Supreme Court New South Wales Medium Neutral Citation: Fragar v Fragar (No 2) [2024] NSWSC 348 Hearing dates: On the papers Date of orders: 4 April 2024 Decision date: 04 April 2024 Jurisdiction: Equity Before: Hmelnitsky J Decision: (1) Dismiss the summons. (2) Declare that the plaintiff holds her legal interest in the two blocks of farmland known as Talgong, folio identifiers 6/721739 and 13/724609 on trust for the cross-claimants trading as the Fragar Partnership. (3) Declare that the plaintiff holds her legal interest in the land identified in folio identifier 1/1208752 subject to a resulting trust for the cross-claimants trading as the Fragar Partnership. (4) Order that the plaintiff's legal interest in Talgong (folio identifiers 6/721739, 13/724609 and 1/1208752) be transferred to the cross-claimants within 28 days of the making of these orders. (5) Order that the cross-claimants indemnify the plaintiff for: (a) the costs, expenses and any transfer duty for, or associated with, the transfer of Talgong; and (b) the liability to pay any loans secured against Talgong, rates, duties or expenses for Talgong. (6) Declare that the cross-claimants trading as the Fragar Partnership are indebted to the plaintiff in the sum of $602,391.03 and are liable to pay this amount to the plaintiff within 28 days of the making of these orders. (7) The further amended cross-claim is otherwise dismissed. (8) Order the plaintiff/cross defendant pay 75% of the defendant's and cross claimants' costs of the proceedings, on an ordinary basis, as agreed or assessed. (9) Grant liberty to any party to apply within three months of entry of these orders, on 7 days notice, for consequential and ancillary orders for the purpose of, or with respect to, giving effect to and implementing these orders. Catchwords: COSTS – Party/Party – Court's discretion – Where the plaintiff has had a measure of success JUDGMENTS AND ORDERS – Interest – Pre-judgment interest – Where plaintiff seeks interest on a loan – Whether to grant interest under s 100 of the Civil Procedure Act 2005 (NSW) Legislation Cited: Civil Procedure Act 2005 (NSW) Conveyancing Act 1919 (NSW) Cases Cited: Beck v Henley [2014] NSWCA 201 Bloch v Bloch (1981) 180 CLR 390; [1981] HCA 56 CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98; [2005] HCA 53 Falkner v Bourke (1990) 19 NSWLR 574 Fragar v Fragar [2024] NSWSC 193 Gray v O'Donnell [2009] NSWSC 259 Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 Ogilvie v Adams [1981] VR 1041 Smith's Snackfood Co Ltd v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470 Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 Category: Consequential orders Parties: Linda May Fragar (Plaintiff/Cross-Defendant) Jeffrey Evan Fragar (Defendant/First Cross-Claimant) Katherine Margaret Fragar (Second Cross-Claimant) Representation: Counsel: C Bolger (Plaintiff/Cross-Defendant) A Power (Defendant/First Cross-Claimant and Second Cross Claimant) Solicitors: Campbell Paton and Taylor Solicitors (Plaintiff/Cross-Defendant) Silkman Austen Brown Lawyers (Defendant/First Cross-Claimant and Second Cross-Claimant) File Number(s): 2020/246228 Publication restriction: Nil JUDGMENT 1. I delivered judgment in this matter on 4 March 2024: Fragar v Fragar [2024] NSWSC 193. These reasons should be read with my earlier judgment. 2. I summarised my conclusions at paragraph 18 of my earlier judgment (J[18]) as follows: 1. There was an agreement reached in February 2013, but that it was not nearly so detailed and extensive as alleged. The only material agreement reached as to a succession plan was that Barry and Linda would restore ownership of Talgong to joint tenancy and that it would remain so held. Other details of how, when and on what terms Barry and Linda would eventually retire from farming and from the partnership were discussed but not finally resolved at the February 2013 meeting. 2. Kathy contributed the lion's share of her inheritance to the partnership, in return for which the existing partners (Barry, Linda and Jeffrey) recognised her as a 33% partner (with contributed funds equal to the cash contribution). Barry and Linda continued as partners as to 17% each. 3. Talgong was partnership property of the three-way partnership largely but not only because it had been purchased by Barry, Linda and Jeffrey as partners and paid for out of the revenue of the business which they conducted as partners. It was also property of the four-way partnership. 4. Barry and Linda used cash provided by Kathy and other partnership funds which they used to purchase the Dubbo house plus other property. These transactions reduced their partners' funds in the four-way partnership and, later, their loan balances with the two-way partnership as further explained below. 5. On the dissolution of the four-way partnership which occurred on Barry and Linda's retirement in 2014, the parties went their separate ways on terms that are reflected in the immediately subsequent partnership accounts of the two-way partnership. Barry and Linda relinquished their claims as partners altogether. The balance of their partners' funds were carried to a loan account. The subsequent financial assistance that they received from the ongoing two-way partnership was part repayment of those loans. Those loans were at call and interest free. They have neither been demanded nor forgiven, despite disappearing from later financial statements. 6. I also found that the four-way partnership was wound up informally by the parties on terms that all of the partnership property would thereafter be owned by the two-way partnership. It was only in that way that the two-way partnership could continue to trade, which was everyone's very clear intention at the time, and to carry the significant debt, including Barry and Linda's loan accounts, with which all parties intended it should be saddled. 1. I also said that the practical effect of these findings was that would I reject Linda's claim for relief under s 66G but that I would also not make the declarations sought by Jeffrey and Kathy. 2. At J[166] I foreshadowed final relief in the following form, but made directions to allow the parties to make further submissions on the form of these orders: 1. Dismiss the summons. 2. Declare that the plaintiff holds her legal interest in the two blocks of farmland known as Talgong, folio identifiers 6/721739 and 13/724609 on trust for the cross-claimants trading as the Fragar Partnership. 3. Declare that the plaintiff holds her legal interest in the land identified in folio identifier 1/1208752 subject to a resulting trust for the cross-claimants trading as the Fragar Partnership. 4. The further amended cross-claim is otherwise dismissed. 5. The plaintiff is to pay the cross-claimants' costs. 1. In accordance with directions made at the time of delivering judgment, Linda has submitted that it would appropriate to make final orders in the following form: "1. DISMISS the Summons. 2. DECLARE that the plaintiff holds her legal interest in the three blocks of farmland known as Talgong, folio identifiers 6/721739, 13/724609 and 1/1208752 (hereinafter "Talgong") on trust for the benefit of the cross claimants trading as the Fragar Partnership. 3. DECLARE that the cross claimants have had sole use and enjoyment of Talgong as and from 30 June 2014 to the exclusion of the plaintiff and the late Barry Douglas Fragar. 4. ORDER that the plaintiff do all things necessary to transfer her interest in Talgong to the cross claimants within 28 days of the entry of these Orders. 5. ORDER that the cross claimants indemnify the plaintiff for: (a) the costs, expenses and any transfer duty for, or associated with, the transfer of Talgong; and (b) the liability to pay any loans secured against Talgong, rates, duties or expenses for Talgong. 6. ORDER that the four way partnership JE, KM, BD & LM Fragar (ABN 82 106 435 958) (Four Way Partnership) be wound up as at 30 June 2014 (Wind up Date). 7. ORDER the first and second cross-claimants as the successors to the Four Way Partnership pay the plaintiff the sum of $835,208.87 (Judgment Sum) within 28 days in full satisfaction of the entitlements of the plaintiff and the late Barry Douglas Fragar to the assets of the Four Way Partnership. 8. NOTE the Judgment Sum is the combined net value of the plaintiff's share and the late Barry Douglas Fragar's share in the Four Way Partnership as at the date of the informal winding up, less the payments made by the cross claimants to the plaintiff and the late Barry Douglas Fragar after the Wind Up Date to reduce that liability. 9. ORDER that interest is payable on the Judgment Sum pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from the Wind Up Date to the date of these orders. 10. The further amended cross-claim is otherwise dismissed. 11. ORDERS the plaintiff/cross defendant pay 25% of the defendant's and cross claimants' costs of the proceedings, on an ordinary basis, as agreed or assessed. 12. GRANTS liberty to any party to apply on 7 days notice, for consequential and ancillary orders for the purpose of, or with respect to, giving effect to and implementing these Orders." 1. Jeffrey and Kathy contend for final orders in the form which I proposed but with the addition of two orders, which would become orders (4) and (5), as follows: "(4) Order that the plaintiff's legal interest in Talgong (folio identifiers 6/721739, 13/724609 and 1/1208752) be transferred to the cross-claimants within 28 days of the making of these orders. (5) Declare that the cross-claimants trading as the Fragar Partnership are indebted to the plaintiff in the sum of $602,391.03, and are liable to pay this amount to the plaintiff within 28 days of the making of these orders." Common ground 1. There is common ground on most matters. I will, as foreshadowed, dismiss the summons and declare that the plaintiff holds her legal interest in Talgong including the Crown Road on trust for the benefit of the cross-claimants trading as the Fragar Partnership. 2. I will also order the plaintiff to do all things necessary to transfer her legal interest in those titles to the cross-claimants within 28 days. That order is appropriate in circumstances where all of the beneficiaries are adults with an absolute vested and indefeasible interest in the trust property: CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98; [2005] HCA 53 at [43]-[47]; Beck v Henley [2014] NSWCA 201 at [32]-[38]. 3. I will further order that Jeffrey and Kathy indemnify Linda for any costs and expenses, including any transfer duty, associated with the transfer. 4. Linda has sought a further order that she be entitled to indemnity in respect of any loans secured against Talgong and any rates, duties and expenses for Talgong. It is implicit in my conclusion as to the basis on which the four-way partnership was wound up that all such liabilities and expenses were to be borne (and, as matters stand, have actually been borne) by Jeffrey and Kathy as partners in the continuing partnership. I will therefore also make this order as proposed by Linda. 5. Linda seeks a declaration that Jeffrey and Kathy have had sole use and enjoyment of Talgong as and from 30 June 2014 to the exclusion of Linda and Barry. The utility of this declaration is said to be that it is relevant to the question of whether the Centrelink debt which Linda and Barry incurred in light of their supposedly continuing interest in Talgong was correctly imposed: see J[88]-[89]. 6. The evidence shows that neither Linda nor Barry ever had any use or enjoyment of Talgong from the time of dissolution of the four-way partnership. To the extent they received funds from Jeffrey and Kathy subsequent to June 2014, they did so in partial repayment of their loans. They did subsequently assert a legal and equitable interest in Talgong, but my conclusions mean that they were wrong to assert anything other than a bare legal interest. 7. I accept that there is utility in making this declaration. Matters in dispute 1. The main areas of dispute concern the terms of the loan from the Fragar Partnership to Linda and Barry, whether there should be interest on the loan, and the question of costs. The loan 1. At J[149] I said that the 2015 and 2016 accounts of the two-way partnership show a loan balance in favour of Barry and Linda. I also noted: "All parties accepted that these loans have neither been paid nor forgiven. Nor have they ever been demanded. The accounts show them as bearing no interest. No-one suggested that the accounts were wrong in this respect. Nor did the evidence disclose any other terms in relation to the loans." 1. This in part reflected Jeffrey and Kathy's express acknowledgment in closing submissions that if I were to conclude that they were the owners of Talgong in equity, then "they accept that they would be liable to repay to the plaintiff the complete sum of the loan account as at 2016, the 602,000." It also reflected the other evidence about the existence of the loan at the time of dissolution of the partnership. 2. I also pointed out that the loan reflected Linda and Barry's share of the net assets of the four-way partnership on dissolution, based on book values, and taking into account their historical contributions to the partnership: J[150]. 3. There seems to be no dispute that Linda as legatee of Barry's residuary estate is now entitled to recover Barry's loan as well as her own. 4. Linda submits that I should declare that the loan balance should instead be recalculated to reflect the market value of the assets of Talgong at the time of dissolution. She submits that the parties had a recent valuation of Talgong to hand at the time and that Kathy had bought into the partnership on the (rough) basis of that valuation. 5. The difficulty with this submission is that my conclusions about the existence of the loan, and my observations about its terms, reflected the evidence about how the parties actually dealt with one another at the time of dissolution. The evidence discloses that the loans were created in a particular amount and it was this fact which significantly affected my conclusion that the four-way partnership had been wound up informally on the terms I found. It was not and is not now necessary or appropriate to consider the terms on which the four-way partnership should be wound up, or the terms on which it should have been wound up, because I have concluded that it already was wound up on terms reflected in the immediately subsequent accounts and the contemporaneous acceptance by all parties that the loans, as recorded, were in place: see for example my discussion of the way Linda and Barry prepared their subsequent wills and the accompanying statutory declarations: for example J[57]. 6. I would only have occasion to consider the basis on which the four-way partnership should be wound up (such as, for example, the question of whether the loans should reflect book values or market values) if I had concluded that it had not already been wound up. Even then, the question would be how it should now be wound up, not how it should have been wound up at the time. It would be an exercise that recognised that all partnership property, including Talgong, was held on a continuing trust for sale. 7. I therefore decline to declare that the loan should be in any amount other than as stated at the time. My invitation to the parties to identify the amount was to ensure that my declaration correctly reflected historical movements in the account, such as to reflect any other payments made by Jeffrey and Kathy to Linda and Barry by way of further repayment. It was not an invitation to revisit the basis on which the four-way partnership was wound up. I will therefore make order 5 as proposed by Jeffrey and Kathy. 8. For similar reasons I will not make an order winding up the four-way partnership as also sought by Linda. My judgment proceeded on the basis of my finding that that partnership had already, in fact, been wound up by the parties, albeit informally. Interest 1. The next question is whether I should order interest on the loan. Linda submits that it is appropriate to make an order under s 100 of the Civil Procedure Act 2005 (NSW). She submits that it is appropriate for interest to run either from the date of dissolution of the four-way partnership on 30 June 2014 or, alternatively, 11 December 2017. The significance of the 2017 date is not readily apparent. 2. Linda has drawn my attention to Ogilvie v Adams [1981] VR 1041 where Fullagar J said at 1043: "... Where there is a loan of money simpliciter (i.e. with nothing at all said as to repayment), the money is repayable instanter...." 1. She also points out that the Court ordinarily awards interest on money judgments: see for example Falkner v Bourke (1990) 19 NSWLR 574 at 576 per Priestley JA. 2. Jeffrey and Kathy submit that this is not a proceeding "for the recovery of money" within the meaning of s 100(1). They point out that the first time there has been any claim in relation to the loan was in Linda's outline of closing submissions dated 24 February 2024. 3. Although not free from doubt, I am inclined to consider the present proceedings to be a proceeding for the recovery of money within the meaning of s 100(1). 4. It is true that Linda brought proceedings by way of summons for an order under s 66G of the Conveyancing Act 1919 (NSW) that trustees for sale be appointed and that Talgong be sold. However, she also sought consequential orders, including that the proceeds of sale be applied first to the usual costs and expenses of sale and then to the parties in a way that reflected her contention as to their respective interests. To this extent, there is some similarity to the relief sought in Bloch v Bloch (1981) 180 CLR 390; [1981] HCA 56. That case also involved a dispute among family members as to the extent of the parties' ownership of property. At 398, Wilson J (with whom the other members of the Court agreed) said: "The claim is for a declaration that the plaintiffs are entitled to a one-third share of the "proceeds of sale" of the property, and, inter alia, for "further or other relief". The writ was issued on 5 July 1976, the sale of the property was finalized on 9 July 1976, and on that day, by arrangement between the parties, the sum of $20,000 being part of the proceeds of sale was paid into court. In addition to making a declaration of the one-third entitlement of the respondents his Honour also ordered that the judgment be satisfied by payment out of the moneys in court. In my opinion, the proceedings clearly come within the description of proceedings in respect of a cause of action for the recovery of money." 1. It is true that the immediate question here is as to whether interest may be awarded on the loan from the partnership, not on an amount owing on the proceeds of sale. But the power to award interest on a judgment sum is one that is engaged where the proceedings meet the description in s 100. I am satisfied that the s 100 power would permit me to make an order for interest on the loan if it were otherwise appropriate to do so in the exercise of my discretion. 2. However, there are several reasons why it is inappropriate to award interest here. First, as I have already found, Barry and Linda's loans were interest free and on demand. The evidence shows that they never demanded full repayment nor did they ever take any other steps to recover, save that they did accept funds after 1 July 2014 in partial repayment. 3. Had it not been for Jeffrey and Kathy's acceptance of their continuing partnership liability to pay the loan to Linda, a question might well have arisen as to whether there was any liability at all in these circumstances having regard to the passing of time. An aspect of the passage in Fullagar J's reasons in Ogilvie v Adams on which Linda relies is that it would have been open to Jeffrey and Kathy to argue that recovery of the loan was statute barred: see Gray v O'Donnell [2009] NSWSC 259 at [15]-[16]. 4. This is also not a case of a simple loan being demanded after many years. In such a case, it would ordinarily be appropriate to award interest to reflect that the debtor has had the use of the creditor's funds. In the present case, however, Linda's whole stance in relation to Talgong has been to deny the very circumstance that I found was always intended to put the Talgong Partnership in a position to be able to pay the loan in the first place, namely that Jeffrey and Kathy are entitled to Talgong. 5. Linda now criticizes Jeffrey and Kathy for not realising sooner that the partnership has the continuing loan which it still recognises. She submits that if the existence of the loan had been recognised sooner, the whole dispute may have been quelled. That may be so, but it is a criticism that might just as easily be made of Linda's position. It was always open to her to recognise the basis on which she and Barry had retired from the partnership. She was, as I have found, mistaken to treat herself as continuing to own anything other than a bare legal interest in Talgong. 6. I also note that a claim for interest under s 100 was never pleaded. 7. In these circumstances, I decline to make any order in relation to interest. Costs 1. Linda recognises that Jeffrey and Kathy have been overwhelmingly successful in the proceedings but submits that this is a case where it is appropriate to deprive them of some portion of their costs to reflect the fact that the major aspect of their cross-claim has been rejected. She has referred me to Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [63]-[66]. She submits that the questions arising on the cross-claim, namely the existence of the alleged 2013 agreement and the matters which were said to flow from it, were clearly dominant within the meaning of the authorities. In this respect, Linda referred me to Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [107] and Smith's Snackfood Co Ltd v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470 at [229]–[232]. 2. Jeffrey and Kathy submit that they have been overwhelmingly successful and that there is no good reason to depart from the usual order as to costs. 3. I consider that it is appropriate for Jeffrey and Kathy to recover most but not all of their costs. 4. I have already noted that the question of the existence of the 2013 agreement and the questions concerning estoppel which flowed from the same facts occupied a very significant part of the hearing time: J[97]. Jeffrey and Kathy were generally unsuccessful in these claims. However, the conclusions I reached about the basis on which the four-way partnership was wound up depended in large part on the evidence which was led by Jeffrey and Kathy in support of these claims. This makes it difficult to say that there was some part of their case that was readily separable. 5. Nevertheless, it is also necessary for me to consider the overall result. The final position is that Linda has no ongoing interest in Talgong but she has established an entitlement to a not-insignficant loan account, the existence of which has been acknowledged by Jeffrey and Kathy. 6. I will therefore order Linda to pay 75% of Jeffrey and Kathy's costs as agreed or assessed. Orders 1. Linda submitted that I should also grant liberty to apply against the possibility that there may be additional matters that arise. I am prepared to make such an order, provided it is for a limited time. In the circumstances, a period of three months seems appropriate. 2. The orders will therefore be: 1. Dismiss the summons. 2. Declare that the plaintiff holds her legal interest in the two blocks of farmland known as Talgong, folio identifiers 6/721739 and 13/724609 on trust for the cross-claimants trading as the Fragar Partnership. 3. Declare that the plaintiff holds her legal interest in the land identified in folio identifier 1/1208752 subject to a resulting trust for the cross-claimants trading as the Fragar Partnership. 4. Order that the plaintiff's legal interest in Talgong (folio identifiers 6/721739, 13/724609 and 1/1208752) be transferred to the cross-claimants within 28 days of the making of these orders. 5. Order that the cross-claimants indemnify the plaintiff for: 1. the costs, expenses and any transfer duty for, or associated with, the transfer of Talgong; and 2. the liability to pay any loans secured against Talgong, rates, duties or expenses for Talgong. 1. Declare that the cross-claimants trading as the Fragar Partnership are indebted to the plaintiff in the sum of $602,391.03 and are liable to pay this amount to the plaintiff within 28 days of the making of these orders. 2. The further amended cross-claim is otherwise dismissed. 3. Order the plaintiff/cross defendant pay 75% of the defendant's and cross claimants' costs of the proceedings, on an ordinary basis, as agreed or assessed. 4. Grant liberty to any party to apply within three months of entry of these orders, on 7 days notice, for consequential and ancillary orders for the purpose of, or with respect to, giving effect to and implementing these orders. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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