Scholfield v Scholfield[2011] QDC 306

DISTRICT COURT OF QUEENSLAND

1. [1]
   The Plaintiff, Stuart Astley Scholfield, seeks repayment of the following amounts which he claims he paid on behalf of the defendants, his sons Julian Astley Scholfield and Berwick John Astley Scholfield:

A. $67,362.20 for loan repayments he made to the Westpac Banking Corporation;

B. $1,587.56 paid for rates to the Brisbane City Council; and

C. $1,470.07 for insurance premiums to Suncorp.

2. [2]
   The action commenced by claim filed on 7 March 2008.

3. [3]
   The defendants by way of counterclaim seek certain declarations that will be detailed later in this judgment and/or the return of $60,000.00.

Plaintiff’s Case

4. [4]
   The plaintiff’s case is that:

a. He and the defendants, who are two of his three sons, entered into a Binding Family Agreement in or about October 1990 to acquire the residential property at 135 Cavendish Road, Coorparoo as tenants in common.  He held a half interest whilst the defendants each held a quarter interest.

b. The defendants did not have the funds to acquire their interest in the property and borrowed $60,000.00 from Westpac Banking Corporation, Coorparoo Branch (Westpac).  The plaintiff guaranteed this borrowing with a supporting third party Collateral Mortgage over his half interest in the property.

c. There was an oral agreement between he and the defendants which contained the following terms:

c.1 The title would be held as tenants in common; plaintiff ½ and each defendant ¼;

c.2 The defendants would apply to Westpac for a loan of $60,000.00 in order to acquire a ½ interest in the property between them;

c.3 Subject to the subsequent terms of the agreement, on the sale of the property the defendants’ interest was to be distributed equally between the defendants and Simon Scholfield, the plaintiff’s third son;

c.4 The plaintiff did not intend to reside in the property;

c.5 The defendants were to reside in the property;

c.6 Simon on his return from overseas was to reside in the property;

c.7 Julian was to have the northern bedroom; Berwick was to have the north/west bedroom and Simon was to have the southern bedroom;

c.8 Simon was to reside in the property for a maximum of three years free of rent whilst attending university;

c.9 While Simon resided in the property he was to contribute pro rata to all gas and electricity charges;

c.10 No other person or persons was/were to reside in the property or any part thereof unless agreed to by the plaintiff;

c.11 The defendants were to maintain the property;

c.12 The defendants were to pay all outgoings on the property;

c.13 The defendants were to pay all mortgage payments to Westpac;

c.14 If the plaintiff was required to remedy the defendants’ default under the agreement the defendants would pay to the plaintiff:-

1. (i)
   Compound interest on the monies paid by the plaintiff;

2. (ii)
   The rate of compound interest would be the prevailing rate of interest charged by Westpac Banking Corporation on the defendants’ loan from time to time whilst the defendants owed to the plaintiff any money by reason of their default under the Agreement;

3. (iii)
   The monies paid by the plaintiff to remedy the defendants default.

c.15 If the plaintiff was required to pay out the defendants’ loan from Westpac the defendants would forfeit to the plaintiff their interest in the property; and

c.16 If the defendants owed to the plaintiff any monies by reason of their default under the agreement when the property was sold then all monies then owing by the defendants to the plaintiff would be paid by the defendants from their respective share of the net proceeds of sale of the property.

d. As guarantor of the Westpac loan, the plaintiff became surety for the defendants.

e. The defendants continually defaulted in paying their mortgage payments to Westpac.

f. The defendants defaulted in paying rates and insurance on the property.

g. The plaintiff made good the default of the defendants for the unpaid rates and insurance as he held a (½) beneficial interest in the property.

h. The plaintiff was continually pressed by Westpac, as guarantor, to make good the defendants’ default in their repayments and to pay out the defendants’ loan by reason of the unsatisfactory manner by which the defendants serviced the loan.

i. Westpac took outstanding loan funds from his account on 4 February 1998.

j. When the property was sold the defendants failed and/or refused to reimburse the plaintiff for the monies he had expended as guarantor (surety) and failed and/or refused to honour their obligations under the Binding Family Agreement to reimburse the plaintiff for money expended for rates and insurance which the defendants should have paid.

k. The plaintiff did not accept the defendants’ offer of $60,000.00 as settlement of the issue of the loan.

l. The plaintiff requires the defendants to honour their obligations under the Binding Family Agreement and to reimburse him for the monies he paid the bank as guarantor (surety).

Defendants’ Case

5. [5]
   The defendants’ case is that:

a. They each acquired a ¼ interest in the property situated at 135 Cavendish Road, Coorparoo.

b. The transfer of that property to the defendants was made from Wilson Joseph Wilde and Ernest George Harris as statutory trustees for sale.

c. The defendants together borrowed $60,000.00 from Westpac to acquire a ½ interest in the property.

d. There was no agreement between the defendants and the plaintiff as to the acquisition of the property.

e. The plaintiff had taken it upon himself to arrange for the defendants to acquire the property with a loan from Westpac and to guarantee the loan.

f. The defendants understood the plaintiff set up the purchase and guaranteed the loan for their benefit as his children and to give them the opportunity to own the property in which they were living.

g. They continued to reside in the property after they acquired their interest in it.

h. They had an obligation to pay off the loan under the loan agreement.  What would happen if they defaulted on the loan or failed to pay outgoings was not contemplated.

i. They considered the arrangement was one set up by a father for his children by way of providing for his children, as a benevolent gesture and for their advancement.

j. It was a term of the defendants’ residence in the property that they would pay all maintenance, repairs and outgoings in relation to the property.

k. On some occasions they did not pay rates for the property because of a lack of funds.

l. On some occasions they did not pay the insurance premium for the property due to a lack of funds.

m. They, on occasions, defaulted in making repayments to Westpac.

n. The plaintiff’s claim is statute barred pursuant to s 10 of the Limitation of Actions Act 1974(Qld).

The Defendants’ Counterclaim

6. [6]
   The defendants each counterclaim that:

a. They are each entitled to a ¼ interest in the net sale price.

b. They were aware at the time of the sale of the property the plaintiff wanted repayment of the loan default proceeds that were paid by the plaintiff and considered that they had a moral obligation to do so.

c. They were unaware that the plaintiff wanted to be repaid interest and the other outgoings which he paid regarding the property.

d. On 28 November 2007 the defendants offered the sum of $60,000.00 to the plaintiff as a settlement of the issue of the loan.

e. The matter was settled on 18 January 2007 when settlement between the parties was reached.

f. Alternatively the sum of $60,000.00 was paid “under a mistake of fact and they want it back”.

g. They claim the settlement money as had and received.

Facts

7. [7]
   On 1 September 1988 the plaintiff and his brother became registered proprietors by transmission by death in equal shares as tenants in common over the property situated at 135 Cavendish Road, Coorparoo.

8. [8]
   Some time later the plaintiff’s brother wanted to sell the property and when he and the plaintiff failed to reach an agreement about that sale, Wilson Joseph Wilde and Ernest George Harris were appointed as statutory trustees for sale and became registered proprietors in fee simple on 7 September 1990.^[1]

9. [9]
   The property was for sale by way of public auction and the auction was held on 8 September 1990.

10. [10]
    The defendants applied for finance from Westpac to enable the purchase to occur. Their father, the plaintiff, had been a long time customer of Westpac. Approval was made in the amount of $60,000.00 on 31 August 1990. In a document entitled “Personal Finance Application/Permanent Report”,^[2] which appeared to be a document completed by bank staff, the following notations appear:

“‘Interest only with full clearance by 30 September 91 from sale of assets.’

‘Applicants seek bill acceptance limit of $60, to bid at auction for family estate property in which they presently live + upfront costs (6 months interest).’

‘Proposal is unusual but assistance considered warranted in view of strong position of guarantor and his assurance of clearance.’”

Under the heading:  “Manager’s Remarks and Recommendations” the following appears:

“Submitted at the request of their father (guarantor) our wealthy retired solicitor customer, who is trying to get his sons to stand on their own feet.  The property was left to guarantor and his brother some years ago.  The brother is forcing an auction to get his share of the estate.  Guarantor wants the boys to buy the Uncle’s share.”

11. [11]
    In a schedule attached to that document the following appears under the heading “Manager’s Remarks”:

“Guarantor has a substantial property portfolio, some of which has passed to him via his mother’s estate, and which is managed by a Trustee.

The subject property is an estate property and has been used by applicants for several years.  It appears there is a disagreement among the beneficiaries, and a sale by auction has been set down for 8 September 1990.

Applicants are anxious to retain the home, and guarantor wants his sons to borrow the funds in their own names, to encourage some responsibility on their part.

They can make an offer to their uncle prior to auction, but have to bid if their offer is refused.

(The property is currently held in trust for their father and their uncle).

Scholfield Senior has several properties for sale, and has sought assistance for 12 months, with clearance to come from proceeds of asset sales.

The following properties are on the market –

Tarragindi, 5 acres

Sherwood, 4 acres

Coorparoo, Corner Old Cleveland Road and French Street

Nerang – 180 acres – a sale has been negotiated here, but settlement may take 12 months.

Scholfield is semi-retired, and interest provision and clearance is dependent on sale of assets, however, because he has several properties to sell, we consider our risk is acceptable, and recommend.”

“The Manager Coorparoo”

“We share your concern at applicant’s ability to cover holding charges pending asset sales.  However subject to Manager being satisfied that:

Assets to be sold will be realistically priced and sales will be followed with vigour,

$60,000 is the maximum and instead “front end costs” will need to be covered from their own resources.

We approve.  In due course please advise of outcome of auction we will then hold commitment.”

12. [12]
    The evidence was somewhat confusing as to just what occurred at the auction. Resolution of that confusion is not necessary given that on 8 October 1990 a contract of sale for the defendants’ purchase was signed. The settlement date was 12 October 1990. It has been submitted on behalf of the defendants that the reasonable inference is that the property was sold after auction, sometime between the auction date 8 September 1990 and 10 September 1990 as auction contracts are customarily 30 day cash contracts. Whilst the inference that the property was sold sometime after the auction is overwhelming, I cannot infer that it necessarily occurred during that time period. There is insufficient evidence in that regard. In any event, nothing turns on the point.

13. [13]
    Certain facts are not disputed:

a. The auction was held on 8 September 1990.

b. Westpac approved a loan of up to $60,000.00 to the defendants for the purpose of purchasing a ½ interest in the property.  That approval was dated 31 August 1990.

c. The defendants purchased a ½ interest (¼ each) in the property.

d. The plaintiff maintained a ½ interest in the property.

e. The defendants borrowed the sum of $60,000.00 from Westpac to purchase their share of the property.

f. The plaintiff guaranteed that loan with a supporting Third Party Collateral Mortgage over his half interest in the property.

g. As guarantor of that loan, the plaintiff became a surety for the defendants.

h. The loan was for a period of 12 months and took the form of an interest only commercial bill.

i. The defendants continued to live in the property.

j. The plaintiff did not live in the property at any time.

k. In September 1991 the defendants applied for a housing loan from Westpac to pay off the commercial bill loan.  That housing loan was approved and the plaintiff guaranteed that loan.

l. In July 1996 the defendants made application to refinance the existing housing loan and for additional finance to pay outstanding arrears and rates.  The total amount sought was $55,000.00.^[3]

m. Westpac offered a new housing loan for $55,000.00 on 8 October 1996.^[4]  That offer was accepted.

n. The plaintiff guaranteed that loan.

o. The plaintiff paid out the balance owing on that loan in the amount of $53,271.20 on 4 February 1998.

p. The property was sold on or about 20 November 2007 for the amount of $650,000.00.

q. The amount of $375,157.28 from the sale proceeds has been released to the plaintiff.

r. The balance of the sale proceeds (minus the agent’s commission and other legal sale costs) remains in trust in the plaintiff solicitor’s trust account.

14. [14]
    It is also not disputed that on occasions the defendants defaulted on the Westpac repayments and that the plaintiff made a number of payments to Westpac when such defaults occurred. The evidence discloses that the plaintiff made the following payments to Westpac.

DatesAmount

17 November 1992$1,100.00

04 May 1993$5,000.00

17 August 1993$1,873.00

16 May 1995$6,118.00

15. [15]
    These amounts do not necessarily reflect the amount in default at the time of payment.

16. [16]
    On 16 January 1998 the defendants had again fallen into arrears and Westpac issued a Default Notice which specified:

“You have made default under the Mortgage by failing to pay the following amounts:

AmountDue Date

1. $8.3715 November 1997

2. $485.0015 December 1997

3. $485.0015 January 1998

To remedy this default the Bank requires you to pay to it the above amounts in respect of which you have made default totalling $978.37 which comprises $380.70 for principal and $597.67 for interest.”

17. [17]
    The plaintiff also received that notice. Although the amount of the demand was for $978.37 the plaintiff paid out the whole of the loan owing at that time i.e. $53,271.20.

18. [18]
    It is also not disputed that the defendants at times failed to pay the City Council rates for the property and insurance premiums for the property. The evidence reveals that the plaintiff made a number of payments for both rates and insurance premiums:

Date AmountReason

14 July 2002 $375.85Rates

27 March 2003 $413.15Rates

10 June 2003 $411.20Rates

25 July 1990 $226.88Insurance

6 August 1991 $274.36Insurance

15 September 1992 $295.00Insurance

13 March 1998 $216.27Insurance

10 June 2003 $478.20Insurance

The Agreement

19. [19]
    The plaintiff alleges that he and the defendants reached an oral agreement the details of which are particularised in paragraph [4]c above. He said that this agreement was reached at a meeting between the three of them in the kitchen of the property sometime in September 1990:

“… A letter came from Westpac dated 14 September 1990 in which Westpac granted an offer to the defendants to purchase a property and that I was to be a guarantor.  There was a long discussion in the kitchen at 135 by the defendants and myself as a result of that letter from Westpac.  In that discussion I made a number of conditions before I was prepared to sign a guarantee with the bank.”^[5]

The plaintiff said that the defendants each agreed to those conditions.  In fact, he said that on the day they all went to the Westpac Branch, he stopped the defendants outside the bank and again made it very clear to the defendants that he was only signing the guarantee on the conditions they had agreed to in the kitchen at 135 Cavendish Road.^[6]

20. [20]
    Both defendants disputed that any conversation took place between themselves and the plaintiff regarding many of the conditions that the plaintiff alleges were agreed upon. Julian Scholfield gave the following evidence:

“Did your father say anything about going guarantor for you? - - Yes, he would have.  Well, he must have agreed to going guarantor.

And was there any discussion about what might happen if you couldn’t pay the mortgage instalment? - - not that I recall.

If you couldn’t pay, what would happen? - -  I imagine the place would be sold and we would lose it.

Was there any discussion about doing your best? - -  Dad said as long as we could cover the interest on the loan, that we would be able to hold the house and that we would all come out OK in the long run.  Now, when that was actually said I can’t tell you, but I do recall the conversation with dad and him saying that.

Who was to pay the rates? - - Berwick and I.

And was there a conversation after that? - - Yeh, I think – yeh, there was an agreement that we would pay the rates and the mortgage and, of course, electricity, gas, yeh.

Insurance? - - Insurance.  But – yes.  But I wasn’t that keen.  Like, I never thought the property was worth insuring in as much as if the house was to burn down, I think the land – the property would be still worth it.

Were you keen to get into the property game? - - Very keen.

And how did you show that? - - By trying to pay to – as much as we could off the loan.”^[7]

21. [21]
    In cross-examination Julian specifically denied that any agreement had been made regarding what would occur if there was a default of payment in relation to the mortgage, rates and insurance.

22. [22]
    Berwick Scholfield said in evidence:

“All right, now, prior to the auction, had you any conversations about what would happen if you couldn’t pay the mortgage that you’re proposing to get? - - Well, we were obviously - I was obviously worried at the time we wouldn’t be able to afford it in the first place.

Yes?  -- Dad said that we - he’s going guarantor for us ---

Yes? - - And not to panic, not worry about it, just do our best, pay it off.

Were they the words that your father used? - - Pretty much”^[8]

23. [23]
    In cross-examination he agreed that some general conversation took place between he, his brother and the plaintiff about the intended purchase. He specifically denied any agreement or conversation regarding the majority of the conditions that the plaintiff claims to have laid down. Importantly, in relation to the issue of default in payment he said:

“A further stipulation the defendants were to pay all outgoings on the property.  That’s rates and insurance? - - Yes, to the best of our ability.

I am suggesting to you that the words “to the best of your ability” were not put forward by your father? - - yes, they were.

And that the stipulation was the defendants were to pay all outgoings on the property? - - To the best of our ability.

Now, a further stipulation the defendants were to pay all mortgage payments to Westpac? - - The same.  To the best of our ability.

I’m suggesting that’s not the case, and I am suggesting that you agreed unconditionally with your brother that you and he would pay all mortgage payments to Westpac? - - To the best of our ability.

There’s a further condition that if you and your brother defaulted in relation to payments, there would be compound interest payable on all defaults on monthly rests at the prevailing rate of interest charged by Westpac Bank - - No.

....

And your father further stipulated that if you and your brother defaulted in your obligations under the agreement, that your interest and your brother’s interest would be forfeited to him in the property? - - No.

And I’m suggesting to you that you agreed to that unconditionally? - - No.

And lastly, that your father stipulated that if any monies were owing under the agreement by you to him because he’s made good your default, then such default would be made good by you and your brother from your respective proceeds received from the sale of 135? - - No”^[9]

Issues

24. [24]
    The parties have identified the following issues as arising on the pleadings:

A. The agreement and its terms;

B. The payments that were made;

C. The right of reimbursement and the intention of the parties;

D. Whether the guarantee was given or whether the payments were made for advancement;

E. The Statute of Limitations;

F. Accord and satisfaction; and

G. Family arrangements.

Statute of Limitations

25. [25]
    The first point that needs to be determined in this matter is the resolution of the defendants’ submission that the plaintiff’s claim in relation to the repayment of monies expended on the defendants loan account to rectify their default as well as monies expended for rates and insurance premiums to rectify the defendants default is statute barred. The plaintiff of course refutes that submission.

26. [26]
    Section 10 of the Limitation of Actions Act 1974 (Qld) (the Act) relevantly states:

“10. Actions of Contract and Tort and Certain Other Actions

(1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action arose -

(a) Subject to s 10AA, an action founded on simple contract or quasi contract or on tort where the damages claimed by the plaintiff do not consist of or include damages in respect of personal injury to any person;”.

27. [27]
    The plaintiff submits however, that s 35(3) of the Act has application.  It states:

“Where a right of action has accrued to recover a debt or other liquidated pecuniary claim, or a claim to the personal estate of a deceased person or to a share or interest therein and the person liable or accountable therefore acknowledges the claim or makes a payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgement or the last payment.”

28. [28]
    Section 36 provides that any such acknowledgment may be made by an agent and must be in writing and signed.

29. [29]
    The right of a surety to sue co-securities for contribution only arises on payment by him of more than his proportion of the debt and the period of limitation only runs against him from that time.^[10]

30. [30]
    The last of the plaintiff’s payments ($53,271.25) was made on 4 February 1998. The six (6) year limitation period therefore expired on various dates six years after the payments were made, with the last date being 3 February 2004.

31. [31]
    These proceedings were commenced on 7 March 2008.

32. [32]
    To overcome the effect of s 10(1) of the Act the plaintiff relies upon two letters written by the defendants’ solicitor on 28 November 2007 and 11 January 2008.

33. [33]
    To put matters into proper context, the relevant chronology is that settlement of the sale of 135 Cavendish Road, Coorparoo was effected on 20 November 2007.  The sale price was $650,000.00.  The day before settlement, solicitors acting for the defendants wrote to the plaintiff’s solicitors in the following terms:

“We have been unable to obtain instructions as to releasing part or parts of the sale proceeds to the sellers – leaving the disputed amount in trust pending resolution by the parties.

We mention that our initial instructions are the proceeds are to be divided and paid to the parties in accordance with their respective share of the ownership.

Accordingly, the sale proceeds (after legal sale costs) are to be held in trust as there is a dispute as to the ownership.  Our tax invoice is attached.”

34. [34]
    On 22 November 2007 the plaintiff’s solicitors wrote to the defendants’ solicitors confirming that the balance of settlement monies, including balance deposit held by the selling agent, had been deposited into their trust account pending resolution of matters between the vendors.

35. [35]
    On 28 November 2007 the defendants’ solicitors wrote to the plaintiff’s solicitors and relevantly said:

“We refer to our phone conversation earlier today, and confirm our instructions:

Stuart inherited a ½ in the subject property and arranged for the two sons to borrow $60,000 from Westpac in 1990 to purchase the other half.  The sons were unemployed at the time and Stuart went Guarantor.  This is consistent with the copy of the Mortgage which we have downloaded from the Titles Office.

No written agreement was entered into in respect of the distribution of the eventual sale proceeds at the time of the son’s acquisition of the half interest in the subject property.  We find this quite inconsistent with Stuart’s current assertion as to the payment of the proceeds of sale.  At the time of his son’s acquisition of the ½ interest, apparently Stuart told the two sons that he had no interest in the property and that on eventual sale, the proceeds would be split three ways to his sons (Julian, Derek i.e. Berwick and Simon).  Simon resided at the property for a year or so and only paid part of the costs of the utilities (i.e. not part of the mortgage repayments).

In or about 1995 the sons were unable to keep up their mortgage payments and Stuart paid out the mortgage.  They believed the payment was approximately $57,000 or so dollars.   They believed at that time Stuart was and still is a millionaire.  They had very little income or money – hence they defaulted on the repayments.  Stuart sometime thereafter paid rates on the property for approximately 4-5 years.  Several years ago, Stuart wanted to sell the property for $440,000.  The sons refused this amount and the property has subsequently increased in value by over $200,000.

Given that the property has increased in value since the $440,000 offer, and that their father paid out the mortgage, they offer $30,000 each of their share (i.e. Julian’s and Berwick’s share) to resolve the matter.  We calculate that amount for Stuart to be (and not taking into account the Release Mortgage Fee):

Amount held in trust (total proceeds of sale) $630,314.562

= $315,157.28 + $60,000 = $375,157.28 – with Julian and Berwick to have the balance (i.e. $127,578.64 each).”^[11]

36. [36]
    No response was received to that letter and on 11 January 2008 the defendants issued Statutory Demands to the plaintiff to pay each defendant the amount of $127,578.64. That same day the defendants’ solicitor wrote to the plaintiff’s solicitor and said:

“We have instructions that the two boys do not dispute that their father is entitled to the balance of the trust monies after their claim of $255,157.28.

We calculate that the amount that can be released to Mr Scholfield Senior to be $328,527.28 i.e. not $375,157.28 (viz $583,784.56 - $255,157.28 = $328,527.28).”

37. [37]
    The defendants have submitted that the letter of 28 November 2007 is inadmissible as an acknowledgement as it was an offer of settlement and was therefore made on a without prejudice basis. The plaintiff however has drawn attention to the fact that the letter (which formed part of the conveyancing file appended to the affidavit of John Cornelius Potts, solicitor for the defendants) was put into evidence by the defendants and as such privilege had been waived. Counsel for the plaintiff had consented to that conveyancing file going into evidence. I accept that as both parties had consented to the discharge of the without prejudice communication, privilege had been waived.^[12]

38. [38]
    The issue for determination is whether the contents of the two letters dated 28 November 2007 and 11 January 2008 constitute an acknowledgement of the plaintiff’s claim or were nothing more than an offer to settle with no acknowledgement of debt.

39. [39]
    The fact that the plaintiff paid certain monies on behalf of the defendants is not in dispute. Whether those payments resulted in an indebtedness to the plaintiff by the defendants and whether those letters acknowledge such an indebtedness is in dispute.

40. [40]
    An acknowledgement need not identify the amount of the debt and it is sufficient if the general indebtedness is acknowledged provided that the amount of the debt could be ascertained by extrinsic evidence.^[13]

41. [41]
    Nevertheless, the acknowledgement must relate to the indebtedness sought to be enforced.^[14]

42. [42]
    The plaintiff has submitted that the contents of these letters acknowledge the indebtedness sought to be enforced and hence the provisions of s 36(2) have application.

43. [43]
    The defendants have submitted that the letters do not constitute an acknowledgment of debt under s 35(3) and s 36(2) of the Act. They submit that the letters did not acknowledge any liability and did not offer to pay any debt; rather the letter of 11 January 2008 offered a lesser sum based on an offer of compromise that was made in the letter of 28 November 2007.

44. [44]
    In Victorian Producers’ Co-operative Co Ltd v Dye [1927] VLR 572 at 575 the court held that there was no acknowledgement in writing taking the debt out of the operation of the Statute of Limitations.  In that matter, the defendant’s letter to the complainant said:

“Received your letter re account…I have no recollection of owing for such account…Rather than be mixed up in any unpleasant affair, I am prepared to pay you half of the supposed amount.”

45. [45]
    A similar situation arose in this matter. In the letter of 28 November 2007, the defendants’ solicitor makes it plain that the defendants’ position is that at the time of the acquisition of the ½ interest, the plaintiff told them that he had no interest in the property and that upon its eventual sale the proceeds would be split between his three sons. The solicitor then goes on to say that the sons’ offer of $30,000.00 each from their share is “to resolve the matter”. The letter also refers to the absence of a written agreement being “quite inconsistent with Stuart’s current assertion as to the payment of the proceeds of sale.”

46. [46]
    The letter of 11 January 2008 does nothing more than identify the sum of money which is not in dispute given the offer of compromise made, but yet to be accepted, on 28 November 2007.

47. [47]
    There is no acknowledgement of the debt or claim contained in either of those letters. Furthermore, when questioned about this issue Julian Scholfield said that around the time of the sale of the house he didn’t know how much money his father had paid into the house but he “figured it would be around $60,000.00”, so he instructed his solicitors that his father should receive his ½ of the proceeds of sale plus $60,000.00.  He said that he made that offer simply because he wanted to give his father that amount and that no demand had been made of him by his father at that time.^[15]

48. [48]
    Berwick Scholfield said in evidence:

“Okay.  Subsequently it was suggested by Julian that some additional money should be released to your father to – when the property was sold.  Do you remember that? --Yes.

What did you say about that? -- I didn’t have a  problem with it.

So, you agreed to that? -- Yes.”^[16]

49. [49]
    The defendants’ evidence is consistent with the contents of the two letters. Effectively, those letters do no more than acknowledge that the plaintiff has in the past made a payment on the mortgage and paid the rates for a period of four to five years after the mortgage was paid out. They in no way acknowledge an indebtedness on the part of the sons to the father and do no more than offer an amount in compromise to resolve the matter. I also note that those letters make no reference whatsoever to insurance premium payments, nor to any rates payments made before the mortgage was paid off.

50. [50]
    The defendants’ offer of $30,000.00 each was, accordingly, an offer of compromise designed to end conflict without any concomitant acknowledgement of debt. The subsequent payment of those sums falls into the same category. It appears to me that the defendants did no more than take the position they considered to be morally correct.

51. [51]
    Accordingly, the provisions of s 35(3) of the Act are not enlivened. The limitation period for this matter therefore ended in February 2004 and this complaint was not made within the required six years after the matter of complaint arose. The plaintiff’s claims in paragraphs 10 and 21 of the Statement of Claim are therefore statute barred pursuant to s 10 of the Limitation of Actions Act 1974 (Qld). 

The Agreement and Its Terms

52. [52]
    Notwithstanding my findings in relation to the provisions of s 10 of the Limitation of Actions Act 1974 (Qld), I will nevertheless make findings in relation to other factual issues that have arisen in this trial. 

53. [53]
    The agreement as alleged by the plaintiff was only in oral form. Whilst that fact, in and of itself, is not fatal to a finding in favour of the plaintiff’s evidence, it is nevertheless a relevant consideration given the competing evidence on the topic. Furthermore, it is of relevance to note that the plaintiff is a retired solicitor and he said in evidence:

“…I had on many occasions as a solicitor whereby parents had cried on my office desk in cases where they had guaranteed children over matters and the result was that they had to payout the debt, and how upsetting it was to them.  I explained this to my sons that I didn’t want this to happen to me and that is why conditions have to be agreed upon.”^[17]

54. [54]
    Curiously though, the plaintiff, notwithstanding his legal background and experience failed to put this alleged agreement into writing and thereby missed the opportunity to negate any potential for dispute in the future. Given his evidence of having previously witnessed distraught parents in similar circumstances, I find the absence of a written agreement a relevant consideration.

55. [55]
    Furthermore, the terms of the agreement as alleged by the plaintiff are spectacularly inconsistent with the information contained in the Westpac documentation referred to in paragraphs [10]-[11] above.

56. [56]
    That information shows that the plaintiff told Westpac that it was his intention to clear the original loan with the proceeds of the sale or sales of other properties he owned within a 12 month period of time. The plaintiff has submitted however that such a conclusion is without foundation and contrary to other inferences which may be drawn. He submits that one such inference is that the facility was either to be renegotiated or replaced with another loan facility offered by the bank. I disagree. The wording of those comments is unambiguous and I have no hesitation in concluding that the plaintiff made such comments to Westpac. It may be that he thought that renegotiation could take place in 12 months time, but that is quite obviously not what he told the bank.

57. [57]
    Furthermore, that inconsistency is also damaging to the plaintiff’s credibility, given that he made no mention in his evidence of giving such assurances to Westpac.

58. [58]
    Relevant evidence was also given by Berwick Schofield’s wife, Katherine Ann Richardson. She claimed to remember overhearing a conversation between the plaintiff and Berwick in approximately November 2003 on the occasion when she first met the plaintiff and his wife. She recalls this was the occasion when they informed them of her pregnancy. She said:

“And do you remember any conversation that might have occurred between Berwick and Stuart in relation to Cavendish Road? -- Yes, I do.  Berwick and Stuart were talking.  They were going – I think Ann Marie and Stuart were going on a cruise, so Berwick – Stuart was talking to Berwick about some paperwork that he had to sign.  And the only thing I recall about Cavendish Road was I heard Stuart mention something about Cavendish Road, which pricked my interest.  So at that point Stuart had said, ‘You know I don’t want anything out of Cavendish Road.  I’m not interested in that.  I don’t need the money.  I’ve got plenty of money.  As far as I’m concerned, my half will be split between you three boys.’  Which at that point I was surprised, because I               knew that there wasn’t much of a relationship with the third son Simon.”^[18]

59. [59]
    The plaintiff denied that any such conversation took place. He submitted that I should reject Ms Richardson’s evidence because:

1. (a)
   Berwick himself gave no evidence of such a conversation;

2. (b)
   The alleged disavowment was not pleaded by the defendants; and

3. (c)
   The alleged statement is inconsistent with the plaintiff’s expressed desire as evidenced by Westpac documents (Exhibits 13 and 29) that his sons show “some responsibility on their part” and have an “element of responsibility”.

60. [60]
    In relation to the first two points, the fact that Berwick gave no evidence of such a conversation does not, in my opinion, diminish the credibility of Ms Richardson’s evidence. If she is merely fabricating evidence to support her husband, one would think that they would have collaborated so that their evidence coincided. The fact that their evidence did not coincide tends to suggest that no such collaboration has occurred. If she was not telling the truth that would mean that Ms Richardson had embarked upon a journey of fabrication of her own knowing that her husband would have no knowledge of any such conversation and would give differing evidence. I find that an unlikely scenario.

61. [61]
    Furthermore, the fact that Berwick Scholfield had no recollection of such a conversation is hardly surprising given that it allegedly occurred eight years ago and at a time when no apparent dispute existed regarding the property at Cavendish Road. 

62. [62]
    Also the absence of reference to this conversation in the pleading is hardly surprising. The pleadings clearly disputed the existence of the agreement as alleged. This was merely a piece of evidence relevant to that issue and as such, did not need and should not have been specifically pleaded.

63. [63]
    Finally, I find the plaintiff’s argument that Ms Richardson’s evidence should be disbelieved because it is inconsistent with the plaintiff’s expressed desire that his sons show “some responsibility on their part”, unconvincing. The plaintiff’s evidence itself identifies an internal inconsistency relevant to this issue. His comments to Westpac at the time the initial loan was taken out, to the effect that he would pay out the loan within 12 months using finance obtained from the sale of other property, were made at the same time that he was expressing the desire that his sons show some financial responsibility and stand on their own feet. A further inconsistency therefore between the latter of those statements and Ms Richardson’s evidence does not cause me to have doubt about the reliability of Ms Richardson’s evidence. 

64. [64]
    Moreover, I found that Ms Richardson presented as a believable and reliable witness. On the other hand, the plaintiff, when questioned on this topic said:

“I never said that there.  I never said that there.  There is some reference to part of that which was the agreed thing in September of 1990.”

65. [65]
    Just what the plaintiff was trying to say is unclear. There were no further questions asked of him on the topic. His answer seems to suggest that some conversation took place on that occasion regarding parts of the alleged agreement between he and his sons. He gave no evidence giving context to that comment.

66. [66]
    In the circumstances, I accept Ms Richardson’s evidence as truthful and reliable.

67. [67]
    When determining whether the plaintiff has proved on the balance of probabilities the existence of the alleged agreement with its alleged conditions, there is one further relevant piece of evidence. That is the plaintiff’s failure, at any time since the various payments were made by him for the loan or for rates or for insurance premiums, to raise the issue of repayment with either of the defendants. In my view, such a failure is quite inconsistent with the existence of such an agreement. If an agreement had been made, it would be reasonable to expect the plaintiff to raise with his sons the arrangements for repayment in a timely way. I do not accept that anyone, in such circumstances, would simply say and do nothing at the time of payment or shortly thereafter. Nor do I accept that anyone would simply wait silently for many years until the day (which might never come) that the property is sold before raising the issue of repayment.

68. [68]
    For these reasons, I find the evidence of the defendants to be believable, reasonable and reliable. The plaintiff has not proved to my satisfaction on the balance of probabilities that the agreement, as asserted by him, was made. I find that the agreement between the plaintiff and the defendants extended only to the plaintiff guaranteeing the loan with his expressed desire that the defendants do their best to meet outgoing expenses and loan repayments.

The Payments That Were Made

69. [69]
    Irrespective of my conclusion above regarding the existence of an agreement with the terms particularised by the plaintiff, the plaintiff’s case has other problems.

70. [70]
    In the agreement as alleged by the plaintiff, the important conditions of relevance to this trial are outlined in paragraph [4]c.14 above. Pursuant to those conditions, the defendants’ obligation to repay arises when the plaintiff is “required to remedy the defendants’ default”.

71. [71]
    Correspondence from Westpac to the plaintiff (Exhibits 10 and 28) records that the defendants were in arrears on the following dates in the following amounts:

DatesAmounts

17 November 1992$1,100.00

5 April 1993$3,470.00

17 August 1993$1,873.00

16 September 1993$2,554.00

16 January 1998$978.37

72. [72]
    The plaintiff alleges that he made payments into the defendants’ loan accounts on the following dates in the following amounts:

DatesAmounts

17 November 1992$1,100.00

30 April 1993$5,000.00

17 August 1993$1,873.00

16 May 1995$6,118.00

4 February 1998$53,271.20

73. [73]
    No evidence was presented to support the assertion however, that the plaintiff paid $1,100.00 on 17 November 1992 or $1,873.00 on 17 August 1993. In fact, in relation to the latter, the evidence discloses that no such payment was made. Westpac wrote to the plaintiff on 17 August 1993,^[19] advising him that the defendants were in arrears in the amount of $1,873.00 which represented “three months in arrears”.  On 16 September 1993 Westpac wrote to the defendants^[20] advising that the account was in arrears to the sum of $2,554.00 which represented “four payments in arrears”.  As no bank statements were produced that referred to that time period, the only inference open is that no payment of $1,873.00 was made on or around 17 August 1993. 

74. [74]
    In so far as the alleged payment of $1,100.00 on 17 November 1992 is concerned, no bank statements for either the defendants’ loan account or the plaintiff’s personal account, nor cheque butts, nor receipt of payment etc have been produced to the court to demonstrate that such payment was made by the plaintiff. Accordingly, there is no evidence before the court that would support a finding that such a payment was made.

75. [75]
    There is no doubt that the plaintiff paid $5,000.00 into his son’s account on 30 April 1993. The evidence discloses that as at 5 April 1993 the amount in arrears totalled $3,470.00. Yet the monthly repayment amount at that time was $681.00. Therefore, despite the fact that the maximum that the account could have been in arrears as at 30 April was $4,151.00, the plaintiff paid $5,000.00. In evidence the plaintiff said that he had no choice in the amount that was paid:

“I didn’t have any alternative.  The bank took the monies because I was in credit there.”^[21]

76. [76]
    I reject the plaintiff’s evidence in that regard. According to him, Westpac has arbitrarily selected an amount that it has then transferred from his account to his son’s loan account. No evidence from a Westpac representative was given. The only evidence touching upon the subject is one sentence in a Westpac letter to the plaintiff dated 30 April 1993:^[22]

“We also confirm having transferred the amount of $5,000 to your son’s housing loan account to clear the arrears in this account.”

That sentence neither proves the amount of the arrears nor proves that the payment was made without the authority or consent of the plaintiff. 

77. [77]
    In those circumstances, I do not accept that Westpac arranged that transaction independently of the plaintiff’s instructions. In my view, the evidence unambiguously shows that the plaintiff voluntarily paid the amount of $5,000.00. The question then arises: Why did he pay more than was outstanding? The only reasonable answer is that he deliberately paid a greater amount to benefit his sons i.e. a gift or a gratuitous advancement for their benefit. No other reasonable inference is open. I will return to this issue.

78. [78]
    There is equally no doubt that the plaintiff paid $6,118.00 into his sons account on 16 May 1995. There is no evidence however that the defendants’ account was in arrears to that amount at that time. In fact, there is no evidence before the court that their account was in arrears at all at that time. In the absence of such evidence, it is impossible to conclude that the payment was made to remedy the defendants’ default.

79. [79]
    Finally, at the time of the plaintiff’s payment of $53,271.20, the defendants’ account was in arrears in the amount of $978.37. The plaintiff’s explanation for the quantum of his payment was that the bank decided that the debt had to be paid out and then debited his account accordingly.^[23]

80. [80]
    It was submitted on behalf of the plaintiff that the bank had such a power pursuant to the terms of the mortgage and that “the court can draw on its experiences with banks, as that is, I suggest, part of the economic conditions which are common knowledge.”

81. [81]
    Whilst I accept the court can, in appropriate circumstances, draw upon its experience of matters that are common knowledge, I do not accept that this is such an occasion. The bank had only issued a notice requiring payment in the amount of $978.37. The only reasonable inference that is therefore open on the evidence is that the plaintiff elected to pay out the whole of the loan. There had been no acceleration of the total debt and the bank had not issued a Notice of Exercise of Power of Sale pursuant to s 84 of the Property Law Act 1974 (Qld).  The defendants have submitted that the plaintiff’s election to pay out the whole of the loan was not a payment made in pursuance of a legal obligation.  I accept that submission.  I note also that the plaintiff did not consult either of the defendants prior to that payment.  He merely told them of the payment afterwards. 

82. [82]
    In summary, in relation to the amounts paid by the plaintiff to the defendants’ loan accounts, I make the following findings:

1. There is no evidence that the plaintiff paid $1,100.00 into the defendants’ account on or about 17 November 1992;

2. The plaintiff’s payment of $5,000.00 into the defendants’ account on 30 April 2003 was in excess of the amount outstanding at that time and in my view, was a gratuitous payment made to advance his sons’ financial positions;

3. The alleged payment of $1,873.00 on 17 August 1993 was not made;

4. There is no evidence before the court to show that the defendants’ loan account was in debt at all, let alone in the amount of $6,118.00 as at 16 May 1995; and

5. The total amount of arrears as at 4 February 1998 was $978.37.  The decision to payout the balance of the loan at that time was a voluntary decision made by the plaintiff and the payment was not made pursuant to any legal obligation. 

Rates and Insurance Premium Payments

83. [83]
    Evidence has been presented that shows that the plaintiff made the payments as particularised in paragraph [18] above for rates and insurance premiums.

84. [84]
    At paragraph 16 of the Statement of Claim the plaintiff pleaded:

“It was a term of the defendants’ residency in the property that they would pay all maintenance repairs and outgoings in relation to the property.”

The defendants admitted that allegation in their fourth amended defence. 

85. [85]
    There is no dispute that the plaintiff made those payments at times that the defendants were financially unable to do so.

86. [86]
    The defendants have pleaded that the plaintiff made such payments without request by the defendants and to advance the defendants by way of gift. They have also submitted that the plaintiff’s claim is statute barred pursuant to s 10 of the Limitation of Actions Act 1974 (Qld), an issue that I have already decided.

87. [87]
    As to the first point, the plaintiff denies that such payments were gifts.

88. [88]
    In determining the issue as to whether these payments were gifts, I note the following:

1. (a)
   The plaintiff made no request for repayment of the amounts at or around the time of payment;

2. (b)
   The plaintiff had no discussion with the defendants since any payment/payments were made regarding the prospects of repayment or making any arrangement in that regard;

3. (c)
   There was no conversation between them confirming that the payments were not gifts and that the plaintiff expected to be repaid; and

4. (d)
   No demand was ever made on the defendants until the date of service of the Statement of Claim.

89. [89]
    These matters are consistent with the defendants’ assertion that those payments were gifts. They are not consistent with the plaintiff’s assertion that he made the payments pursuant to the terms of the agreement between he and his sons. Furthermore, I have already concluded that the plaintiff has not established on the balance of probabilities that any agreement between he and his sons included the conditions that are contained in paragraphs [4]c.14 - [4]c.16 above. Accordingly, he cannot rely upon those alleged conditions as a basis for this claim. In any event, it is my view that these payments were made to advance the defendants by way of gift.

Right of Indemnity or Reimbursement

90. [90]
    There is no claim in these proceedings for a constructive or resulting trust, nor is there a claim for an equitable charge in aid of any rights the plaintiff might have for reimbursement.

91. [91]
    The parties’ entitlements to the proceeds of sale of the property on the sale of it are determined by their legal and equitable entitlements to the property. The parties are therefore entitled in law and equity to their interests in the property registered on the Certificate of Title.^[24]  That is, as tenants in common in the share of ¼ to each of the defendants and ½ to the plaintiff. 

92. [92]
    The contributions of each party towards the purchase price were in the same proportion as the interests registered on the title. The fact that the defendants borrowed money to pay their share is irrelevant to the issue.^[25]

93. [93]
    Furthermore, the fact that the defendants and the plaintiff subsequently made payments on the mortgage and paid various outgoings made no difference to the way in which the interests were held.

94. [94]
    Does a right of indemnity or reimbursement then arise as a result of the plaintiff paying off the debt, paying some monthly repayments and/or some outgoings? The defendants have submitted that although the plaintiff pleaded a term for reimbursement under the alleged contract, the claim for relief actually made is not contractual but under the right of Indemnity or Reimbursement that arises at law or an implied promise in equity.

95. [95]
    Given the fact however, that I have already concluded that the payments made by the plaintiff, as particularised in paragraphs [14], [17] and [18] above, were made as gifts or as gratuitous advancements for the benefit of his sons, I do not need to further consider this issue.

96. [96]
    In such circumstances, the plaintiff cannot successfully claim for relief under a right of indemnity or reimbursement.

Counterclaim

Settlement Agreement

97. [97]
    The defendants assert that a settlement agreement was reached on 18 January 2008 by reason of the terms of their solicitor’s letter dated 11 January 2008.

98. [98]
    Despite there being an error in the factual basis of the calculations contained in that letter (the purchase deposit amount was overlooked), this letter provided authority to the plaintiff to claim ½ of the net sale proceeds plus $60,000.00.

99. [99]
    That letter of course followed another letter sent by the defendants’ solicitors on 28 November 2007. I note that the letter of that date did not contain the factual error.

100. [100]
     The defendants also forwarded statutory demands, each dated 11 January 2008 to the plaintiff’s solicitors, for a total amount of $255,157.28.

101. [101]
     On 14 January 2008, the plaintiff’s solicitors wrote and advised that they intended to release the sum of $375,157.28 to the plaintiff provided there was no objection. It appears the release of that amount occurred on or about 18 January 2008. The defendants maintain the plaintiff has, by his conduct, accepted the offer of settlement. They submit that the money was paid in good faith on the understanding it would settle the matter and that the plaintiff accepted the settlement by accepting the money on or about that date. In the alternative, the defendants submit that the money was paid under a mistake of fact and they seek its return.

102. [102]
     The plaintiff has submitted that the letter of 18 January 2008 makes an unequivocal statement that the plaintiff is entitled to his ½ share of the net sale proceeds plus the sum of $60,000.00, noting that there were no proceedings on foot at that time. All that existed then was a difference of opinion between the defendants and the plaintiff.

103. [103]
     The plaintiff has submitted that in those circumstances the election by the defendants to unconditionally pay to the plaintiff the sum of $60,000.00 was done in the hope that it would settle the differences between them.

104. [104]
     I agree with that categorisation of that payment. I am fortified in that finding by evidence given by Julian Scholfield in evidence in chief:

“Was there any demand by your dad for a specific sum of money in respect of what had happened in the past? -- No.  Specific from that – the sale you’re talking about?

Yeah? -- No.  I tried to get that from him, but – and the only thing I could go was, well, Berwick and I have a quarter, quarter and he is a half, so that would be it at the sale.

There was a figure of about 60,000 settled on as being something that should be paid to your father.                Do you remember that? -- Yes, that was after the – when I went to Potts and Potts solicitors for the settlement.  I figured that I knew dad had put money in.  I didn’t know exactly how much, but I figured it would be around 60,000.  So I said to the solicitors that dad have his half plus 60 out of our shares and we’d get the rest.  But as we all know, that hasn’t happened. 

Was that as a result of any demand made by your father on you? -- No.

It was you wanting to give him money? -- Yes.  Yeah.”^[26]

105. [105]
     I note also that in paragraph 3 of the counterclaim, the defendants stated that they had a “moral obligation” to pay.

106. [106]
     It follows that I do not accept that the money was paid on the understanding that it would settle the matter, nor that it was paid under a mistake of fact.

Orders

1. The plaintiff’s claim is dismissed.

2. The defendants’ counterclaim seeking a declaration that the plaintiff’s claim has been settled and that there has been accord and satisfaction is dismissed.

3. The defendants’ alternative counterclaim for $60,000.00 from the plaintiff as money held and received is dismissed.

4. It is declared that the defendants are each entitled to $127,578.64 held on account of this action.

5. Interest on that sum for each defendant is allowed pursuant to s 47 of the Supreme Court Act 1995 (Qld) at the rate of 10% from 18 January 2008 to 11 May 2011, a period of 1209 days producing a figure of $42,254.55 ($34.95 per day). 

6. I will hear the parties as to costs.