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Which case won?

casea
The case for M
  • My brother, G, may technically have a legal interest in the shares, but he should be estopped (barred) by the court from insisting upon those legal rights.
  • G encouraged me to assume that the sale of the farm included the shares and associated water rights. At the family conference in April 2000, I asked G if the sale was "land and water", and G replied "yes". G also told me "I am selling everything, you go your way, I go mine." I took this to mean a complete separation of all joint property, including the shares.
  • Relying on this assumption, I treated the shares and the water allocation as my own property, paying the full costs of the water supplied to the farm each year from 2000 onwards.
  • Clearly G knew that I was operating under the assumption that I was the sole owner of the shares, since he never offered to contribute to the cost of the water.
  • I will suffer significant detriment if G is allowed to insist upon his strict legal right to the shares. I could even lose my water allocation for the farm.
  • The court should therefore declare that G holds his interest in the shares on trust for me and require him to transfer this interest to me.
caseb
The case for G
  • I never encouraged my brother, M, to assume that the sale of the farm included the shares and associated water rights. When I agreed that the sale was for “land and water”, I meant the water then already on the farm, not the water rights.
  • Even if the court concludes that by “land and water” I meant water rights, the contract for sale prevents G from relying on any representations not expressly provided for in the contract. The contract was silent on whether the shares and associated water rights were included in the sale.
  • In June 2000 I gave M a power of attorney that he could use in his dealings with the utility company to access my share of the farm’s water allocation each year. So M clearly knew that he wasn’t the sole owner of the shares and associated water rights.
  • I did nothing to foster an assumption by M that the shares and associated water rights were included in the sale, so I should not be barred from exercising my legal rights in relation to the shares that we co-own.
  • The court should appoint a trustee to sell the shares and divide the proceeds of sale equally between M and me.

So, which case won?

Cast your judgment below to find out
Case A Case B

Case A won. You were right!

How people voted
a46%
b54%

Expert commentary on the court's decision

“It is so important to ensure that everything associated with a sale is clearly dealt with in the contract. Even though in this case, the outcome was that the shares be transferred to the owner of the land, Maurice, he still had to spend much time in court worrying about this and paying his legal advisors.”
Court rules in favour of M, requiring G to transfer the shares to M

In Walsh v Walsh [2011] NSWSC 271 the Supreme Court of NSW ruled in favour of the defendant, Maurice Walsh.

The court declared that the plaintiff, Graham Walsh, held the shares in Murrumbidgee Irrigation Limited (MIL) on trust for Maurice and ordered Graham to transfer his interest in the MIL shares to Maurice.

Principles of equitable estoppel

The court noted that for Maurice to establish an equitable estoppel, he had to prove that:

1. Graham encouraged him to adopt an assumption or expectation that a particular legal relationship existed (ie that Maurice was sole owner of the shares);

2. Maurice had relied upon that assumption or expectation;

3. Maurice’s reliance was known or expected by Graham; and

4. Maurice would suffer detriment if the assumption or expectation that he solely owned the shares was not fulfilled by Graham.

Court finds plaintiff barred from claiming interest in water utility shares

The court agreed with Maurice’s argument that Graham was estopped (barred) from asserting his strict legal rights to an interest in the MIL shares against Maurice.

Graham had permitted Maurice to act in relation to the MIL shares as if Maurice held the exclusive rights to them, and Maurice would suffer detriment if Graham was allowed to keep the shares.

Contrast in strength of witnesses

The court commented that it found Maurice to be a prudent man and an honest witness.

It also accepted his mother’s evidence that upon dissolution of the family partnership “the children would all then go their separate ways and would be completely independent from each other”.

In contrast, the court did not believe Graham’s story about a power of attorney having been granted, stating that the implausible story “significantly damaged Graham’s credit as a witness”.

Court has no need to consider whether shares passed between brothers under sale contract

In addition to arguing equitable estoppel, Maurice argued that although there was no express reference to water rights in the land sale contract, the water allocation and the associated shareholding could be found to be inherently part of the bundle of rights of ownership sold under the contract.

The court said that this could not be decided without detailed analysis of the operation of the MIL Constitution in relation to the title to the farm. Because the court could decide the proceedings on the basis of estoppel, it did not find it necessary to do this analysis or to decide the argument.

Court rejects argument that implied term in land sale contract required transfer of shares

The court rejected Maurice’s argument that a term should be implied in the land sale contract to the effect that “Graham would execute any documents and do all things necessary to convey to Maurice the shares in the MIL and any associated contractual rights in relation to the water allocations”.

The court noted that although a term may be implied to give a transaction the efficacy that both parties intended it to have, Maurice and Graham’s transaction was legally efficacious without the need for an implied term.

Appeal by plaintiff to NSW Court of Appeal dismissed

In Walsh v Walsh [2012] NSWCA 57, Graham appealed the Supreme Court’s decision to the NSW Court of Appeal, but his appeal was dismissed.

Important to document terms regarding water access

It is so important to ensure that everything associated with a sale is clearly dealt with in the contract. Even though in this case, the outcome was that the shares be transferred to the owner of the land, Maurice, he still had to spend much time in court worrying about this and paying his legal advisors.

Water is so important in everyone’s life, especially in rural areas where businesses require water to function. Your contract or deed of transfer should always specify exactly what is included, including specifically water.

Further, where there is a water sharing agreement, the specific details of that agreement should be detailed in writing, including obtaining consent from relevant overarching entities such as Murrumbidgee Irrigation, or your local community bore scheme.

Strength of witness testimony can determine outcome of case

This case demonstrates that even if something is not written down, the court has the power to make a transfer based on the evidence provided before it at trial.

In this case, the mother’s oral evidence at trial was convincing, where she stated that the purpose of the partnership dissolution was to ensure the children were independent of each other.

Sometimes, winning or losing a case can come down to how well you or one of your witnesses perform in the witness box.

If you have strong, clear evidence, you are more likely to convince a judge to order in your favour.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.
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