the inclusive sense involving the plaintiff.
2. Mr Hilzinger was involved in nominating the tender price. The tender was signed (by Mr Hilzinger) on behalf of the plaintiff. That signing occurred in the office of the plaintiff. I find that the plaintiff was a joint tenderer for the replacement ferry; notwithstanding Mrs Kennedy's representation (to the contrary) to the RTA (Ferries). That being so, if all that the plaintiff sought was continued share use of a ferry there is no obvious reason why it would go to the trouble of being party to the tender process.

Absence of written contract

1. I am conscious that the agreement relied upon is verbal, and that it was in relation to a commercial contract. But unlike the (written) leases, whose contrast with the subject transaction was repeatedly emphasised by the defendants, there was a statutory requirement that they be written. There was no requirement, or necessity, for the plaintiff to have a written contract for the transfer of ownership for the ferry.
2. The Kennedys' reliance upon this circumstance as being a matter in their favour pays no heed to the longstanding connection that the plaintiff and its officers had to the Kennedys. This was not an arms' length commercial arrangement between strangers, but one between persons who knew each other well and, whether they liked it not, by reason of their circumstances, had to get along: the plaintiff needed access to the ferry; the Kennedys relied, to a not insubstantial degree, upon the rent paid by the plaintiff. (Having to find a replacement tenant would, in 2010, have only added to Mrs Kennedy's troubles). They had been in close geographical proximity for a long period of time in a slightly remote area. Such relations are underpinned by a need for co-operation and, I think, at least a certain degree of trust; if not, give and take. Further, I have regard to the circumstance that the plaintiff and the Kennedys each ran relatively small scale operations. The plaintiff company was a small, essentially family owned business; with about 5 employees. The Kennedys ran a dairy farm that was part of their lifestyle in living on the island. Whatever the wisdom for their not doing so, it should not be assumed that either the plaintiff or the Kennedys would instinctively turn to solicitors to help them document or effectuate a transaction for the purchase of a chattel.
3. Even for the purchase of a form of transport exceeding $100,000 it does not strike me as inherently implausible that a 'gentleman's agreement' could be reached as how it might be acquired for joint benefit.
4. Further, the plausibility of the agreement being verbal only is enhanced by the circumstances that Mrs Kennedy was very preoccupied. There was no natural incentive, on her part, to record the agreement in writing. I accept Mr McCormac's recollection, in his affidavit, that Mrs Kennedy had indicated that there was some haste about raising the money for the tender price after it had been announced that that the bid was successful such that there was little time to get a solicitor to prepare a written contract. In view of their long standing relations, it would not surprise me that Mr McCormac acquiesced to delaying his wish to obtain a written record.
5. I am conscious of the wisdom, with respect, in the observations of McLelland J in Watson v Foxman (1995) 49 NSWLR 315 at 319 regarding the fallibility of human memory, but I do not regard the substance of what was said as between Mrs Kennedy and Mr McCormac to be overly complicated, such that there was any significant subtlety in the substance of what was said.
6. The defendants say that the plaintiff did not seek a written contract after entry into the oral agreement. That is true, but the submission disregards the evidence, which I accept, that what Mr McCormac repeatedly sought from Mrs Kennedy was evidence of the agreement recording the shared ownership being in writing. That did not need to be a contract after the event (where the plaintiff had already partially performed its promise). If Mrs Kennedy had 'fobbed' off Mr McCormac's request merely for written confirmation of their agreement, it was speculative to think he might procure a written contract - after having made that payment.

Problems caused to the Kennedys if there was shared ownership of the ferry

1. I regard this point, though superficially of some force, does not fully reflect the reality of the circumstances that the Kennedys faced in 2009 and 2010.
2. As a starting point, any disconnection between ownership of the ferry and ownership of the island was not insuperable. For one thing, the Kennedys themselves were less than rigorous in applying this distinction when the island had been put in Mr Kennedy's name but the existing ferry was put in Mrs Kennedy's name. For another, there is a qualitative difference, recognised in law, between a lease interest over real property and an ownership interest in a chattel. The latter interest, a 'chose in possession', is a much more liquid asset, or at least much more capable of easier means of alienation. The remedies against interference against real property and personal property are qualitatively different as well [11] . If it became truly necessary, the owner of the island could buy-out a joint, or co-owner, of the ferry at market value if it interfered with the joint or co-owner's interest; certainly much more easily than if there was interference with the leasehold interest.
3. It was not just an imperative for the plaintiff to obtain a replacement ferry. It was as much an imperative for the Kennedys who, of course, had their own operations on the island requiring the use of the ferry (leaving aside any prospective liability to the plaintiff in damages they might have had if they did not procure a replacement ferry). But the Kennedys could not afford the replacement cost themselves. They had a monetary limit of $80,000 and could not obtain loan finance from their bank to acquire the replacement ferry that had been identified (particularly by Mr Kennedy) as being the most suitable (contrary to Mrs Kennedy's preference, who thought it was much too big and cost too much).
4. Indeed, the background circumstances suggested that the imperative might, if anything, have been more pronounced on the Kennedys side. For the plaintiff, there was a known, albeit manageable, problem, but, although there was foreseeable risk, practical means had been deployed to make the old ferry usable. In 2010-2011, the Kennedys, were, according to Mrs Kennedy, facing increasingly strained financial circumstances. Sadly, they were also facing Mr Kennedy's declining mental health. They were looking for a peaceful and orderly retirement to Nowra. They had an island to sell, but fully appreciated that they needed a serviceable ferry which, to their mind, ran with the island. Because of the uncertainty associated with profits from their own farming operations, the annual rent that they received from the plaintiff was a vital supplement to their income. In order to acquire the ferry, it is not inherently surprising that Mrs Kennedy was willing to agree, albeit reluctantly, to the plaintiff's partial ownership.
5. In this regard, I do not accept the variety of alternative ferries which the Kennedys submit were available. A ferry from Port Macquarie was estimated to cost $129,000, but that was for a barge without any fittings and it was not obviously the case that a final figure for a complete replacement would have come in at less than the price paid for the "Sackville" version. Mrs Kennedy spoke of a replacement ferry being built, with the assistance of Mr John Henry, but Mr Henry was not called to confirm either his willingness or ability to build a ferry; including what, if any fee, he might charge for building one. There was no evidence as to how quickly Mr Henry could construct an adequate replacement. There was no evidence of his qualifications to manufacture a replacement ferry that could be serviceable and, I infer, could meet safety standards (enforced by inspections of the RMS). Mrs Kennedy described him only as a 'local businessman and friend'. By her evidence (paragraph 10), Mrs Kennedy acknowledged her and her husband's need to get off the island quickly. Save for the Port Macquarie 'option', there was no real alternative to 'Ferry No. 40', which had had a proven track record for use and still appeared in good physical condition even after usage for nearly 100 years.
6. I do not accept the position which, I think, Mrs Kennedy was anxious to portray, that she and her husband did not really need the ferry that was chosen; or the plaintiff's substantial financial contribution to acquire it. I think her real position was displayed when Mrs Kennedy expressed her belief that she agreed to the Sackville ferry, 'Ferry No. 40', under 'duress' exerted, not by the plaintiff, but by Mr Kennedy (T 95.34). Reluctant though she may have been, she nevertheless acquiesced to a situation where her husband thought that this particular ferry would be suitable for the plaintiff. She may have had a case of 'buyer's remorse', having regard to her evidence of what I understood to be the strained financial predicament that she and her husband were in at the time.
7. I accept that, in retrospect, an objective bystander may consider that an agreement to share ownership in relation to the new ferry might be regarded as prejudicing the market value of the sale of the island. But that would only be the case if the fact of the sale was transparent. A 'gentlemen's agreement' could be overridden. It is not necessary to find, and I do not find, that Mrs Kennedy set out from the outset to deceive Mr McCormac or duped the plaintiff more generally, in the course of discussions about the purchase of the new ferry in 2010. I think the more likely explanation is that, in all her 'busyness', and the load that she was carrying, Mrs Kennedy was preoccupied with her and her husband's interests. Events were moving fast after the successful tender. It is plausible that Mrs Kennedy would say to Mr McCormac that the priority was to pay the purchase price first, then worry about documentation thereafter; and, for a period, she neglected to follow through to provide written confirmation of ownership. It is also plausible that, by late 2010, and not being satisfied with the bargain made with the plaintiff, Mrs Kennedy might think that the plaintiff had served her and her husband's purposes by making the contribution to facilitate the tender price.
8. I also accept the evidence of Mr Gibson that he had informed Mr Campbell of the plaintiff's 'interest' in the new ferry. Although that choice of word was ambiguous, I find that Mr Campbell understood him to be referring to interest in the sense of partial ownership; and not merely a right of access. I would be surprised if that notification had not been passed back from Mr Campbell to Mrs Kennedy, but there was no evidence of what, if anything, Mrs Kennedy did in response. It is clear, however, that whatever she did or did not do, did not involve any such contact with Mr McCormac.
9. Such requests, or indications, by or on behalf of the plaintiff, were disregarded by Mrs Kennedy. Having regard, also, to the surprising circumstance that Mrs Kennedy had not even informed Mr McCormac, or anyone else for the plaintiff, of the date for sale of the island by auction to take place in May 2011, I find that in the state of mind that she was in during the period from March and April 2011 she simply disregarded the verbal agreement in the expectation that the new owner of the island and the plaintiff could sort out their own arrangements for the ferry, after she and her husband had left the island.

Unequal or inequitable contributions to purchase price

1. Counsel for the Kennedys pointed to the circumstance that the financial contribution to the purchase price made by the plaintiff was less than 50%. Therefore, it was submitted, it would hardly be expected that the Kennedys would have agreed to an ownership share of that level.
2. That disregards the non-financial contributions which the plaintiff promised it would provide; for which, at least, there was some proof: the plaintiff had paid civil engineers to draw plans and carry out works. It may be that in the performance of that promise, the performance rendered by the defendant was less than that which was promised or expected by Mrs Kennedy. But no formal contention (such as non-observance of a condition precedent to an oral agreement) was stated and it is not necessary to engage in an accounting exercise as to what was done and what was not done. That the circumstances, as they unfolded, might indicate that it was a bad bargain from the perspective of the Kennedys was not to say, however, that there was no bargain at all.
3. It is not inconceivable, however, that any grievance in Mrs Kennedy about the plaintiff not fulfilling this end of the verbal bargain might have influenced her conduct in directing the auctioneer to include the ferry in the inclusions for the sale of the island.

Documents

1. It is not correct to suggest, as the Kennedys do, that such documentation which exists points exclusively in favour of the Kennedys or that, even if it did, this consideration was determinative.
2. I accept the submission of counsel for the plaintiff that it was surprising that the Kennedys would only partially account, in the relevant depreciation schedule, for part of the contribution that they had made to the new ferry if they maintained that they owned the new ferry entirely in their own right.
3. I also accept that the tax invoice that Mrs Kennedy issued to the plaintiff on 10 June 2010 corroborates the plaintiffs close involvement in the tender bid; where such involvement corroborated the plaintiff's case that it was more than simply a contributor to payment of the purchase price.
4. Because she put the registration in her name, exclusively, it would have been strange that the insurance that Mrs Kennedy arranged and paid for might have been put in someone else' name. The circumstance that there was an agreement as to shared ownership interest is not inconsistent with finding that Mrs Kennedy continued to take steps to manage the operation of the ferry
5. Though she essentially rejected any notion that Mr McCormac did anything to fulfil the plaintiff's promise to facilitate the upgrading of the landing, documents were put in evidence, sourced from engineers, by the plaintiff to prove that it contributed to the cost of works.
6. The letter of 8 April 2011, upon which the Kennedys placed significant reliance, confirmed the proportions of financial contributions made to the purchase price for the new ferry pursuant to an oral agreement. With its request for "proper(ly) documenting the arrangements", this was plainly a reference to past arrangements having been entered into and, implicitly asserted a departure from pre-existing arrangements (recorded in Art 3.01 of the lease). The request is consistent with Mr McCormac's evidence that he had previously sought written confirmation from Mrs Kennedy of the oral agreement that he regarded as being entered into.
7. I will return to this last document in the next section of these reasons.

General

1. In his written submissions, Counsel for Mr and Mrs Kennedy cited the following commentary in Heydon on Contract [2.110] relating to the significance of subsequent conduct indicating performance of an oral contract that it denies: "That party is in effect, by behaving in those ways, making repeated admissions against interest by conduct that there was a contract. The party's actions and conduct before the inception of a controversy (are) of much greater weight than what they said or did after a dispute arose."
2. From this, Counsel for the Kennedys said that logic suggested that a party who maintains the existence of an agreement in failing to behave as if the contract actually existed - such as by failing to assist on its rights, or assert a contract - also amounts to an admission against interest by conduct. Counsel did not, however, cite Mr Heydon, any other commentator or authority to support this particular submission.
3. There is no doubt that conduct of the parties after a disputed oral agreement has been entered into casts a light upon the question whether an agreement was entered into at all and, if so, its terms. Stephenson LJ, of the English Court of Appeal held in Mears v Safecar Security [1983] QB 54 at 77 has even said that 'common sense suggests that (the parties') subsequent conduct is the best evidence of what they had agreed orally, but not reduced to writing ..' [12] . But it is necessary to take care to characterise what has been done after a party amounts to a sufficiently clear 'admission'. Simply because a party has not acted in a way which aligns with how a bystander might reasonably expect it will conduct itself is a different thing from saying that it has acted in a way that is contrary to what it has promised to do, or is otherwise inconsistent with what it believes it is required (or entitled) to do. That, in my view, is to conflate different things.
4. In this case, in several instances, the Kennedys say that because the plaintiff did not act in ways to protect its rights under a verbal agreement it contends for, this is tantamount to an admission by conduct that no such agreement exists. In my view, although I accept that some weight should be given to conduct that has occurred which would not accord with how entities in the position of the plaintiff (propounding the agreement) would reasonably expected to act, I think it goes too far to say that such conduct amounts to an admission against interest.
5. One of the circumstances that may explain why the plaintiff acted in the way that it did (or, indeed, did not do) is that there were changes afoot in the management of the plaintiff. In late 2010, Mr Hilzinger retired from the directorship and left the business permanently. Mr Hilzinger said that he administered the plaintiff's affairs with the assistance of his wife, Janice. Until he retired, Mr McCormac mainly attended physical work tasks. I infer that from the point of his retirement, Mr McCormac started to assume more managerial responsibility although it also appeared that Mr Penkaitis had some role as well. Mr McCormac agreed, under cross-examination, that from 2010, the company was in the process of being transformed from a family company into a broader commercial entity (T 45).
6. At some point, apparently close to early May 2011, but in circumstances not explained or readily apparent, Mr Gibson and Mr Penkaitis were appointed as guarantors to the lease and, I infer, were also appointed directors. On these bare facts, this is not a picture of very stable management in the plaintiff for what turned out, for the purposes of the subject transaction, to be a very important period, being from late 2010 to May 2011.

No assertion of ownership

1. It is wrong to say that the plaintiff did nothing to preserve its position until it was too late; however one may quibble about the sufficiency or efficacy of such attempts. To begin with, Mrs Kennedy did not extend any courtesy to the plaintiff by personally informing Mr McCormac the date for the auction for sale; even if the latter had a general understanding, back in 2010 (if not before) of the Kennedys' intention to sell the island. There was no evidence before me of any discussion between them, prior to 3 May 2011, about transitional arrangements about the ferry.
2. I also note that there was a relatively close proximity in time between Mrs Kennedy's belated registration (ie 9 months after the purchase) of the ferry solely in her name (14 March 2011 [13] ) and a range of other dates in the lead up to the auction: the date of the first advertisement for the auction sale (26 March 2011 [14] ); the date that the auction was originally listed for (5 April 2011 [15] ), the date the auctioneer received the auction sale contract (15 April 2011 [16] ) and the eventual date for the auction (3 May 2011). Registration of the ferry solely in her name at this time would certainly confirm, to any inquisitive prospective purchasers, title to the ferry. Conversely, the act of registration would make it more difficult for the plaintiff to establish any title to the ferry.
3. Mr McCormac gave evidence (in his affidavit in chief), which was not challenged in cross-examination, of his telephone calls to Mrs Kennedy in late April or early May 2011; after he had learnt of the forthcoming auction through reading a newspaper advertisement.
4. Mr McCormac says, and I accept, that at that point, he was complaining about the imminent disposition of what he perceived to be the plaintiff's interest in the ferry. But he obtained no joy from his discussions with Mrs Kennedy. Instead on the basis of what he was told by Mr McCormac, Mr Gibson understood that the plaintiff had an ownership interest in the ferry, and on the basis of that understanding, Mr Gibson approached the auctioneer. Mr McCormac's conversation with Mr Campbell appeared to be, almost literally, on the eve of the auction. By then, it really was too late.

The RMB letter of 8 April 2011

1. I do ascribe some significance to the fact that the letter of 8 April 2011, in advance of the auction, sent on behalf of the plaintiff, did not assert any ownership interest in the ferry, but rather sought to negotiate arrangements for use and operation of the ferry.
2. However, under fairly intense cross-examination on the matter, Mr McCormac said he had not spoken with Mr Gleeson, the plaintiff's solicitor, about the sale of the island, or the ferry (T41-42). Mr McCormac was not directly challenged on the correctness of that evidence. By this stage, Mr Hilzinger had retired, so it is unlikely that he could have been the source of information.
3. In the circumstances, although I accept that, objectively, the occasion for sending the letter provided opportunity to assert an ownership interest, I am not persuaded that the failure to do so amounts, in the circumstances, to an admission by conduct that no such ownership interest existed.

The deed of variation

1. The Deed of Variation entered into in May 2011 did not seek to alter Article 3, to reflect what the plaintiff says was an antecedent verbal agreement. It appears that, by then, the plaintiff was aware of the auction of the island, and the prospective disposition of the ferry. This, the defendants say, reflected a lost opportunity for the plaintiff to insist upon a written record of the earlier agreement.
2. The circumstances into which this variation was entered into were obscure. There was a need to change the guarantors following a change of officers in the plaintiff. The Deed was attached to Mrs Kennedy's affidavit (prepared in response to Mr McCormac's first affidavit), but was not the subject of comment by her. It was not referred to by Mr McCormac in his first affidavit or affidavit in reply, or in any of the other deponents of affidavits for the plaintiff.
3. As indicated above, Mr McCormac was cross-examined on the document, but his evidence, which I accept, was that he appended his signature in execution of the document after someone else had printed his name. Otherwise he was unaware of the reason for the document (T 47-49).
4. Whatever one might think about the care that Mr McCormac exhibited to signing the document, on the basis of this evidence, the evidence is too uncertain or equivocal to treat the circumstances in which no insertion had been made in the Deed about rights to the ferry as an admission against the plaintiff. I note that it was not suggested to Mr McCormac that in the circumstances, he, or solicitors on his behalf, should have requested the insertion of something additional in the Deed of Variation.

No urgent approach to the Court

1. Counsel for Mr and Mrs Kennedy also submitted that at no time after the purchase of the ferry did the plaintiff ever seek or at least threaten a suit for declaratory relief or injunctive relief, or possibly even specific performance, once it became aware of an impending auction.
2. This runs, however, into the same issues identified in the letter of 8 April 2011, as to what Mr Gleeson was being informed and by whom. I also consider that, even objectively, there would have been formidable constraints upon a court of equity granting interim or final relief, a matter of weeks before the auction, in circumstances where the Court's involvement was sought about a transaction that had occurred a year before, and where there was no obvious reason why damages might not be an adequate remedy assuming that the plaintiff could establish its title.

Summary

1. Actions to enforce oral agreements commonly present problems of proof for the Courts; not least when a dispute is finally heard years after the event. In my view, this was a finely balanced case. There is force to the Kennedys' arguments that the plaintiff did not act as one might expect an entity to act in its position after the verbal contract had been entered into. Nevertheless, I consider that the circumstances of Mr and Mrs Kennedy in 2010 were such that Mrs Kennedy was prepared to do what was necessary to ready the island for sale. She perceived the need to replace the ferry and, with great reluctance, agreed to the purchase of a ferry which could only be purchased with the financial assistance of the plaintiff; with whom, it appears, the Kennedys had co-operative dealings with over many preceding years. When the time came for the imminent sale of the island, by auction, I am satisfied that Mrs Kennedy acted in disregard of the right to shared possession of the plaintiff; knowing that Mr McCormac had requested documentary confirmation for the transaction that had occurred. The closest explanation for why she did this was when she said to Mr McCormac, on the eve of the auction, that the plaintiff would have to sort out access to the new ferry with the new owners, who would still be subject to the plaintiff's lease and, for which, it would be rational to expect that the new owners would continue to allow access to the replacement ferry to carry out the mining works needed to provide the rental income. That, however, left the matter to chance and did not justify the Kennedy's own negation of the plaintiff's rights arising from their agreement.
2. I am satisfied that an oral agreement was reached for the transfer of a half share of the ownership to the new ferry.
3. That being so, in light of the concession made by Counsel on behalf of the Kennedys (correctly in my view), the act of instructing and arranging for the sale of the vessel, without permission of the plaintiff and without payment of any share of the sale proceeds, amounted to an act of conversion by Mr and Mrs Kennedy.

Claim for equitable compensation

1. It is unnecessary to consider this claim as there is no reason for thinking that, even if sustained, it could yield any greater monetary outcome to the plaintiff. It must be acknowledged, however, that there is a serious (if not invincible) jurisdictional doubt whether the court could entertain the claim in any event.

Liability to plaintiff

1. In his written submissions, the legal representative for Mr Campbell identified the issues as between his client and the plaintiff was whether the plaintiff acquired a half share interest in the ferry and, if so, whether Mr Campbell was accessorily liable to the Kennedys' sale of that interest.
2. In my view, the question of accessorial liability does not come into the matter at all. The legal representative who appeared for Mr Campbell accepted, in his closing address, that in the event that the plaintiff could establish an interest in the ferry in the requisite sense, then if, because of conduct by his principal (Mrs Kennedy) he acted in a way inconsistent with the interest, than regardless of his state of mind (be it intention, knowledge or negligence), he was strictly liable in conversion [17] . His recourse, if any, would be against Mrs Kennedy.
3. I do not consider that Mr Campbell can seek refuge in the corporate form, at least in relation to any liability he may have to the plaintiff under the tort of conversion. (The issue may be different when considering the rights and obligations of Mr Campbell with the Kennedys). In my view the relevant principle is that if an employee, acting within the scope of his or her authority, commits a tort, it is not only the case that the company is vicariously liable to the victim, but the employee is directly liable as well: it matters not that s/he was acting in the interests of the company [18] . There was no relationship, here, between the plaintiff and Campbell Holdings (NSW) Pty Ltd.
4. As I have found that the plaintiff has established its interest in the ferry, it follows that Mr Campbell is liable in conversion, notwithstanding that he had no intention to interfere with the plaintiff's intent; but did so innocently.

Action in contract

1. I agree with the submission of the cross-defendants that they cannot be liable in contract to Mr Campbell in circumstances where he was not a party to the contract with them that created the agency. But for that circumstance, I would have agreed with Mr Campbell that there was an implied warranty that the information as to ownership of chattels the subject matter of an auction would be correct; with such warranty arising in fact; if not in law. I do not understand how an auctioneer could otherwise proceed than by relying upon the veracity of information as to title of goods that s/he is entrusted to auction for sale.

Action for misleading or deceptive conduct

1. In my view, Mr Campbell is unable to distinguish this case from that of Williams v Pisano. The principle identified by Emmett JA (with whom Bathurst CJ and McColl JA agreed) at [38] was that whether it could be concluded that a real estate agent who reaches an agreement with vendors of property to sell land (used by the vendors as their residence) by auction could be engaging in conduct constituting trade or commerce depends on the character of the parties involved, whether the people have engaged in, or are about to engage in commercial activities, whether the transaction is motivated by business, as distinct from personal, reasons and whether the person whose conduct is under attack played an active part in the transaction. The mere use of an estate agent does not bring about the result that the sale of a capital asset by a householder is a transaction occurring in trade or commerce. His Honour also noted (at [39]-[43]) that the business character of the conduct engaged in by the agent cannot be imputed to the acts of the principals.
2. Williams was a case where the vendors were selling their residential home and engaged a real estate agent. It did not suffice to establish that the agent itself was engaging in trade or commerce, such as by advertising or marketing the subject property for sale. Nor did it matter that the sale took place shortly after the vendors had renovated the subject property with the object of making a capital gain.
3. In my view, virtually all of what was said in Williams applies here. Mr and Mrs Kennedy were readying to retire. Although their home had been used, for farming purposes, this was not the reason for which they engaged Mr Campbell. Their purpose was to sell so that they could retire. Plainly, they sort his assistance to market the property as well as he could, in order to reach the highest purchase price and plainly this was conduct engaged in by Mr Campbell for the business purposes of himself.
4. I do not regard the circumstance pointed to, by Mr Campbell, that an agency agreement was entered into to confirm and protect his commission as altering this result. That circumstance was only one which involved conduct in furtherance of the commercial activity of, or for the benefit of, Mr Campbell.
5. It follows that to the extent that any representations that were capable of amounting to conduct that was misleading or deceiving, those representations did not constitute conduct in trade or commerce. The statutory count in the cross-claim fails.
6. In his cross-claim, Mr Campbell did not plead any right of indemnity against Mrs Kennedy, his principal, which might have been applicable to all agents, including to agents 'of necessity', or others who may not strictly be in a contractual relationship with the principal [19] . There was no indication in the agency agreement that such right was excluded. Such right was not invoked and, in circumstances where the issue was identified in closing addresses, but no attempt was made by Mr Campbell to rely upon it during the hearing, I consider that it would be procedurally unfair to allow Mr Campbell to rely upon it now.
7. Accordingly, the cross-claim, as it is pleaded, is dismissed.

The agreed component for market value of the interest

1. The parties ultimately agreed that on the basis that if liability was established, the methodology for assessing the plaintiff's loss of its interest in Ferry No.40 is: 1. to take the purchase price of Ferry Number 40 ($119,596); 2. divide the purchase price by a factor of two ($59,798); 3. discount the value of the interest by 5% for depreciation, between the date of the purchase (21 June 2010) and the date of conversion (3 May 2011).
2. The plaintiff submitted that this methodology produced the sum of $56,808, after factoring in the depreciation between the date of purchase and date of conversion. I do not understand that amount to be disputed. If I am wrong, the defendants might address the point in short minutes (see below). I accept this amount as the primary head of damage.

Additional expenditure

1. To this, the plaintiff also submitted also that it was entitled to the additional component of $17,163. None of the defendants specifically addressed this component of the claim for damages.
2. Mr McCormac exhibited to his affidavit invoices issued to and receipts for payment made by the plaintiff to Allen Price & Associates (Civil Engineers) (for the sum of $3,333) and Jirgins Civil ($13,820) in relation to the engineering plans to upgrade the landing and for the carrying out of construction works, respectively.
3. The engagement of these third parties and payment for their services was in performance, by the plaintiff, of the agreement reached with the Kennedys. It was performance of these works which constituted part of the consideration for the plaintiff's receipt of the ownership interest that they claim (in addition to the $50,000 cash contribution made), which supplies the basis for the claim in conversion for interference with that proprietary interest.
4. The basal principle for recovery, however, is to place the Kennedys in the position that they would have been in but for the conversion. This expenditure outlaid was necessary to sustain its acquisition of the interest in property in the first place but, in my view, it would amount to double compensation to award these amounts as additional head of damage on top of the award for market value of the plaintiff's half share in the new ferry.
5. I do not allow this head of damage in the damages award.

Pre-judgment interest

1. To the judgment sum of $56,808, interest is also claimed at Court rates.
2. The first and second defendants request that consideration of this entitlement should be deferred, by reference to correspondence exchanged with the plaintiff on a without prejudice basis.
3. As the interest sums would need to be revised, in any event, to the date of the orders, I am prepared to defer consideration of this component.

SUMMARY & ORDERS

1. There should be Judgment for the plaintiff against the first, second and third defendants for the sum of $56,808 plus interest and costs.
2. The cross-claim should be dismissed with costs.
3. The plaintiff should bring in short minutes of order which reflect these reasons for judgment. This should include orders (including quantification) for interest, from 3 May 2011, and costs.
4. This should occur in the following manner: 1. The plaintiff serve proposed short minutes on the defendants within 3 days; 2. In the event that the defendants disagree with the short minutes formulated by the plaintiff, the defendants are to serve short minutes that they contend for within a further 3 days, in conjunction with a short statement of reasons for such disagreement (not exceeding 3 pages; but excluding any evidence they may wish to rely upon on the question of costs). 3. The plaintiff is to provide my Associate with the documents in (a) and (if appropriate) (b), above, with a statement of reasons in response (not exceeding 3 pages, excluding any evidence relied upon on the issue of costs) within a further 2 days.
5. Absent any indication to the contrary, final orders will be made on the papers.

Endnotes

1. At one point, it was apparent that Mr Hilzinger had been prepared to make himself available to give evidence by telephone (T73.47).
2. I consider that the Court can have regard to the content of the RMS website under s144(1) of the Evidence Act 1995 (NSW).
3. Penfold Wines Pty Ltd v Elliott (1946) 74 CLR 204 per Dixon J at 229
4. Wilton & Anor v Commonwealth Trading Bank of Australia [1973] 2 NSWLR 644, also Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 9(1) (and see the limited definition of "wrong" in s 8).
5. Gordon v Harper (1796) 101 ER 828
6. Fleming, Law of Torts (7th ed) p 54
7. Ashby v Tolhurst [1937] 2 KB 242
8. Western Australia v Ward (2002) 213 CLR1 per McHugh J at [504]; Georgeski v Owners Corporation SP 49833 at [91] - [106] cf Manchester Airport Plc v Dutton [2000] 1 QB 133.
9. The equivalent of one year's rent to use the demised part of Burraga Island
10. Ex A (Vol 1, p 34)
11. J Carter & Ors, Helmore Commercial Law and Personal Property in New South Wales (10th ed, 1992), pp 3-5
12. Cited approvingly in BH Australia Constructions v Kapeller [2019] NSWSC 1086 per Leeming JA at [69]
13. Ex A (Vol 3), p 441
14. Mrs Kennedy's evidence at Ex A, (Vol 2), p 249; (Vol 3), p 443
15. Mr Campbell's evidence at Ex A, (Vol 3) p 616
16. Ibid at 616
17. Dal Pont, Law of Agency, (3rd ed) [24.14]
18. Dal Pont [24.8], [24.11]; also Austin, Ford & Ramsay, Company Directors: Law and Corporate Governance (2005), [16.11], citing O'Brien v Dawson (1942) 55 CLR 18 at 32, in which decision a director trespassing a claimant's land was found personally liable for the trespass, even if the act of trespassing was engaged in on the company's behalf.
19. Dal Pont, Law of Agency at [4.14]-[4.20], [18.8] & [24.16]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 September 2019