Waddell v Waddell

The Primary Judge's Reasons 40The judge adopted the enumeration of the requirements for an equitable estoppel that paraphrases the requirements that Brennan J articulated in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428-29. The judge's paraphrase is: "(1) the plaintiff assumed or expected that a particular legal relationship would exist with the defendant and the defendant would not be free to withdraw from that relationship, (2) the defendant induced the plaintiff to adopt the assumption or expectation, (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation, (4) the defendant knew or intended him to do so, (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled, and (6) the defendant has failed to act to avoid that detriment:" There is no dispute on the appeal about the correctness of this statement of the law. 41The judge made the following findings: "I accept Ken's evidence that whatever be the situation before William's death in 1981 the reason that he stayed on the farm was what Bill said to him about the 1981 will. He says and I accept that he felt that for the family farm to survive that he had to stay on the property. This was because the farm was not generating enough income to employ someone. So Ken was required to work in order to maintain the farm's productivity. Ken says, and I accept, that he 'was not happy working such long hours' but that he felt an obligation to see the family farm survive. He also had the tangible incentive that Bill had communicated to him that the 10 acre block had been promised to him and that he would be looked after in Ron's will, among other things in relation to that block being transferred to him. I accept that Ken was also motivated by the Waddell family tradition to maintain the family farm. But in my view, Bill's communication to Ken about the 1981 will was and remained a powerful, though a not much articulated, influence on Ken's career choice to stay on the farm and work there for his father and then after 1986 to join and stay in partnership with Bill and his father." 42In discussing the circumstances in which the partnership was entered in 1986, the judge found: "On the evidence there does not seem to have ever been a question about whether or not Ken would enter into the partnership. It seemed to have just been assumed among all the partners that that is what Ken would do, because it involved staying on the property and adjusting himself to the new legal arrangements that were necessary after Mr Johnston's retirement. The absence of any discussion about alternatives for Ken at the time the partnership was entered reinforces the inference that Ken had already made a choice to stay on the farm to assist his father when he was aware of the 1981 will. Although there was no clear evidence before the Court as to the comparative financial advantages or disadvantages for Ken of employment versus partnership, his involvement in the partnership entrenched from 1986 onwards, longstanding arrangements by which he had never, in the time he had worked on the farm, been paid ordinary employee benefits such as overtime, long service leave, annual leave or superannuation. The partnership was the new legal structure under which he could stay on the property and do without these benefits. Len says that he benefited financially from higher wages. But even if this is right, (and the evidence does not allow me to decide it either way), the loss of the enforced tax effective savings from superannuation through the way [he] worked and was paid [was] a significant detriment. This structure had other long term financial negative effects upon him. For example Ken's evidence, which I accept, was that he had greater difficulty in demonstrating to financial institutions that he had a reliable source of income from the partnership, than he otherwise would have had as an employee. This limited his capacity to borrow money for investment purposes because of his difficulty in demonstrating serviceability of his financial obligations. This in turn limited his capacity to generate wealth in the longer term." 43After recounting Mr Millauro's evidence of Ron saying in 1985 "I promised that 10 acres to Ken because he stayed on with me", the judge found that that evidence was: "... an important basis to infer that Ron was conscious that by staying and working on the farm Ken was relying upon and acting to his (Ken's) detriment upon Ron's promise of the 10 acres." 44Concerning the first of the conversations between Ron and Mr Hill in 1995 ([24] above) the judge found that it: "... does not on its own go so far as to confirm that Ron felt under an obligation not to change his will but that inference may be drawn from other evidence as is explained later in these reasons, including the evidence that follows of another conversation between Ron, Ken and Mr Hill a few months later." 45Concerning the subsequent conversation between Ron, Ken and Mr Hill in 1995 ([25] above) the judge observed that Ken's reply showed that he was conscious that Ron had already made promises of giving him the 10 acres, and Ron's absence of dissent shows that he "must have appreciated what it implied about Ken's state of mind about his [Ron's] testamentary intentions". The judge inferred from it that as at about mid-1995: "(1) that Ken had for some time expected to receive the 10 acre property under Ron's will after Ron's death; that (2) Ron had become aware of Ken's existing expectation, however it had been formed; that (3) Ron did not see fit to correct any part of Ken's articulated expectations; and that (4) Ken's expectations and Ron's acknowledgment of them were of a sufficiently well formed character that they could be shared outside the family." 46As mentioned earlier ([15] above) the judge found that in 1981 Ron must have expected that information about his Will would be conveyed to Ken, and must have known soon after it was conveyed that it had been conveyed. 47Concerning information about Ron's intention to leave Ken the 10 acre block that came to Ken from sources other than Bill the judge found: "Ron's willingness to have such a conversation outside the family with friends such as Mr Cranston shows that his intentions were sufficiently firm that they could be made semi-public without any concern on his part about the embarrassment that might follow from going back on them. If Ron was at all tentative about the idea of Ken acting on the assumption that he (Ken) would receive the 10 acre block, then it is difficult to see why Ron would share this information so widely." [69] "... the range and number of the witnesses to whom he stated his testamentary intentions is a basis, to infer that Ron must have anticipated that at least some of them would pass the information on to Ken." [73] 48The judge made some specific findings about reliance. Two of them have been set out at [41] and [43] above. He also made other findings: "One of the reasons in my view that kept Ken working these long hours was what Bill had told him about the 1981 will." [39] "The level of Ken's commitment is partly to be explained by his own natural inclination to farming. But I accept his evidence that the level of his time commitment on the property was also the result of his relying upon his assumption about inheriting the 10 acre block." [65] 49The judge's ultimate findings (at [99]) were: "The pleaded representation here is that if Ken continued to attend at the property and devote himself to the maintenance and improvement of it that Ron would structure his affairs, including by the making of a will such that upon his death the 10 acre block would pass to Ken absolutely. In my view on the findings that I have made this estoppel is made out. The plaintiff did hold that assumption or expectation. It was induced by Ron by a combination of the direct and indirect methods that the Court has found, by making statements to third parties that he anticipated would come to Ken's attention and when he was made aware that the information had come to Ken's attention he did not correct it, especially as late as 2005 when it was discussed directly between Ken and Ron. In my view Ken did act in reliance upon that assumption or expectation and I infer that Ron intended him to do so. It seems to me that the detriment suffered by Ken is irreversible unless the expectation is fulfilled. A continued career choice since 1981 has resulted from Ken's adoption of the assumption or expectation. The detriment in this case is the failure to convey the 10 acre block to Ken. This can only be avoided by ordering that to occur. It does not matter that the 1981 will gave Ron's estate to Vera as she pre-deceased him."

The Appellant's Submissions Pleaded Representation Not Made Out? 50Mr Willmott SC, counsel for the Appellant, reminded us that the pleaded representation, that the judge found had been made out, is a conditional one. It is that if Ken continued to attend at the property and devote himself to its maintenance and improvement, Ron would cause the 10 acre block to pass to Ken upon Ron's death. Mr Willmott submits, correctly, that all the statements about his testamentary intentions that Ron made took a different form. Some of them were, in substance, that Ken was going to get the property under Ron's Will (with no mention of a condition, or a reason for making the gift). Some of them were, in substance, that Ken would get the property under Ron's Will because of work that Ken had done in the past. He submits that the judge was not justified in finding that the pleaded representation was made out. 51I do not accept that submission. No submission had been made to the judge below that the conditionality of the pleaded representation was of any significance. That may explain why no part of the judgment below specifically considers what, if any, significance attaches to the pleaded representation being a conditional one. However, the judge at [99] of the judgment ([49] above) made a finding that the plaintiff held an assumption or expectation that was conditional upon him continuing to attend to the property and devote himself to its maintenance and improvement. 52In my view, it was open to the judge to come to that view. By 1981, Ken had been working on the property for 21 years, without significant reward. There was uncontested evidence that at that time the farm was not generating a sufficient income to employ someone to work the hours that Ken worked. It appears from a note made by Mr Frances that Ron was 85 in 2005, so in 1981 he would have been 61. In 1981 the years in which he would be able to do the heavy work associated with being an orchardist were limited. In 1995, Ron said to Mr Hill "without Ken I would have had to shut shop years earlier because I can't do this work any more". The 1981 Will was made, and Bill told Ken about its provisions, in a context where Ron, Ken and Bill would all have been assuming that Ken would remain working on the farm. It was open to the judge to find that any representation that Ron made about Ken getting the farm could not be taken as continuing to apply if there was the fundamental change of circumstances that would be involved in Ken ceasing to work diligently at maintaining and improving the property. 53It is no novelty that a representation upon which an estoppel case is founded is subject to limitations or conditions that arise by implication from the circumstances in which the representation is made. For example, Thorner v Major [2009] UKHL 18; (2009) 1 WLR 776 concerned a farmer who had represented that his younger relative would be left his farm. They both knew that the identity of the fields that made up the farm had fluctuated over the years. Lord Scott of Foscote at [20] was of the view that the farmer would not have been acting in a way that was contrary to his equitable obligations if it was necessary for all or part of the farm to be sold in his lifetime to meet his own medical expenses or to fund his needs in old age. Lord Walker of Gestingthorpe at [62] and Lord Neuberger of Abbotsbury at [95] regarded the subject matter of the representation as concerning whatever the farm consisted of at the time of the farmer's death. 54In any event, whether the representation was a conditional one is of no practical importance for the outcome of the case. There is the authority of Lord Walker in Thorner v Major at [57], Lord Neuberger in Thorner at [101], Hoffmann LJ in Walton v Walton [1994] (Court of Appeal of England and Wales, 14 April 1994, unreported) and this Court in Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483 at [81] and Evans v Evans [2011] NSWCA 92 at [108] for the proposition that: "... equitable estoppel [by contrast with contract] ... does not look forward into the future [it] looks backwards from the moment when the promise falls due to be performed and asks whether, in the circumstances which have actually happened, it would be unconscionable for the promise not to be kept." 55In fact, Ken did keep on working on the farm. Thus, whether or not the representation was conditional upon Ken keeping on working there, the assumption or expectation that it generated was not fulfilled by Ron's 2005 Will. Erroneous Finding of Reliance? 56Mr Willmott submits that the judge was mistaken in finding that Ken relied on his knowledge of Ron's testamentary intentions concerning the 10 acre block. As I understand the submission, it is that Ken was aware, from conversations with his William, that William wanted him to have the block, that Ken had already worked on the farm for many years with no promise of eventually receiving the block, and that his knowledge of Ron's planned gift to him of the block did not alter his conduct. Mr Willmott points to a passage of cross-examination dealing with the situation as at 1981: "Q. You had been there for 22 years? A. That's right. Q. You say that when you were told that in the Will your father had left you the 10-acre block that changed your mind about staying on the farm? A. Yes. Q. When did you intend to leave? A. I didn't have any intention, definite intentions to leave but I guess the pressure would have came on that I just would have been forced off the land. Q. But you had no intention of leaving the property when you were told about what was in your father's Will, did you? A. Not to my recollection, I didn't, no, not at that time. 57However, there was also affidavit evidence from Ken about his state of mind after being told of the gift in Ron's Will: "Although I was not happy working such long hours, I felt an obligation to see the family farm survive. I also felt a strong incentive knowing that Grandpa's Block was promised to me and that I would be looked after in my father's Will. I also felt obliged to continue the family farm tradition for many years." 58As well, Ken's cross-examination included: "Q. When you say in your first affidavit that in 1981 when you first heard ... in about July 1981, you remained on the farm, as I understand your evidence, because you were promised the 10-acre block? A. That's right. Q. You were going to remain on the farm anyway, weren't you? A. Not without the 10-acre block, not without some sort of incentive. It was- ... Q. Sir, I am going to suggest to you that when you talk about wanting to remain on the farm, as it were, because of what was said to you in 1981, that is just a recent invention. You never intended to rely upon that at all? A. Incorrect. I did intend to rely on that. Q. When? A. When I found out that it was available to me and that was in 1981. Q. But nothing changed. You were remaining on the farm and you continued to remain on the farm? A. Knowing that I was going to get the 10 acres." 59The judge was in no way critical of Ken's credibility as a witness. In light of that evidence, this Court cannot find that the judge was mistaken in holding that Ken relied on his assumption or expectation that he would receive the 10 acre block. Incorrect Finding of Ron Inducing Ken's Assumption? 60Mr Willmott accepts that Ken had the belief that he would receive the 10 acre block, but submits that Ron's words or action did not induce Ken to have that belief. One basis for this submission is that Ken already understood from his grandfather, long before 1981, that he was to get the block, and nothing that Ron said or did changed that belief. 61I do not accept that interpretation of the facts. Ken was aware, for years before William's death, of William's wish that Ken ultimately have the property, but when William left the property to Ron (as Ken was aware he planned to) that wish would become reality only if Ron carried it through. Bill's communication to Ken in 1981 of the terms of the Will that Ron had made provided a basis, that otherwise would have been lacking, for Ken to assume or expect that Ron would leave him the 10 acre block by Will. 62There is a second basis upon which Mr Willmott submits the judge's finding of inducement is erroneous. He submits, correctly, that it was not until 2005 that there was any conversation or other direct communication between Ron and Ken about Ron's testamentary intentions. Mr Willmott submits that the evidence does not support a finding that Ron anticipated that his statements made to Bill and other third parties would come to Ken's attention. Thus, he submits, there was no indirect representation by Ron to Ken. Putting it in language more appropriate to the test for estoppel as formulated by Brennan J, Ron did not induce Ken to adopt the assumption or expectation. 63I do not accept that submission. There was uncontested evidence from Ken that, as at 1981: "... Bill, my older brother, was the head of the family. We are an old, traditional family. If my father was to make any important decisions he would also ask Bill to be present. ... My father was not the sort of person to sit down and expressly say to me what he was doing. He would normally discuss these matters with the oldest son, Bill." 64A trial judge who sits through a case such as the present frequently obtains a picture of the personalities and interpersonal dynamics in a family that an appellate court cannot recapture. The hearing occupied three days, with evidence being taken on two of those days. I am not satisfied that the judge was in error in inferring that Ron must have expected, in 1981, that Bill would convey information about his Will to Ken, and must have known soon after it was conveyed that it had been conveyed. Similarly, the evidence of Ron's garrulousness about his testamentary intentions, to people likely to come into fairly regular contact with Ken, has the effect that I do not conclude that the judge was mistaken in inferring that Ron must have anticipated that at least some of the people outside the family to whom he disclosed his testamentary intentions would pass the information on to Ken. The incident with Mr Hill in 1995, when Ron showed no sign of surprise of Ken knowing his testamentary intentions, confirms this. The number of instances when Ron made reference to having "promised" Ken the 10 acre block is eloquent confirmation that Ron was aware that Ken knew the provision in his Will concerning the 10 acre block, and that he regarded Ken as being justified in regarding himself as having been promised that he would receive the 10 acre block. Insufficient Evidence of Detriment? 65Mr Willmott also submits that the Respondent led no credible evidence of detriment. I do not accept that submission. Ken made no attempt to demonstrate that in some fashion he was worse off as a result of staying working on the farm than he would have been if he had stopped working on the farm in 1981. However, that is not the type of detriment that is relevant. As Allsop P said in Delaforce v Simpson-Cook at [5]: "That the party encouraged cannot show that he or she would have been better off in the posited alternative reality is not fatal to the making out of the estoppel. Indeed, the inability to prove such things reveals a central aspect of the detriment: being left, now, in that position." 66In accordance with the judge's enumeration of factors derived from those that Brennan J gave in Walton's Stores ([40] above), the relevant detriment is one that the plaintiff's action or inaction (ie, what the plaintiff has done or not done in reliance on the assumption or expectation) will bring about if the assumption or expectation is not fulfilled. I have earlier referred to how equitable estoppel looks backwards from the moment when a promise falls due to be performed and asks whether, in the circumstances which have actually happened, it would be unconscionable for the promise not to be kept. 67There was ample evidence of the detriment that the judge found, namely a "continued career choice since 1981". That career choice has brought with it the consequences of being without the superannuation and other benefits that an employee would have, and being inhibited in his borrowing capacity ([44] above). It has set the course of Ken's life over decades, in a way that cannot now be unscrambled. The judge was justified in taking the view that for Ken to have followed his career choice for the 28 years between his becoming aware of Ron's testamentary intention and Ron's eventual death, in the expectation induced by Ron that he would receive the 10 acre block, and for him not to then receive the 10 acre block, would occasion him detriment of a kind and to an extent that calls for equity's intervention. 68The judge made the order in Ken's favour subject to Ken giving credit for the value of certain benefits Ron had given him in his lifetime. There is no appeal or cross-appeal concerning that aspect of the decision below.

Orders 69The appeal should be dismissed. In the court below, the judge ordered the costs of defence of the proceedings to be paid from the residue. He ordered that Bill should pay Ken's costs, but with Bill to have a right of indemnity for those costs from that part of the residue that did not include Ken's share of the residue. The rationale for that order was that the costs of defence of the proceedings was a testamentary expense, and thus payable from the residue, but if the costs that Bill was ordered to pay Ken were payable from the residue as a whole Ken would in substance be paying part of his own costs. 70Concerning the costs of the appeal Mr Ellison SC, counsel for Ken, did not put any submission that if the appeal failed Bill should be denied the usual executor's indemnity for the cost of action properly taken in administering the estate. He submits that costs orders should be made consistent with the costs orders that were made below. He submits that the way of making orders consistent with the costs order made below is as follows: "1. Appeal dismissed. 2. The Appellant to pay the costs of the Respondent and in that regard to have an indemnity out of the estate of the deceased. 3. The Appellant's costs on the indemnity basis be paid out of the estate of the deceased. 4. The Respondent's share of residue should not bear any part of the estate's liability in respect of the Appellant's costs and the Respondent's costs." 71I do not agree that Mr Ellison's draft order 4 gives effect to the same principle as was adopted in the court below. Rather, if the bringing of an appeal is (as seems to be conceded) an appropriate exercise by Bill of his role as executor, Bill's own costs would be a testamentary expense, and payable from the residue as a whole. To achieve that objective, the words "the Appellant's costs and" should be deleted from his draft order 4. I propose the following orders:

1. Appeal dismissed.
2. The Appellant to pay the costs of the Respondent and in that regard to have an indemnity out of the estate of the deceased.
3. The Appellant's costs on the indemnity basis be paid out of the estate of the deceased.
4. The Respondent's share of residue should not bear any part of the estate's liability in respect of the Respondent's costs. 72SACKVILLE AJA: I agree with Campbell JA.

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