Gladys Hargraves v Susan Eveston

This unpleasant litigation involves a dispute between a mother and daughter over a fairly large sum of money. The plaintiff (Mrs Hargraves) is suing her daughter (Mrs Eveston) for around $1.7 million, which she lent her in 2013 and 2014. Mrs Eveston agrees that she has to pay her mother back. However, she says that in September 2016 her mother agreed to defer the repayment date until another family dispute was settled. At its core, the dispute involves the question of whether a particular conversation occurred in September 2016 and, if it did, the precise contents and legal effect of the conversation. The two litigants gave evidence at the hearing. Neither presented as a witness of particular credit. No other witnesses were called. Based on the oral evidence, it is difficult to decide what (if anything) the parties agreed upon. However, on the basis of the objectively established chronology of events following the disputed conversation, I am comfortably satisfied that no binding variation was made to the contractual terms. Mrs Eveston is bound to repay the loan immediately and there will be a judgment for the plaintiff. The parties can agree upon the precise amount of the debt, including the interest that has accrued to the date upon which the judgment in a certain sum is entered. These are my reasons for those conclusions.

There is no dispute that on 29 November 2013 Mrs Hargraves lent Mrs Eveston $1,654,516. The verified defence said the advance of the money was “not admitted” but the defendant acknowledged at the hearing that her mother gave her the money. This was not surprising given the ease with which the advance could be established. On 13 March 2014, the loan agreement was formalised by a deed executed by both parties. There was a stipulated interest rate of 10% commencing on 29 November 2013. The “principal repayment date” was 15 September 2015. There were two other contingencies relating to the repayment date but neither eventuated. On 7 April 2014, a second deed was entered whereby Mrs Hargraves lent a further $7,000 to her daughter. The deed particularised the same interest rate and principal repayment date. On 17 October 2014, the parties entered a third deed wherein a further $20,000 was advanced on the same terms.

Accordingly, by the terms of the three deeds, on 15 September 2015 an amount of $1,681,516 together with interest fell due for repayment. However, the parties agreed that the original repayment date was extended, although there is some dispute as to the precise terms of the conversation that led to that extension.

The circumstances of the extension concerned the disposal of real estate referred to as “the Box Hill property”. This was a property worth many millions of dollars. Mrs Eveston’s father transferred it to Mrs Eveston and her husband in 1986 as a gift. At the time the loans were created with her mother, Mrs Eveston and her husband were attempting to sell the Box Hill property. Mrs Eveston wanted her mother to delay repayment of the loans until the Box Hill property was sold. Mrs Hargraves agreed, although she claimed she had no real choice. On 17 September 2015, Mrs Eveston and her husband entered an agreement to sell the Box Hill property for $10,130,000. However, the completion date was to be “12 months after the contract date”, that is 17 September 2016. The parties were in general accord that Mrs Hargraves agreed to defer repayment of the loans for that (approximately) twelve month period. There was a dispute as to precisely what was said in the conversation in which that agreement was reached. That dispute involved whether the parties also discussed other family financial disputes and attempting to resolve all debts and disputes at the same time. For present purposes, it suffices to say that both sides accept that the repayment date was deferred until completion of the sale of the Box Hill property in September 2016.

In September 2016, the sale of the Box Hill property was settled and Mrs Eveston received her share of the proceeds of the sale (presumably half of approximately $10 million). By the terms of the agreement, as varied the year before, it was at this point that Mrs Eveston was contractually obliged to repay the loans together with the agreed interest. However, her case is that she and her mother agreed to a further variation to the conditions of the loan. She gave evidence that “in around early to middle September 2016” there was a conversation to the following effect:

Mrs Hargraves denies this conversation and disputes the assertion that she agreed to further defer repayment of the loans.

The references in this conversation to “Neil” and “your brother” are to the same person. Mrs Hargraves has three children including Mrs Eveston and Neil Hargraves (“Neil”). The references to “various disputes” and “all the disputes” are to ongoing disputes between Neil, Mrs Eveston, Mrs Hargraves and other parties, both corporate and individual. The reference to “funds from Oberon” relates to money that Mrs Eveston says one of the family businesses (Oberon Quarries) owes her and her husband. There are extant proceedings in the Equity Division of this Court in relation to this alleged debt and an attempt to consolidate these proceedings with those proceedings was unsuccessful. [1]

It is necessary to go back in time to understand in general terms the historical context in which the present dispute arises, the sources of the conflict and the internecine nature of the disputes that have vexed the family since the death of the man who made the family’s fortune.

Mrs Hargraves’ late husband set up the business known as Oberon Quarries many years ago. The structure of the family businesses was somewhat complex, and became more complex after Mr Hargraves died. There was a family company – VR Hargraves Investments Pty Ltd – which was an investment vehicle for Mr and Mrs Hargraves. It seems they did very well in the concreting business, and otherwise in their investments, and Oberon Quarries was established so that the family could produce its own raw material for the concreting business. Initially, Mr Hargraves and Neil operated Oberon Quarries in conjunction with another family or corporation referred to by the parties as “the Friends”.

The Friends’ involvement is of no particular significance to the present dispute other than to observe that there was a falling out between Neil and the Friends in 2002 and, as a result, it was necessary (or decided) to buy the Friends’ share of the business. As a result, Mrs Eveston’s Box Hill property was used as security for a loan. Over the years, this investment or loan was rolled over, renewed and reconfigured on a number of occasions. Mrs Eveston says that in this context, in June 2008, she and her husband lent Oberon Quarries $1,642,705. Not unreasonably, she expected to be repaid and to receive a share of the profits made by Oberon Quarries. There remains an ongoing dispute about this and it is the subject of the Equity proceedings to which I referred earlier.

After Mr Hargraves’ death in 1995, his estate was left to Mrs Hargraves and there were conversations between the remaining family members as to how the businesses should be run. The details of these are not important to resolve the present dispute except insofar as they provide further context for the conversation upon which Mrs Eveston relies in asserting that the repayment date was deferred until settlement of the “various disputes”. In other words, while the Eveston/Oberon loan is a concrete example of such a dispute, there are other matters that have, over time, caused various members of the family to fall into disagreement over money. It seems that Mrs Hargraves has sided with one or other of her two antagonistic children at different times or, perhaps, that she has been torn and tried to keep the peace between them. The defendant’s case is that the plaintiff agreed to defer repayment of the loan being the subject of the present proceedings until the family disputes, and at least the Eveston/Oberon loan, were resolved.

Mrs Eveston worked for many years at Oberon Quarries at a wage that she considered “did not reflect [her] tasks and responsibilities”. She was, by that time, qualified in business and had experience operating a number of businesses. Neil was running the business. There were, at least according to Mrs Eveston, a number of discussions between her and her mother about trying to persuade or force Neil to dispose of the assets of Oberon Quarries “equitably between us”.

At some stage, in about 2009 to 2011, Mrs Eveston “used company funds to meet personal commitments.” In her affidavit she says she is “now” aware that she should not have done this. Under cross-examination she admitted (with the protection of a certificate under s 128 of the Evidence Act 1995) that she “stole” from the company. This caused further rancour between the members of the family. There remains a dispute as to how much money was misappropriated by Mrs Eveston. She concedes it amounted to about $50,000. Those on the other side of the dispute suggest it is considerably more.

Mrs Eveston also referred to proceedings (2017/235490), which relate to an allegation by Neil that she misappropriated the funds of another company (Karinya Haulage). These proceedings are also ongoing.

There have been attempts to resolve these various disputes by formal mediation but no agreement has been reached.

Meanwhile, and sadly, these financial shenanigans have taken their toll on the personal relationships within the family. This involves, as I followed the evidence, not only Mrs Hargraves and at least two of her children but also some of her grandchildren. After her home was sold (which was owned by VR Hargraves Investments), Mrs Hargraves lived for a long while with Mrs Eveston, even it seems while the current dispute was in its infancy. She later moved and it is now apparent that the relationship between mother and daughter has been badly damaged. When the parties gave their evidence, people in the back and side of the courtroom, who I take to be other members of the family, made their feelings clear by their visceral and ostensible reactions. There were dark looks across the public gallery. There was scoffing, tsk-tsking, and rolling of eyes. None of this matters very much, at least from a legal perspective, although the palpable, personal hostility between the parties impacted on their credibility and made their demeanour difficult to assess.

I do not pretend that the above summary is close to comprehensive and it does not purport to be in chronological order. But it is within this context that the present dispute must be determined. What is clear from the background is that there are other family disputes, including a particular dispute under which Mrs Eveston and her husband may be owed a substantial sum of money. Accordingly, the terms of the conversation asserted by Mrs Eveston (by which the repayment date under the varied term of the deeds was said to be further extended until settlement of other disputes) are not implausible on their face. That is, there were other issues including the debt owed by Oberon Quarries to Mrs Eveston that could have formed the basis for a future repayment date which was beyond the settlement of the Box Hill property.

Both parties gave evidence and were cross-examined. As stated in the first paragraph of this judgment, neither party presented as particularly credit-worthy.

Mrs Hargraves had difficulty answering questions directly. I did not form the view that this was the result of any lack of nous or acumen associated with her advanced years. Rather, I formed the view she was prevaricating, responding defensively, and that her animosity towards her daughter caused her to be guarded and less than open in answering questions. She repeatedly referred back to the defalcations committed by Mrs Eveston between 2009 and 2011 when the issue was not the subject of the questioning. She purported not to follow the cross-examiner’s point when he repeatedly reminded her that she had lived with Mrs Eveston and that the latter had assisted her move, a long time after these misappropriations were exposed.

Similarly, Mrs Eveston was guarded and defensive when giving her evidence. Her version of the conversations upon which her defence is based is obviously to her financial advantage. She could not explain the correspondence emanating from the lawyers for both sides in the aftermath of that conversation other than to say that she may (or must) have neglected to tell her own lawyer that the agreement had been varied as she now asserts. [2] The assessment of her credibility must be made in light of her admissions, made with the protection of a s 128 certificate, that she stole money from the company and did so in large amounts. Even allowing for the length of time that has expired since the theft, and her ready admission of her criminal conduct, the matter remains significant in an assessment of her honesty when it comes to financial matters.

The credibility issues attending the evidence of both Mrs Eveston and Mrs Hargraves make it difficult, on the basis of the oral evidence, to come to a determination one way or another as to what was said in the conversations between the two in September 2015 and September 2016. However, the correspondence between their lawyers from September 2016 until the institution of proceedings on 1 June 2017 strongly suggests that no agreement was reached to further defer the repayment of the loan.

Mrs Eveston’s affidavit says that the controversial conversation took place in early to mid-September 2016. The evidence was that the conversation occurred after settlement of the Box Hill property took place. That was on 19 September 2016 and, accordingly, it is safe to assume that the conversation took place after that date. If the parties did reach the agreement asserted by Mrs Eveston, it is unlikely that her mother’s solicitor would have written a letter of demand around two weeks later. However, on 27 September 2016, Mrs Hargraves’ solicitor (Mr Gubbay) wrote to Mrs Eveston in the following terms:

On 13 October 2016, Mrs Eveston’s solicitors (Coleman Greig) replied:

The letter from Coleman Greig made no reference to any variation to either the deeds or the proposed repayment date. However, at that stage, the solicitors sought time to obtain instructions. Even so, the terms of the letter allow for an inference that there was some consultation between the lawyers and their client. If the agreement had been varied just a few weeks earlier, it is unlikely that there would be no mention of this and, rather, that the solicitors simply sought more time and copies of the relevant deeds.

On 14 October 2016, Mr Gubbay responded, taking umbrage at the request not to correspond with Mrs Eveston directly, providing copies of the deeds, indicating he had instructions “to immediately commence proceedings” and positing that Coleman Greig had “had ample time to obtain your client’s instructions.”

There was a substantial delay before proceedings were actually commenced on 1 June 2017. Mrs Eveston relies on this to raise an inference that there was, as she asserts, an agreement to defer the repayment date. She also relies on the fact that the parties appeared at this time to be getting on well in their personal relationship and that Mrs Eveston assisted her mother to move into new premises and similar normal, mother/daughter interactions. I have taken those matters into account in resolving the dispute between the parties and attempting to determine where the truth lies.

On 30 May 2017, Mr Gubbay wrote to Coleman Greig advising that he was instructed to commence proceedings and asking whether the latter firm had instructions to accept service. On 1 June 2017, proceedings were commenced by statement of claim.

On 2 June 2017, Mr Gubbay wrote to Coleman Greig as follows:

On 5 June 2017, Coleman Greig confirmed they had instructions to accept service.

According to a letter from Mr Gubbay dated 12 July 2017, the statement of claim was served on 13 June 2017. The letter noted that no appearance or defence had been filed, and asked for confirmation that Coleman Greig continued to act for Mrs Eveston.

On 13 July 2017, Coleman Greig wrote a lengthy letter requesting particulars. The letter was as follows:

Even allowing for lawyers’ tactics calculated to delay the expeditious conduct of litigation, this letter is extraordinary in its failure to make any mention, or seek any particulars, of the alleged agreement made in the middle of September 2016 to vary the terms of the agreement by forestalling the date for repayment until the resolution of the various disputes, as particularised in the defence that was eventually filed.

Mr Gubbay responded to the request for particulars on 14 July 2017, but opened his letter stating:

Coleman Greig wrote to Mr Gubbay on 21 July 2017 proposing what was described as “a commercial resolution” to the dispute. Again, there was no mention of any variation to the deeds or the loan agreement, or any reference to the conversation in September 2016. The letter was as follows:

In spite of the direct reference to the loan from Mrs Eveston to Oberon Quarries as well as other family disputes, nothing was said to suggest that the parties had already agreed to delay payment of the loans pending resolution of any or all of those disputes.

Mr Gubbay responded at some length on 24 July 2017 but stressed that the various disputes were distinct and unrelated. He indicated that he proposed to apply for default judgment that day.

The Court’s records indicate that default judgment was entered on 25 July 2017. A notice of motion seeking to set aside the default judgment was filed on 4 September 2017. It appears that the first time Mrs Eveston formally asserted that the loan agreements were varied as she now asserts was in her affidavit filed in support of the notice of motion to set aside default judgment. However, she prevaricated when cross-examined about this issue: [3]

Mrs Eveston provided no credible explanation for her failure to assert at an earlier time that she and her mother had a conversation in September 2016 (or September 2015) whereby the terms of the loans were varied to allow for a repayment date predicated upon repayment of the loan to Oberon Quarries, or other family disputes over money. I am satisfied that there was no such conversation. I do not doubt that many conversations occurred and that there were discussions about the whole of the family’s business affairs, and that this included the failure of Neil and Oberon Quarries to repay the loan to Mrs Eveston and her husband. However, I do not accept that an agreement was reached by which the terms of the loan agreement between the parties was varied or that there was a conversation in the terms now asserted by the defendant.

Based on that factual finding, the plaintiff must succeed in her action against her daughter.

The defence as filed raised an estoppel, presumably on the basis that Mrs Eveston and her husband set about using the $10,000,000 that they received from the sale of the Box Hill property on the basis of the alleged variation to the agreement. However, that ambitious pleading was abandoned and the evidence was that the couple invested the proceeds of the sale of the Box Hill property in another business. There was no evidence that they had suffered any relevant detriment as a result of the asserted representation by Mrs Hargraves that she would not enforce the terms of the agreement until a later date.

As the term of the deeds the defendant asserts was varied was agreed by the parties to have been varied orally a year before, I need not determine whether the deeds could lawfully be varied by a conversation (rather than by a further deed). However, against the possibility that I accepted the conversation occurred, the plaintiff also made a number of submissions about the legal consequences of the September 2016 conversation. It is not necessary to dwell on these arguments or to come to any final resolution in relation to them in view of my factual conclusion. However, for the sake of completeness, I will set out the arguments briefly and indicate my initial reactions to them. It was put that there was no consideration for the agreement, an argument with which I had some difficulty given the generous interest rate from which Mrs Hargraves was benefiting. It is true that Mrs Hargraves was already entitled to that interest rate but the extension of the loan meant that she would receive interest substantially higher than commercial rates for an extended period of time. A second issue was whether the conversation asserted by the defendant was such that it could be found that the parties intended to create legal relations. The nature of the family relationship was referred to, as were a number of authorities in analogous although not identical, circumstances. Against those arguments, this was a mother who insisted her daughter enter into three separate deeds and who had, a year earlier, varied the critical term of the deed orally by agreeing to defer the date for repayment of the money advanced under the loan agreement. Had the conversation occurred, I am satisfied it was capable of establishing (or, more correctly, varying) the legal relations between the parties. The final argument was that the terms of the conversation were so vague and uncertain as to be unenforceable. I had more sympathy with this argument in circumstances where some of the contingencies upon which the variation was based may never manifest and others were in such general terms that it would be difficult to know whether they had eventuated.

In any event, the observations in the last paragraph are probably unnecessary because there is no need to resolve these alternative issues raised by the plaintiff. I accept Mrs Hargraves’ primary case that the defence fails at an earlier stage. As I have said, and for the reasons indicated, I am not satisfied there was any such conversation (in September 2015 or September 2016) in the terms asserted by Mrs Eveston.

Accordingly, I make the following orders: