Steiner v Strang

Supreme Court of NSW|2014-12-15|Before: Slattery J

ies Development Pty Ltd v Chatswood Investment and Development Co Pty Ltd (2002) 40 ACSR 619; [2002] NSWSC 13 Steele v Mirror Newspapers [1974] 2 NSWLR 348 Steiner v Strang [2014] NSWSC 1250 Voce v Deloraine [2012] NSWSC 1187 West v GIO (NSW) (1981) 148 CLR 62 Category: Principal judgment Parties: Plaintiff: John Steiner First Defendant: Kenneth Ross Strang Second Defendant: Jason Tang Third Defendant: Steiner Wilson & Webster Pty Ltd (ACN 003 140 823) Fourth Defendant: Wayne Porter Webster (Junior) Fifth Defendant: Lesley Margaret Webster Sixth Defendant: Kelly Lee Midgley Seventh Defendant: Robyn Gai Webster Representation: Counsel: Plaintiff: P.H. Blackburn-Hart SC; R. Jefferis Third to Sixth Defendants: M.K. Meek SC; R. Potter

Solicitors: Plaintiff: Gells Lawyers First & Second Defendants: Jeremy Neil Glass, Glass Goodwin Third to Sixth Defendants: DLA Piper Australia Seventh Defendant: Gregory Hilliard Smith, GHS Legal File Number(s): 2014/10747 Publication restriction: No

Some Further Procedural Background

The plaintiff, John Steiner, commenced these proceedings by Summons on 13 January 2014. He now maintains the proceedings against seven defendants (collectively referred to in these reasons as "the defendants"): the executors (the first and second defendants), Wayne Porter Webster and Lesley Margaret Webster (the third and fourth defendants), SWW trading as "Abbey Bridal" (the fifth defendant), Kelly Lee Midgley, Lesley's daughter, (the sixth defendant), and Robyn Gai Webster (the seventh defendant).
The executors filed a submitting appearance. All the other defendants were represented and contested the plaintiff's claims. One side issue about the role of the executors can be dismissed. Citing Fried the plaintiff sought to explain his commencement of the proceedings as a result of the executors delay in the administration of the estate thereby forcing his hand. The four active defendants denied there had been any delay on the part of the executors. Based on the statements of principle in Fried, Mr Meek SC did not ultimately submit that if the executors were not guilty of any delay that the plaintiff was somehow disentitled from bringing the proceedings. It was accepted that the proceedings were properly constituted.
The proceedings were not the subject of pleadings. The issues for decision would have been clearer with pleadings. On the other hand, the co-operative approach of the lawyers on both sides overcame the lack of pleadings.
The present proceedings are one of three sets of current proceedings involving aspects of Dorothy's estate. John commenced other proceedings in April 2012 the Equity Division of the Court seeking orders for family provision under Succession Act 2006, s 59. John's sister Robyn, the seventh defendant, commenced similar proceedings shortly afterwards. The hearing of those proceedings has been deferred, pending determination of the issues in these proceedings, which will determine the extent of Dorothy's estate.
In the family provision proceedings the executors cross-claimed against John, contending that he was indebted to the estate in the sum of $881,000 in respect of a loan the deceased allegedly made to him prior to her death. Sackar J determined that cross-claim in favour of the executors in September 2014: Steiner v Strang [2014] NSWSC 1250.
John and Robyn have also been active litigants in the United States. They have commenced two sets of proceedings in Utah. In the first US proceedings John and Robyn seek the appointment of an independent personal representative to investigate potential claims in relation to certain of Dorothy's assets in the USA. In the second US proceedings John and Robyn seek to challenge a July 2008 transaction in which by two share sale agreements Dorothy sold her shareholding interests in the corporate entity holding her US business, Maggie Sottero Designs LLC ("MSD") to family members. In those proceedings John and Robyn claim that this sale transaction was entered into at an undervalue.
Throughout these reasons the two corporate entities that own the Australian and US businesses will be distinguished from the businesses and business names themselves. The Australian corporate entity will be referred to as "SWW" and its business as "Abbey Bridal". The US corporate entity will be referred to as "MSD" and its business as "Maggie Sottero".
The terms of the July 2008 transaction in MSD's shares also feature in these reasons as part of the background to the payment of the $1,227,941 cheque made out and given to Wayne on 2 April 2009. The July 2008 share sale transaction was Dorothy's final transaction concerning the ownership of the US businesses before her death. The two July 2008 share sale agreements reflect a decision on her part to exit and be paid over time for her ownership of shares in MSD and therefore her control of the Maggie Sottero business in the US but nevertheless to retain her shareholding in SWW and her involvement with Abbey Bridal in Australia. The terms of the July 2008 agreements are examined in more detail later in these reasons.
The wider history of Dorothy's family and her role in the Abbey Bridal and Maggie Sottero businesses closely informs the issues presented for decision.

Dorothy, her Family, Abbey Bridal and Maggie Sottero - 1986 to 2013

This section of the Court's reasons contains a detailed narrative of the Court's findings. This narrative represents the Court's complete findings as to what happened, recording uncontested facts and deciding all relevant contested matters. It does not always refer to all the evidence that the Court considered and rejected.

Dorothy Steiner Establishes Abbey Bridal

Dorothy established Abbey Bridal in 1986. From the first she did everything in the business. And she played an active role as a director and shareholder, working closely with the board of SWW, the company that owned the business.
She managed and built the business at an operational level. After her husband's death in 1982, Dorothy went to live with her daughter Lesley and son-in-law, Wayne Webster in the US state of Utah. It was clear from the way Wayne gave evidence that he admired his mother-in-law and that he welcomed Dorothy living with Lesley and him.
Dorothy was living with Lesley and Wayne when Abbey Bridal was established. But in 1987 Dorothy decided to move back to Sydney from Salt Lake City, Utah. She was Sydney-based by the time Abbey Bridal opened its first retail shop in Sydney. Eventually Wayne and Lesley followed her to Sydney at the end of 1990. They too commenced work in January 1991 with the expanding SWW.
By the time Lesley and Wayne returned to Australia, Abbey Bridal had started to open its own stores across the country. Wayne helped this expansion. He established retail stores in Melbourne, Perth and Brisbane, negotiated for leases, decided on shop fit outs, and engaged and trained store managers.
But during the late 1990s, Lesley, Dorothy and Wayne redirected their focus away from retail outlets to wholesaling Maggie Sottero branded bridal dresses to third party retail bridal outlets. From the late 1990s wholesaling bridal dresses in Australia, and expanding the US Maggie Sottero sales outlets was the core of Dorothy and her family's business activity. Most of Abbey Bridal's own retail stores had closed by the end of May 2001. The Melbourne store closed in June 2005.
After these Australian store closures Abbey Bridal was left with only one retail outlet, the Sydney store in the Dymocks Building in George Street. At the time of the hearing Abbey Bridal was selling wholesale to approximately 22 other retail shops around Australia.

Corporate Structure - Abbey Bridal, Maggie Sottero and Maggie Designs

Dorothy incorporated her Australian business, SWW in 1986 and her US business in 1997. Dorothy and her husband had three children, a son John and two daughters, Robyn and Lesley. When Dorothy established Abbey Bridal, her principal entrepreneurial collaborators were her daughter Robyn and Robyn's husband Larry and another US-based couple, Scott and Kristine Wilson.
Lesley and Wayne joined the board of SWW in 1992 and acquired the Wilson's shares. They became increasingly close to Dorothy and to the heart of the business' operations.
In 1997 together Dorothy, Wayne, Lesley, Robyn and Larry decided to establish Maggie Sottero Designs LLC, which was based in Utah. Each of the five of them held a 20 per cent interest in this US company, MSD. Both SWW in Australia and MSD in Utah were involved both in the wholesaling and retailing of wedding dresses.
During the period 1998 to 2005 Robyn and her husband Larry gradually withdrew from SWW. In 1998 Robyn sold her shares in SWW to Lesley, Wayne and Dorothy and she ceased to be a director in July of that year. Larry ceased his directorship in March 2005 and is no longer a shareholder. From 2005 Dorothy, Wayne and Lesley were the principal shareholders in SWW. Dorothy then held 92 of its total issued share capital, Wayne held 66 shares and Lesley 67 shares.
In 2002 a separate purely design focussed entity, Maggie Designs Pty Limited ("Maggie Designs") evolved from the operations of Abbey Bridal. Abbey Bridal's retail and wholesale businesses principally operate from level 2 in the Dymocks building in George Street, Sydney, where it conducts a shop. Maggie Designs operates from level 5 in the same building. Prior to 2002 Abbey Bridal primarily sold wedding dresses created by other designers. Maggie Designs was established after Abbey Bridal decided to create its own designs in its own design department. To implement this plan Ms Kym Bournes, a manager with Abbey Bridal, moved from her existing role with Abbey Bridal and became the Chief Executive of Maggie Designs.
Both Maggie Designs in Sydney and Maggie Sottero in Utah produce bridal dress designs. Maggie Designs collaborates on the final form of these designs and co-ordinates their manufacture under the direction of Kelly Midgley, Lesley's daughter, together with Lesley and Kym Bournes. The dresses are now manufactured by independent contractors in China in accordance with Maggie Designs specifications.
Abbey Bridal is a substantial business. By the time of the trial the evidence was that it would have on average 700 to 800 dresses available at any one time in its Sydney store, where the business can accommodate both walk-in casual customers and brides who wish to make advance appointments.
Kelly Midgley, Dorothy's granddaughter, Lesley's daughter, became the driving force behind Maggie Sottero in Utah and the distribution of Maggie Sottero designed bridal dresses in the United States. Once the family's enterprise had developed its corporate dual structure in Australia (SWW) and in the US (MSD), it was necessary for Dorothy, Wayne and Lesley to divide their time between the two continents. Whatever the marketing reasons for this pattern may have been, the family tended to work and do business by following the summer, living in the northern hemisphere mid-year and the southern hemisphere at the turn of the year.

Dorothy Thrives in the Business

But even when she was living in Utah, Dorothy was closely involved in the Abbey Bridal business in Sydney. Kym Bournes says, and I accept, that Dorothy often spoke to her and gave her directions about the operation of the business from the US. Only two days before she died Dorothy was telling Ms Bournes that she and Kelly had been "picking dress styles together over the past few days".
Dorothy was devoted to the people of the business. She remembered the names of the children and grandchildren of her staff. She knew all the code numbers of the dresses that Abbey Bridal sold. She thrived on her personal interaction with customers in the show room.
Twice a year in Sydney in February and August, Abbey Bridal conducted showings for Australian wholesalers. Dorothy never missed a February showing in Australia. Dorothy was usually not present for the August showings, as she was then attending similar shows for Maggie Sottero in Utah. But despite her absence from Australia, she required daily detailed reports from Ms Bournes about the showings and all the styles that were selling in Sydney.
Dorothy, Lesley and Wayne talked constantly about their business. I accept Wayne's evidence that they discussed it to and from work in the car, at lunchtime, and at home. Dorothy wanted to know everything about business operations and Wayne says, and I accept, that he made sure that she did. Wayne worked closely with Dorothy for almost 30 years. I accept his evidence that she never even hinted at retiring.
Dorothy's enthusiasm for the success of Abbey Bridal ensured she kept long working hours. In the early developing years of the business Dorothy, Wayne and Lesley worked six days a week from 8am to 4pm and on Thursday nights until 9pm. They were always at the store from opening to closing. But as more senior staff were able to take over aspects of the business, Lesley and Wayne began to reduce their working hours. But as Wayne concedes, and Ms Kym Bournes confirms, Dorothy would still go into Abbey Bridal's shop and offices even without Lesley and Wayne. She was still working six days a week until two years before her death.
I accept Wayne's evidence about Dorothy's close personal oversight over all the financial aspects of the business, "My mother-in-law knew where every penny she had was, what it was doing, who was doing what with it and she had control. She decided what was to be done." I accept this not just because it was a compelling and clear part of Wayne's evidence, but it also accords with evidence of other highly credible witnesses such as Ms Bourne and Ms Dorita Trostel, the Abbey Bridal accounting manager. Acceptance of this part of Dorothy's character is an important factor in assessing the reliability of Wayne's evidence in relation to the April 2009 cheque issue. At first blush some of Wayne's evidence about the April 2009 cheque seemed improbable and his account was troubling to the Court in the ways that are identified below. Indeed some of these aspects of his narrative remain a puzzle. But the Court ultimately finds the main structure of what Wayne says to be an acceptable account of events, partly because of Dorothy's single-minded personal control over her financial affairs and partly because the overall course of the events and the testimony of other credible witnesses, does favour Wayne's version.
These reasons now turn to the three questions for decision, the April 2009 cheque claim, the long service leave claim and the dispute about the $15,000 payment to Wayne.

Question 1 -The April 2009 Cheque Claim

The plaintiff, John, did not participate in any of the events concerning Dorothy's drawing of the April 2009 cheque to Wayne in the sum of $1,227,941 and its subsequent delivery to Wayne. This was entirely a transaction between Dorothy, Wayne and Lesley, and principally between Dorothy and Wayne.
John says that the April 2009 cheque was a loan from Dorothy. Wayne contests this. But John's lack of involvement in the events meant that the evidentiary contest was confined to John accepting certain uncontested facts and testing Wayne's version of events that the cheque was a gift. John submits that Wayne's evidence that the cheque was a gift should not be accepted. He asks the Court to infer that the value represented by the cheque must have been a loan and must now be restored to the estate.
But as the Court's analysis below shows, it is John, the plaintiff, not Wayne, who always bears the onus of proof that the cheque payment was a loan by Dorothy to Wayne and Lesley. And in my view, he has failed to establish that the cheque was a loan.

Wayne's Version

Wayne's version of the events surrounding the drawing of the April 2009 cheque is that it arose out of Dorothy's July 2008 sale of Dorothy's share capital in MSD to Lesley and Kelly Midgley. Wayne says the cheque was Dorothy's gift to reimburse Lesley and him for deposits they had caused to be paid to her on that sale. I accept his evidence that this transaction was a gift, not a loan.
In July 2008 Dorothy, who was then a shareholder in MSD (holding 200 voting units and 1800 non-voting units in MSD) agreed to sell all these units, described in the sale agreements as Dorothy's "membership interest " in MSD. She agreed to sell half her membership interest (100 voting units and 900 non-voting units) to a trust Lesley controlled, "The LM Webster Irrevocable Trust". She agreed to sell the other half of her membership interest (100 voting units and 900 non-voting units) to a trust Kelly Midgley controlled, "The KL Midgley Irrevocable Trust." Before 2 April 2009 these trusts had each paid an amount of US$417,500 as the initial payment, or deposit, on this July 2008 purchase of all Dorothy's membership interest in MSD. These deposit payments had each been made to Dorothy on 30 October 2008.
Wayne says that on 2 April 2009 Dorothy told him in conversation that she wanted to reimburse him for these payments, variously called in the evidence "deposit" monies or "down payments" and that Dorothy asked him what the total amount of that deposit payment was in Australian dollars, so that she could write a cheque to him in Australian dollars to reimburse him for the full amount of the deposit. His affidavit account of the conversation gave some of its surrounding circumstances. More detail emerged later in his cross-examination.
Wayne said in his principal affidavit on this issue that Dorothy said to him on 2 April 2009 shortly before this cheque was written words to the effect "I want to write you a cheque to reimburse you". He says that he responded to her saying "Part of it is mine and Lesley's share, so if you reimburse me it should only be for Kelly's share". By this he meant that he and Lesley had funded the share of their daughter, Kelly Midgley, in the acquisition of her half of Dorothy's share capital of MSD and were happy to be reimbursed for that but that they were resisting reimbursement so far as the acquisition of their own share in MSD was concerned. His recollection is that Dorothy responded to this saying "I want to pay it all. I need to know how much it is. I am going to reimburse the total figure".
Wayne says that after this conversation with Dorothy, he instructed Mr Jason Tang, SWW's accountant, to obtain that day's A$/US$ Australian exchange rates, so that the reimbursement Dorothy wanted to make could take place in Australian dollars. The A$ equivalent of US$835,000 at foreign exchange rates current at 2 April 2009 was A$1,227,941. Mr Tang confirms that Wayne asked him to obtain the A$/US$ exchange rate for that day from their bank, Westpac, which he did. Wayne says that on that day after the figure was calculated Dorothy "issued a cheque to myself and Lesley for this amount". He explained in more detail in cross examination how Dorothy actually issued this cheque.
Wayne also indicated in his principal affidavit that Dorothy's executors had not pursued him for the recovery of this amount, nor had they sought to assert against him or Lesley that the sum of A$1,227,941 should form part of Dorothy's estate.
For the reasons which follow I accept Wayne's account of these conversations with Dorothy. Some of the issues between the parties require a preliminary analysis of Dorothy's sale of her membership interest in MSD to Lesley's trust interests and Kelly's trust interests.

The Two July 2008 MSD Membership Interest Purchase Agreements

As indicated, on 25 July 2008 Dorothy personally entered as seller into two agreements for the sale of her membership interests in Maggie Sottero Designs LLC, or MSD. These agreements were each entitled "Maggie Sottero Designs LLC Membership Interest Purchase Agreement". Each agreement recited, as was the fact, that MSD operates from Salt Lake City Utah as a Utah Limited Company and that at the time of the sale, Dorothy held 200 voting units and 1,800 non-voting units in MSD. Under each of the two July 2008 sale agreements Dorothy sold 100 of her voting units and 900 of her non-voting units to one or other of the two identified trusts. One trust was controlled by Lesley "The LM Webster Irrevocable Trust" (Lesley and Mr Harlan Schmitt, a consultant accountant in Utah, were its trustees). Kelly controlled the other trust "The KL Midgley Irrevocable Trust" (Kelly and Mr Harlan Schmitt were its trustees).
Both the Membership Interest Purchase Agreement with Lesley's trust and the Membership Interest Purchase Agreement with Kelly's trust were in identical terms. Each agreement provided for Dorothy's complete withdrawal from membership of MSD and for a market appraisal of Dorothy's membership interest in MSD. The agreements provided that: Dorothy as seller would retain no ownership interest in MSD (clause 1); the purchaser would acquire all rights and obligations previously enjoyed by Dorothy as a member (clause 6); MSD had engaged an independent appraiser to value Dorothy's membership interest as at 31 December 2006 and the appraiser had determined that Dorothy's membership interest to be sold under each agreement had a market value at the appraisal date of US$3,795,500 with the appraisals to be adjusted if necessary for changes of market value closer to the sale date; and the parties accepted the risk of fluctuations in the market value of the MSD membership interest after settlement (clause 5);
Clause 6 of the Membership Interest Purchase Agreements dealt with the Sale and purchase. The purchase involved each purchasing trust making instalment payments plus interest to the seller, Dorothy, for a term of seven years and six months but subject to a condition that the seller must be "alive on the scheduled payment date and if the seller dies before any scheduled payment purchaser's obligation to make such payment shall not come into existence" (clause 6.1). Although the fair market value of Dorothy's membership interest being sold under each contract was agreed at $3,795,500 the purchase price under each contract was the greater sum of US$4,175,000 because (it was declared) the seller bears some risk of the obligation terminating, due to Dorothy's death, prior to full payment. These figures were subject to certain adjustments for ascertaining the fair market value of the business, as at 31 December 2006, at the time of settlement (clause 6.1).
Thus, a central feature of both agreements was that each purchaser trust's obligation would disappear on Dorothy's death. In submissions it has been suggested that this transaction structure was to minimise death duties on Dorothy's estate in the US.
The purchase price under each agreement was to be paid in two parts: a 10% deposit and the balance secured with a promissory note. The purchaser "shall make an additional down payment of US$417,500 to seller and shall execute a separate note for the balance of the purchase price". Indeed a Self-Cancelling Instalment Note for US$3,757,500 (being $4,175,000 less US$417,500) was issued the same day, 25 July 2008. As each agreement provided (clause 6.2) the note for each agreement bore interest of 3.5 per cent per annum, calculated quarterly and provided that on the 15th day of the first month of each quarter (April 15, July 15, October 15 and January 15) for a period of 30 quarters, beginning with October 2008 and ending with April 15, 2016, that the purchaser shall pay the seller US$140,773.22; the obligation being subject, as was the agreement, to the vendor being alive at each of those payment dates.
Finally, settlement of the agreements was to take place on 25 July 2008 (clause 9); following the settlement of each agreement the seller entered into various covenants for the seller, Dorothy to be retained as an independent contractor with MSD (clause 7) and for the seller not to compete with MSD (clause 8).
Both agreements were signed before a notary public. Dorothy's voting and non-voting units being transferred for the benefit of Kelly were assigned to Kelly Midgley and Harlan P. Schmitt, as trustees for the K.L. Midgley Irrevocable Trust. The other voting and non-voting units were assigned to Lesley M Webster and Harlan P. Schmitt, as the trustees of the LM Webster Irrevocable Trust.
Each agreement contained a schedule showing how much was payable on completion and on each of the quarterly periodic payment days of 15 October, 15 January, 15 April and 15 July thereafter. The table identified the early payments due for the first year and up to 15 July 2009, as follows: (a) 25 July 2008 - US$417,500 (b) 15 October 2008 - US$120,000 (c) 15 January 2009 - US$20,000 (d) 15 April 2009 - US$20,000
The agreement (in paragraph 6.2) describes the first payment of US$417,500 as an "initial down payment", as it was described by some of the witnesses in their evidence.

Wayne Expands His Version

A more detailed account of the circumstances of Dorothy's alleged gift emerged in Wayne's oral evidence. But in chief and in cross-examination, his narrative raised some puzzling questions. But the Court concludes it can rely upon his evidence. Wayne came across to the Court as a well-controlled, intelligent man who put considerable thought into answering the questions put to him and who was a witness of substantial truth. I accept his account as reliable, despite some of its unusual features.
The circumstances in which Wayne says that Dorothy announced the gift to him and Lesley of the money and then gave the April 2009 cheque to him were unusual. Wayne says that on 2 April 2009 he and Dorothy (and no one else) were walking together from the Abbey Bridal's shop in the Dymocks building down George Street Sydney to purchase lunch at the Myer Food Court. He says that the whole of their relevant conversation about why the April 2009 cheque was being offered, took place on their journey to collect lunch on foot. They walked out of the building together to buy lunch and bring it back to the office.
The whole lunch journey took about 15 to 20 minutes. The only topics of conversation he could remember from the journey were this gift and what they were going to have for lunch. That is probably understandable as it was a routine journey for him and Dorothy. The conversation about the gift did not take more than 5 minutes. Of this subject the only conversation Wayne could recall is Dorothy saying to him that she wanted to make the gift and him saying back to her that he could understand if she wanted to reimburse Lesley and himself for Kelly's share but not for Lesley's share, to which Dorothy replied "I am going to pay you back all, the total figure" without giving any further reasons.
I accept that Dorothy was a self-reliant and determined woman, who was very energetic for her age. But announcing to her son-in-law, rather than her daughter Lesley with whom she was also very close, the gift of $1.22 million whilst walking down George Street seems somewhat odd. This was by far the largest gift that Dorothy had ever made to Lesley and Wayne. Dorothy's other gifts to Wayne or Lesley had only been small amounts of money that had been given with Christmas cards. Why a remarkably business-like 85 year old woman (as she then was) would decide to broach such a topic for the first time on a bustling Sydney lunchtime pavement is difficult to fathom. But I accept that this is just what Dorothy did.
Wayne understandably says, given the size of the gift, that he was "stunned by it". He recalls, and I accept, that he tried to talk Dorothy out of it. That would be the natural reaction. Wayne described George Street at lunchtime as "pretty hair raising".
Wayne says that when he arrived back at the Abbey Bridal office that he and Dorothy went their separate ways. Wayne says, and I accept, that he went straight to see his wife Lesley and told her about the gift. Meanwhile Dorothy went back up to her own office on the second floor to have her lunch with other staff members, as she often did. Wayne says he spoke to Lesley on the fifth floor. Lesley was apparently also stunned on hearing the news about the cheque that Wayne conveyed to her, with him reaffirming how emphatic her mother was about the gift, I accept that Lesley said back to Wayne "if that's what mum wants, do it". Dorothy had already conveyed her decision in the matter to Wayne. There seemed little point in arguing. Wayne cannot recall Lesley immediately going down to speak to her mother to share this news with her and thank her for such a large gift. Maybe she did. I accept Wayne's evidence that he cannot remember her doing so.
Wayne said that without Dorothy's emphatic insistence he was resistant to the idea of this gift, and especially in respect of the membership units in MSD being sold to Lesley, as distinct from those being sold to Kelly.
When asked about Lesley's reaction to this news, Wayne explained that Lesley had the same initial resistance to her mother's gift. But Lesley seems to be resigned, saying to Wayne "well, you know mum, if that's what she wants, do it". Wayne cannot recall Lesley having an immediate interest in ascertaining: how insistent her mother was; whether this is what she really wanted; or to ensure that her mother had been warmly thanked. Wayne disclaimed knowledge of whether Lesley actually went and discussed the gift with Dorothy. He says that he went downstairs to arrange the cheque, which I accept he did.
But Wayne's limited recall of what Lesley did that afternoon is not improbable. Wayne was keen to have the cheque drawn to follow Dorothy's instructions, which took a little time. He probably did not notice what Lesley was doing. And at the time of hearing he was a witness in his 70s trying to recall detail of events five years earlier. Some imperfections in his memory are to be expected.
A puzzling part of Wayne's evidence was his lack of memory of any other later reaction from Lesley about this news. Lesley, Wayne and Dorothy all lived at the Killara house together. They travelled to work daily together in the same car. When they were in Utah they lived in a single household together. Moreover, they saw a great deal of each other at work. The very day the cheque was written, 2 April 2009, the three of them went home together in the car. Wayne could not recall any conversation about the gift on that journey or at home that night. Nor could he recall any later expressions of gratitude on Lesley's part about the generosity of the gift. When he was asked about why he had not recalled such expressions of gratitude, he said: "I haven't said anything like that because I honestly do not remember very well, and I can make an assumption and feel I was quite right that something was said, but I don't know what else to tell the Court other than - I assume yes, that something was said. Do I remember what was said? I do not."
In my view he was a careful witness and as he did not remember he was not prepared to speculate.
There was a contest about the exact terms of Dorothy's gift. When Wayne gave oral evidence in chief on the subject of what Dorothy had said to him as they walked along George Street, his account was that Dorothy said, "I want to reimburse you and Lesley for the monies you paid". His oral version was that she then clearly commanded him what to do, saying "it needs to be converted into Australian dollars so I can write you a cheque". He then recalls responding "Well Dot, half of that was - one of those cheques was Lesley and I. I don't see that you can reimburse us as far as I am concerned. You don't need to reimburse us for anything but if you do, it would be just Kelly's portion of it, which we took care of because she didn't have the money". He then said that Dorothy concluded the issue "very firmly, which she had a way of doing" by saying to him "I want to pay for the whole thing. Find out what it converts to in Australian dollars as of today, so I can write you a cheque". He said that he responded, "Okay, I will".
Wayne's version of the conversation, with Dorothy saying that she wanted "to pay for the whole thing", rather suggests that Dorothy wanted to fully reimburse Lesley and Wayne for all the payments they had made up to that time under the July 2008 sale agreements. Indeed when clarification was sought from Wayne during his evidence in chief he seemed to think, erroneously as it turned out, that the two US$417,500 deposits (for each agreement) were the only payments that had been made by 2 April 2009. But two more contractual instalments under each of the July 2008 agreements had in fact been paid by the 2 April 2009: $120,000 on 15 October 2008 and $20,000 on 15 January 2009.
By the time Wayne came to be cross-examined about this issue his evidence was clearer, corresponding more closely to what he had originally said in his affidavit: that Dorothy "wanted to reimburse the deposit monies". But by then he had been cross-examined about the extra payments and was aware of the importance of the distinction and the need to have clarity about exactly what amount was being reimbursed. Unless Dorothy had clearly explained that it was only the deposits that were to reimbursed, his oral version of her instructions was open to the construction that she was intending to reimburse Lesley and Wayne for all the payments that had by then made under the July 2008 agreements.
Wayne's final account clarified what Dorothy meant in conformity with his affidavit: she wanted to reimburse Lesley and him only for the deposits that had by then been paid. John submits that it is difficult to see why she would wish to do that and not also reimburse them for other payments that were to be made during the life of the agreement. But in my view, there is a good explanation as the more detailed analysis later in these reasons of wider aspects of these transactions shows. Every account of Dorothy in her last years was that she was an intelligent, perceptive woman, well in control of events and having good reasons for everything that she did. She seems never to have been asked or to have volunteered why it was only the deposits that she was going to fund by way of gift in this way. If Dorothy was saying "I just want to pay you back" the deposits in full, she never explained her reasoning and it never subsequently seems to have come up in discussion. But I accept Wayne's evidence that is what she wanted to happen.
Wayne appeared to the Court to be essentially respectful and courteous. In my view, he did not wish to be impertinent in the face of his mother-in-law's generosity. Questioning Dorothy was not something that people did. This gift was made in April 2009. Dorothy lived until October 2011. Further payments were made under the July 2008 agreements right up until the time of her death. Dorothy never raised the subject of reimbursement of these other amounts during the remaining two and a half years of her life. I accept that for her own reasons she decided to reimburse Lesley, Wayne and Kelly just for the deposits and not for the other payments that would fall due before her death.
And it can be accepted that on 2 April 2009 Dorothy proposed to fund only the deposits paid under the July 2008 agreements. This is the reasonable inference to be drawn from the fact that she did give instructions for the drawing of a cheque for the Australian dollar equivalent of US$835,000 (being 2 x US$417,500) that day. Both the cheque that was drawn, the evidence of Mr Jason Tang who did the calculation, and Wayne's evidence all show that a calculation was done that day converting US$835,000 into A$1,227,941 at the then current exchange rates. Wayne says, and I accept, that he looked at a copy of the July 2008 agreements, and worked out the US dollar amount that needed to be converted into Australian dollars. He then says, and I accept, that he spoke to Jason Tang who in turn spoke to the commercial manager at Westpac to give him the exchange rate for that day. Once Wayne had the figure I accept that he must have gone down to Dorothy's office and spoken to her about this subject. Some such conversation must have taken place in order for the cheque to have been written that day, as I accept that it was. Wayne says that within about an hour or so after Jason came back to him with the correct figure he went to see Dorothy. He says that he gave her the calculation and then Dorothy said "fine" and took out her cheque book from the right hand drawer of her desk.
Dorothy undoubtedly signed the 2 April 2009 cheque. No one disputes that it bears her signature. The rest of the cheque, apart from Dorothy's signature, is written in Wayne's handwriting: the date, the amount in words, the amount in figures and the payee. The payee is simply identified as "W.Webster jr". The cheque butt is also filled out in Wayne's handwriting with the date and the amount. But the addressee is described on the cheque butt slightly differently, as "W & LESLEY". The cheque butt contains no other notation as to the purpose of the payment and does not describe it as either a gift or a loan.
How did the cheque come to be in Wayne's handwriting? Wayne's explanation for this was that Dorothy had said to him that because the numbers were so big and she had trouble making sure she wrote the big numbers out accurately that she asked him to go ahead and fill out the cheque. I accept that this is what happened. Even for Dorothy this was a large cheque. She was 85. She wanted to make sure that it was exactly the right amount. And as a result of her long family association with Wayne she completely trusted him to get the figures right.
The evidence traversed at some length Dorothy's cheque writing habits. I accept Wayne's evidence that in the six months prior to April 2009 Dorothy was in the habit of writing her own personal cheques and that she did so subsequent to that day. Wayne regarded this 2 April 2009 cheque as a "personal cheque". He said that he was not in the habit of writing out cheques for her on her personal account. But over a period of 30 years or so she "may have done it a dozen of times or so". In my view this was one of those occasions.
Wayne's evidence as to Dorothy's cheque writing habits is somewhat in tension with another reliable witness. But the differences do not ultimately matter. Wayne said that Dorothy did not write out business cheques. Yet Kym Bournes, the general manager at Abbey Bridal said that Maggie had an interest in running the whole business, not only the design side but the financial side, and that when she spoke to Ms Bournes from anywhere in the world, as "she'd [Dorothy] wanted to know everything".
Kym Bournes was an excellent witness. I accept all her evidence. Ms Bournes joined Abbey Bridal as a shop floor junior at the age of 15 in 1994. She worked her way up from there, consulting with brides, assisting with bridal dress fittings and then taking on more responsibility until she assumed the role of general manager in 2006. Dorothy had clearly inspired Ms Bournes, who took great personal pride in working closely with Dorothy. She says, and I accept that, she saw Dorothy write cheques for both business and personal purposes. Ms Bournes was insistent that Dorothy "would write the cheques out and she would also have the address, have the actual envelope that would have her writing on the outside of the envelope as well". And Dorothy would write on the cheque before she signed it. She was less clear about Dorothy's habit in relation to cheque butts.
I prefer Kym Bournes' evidence to that of Wayne Webster on the subject of whether Dorothy wrote out business cheques. Kym Bournes' capacity to observe Dorothy's daily business habits is beyond question. I accept Ms Bournes' evidence that she and Dorothy "were extremely close" and that she spent "every lunch break with her" and that even when they weren't working side by side, there was a great deal of interaction between them.
But there is room for both versions. Ms Bournes' evidence does not go so far as to say that Dorothy would be unlikely to ask Wayne to write a substantial personal cheque for her.
It was not in contest that the cheque butt was in Wayne's handwriting. Neither side put the original book of cheque butts into evidence. So it is not possible to ascertain from that source any pattern in the way that Dorothy filled out cheque butts.
Wayne gives an account, which I accept, of his filling out the cheque butt. Wayne described Dorothy as having "a very poor habit" of writing cheques and not making any notation on her cheque butt. He says that he felt that this transaction was sufficiently important that "it should be written down", so he says "I wrote it down" on the cheque butt. He says he said to Dorothy "here Dot, you need to write this down in the cheque book, I'll write it down for you so that it's there" and he just entered something that he "judged was appropriate".
But he did not record the transaction as he fully understood it, which was as a reimbursement of the deposits for the July 2008 sale agreements as a gift from Dorothy. He was in charge of recording this transaction on the cheque butt without clear instructions from Dorothy. Yet he did not take the opportunity to record it the way he now says that it worked: as a gift from her. The record he made of the transaction is equally consistent with it being a loan, which he and Lesley were obliged to repay to Dorothy in due course. But to criticise him for failure to enter this in the butt as a gift is, in my view, to misuse the benefit of hindsight. He did not expect this issue would arise years later. What he entered then is still consistent with his present case.
The cheque is made out only to Wayne. He explains this as consistent with the way that the household account was operated for their jointly occupied East Killara home. He explained that Dorothy's habit with the household account was for her to write out a cheque addressed to him. That is understandable for petty expenditure. But the April 2009 cheque was not paid into the household account. It was actually paid into Wayne and Lesley's interest bearing account with the Commonwealth Bank of Australia. It is difficult to see why the April 2009 cheque should follow a habit for an account into which no-one expected it would be paid but that is what Dorothy authorised.
I accept that from April 2009 until Dorothy's death she did not ask Wayne (or Lesley in Wayne's presence) for the return of the funds paid in this cheque.

After Dorothy's Death

There the matter rested until after Dorothy died. Within 12 months of Dorothy's death John and his sister Robyn began to ask questions about a number of transactions in Dorothy's estate, including this cheque. Mr Blackburn-Hart SC for John, challenged the veracity of Wayne's version, partly because of the alleged halting way in which he submits Wayne's version of events emerged. Mr Blackburn-Hart SC's submission is: that if Wayne were telling the truth he is unlikely to have forgotten (as he appears to have done for a period) the single largest gift that Wayne and Lesley would have ever received from Dorothy; and that, as soon as John and Robyn raised the issue, Wayne should have been in a position to explain the cheque in the terms that he has now sought to explain its provenance to the Court. Instead he says Wayne did not declare what the cheque was for, when it must have been obvious to him, given the circumstances of the gift that Wayne describes. Mr Blackburn-Hart SC's submission about Wayne's delay in responding to John and Robyn's enquiries about this transaction is, he contends, far more consistent with Wayne realising that the cheque was not a gift, and that Wayne was reluctant to explain its true purpose as recording a loan.
There was some delay in Wayne's final explanation emerging. But such delay as there was and the reasons for it quite explicable and is corroborated by Ms Bournes' evidence.
Before June 2014, when Wayne filed his affidavit with his explanation of the April 2009 cheque, John's solicitors, Gells, were pressing Messrs Glass, Goodwin solicitors, who acting for the estate, for an explanation of this payment by cheque. Wayne's explanation for the payment did not emerge quickly. Inquiries about the April 2009 cheque had been taking place since June 2013. On 27 June 2013 Glass, Goodwin sought information from DLA Piper about the cheque. On 15 August 2013 DLA Piper responded, saying they were instructed that Mr Jason Tang and Mr Schmitt were conducting investigations into the matter. A Gells letter of 2 August 2013 asked about the amount of $1,227,914 "Does Wayne Webster owe this amount to the estate?" Mr Glass then followed up his request for information about the April 2009 cheque on behalf of the estate on 8 August 2013, enquiries that were continued on 26 August. In September 2013 Mr Jeremy Glass asked Wayne and Lesley's solicitors, Messrs DLA Piper Australia for an explanation for the cheque: Mr Glass said on this subject to DLA Piper "is your client unable to provide any explanation at all?"
DLA Piper responded on instructions on 9 October stating the then declared limit of Wayne's recollection as follows: "Mr Webster is unable to recall the circumstances in which the cheque for the sum of $1,227,941 was issued in April 2009. We are instructed that it was not unusual for our clients to pay expenses on behalf of the Deceased and for the Deceased to reimburse our clients at a later date. Given the precise nature of the amount of the cheque, Mr Webster believes the payment would have related to the reimbursement of an expense paid by our clients' on behalf of the Deceased. Our clients are continuing with their investigations, however, some of our clients' records are maintained here in Sydney. Our clients will be returning to Sydney on 30 December 2013 and will review these records upon their return. We will revert to you as soon as we have any additional information".
The DLA Piper response was helpful and reasonable. But it did not reveal that Wayne was either able, or prepared, to share any of his recollections of the payment of the cheque with his solicitors.
But when this inquiry came in, Wayne was in the United States. He says that he needed to find the banking records to ascertain the amount and date of the cheque and to discover its purpose. Wayne says, and I accept, that he had an assumption in his own mind as to what it was probably for and that he asked Ms Bournes to see if she could find the cheque or perhaps a copy of it in the house in Killara whilst he was away in the United States. But he says that she could not find what she wanted. Wayne says that his object was to try and get hold of the cheque itself and to "figure out what it was", believing that that might "spike the memory".
Wayne already had much information about the cheque. Mr Glass by then had a copy of the cheque butt and had forwarded it to DLA Piper on 25 September. The cheque butt is informative. It at least it identifies Wayne and Lesley as the recipients of the cheque, which according to Wayne was a more accurate description of the real transaction than the form of the cheque itself, which was just addressed to him.
It is indeed somewhat strange that the cheque butt alone did not jog Wayne's memory. But Wayne says, and I accept, that when he finally saw the cheque "I visualised myself standing at [Dorothy's] desk". I accept that Wayne did not appreciate what this cheque was for, when he saw the cheque butt. But once Wayne had seen the cheque, which seems to have been when he got back from the United States in January 2014, he was not very quick to share until his June 2014 affidavit what he now says is the true explanation of the payment. But there was already deep family distrust by this time and it is perhaps not surprising that Wayne and his legal advisers decided to keep their powder dry on this issue until his first affidavit was filed.
Ms Bournes confirmed Wayne's story that she had gone to the Killara house in January 2014 when Wayne was in the US to look for what she thought was a particular cheque number but was unable to find it. The Bank of course would probably have had the original cheque. Glass, Goodwin already had the cheque butt which had been shown to Wayne and Lesley through their own lawyers. Although Ms Bournes was uncertain as to when she undertook this search for Wayne, the evidence is generally consistent with his account of asking her to look for the cheque butt in January 2014. And Exhibit C contains a series of emails that show that Wayne still seemed genuinely unsure in January 2014 of what the cheque was for and wanted a search for it to be undertaken.
Once Wayne was in possession of the cheque, probably by late January this year, I accept his memory was jogged. He would by then have had all that he needed to declare what had happened on 2 April 2009. I do not think he is to be criticised because his version does not go into evidence in these proceedings until June.

Lesley Webster fails to give Evidence - the Jones v Dunkel Inferences

Wayne Webster's wife Lesley did not give evidence. Her failure to do so was important in assessing some of the evidence in relation to the April 2009 cheque claim.
Wayne professed to justify her absence on the basis that Lesley "has been severely affected by these proceedings" and that she had "found the entire proceedings [both in New South Wales and in Utah] highly stressful and emotional" and that this in turn "had negative impacts on her health". But this contention was not supported by any medical evidence to justify Wayne's opinions. Such lay opinions are admissible under the Evidence Act 2005: Evidence Act, s 78. They have long been admissible at common law.
Over objection the Court admitted evidence from Wayne about Lesley's mental state and general health, on the basis that he could offer direct observations about his perceptions of his wife's state of health. Although not medically qualified, he did just that. But such lay opinions alone are of minor persuasive value in determining whether Lesley was unable for good medical reasons to come to Court to give evidence.
Wayne Webster's evidence was that in addition to "being extremely mentally and emotionally affected" by this litigation that his wife Lesley had been "admitted to hospital on occasions and has been diagnosed with various conditions, including a now persistent high blood pressure". He professed that his overall concern had been to protect Lesley's health and wellbeing and he concluded that for these reasons "it is the position of both Lesley and myself that it is our desire for Lesley not to give evidence in these proceedings". His affidavit concluded with a single sentence "Lesley will not attend the hearing". The trial commenced on Wednesday, 19 November 2014. The affidavit containing this information was sworn in the proceedings on 20 November 2014.
The Court cannot infer on the basis of such evidence that Lesley has any medical condition sufficiently debilitating that it would prevent her from attending Court to give evidence. Medical evidence would be required to justify that conclusion. Statements that Lesley has high blood pressure and suffers stress are an insufficient basis for determining that she cannot come to court. These stated conditions are all treatable by modern medicine. The Court will offer many facilities to accommodate witnesses who have difficult medical conditions. No application for a special hearing to accommodate Lesley was made. No affidavits from her were proffered.
And Lesley had access to medical advice. She saw her usual general practitioner, Dr Raymond Choy, twice in the fortnight before Wayne gave evidence. Dr Choy had been her medical practitioner for nearly 30 years. But despite being contacted for the purpose he did not provide either an affidavit or medical certificate as to her unfitness to give evidence.
On Wayne's own account of the events relating to the writing of the April 2009 cheque, Lesley was a party to an important conversation when he says he told Lesley of Dorothy's gift on the afternoon of 2 April.
The plaintiffs contended that the defendants' failure without explanation to call Lesley to give evidence should found a Jones v Dunkel inference against them.
The law as to the inferences the Court may draw from the failure by a party to call a witness is clear. The unexplained failure by a party to call a witness may in appropriate circumstances lead to the inference that the uncalled evidence would not have assisted that party's case: Jones v Dunkel (1959) 101 CLR 298 at 308, 312 and 320-1 ("Jones v Dunkel"), and see Dilosa v Latec Finance Pty Limited (1966) 84 WN (Pt 1) (NSW) 557; [1966] 1 NSWLR 259, at 582 ("Dilosa"). The appropriate circumstances exist where it was within the power of the party to tender the evidence which is not tendered. The "significance to be attributed to the fact that a witness did not give evidence in the end will depend upon whether, in the circumstances, it is to be inferred the reason why the witness was not called was because the party expected to call him feared to do so": Fabre v Arenalis (1992) 27 NSWLR 437 at 449-450. But there are circumstances in which it has been recognised that a Jones inference is not available, or if available, it is of little significance, because for example, a party is not in a position to call a witness, a party is not sufficiently aware of what the witness would say, or the witness has a reason for not telling the truth or refusing to assist: Fabre v Arenalis (1992) 27 NSWLR 437.
None of these explanations appear to be applicable here. Nor is there any justification for inferring that Lesley's absence is to be explained by illness or loss of memory: Payne v Parker (1976) 1 NSWLR 191 at 202 ("Payne") and Shum Yip Properties Development Pty Ltd v Chatswood Investment and Development Co Pty Ltd (2002) 40 ACSR 619; [2002] NSWSC 13 at [65]; [2002] NSWSC 13.
But the Jones v Dunkel inference has limitations. It does permit an inference to be drawn that the untendered evidence would not have assisted the party who failed to tender it. The Court is entitled to take Lesley's failure to give evidence into account in deciding whether to accept evidence, which relates to a matter on which she could have spoken and may readily draw more inferences, fairly to be drawn from the other evidence, by reason of the defendants being unable to prove the contrary. But the rule does not permit an inference that Lesley's evidence would in fact have been damaging to the defendant's case, such that the rule cannot be employed to fill gaps in the evidence or convert conjecture and suspicion into inference: Jones at 308, 312 and 320-1, and Dilosa at 582, Payne at 194 and West v GIO (NSW) (1981) 148 CLR 62.
The rule only applies where a party is required to explain or contradict something: Jones at 321. Thus no inference can be drawn unless evidence is given of facts requiring an answer: Jones v Dunkel at 322 and Schellenberg v Tunnel Holdings Pty Limited (2000) 200 CLR 121 at [51]. For example if there is no issue between parties on a matter, there is nothing to answer. And if there is an issue between them but the party bearing the burden of proof has tendered no evidence of it, the opponent is not required to answer. The rule can operate against parties who do not bear a burden of proof as well: Ho v Powell (2001) 51 NSWLR 572 at [16]. This particular aspect of the rule is of considerable relevance in this case, where the parties were at issue as to who bore the onus of proof that the April 2009 cheque was a gift or a loan.
Sometimes problems arise in the application of the rule in Jones v Dunkel as to whether or not the witness not called merely provides cumulative evidence or evidence only from junior decision makers, where more senior people have been called Apand Pty Limited v Kettle Chip Co Pty Limited (1994) 52 FCR 474, at 490. Such considerations are not applicable in this case.
The rule has direct application to the failure to call Lesley, the fifth defendant. Difficulties can arise in the application of the rule in Jones v Dunkel, from the failure to call non-party witnesses. A requirement for the application of the rule is that it must be established that it would be natural for the party to call the non-called witness, or that the party might be reasonably expected to call the witness, or that the missing witness would be expected to be called by one party rather than the other: O'Donnell v Reichard [1975] VR 916 at 929 and Payne at 201-202. Those problems do not arise in this case, because Lesley is a party, not just a witness. The principle applies to a party who fails to give evidence: Steele v Mirror Newspapers [1974] 2 NSWLR 348.
Wayne gave an account of Dorothy's statements to him about the April 2009 cheque. Wayne's account that the 2009 cheque was a gift was put under strong challenge. As Wayne's own narrative of events clearly shows, Lesley was involved in dealings with Dorothy at the time and could be expected to have given evidence about the same subject. But Wayne's evidence about the April 2009 cheque itself has sufficient weight in the Court's assessment for this transaction to be characterised as a gift. But in my view Lesley's absence from the proceedings is not a reason not to accept Wayne's evidence about the April 2009 cheque.

Applicable Legal Principles - Gift or Loan?

Executors not uncommonly find themselves in the position of alleging that money paid by a deceased person to another was a loan, only to encounter a defence that the money paid was a gift. The High Court considered just such a situation in Heydon v The Perpetual Executors Trustee and Agency Company (W.A.) Ltd (1930) 45 CLR 111 ("Heydon"), a case the defendants' cite in these proceedings as authority for the proposition that a plaintiff bears the onus of proof of the loan in such circumstances.
In Heydon an executor trustee company brought an action for 150 pounds allegedly loaned by a testatrix to the defendant, Heydon or alternatively an action for money had and received by the defendant as trustee for the plaintiff. The defence was that the testatrix had given the money to the defendant. At first instance the trial judge had held the burden of establishing a gift was on the defendant. The defendant gave evidence of the circumstances that she said showed that the payment was a gift. The plaintiff gave evidence as to the payment, but did not establish a loan. The defendant was disbelieved and on the evidence the trial judge held that the defendant had failed to establish her case of a gift due to its own inherent weakness and entered judgment for the executor with costs, which judgment was confirmed on appeal.
The unsuccessful defendant appealed to the High Court which unanimously (Gavan Duffy J, Rich, Starke, and Dixon JJ agreeing) reversed the judges below and decided that "'the burden of proving the facts in support of either one or other cause of action set out in the statement of claim lies on the plaintiff". The plaintiff, the respondent to the appeal in the High Court, to support the decisions of the judges below cited cases such as Scott v Pauly (1917) 24 CLR 274, at 281, Pink v Pink [1912] 2 Ch. 528 at 540 and Bouts v Ellis (1853) 17 Beav. 121, 51 ER 978 and to argue that a voluntary payment of money to a stranger raises a presumption of resulting trust. But Dixon J said in the course of argument that the correct principle was that chattels which passed by delivery are not within the rule and a presumption arising from the voluntary delivery of chattels is that a gift was intended in the absence of circumstances to the contrary. The course of argument in the case Dixon J referred counsel for the respondent to George v Howard (1819) 7 Price 646, at 651, 146 ER 1089 at 1090, where Richards CB said "If I deliver over money…to another, even although he should be a stranger, it would be prima facie a gift".
The decision Heydon has been frequently applied. Recently in this Court White J referred to Heydon in Schmierer vTaouk [2004] NSWSC 345 at [63] (Shmierer). Lindsay J has also referred to it in Voce v Deloraine [2012] NSWSC 1187 at [12] ("Voce"). These cases confirm that the plaintiff in such actions bears the onus of proving that the payment should be characterised as a loan or in some way other than as a gift. And Shmierer (at [59]) makes clear that the onus of establishing the monies were a loan always lies upon the plaintiff and that onus is not discharged by mere proof of the payment itself.
Another important preliminary issue in relation to such a domestic transaction is whether there is an intention to create legal relations. The High Court no longer frames such questions in terms of presumptions: it is no longer presumed that in domestic transactions the parties do not intend to create legal relations. The modern principle is that the issue is one of onus of proof for the plaintiff, who must prove that there was an intention to create legal relations: Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at [105] - [106] (the joint judgment of Gaudron, McHugh, Hayne and Callinan JJ.)

Consideration

The Court's findings so far are quite sufficient in my view for the plaintiff's claim in respect of the April 2009 cheque to be dismissed. John bears the onus of proof. The Court has accepted Wayne's version that Dorothy said the cheque was a gift. There was no conversation between Dorothy and Wayne on 2 April 2009 or at any other time, which would found an inference that the money was a loan. That is an answer to the plaintiff's case.
But John's legal representatives, led by Mr Blackburn-Hart SC propounded other ways of advancing the plaintiff's case which the Court should address. But in my view, the discussions between Dorothy and Wayne are of critical significance in this case in determining the proper characterisation of the cheque payment that Dorothy made on 2 April 2009. The Court has found there were express discussions between Wayne and Dorothy about the subject and they, in my view, are decisive on the loan/gift question.
John submits that in the alternative that notwithstanding Dorothy's characterisation of the cheque that she gave to Wayne, that Wayne and Lesley should repay the estate of the sum of A$1,227,941 because either: 1. There was a loan agreement - said to be implied as distinct from express between Dorothy and Wayne or alternatively between Dorothy, Wayne and and Lesley; and 2. Wayne deliberately deceived Dorothy by allowing her to reimburse the deposits to him but either failed to tell her at that time that the loans had already been repaid to other living trusts of Wayne and Dorothy, or alternatively actually told her that the loans had not been repaid.
This alternative case really only emerged towards the end of the hearing and would probably have been addressed earlier in the proceedings had it been pleaded. Nevertheless, an adjournment permitted the parties to put on supplementary submissions and deal with the issue.
To deal with John's alternative case it is necessary for the Court to make some supplementary findings about other transactions surrounding the two deposit payments of the US$417,500 that the K L Midgley irrevocable trust and the L M Webster irrevocable trust made to Dorothy.

Supplementary Findings in relation to Payment of the Deposits

The Court has found that each of the LM Webster Irrevocable Trust and the KL Midgley Irrevocable Trust paid US$417,500 to Dorothy on 30 October 2008. But each of those two irrevocable trusts were funded in that payment by two other living trusts: one controlled by Wayne Webster ("The Wayne P Webster Jr Living Trust") and the other controlled by Lesley Webster ("The Lesley M Webster Living Trust"). These two trusts will be referred to collectively as "the living trusts", as distinct from the two "irrevocable trusts" that were the parties to the July 2008 MSD Share Sale Agreement.
Two promissory notes (Exhibit 5) show that on the same date as Dorothy's sale contracts to the two irrevocable trusts, 25 July 2008, these two living trusts funded the irrevocable trusts to make these deposit payments as follows: 1. Lesley as the trustee of the Lesley M Webster Living Trust loaned to Kelly and Mr Schmitt, as the trustees of the KL Midgley Irrevocable Trust, the principal sum of US$417,500 with interest from the date of the note at the rate of 3.41% per annum, paid quarterly on the 15th day of the first month of each quarter according to an amortization schedule. 2. Wayne as the trustee of the Wayne P Webster Living Trust loaned to Lesley and Mr Schmitt, as the trustees of the LM Webster Irrevocable Trust, the principal sum of US$417,500 with interest from the date of the note at the rate of 3.41% per annum, paid quarterly on the 15th day of the first month of each quarter according to an amortization schedule.
The promissory note agreements between the two living trusts and the two irrevocable trusts contained amortization schedules to the effect there would be 36 quarterly payments of interest over a period of nine years between July 2008 and July 2017 on the loaned amounts but with interest only being paid until the end of the period and the principal plus any accrued interest being paid in the final quarter of the period.
These promissory notes were in identical terms. They show that as at Dorothy's 2 April 2009 cheque payment, there had been two interest payments made to each of the living trusts, one on 15 October 2008 in an amount of $3,198.32 and another on 15 January 2009 in the amount of $3,559.19 from each of the irrevocable trusts. But in accordance with the terms of the promissory notes, no payments of principal had been made at that stage.
After the 2 April cheque was paid, a further interest payment was made by the irrevocable trusts to the living trusts on 23 April 2009 for $3,755.95 in each case. The first payment of principal by the irrevocable trusts to the living trusts was not made until 15 July in the sum of $73,354.41.
Thereafter repayments of principal and interest were made each quarter, coinciding with the dates that further instalments were to be paid to the deceased under the Share Sale Agreement. The last repayments were made to the two living trusts from the irrevocable trusts on the date the deceased died, 12 October 2011 for $13,628.65.
These early part payments of principal by the irrevocable trusts to the living trusts were the product of the success of MSD's business after Dorothy sold her membership interest in it to the two irrevocable trusts. The part payments of principal are not accounted for and are in advance of the interest only obligations of the promissory note agreements.
I accept Mr Harlan Schmitt's evidence, who was MSD's independent accountant through this whole period and a co-trustee of each of the irrevocable trusts, that the part repayments of principal occurred more quickly than had been anticipated as a result of MSD's successful retail seasons after July 2008. Indeed Exhibit H shows that the irrevocable trusts made repayments to the living trusts in instalments by electronic funds transfer on the same date each quarter that MSD made distributions to the two irrevocable trusts (Exhibit H).
These overall funding arrangements allowed Lesley's Irrevocable Trust and Kelly's Irrevocable Trust to pay the deposits of US$417,500 to Dorothy on 30 October 2008 (although the deposits were actually due under the agreements on 25 July 2008). The amortization schedule attached to each of the loan agreements also showed that $120,000 was to be paid on 15 October 2008 and $20,000 on 15 January 2009. The first of these amounts was certainly paid on 30 October 2008 in respect of each contract into a joint account with Zion's Bank that Dorothy held with Lesley and Kelly. The funds were then remitted to Dorothy's bank account in Sydney.

Consideration of John's Alternative Case

The plaintiff submits that the inferences are strong that the two irrevocable trusts have now repaid in full the advances that the two living trusts originally made to the two irrevocable trusts for the down payments. Mr Schmitt's calculations appear to show that the total repaid to each living trust by each irrevocable trust on this account was US$451,958.97, being the initial advance of US$417,500 plus interest of US$34,458.97.
Wayne's evidence was that he did not tell the deceased that these arrangements were in place either before the Share Sale Agreements were made on 25 July 2008 nor at the time the cheque was drawn or subsequently.
John submits that there was an intention to enter into legal relations between Dorothy and Wayne and alternatively with Wayne and Lesley on 2 April 2009 and that an agreement can be inferred from the conduct of the parties. The evidence of intention to enter into legal relations is said to be implied from the following matters: (1) the size of the April 2009 cheque; (2) that the cheque was unusual for the deceased to draw; (3) that the deceased had already disposed of her MSD shares and that it must have been obvious to Wayne, or Wayne and Lesley, that Dorothy was relying on his assurance, implicit in the terms of the conversation reported by him, that the loans from the two living trusts to the irrevocable trusts had not been repaid; (4) that payments between the trusts were being arranged by Mr Schmitt; and (5) in the circumstances Dorothy's payment was ostensibly only for one purpose - as a reimbursement to Wayne and Lesley for their loans through their living trusts to Kelly and Lesley's irrevocable trusts. John submits that this is clearly a case where the circumstances indicate that the members of this family did intend to enter legal relations.
The argument concludes with propositions that: there was an implied loan agreement between Dorothy and Wayne and alternatively between Dorothy, Wayne and Lesley for US$1,277,961. The April 2009 cheque had the sole purpose of discharging the indebtedness of the irrevocable trusts of their loans from the living trusts and the lifting of their financial burden as assistance to Kelly and Lesley and in the circumstances there was an implied term that as and when each payment of principal and interest was received by the living trusts from the irrevocable trusts that a similar amount would be repaid to Dorothy, and in breach of the loan agreement Wayne, and alternatively Wayne and Lesley, have failed to repay the loan.
This argument is ingenious but flawed. It has at least the following problems.
First, the internal funding arrangements for the deposit between Wayne and Lesley and their daughter Kelly were always an internal matter for them and do not change the nature of the external dealings between Dorothy and the two irrevocable trusts that purchased Dorothy's MSD shares on 25 April 2008. The evidence of Dorothy's wishes as expressed to Wayne only supports the simple inference that Dorothy wanted to reimburse the deposit monies paid under the two Share Sale Agreements, the transaction of which she was aware, and that her reimbursement was a gift. Nothing in the conversations which the Court has found provides an express, or even an implied, basis for the Court to infer that Dorothy wanted to fund the living trusts to reimburse the irrevocable trusts. In my view all that the evidence supports is that Dorothy had a simple intention: to give Wayne and Lesley the full amount of the deposits paid under the two July 2008 Sale Agreements.
Secondly, the factual supposition behind John's argument is wrong. The principal sums of US$417,500 under the promissory note agreements between the living trusts and the irrevocable trusts had not been repaid as at the date of Dorothy's cheque on 2 April 2009, either in whole or in part. Only two interest payments had been made to the living trusts at that time and no payment of principal. So, even if what John says should be implied from the conversations is accepted, the gift was properly made because the full principal was still due from the irrevocable trusts to living trusts at the date of her gift.
Thirdly, the idea that an obligation would arise by implication in Wayne or Lesley to repay Dorothy, once the irrevocable trusts repaid the living trusts, is incompatible with a number of features of the overall commercial relationship between Dorothy and the two irrevocable trusts under the July 2008 Sale Agreements. Those agreements make clear that the purchasers can take the benefit of any increase in value and will bear the risk of any decrease in value of the MSD membership interests that Dorothy was selling to the irrevocable trusts. Thus the parties to those agreements can be taken to have contemplated that Kelly and Lesley would earn, if the Maggie Sottero business was successful and a sufficient return derived from it, enough to assist them, if they so chose, to defray the outgoing they had incurred by paying the deposits under the two agreements. As Mr Schmitt has pointed out, that is exactly what happened. Kelly and Lesley through their irrevocable trusts made enough money from MSD to cover the cost of the deposits on the two agreements. But the intention of Dorothy's gift was to ensure that they would be in a position to retain those profits themselves rather than use them to meet the outgoings of the deposits that their irrevocable trusts had paid to her.
Fourthly, the implication of a loan is incompatible with the structure of the July 2008 sale agreements. Upon Dorothy's death, the balance of the consideration due under those sale agreements and their associated notes would be forgiven. Dorothy did not seem interested in bargaining for the benefit of her estate for every last cent of the consideration that might be due under the agreement. Consistent with this it is not at all improbable that she would at some stage gift back some of the earlier consideration that had been paid to Lesley and Wayne: after all that is what would happen to all future payment obligations, if she died. This objective circumstance is also to be taken into account in support of Wayne's version, and in answer to John's alternative loan case.
Fifthly, Dorothy's last will is also incompatible with any inference that there was a loan to Wayne and Lesley. She made her last will on 7 June 2011, over two years after the gift of the cheque. She does not mention a loan to them in her will. In fact she ensures, in clause 7, that if she has any residual interest in MSD, or any monies from MSD in her bank accounts, that they would be given to Lesley and Kelly's irrevocable trusts.
John also propounded a case that Wayne had deceived Dorothy. But the case is deficient. The Court expressly finds that Wayne did not have an intent to deceive Dorothy about any part of this transaction, nor did he deliberately conceal anything from her. The plaintiff has not demonstrated Dorothy's awareness or lack of awareness of the state of accounts between the irrevocable trusts and the living trusts. The plaintiff has not demonstrated Wayne's state of mind about what had happened or was to happen between the irrevocable trusts and the living trusts.
These same defects mean that John's case of mistake, which was faintly put, also must fail. In the result therefore John's alternative case is unsuccesful.

The Claimed Long Service Leave Entitlement and the Defences

John claims that SWW should have paid Dorothy long service leave. SWW contends that it had no liability to do so. John initially claimed on behalf of the estate that SWW was liable to pay annual leave to Dorothy, but that claim was abandoned in the course of the proceedings.
John's case is that Dorothy had not been paid any long service leave since 1986. John encountered evidentiary difficulties in establishing what had and had not been paid to Dorothy prior to the year 2000. On the second day of the hearing his call for employment related records for Dorothy for the period 1986-2000 was not permitted as being too late and likely to cause unnecessary delay in the resolution of the proceedings. As a result, John's argument about the first 14 years of Dorothy's employment record with SWW was that it would have been the same before 2000 as it was after 2000. But as will be seen, John fails on this claim with the evidence after 2000. His contentions for the period before that could be no more than advantageous to him.
But the real issue was the characterisation of Dorothy's employment; Did she qualify as a "worker" entitled to long service leave? SWW contended that even if she were a "worker" within the Act, that she was not in "continuous" service to SWW for that whole period, a requirement of the Long Service Leave Act, s 4(11).
The Long Service Leave Act, s 4(1) is the source of the claimed entitlement to Dorothy's long service leave and relevantly provides that "Except as otherwise provided in this Act every worker shall be entitled to long service leave on ordinary pay in respect of the service of a worker with an employer." The Long Service Leave Act, s 4(2)(a) sets out the "long service leave to which a worker shall be so entitled", which is calibrated according to the worker's length of service with an employer. The potentially relevant entitlement for Dorothy under Long Service Leave Act, s 4(2)(a)(i) is "in the case of a worker who has completed at least 10 years' service with an employer" (A) "in respect of 10 years' service completed, 2 months" and (B) "in respect of each 5 years' service with the employer completed since the worker last became entitled to long service leave, 1 month". Thus, her entitlement would be to two months long service leave after every ten years of service and one month for any further period of five years' service. It is agreed that the potentially relevant period in this case is the 25 years between 1986 and 2011 (comprising two Long Service Leave Act, s 4(2)(a)(i)(A) 10 year periods and one 5 year Long Service Leave Act, s 4(2)(a)(i)(B) period), over all of which periods it is accepted that at times Dorothy did receive some remuneration from SWW.
After a worker's death, the worker's personal representative is entitled to request long service leave entitlements (that the worker has not taken before his or her death) from the employer and the employer is required to pay to the worker's personal representative in full the ordinary pay that would have been payable to the worker in respect of long service leave, less any amount already paid to the worker in respect of that leave: Long Service Leave Act, s 4(5)(b). If the employer does not pay upon this request, the worker's personal representative may recover the long service leave "in like manner as a worker may recover any amount under s12": Long Service Leave Act, s 4(9).
The relevant "service" of a worker grounding long service leave entitlements means "continuous service" on either a permanent, casual, part-time or any other basis, as Long Service Leave Act, s 4(11)(a) provides: "(11) For the purposes of this section: (a) service of a worker with an employer means continuous service, whether on a permanent, casual, part-time or any other basis, under one or more contracts of employment, (a1) the service of a worker with an employer shall be deemed to be continuous notwithstanding that the service has been broken by reason only of an interruption or determination thereof: (i) caused by the absence of the worker under the terms of the worker's employment, (ii) caused by the absence of the worker on account of illness or injury, (iii) made by the employer with the intention of avoiding any obligation imposed on the employer by this Act or by any obligation in relation to sick leave imposed on the employer by a State industrial instrument, (iv) arising directly or indirectly from an industrial dispute, (v) made by the employer by reason of slackness of trade, (vi) arising from the absence of the worker for any cause by leave of the employer, or (vii) caused by the employer for any reason other than those referred to in subparagraphs (iii)-(v) where the worker returns to the service of, or is re-employed by, the employer within 2 months of the date on which the service was interrupted or determined, but the period during which the service is so interrupted or determined shall not in the circumstances referred to in subparagraphs (iii)-(vii), by reason only of this paragraph, be taken into account in calculating the period of service,"
An employer may not contract out of the Long Service Leave Act, so that its provisions "shall have effect notwithstanding any stipulation to the contrary" Long Service Leave Act, s 7(1). And "[n]o contract or agreement…shall operate to annul or vary or exclude any of the provisions of this Act": Long Service Leave Act, s 7(2). Employers must keep records of employees' long service leave entitlements for 6 years "in a form approved by the Minister": Long Service Leave Act, s 8. SWW did not keep any records of Dorothy's long service leave entitlements. It did not do so, consistently with the Court's findings below, that the question of whether Dorothy was or was not entitled to long service leave seems never to have been discussed or considered within SWW.
Long service leave is ordinarily recovered in the Local Court, or in the Industrial Relations Commission in court session and "any worker may [so] apply … for an order directing the employer to pay to the worker the full amount of any payment which has become due to the worker under this Act at any time during the period of 6 years immediately preceding the date of the application": Long Service Leave Act, s 12(1). Those courts were empowered to make any order that they "think just in the matter" under the Long Service Leave Act, as well as by making awards of costs and assessing the amount of such costs: Long Service Leave Act, s 12(1).
The Court raised with the parties whether there may be a jurisdictional issue in respect of its capacity to determine this long service leave claim, given the Act's express conferral of relevant jurisdiction on the Local Court and the IRC. But both sides agreed to be bound by this Court's decision on this issue and mutually undertook to the Court (see Exhibit 4) to be bound by the Court's declarations on this issue and therefore neither pursue nor defend any claim in any other jurisdiction for Dorothy's long service entitlements in a manner that would be inconsistent with the Court's findings in these proceedings. In the result, on the basis of those undertakings and to avoid unnecessary multiplicity of proceedings the Court will make a declaration of right on this issue.
John's case is that Dorothy was not remunerated according to a fixed rate of pay, as a more junior worker might be, so that to calculate her entitlements under the Long Service Leave Act, s 3, it is necessary instead to determine her average weekly wage. Long Service Leave Act, s 3(b) provides for the definition of "ordinary pay" that includes the concept of averaging pay received: "Ordinary pay, in relation to any worker, means the sum of: (a) where the worker is, on the prescribed date, remunerated wholly in relation to an ordinary time rate of pay fixed by the terms of the worker's employment: (i) the amount of the ordinary remuneration of the worker, as on the prescribed date, or (ii) the average weekly amount of the ordinary remuneration which was earned by the worker as a worker during that part of the period of 5 years ending on the prescribed date during which the worker was so remunerated, whichever is the greater, (b) where the worker is, on the prescribed date, remunerated otherwise than wholly in relation to an ordinary time rate of pay so fixed - the amount of the average weekly wage which was earned by the worker as a worker (being the average of the amounts received by the worker each week under those terms after excluding any amount payable to the worker in respect of shift work, overtime or other penalty rates) during the period actually worked by the worker during: (i) the period of 12 months, or (ii) the period of 5 years, ending on the prescribed date, whichever amount of average weekly wage is the greater, (c) the average weekly amount of bonuses received by the worker as a worker employed by the person who is the worker's employer on the prescribed date during: (i) where paragraph (a) (i) or (b) (i) applies for the purpose of calculating the worker's ordinary pay, the period of 12 months, or (ii) where paragraph (a) (ii) or (b) (ii) applies for that purpose, the period of 5 years, ending on the prescribed date, and (d) where the worker was, immediately before the prescribed date, provided with board or lodging by the person who is the worker's employer on the prescribed date - the cash value of that board or lodging."
The relevant "prescribed date" for a deceased worker such as Dorothy, is defined under Long Service Leave Act, s 3 as the date of death of the worker.
John claims that because the deceased was receiving a gross annual salary of $364,000 for the last year of her life, the estate is entitled to receive the sum of $60,666.66 (being the annual salary of $364,000 divided by 6 to calculate the two months' salary) for each of the two blocks of ten years of service together with the remaining five years of service that totals the 25 years and one month between September 1986 and 12 October 2011.
So the claim is for $60,666.66 for each of the two ten year periods, which totals $121,332.00. And for the five years between 2006 and 2011 the amount claimed is $30,333.00. Thus the total of the long service leave claim is $151,665 before tax. The parties agreed that this was the maximum quantum of the claim against SWW for Dorothy's long service leave. And it was based on agreed average weekly wages.
SWW defended the long service leave claim on several grounds. First, it contended that any claim for entitlements accrued prior to six years before the filing of the Summons, that is any time before January 2008, was statute barred by Long Service Leave Act, s 12(1). Secondly, SWW contended that the evidence does not permit Dorothy to be classified as a "worker" who was "employed" by Abbey Bridal for the purposes of the legislation. Thirdly, Dorothy did not qualify for long service leave because she did not give "continuous service" to SWW as she worked for six months of the year in the USA in the operations of Maggie Sottero. Fourthly, the directors and shareholders of SWW all conducted their affairs on the basis that none of them claimed long service leave entitlements and Dorothy had signed and lodged her tax returns on that conventional basis, as a means to calculate the distribution of the pool of profits from the operations of SWW to all its shareholders.

Dorothy's Employment Arrangements

Unsurprisingly for such a senior employee and one of the owners of the business, Dorothy's employment arrangements with SWW are difficult to separate from her directorship and shareholding interests in that company. Dorothy was a shareholder and director of SWW from its foundation in 1986 and, as these reasons have already indicated, she was actively involved in its day-to-day management.
Her employment arrangements may be briefly summarised. Her shareholdings in each of SWW and MSD have been described earlier in these reasons. SWW did not determine Dorothy's work hours. She decided her own hours of attendance at the Abbey Bridal premises, which largely but not entirely, accommodated the work patterns of Wayne and Lesley, as they all lived together in Killara, when they were in Australia. But Dorothy made her own decisions and was ultimately not constrained in spending more time with Abbey Bridal's customers by Lesley and Wayne's reluctance in later years to go into work some days.
The three principal SWW shareholders, Dorothy, Lesley and Wayne divided their work time between Sydney and Salt Lake City, spending six months of each year in each place for over 20 years. MSD did not pay Dorothy a salary for her work for its business in the US, Maggie Sottero. But she earned dividend income from MSD. Dorothy, Wayne and Lesley also had active roles in the corporate structure of MSD. As might be expected with a family business, SWW and MSD seem to have been managed informally rather than through formal board meetings.
There is no board resolution of SWW or shareholders agreement setting the remuneration for Dorothy's services at any time. Indeed what was paid to her varied from year to year. In some years she received a salary and others a dividend from SWW and yet in other years a proportion of each. She only received superannuation, when she was paid a salary, and she was not paid superannuation past the age of 80, which she reached in 2003.
The precise form of the remuneration paid to Dorothy and the other shareholders was decided annually on the basis of financial and accounting advice from Mr Jason Tang, the second defendant, SWW's accounting manager, and one of Dorothy's two executors. Instructions were then given each year to Ms Dorita Trostel, SWW's accounting manager, to make the payments to the shareholders. SWW paid salary (and/or dividends as was decided in a particular year) to Dorothy and the other shareholders. SWW's books made clear whether the payments were salary or dividends. But if it was salary Ms Trostel never extrapolated the salary to an annual figure to pay Dorothy even for the part of the year she was away. She just paid Dorothy, and the others, weekly or fortnightly for periods they were in Australia as and when she was instructed to do so, usually by Mr Tang.
At the end of each financial year Mr Tang gathered the financial information for each of the shareholders separately. He did the company's books and tax returns and the individual tax returns for each of the shareholders. He sometimes had SWW pay dividends to Dorothy, when she was in the US but not salary. He usually consulted Mr Harlan Schmitt, the family's US accountant to ensure that his advice in Australia was consistent with his client's best financial interests outside Australia as well.
Ms Trostel made clear that SWW never paid Dorothy wages for a full 12 month period and that when Dorothy was not in the office in Australia SWW did not pay her. Given the Court's findings that she spent 6 months of the year in the US, I infer that SWW never paid her a salary for more than six months in any year. And given that she sometimes took her SWW remuneration as dividends I infer that in some years SWW paid her for even less than six months. And as evidence of Mr Tang and Ms Trostel suggests, that the dominant consideration for the directors of SWW was tax efficiency in their income rather than continuity of salary, I infer that there were years where Dorothy was paid no salary and only dividends.
Dorothy's workers compensation coverage was calculated through an annual wages declaration, as required by legislation, but Ms Trostel only declared at what six months' salary for Dorothy was for workers compensation purposes for the time she was working in Australia.
I accept Ms Trostel's and Mr Tang's evidence on the whole subject of Dorothy's salary and dividend payments from SWW. In the end Ms Trostel agreed that she could discern no obvious pattern in the way that SWW paid wages or dividends to its proprietors. She said, with some colour, about the annual salary, dividend decision: "I never knew what was going to happen that year".
I accept Wayne's evidence that there was never any discussion between himself, his wife Lesley and Dorothy about the payment of long service leave. They never resolved to pay it. I infer they never thought about it. From what the Court could see of Wayne, and hear about Dorothy, they were all astute business people who must be taken to have mutually assumed that long service leave was not a relevant issue for the way that they were ordering their business and personal financial affairs.
Despite their personal views the Long Service leave Act may have applied to them as employees of SWW in this State. The question here is whether the facts show that the Long Service leave Act did apply to Dorothy.

Is the Long Service Leave Claim Statute barred for any period?

Long service leave entitlements are entirely a product of the statute which creates them, the Long Service Leave Act. They are only recoverable in conformity with the statutory procedure for which the Long Service Leave Act itself provides. That procedure limits the recovery of long service leave to a period of six years before the filing of process in the Local Court or in the Industrial Relations Commission in court session.
This is not a case where Dorothy, and now her estate, would have a cause of action that is recognised at common law or in equity, the maintenance of which is directly or by analogy barred by a time limit provided for in the Limitation Act 1969. The remedy that the statute creates only permits recovery of long service leave entitlements for a limited period in the past, defined by the filing of legal process in one of the two tribunals specified in the statute itself. Here legal process has actually not yet been filed in accordance with Long Service Leave Act s 12, so strictly it can be said that the six-year relation back period for recovery of long service leave has not yet been fixed. On one view, if a claim were filed today in the Local Court, at the time of giving this judgment, 12 April 2016, such a claim could cover a period no earlier than back to 12 April 2010. In the course of argument the parties appeared to treat the potentially available six years, if a limitation period were applicable to this claim, as dating from the date of filing of the Summons in these proceedings in this Court on 13 January 2014. But because of the express words of the statute that may not be correct.
Not much may be recoverable here anyway. Long Service Leave Act s 12(1) allows the recovery "of any payment which has become due to the worker under this Act at any time during the period of 6 years immediately preceding the date of the application". The questions arise as to how much of the long service leave now being claimed actually "has become due" since 12 April 2010, or even since 13 January 2008, 6 years before the filing of the Summons in these proceedings on 13 January 2014 and how the agreement the parties have made as to the maximum quantum of the long service leave claim should be implemented in the circumstances.
But the Court does not have to decide these questions, because the Court has determined the long service leave claim adversely to the plaintiff and SWW, on other grounds.

Was Dorothy a "worker" who was "employed" by SWW?

Was Dorothy a "worker" within the Long Service Leave Act? In my view, the defendants' arguments that she was not such a worker are not persuasive.
The defendants submit that the context of the legislation, including the second reading speech, shows that the legislation was intended to apply to "ordinary workers" as a fulfilment of an obligation of employers to reward employees of many years standing of the necessity for greater leisure. The references to "ordinary pay" and "ordinary remuneration" provide statutory benefits for what might be described as "ordinary workers".
The defendants rely upon A J Mills & Sons Proprietary Limited v Transport Workers' Union of New South Wales (2009) 187 IR 56; [2009] NSWIRComm 135 (A J Mills), the Full Court of the NSW Industrial Court described (at [58]) in the majority judgment, the purpose of the Act as follows : "…to provide paid leave for workers who have provided long service to an employer. As Haylen J observed, the purpose of long service leave was described as being 'a period of rest for the employee, so that he might recuperate after a long period of continuous service' or as providing a rest to employees to re-energise and recuperate after many years of loyal service to an employer."
On the basis of authorities such as A J Mills the defendants submit that it is quite artificial to apply statutory concepts such as "ordinary workers" to someone such as Dorothy. She was a co-owner and director of SWW who in consultation with her co-directors, co-owners and advisers determined how she and they would benefit not only for their work in relation to the company but in order to achieve the most tax effective means by which she and they could take profits out of the company assessed on an annual basis.
But in my view, the plaintiff has effectively answered this argument. Dorothy and her advisers were parties to creating a legal structure that, whatever else it did, deliberately made her from time to time a salary-earning employee of SWW. That structure meant that, in some years at least, she received a salary and the compulsory superannuation of an employee was deducted from her wages up to the age of 80 in 2003 (after which federal superannuation legislation did not require compulsory superannuation to be deducted from her salary). Dorothy also kept hours attending the business just as an employee would, and her tax returns recorded her remuneration as the salary of an employee and workers compensation premiums were paid for her as an employee. In these circumstances, in my view, she qualifies as a "worker" under the Act.

Did Dorothy give "continuous service" as an employee to SWW?

The defendants submit that Dorothy did not give "continuous service" under Long Service Leave Act s 4(11)(a), such that she did not render relevant "service of a worker" under the Act. The defendants' argument on this issue is persuasive.
The decision of A J Mills is also instructive here. In A J Mills the question for consideration was whether the Long Service Leave Act applied to road transport workers employed over a period of only 26 weeks each year to assist sugar harvest between June and December of each year. The workers had a break from their work for the other half of the year, until the following year when they recommenced work. It was argued on behalf of the workers' union that these seasonal workers were engaged in "continuous service" within the meaning of the Act.
The Full Court in A J Mills rejected this argument. The majority judgment (at [73] -[74]) held that the union's argument was inconsistent with the ordinary meaning of the word "continuous service", stating the matter the following way: "In our opinion, there is no basis upon which to construe the phrase 'continuous service' other than to give it its ordinary meaning. The word 'continuous' means 'having the parts in immediate connection, unbroken; uninterrupted in time'; 'without cessation' The Macquarie Dictionary, 3rd ed (1997) The Macquarie Library Pty Ltd. 'Service' in the present context means 'employment in any duties or work for another': (The Macquarie Dictionary). 74 Continuous service as that phrase is used in s 4(11)(a) means uninterrupted or unbroken employment."
The majority judgment held that Long Service Leave Act s 4(11)(a) must be read in conjunction with the deeming provisions in s 4(11)(a1). The majority judgment then summarises in the following way (at [81] to [83]) the intention of the legislature that is to be gleaned from the combination of these provisions: "81 We do not accept it was the legislature's intention that an interruption or determination of a worker's service, other than for the reasons referred to in s 4(11)(a1)(iii)-(v), could be for an open-ended period. Such a construction is not only inconsistent with the purpose underlying long service leave but it devalues the benefit. Take the fruit picker example: one month's employment out of twelve, even in a consistent pattern over 10 or more years, is not a proper basis upon which to justify leave for the purpose of allowing the worker to 'rest and recuperate after a long period of continuous service'. 82 That is why, in our opinion, the parliament limited the period of interruption to the service of a worker to two months in s 4(11)(a1)(vii). Such a limitation easily caters for the class of workers that were at the forefront of the parliament's concern in 1985, namely, regular or permanent casuals personified by Ms Miller in Neill v Cameron. And whilst the limitation might be arbitrary, indeed inequitable in some circumstances, it is not a matter for this Court to ignore the clear intention of the legislature. 83 Of course, we are here concerned with drivers who worked in a continuous pattern of employment for six months each year. Whilst their claim to a long service leave entitlement is more meritorious than the fruit picker, there is no basis, under the relevant provisions of the Act to distinguish between the two classes of workers. Putting to one side for the moment whether there was an unbroken contract of employment and assuming the employment of fruit picker and the drivers was terminated at the end of their respective seasons for reasons other than those referred to in s 4(11)(a1)(i) - (vi), the period between their termination and their re-employment next season both exceeded two months. Hence, on these assumptions their service must be regarded as having been broken."
Put another way, the Full Court was saying that the period of two months that was expressed to be within the circumstances specified in s 4(11)(a1)(vii), was a time period that indicated the intention of Parliament not to have open-ended breaks within the period of qualifying for long service leave, and therefore to put for the purposes of s 4(11)(a), a limit on any break in or interruption to work continuity that was analogous to the two month limit defined within s4(11)(a1)(viii). Therefore the Court reasoned that the break of six months enjoyed by the drivers in A J Mills went beyond the two month limit on periods of interruption to service that the legislature would permit and was sufficient to break "continuous service" for the purposes of the Act.
In my view the same reasoning can be applied in this case. For 20 years before her death, Dorothy always took an annual break of six months from working in SWW's business in Sydney. This situation was not altered by the fact that Dorothy spoke with Ms Bournes at SWW on a regular basis from the US, which was consistent with her role as owner of the business, SWW. Moreover, Dorothy was never paid any salary or compulsory superannuation by SWW whilst she was overseas in the US.
Even when she was in Australia, depending on the requirement to pay her dividends rather than salary in any one year, she could be paid an Australian salary for less than six months and in some years none at all. The structure of her employment showed "no obvious pattern" and involved open-ended breaks or interruptions that were inconsistent with the policy of the Long Service Leave Act as explained in A J Mills.
The evidence that the plaintiff, John points to in answer to this conclusion is not persuasive. He points to her membership of the BT Business Super - Employer Plan, her coverage by SWW's Workers Compensation Policy with GIO and then CGU and to Robyn's evidence that Dorothy "remained an employee until her death in 2011". But all this evidence is of a general nature and is difficult to accept in the face of the detailed findings set out above from the evidence of Ms Trostel and Mr Tang.
John says there is no evidence that the three directors ever considered whether Dorothy would cease to be an employee of SWW when each six-month relocation occurred, or that in moving to Utah each year that Dorothy intended to terminate employment with SWW and then re-join on her return. It is true there is no evidence that her employment was determined on her departure to the US. But in my view her employment was interrupted on an open-ended basis for periods in excess of six months and more. In my view that is inconsistent with the requirement of "continuous service" within section 4(11).
The plaintiff seeks to draw parallels with the cases that analyse whether an individual is an employee or an independent contractor, Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 ("Hollis"), where the court is required to consider the "totality of the relationship" test. But the Long Service Leave Act has its own clear provisions that must be construed as the Court has now done. I do not find the analogy with cases such as Hollis helpful in this context.
The Long Service Leave Act does not apply to Dorothy's employment with SWW. No long service leave was due to her at the time of her death.

Did SWW's officers structure their affairs so no long service leave was due to them?

The defendants' final argument depends on the conventional basis on which the controllers of SWW conducted its financial affairs. SWW's shareholders' and directors' treatment of profit distributions from the company on an annual basis is consistent, the defendant's submit, with them dividing up profits rather than rewarding a set quantum of service with an equivalent fair quantum of salary. As I said in McCausland v Surfing Hardware International Holdings Pty Ltd [2013] NSWSC 902 at [809], it is artificial to apply long service leave concepts to a situation where co-owners and directors of a company in consultation determine with one another how they will benefit themselves for their work in relation to that company. That does not mean that Dorothy and SWW can just agree to exempt themselves from the Act: see Long Service Leave Act, s 7.
But given the Court's findings about "continuous service" it is not necessary to decide this argument. The argument is useful though as it gives emphasis to what in my view was the reality here: that Dorothy's employment relationship with SWW was a subsidiary tool for her to enjoy the benefits of her shareholding interest in SWW. This does not exempt her from possible long service leave rights. Continuity in an employment relationship with SWW was not a priority for Dorothy, as distinct from continuity in the benefits to be derived from her shareholding in SWW, which was important to her. And her employment record should not be approached with an assumption, as it might with an ordinary employee, that inferences in favour of continuity of employment should be drawn to reflect the individual's desire for financial stability.

Question 3 - Wayne's Claim for Reimbursement of $15,000 from the Estate

The parties are at issue about an amount of $15,000 which Wayne and Lesley contend they paid to John at Dorothy's request and for which they are entitled to reimbursement from the estate in restitution.
Wayne says that he had a face-to-face conversation with Dorothy in Utah about five days before she died in which she requested him to send $15,000 to John to provide funds to cover the expenses associated with a hip replacement operation that John was then about to undergo. I accept Wayne's version of this conversation with Dorothy as accurate and reliable.
Wayne says that at the time of this conversation Dorothy was perfectly lucid. This is evident not only from what Wayne said but also from the content of the conversation that he recounted that he had held with Dorothy. He says that she was not on life support and not even in the hospital where she later died but in a rehabilitation unit. And I accept Wayne's evidence that although Dorothy died only a few days later, at this time she was "in very good shape" and "in quite good spirits", after which she declined quite quickly, and ultimately in only a matter of hours.
And Wayne's evidence about Dorothy's lucidity is consistent with the accounts of other witnesses: that Dorothy was actively involved in giving directions about bridal gown designs within two days of her death, something she was hardly likely to do if she lacked mental competence.
Wayne was able to give a spontaneously detailed account of this conversation with Dorothy, or "Dot" as he always called her. I accept that Dorothy told Wayne "that John had been in touch with her and that he needed a hip replacement immediately and that he [John] had been able to get information and make arrangements that it could be done immediately and it would cost $15,000 and if we could send the money over…as quickly as possible he could get it done… and knowing that it was coming [John] would book [the operation]". Then Dorothy instructed him "Wayne, will you send the money over so that he can get it". Wayne remembers assuring Dorothy that he could transfer the money immediately from his Westpac account to John's bank account and that he would "just get the details from [John]". Wayne gained the clear impression from Dorothy that John's call to her "was urgent and that he needed the money quickly to get it done quickly otherwise he was going to have to wait in line".
But Wayne remembers that the transfer could not take place the same day because it was "too late in the day [in Utah] to make the transfer that day" and his bank manager told him it would be done first thing in the morning. Wayne says, and I accept, that he assured Dorothy that everything was being taken care of and that "the monies were being transferred and that John would be notified by me immediately that they were on their way and he just needed to check with his bank to make sure when they arrive".
Wayne says, and I accept, that within an hour or two of having his first conversation with Dorothy, he made a telephone call to John and informed him of these events. Wayne obtained John's BSB and bank account details so that he could arrange the funds transfer and suggested to John that he "call [his] bank in the afternoon, the funds ought to be there". Wayne says, and I accept, that when he conveyed this information to John that he said to him some words of comfort that one might expect to pass between brothers-in-law at such a time, "I hope your hip gets taken care of quickly and you're okay".
John did not dispute that Wayne and Lesley had paid him $15,000 shortly before Dorothy's death. Indeed John accepted that he had received the payment on 10 October 2011, two days before Dorothy died. But John contests that this $15,000 was paid at Dorothy's request to fund his hip replacement operation. He says the sum was paid to cover his airfares, travel and accommodation expenses so he could urgently try and get from Australia to Dorothy's bedside in Utah before she died. He regrets that he ultimately failed to reach her before she died.
John was insistent in evidence that on the Sunday before his mother's death Wayne had telephoned him and said "you'd better come now", indicating that Dorothy was getting very ill and may be close to death. John says that he responded "I haven't got enough money to pay the airfares" to which Wayne said "well okay, we'll send you the money". John says that he can recall that Lesley came on the telephone and said to him "are you sure that's enough money?" and "will 15,000 be enough?". He claims that he said "yes" and that the money was then deposited into his account the Tuesday following their Sunday conversation.
In answer to John's account, Wayne acknowledges that there was indeed a conversation about the cost of John's airfares from Australia to Utah, but that this conversation only took place well after Dorothy's death and after John had incurred the expenses. Wayne says that John rang him and said that he (John) would need to cover the cost of his travel expenses to Utah. Wayne and Lesley's case is that John is confusing the two payments. They say that a later amount of $10,000, which was indeed paid to John in December 2011, was in fact intended to be used to cover the cost of John's travel and accommodation from Australia to Utah after the event.
Which of these versions is correct? I prefer Wayne's account for several reasons. First, Wayne was the more reliable witness on these issues as his account of his conversation with Dorothy was detailed and compelling. In contrast John seemed somewhat evasive: for example he was even disinclined at one point to admit that he had had hip problems at about the time of his mother's death.
Secondly, John did not have very good explanation for the obvious problem with his account: if the first payment of $15,000 was to cover the airfares from Australia to Utah, what was the purpose of the second payment of $10,000 in December that year? Mr Meek SC put to him, "Why would Wayne give you $10,000 Mr Steiner?" To which, with a somewhat Delphic touch, John replied "You'd have to ask him that". It is difficult to accept that Wayne or Lesley would feel any obligation to cover John's hip replacement operation costs unless Dorothy had requested them to do so. John's medical problems were not obviously their responsibility. But given his physical closeness to Dorothy in Utah at that time, in my view Wayne did perceive as his (and Lesley's) immediate responsibility the carrying through of Dorothy's wishes when she was close to death. And one of those wishes was, as a mother, to respond to one of her children's needs and ensure that her son's hip replacement operation could be undertaken at a time to his best advantage.
Thirdly, the timing of John's hip operation is consistent with Wayne's version. John agreed after he got back from America his hip was indeed "playing up" and he had a hip replacement. And he agreed "I've had hip problems for a long time". I infer that John was sufficiently well aware of his hip problems before his mother's death that it is not improbable that he had such a discussion with Dorothy before she died.
Fourthly, in order to repel the suggestion that the $15,000 related to the hip replacement expenses John said at one point in his cross examination that "I suggest to you I've got emails to the contrary". But when those emails were called for by Mr Meek SC none could be produced. If the $15,000 was expended on his airfares to Utah, one might expect that could easily be shown. John could not deliver on his claim to have such evidence. Interestingly one email that John did send to Wayne on 24 December 2011 only related to the $10,000 and in it John intimated that as he had now received money from the trustees "please let me know where and how to send you the $10,000". The email does not mention the $15,000. This would appear to suggest that John acknowledged he owed Wayne and Lesley the $10,000, for the airfares and travel expenses but not the $15,000. The mention on this occasion of the $10,000 and not the $15,000 is quite logical if it were understood between John and Wayne that the money for John's hip replacement was coming from Dorothy, and in December 2011 would eventually be coming from Dorothy's estate to Wayne, because that is a payment that she, Dorothy, wanted to make.
In conclusion on this issue, Wayne's payment of the $15,000 of his own and Lesley's money to John was at Dorothy's request and the fact that Wayne was making this payment was confirmed back to Dorothy, so she could be assured that her instructions had been carried out. I accept the payment was made. In these circumstances Wayne is entitled to restitution from Dorothy's estate for monies paid at her request: David Securities Pty Limited and Others v Commonwealth Bank of Australia (1992) 175 CLR 353. Wayne and Lesley, the third and fourth defendants, should therefore have either judgment against the estate in the sum of $15,000 or a declaration that they are entitled to that sum. It may be that is all that is now required in this case, as the estate has the funds and there is no dispute that any sum found due will be paid in accordance with the Court's findings.
According to Wayne, Lesley was herself involved in some of the events that resulted in Wayne's payment of the $15,000 to John at Dorothy's request. Although Lesley did not give evidence and could be expected to do so on behalf of herself and to support her husband's case, she did not. I infer that her evidence would not have assisted Wayne's and her case on this issue. But I am nevertheless prepared to accept Wayne's version over John's version for the reasons already stated.
John does not actively contest Wayne's contention that he paid the two amounts of $15,000 and $10,000 to John. Wayne and Lesley submitted that whether or not the Court accepts that any of these sums are due from the estate to Wayne and Lesley that, in the interests of bringing finality to all the disputes among these parties, the Court at least should order as part of final relief that John pay Wayne the sum of $10,000.
In the result of the Court's findings the dispute between the parties about the payment of the $10,000 that Wayne made to John should also be resolved but it settled in the course of the proceedings and a ruling upon it should not be required. But if the parties wish the Court to make specific orders in relation to the resolution of that or any of the other disputes about the estate's liabilities that were originally the subject of these proceedings then the Court reserves liberty to apply so the proceedings may be relisted for that purpose.

Conclusions and orders

In summary the Court concludes as follows in relation to the three issues for decision. The plaintiff has failed to establish that the April 2009 cheque was a loan from Dorothy to the third and fourth defendants, Wayne and Lesley Webster. The plaintiff has also failed to establish that any long service leave entitlements were due from the fifth defendant SWW trading as "Abbey Bridal" to the late Dorothy Steiner under the Long Service Leave Act at the time of her death. And finally the Court has found that the estate is liable to reimburse Wayne Webster in the sum of $15,000 arising out of the payments he made to John at Dorothy's request, just before Dorothy's death. Declarations will be made to this effect. If a judgment for Wayne for the $15,000 against the estate is required the matter can be relisted under the Court's grant of liberty to apply.
Questions of the calculation of interest may arise in relation to the $15,000 that the Court has found the estate owes Wayne. If there is any issue about the calculation of this interest that will be covered by the liberty to apply that the Court has granted.
A number of the items originally in dispute were abandoned in the course of the proceedings. It is unclear whether their abandonment has any cost consequences that are not adequately covered by the costs orders which the Court is making, or whether their abandonment requires a special costs order. But should a special costs order be required with respect to these items or for any other reason, the opportunity to argue for such an order will be available as part of the Court's general grant of leave to the parties to advance submissions about special costs orders.
In the result therefore the orders of the Court will be: 1. Declare that the late Dorothy Steiner gave a cheque in the sum of A$1,227,941.00 to the third defendant Wayne Webster on 2 April 2009 as a gift to himself and the fourth defendant Lesley Webster, and not as a loan; 2. Declare that nothing is due under the Long Service Leave Act by the fifth defendant, SWW to the first and second defendants as the executors of the estate of the late Dorothy Steiner; 3. Declare that the first and second defendants are liable as the executors of the estate of the late Dorothy Steiner to pay to the third defendant the sum of $15,000 (together with interest as agreed or assessed) by way of restitution to the third defendant for the third defendant's payment of that sum to the plaintiff at the request of the late Dorothy Steiner in October 2011; 4. Summons otherwise dismissed; 5. The plaintiff shall pay the third, fourth, fifth and sixth defendants' costs of the proceedings; 6. Any party seeking a special costs order should apply by motion for such order within 7 days and the Court will make any such motion returnable before the Court at 9.30am on Wednesday 20 April 2016 in Court 8B or such other time as is mutually convenient to the parties and acceptable to the Court; and 7. Grant liberty to apply.

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: 12 April 2016

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Judgment (27 paragraphs)

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