MERRADITH GAI MUNRO v RYAN JAMES KELLY [2024] SADC 147

Applicant: MERRADITH GAI MUNRO Counsel: MR N SWAN - Solicitor: SWAN FAMILY LAWYERS Respondent: RYAN JAMES KELLY Counsel: MR R CATTERWELL - Solicitor: RICHARDS & EVANS COMMERCIAL LAWYERS Hearing Date/s: 02/04/2024, 03/04/2024, 04/04/2024, 05/04/2024 File No/s: CIV-21-012720 B DISTRICT COURT OF SOUTH AUSTRALIA (Civil: Application) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated. MUNRO v KELLY [2024] SADC 147 Judgment of his Honour Judge Slattery 14 November 2024 DEBT RECOVERY INTERFERENCE WITH PROPERTY - INTERFERENCE WITH GOODS - CONVERSION - REMEDIES - ACTION FOR CONVERSION - DAMAGES - GENERALLY CONTRACTS - PARTICULAR PARTIES - RECOVERY OF MONEY AND PROPERTY In 2016, the applicant Ms Munro, commenced a relationship with Mr Shane Kelly, the father of the respondent. At the time, Shane Kelly and the respondent were conducting a farming enterprise upon several properties situate in the area of Wallaroo in the northern Yorke Peninsula, South Australia. The respondent was largely in charge of the farming operation as Shane Kelly had taken a fulltime employment in Adelaide in order to supplement his farming income. The respondent was also employed part-time in a fire brigade in Wallaroo in order to supplement his farming income. It was necessary to supplement the farming income because the farms were in marginal country, they were not profitable and the farming enterprise was, by 2016-2017, very significantly undercapitalised for plant, machinery, farm fixtures and in the operation of the farm generally. The applicant had previously been married to a farmer, she had been intensively involved in the operation of a multi-faceted broad acre farming enterprise and was very familiar with successful farming practices and the requirements of farming. In the period between 2016 and 2019, the matrimonial property proceedings between the applicant and her former husband were resolved and the applicant became entitled to receive a settlement totalling $4,200,000 payable in several tranches. At the same time, discussions occurred between the applicant and the respondent about the lack of income generated by the respondent's whole farming enterprise, its shortage of capital and its inability or failure to maintain and where necessary to replace plant, equipment, and fixtures of that enterprise. -- 1 of 77 -- Following those discussions, the applicant agreed to provide loan funds to be used by the respondent to pay for farming expenses incurred from day to day including for fuel, machinery parts and other necessities in order to allow the farming enterprise to continue. Those discussions then progressed to a suggestion by the applicant that ‘bobby’ calves be purchased from dairy farmers to then be fed to maturity and sold. The loans made by the applicant in connection with this venture were to be repaid upon sale of the cattle at maturity. Any profit was to be shared equally with the applicant. The suggestion by the applicant to commence the bobby calves venture was agreed upon and during the course of that enterprise the applicant agreed to make a series of further loans to the respondent to purchase plant and machinery and to construct fixtures upon the farming land. The respondent requested the applicant to make these loans for those purposes. At the same time, the respondent revived his hay contracting business by using a harvester and rake purchased by the applicant. He also operated a contract harvesting business using the same harvester, rake, header comb and transport trailers purchased by the applicant. That same harvester, header comb and rake were used by the respondent in his own farming business. The applicant then loaned funds to the respondent to purchase field bins, chaser bins, a roller and other equipment in connection with his hay carting and contract harvesting business. In 2020, the respondent borrowed funds from the applicant to construct machinery storage sheds and an accommodation shed for himself upon one of the farm properties. The applicant and the respondent agreed that the loans made by the applicant would attract an interest expense. The applicant contends that the agreed rate of interest was 4% and the respondent contends that the agreed rate of interest was 3.5%. Notwithstanding, the applicant has not been paid any interest by the respondent nor has the applicant ever been paid any hire fee for the use of the harvester, the header comb, the rake, the trailers and associated equipment. The relationship between Shane Kelly and the applicant ended in 2020 and soon afterwards, the applicant returned to Victoria to live and she has lived there ever since. The applicant has not received repayment of any of the loans made to the respondent and has not received any of the plant and equipment owned by her. The respondent contends that the applicant is estopped from claiming repayment of the loans connected with the calves venture as she effectively waived the requirement for the loans and the profits to be paid to her. Waiver is not pleaded by the respondent but his evidence on that topic was led without objection. The applicant contends that the loans made by her are all repayable at the latest within three years after the making of those loans and all of them are now repayable. The respondent contends that the machinery shed loans are repayable only after ten or more years from the time of those loans and that the loans in connection with the fixtures upon the land are repayable only by the owner of the land. The respondent admits that the harvester, the header comb, the rake, and the trailers belong to the applicant and that, at the latest, the applicant demanded the return of those items by a solicitor’s letter dated 22 September 2022. Those items were not returned by the respondent. No hiring fee or its equivalent has been paid by the respondent and the applicant claims that the respondent has converted those goods to the use of the applicant. The respondent contends that the preliminary loans for the farm expenses are not repayable before the expiration of ten years. Held: 1. The original agreement for the applicant to provide loans to the respondent to purchase ‘bobby’ calves required the respondent to repay those loans at the point of sale of the calves and that any residual profit was to be equally shared. Although the calves were sold and generated some profit the applicant informed the respondent that she would not insist upon the fulfilment by him of her strict legal requirements under that agreement and the applicant has effectively waived the benefit of that contract. 2. All other loans made by the applicant to the respondent were personal to the respondent and the obligation to make repayment of those loans falls upon him. 3. The agreements on the loans did not include a ten-year repayment term or any term about repayment and those loans are repayable upon demand. -- 2 of 77 -- 4. The applicant has demanded but has not received the repayment of her loans to the respondent in connection with the preliminary farm expenses, the farming plant and equipment, the sheds or any other expenses in respect of which loans were made by the applicant to the respondent. 5. The loans made by the applicant in connection with the construction of the machinery sheds and the accommodation shed was personal to the respondent and the obligation to make repayment of those loans falls upon the respondent. 6. The respondent has failed or refused to make repayment of the machinery shed and accommodation shed loans. 7. The respondent’s failure or refusal to return to the applicant the harvester, the header comb, the rake and the trailers belonging to the applicant constitute a conversion of those items by the respondent. 8. On the evidence, the court is not in a position where it may make an assessment of the value of each item of equipment converted by the respondent at the date of the wrong committed by the respondent. 9. The applicant is entitled to an order for the immediate return of each item converted by the respondent. 10. The applicant is entitled to an award of damages equivalent to the appropriate hiring fees payable in respect of the use of the converted items from the date of conversion to date. 11. The court will hear the parties further on the question of damages. 12. The respondent is required to pay interest to the applicant on damages assessed at the rate of 4 % per annum. 13. The court will hear the parties further in relation to the proper calculation of interest, damages, costs and other consequential orders. Uniform Civil Rules 2020 (SA), referred to. JW Carter: Contract law in Australia (6th Edition (LexisNexus Butterworths) paragraph 7-26; Laaratt v Bankers and Traders Insurance Co Ltd [1941] 41 SR (NSW) 215; Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87; Wade Sawmill v Colenden [2007] QCA 455; JE Hall Limited v Barclay [1937] 3 All ER 620; Strand Electric and Engineering Co Ltd v Brisford Entertainments Limited [1952] 2 QB 246, CA; Sadcas Pty Ltd v Business and Professional Finance Pty Ltd [2011] NSW CA 267; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd 149 FCR 395; Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305; Commonwealth v Verwayen (1990) 170 CLR 394; Freshmark Ltd v Mercantile Mutual Insurance (Aust) Ltd [1994] 2 Qd R 390; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; S P Hywood Pty Ltd v Standard Chartered Bank Ltd SCGRG 92/678, s3733, considered. -- 3 of 77 -- -- 4 of 77 -- MUNRO v KELLY [2024] SADC 147 1 The applicant’s claim in this action falls generally into two parts. The first part of the claim is for repayment of funds loaned to the respondent under agreements made between October 2017 and April 2020. The second part is for declarations in respect of the ownership of equipment purchased by the applicant, possession of which was given to the respondent and for damages for conversion. The applicant claims for immediate repayment of the loans made by her to the respondent and for the return of plant or equipment that she alleges that she purchased or for damages for conversion of that plant and equipment. 2 In relation to the first part of the claim, the loans made available by the applicant to the respondent fall into two main tranches. The first is connected with the investment in ‘bobby’ calves from dairy farmers mainly in the Barossa Valley, the feeding and raising of those calves and their intended sale at a profit once they reached sufficient maturity. 3 The second tranche concerns loans for expenditure upon plant and equipment and fixtures for use in the respondent’s farming business. In due course I will deal separately with these two tranches of this part of the claims of the applicant. The respondent contends that the calves venture was not profitable and that the applicant waived any right that she had to be repaid from the profits because she told the respondent that she did not need to be repaid. It is contended that, in effect, she elected not to be paid the debt owing to her. This, it is said, must be judged in the context of the intra familial nature of this relationship. At the time the applicant was in a defacto relationship with the respondent’s father, Shane (Shane). 4 The respondent denies that any of the loans made to him by the applicant (and therefore at least to that extent such loans are admitted) are currently repayable. He claims that no loans are due to be repaid and they only become payable not before the expiration of ten years from the date of the making of the loans. He contends that these are the terms of the loan agreements made with the applicant. The respondent also denies that he holds and is refusing to return any property owned by the applicant. He contends that the transactions were loans and that the applicant did not obtain any proprietary or other interest in any plant which he purchased using funds loaned by the applicant. He also contends that some of the funds provided by the applicant were used to construct fixtures upon land that did not belong to him, and there can be no claim for conversion of those assets at the suit of the applicant. 5 The applicant claims that the agreements made with the respondent evolved over a period of time. The availability of the funds of the applicant was connected with a substantial settlement in favour of the applicant with her former husband in the Family Court. That settlement was connected with a large rural holding in southeastern South Australia and then in the Wimmera region in Victoria. The -- 5 of 77 -- [2024] SADC 147 2 applicant received a very significant amount of money from that settlement. This was the source of funds that she used in her dealings with the respondent. 6 In 2016-2017 the applicant commenced a relationship with Shane, the father of the respondent. There is some uncertainty about when that relationship commenced as there are a number of events, some extraordinarily tragic, that have tended to obscure and make crepuscular the facts as they have developed over time. Another aspect of this action about which there is some evidence is the nature of farming enterprise conducted on the farms operated by the Kelly family. 7 I am satisfied on the whole of the evidence that an inference clearly exists that the family farms at Wallaroo Plains have not been consistently profitable enterprises. They are situate in what is commonly described as marginal country. I am satisfied that the Court has before it sufficient evidence upon which a number of inferences may be drawn on the balance of probabilities. These farms are of limited acreage; they are situate in areas of fluctuating rainfall, they have not been completely financially successful (apart from in years of above average rainfall); and, as a result, they are under capitalised for the maintenance and in the usual course of a farming business, the replacement of farming machinery, implements and fixtures. 8 The farm property is disposed over a number of blocks. These are situated at 57 Kelly Road in the area commonly called Point Riley and at 10218 Spencer Highway in the area commonly known as Wallaroo Plains. There was originally a 100 acre block at the Wallaroo/Kadina Road near to the Wallaroo township. Much of this block has been sold and only about 12 acres, or about 5 hectares remains. This is not large enough for commercial use apart from, perhaps a feed lot or something similar. I am satisfied that the farming operation operated upon these properties had not been sufficiently profitable for some period of time apart from very good rainfall years such as 2016. The evidence discloses that the proprietors of the businesses conducted upon these properties both, separately, worked for salaries. Shane worked in the Department of Agriculture in Adelaide. His son, the respondent Ryan Kelly, worked part time in the local fire brigade and this occupation provided supplementary income. His principal occupation was as a farmer. 9 There are also a number of other obvious evidentiary inferences that arise on the balance of probabilities. The properties were not sufficiently large enough or productive enough to financially sustain a proprietor or the family of the proprietor. The second, which on the evidence I am satisfied follows the first with equal strength, is that such commercial farming enterprises suffer the usual consequences of a failure to generate sufficient income and so capital: there is a failure to either replace or renew (and usually both) plant, machinery and farm structures which reduces the efficiency of the enterprise. As a further result, these deteriorate at a significant rate over time. The direct evidence, and all of the inferences arising therefrom satisfy me that this was the position with the farms operated by the family of the respondent from and after 2017 and especially as of -- 6 of 77 -- [2024] SADC 147 3 2019. This finding may be made despite the very good year experienced because of the plentiful rainfall in 2016. It is necessary for this background to be understood in order to properly comprehend the description and the effect of the evidence which follows and the decision that I have made. 10 The applicant’s claim, in large part succeeds. I find that she is the owner of the harvester, header comb, rake, drop deck trailer and associated equipment all of which is in the possession of the respondent and which he has refused to return. 11 The loans made by the applicant were all private loans made to the respondent personally. These loans are immediately repayable and attract an interest rate of four percent per annum. 12 The applicant is not entitled to claim repayment of the loans and the expenses she paid in connection with the ‘bobby’ calves venture. She has elected not to claim repayment of those funds from trading profits connected with those calves and she is bound by that election. 13 I turn to the facts of this action. The applicant Ms Gai Munro (Ms Munro) is 67 years of age. Prior to meeting Shane, she had been married for 38 years and lived with her former husband in Tintinara and then in the Wimmera area in Victoria. These were grain and livestock properties, and Ms Munro was involved in many aspects of the operation of these properties. Ms Munro commenced living with Shane at the farm at 57 Kelly Road, Wallaroo Plains after September 2016. The respondent Ryan Kelly is the son of Shane and at the commencement of her relationship with Shane, Ryan Kelly was about 26 or 27 years old. Prior to that time Ryan Kelly had operated the farm with his grandfather and during this time, Shane was employed in Adelaide working for the Department of Agriculture. Some six years after Shane’s father died after an accident upon one of the farms, Shane moved back to live at the farm. Prior to that time, Ryan Kelly had operated the farm, but he was very badly affected by his grandfather’s death. 14 At the time that Shane returned to the property, he and Ms Munro had commenced a relationship. Shane and Ms Munro moved in to live together and at that time Ryan Kelly was living in a different home on a property called Alford Road, with his girlfriend. At the time Ms Munro commenced living at the property, it comprised about 1500 acres. At that time the usual routine was for Ryan Kelly to attend the Kelly Road property every morning to have breakfast and to feed his dogs. 15 Ms Munro was aware from the outset that Shane and Ryan Kelly were having financial difficulties in relation to the farm. There had been three years of drought which put significant pressure on the farming enterprise. Following the death of Shane’s father, the farm financier Rabobank reacted to the poor returns from the property by raising applicable interest rates on its loans and it restricted the loans it would make for working capital. -- 7 of 77 -- [2024] SADC 147 4 16 By the time that Ms Munro had commenced her relationship with Shane both of them had been separated from their respective spouses for about two years. When Shane separated from his wife Helen, the bank accounts of the couple had been frozen and, in their property settlement it was arranged that Ryan Kelly was to be given the whole farm. 17 It became clear to Ms Munro from very early times, that if the farm was to flourish, it was necessary to think of alternate ways to raise income. This reflected the early understanding that she gained about the marginal nature of the farm and its urgent need to generate income and so, further capital. In her life involved on the farms in Tintinara and in the Wimmera, she had some involvement with stock. She made a suggestion that the farm raise some ‘bobby’ calves which could be purchased from a dairy farmer and raised in a feed lot. She raised this idea first with Shane and then discussed it with Ryan Kelly. Shane did not give evidence to contradict this evidence. From the outset it would be necessary for her to fund the purchases of these calves. The intention was that they would be fed and raised to maturity and sold at a profit. 18 This required expenditure upon the purchase of calves, milk, stock feed, fences, gates, and other infrastructure necessary for raising cattle (which require much heavier gauge yarding and fences than sheep). All of this was, in the main, paid for by Ms Munro. I am satisfied that Ryan Kelly agreed to incur all of those costs with the intention that after Ms Munro was repaid her loans, he would share the profit from this venture. On occasion Ryan Kelly paid some expenses associated with this undertaking. Overall, this was an enterprise funded by Ms Munro. 19 The first lot of bobby calves were purchased in 2017, a week or so after the first discussion about the idea. These were paid for by Ms Munro as she was well aware of the poor financial situation of Shane and Ryan Kelly. This was exacerbated by Shane’s difficulties in his matrimonial settlement with his former wife. 20 Ms Munro proposed to Ryan Kelly that she lend him money to purchase the calves. He agreed to the proposition only on the basis that any money that she lent him would be repaid when the fight between he and Shane with Rabobank was resolved. She said that these discussions occurred daily but the impression I formed was that the agreement was made once and the regular discussions were about whether or not and if so when to purchase the ‘bobby’ calves. Ms Munro said she told Ryan Kelly that she would only incur the cost until such time as he could repay her loan. Her understanding from what she was told by Ryan Kelly, that was to be at the time when the Rabobank fight was over.1 She also had ongoing discussions with Ryan Kelly about plant and equipment and machinery for the properties. For example, some of these occurred in October 2019 when she had a discussion with Ryan Kelly about buying a tip trailer and, later in 2020, there was 1 T32.2-T32.30. -- 8 of 77 -- [2024] SADC 147 5 a discussion about purchasing a 44-foot drop-deck trailer for the contracting business to be conducted using a harvester, header comb and rake purchased by Ms Munro.2 21 Ms Munro also gave evidence that the property settlement from her matrimonial dispute with her former husband was to be paid over a period of time. The first payment she received was $150,000 sometime in or about November 2019.3 It was at that time that she first had discussions with Ryan Kelly about lending money to him for the purposes of operating the farm until the Rabobank dispute was over and until the business got back on its feet. This was because she now commenced receiving capital payments from her former husband and that these would be ongoing over a period of time. 22 Ms Munro gave evidence that the person who came up with the proposal that she should lend money to the business was Ryan Kelly.4 This was then discussed many times on different occasions between Ms Munro and Ryan Kelly. In her evidence, Ms Munro said that on her suggestion, an appointment was made for Ryan Kelly to see her bank, the Westpac bank in Adelaide to ascertain if Westpac would refinance the Rabobank debt. Ryan Kelly denied attending any meeting with the Westpac Bank in Adelaide. Ms Munro gave evidence that she attended such a meeting in King William Street with Shane and Ryan Kelly, and this occurred at about the same time as the final divorce for Shane’s marriage. Ms Munro had a clear memory that Westpac said that they would not lend any money to the business until Ryan Kelly had three years’ worth of farming records under his management. He said he did attend a meeting at the Westpac branch at Norwood. I will deal later with that evidence. The importance of this evidence is that it fits within the narrative of Ms Munro participating in the business of the farm. She was obviously very keen to immerse herself in that enterprise. And she was very experienced generally with farming enterprises. 23 Ms Munro gave evidence that Exhibit A1 contains a number of entries at a number of pages connected with the bank statements that commence at page 32 of Exhibit A1. She was taken to particular pages and gave evidence in relation to a number of items on those pages. As some of this evidence became controversial, it is necessary that I summarise it in the form of a summary chart. That chart is set out below. My intention here is to identify the page number of Exhibit A1, the amount of the transaction and a summary of the evidence given by Ms Munro about that expenditure. Some of this evidence was not controversial and some was subject to challenge. 2 T43.16. 3 T43.27; T44.8. 4 T44.38. -- 9 of 77 -- [2024] SADC 147 6 Transactions Page # of A1 Amount Evidence 33 $501.20 Ms Munro gave evidence that this transaction, described as AW Vater & Co, Kadina, was for milk powder. The milk powder is for the calves. The calves have to be raised on milk for the first few months and then they are fed grain (T26.31) 33 $401.00 This payment would have likely been for the calves. Ms Munro gave evidence that they often used to buy three to six calves at a time. They bought from the Nietschkes from up near Tanunda. (T27.6) Usually they would pay cash for the calves. Ms Munro would go to the bank and get the money out and give it to Ryan Kelly or Shane, whoever was going to pick up the calves. (T28.15) 35 $222.20 Ms Munro said she bought stock drench at Tintinara because they didn't have any at Kadina that week. She was visiting her mother at Tintinara and bought it from her friend there a Landmark agent. The drench was for the calves. (T28.27) 37 $467.50 This was a transaction for more milk and incidentals to do with calves. She bought teats and things to feed the milk to the calves. (T28.35) 37 $1,402.50 Transaction for milk and innoculations. (T29.1) 39 $500.00 ANZ Banking transfer to J.T. & A.M. Nietschke for the calves. Occasionally Ms Munro made bank transfers, rather than cash. This was usually for larger amounts. (T29.12) 41 $346.50 Transaction to AW Vater & Co for the calves (T29.15) 41 $705.80 Transaction to BP Wallaroo to fill the fuel trailer for the tractors and header on the farm. This transaction was likely for the header. (T29.24) Ms Munro said that Ryan Kelly usually asked her to pay for the fuel and other farm costs. In the mornings he would bring her accounts to pay and ask her to pay for things; each morning was different matters connected to the farm. She often used to go and fill the fuel trailer herself. (T30.34) This commenced about a month after she moved in. (T30.38) -- 10 of 77 -- [2024] SADC 147 7 Page # of A1 Amount Evidence 41 $70.00 The $70 for B & A Hines Ltd, Kadina would have been a personal purchase for Ryan Kelly. Ms Munro believes it was a sports store. Ms Munro explained that she would give Ryan Kelly her card sometimes. Sometimes she paid for their groceries or rent. (T29.35) 42 $397.50 Another milk payment to Vater & Co Kadina. (T32.38) 43 $209.00 Same as for number 42. (T33.10) 43 $313.50 Same as for number 42 and 43. (T33.13) 46 $557.00 Another calf payment to the Nietschkes. (T33.23) 47 $275.50 Milk or supply payment for the calves. (T33.34) 50 $199.15 Payment for farm fuel trailer. (T34.9) 50 $500.00 Payment to Vater & Co for milk. (T34.14) 50 $882.15 Payment for innoculations for the calves. (T34.19) 51 $231.00 Payment to AW Varter and Co for milk. (T34.23) 58 $495.00 Payment to AGL Eastwood; farm power for the workshop. (T34.27) 58 $600.00 Payment for the vets; some of the calves got sick and died and the vets did an autopsy on the calves. (T34.38) 59 $402.03 Payment for fuel for the farm trailer. (T35.8) 60 $104.29 Payment to AGL for the farm power bill. (35.17) 60 $259.00 Payment for Neptune blanket, South Hurstville. It is a special blanket for anxiety, PTSD. (T35.21) 61 $775.86 This is a payment to Diesel Exhaust Systems, Wingfield for part of the truck. Diesel Exhaust Systems are a specialist in commercial vehicles and diesel. (T35.33) 65 $978.17 Payment to Harry’s Station at Wallaroo for the fuel trailer. (T35.37) 65 $79.30 Payment to Emmetts, Kadina; for the purchase of tractor parts, probably fuel filters. (T36.5) 65 $275.00 Payment to Larwoods. Ms Munro said that she did not make this payment. Larwoods sell farm equipment and farm parts. (T37.7) 65 $247.59 Payment to Seaside Veterinary Wallaroo for the farm dogs. (T37.15) 66 $590.66 Fuel trailer payment. (37.21) 66 $115.50 Payment to AW Vater & Co for milk for calves. (T37.28) 68 $750.80 Payment for fuel. (T37.31) 70 $116.70 Payment to AGL for the power. (T37.33) -- 11 of 77 -- [2024] SADC 147 8 Page # of A1 Amount Evidence 70 $306.60 Payment to NYPCC. Ms Munro said that this was a farm transaction but does not know what it would be for. She did not make the payment. (T38.7) 73 $126.50 Payment for calf milk. (T38.11) 75 $500.00 Internet banking transfer to Ryan Kelly. Ms Munro does not have any recollection of what that would be for. She said that she used to send Ryan Kelly money if he needed to pay for something. It is likely for farm items as he did not buy many personal items. (T38.22) 76 $250.00 Transfer for the calves. (T39.8) 77 $850.00 This payment to Ryan Kelly was farm related. (T39.17) 80 $101.53 This payment to CGU Insurance may have been for one of the farm trailers. She paid for insurance for the farm trailers when asked by Ryan Kelly. (T42.20) 80 $162.08 Payment to AGL or the power. (T42.32) 80 $231.50 Payment to AW Vater & Co for milk for calves. (T43.1) 80 $200.00 Payment to Ryan Kelly for the calves. (T43.4) 86 $115.50 Payment to AW Vater & Co for milk for calves. (T43.8) 156 $2,856 Payment to Ryan Kelly. Ms Munro made this payment. (T51.7) 260 $3,000 Payment to Ryan Kelly. Ms Munro cannot remember this payment. (T51.17) 261 $75,000 Payment for purchase of a header. (T51.10) 261 $34,568 This was a payment for a Landmark, account owed by Shane and Ryan Kelly. (T51.8) Ryan Kelly gave Ms Munro the invoices and she went into the store and paid them with a card. (T67.23) 160 $1000 Internet transfer to Ryan Kelly, possibly for the calves. (T55.9) 165 $5000 Internet transfer to Ryan Kelly, possibly for the sheds. (T55.22) Ms Munro was unsure exactly what the money was for. (T56.15) 165 $210.84 Payment for the game licensing unit, Orange. Ms Munro gave evidence that she is not sure what this would be but may possibly be a payment for Shane. (T55.37) 166 $5,000 Transfer to Ryan Kelly. This money must have been advanced after the agreement. (T59.6) This was likely before Ms Munro went snow skiing at Swifts Creek, due to the other payments at around that time. (T59.18) -- 12 of 77 -- [2024] SADC 147 9 Page # of A1 Amount Evidence Ms Munro lives at Swifts Creek now. (T59.33) 167 $1,899 Payment to Oricom International was for two CB radios for farm use and a baby monitor for Ryan Kelly to gift to his friends. (T60.20) 168 $5,000 Payments made to Ryan Kelly pursant to the loan arrangements. (T69.8) 169 $6,000 Payment to Ryan Kelly pursuant to the loan arrangement. (T70.10) 170 $9,474 Ms Munro gave evidence that Ryan Kelly asked her if she could purchase three sheds for the farm, one main big shed for housing the big machinery and the other one was for him to live in and there was another smaller shed. (T71.38) The payment of $9,474 to Spanlift Australia Pty Ltd was for the shed. Only a portion was paid at a time for the sheds. (T72.19) 170 $85,260 This payment was for a bulk tipper trailer to carry grain and tip it out. (T74.37) Ryan Kelly did the deal with the company, but Tabu Soro Farming, this was the farming business name of Ryan Kelly which was on the receipt. 170 $66,510 This payment was to Alan Wilson; Ms Munro said that Ryan Kelly asked her to pay for this amount. This was a payment to Alan on behalf of Ryan Kelly. (T75.2) 170 $29,160 This was a payment to Dohnt Contracting for contract harvesting. When the header was broken down, Phillip Dohnt did two harvests for them. This was the payment. (T76.9) 170 $2,000 This amount was paid to GJ East Kadina for an account, and Ryan Kelly asked that Ms Munro pay for this. (T76.38) 170 $4,500 Transfer to Ryan Kelly as part of the ongoing arrangement. (T77.11) 170 $3,438.45 Payment to Freightmaster for the registration of the trailer. (T77.14) 170 $9,674.20 Payment for fuel to Reliable Petroleum Pty Ltd. (T77.22) This is a slightly different vendor because Ryan Kelly went someone in Kadina to purchase fuel. It was fuel bought in bulk for cropping. (T78.16) 171 $500 Payment to Wallaroo Service Station for the fuel trailer. (T79.3) -- 13 of 77 -- [2024] SADC 147 10 Page # of A1 Amount Evidence 171 $5,550 Payment for the Rota-Forma shed, the third shed. (T79.22) 171 $9,000 Payment to Ryan Kelly pursuant to the same arrangement. (T79.25) 171 $5000 Payment to Freight Master Trailers. (T79.33) 171 $400 Payment to Wallaroo service station for farm fuel, diesel fuel. (T80.14) 171 $39,000 This withdrawal from the Kadina branch is most likely for the sheds, but Ms Munro is not quite sure. (T80.26) 172 $10,000 Payment to Ryan Kelly. This seems to relate to the payment on page 337 of A1 is for a heavy roller to roll paddocks. Ryan Kelly asked Ms Munro for the money as part of the farming loan. (T81.13) This $10,000 payment to Ryan Kelly is most likely for that. (T81.17) 172 $50,000 This withdrawal from the Kadina branch is likely to be for field bins which were $25,000 each with a $10 fee for the bank cheque. (T81.29) Ms Munro is directed to page 336 of Exhibit A1, she confirmed that the invoice relates to two field bins. It is a document that relates to the purchase of the second- hand bins for a total of $50,000. (T99.15) Ms Munro said that the $50,000 entry on page 172 of A1 is for the purchase of the bins and $10 for the bank cheque. (T99.29) 172 $200.00 This payment to Ryan Kelly most likely for the calves. (T82.7) 173 $4,094 Payment to Spanlift. Ms Munro was initially unsure what this would be for until she was taken to the invoice at page 331 which matches that figure. This is a payment the shed. (T82.18) 176 $600.00 Ms Munro does not know what this payment is for but mentioned that it is farm related. (T83.5) 274 $2,895 Access Advantage Account payment made to Custom Consulting Pty Ltd. Ms Munro cannot recall what that payment would be for. (T84.4) 274 $7,636 Payment to AG Shilling. Ms Munro said that she does not know what the payment is, but it would be to do with the farm. (T84.17) 274 $1,043.48 $345.18 $1,023.00 Payments to Skinners was for the shed base. (T85.11) -- 14 of 77 -- [2024] SADC 147 11 Page # of A1 Amount Evidence $1,685.51 Ms Munro clarified her evidence that Skinner is for the shed base and Shilling is for the feed stock. So, these payments were for the shed base. (T100.20) 274 $28,000 Payment to Spanlift is also for the sheds. (T85.24) 274 $4060 Payment to Deft insurance is for the farm insurance. (T85.27) 274 $24,000 Payment to Ryan Kelly. Ms Munro cannot recall what it was for but it was a farm payment. (T86.2) 178 $1,090 Transaction of $1,090 for Square Adelaide Annexe at Torrensville. Ms Munro does not recall this payment. (T88.12) 274 $882.44 MA Skinner Contract Kadina. This would be for transport costs. (T89.14) 275 $877.04 MA Skinner Contract Kadina. This was another payment in respect of the shed base. (T90.13) 275 $345.18 Another payment for the same purpose. (T91.4) 278 $1,184.93 $2,372.26 Payments to M.A Skinner for the shed base. (T100.36) 278 $2,995 Payment to Spitwater for pressure washing, cleaning down the header. This payment was for the contracting business. Ms Munro gave evidence that you need to clean down the header before and after reaping grain. (T101.8) 278 $278.43 Another payment to MA Skinner. (T101.10) 278 $976 Payment to AW Vater & Co for stock feed. (T101.19) 262 $47,374.24 Ms Munro said that it is a Spanlift payment for the shed. (T101.34) 282 $1,000 ATM card payment of $1000 taken during a period when Ryan Kelly had the credit card of Ms Munro and she does not know what the $1000 was spent on. (T105.14) 266 $5,665.98 Amount payable to MJ Roberts. Ms Munro gave evidence that she has no recollection of that payment. (T106.3) 266 $27,223.60 This is payment to GA Harding; she cannot remember this payment and that it was made in 2020 when she was not at the farm. (T105.37) 266 $6,000 Payment to Ryan Kelly Francis; this payment was actually for a floating device for her boat which raises her boat out of the water. (T106.15) -- 15 of 77 -- [2024] SADC 147 12 Page # of A1 Amount Evidence Ms Munro said “So we can withdraw that one”. (T106.19) Q 266 $2,970 Ms Munro gave evidence that this was a withdrawal made by Ryan Kelly. (T107.8) 294 $1,000 Ms Munro could not recall what that would be for. (T107.27) 24 In her evidence, Ms Munro said that the agreement with Ryan Kelly about the purchase of the ‘bobby’ calves was made orally and its terms were that she would fund the calf venture but that he would repay to her the money she provided. The timing agreed was after the settlement of the Rabobank debt. There were many of these discussions, but she only continued to provide funding to Ryan Kelly on a loan basis. Ryan Kelly rejected that version of events and said that, in the end, Ms Munro agreed that he should keep the proceeds of sale of these cattle. At transcript page 155.7-9, page 163.3-16, and page 168.31-32, Ms Munro gave the following evidence:- Q And you told Ryan he could keep the proceeds of sale. A Yes, he was to keep the proceeds anyway, that wasn't going to be for me. ….. Q I think there might be some confusion in that I was referencing the $1,000 withdrawal on 24 December, the last entry with a line through it. And I believe you are referencing the $1,000 deposit on 24 December that is two lines above it. A Right, okay. Q And what I'm saying to you is that the withdrawal of $1,000 'ANZ ATM Card 1050' was not for Ryan's benefit. A Unless it was to pay for calves or something for the farm. Q And the calves venture, the steers, was a failed joint-venture and you told Ryan he could keep the sale proceeds. A Yes. ….. Q You told Ryan he could keep the proceeds of sale. A Yes. Yes, I did. 25 I understand this was intended to suggest that Ms Munro waived the requirement to repay his debt to Ms Munro. Waiver was not pleaded by Ryan Kelly. -- 16 of 77 -- [2024] SADC 147 13 26 At a number of levels there are significant problems with the position taken by Ryan Kelly. Ms Munro immersed herself in the life of the farm, but she never became a proprietor of the business. She was not the beneficiary of any transfer of a proprietary interest in the farm. She was in a relationship with Shane and was actively attempting to assist Ryan Kelly and his poor financial position. She could not become an investor because she was held at arm’s length to the business and the property. She was a provider of capital which had to be repaid. She was more a beneficent financier than a bank, but she was always financier. 27 As things developed, there were discussions about other matters. For example, from about October 2019, Ms Munro and Ryan Kelly had daily discussions about purchasing new farm machinery. Following these discussions, an agreement was made that she would finance the purchase by Ryan Kelly of a tip trailer in early 2020. Then, as the discussions progressed, there was an idea formulated between them that Ryan Kelly would involve himself in a contracting business for grain harvesting and hay carting. Following those discussions, Ms Munro agreed to finance the purchase of a 44-foot drop-deck trailer for that contracting business. A new harvester and header comb (for grain) and rake (for hay) would also need to be purchased. 28 Ryan Kelly was aware from what Ms Munro told him that she received a first tranche of payment from the matrimonial settlement. In or about November or December 2019, discussions between Ms Munro and Ryan Kelly started about loans being made to Ryan Kelly. It was he who first proposed a loan agreement and that proposal then developed over a number of discussions. In the course of those discussions Ms Munro suggested that an approach be made to Westpac to finance the Rabobank debt rather than having the continuing dispute with Rabobank. When asked what the terms of the proposal were, Ms Munro gave the following evidence:5 Q Well, what I'm trying to ascertain is - okay, perhaps we'll go to the proposal. What was the proposal that was put to you. A He wanted me to fund the running of the farm until he got - until he was able to get the Westpac loan. It was the interim between - because he had to - he had that appointment with Westpac and then he had to find finance to fill in the three years, which he eventually got from Win Securities, but it was - the loan was for 10% interest, and at that time, COVID had started and I was getting less than 1% on any investments that I had, so it was going to be a win/win situation for both of us because he offered me 4% interest on the money, which was a lot better than 10, and I had the money at the time and I couldn't make any interest on it. So, I was going to try and supplement my income with that, so I needed the interest payments to be made along the way. Q Yes, all right, now, so that discussion - that was a discussion, was it, with Ryan Kelly. A Yes, yes. 5 T46-48. -- 17 of 77 -- [2024] SADC 147 14 Q And where did that discussion take place. A At the kitchen table. Q And the discussion - perhaps if we take it piece-by- piece, the discussion about having to pay 10% if he went with I think you said Win Securities. A Yeah. They took over the - Win Securities took over the existing Rabobank loan and I was going to - the proposal was for me to continue funding the farm at 4% until he could borrow the money from Westpac later down the track. Q All right, so you say the proposal was that you fund at 4% until Westpac - A He - he offered me - Q Hold on, let's - A - 4%. Q - go ... until Westpac came into it, and you told us you had a meeting with Westpac. Was the meeting with Westpac before or after - A I don't - Q - you were told - A - I don't remember - HIS HONOUR Q Just a minute. For me to understand your answer, I’ve got to hear the full question. All right, just listen to the question, and then answer, all right. A Yep. Q So what I wanted to ask you was whether your meeting with Westpac where they - you told us they talked about needing three years of records. Was that before or after it was put to you that you might fund something at 4% until Westpac stepped in. A I can't remember. Q No, all right. And the discussion about the 10% with Win Securities, was that at the same time as you discussed something about Westpac stepping in. A Win Securities was found after Westpac - after the Westpac meeting, because he had a broker working on that. To find somebody. 29 Later at transcript pages 49-50 Ms Munro described the proposal made by Ryan Kelly in more detail:- A He wanted to know if I would loan him the money to keep running the - keep the farm running, until he was able to get finance from another bank, and he offered me 4% interest on - and it was after the divorce, and before the Rabobank was finished. Q Yes, and was anything said about for how long. -- 18 of 77 -- [2024] SADC 147 15 A Three years, was the term. Q Yes, who said that. A I did. Q Yes, and why did you select three years. A Well, the - the Rabobank was going to take about three years anyway to - to get sorted. Q And how did you know that. A Well, because Ryan Kelly had told me that, earlier. Q And was any - that was what was put to you, you talked - you told his Honour what you said - was anything said to conclude that. Did he say 'I agree', or you said 'I agree'. What happened. A I said I'd be happy to have - to have the 4% interest, and that would be helpful to me to get through the COVID time, and - because I couldn't - I couldn't live on the money. I was getting 13 - 13,000 a year during the COVID - from my investment. Q And was anything said about documenting that arrangement. A Yes, I asked him if he would be able to get a contract drawn up, and he said up, and see if his accountant would be able to do it … 30 Ms Munro could not recall the precise date when these conversations took place; all she could remember is that they occurred when her divorce was happening, so she thought that was some time before the first payment of the divorce payment that was made to her in about November 2019. In the usual course Ms Munro needed to achieve a settlement with her former husband, for it to be registered at the Family Court and for it to be implemented. This all takes time. The settlement was significant and was paid in several tranches over a period of time commencing with the first payment of about $150,000. There were other very large payments made to Ms Munro, for example a sum of $2 million dollars was paid to her from the trust account of her solicitor, Scales and Partners directly into her own bank account.6 Ms Munro confirmed that this was part of her property settlement. 31 Along the way she made payments for a number of other expenses. For example, she made a truck payment for a semi-trailer in the amount of $10,000.7 The truck payment was for a Kenworth truck that was used around the farm, and which was essential for the farm operation. Another expense that Ryan Kelly discussed with her was for the purchase of a new header. The header on the farm had broken down and she had already paid $26,000 to a contractor for the crop on the farm to be ‘taken off’. There are two significant aspects here: the first, that the 6 Exhibit A1, page 261. 7 Exhibit A1, page 357; T39.23. -- 19 of 77 -- [2024] SADC 147 16 farm was then incapable of generating sufficient funds to repair the header or purchase a new one; and second, that there were none of the usually available sources of capital finance (such as a bank or finance companies) available to the farm to finance such expenditure. The farming enterprise was in a financially bleak position. In light of that expense, and at least inferentially, the inability of Ryan Kelly to take steps to solve those problems, Ms Munro made a suggestion to Ryan Kelly that they should start a contract harvesting business at the same time. Those discussions commenced in 2019. 32 Prior to that time, and at least for a year since about 2018, payments were made to Ryan Kelly by Ms Munro without any specific request being made of her by Ryan Kelly for the provision of money, and where it would be spent. It was in about 2019 that discussions about the expenditure of money by Ms Munro under a loan agreement commenced. At around that time, Ryan Kelly lost the roof of his house as a result of a storm; the house was written off and insurance money was paid to him. He put the money from the insurance into the farm. 33 Ryan Kelly then approached Ms Munro asking for financial assistance to pay for panels, gates, a cattle crush and a loading ramp for calves which was to be used in the cattle business. Ms Munro agreed to lend Ryan Kelly this money and she went with Shane to Naracoorte and purchased these items. This was done at the request of Ryan Kelly. At the time, Ms Munro and Shane were holidaying towards eastern Australia. As part of their holiday plans, they detoured to Naracoorte and made these purchases. The invoice for these purchases was made out to Ryan Kelly.8 I consider that the decision to arrange for the invoice to be made out to Ryan Kelly is of significant weight. It indicates an intention that Ryan Kelly would become an owner of the property using funds loaned to him by Ms Munro. In other transactions for purchase of farm machinery, invoices were made out to her personally. Ms Munro said that she paid this invoice and I accept her evidence. Shane was not called in evidence even though on the first day of trial he was present and responded to the order for witnesses by leaving the court. 34 At around the same time, Ms Munro paid for a harvester purchased from Vater Machinery. The purchase price was $132,000.9 There was also a combine rake purchased for $12,000 to be used on the front of the header. The sales contract in relation to these items was made out to Point Riley Cattle Co and Ms Munro registered that business name under which she purchased the harvester. There was a GST advantage in doing so but these purchases only occurred after discussions between she and Ryan Kelly.10 It is quite apparent and I find that Ms Munro had never had any intention to create, and the parties each had no intention to create, any proprietary or other interest in this machinery in favour of Ryan Kelly (or any other person or entity) inconsistent with the proprietary interest of Ms Munro. 8 Exhibit A1, page 321. 9 Exhibit A1, page 319. 10 T61.37. -- 20 of 77 -- [2024] SADC 147 17 35 The background to this purchase was that Ryan Kelly told Ms Munro that he needed a new header because his old one had broken down and the contractor for reaping grain was very expensive. Then Ms Munro suggested to Ryan Kelly that they set up a contract harvesting business to complement his hay contracting business which would bring in more income. It was very soon after this conversation that the header was purchased. That was all organised by Ryan Kelly although Ms Munro made an appointment with the agent at Vater Machinery, Mr Nigel Phillips who was the agent at Vater & Co when the header and associated equipment was purchased. As best as Ms Munro can recall, she paid $120,000 for the header itself and around $12,000-$15,000 for the front rake.11 A header comb was also purchased for the harvester under the same arrangements. 36 Her expectation was that this machinery would be used in a contracting business to be operated by Ryan Kelly. This was her machinery. She had discussions with Ryan Kelly about how he would pay her for using her machinery. Part of those discussions was in relation to a method called ‘rotor hours’. This is a method of payment according to the period during which the machinery is being operated and grain is being reaped.12 During the time that he used the header, Ryan Kelly did not make any form of payment on an ongoing basis to Ms Munro and it was only after Ms Munro and Shane separated, that Ryan Kelly approached her and asked to buy the machinery from her.13 The purchase has not occurred. 37 Ms Munro gave evidence that part of the process of having a harvest contracting business is to have field bins in which the reaped grain is to be held or stored. They are called field bins and chaser bins. Also, it is necessary to have a tip trailer and a drop deck trailer for shifting the header and the front comb for the harvester and the rake. The machinery purchased from Vater & Co for this purpose needed to be renovated to be ready for use. It was not delivered until around October just before the commencement of harvest.14 Ms Munro said that she also purchased the Honey Bee Flex Front comb for the header for $55,000.15 She paid a number of deposits as part of that transaction and identified a tax invoice relative to the transaction.16 38 Ms Munro also made payments to the machinery business G & J East of Kadina.17 Some payments were made over time as well to Vater Machinery and an example is a payment of $75,000 made in connection with the harvester.18 39 Ms Munro said that she financed the purchase of the chaser bins that were used in the harvesting business, and she provided $27,500 for those bins. The 11 T63.5. 12 T63.30. 13 T64.8. 14 T66.6. 15 Exhibit A1, page 317; T66.18. 16 Exhibit A1, page 358; T66.30; Exhibit A1, page 323; T67.1. 17 Exhibit A1, page 261. 18 Exhibit A1, page 360; T68.17. -- 21 of 77 -- [2024] SADC 147 18 purchase of the bins was organised by Ryan Kelly in his name, but he requested that Ms Munro pay for them.19 40 In May 2020, Ms Munro and Shane went to stay at Swifts Creek in Victoria. At that time, the COVID virus hit, and they were unable to cross the border from Victoria back into South Australia for a period of about eight months. At that time, Ryan Kelly remained working at the farm and was doing other cartage work such as carting grain. Ms Munro left her visa debit card with Ryan Kelly to enable him to make purchases from time to time. He used the card, and she would top up the credit balance of the card from Swifts Creek. She made a payment of $50,000 to top up the account from her own personal account; she kept an eye on the account and would top it up from time to time as required.20 For example, whilst she was away in Swifts Creek, Ryan Kelly made a payment on an invoice for $5,587.15. She did not make that payment but Ryan Kelly was authorised by her to draw funds to make the payment. The payment was to YP Hydraulics at Kadina. The invoice dated 31 May 2020 is made out to Tabu Soro Farming of Wallaroo, which is the business name of Ryan Kelly. The funds were all sourced from Ms Munro and not from the resources of Tabu Soro Farming. 41 Ms Munro authorised the payment of the amount but was not in South Australia at the time because in May 2020, she was unable to cross back from Victoria into South Australia.21 Ms Munro does not recall directly paying any farm accounts whilst she was away in Swifts Creek and any farm account payments were through the debit/credit card that she left with Ryan Kelly.22 42 Ms Munro said that she made a demand for the return of her equipment after the breakdown of the relationship between herself and Shane. She spoke to Ryan Kelly and demanded the return of the machinery. He responded that she should sell him the machinery and he was operating on the understanding that she would sell him the machinery and therefore she could not repossess it. There was then some discussions about selling the machinery to Ryan Kelly but these did not advance. She cannot recall whether the discussions were in person or over the phone. There were a number of discussions and they probably occurred personally and over the phone.23 43 In cross-examination Ms Munro confirmed her long familiarity with farm life. She was born and grew up in a farm in Tintinara, her father was a property manager and the farming was generally mixed farming of stock and crops with pasture renovation from time to time. She married Kevin Munro in 1978 and they farmed in the Tintinara area until 1988 when they moved to the Wimmera. A further family farm was purchased through the trustee of a family trust. And initially, a single trust was used and later this was divided into two separate trusts 19 Exhibit A1, page 324; T71.20. 20 T87.36. 21 Exhibit A1, page 338; T89.38. 22 T90.6. 23 T108.2-T108.18. -- 22 of 77 -- [2024] SADC 147 19 so that one of the farms was operated under a separate trust controlled by Ms Munro and Kevin Munro. It was called Beulah Farm. Eventually their sons came home from school and they took over the property. At commencement, the Beulah Farm property was about 2,680 acres but after leasing further property, and purchasing further property, it became a 15,000-acre farm. 44 Finance was obtained through Rabobank to develop the farm through an initial loan and other loans were added. The first loans from Rabobank were taken in 1988 and then later loans were taken at the time of the expansion of the property which took about 28 years. Ms Munro was the person most familiar with the finances of the Beulah Farm business. She controlled those finances whilst also operating her own hairdressing business in the town of Beulah. She operated her business three days per week but otherwise was involved in the control of the farm finances and in the operation of the farm business. 45 Drawing upon her farming experience, she took a loan from the Commonwealth Bank to purchase and operate a childcare centre. This was a long- term loan. Her daughter obtained a teaching degree and then did specialist early childhood training. Thus, Ms Munro left her daughter in charge of the finances and operation of the childcare centre. 46 In managing the farm, she controlled the finances, kept house, she fed up to thirteen workers at a time, and assisted in doing manual tasks such as moving field bins and header combs. Self-evidently, she did all of the work expected of her as a functioning ‘partner’ in a mixed farming business. She was an equal contributor, confirmed perhaps by the size of her property settlement in her matrimonial proceedings. Over time she found that the farm business was so demanding that she could not continue fulltime operation of the hairdressing business. Over time, she developed some health issues such as hearing problems and she admitted that she had also some issues with her memory concerning dates and times. 47 In 2015, Kevin Munro decided to leave the farm and went back to his brother’s farm in Tintinara. Ms Munro stayed on the farm and coopted her brother to run the farm for a year or so until Kevin Munro returned to operate the farm. Following his return, he lived away from the farm. At about that time, Ms Munro moved to Adelaide to live with her sister. This heralded the start of the finalisation of the property issues with Kevin Munro and eventually in the Family Court the parties achieved a property settlement. The first payment made to her of $150,000 was received on 21 November 2019 and then on 11 March 2020, she received a further payment of $2.344 million dollars. She received further payments of $550,000 per year for three years. 48 Ms Munro met Shane in 2016 and commenced living with him in Wallaroo after September 2016. That was an intermittent relationship because she was spending time at the Beulah property and also at Wallaroo. She was shifting between those two places but she did spend a lot of time at 57 Kelly Road Wallaroo. She developed a close relationship with Shane, she cared deeply for him -- 23 of 77 -- [2024] SADC 147 20 and wanted to support him. Her agreements were made with Ryan Kelly who was the manager of the farm. She was aware that the farm was operated through a trust and that Brofern Pty Ltd was the trustee of the trust which was a family trust arrangement. She initially was not sure of the name of the trust whether it was called the Kelly Family Trust or perhaps the Riley Trust. In any event, the position from her point of view was that Ryan Kelly ran the farm and Shane lived in Adelaide whilst he worked for the Department of Agriculture. Ryan Kelly took over the farm completely from about October 2019. Ryan Kelly was also managing the finances and any meetings that she had with him prior to October 2019 did not involve Shane as he was in Adelaide working. 49 Her relationship lasted between September 2016 and about December 2020 when the relationship broke down. Prior to that time, she had purchased a property at Swifts Creek in Victoria on 10 March 2020.24 50 From the time that Shane returned to the farm, she paid him a weekly allowance of $500 as she wanted to ensure that he would have his own money. He was not employed at the time and she was happy to support him. 51 In cross-examination Ms Munro was challenged about a number of payments that she said that she had made. The first, related to a withdrawal to pay for a Landcruiser vehicle. This was for Shane. In her bank statement, there is a withdrawal made on 22 July 2020 for an amount of $5,000. There is a handwritten note against the withdrawal:- ‘Shane’s Landcruiser deposit…’25 52 Ms Munro said that she purchased this vehicle for the farm, however, the entry refers to ‘Shane’s Landcruiser deposit’. The proposition was put to Ms Munro because that entry is there, the loan must be personal to Shane and cannot be connected to the farm. She in fact made a full payment of $27,223.60 on 4 August 2020 for the purchase of that vehicle. Therefore, she paid for the deposit and the vehicle from her own funding. There is no note accompanying that entry.26 The proposition was put to Ms Munro that this can only mean that the purchase of the Landcruiser was connected to a personal arrangement made between herself and Shane. She denied that. She said that the Landcruiser was used in farm work, Shane was the principal driver of the vehicle and it was purchased for working the property. Shane was not called to give evidence to gainsay this evidence. 53 Another payment that is challenged is one made on 2 April 2020 in the amount of $10,000, directed to Shane. Ms Munro said that this amount is a loan to Shane for payment to assist in repayment of money that he had borrowed from her connected with his mother going into a nursing home. The evidence of Ms Munro was that she did not demand repayment of this money from Shane but left it as part 24 Exhibit A1, page 347; T121.11. 25 Exhibit A1, page 263. 26 Exhibit A1, page 266. -- 24 of 77 -- [2024] SADC 147 21 of a settlement when she left the property.27 In that case, I am unable to accept that the $10,000 is an amount claimable from Ryan Kelly but rather is an amount that arises under a separate chose between Ms Munro and Shane. 54 I have earlier described the amounts of money received by Ms Munro from the Family Court property settlement. Ms Munro agreed that she commenced spending significant amounts of money in late 2019 and her spending continued into early 2021. She agreed that from the family settlement, she transferred about $4.8 million dollars over a two-year period, and this included part of her superannuation funds. Part of these transfers included transfers between her own accounts. She was not receiving much, if any, interest at the time and her intention was to buy things that would grow in value and so would protect her capital. She agreed that in March 2020, she had purchased a 1998 Mustang 2600 Sportscruiser boat called a ‘Mercruiser’ as well as a floatation device and an AirBerth for the boat.28 She spent money on herself for things that she wanted as well as on people very close to her. An example was a payment made to Chloe Huth a friend who had started a business and she provided about $60,000 in funds to her son Steve Munro, because she became aware that Kevin Munro, his father, had kicked him off the farm property. He did not have a job for a while and so she assisted him in purchasing a house in her name which she intended to be her retirement home.29 55 Ms Munro agreed that she saw Ryan Kelly at the Kelly Road farm almost every day. He called in for breakfast and conversations occurred every day and she felt particularly sorry for him because he had PTSD arising from the experience he had with his grandfather. She knew that he was struggling with that condition, and she knew that he had no money to run the farm and it was all very difficult. I have earlier canvassed the reasons why the farm was not profitable. Another difficulty was that Ryan Kelly’s mother, Helen, refused to contribute to the farm after the arrival of Ms Munro, so she took on the role of something as a step-mum and took care of Ryan Kelly.30 56 Ms Munro was also challenged about the nature of the loan that she alleges was made between herself and Ryan Kelly. She was taken to a letter from Swan Lawyers to Ryan Kelly dated 6 October 2021.31 The relevant portions of that letter, on page 1 (exhibit A1, page 379) provide as follows:- ‘In October 2017 my client agreed to lend to you funds for the purpose of your farming enterprise carried on at Wallaroo Plains. The terms of that agreement were: 1. That amounts would be advanced from time to time as agreed; 2. That the amounts advanced would be repayable on demand; 27 T126.26-T126.7. 28 T130.16. 29 T32.22-132.14. 30 T135.16-T136.21. 31 Exhibit A1, page 379-381. -- 25 of 77 -- [2024] SADC 147 22 3. That the balance outstanding from time to time would bear interest at the rate of 4 % per annum; As acknowledged by you on 26 July this year, the total advanced by my client was $920,279.35. My client hereby demands repayment of that sum within 14 days. My client is also entitled to interest on the amount outstanding from time to time but will defer her claim for interest to allow that to be calculated to the date of repayment. Should you wish to make an offer in that respect please do so. In addition to constituting a demand pursuant to the loan agreement this correspondence to you is a pre-action claim pursuant to Rule 61.7 of the Uniform Civil Rules 2020 (SA)…’ 57 Ms Munro thought that the loan was only repayable upon demand after Ryan Kelly had rescinded the loan agreement by letter from his solicitors. However, that rescission letter is dated after the date of this letter of 6 October 2021. 58 The evidence of Ms Munro about the terms of the loan agreement were confused. Ms Munro continued to maintain that the loan was only repayable upon demand after the rescission, but she could not remember when it was rescinded. This letter of 6 October 2021 purports to reflect an agreement of October 2017. Ms Munro gave evidence that she wanted to demand repayment of the loan after she thought that the Kellys were out of her life. 59 In that context, she was not able to remember precisely the terms of the oral agreement about the loans reached with Ryan Kelly. In cross-examination she used different forms of expression about when the loan would be repayable.32 Initially, she thought the loan was repayable once the Rabobank fight was over. Then it would be repayable once Ryan Kelly obtained finance from Westpac, and then, she said that it might be repayable over a period of three years. She said that the initial term was for three years but then the money was not repaid. The proposition was then put to her that in fact the loan term was over a period of ten years. She emphatically denied that proposition. It was then put to her that the loan was over a ten-year period because it was a long-term loan just like other farm loans. She denied that proposition and said that it had never been agreed to and she had never heard any suggestion of a ten-year term. She denied any suggestion that anything to do with the Beulah Farm investment which she made with Kevin Munro had any bearing upon anything she did with Ryan Kelly. She said that the three-year loan part of the agreement was connected with the fight that Kelly farming was having with Rabobank. She denied ever agreeing to a ten-year agreement. 60 I think on balance that there was confusion in the mind of Ms Munro about the connection between the repayment of the loans and the various disputes with banks. I accept that the Rabobank litigation with the Kellys was resolved by October 2019 following a mediation in November 2018. Winsec replaced Rabobank as the lender to Brofern Pty Ltd by October of 2019. However, the fact 32 T139.34-T140.4. -- 26 of 77 -- [2024] SADC 147 23 that the loans were not repaid is not inconsistent with the version of events given by Ms Munro. That is because her evidence is that the loans were intended to be repaid but were not repaid as had been agreed.33 Also, Ms Munro refused to sign the loan agreement proffered to her by Ryan Kelly.34 She refused to sign the agreement because it did not contain any of the terms as had been discussed with Ryan Kelly and she would never, for example, sign a loan agreement that was for eight or ten years. As an example, she referred to item 3 for repayment (of the machinery shed portion of the loan) over eight annual payments commencing on 28 February 2022 and each successive year. That had never been discussed with her and it was not something to which she would agree. The interest rate was also not agreeable at 3.5%. From her point of view, the suggestion of a ten-year loan period was made up by Ryan Kelly and it had never been discussed earlier. 61 In cross-examination, Ms Munro was taken to a letter from Tabu Soro Farming to her solicitors dated 13 October 2021. The first full paragraph of that letter rescinds the loan agreement proffered because of the refusal of Ms Munro to sign it. A formal rescission would only be effective if there was an agreement which is reflected within the terms of some form of loan agreement and that separately, the parties had agreed to reduce their agreement to a form of writing that is reflected within the terms of the written loan agreement. I am satisfied that no such agreement existed. The only agreement which could be rescinded was an agreement to repay the money owed by Ryan Kelly to Ms Munro. 62 The second paragraph of the letter denies that the monies loaned were repayable on demand and Ryan Kelly did not have resources available to him to repay any loan on demand. 63 For the reasons which I have already set out, I place no significance upon this contention of Ryan Kelly. As I have explained, the farms suffered an endemic shortage of capital, they could not borrow funds to re-equip the farms and they needed to find a separate source of finance. Ms Munro was that source, but in return she was not given any interest as a proprietor of the business, any proprietary rights as an owner and was entirely dependant on the Kellys. She was a lender in the short term and her loans were unsecured. She did not commit herself to a long term loan arrangement and there was no prospect of this happening especially for someone as experienced in rural property matters as Ms Munro. She wanted Ryan Kelly to get back on his feet but that was a long term task for him. 64 The letter alleges that repayment was discussed to be over a ten-year period to allow the farm to become productive for Ryan Kelly to get back on his feet. This statement again reflects the actual position of the farm as I have summarised earlier in this judgment. The same position pertains in relation to the resources available to Ryan Kelly to repay such loans. 33 T123.11. 34 Exhibit A1, page 349-356. -- 27 of 77 -- [2024] SADC 147 24 65 Ryan Kelly then suggests that he has a counterclaim against Ms Munro for breach of an agreement to provide him with the following:- ‘A With habitable accommodation, as she was living in the home on my property; B The funding for a completed machinery shed; C Fuel and other accommodation to enable off farm contracting; and D Such other relief and damages as the Court deems fair and reasonable’. 66 It is apparent that this letter was written (or drafted) by a solicitor. It contains a number of significant peculiarities. If Ms Munro was living in a home on the property owned by Ryan Kelly, she could not owe him any obligation to provide him with habitable accommodation. Rather, the obligation would be upon Ryan Kelly to do so. The second alleged obligation in relation to the funding for a completed machinery shed appears similarly misconceived. It may well be that there was an arrangement between the parties for Ms Munro to finance the construction of the machinery shed. So much may be accepted. That does not mean that a failure to provide the complete funding is an example of a breach of an agreement said to require repayment of an amount over a period of ten years. To the contrary, it indicates that the parties are acting inconsistently with what is alleged to be a ten-year agreement because one party has walked away from it. The third falls into the same category; it alleges an obligation to provide the cost of fuel and the cost of accommodation to enable off farm contracting but that obligation is not anywhere contemplated within the parties’ arrangement. There was a willingness on the part of Ms Munro to provide funding for such a business to be commenced. 67 All of this was then confirmed by Ms Munro in her evidence.35 She said that long term loans from her experience were only connected with the purchase of land. In her arrangements with Ryan Kelly, no land was being purchased. The funding was to enable him to generate income from the businesses that he was carrying on such as cropping, stock and his contracting businesses. And she was not a ‘charity’; she needed to invest her money wisely and obtain a return from her money. That could only have been obtained in the short term. Once Ryan Kelly became profitable, Ms Munro looked to him to pay interest on the money loaned to him until such time as it was repaid. As well, I accept the evidence of Ms Munro that the discussion about the loan evolved over a long period of time. 68 The proposition was put to Ms Munro in cross-examination that the three- year loan terms was a recent invention.36 She maintained that there were meetings with Westpac and that Ryan Kelly was present in that meeting; she denied that only Shane was present with her during that meeting. She did not know when the 35 T149.34 et seq. 36 T150 et seq. -- 28 of 77 -- [2024] SADC 147 25 meeting was held and therefore could not gainsay the proposition that it occurred in 2018. 69 In relation to the calves joint venture, Ms Munro said that in 2017 she knew that Ryan Kelly was struggling on the farm, he was not generating sufficient income and needed to do something differently in order for him to reestablish himself on the farm. It was for that reason that she made the suggestion that they raise cattle from the ‘bobby’ calves. She made an offer of loans for the purchase of the calves, for milk and inoculations. She said that Ryan Kelly was supposed to pay her back at the point of sale. He did not need to pay her any interest. She did most of the work in buying the calves and obtaining the milk and this business was conducted under the name of Point Riley Cattle Co which was a business she registered. She agreed that Ryan Kelly used the Tabu Soro Farming business on the sales invoice and that was not correct, it should have been on the invoices of Point Riley Cattle Co but that was not something she worried about as much as it was a joint venture. However, the agreement to buy calves and grow them to steers was a different agreement. In the calves agreement, Ryan Kelly provided the grain to feed the calves, but he ran out of grain. Ms Munro then paid for the purchase of truckloads of grain, and she made payments to Ryan Kelly in the amount of $10,000 for these purchases. Some of the calves died; she was aware of twelve calves dying at a particular point. She thinks many calves may have been lost to premature death whilst she was away in 2020. 70 Notwithstanding the propositions put to her, Ms Munro denied that the calves joint venture was not profitable even though she did agree that Ryan Kelly could keep the proceeds of sale of calves. She said that Ryan Kelly was asked to pay for the costs that she had incurred at point of sale. She denied the proposition put to her that she had told Ryan Kelly that he did not have to repay her the money involved in the calves joint venture. She expected to be paid at the point of sale and it was only out of the goodness of her heart that she allowed the joint venture to proceed to allow Ryan Kelly to make some money. She also denied that it was a joint venture in which she would purchase the calves, they would be agisted on Ryan Kelly’s property, he would pay for the milk and the grain and they would share in the proceeds of sale. She said only the 2016 year was a good rainfall year and the 2017, 2018 and 2019 years were not good on the farm.37 71 Ms Munro was challenged about her evidence concerning the purchase of the plant and equipment. She said that the plant and equipment belongs to her and that the agreement with Ryan Kelly was to finance the purchase on her behalf rather than a loan to him to purchase the equipment. She denied the proposition that under the agreement made between them in the period between October 2019 and March/April 2020, the agreement was to loan funds for the expenses upon the farm and the purchase of plant and machinery. She said that no agreement had been made in relation to plant and machinery by that time. The loan agreement which was given to her by Ryan Kelly only included monies that she paid over to him. It 37 T155.23-155.33. -- 29 of 77 -- [2024] SADC 147 26 did not include plant and equipment. She did discuss selling the plant and equipment to Ryan Kelly.38 This conversation occurred after she had left Shane. Ryan Kelly approached her and asked if he could buy the equipment but there had been no discussion about price at that stage. She did say that she would be willing to sell the equipment to him but no further communication was had about the potential sale of the equipment; and she did not receive any documentation connected with the potential sale of the plant and equipment to him.39 72 I have found that the evidence given by Ms Munro was generally credible. I also accept that a number of the criticisms about the accuracy of some of the evidence given by Ms Munro were properly made and that she suffered some memory deficits about particular things that may have happened. For example, I would not accept that the $10,000 loan made to Shane in connection with the money borrowed from his sister associated with his mother going into a nursing home has any connection with any claim made between Ms Munro and Ryan Kelly. 73 However, I am not prepared to accept assertions made in cross-examination that the only agreement made was for a ten-year loan. Nor am I prepared to accept that no separate agreement was made in relation to plant and equipment. The reasons are obvious. For there to have been a ten-year loan it would have been necessary for Ms Munro to turn her mind to a number of issues. The first was the expected longevity of her relationship with Shane and the connection between herself, Shane, Ryan Kelly and the farm. The second was whether or not she wished to be the principal financier of these aspects of the farm operation and if so, for how long; the third is that she did not have a separate source of income but relied upon the investment of her property settlement to obtain an income which was not being paid and so the longevity of the alleged ten-year loan arrangement in those circumstances was very problematic and highly unlikely; and fourth an assessment of the overall arrangement and whether, on any basis, it became clear that Ryan Kelly could ‘get himself back on his feet’, given any particular circumstance including, for example, whether (or not) there was a favourable year of rainfall. There are so many unknown and contradictory variables, even accepting, as I do, that there was an aspect of emotional attachment between Ms Munro, Shane, the farm and therefore Ryan Kelly. 74 There is no separately identifiable evidence, actual or arising by inference that any agreement (assessed objectively) was ever made for there to be a ten-year loan agreement. That is an issue which I will separately assess in light of the evidence of Ryan Kelly. I reiterate that Shane did not give evidence and therefore there was no clarification from the point of view of the respondent of a number of assertions made by Ms Munro and aspects of her evidence which involved Shane. I turn then to the evidence of Ryan Kelly. 38 T179.9. 39 T179.23-T180.12. -- 30 of 77 -- [2024] SADC 147 27 Ryan Kelly 75 Ryan Kelly was the only witness called for the respondent. He is the son of Shane and Helen Kelly. He is a farmer but also a senior fireman with the Metropolitan Fire Service stationed at Kadina. He lives in Wallaroo. 76 His farming business is called Tabu Soro Farming, and it operates the farming enterprise. He based that business at 10218 Spencer Highway. He separately has a transport business under the Tabu Soro Farming Trust which was registered in September or October 2015. He also owned a Kenworth prime mover which he hired to his uncle in Shepparton who was involved in the orchard industry. 77 The farm at 57 Kelly Road was purchased in 1959 by his grandparents and in 1992 it was shifted into the entity known as Brofern Pty Ltd as the trustee of the Riley Trust. He said that the Riley Trust owns the shares of Brofern Pty Ltd.40 As a trust does not have a legal existence and only exists beneficially for the benefit of the beneficiaries of the trust, it is not possible for the trust to own the shares. Rather, the issued shares of Brofern Pty Ltd must be owned by independent persons. Likely that is the members of the Kelly family. 78 The farm comprises of about 1,500 acres made up of two parcels of land on the Spencer Highway and at 57 Kelly Road. There is another small parcel of twelve acres. The business is broadacre farming and a livestock operation comprising mostly sheep with wool and lamb production. Cropping is of wheat, barley and some hay. Some of the crop is used for the farm’s own purposes and some is sold. 79 Ryan Kelly suffered PTSD as a result of a fatal farm accident which occurred in 2012 and he decided that the land on which the accident occurred would be sold in 2017. 80 Because of his PTSD, his father left a high paying government job with Rural Solutions/PIRSA to move back to Wallaroo to be with him. His mother did not come back to the farm at that time but stayed in Adelaide with his sister in rental accommodation. There was a farmhouse on 57 Kelly Road which was empty. That farm had been operated under a partnership between his parents Shane and Helen trading as PS & HG Kelly which leased the farm from Brofern Pty Ltd. 81 Following a fatal accident, the farm was performing poorly. In 2014, the primary lender Rabobank commenced to increase financial pressure upon their business. His grandfather had died and on the basis of the bank’s policies, and the terms of the grant of funding where a death in the family of a borrower has occurred, Rabobank decided that it would rewrite the loan. At the same time, Ryan Kelly’s parents separated permanently, and he was to become a business partner with his father whilst his mother was to leave the partnership. Rabobank did not 40 T187.28-T188.11. -- 31 of 77 -- [2024] SADC 147 28 want to release his mother as a borrower and this dispute emerged in the second half of 2016. Rabobank had first mortgage security on all three properties. 82 As well, each of the families suffered a considerable deficit in income. His father Shane was receiving about $130,000 per annum in his job with the department which he quit. That also resulted in financial issues between Brofern Pty Ltd and Rabobank and it created cashflow problems. This worsened over time and particularly by the middle of 2015. The financial position of the property did not improve after that time despite 2016 being a very good season because of very favourable rains. Also, in 2016 there was a storm which largely destroyed the farmhouse on the Spencer Highway property; there was an insurance payout. Ryan Kelly had been living in that property with his girlfriend. He had to move to emergency accommodation funded by the insurance company. After the insurance payout, they lived in holiday accommodation from about May 2017. 83 Ryan Kelly first met Ms Munro on or about 10 July 2016 at the Riley Farmhouse at 57 Kelly Road. That was about two weeks after his father had met Ms Munro. Sometime in 2017, and on the evidence about a year after his father and Ms Munro had been living at the Kelly Road property, he made a decision to investigate purchasing ‘bobby’ calves from dairies, raising them as cattle and selling them for a profit. He said that this was his idea. This proposition was not put to Ms Munro in cross-examination. He said that he discussed the proposition with his father over about a six-month period. I have significant doubts about the credibility of this evidence. 84 The evidence satisfied me that there was no infrastructure for cattle on the property. The only existing infrastructure was suitable for handling sheep. If cattle were to be raised on the property, it would be necessary to obtain particular infrastructure to handle larger beasts. Through Ms Munro and his father, he then purchased cattle infrastructure during the first half of 2017. He cannot recall what conversations he might have had with Ms Munro, but at that time that he was aware she was familiar with handling cattle. He also converted part of a pig shed at 57 Kelly Road for the cattle. Thus, from the outset the plan was to use the Kelly Road property on which Ms Munro and his father lived for the cattle. At that time, he knew that he would have to buy bags of milk for the calves. He recalls that on a Friday in September 2017 he collected the calves and brought them back to the property. A decision was made between his father, Ms Munro and himself to take five calves and five bags of milk. The initial batch was successful, and a second batch was purchased. 85 Ryan Kelly denied that there was ever any discussion about any financial agreement with Ms Munro concerning the purchase of the calves. He paid for the first lot of calves purchased and Ms Munro paid for a second lot and a number of lots thereafter. He thinks about sixty calves would have been purchased between September 2017 and May 2018. At the rate of five calves per purchase, this is twelve purchases of calves made by the farm, eleven of which were paid for by Ms Munro. I am unable to accept this evidence of Ryan Kelly. It is quite apparent, -- 32 of 77 -- [2024] SADC 147 29 even on Ryan Kelly’s own evidence, that the funding for the purchase of the calves was from Ms Munro. He also agreed that Ms Munro paid the majority of the money for the milk and the farm had available hay and grain when the calves came off milk. Ryan Kelly said that there was never a discussion about what would happen with the funds on the sale of the cattle. I am unable to accept that evidence. It is apparent even on his own evidence, that the majority of the outlay of costs, if not the whole of the outlay of costs was provided by Ms Munro for the purchase of the calves and the milk. He said there were significant losses from the calves and he thinks they sold only twenty-five of them, this occurred in 2020. He thinks he sold them for about $1,500 per animal, and that when he did, Ms Munro told him to keep the proceeds of sale. He said that she told him to do that because the farm had put up feed, hay and feed grain. 86 A sale of twenty-five of the calves for $1,500 per animal would have achieved the sum of $37,500. Ryan Kelly gave no evidence of the cost of the purchase of the calves. By that time, fifty five of the sixty calves purchased had been paid for by Ms Munro and at least these calves had been fed with milk purchased by Ms Munro. The hay and grain provided from the farm resources already existed. I think there is considerable doubt about this evidence given by Ryan Kelly about the sale of the calves. Absent any corroboration of that evidence, I am not prepared to accept it. 87 Ryan Kelly agreed that in 2017, he was living at the Marina in Wallaroo, and he came to the Kelly Road farm daily. He would have discussions with Ms Munro daily and often many times per day. In those discussions during 2017, they talked about the possibility of him borrowing money from Ms Munro for farming activities. His best recollection was that Ms Munro was amenable to helping him if she could. 88 He said the dispute with Rabobank erupted over the decision by his mother, upon final separation from his father, to seek a property settlement and this occurred sometime in about April or May 2018. Rabobank as the primary secured lender was involved in those negotiations. This gave rise to a dispute with Rabobank and led to a farm debt mediation between the bank, the farming partnership of his parents and Brofern Pty Ltd. He was joined to that dispute as a third party. At that time, he claimed for the first time, that he had not been paid a wage by his parents partnership and was owed about $1.7 million dollars by the partnership or Brofern Pty Ltd or both of them (he did not say which) for unpaid wages and superannuation. There is no evidence to support this assertion. For example, no evidence was called from Shane to support this contention and there was no contention or evidence that Shane was unavailable to give evidence; there was no evidence that he was suffering any form of malady. He was at the Court at the commencement of the trial. In the absence of any corroborating evidence, I am not prepared to accept that evidence of Ryan Kelly. I think it is fatuous. 89 The Rabobank mediation occurred in 2018 and an aspect of the agreement which followed that mediation was that Ryan Kelly was to take over the farming -- 33 of 77 -- [2024] SADC 147 30 business as well as both of the farms on the basis that he would be able to obtain money to discharge part of the Rabobank debt. It was necessary for Shane to walk away from the farming property, to resign as a trustee and his former wife to resign as trustee but remain a beneficiary. Ryan Kelly became a trustee of the Riley Trust on about 5 October 2019. At that time, Rabobank was replaced as a lender to the farm by Winsec which in the short term of about two to four years loaned money to Ryan Kelly as the trustee of the Riley Trust. 90 The Kelly partnership had earlier borrowed money from Rabobank with a company guarantee from Brofern Pty Ltd. Ryan Kelly was the guarantor of the Winsec debt, as a director, and Tabu Soro Farming separately gave a guarantee. Exhibit R2 was a certified copy of the Riley Trust Deed. Exhibit R3 was a document evidencing the removal of Ryan Kelly’s parents as trustees of the Riley Trust. Exhibit R4 is a copy of the Brofern Unit Trust Deed and Exhibit R5 are financial statements for the Brofern Unit Trust. Ryan Kelly became a director of Brofern Pty Ltd which owns both the property at 57 Kelly Road and the Alford Road Farm on 8 October 2019.41 On 14 October 2019 Shane ceased as the director of Brofern Pty Ltd and Ryan Kelly became the sole shareholder. 91 Ryan Kelly said during 2019 he had a meeting with Westpac at a branch somewhere on the Parade at Norwood. He met with Mr Allen Wilson. This meeting followed a meeting held between Ms Munro and his father at Westpac in 2017. He said this was the only meeting he ever had with Westpac. No evidence was called from Shane on this topic. Ms Munro was adamant on her evidence that Ryan Kelly had attended the meeting with Westpac in Adelaide. 92 There is a peculiar aspect about this evidence of Ryan Kelly. He said that the meetings with Westpac occurred throughout 2019. He also said that negotiations were going on with Winsec at the same time and that Winsec had issued a term sheet on 27 June 2019 under which it would lend money to the trustee of the Riley Trust. It would be somewhat unusual, if not peculiar, for Ryan Kelly whilst in the throes of finalising his negotiations with Winsec to be troubling himself to have meetings with Mr Allen Wilson of Westpac. For those reasons I do not think this evidence of Ryan Kelly is reliable and I would not accept it in preference to the evidence of Ms Munro. 93 Ryan Kelly then said that he had some discussions with Ms Munro in October 2019 about a machinery shed. He said by that time, it was obvious that a harvester had to be purchased. There was no challenge to the evidence of Ms Munro that the harvester that existed upon the property had irretrievably broken down. At the time, the farm was paying a contract harvester some $26,000 per year to do the contract harvesting upon the property. If crops were to continue to be grown upon the property it was necessary for a harvester to be purchased. It is also apparent 41 Exhibit A1, page 389. -- 34 of 77 -- [2024] SADC 147 31 when full regard is had to the evidence of Ryan Kelly that at least some of the machinery on that farm had previously been stored outside.42 94 Ms Munro had been involved in a very successful farming partnership with her former husband. That mixed farming business operated over a fifteen- thousand-acre property, was much larger and necessarily more sophisticated than the Kelly operation. Ms Munro was well aware of good farming practices and that storing machinery outside was not necessarily consistent with good farming practices. Ryan Kelly said that she was the person who told him that it was not good having machinery outside and this is at the time that the new harvester and other machinery was being purchased. 95 Ryan Kelly said that at that time, Ms Munro suggested to him that she would like to help him to get back on his feet and there were several of these conversations that occurred on a casual basis at the Kelly Road farm. It is also quite apparent on the evidence that not only did the farm need to have a large and reliable machinery shed, but there were also other aspects of the property which needed urgent attention. Ryan Kelly said that on 24 March 2020, he purchased new sheep guards from Clipex. At the same time Ryan Kelly had a discussion with his father about where to put the machinery shed on the Spencer Highway farm. He volunteered that his father had been dreaming about putting a machinery shed up on that farm for thirty years but could not do so because they did not have the funds. This corroborates the evidence of Ms Munro and the evidential inference that very strongly arises that the Kelly farm was not successful and that plant, equipment and other improvements on that property had been deteriorating for many years because of the lack of success of that farm. 96 These farms needed a significant capital injection to be brought to profitability. The only source of that capital was Ms Munro. Ryan Kelly agreed that he was the person who arranged with Clipex for the purchase of the new sheep yards and that Ms Munro provided the funds to purchase the sheep yard. He said this was under a loan.43 The purchase invoice was directed to Ryan Kelly. 97 Ryan Kelly also agreed that the Point Riley Cattle Co, business owned by Ms Munro purchased the Honey Bee 94c Grain belt and front-end harvester. The intention was to use the harvester and the front end on the Kelly farms, but he also wanted to use it in a contracting business which he wanted to commence. The harvester and the front end were purchased from Vater Machinery.44 He agreed that all of these purchases occurred under the name of Point Riley Cattle Co, the business of Ms Munro. He said this was for taxation purposes. All of the funds for the purchase of all of this machinery was provided by Ms Munro.45 42 T226.4. 43 T227-228.33; T229.25; T230.12. 44 Exhibit A1, page 319. 45 Exhibit A1, page 344; T232.32; T233.20. -- 35 of 77 -- [2024] SADC 147 32 98 Ryan Kelly also agreed that there were other conversations with Ms Munro about providing capital for other needs of the farm. He said that in other discussions he told Ms Munro that if she provided this capital to him, it would be paid back over a ten-year period. He thinks these discussions took place in about March 2020. He said it was Ms Munro who told him that she understood that he would not be able to pay capital back immediately and it would have to be paid over a long period of time. Within that discussion, there was a suggestion of the ten-year repayment period. These discussions occurred at a similar time to when the shed contract was signed which was somewhere near the end of March or early April 2020. These sheds were to be built on the Spencer Highway property commonly called the Alford Road Farm. 99 When Ms Munro was cross-examined, no suggestion was made to her that it was she who suggested to Ryan Kelly that if she made capital available to him, she understood it could only be repaid over a long period of time. Rather, it was put to her that she agreed to the suggestion that it be repaid over ten years. 100 I have very significant doubts about the credibility of this evidence. Ms Munro was a person experienced in rural business. She accurately made an assessment of the needs of the Kelly Farms. She was prepared to give assistance to Ryan Kelly, the son of her partner, to help him get back on his feet. She did not, for example, purchase the header, the comb and the rake in the name of the farm. She kept those assets separate. And these discussions were going on at the same time as the shed contract was being signed. I consider that this evidence of Ryan Kelly is contrary to plain common sense. It is inconsistent with the evidence of Ms Munro, whose evidence I found to be generally credible and these propositions were not completely put to Ms Munro in cross-examination. In my view the evidence of Ryan Kelly does not accord with the commercial reality. 101 Two chaser bins were purchased in connection with the proposed contracting business. Also purchased was a Tri-Axle tipping trailer a thirty foot land roller and a drop deck widening trailer.46 Ryan Kelly said that Ms Munro provided him with the funds to acquire all of this machinery but it was all part of a loan from Ms Munro.47 In his evidence48 Ryan Kelly said that the discussions that he had with Ms Munro was that all of this machinery was to be paid for over an extended period of time, that it was not to be repaid on demand and that the arrangements were the same as if there was a chattel mortgage in favour of Ms Munro. Thus, payments were to be made regularly but for an extended period of time on certain pieces of machinery. This would assist with cashflow. However, having said that these discussions took place, he could not remember when they occurred. 102 In my view, there is significant doubt about this evidence. These propositions were not put to Ms Munro in cross-examination. The expression ‘chattel mortgage’ 46 Exhibit A1, page 324; Exhibit A1, page 325; Exhibit A1, page 336; Exhibit A1, page 337; Exhibit A1, page 343. 47 T236-239.29. 48 T239-T240. -- 36 of 77 -- [2024] SADC 147 33 was not put to her as the nature of the relationship between the parties and the evidence satisfies me that no regular payments were made. I think this evidence is of very little weight. The evidence is also inconsistent with obvious commercial reality. There was no record of such an arrangement and there were no regular payments made to ensure the continuation of the financial arrangements which were claimed to continue for ten years. 103 Ryan Kelly agreed that in 2020, Ms Munro and his father were living interstate and were unable to return to South Australia because of the COVID restrictions. However, he was speaking to his father and to Ms Munro regularly and sometimes two to three times per day. He knew that they went to the Swifts Creek property, and he did not see them between 26 May 2020 and 22 December 2020 when they returned to the Kelly Road property. During this time he lived at 57 Kelly Road and after their return, all three of them lived at 57 Kelly Road from 22 December 2020. Later Ryan Kelly started living at the Alford Road farm. At the end of December 2020, he was told that his father and Ms Munro were separating. 104 He said that Ms Munro was obviously upset about the separation. He said that they then started having a discussion about a loan agreement to record what had happened. He also wanted it to record that he would purchase the header from Ms Munro and this would be added to a loan agreement. He did not think it was fair for her to be providing long term finance for a header. A document was prepared.49 He was the person who prepared it and he said it was done at the suggestion of his accountant. It is an invoice directed to Ryan Kelly from the Point Riley Cattle Co for the New Holland Header, the 76C Pickup and the 36-Foot Honey Bee Header Comb. The total of the invoice was $167,000 and it was dated 25 March 2021. This document was prepared almost four months after the alleged separation of his father from Ms Munro. Ryan Kelly said that this document was prepared after a telephone conversation in which Ms Munro requested the preparation of the document. 105 There are a number of unusual features about the document. The first is its date. The second is that there is a figure disclosed inclusive of GST which seems to bear no relation to the content of the document. There is a question whether this is a GST applicable transaction. Third, in his initial evidence, Ryan Kelly said that his bookkeeper prepared it on his instructions after Ms Munro asked for it. In her evidence, Ms Munro said that she had never formed an intention to sell the machinery to Ryan Kelly and that she had never seen this document. I am unable to accept the evidence of Ryan Kelly on the topic. I think that this document was prepared by Ryan Kelly in the hope that one day, it might have been used. I accept the evidence of Ms Munro that the document was not seen by her at any time. 106 Ryan Kelly then said that in the refinance with Winsec, he had allowed for some working capital. He needed capital to assist with the property settlement with 49 Exhibit A1, page 345. -- 37 of 77 -- [2024] SADC 147 34 his mother which was about $70,000 and he wanted to buy a new car. He also needed some capital to operate the farming business and he set aside a couple of hundred thousand dollars. 107 This amount of working capital was not sufficient to pay for the capital improvements on the property which were necessary bearing in mind what had happened with the other capital expenditure paid for by Ms Munro. He used monies from Ms Munro to pay for extra costs such as for the base of the shed. He said that Ms Munro agreed to pay for the base of the shed as organised by him as part of the shed discussions. He had the same discussions with Ms Munro about the shed base as he had with her about the sheep yards. She wanted to do things as efficiently as possible and it was she who suggested that once he got on his feet, in say ten years, then the loans could be repaid. This was because the Winsec loan was never a long-term prospect. 108 He said all of these conversations happened in 2020, however, that proposition was not put to Ms Munro in cross-examination. For example, it was not put to her in cross-examination that she volunteered to Ryan Kelly that he could repay the debt owed to her after about ten years and once he got onto his feet and that she understood that the loan was to be long term. It was never put to her that she was the person who suggested a ten-year period. It appears that Ms Munro was aware that the loans of Winsec were only short term and that, in time, a long-term lender had to be obtained. In my view this knowledge reinforces the credibility of the version given by Ms Munro. She would always ‘stand behind’ the security given to a long-term lender in terms of priorities. Her debts had to be repaid early so that her interests were not postponed by the priority given to a lender under a long term loan arrangement. I am unable to accept this evidence from Ryan Kelly. I think it is fanciful to now suggest that it was Ms Munro who suggested a ten-year term. 109 I do not think that a ten-year term was ever mentioned until Ryan Kelly put to Ms Munro a formal loan agreement document between herself, himself and his business of Tabu Soro Farming.50 The recitals to the agreement were first seen by Ms Munro when the document was presented to her. There is an acknowledgment of indebtedness of the principal debt as described in item 1 of the schedule to the document. Item C of the recitals records the borrowers, namely that Ryan Kelly and Tabu Soro farming agreed to repay the principal sum on the terms and conditions within the agreement. The terms of the agreement are that the borrowers agree to repay the principal sum in accordance with the requirements of Item 3 of the schedule and pay interest at the rate prescribed in Item 5 of the schedule. Item 3 of the schedule sets out a repayment program. The first, that the machinery shed portion is to be paid over an eight-year period not commencing before 28 February 2024 some three years hence, that is over an eleven-year period. The amenities shed will be paid by eight equal payments, also commencing on 28 February 2024, three years hence and similarly also over 11 years. The header and bin portions are 50 Exhibit A1, page 349-356. -- 38 of 77 -- [2024] SADC 147 35 to be paid over a five-year period. The tipper portion is to be paid over eight equal half year payments, over a four-year period. The drop deck portion is to be paid by the greater of either $1 per km of use of the drop deck or eight equal pro rata equal annual payments commencing on 12 August 2022, namely over nine years and the balance of the portion is to be paid by eight annual payments commencing 31 March 2024, namely over 11 years. 110 There is no evidence that such terms of an agreement were ever reached between Ms Munro and Ryan Kelly; or that Ms Munro anticipated such an agreement would be presented to her; or that Ms Munro ever agreed for substantial capital injections to be repaid over an eight, nine, ten or eleven year period; or that Ms Munro would commit herself to such a relationship which was wholly dependent upon the success of the farming enterprise of Ryan Kelly which, up until 2020, had not been sufficiently successful. 111 After the refusal of Ms Munro to execute the document, Ryan Kelly engaged a solicitor friend to prepare a letter which he sent under the Tabu Soro Farming letterhead to the lawyers for Ms Munro. The first paragraph reads:- ‘As your client’s intention was not to sign the loan agreement, I formerly rescind the loan agreement delivered to her’. 112 The letter goes on to deny the monies loaned were repayable on demand especially as the circumstances of Ryan Kelly were known and there were discussions of repayment over a ten-year period.51 A letter was received from the solicitors for Ms Munro demanding a return of the items belonging to Ms Munro.52 The pertinent parts of the letter provide:- On behalf of our client we now demand the return of each of those items of property which we list as follows:- 1. New Holland CR9080 Header VIN: YBG114510, registered number CR9080LIT. 2. 2010 Honey Bee 94C 36G 36ft Grain Belt Header front with Trailer, serial no. 3655103171. 3. Clipex Portable Cattle + Sheep Yards delivered on 24 March 2020. 4. 2 x 2002 Moohna Engineering chassis bin (field bin) VIN 12345 5. 1985 Venning chassis bin (chaser bin) VIN 54321. 6. 2020 Freight Master 44 ‘Tri Axle Drop Deck Semi Trailer VIN: 6TWSDD3ECL1010182. 7. Freight Master Tip trailer. 51 Exhibit A1, page 382. 52 Exhibit A1, page 383 dated 13 September 2022. -- 39 of 77 -- [2024] SADC 147 36 8. Catford 30’ Land Roller. Our client requires each of these items to be made available for our client’s agents to collect on Tuesday, 20 September 2022 at 8.00 am at 57 Kelly Road, Wallaroo Plains SA 5556. 113 Ryan Kelly said that this was the first time such a request had been made of him to return the equipment. 114 I have earlier made reference to the evidence given by Ryan Kelly about his claim to be owed $1.7 million dollars in backpay. This could only have been owed to him by the partnership of his parents PS & HG Kelly.53 Ryan Kelly confirmed that he did not make any claim for backpay or unpaid superannuation benefits or any other benefit at any time up to the time that this parents Shane and Helen separated. He rejected the proposition that such a claim was merely a device to be used by himself and his father to avoid paying his mother larger amounts from the assets of the farm.54 Ryan Kelly then said that he did not get paid the full amount of $1.7 million dollars in cash because, in effect, he got the entire property. That was part of the settlement of the Robobank dispute at the Robobank mediation.55 At a number of levels, I consider that this evidence given by Ryan Kelly is lacking in credibility, reliability and truthfulness. Ryan Kelly did not give evidence that he had any expectation of getting less than the property that he received. He received the benefit of the entire property and in my view, the inference, which is available on the evidence and which, in my view rises to the level of certainty is that he was always going to get the property. As I have earlier recounted, the property was marginal in many respects; it was very productive in good rainfall years and much less productive in other poorer years. There were many more poor years than good years. I consider that his evidence about the claim for $1.7 million dollars in unpaid wages and other benefits of employment is not credible evidence and I reject it. 115 Having maintained that he was owed this very large amount of money, Ryan Kelly then rejected the proposition that he had difficulty meeting his own day to day expenses because it was not until 2019 that he was paid for work done on the farm.56 He initially claimed that he used his salary from his fire brigade job. When he was questioned more closely, he admitted that the salary received from the fire brigade job was, before tax, between $12,000-$20,000 per annum. It was not a full time job and the evidence does not satisfy me that it was possible for Ryan Kelly to subsist on this salary or the addition of this salary to any other income, sufficient to sustain him.57 He also admitted that there was no written or verbal agreement in relation to the payment of wages for which he made such a large claim. In my view, in the context of the arrangements within farming families, the inference clearly arises that as the successor to his parents, he forsook salary as part of the arrangement to receive the whole of the benefit of the family farm. 53 T262.3. 54 T262.8-262.24. 55 T262.38. 56 T263.40. 57 T264.17-T264.37. -- 40 of 77 -- [2024] SADC 147 37 116 After further cross-examination Ryan Kelly said that this claim for $1.7 million for unpaid wages was his solicitor’s idea.58 I am satisfied that the claim for $1.7 million dollars in unpaid wages and other emoluments of services was illusory. Confirmatory of that position, Ryan Kelly also said in his evidence that there were no written or verbal agreements in relation to the payment of wages. In my view, so much is obvious. It was a device to avoid paying the amounts to his mother in the property settlement connected with his father Shane. I reject his evidence on the topic. 117 Ryan Kelly was then cross-examined about the calves business and he agreed that Ms Munro wanted that business to be successful.59 When questioned more closely about the business, Ryan Kelly agreed that there had been no discovery of any records or bank statements connected with the purchase of the first lot of calves. It is implicit from his subsequent answers that those documents existed. He said in evidence that he was not sure if those documents were to be included in discovery. They were therefore not provided to his solicitors.60 No credible or acceptable reason was given by Ryan Kelly about why he did not make disclosure about the records that were in his possession. It is inconceivable that he thought that there could be any doubt about the need for them to be included within the documents discovered. 118 In his evidence, Ryan Kelly said that more than eighteen of the calves died.61 He disagreed with the assertion put to him in cross-examination that there were at least forty-three calves left for sale in May 2020. Having denied that proposition, he then volunteered that there were at least four cows that had calves a foot, but he could not recall the correct number of calves that had died.62 119 Ryan Kelly agreed that the calves, once fully developed were selling at about $1,500 per animal. He agreed that if he had sold twenty animals at that price, he would have received something in the order of $30,000. There would have obviously been sale expenses deducted from that amount. Having volunteered that the stock was selling at about $1,500 per animal, Ryan Kelly then said that he could only guess that was the amount received per animal. He then volunteered that it was approximately $1,500 per animal but he would need to look at the invoices.63 There has been no inclusion within the tender book of invoices in relation to the sale of the animals once fully developed.64 120 Ryan Kelly then rejected the proposition put to him that if $30,000 was received from the sale of 20 animals (and it is not clear that only 20 animals were sold) then the calves venture was profitable. And he did not have to contribute any 58 T265.16. 59 T265.35. 60 T266.4. 61 T266.38. 62 T267.1-T267.21; T269.7. 63 T269.30. 64 T269.30. -- 41 of 77 -- [2024] SADC 147 38 money to the venture at all. Ryan Kelly then asserted that it was necessary for him to supply substantial grain and hay. However, there is no evidence to allow a calculation of the value of that grain and hay. Nor is there any evidence that this grain and hay, would, for example, have been otherwise sold into a market (which was unidentified) or would have been used as dry feed for other stock on the properties. Ryan Kelly then attempted to calculate the value of that grain and hay and said that he would have spent $5,000 or $6,000 on hay. There is no evidence that Ryan Kelly expended the sum of $5,000 or $6,000 on purchase of hay from an outside source. Notwithstanding, Ryan Kelly then disagreed with the proposition that receiving $25,000, for example, from the proceeds of the sale of the calves, it was not a failed business. Ryan Kelly vehemently disagreed with that proposition.65 121 The following exchange then occurred in cross-examination:-66 Q Sorry, I'll put it again. You agree that Ms Munro said to you that she would pay for the purchase of the calves and would pay for the necessary expenses incurred in their rearing. A Yep. Q And she then also said to you at the same time and you could pay her back out of the proceeds of sale. A Yep. Q And she never said to you 'Don't worry about paying me back out of the proceeds of sale' did she. A She told me that in 2020. Q Well, I suggest to you that's a lie and she never said that to you. A No, she told me that. It was because it was at the time when we were trying to move forwards and we were buying this other equipment and doing the shed and that and she said keep it and put it towards what we’re doing. Q Well, you didn't say that yesterday. If you just remembered she said keep it and put it towards - A Oh well, it was to go into my operational pool. Q It was to go into your operational pool. She didn’t say that did she. A She did. Q Are you suggesting to this court Ms Munro said put it into your operational pool. 65 T270.9; T270.30-T271.18. 66 T271.26-272.19. -- 42 of 77 -- [2024] SADC 147 39 A No, she said for me to hold on to the funds and to use them to do what I was doing not - Q What did she actually say. A That's what she told me to do. Q No, what words did she use. A I can't remember the exact words. 122 In fulfilment of his obligations, cross-examining counsel put to Ryan Kelly that he was lying about Ms Munro volunteering to him that he did not need to pay her the money that she had outlaid for purchasing the calves. In his evidence, Ryan Kelly suggested that Ms Munro suggested that he put the proceeds of sale into his operational pool. He was adamant that she said such a thing. He then recanted from that evidence and said he could not remember the exact words that Ms Munro used. 123 This was a further example of the inability of Ryan Kelly to answer questions directly and to remain consistent in the answers that he was giving about matters about which Ms Munro gave evidence, about which she was cross-examined and which he contends were untrue. In the end, he said that he could not remember precisely what was said by Ms Munro. Even though there was some lack of specificity about the evidence given by Ms Munro, when regard is had to the evidence by Ryan Kelly, the evidence given by Ms Munro carries much greater credibility and in my view was truthful. 124 Ryan Kelly was then questioned about the expenses paid by him with financial assistance given by Ms Munro. These were the expenses connected with the farming operation. He then said that he kept records of these expenses. These records were not discovered. Again, he was asked why these documents had not been discovered and he said that he was not asked for them in discovery.67 This became a consistent answer given by Ryan Kelly. I have considerable doubts whether these records actually exist, and I have greater doubt about the veracity, truthfulness and reliability of the evidence given by Ryan Kelly that he did keep those records. I also have same doubts about the fact that he was not asked to provide such documents in the discovery process. I think that this evidence of Ryan Kelly, lacks credibility, reliability and is not truthful. As another example, Ryan Kelly said that he had records in relation to the purchase of an air seeder and a payment of $5,000 made by him on 25 March 2020. He then said that he was not aware that the relevant invoice had not been discovered by him.68 Ryan Kelly was then further cross-examined about the efforts he made to provide documents in discovery. At transcript page 275.3-275.21 the following exchange occurred:- 67 T273.15. 68 T273.23-T74.19. -- 43 of 77 -- [2024] SADC 147 40 Q And apart from some bank records that were produced on last Friday, you've not produced anything, have you. A Those bank records are what I was asked to produce of the timeline. Q Well, you've told us you were advised to produce all documents that are directly relevant to any fact in issue. A Yes. Q Did you keep a running total in a ledger about what Ms Munro had provided you. A No, not as a day-to-day thing. Q Well, as a week-to-week thing or month to month thing. A No. Q As on any basis. A It was reconciled into my account keeping program. Q Into your what. A Account program, my book, my farm books, my accounts. Q So that's on a computer system, is it. A Yep. 125 Having given that evidence, Ryan Kelly was then asked about the operation of his computer accounting program. He said that the program was called Phoenix but it is currently broken and the records can only be recovered with great difficulty. The program broke down after the proceedings commenced.69 126 Before turning to the cross-examination of the respondent about the financial statements of the entities associated with the respondent Ryan Kelly, it is appropriate to ‘set the scene’ as it were because I have found that there is a considerable degree of confusion in the transcript about the arrangements connected with the various properties. 127 Ryan Kelly gave evidence about the existence of the Brofern unit trust and the Tabu Soro Trust. I have earlier referred to both of these trusts in my discussion of the evidence. 128 As the name implies, the Brofern Unit Trust is a unit trust in which there has been the issue of units in four separate classes, classes A – D inclusive. Exhibit R5 is the financial statements of the Brofern Unit Trust for the financial year ending on 30 June 2017. These are the only tendered documents connected with the Brofern unit trust. The second page of these financial statements records that the 69 T275.34-T276.4. -- 44 of 77 -- [2024] SADC 147 41 directors of the trustee company declare that the trust is not a reporting entity and, of the accuracy of the financial statements. The trustee company, according to the evidence is Brofern Pty Ltd, and it appears that Ryan Kelly is the director of Brofern Pty Ltd. The beneficiaries holding units in the Brofern Unit Trust are not identified apart from a trust entitled ‘The Riley Trust’. 129 The detailed statement of financial position for the year ending on 30 June 2017 in relation to the Brofern Unit Trust discloses the current assets comprised of the beneficiary loans made to the Riley Trust in the amount of $44,166. In the previous year, that loan was recorded as $43,611. The loan is recorded as a current asset and therefore it is immediately recoverable. No provision is made against that loan and therefore the financial statements are to be read as indicating that the directors are satisfied that this loan is fully recoverable upon demand. 130 The non-current assets are listed as land at cost ($296,931) and plant and equipment less accumulated depreciation. Total current and non-current assets are in the amount of $342,579 and, after allowing for a small amount of current liabilities, total net assets of the unit trust are $342,100. These are reflected within the equity amounts attributed to each of the unit holders (class A – D inclusive) of the unit trust. The funds/loans/capital account for the year ending on 30 June 2017 for the Brofern Unit Trust within Exhibit R5 show that the Riley Trust had an opening balance as a beneficiary of a deficiency of $43,611. This reflects the amount of the loan as it existed in 2016. There is a credit against that deficiency in the amount of $61,026 which is the profit distribution for the year. That leaves a credit in the beneficiary account of $17,415 but after drawings of $61,581 there is a deficiency of $44,166. The total beneficiary funds (deficiency) are in that amount. 131 In the equity statement of beneficiaries, each of the class A – D (inclusive) unit holders are Riley Trust Unit holders. The correct description is Riley Trust class A fully paid – Riley Trust class D fully paid (inclusive). The amount subscribed by those unit holders is reflected in the net assets and is the same figure $342,100. This is the usual method of accounting. 132 Thus, it may be seen that the Brofern Unit Trust through its trustee Brofern Pty Ltd is the landholder upon which the farming business is, in whole or in part, conducted. Exhibits R6, R7 and R8 are the financial statements and income tax returns for the Tabu Soro Trust for the 2021 (R6) 2022 (R7) and 2023 (R8) financial years. Each of those financial statements discloses that the trustee is Ryan James Kelly. The Tabu Soro Trust conducts the farming business upon the land. As trustee, Ryan Kelly controls the business of the trust. 133 There are a number of features about these trading statements, income statements and tax returns that require comment. The trading statement for the trust for the year ending on 30 June 2021 disclosed that the business of the trust is sale of livestock, cropping, sheep sales, wheat and wool sales and beef cattle sales. In 2021, the largest single source of income was contracting income which increased -- 45 of 77 -- [2024] SADC 147 42 by about $75,000 from the previous year of 2020. The most significant decrease in earnings between 2020 and 2021 was ‘barley malt sales’. No beef cattle sales were recorded for the 2020 year. In 2021, there were beef cattle sales of $22,821.16. There was a decrease of about 25 % in sheep sales and wheat sales. There was a small increase in the level of contracting income. The income statement for the trust for the year ending on 30 June 2021 shows income from farming and truck contracting. The largest ‘expense’ was depreciation in the amount of $685,080.76.70 134 In the expense column, there are a number of expenses for interest. No provision is made for interest to be paid to Ms Munro. After taking into account total expenses there was a deficiency of $939,138.09. In the balance sheet, plant and equipment was recorded at $396,344 but the total amount of the plant and equipment was depreciated to NIL. In the previous year, 30 June 2020, the plant and equipment was recorded at $284,211. The current liabilities are comprised, in the main, of accounts payable. There is no ageing of those creditors. In the non- current liabilities, the beneficiaries account discloses an opening balance in favour of Ryan Kelly in the sum of $135,646.02 with funds introduced of $452,915.26. Drawings are recorded at $209,001.70. This leaves the total beneficiaries accounts at $379,599.51. 135 There were purchases made in that year. A boom spray was purchased. There was a significant increase of $110,000 in respect of a loan from AgriFunder. There was also a significant increase in liabilities owed to Wardle Co and there was a significant increase in what is described as a loan - Merradith loan which increased from $410,903.51 to $767,841.57. Total liabilities were recorded as $1,855,119.71 leaving a total deficiency of $1,400,474.07 which was the measure of the undistributed income in the equity column and so was the deficiency in total equity. 136 I have earlier made reference to the current liabilities and non-current liabilities column. In the usual course, current liabilities are recorded as debts payable upon demand. Non-current liabilities are, in the ordinary course, liabilities not required to be paid within 12 months of the date upon which balances are struck. 137 The 2022 Tabu Soro Trust trading statements, income statements and balance sheets are largely in the same form. There were no cattle sales recorded in the cattle statement nor was there any contracting income. Sheep sales increased as did wheat sales, but wool sales decreased. There was another significant increase in farming direct costs. The largest source of income was truck contracting income which increased from $59,084.14 in the 2021 year to $485,419.13 in the 2022 year. Depreciation was in the amount of $513,299. There was a significant increase in truck contracting expenses from $47,556.28 to $307, 402.97. No interest expense 70 Depreciation of assets is an expense in an accounting sense but it does not reflect the payment of an outgoing. It also reflects a decision by the owner of the assets about the rate of depreciation of the assets. -- 46 of 77 -- [2024] SADC 147 43 in respect of a loan to Merradith Munro was reported. There was also a significant expense increase for wages and salaries from $42,710.75 to $208,850.80. The deficiency reflected in undistributed income was in the amount of $835,236.95. In the balance sheet for that year, plant and equipment increased from $396,344 to $825,071.55 all of which was written off in the year. Non-current liabilities disclosed an opening balance for Ryan J Kelly, the principal beneficiary of $135,646.02 and funds introduced of $1,474,794.04. Drawings of Ryan Kelly are disclosed at $684,957.35. The same return discloses the purchase of a Kenworth truck, an HP Slasher and other small hire purchase agreements. In relation to non- current liabilities the same loans from financiers as well as from ‘Merradith’ are recorded. The loan from ‘Merradith’ has not increased from the previous year. Total non-current liabilities were $2,345,541.09 leaving a total equity deficiency of $2,235,712.36. 138 The trading statement for the Tabu Soro Trust for the year ending on 30 June 2023 reflect largely the same position. Of note is that sheep sales dramatically reduced from $123,546.68 to $9,646.34 there were no wheat sales and there were no wool sales. There were no barley malt sales. There was a loss sustained on trading income from sale of livestock of $33,494.25. There was a significant drop in truck contracting income from $485,419.13 but there was recorded a significant gain on the sale of a non-current asset of some $420,000. The asset is not disclosed but it appears to have been a Kenworth truck. Depreciation dropped considerably to $77,071.68. As well there was a considerable drop in wages and salaries paid. There was a trading loss of $30,135.11. 139 The balance sheet recorded buildings at cost of $282,866.82. This is the same figure at which it had been carried for the previous two financial years. Plant and equipment were written down to $481,703.55. In relation to liabilities the accounts payable amount was identical to the previous years, and I think there is some considerable doubt about this figure. There was a significant increase in PAYG withholdings payable an amount of $20,000. There were outstanding wages of only $9,937 and there was a loan in current liabilities from the Tabu Soro Transport and Logistics Trust of $219,674.62. In the non-current liabilities, the beneficiaries accounts showed for Ryan Kelly an opening balance of $135,646.02, funds introduced of $2,103,240.98 and drawings of $1,001,368,02 leaving a total beneficiary account of $1,237,518.98. The Kenworth truck purchased the previous year appears to have been sold as well as the NH Round Baler and in relation to the financial loans, each of them continued to be carried at the same amount. The ‘Merradith’ loan is carried at the same amount of $767,841.51. There was a total deficiency in equity of $2,265,849.12. 140 In cross-examination, Ryan Kelly said that there was always a liability line in the non-current liabilities of the Tabu Soro Trust showing an amount owing to Ms Munro. However, Ryan Kelly also agreed that these financial statements were prepared without any input from Ms Munro and without any agreement on her part. Absent any discussion with her, they do not bind Ms Munro, she has never agreed to them and has never signed off on them. They do not reflect any -- 47 of 77 -- [2024] SADC 147 44 acceptance by Ms Munro of the version of events now contended for by Ryan Kelly and they do not attain the status of an ‘account stated’ which is well understood in the context of, for example, a partnership. 141 Ryan Kelly was cross-examined about the figures disclosed at item 1 on page 354 of Exhibit A1. There are six sub-paragraphs (A-F inclusive). At transcript pages 279-280 Ryan Kelly gave the following evidence:- A Okay, so all my personal and business bank accounts were reconciled into the program, and Ms Munro supplied me all her bank statements, and we went through them of what we knew what were expenditure of mine, for instance, where she had paid for something out of her own account, for example the dirt, and that was reconciled in as well. Q When do you say Ms Munro gave you her personal bank accounts. Haven't heard anything about that today. A In 2021. Q In what circumstances. A She gave them to me so I could work out what was the moneys that she was owed. HIS HONOUR Q Was this after you were told that she had separated from your father, and their relationship was at an end. A Yeah, a month later. She supplied me with all of her bank accounts so I could go through them one by one to add up what it was. 142 There are a number of aspects of this evidence which require comment. No evidence had been given previously that Ms Munro gave all of her personal bank account statements to Ryan Kelly in order for him to do a calculation. No proposition to that effect was ever put to Ms Munro in cross-examination. The second is that this event is alleged to have occurred after the separation of Ms Munro and Shane. Similarly, no proposition to that effect was put by counsel for Ryan Kelly to Ms Munro in cross-examination, nor did Ryan Kelly give any evidence to that effect in examination in chief. 143 I have earlier referred to R5, R6, and R7 which are the financial returns for the Brofern Unit Trust and the Tabu Soro Trust statements. I am satisfied from the evidence that Ryan Kelly did not understand the financial structures under which he operated. He said that after being questioned about the entry within the account statements for the Tabu Soro Trust of a non-current loan from Ms Munro of $767,841.51 that all of these figures came from a computerised accounting system. He was the person who input information into that system.71 He was then 71 T285.8. -- 48 of 77 -- [2024] SADC 147 45 questioned about why the loan was reflected in the Tabu Soro Trust statement and not for example the Brofern Unit Trust. At transcript pages 286.16-.25 he said:- Q The question is: Ms Munro did not lend money to the trust, to the Tabu Soro Trust. A Can you please break that down for me, sorry? Q I'll put another question. Ms Munro never had any dealings with the trust did she. A I'm the sole trustee of the trust. Q Yes, I know. But you never had a discussion with Ms Munro about lending money to the trust did you. A She knew how I was trading. 144 In my view, Ryan Kelly was deliberately avoiding addressing the question put to him by the cross-examiner because he was unsure whether there were any dealings with the trust, who had the dealings and the nature of those dealings. His response at transcript page 286.22 that he was a sole trustee of the trust bears out this view. 145 Ryan Kelly then confirmed that he never provided to Ms Munro any annual trust account statement or anything of that nature. 146 I am satisfied and I find that Ms Munro was not aware of, did not agree to, and was not bound by the entries in the accounting returns prepared by or on behalf of Ryan Kelly. In his evidence, Ryan Kelly agreed that he did not ever give Ms Munro any form of annual trust statement or any form of accounting returns. He volunteered that he thought that Ms Munro knew how he was trading.72 It is quite unclear to me how he could have assumed that she knew how he was trading unless he did provide to her the annual financial returns, obtained her consent to them and that he provided to her copies of the annual trust statements and financial returns. He then also volunteered that the loans made to him by Ms Munro are reflected in the Tabu Soro Trust statements.73 I am unable to accept that evidence. In my view, the content of the Tabu Soro Trust statements merely reflects a rounded-up figure that Ryan Kelly knew reflected an amount of money that had been provided to him by Ms Munro. That ‘rounding up’ does not reflect a determination that the amount of money provided was a loan or was of some other nature. 147 The first entry in the accounts was made in 2020 and was therefore contemporaneous with the alleged loan as contended for by Ryan Kelly, the evidence of whom I reject. He was asked whether Ms Munro provided money to him from 2017 onwards.74 He did not answer directly. His response was ‘in what respect?’75 In the end, he could not deny that from time-to-time Ms Munro 72 T286.32. 73 T287.17. 74 T287.36. 75 T287.38. -- 49 of 77 -- [2024] SADC 147 46 transferred money into his bank account and then when he was asked whether he could remember it happening he answered that it was a long time ago.76 148 Ryan Kelly then denied that in 2018, Ms Munro provided money to him for farm expenses. He was then taken to a number of invoices from 18 May 2018. Ryan Kelly suggested that he was not operating the farm at the time, it was still operating under the partnership of his parents. When challenged, he denied that in 2018, Ms Munro was paying many hundreds of dollars for things like diesel exhaust systems and fuel and farm parts. He then suggested that, for example, an amount of $775.86 which she paid for farm parts could have been at the request of his father. When challenged he said that it could have been at the request of his father. He said that he does not know whether he asked Ms Munro for money or if there was another source of money. In the end, he relied upon the fact that his parents’ partnership still existed in 2018 to contend that whatever was paid by Ms Munro at that time fell into some different category.77 149 I do not accept this evidence of Ryan Kelly as being truthful, reliable or having any credibility. I am satisfied from the evidence that during 2017 and 2018, conversations were occurring between Ms Munro and Ryan Kelly about the payment of the expenses for the farm being incurred from time to time. The farm was not profitable. It was unable to pay its fuel bills. Because of that fact, Ryan Kelly made requests of Ms Munro to pay for such things as the fuel, for spare machinery parts, for new machinery and other incidental expenses. I do not accept the denials of Ryan Kelly. I also do not accept his evidence that he did not know who was discussing these expenses with Ms Munro and that it could have been his father. It is not necessary for me to decide whether Ryan Kelly was deliberately trying to mislead the court. I am satisfied that on the whole of the evidence, there is no credibility in the answers given by Ryan Kelly on these topics which is consistent in my view, with his lack of credibility overall as a witness. 150 Ryan Kelly then said that the accounts produced which record relevant information do not cover any payments before October 2020.78 He then said that Ms Munro did make payments prior to 2020 at his request at the time that he was managing the farm.79 He then said that these accounts do not contain any reference to the amounts that Ms Munro spent on the calves because the calves were not done under his entity.80 In my view, the admission by Ryan Kelly that Ms Munro made payments prior to 2020 at his request whilst he was managing the farm is consistent with the findings that I have made that these payments were made, they were made at his request, the farm could not have operated without the capital provided by Ms Munro and it was a matter for Ryan Kelly to make his own 76 T288.3-.7. 77 T288.10-.38; T289.1-.20. 78 T289.32. 79 T290.12. 80 T290.27. -- 50 of 77 -- [2024] SADC 147 47 arrangements to fund promises of repayment he provided to Ms Munro in relation to the capital that she provided. 151 Ryan Kelly then said that the accounts that have been produced do not contain any reference to the amounts that Ms Munro provided connected with the calving venture because the calves were not done under his entity.81 It is difficult to make anything of this evidence given by Ryan Kelly although it confirms the view that I have formed that Ryan Kelly made his own decisions about where particular expenses and income would be recorded as it suited him. That is not necessarily a criticism of Ryan Kelly however it reflects the reality that these relationships were fluid but that the source of the capital was always Ms Munro. 152 Ryan Kelly then said that he had some records of the calves, but he had not produced them in discovery. For example, he had a spreadsheet from 2017 but that spreadsheet did not show expenditures in 2018 or 2019. He then denied that there were constant expenditures on this venture during 2018.82 However when cross- examined about the evidence given by Ms Munro concerning the dates and the amounts of expenditure made in relation to the calving venture during 2018, Ryan Kelly did not disagree with that evidence and said only that he had included the relevant dates and the purchase prices in his spreadsheet but not the sale prices.83 In a sense that is peculiar. He has alleged that the calving venture was not profitable, yet he has not kept a record of the sale prices. At transcript pages 291- 292, he gave the following evidence:- A No. But I can confirm the average was $1,300. I checked at lunchtime, for four of them. Q You're now telling us that you looked at some spreadsheet you haven't produced over lunch - A No, I didn't - Q Hold on - which doesn't give the sale prices, that has some sort of average figure in it. A No. Q Is that what you're telling us. A No, that's not what I'm telling you. Q What are you telling us. A What I said is I looked up the remittance of when I was - when they were sold. Q Were they all sold at once. They weren't, were they. 81 T290.27. 82 T290.32-291.9. 83 T291.24-T292.9. -- 51 of 77 -- [2024] SADC 147 48 A No, they weren't sold all at once. HIS HONOUR Q What did you look at. A Beg your pardon? Q What did you look at. A Just the sale remittance. Q Where are they. A They were supplied to me back when I sold the cattle. Q No, where are they for you to look at them at lunch. A Just on my phone. 153 Ryan Kelly then volunteered that he had looked on his phone over the lunch break and found one email remittance in relation to the sale of calves and that this sale was at the price of $1,300. He attempted to satisfy me that the average stock price for calves once they were steers was in the amount of $1,300. However, he accepted that there was only one remittance where the sale price was $1,300 per animal.84 154 Ryan Kelly also accepted that there was no allowance in the account statements for any liability in respect of interest payable to Ms Munro notwithstanding that he had accepted that the loan accrued interest.85 He thought that there were some changes to the business structure in 2019 but agreed that there was a Riley Trust, the Brofern Trust and the Tabu Soro Trust all of which had been set up prior to 2019.86 He had established the Tabu Soro Trust by a settlement in about September 2015 but the amounts loaned by Ms Munro were not included in the Tabu Soro Trust until 2021 notwithstanding that, in accordance with usual requirements, the Tabu Soro Trust, which was a trading trust controlled by Ryan Kelly was trading at least from 2015.87 The implements sheds 155 Ryan Kelly agreed that Ms Munro had provided to him money to be used by him to build the implements sheds. He said it was the suggestion of Ms Munro that he should build a shed to house his plant and equipment and that he told her that when he had his settlement he would fund the construction of a shed.88 My understanding of the evidence of Ryan Kelly is that he intended to convey that this agreement was part of some broader commercial arrangement between himself and 84 T292.33. 85 T292.9-T292.20. 86 T293.37. 87 T294.1; T294.5. 88 T297.13. -- 52 of 77 -- [2024] SADC 147 49 Ms Munro. He denied that the arrangement between himself and Ms Munro was in any sense a personal arrangement and that it was part of the overall arrangements reached between himself and Ms Munro.89 He specifically denied any suggestion that the deal was personal between he and Ms Munro.90 156 At transcript pages 299.1-300.10, he gave the following evidence:- Q Well, you say 'Can you please put the money to my NAB account so that I can pay for it'. That's personal, isn't it. A That's something all in the terminology. Q I'm sorry. A That's a terminology because she put - I said because at the time I had her NAB card - her ANZ card and the money couldn't go into the ANZ card because I couldn't transfer it out because I didn't have access to the transfer ability from that. Where if she transferred into my internet banking what I would have dealt out of, I could then pay for it. Q There's no mention of Brofern or any company or any trust or anything like that, is there. A No. Q Your deal was between you and Merradith Munro. That's right, isn't it. A No. Q Who else was in the deal. A Well because Merradith knew, Merradith was well aware that the Tabu Soro Farming, was, she was assisting Tabu Soro Farming, she was assisting me and the items were on Brofern land. Q So what. The deal was with you, wasn't it. A No. Q But you're the one who negotiated it with Merradith Munro, that's right, isn't it. A I spoke to Merradith. Q You were the manager of the property. A Yep. Q If not the owner at a later stage. At this stage I think you were effectively the beneficial owner, weren't you. 89 T297.25; T298.26. 90 T298.29. -- 53 of 77 -- [2024] SADC 147 50 A Yep. Q You were going to live in it. A Yep. Q And you didn't at any stage say to Merradith, 'This is a deal with Brofern' or anyone else, did you. A Merradith was aware of it because - Q What do you say she's aware. You never said to her anything. A On the shed contract. Q You never said anything to Merradith about your deal with her not being a deal with you, did you. A I can't really see the difference. Q Okay, so you can't see the difference, so you didn’t say it. A I can't say I didn't say I can't remember. 157 I am unable to accept the evidence given by Ryan Kelly at transcript page 299.16-.17 about the arrangement made with Ms Munro. I reject the evidence of Ryan Kelly at transcript page 299.20 that Ms Munro was well aware that Tabu Soro Farming was the entity that she was assisting, and the items were on Brofern land. There is some obvious legal importance of those answers. The implements sheds were built upon land owned by Brofern Pty Ltd which was leased by the Tabu Soro Farming business. Those implements sheds were permanently attached to the land. They would otherwise be fixtures. There is no evidence before me that there was any discernment or any aspect of sophistication about the discussions between Ms Munro and Ryan Kelly concerning the financing of the implements sheds. So much is apparent from Exhibit A1 page 371 which is email correspondence dated 4 November 2020 sent by Ryan Kelly to Ms Munro in which Ryan Kelly informs Ms Munro of the amounts payable for the shed, the costs of a concrete apron to the sheds, the costs of the concreting of the floor of a ‘live in’ shed (which he intended to inhabit) and other matters connected with the sheds. He then says:- ‘…can you please but (sic) the money to my NAB account so I can pay for it…’. 158 There is no discernment in that correspondence or any discussion with Ms Munro about the involvement of Brofern Pty Ltd as the owner/lessor of the land, the involvement of the Tabu Soro Trust as the lessee of the land and anything done by Ryan Kelly and Ms Munro. To the contrary, it is apparent that all of the correspondence between Ryan Kelly and Ms Munro and the discussions held between them were purely personal and were not connected with any other commercial arrangements made by Ryan Kelly. There is no evidence that the loan was for a particular period of time apart from the fact that it was made. In the -- 54 of 77 -- [2024] SADC 147 51 absence of any specific term, it is, in the usual course, a loan repayable upon demand. 159 To that end, Ryan Kelly agreed that there were conversations from time to time that he had with Ms Munro where he asked her to pay for fuel. An example was a payment of $705.80 made by Ms Munro to BP Wallaroo.91 And Ryan Kelly said that this was for fuel to be placed into an 800 litre container on a trailer. 92 Payments of this nature were usually connected with casual conversations between Ms Munro and Ryan Kelly over a cup of tea in the kitchen of the homestead during the early morning. Ryan Kelly attended for breakfast every day at the homestead and Ms Munro would be present.93 In fact, the way things developed was that insofar as there may have been a difficulty experienced in the farm through cashflow shortages and there were outstanding bills to be paid such as power bills, there would be a discussion had with Ms Munro and she would be asked to pay for them.94 That was the way in which things developed between 2017 and 2019 and then things were more seriously formalised after 2019. 160 Ryan Kelly then agreed with the proposition that he wanted Ms Munro to help him to pay for the implements shed construction cost by lending money to him. He thought that the agreed interest rate was 3.5 %.95 Having said that, Ryan Kelly then denied that there was any loan period of three years that was discussed. He maintained that it was always a ten-year loan agreement. However, I am unable to accept any evidence from Ryan Kelly that there was ever any discussion with Ms Munro about a loan agreement being for a period of ten years. As an example, Ryan Kelly pointed to the financial arrangements with Winsec which refinanced the Rabobank debt. As I have earlier discussed the Winsec arrangement was an interim arrangement until such time as other arrangements could be made with another financier. The Winsec loan was a two plus two-year arrangement. The second two years arrangement depended upon the performance of the borrower in the first two years in accordance with usual commercial precepts. And properly analysed, the Winsec arrangements were very different as there is security over property in favour of the lender/mortgagee. That was the arrangement with Rabobank. 161 Notwithstanding the Winsec arrangements were only for a two plus two-year period, Ryan Kelly accepted that the three-year term contended for by Ms Munro was in fact more generous than the Winsec arrangements given that Winsec was a secured mortgagee.96 Ryan Kelly attempted to qualify his answer by saying that it would have been more generous if it had been discussed. I am satisfied that it was discussed. I do not accept that generalised evidence of Ryan Kelly, that without more, rural loans were always long term and, for example, could never be called 91 Exhibit A1, page 41. 92 T302.13. 93 T304.1. 94 T304.20. 95 T305.7-306.3. 96 T307.27. -- 55 of 77 -- [2024] SADC 147 52 up for payment except for the period of the term. For example, Winsec itself did not provide a long-term loan. At transcript page 308.3-.24 Ryan Kelly gave the following evidence:- A Because the Winsec wasn't in the - Winsec was a case of helping to rebuild, and that's why it was two, plus two, plus two, if it was desired. Q What do you mean, helping to rebuild. A Winsec's specialty is taking on loans of such, of where, for instance, as I was - didn't have a lot of trading numbers - to assist people to build up their numbers. Q And your lack of trading numbers was something you discussed with Westpac, as well, in the presence of Ms Munro. A I never went to a Westpac meeting. Q Well, I suggest you did go to a Westpac meeting, at the King William Street office of Westpac. A I did not go to a Westpac meeting on King William Street. 162 The importance of the evidence given by Ryan Kelly at transcript page 308.9.20 is that, consistent with my earlier findings, Ryan Kelly was in the throes of rebuilding the farm, he needed loans on a short term basis to get him through the trading periods and to overcome (at least in the short term) his shortage of capital. The same situation pertained for Ms Munro. She was providing cheap capital, unsecured, to allow Ryan Kelly to rebuild in a quicker fashion than if Ryan Kelly was left to his own devices. 163 For the avoidance of any doubt, I am satisfied that Ms Munro took the same attitude to the risks that she was accepting in making out the funds to Ryan Kelly. That is, the loans were short term, they were to provide capital to Ryan Kelly to get him through a period where there was a shortage of capital, to allow him to get back onto his feet and to trade as profitably as he could. I do not accept, and I find that it was not the case that Ms Munro was ever interested in or intended to enter into any long-term arrangement. I find that she did not enter into such an arrangement either by some form of parole contract with Ryan Kelly or by any other form of similar arrangement. 164 Ryan Kelly was then directed again to the content of the loan agreement prepared by his solicitors on his instructions and delivered to Ms Munro.97 The front page of this agreement discloses that it purports to be between Ms Munro and Ryan Kelly and Tabu Soro Farming. In the preamble to the loan agreement, the parties are identified as Merradith Munro called the lender and Ryan Kelly called the first borrower and Tabu Soro Farming called the second borrower. As I have earlier explained, the business Tabu Soro Farming is a business conducted under a trust. Ryan Kelly is an individual borrower. The first recital states that the first 97 Exhibit A1, page 349-356. -- 56 of 77 -- [2024] SADC 147 53 borrower and the second borrower acknowledge and agree they are indebted to the lender in the principal sum stated in item 1. Item 1 provides as follows:-98 ITEM 1 Principal Sum NINE HUNDRED AND TWENTY THOUSAND TWO HUNDRED AND SEVENTY NINE DOLLARS AND THIRTY FIVE CENTS ($920,279.35) consisting of the following Portions: $189,380.64 for the construction of the machinery shed by Spanlift Australia Pty Ltd (“Machinery Shed Portion”) $43,868.67 FOR THE CONSTRUCTION OF A STAFF AMENITIES SHED (“Amenities Shed Portion”); $244,500.00 for the purchase of New Holland Combine Harvester, Chaser Bin, and two Chassis Bins (“Header and Bins Portion”); $85,250.00 for the purchase of the semi tipper (“Tipper Portion”); $146,012.90 for the purchase of the drop deck (“Drop Deck Portion”); and $211,267.14 for the balance of the Principal Sum (“Balance Portion”) 165 Thus, it may be seen that Ryan Kelly acknowledges that he is a personal borrower together with Tabu Soro Farming. There is no sense of a ‘several liability’ of any borrower or borrowers or such an entitlement of Ms Munro as the lender. Thus, the law would presume that the liability accepted by the borrowers is joint. That being so, at least from the perspective of Ryan Kelly as the person giving instructions for the preparation of this document, he accepted a joint liability with Tabu Soro Farming to repay a debt to Ms Munro. 166 Then in schedule 1 Ryan Kelly identifies an amount that is said to be outgoing to Ms Munro in the sum of $920,279.35. Items (c)-(e) relate to amounts payable for plant and equipment. That is the plant and equipment specifically purchased by Ms Munro in the name of Ms Munro’s trading entity which, in part, Ryan Kelly has accepted was not purchased by him in connection with any loan arrangement with Ms Munro. 167 When questioned about the figures reflected in Item 1, Ryan Kelly said that they were taken from account records and some taken from direct invoices.99 Ryan Kelly accepted that many of the figures do not appear within the annual trading accounts of either trust and he said that he had used other information that was put into the accounting programme at the time.100 However, Ryan Kelly was unable to 98 Exhibit A1, page 354. 99 T309.11. 100 T311.19. -- 57 of 77 -- [2024] SADC 147 54 explain why one of the figures added up to $189,380.64 and he could not say whether there were some other invoices that might relate to the same items.101 168 Ryan Kelly accepted as well that the other figures that had come from the invoices also do not seem to add up and he was unable to explain the differential apart from saying that he physically put each invoice into his computer programme and confirmed that he did not provide any form of reconciliation of them. All he could say was that there must have been some other invoices that relate to the same item. He then confirmed that he could not give evidence that there are other invoices that relate to the same item.102 169 He also accepted that when a reconciliation is done of the available invoices within Exhibit A1, they do not match the figures which are disclosed on the face of Exhibit A1, page 345, Item 1 in the draft agreement. Ryan Kelly could not accept that fact but could not explain the differential. He continued to insist that he had put each invoice into the computer programme but then accepted that he could not inform the court what the source materials were that were used to calculate this figure. He kept repeating that the source materials were the invoices for the purchases, but it is known that those invoices do not reflect the content of Item 1 of the schedule to the draft agreement. He could only identify the invoices for the drop deck trailer, the tipper portion and the harvester but he could not identify any invoices for any other items.103 All he could say was that he put them into the computer programme.104 170 When asked what he put into his computer programme he said that he had reconciled the invoices into his computer programme. Then he could not say what he put in; he could generalise, for example in relation to the sheds he could say that the shed invoices and things like that related to the sheds. He could not understand what might have been a balancing item added to or subtracted from the figures within Item 1. He also could not explain Item 1 (f) which reads:- ‘…(f) $211,267.14 for the balance of the principal sum (balance portion)’. 171 He said that this item referred to things such as sheep yards and extras that Ms Munro had helped him with but he is unable to disclose any working documents to show how he achieved that figure. He is unable to identify how it could be a balancing figure.105 172 Ryan Kelly was then asked about the interest rate contained within the agreement. In cross-examination he said:106 101 T312.16. 102 T312.16. 103 T313.33. 104 T313.34. 105 T312.19-T313.22. 106 T314.23-T315.37. -- 58 of 77 -- [2024] SADC 147 55 A Item F refers to things such as the sheepyards and extras that Merradith had helped me with. Q That may have been your intention, but what number did you start with - A That is the - Q and what did you take away from - A That is the total of the balance of what - of other moneys. Q I'm just going back to the question of interest rate when you were around the kitchen table, I suggest, in October 2019, one morning about breakfast time, it was you who suggested the interest rate should be 4%, Q wasn't it. A No, it wasn't. Q And it was you who suggested the three-year period. A It wasn't me because the three-year period was never discussed. Q After that discussion around the breakfast table, you told Merradith Munro that you would have terms of the loan agreement drawn up in a document, didn't you. A No, not at that point. Q Well, I suggest you did tell her that in 2019. A No, because at that point in time, there was no large expenditure to warrant a loan agreement. Q Well, you were planning on significant expenditure in Q relation to a shed and works programs, weren't you. A We were. Q And you had reached an agreement apparently with Merradith. A We had an agreement that Merradith would help me. Q And she - well, you had asked her whether she would actually loan you money on a - was there any limit to how much she was going to lend. A At that point of time, we didn't know what the prices were. Q So, there was no limit. This unlimited agreement to lend you money in respect of the operation of the farm in which I suggest to you Merradith had acquiesced but said 'Okay, let's get an agreement drawn up'. A No, there was - we had no idea of prices at that point. It was merely a discussion. -- 59 of 77 -- [2024] SADC 147 56 Q You did have ideas about prices, didn't you. You knew this shed was going to cost in the order of hundreds of thousands of dollars. A We had an idea, we hadn't even quoted on, we had talked on at the field days. Q Sure, I'm not suggesting you had a quote, but you knew enough to know you needed Merradith Munro's help to do it, that's right, isn't it. A Yes, yeah, yep. Q And if you were going to take the next step, I'd suggest to you it would have been sensible to have a written agreement about it. A Merradith wasn't concerned about it at that point. Q Well, she was, actually, wasn't she. She kept following you up and saying, 'Where's the agreement'. A No. Q And you told her it was still being prepared and you mentioned your accountants were doing something, that's right, isn't it. A. No. 173 I am unable to accept the evidence given by Ryan Kelly that, in effect, the amount that was agreed to be lent by Ms Munro was open ended. I think that he had a firm idea about the prices, he knew within a proper estimation what the items of expenditure would be, such as for example the shed and he always knew that he needed Ms Munro’s help to construct the shed. In my view, this is entirely consistent with the reliance he personally placed upon Ms Munro and the funds that she possessed. As things developed, some of these loans were made after the time of the separation of Ms Munro from Shane. I accept the evidence of Ms Munro (and reject the evidence of Ryan Kelly) that she continually requested Ryan Kelly to produce a form of a loan agreement which reflected the purchases that she was making as well as the loans that she was providing. I am unable to accept the evidence of Ryan Kelly that he told Ms Munro that he had instructed his accountants to prepare a document. That is because Ryan Kelly was continuously asking Ms Munro for the provision of funds. For example, he asked for money to purchase chaser bins, but he denied that he wanted Ms Munro to purchase the bins. He gave evidence that Ms Munro volunteered to him that she would lend him money to buy the bins.107 174 At transcript page 317, Ryan Kelly insisted that Ms Munro did not say that she would buy the bins but that she had offered to fund the bin purchases and offered to loan the money. He rejected the suggestion that the expression ‘to fund the bin’ was not a form of expression that would ever have been used by Ms Munro. Having heard Ms Munro give evidence, I think that this evidence of Ryan 107 T316.9; T317.21. -- 60 of 77 -- [2024] SADC 147 57 Kelly carries no credibility at all. It is not a form of expression that would ever have been used by Ms Munro. 175 In that context, Ryan Kelly accepted that Ms Munro purchased the 36-foot grain belt header and that it belonged to her. At transcript page 318 he gave the following evidence:-108 Q I suggest to you that's complete nonsense and what she actually said is 'I'll buy the bin'. That's the sort of language she would use and that's what she said. That's the case, isn't it. A It is not what she said. Q And that's what she said about the field bins as well, isn't it. A What part? Q I'm sorry. A That's not a question. HIS HONOUR Q I think it is. XXN Q It actually was. Do you not understand the question. A Can you repeat it then, please? Q That's what she said about the field bins as well, isn’t it. A That she would fund the bins, yes; she'd loan me the money to fund it. Q No, what she said about the field bins is she would buy the field bins, that's right, isn't it. A No, it was a loan on the field bins. Q I'm not quite sure at this stage whether you dispute that Ms Munro bought the 36 foot grain belt header, the Honey Bee, or not. Do you agree she bought it. A She bought it. Q So it was hers and you don't dispute that. A No. Q The reason you don't dispute that, is that because the invoice is in her name. 108 T318.1-318.36. -- 61 of 77 -- [2024] SADC 147 58 A Yes, and I was sitting there when the purchase was done. I didn't sign the purchase contract on the header. Q You didn't sign one for the bins either, did you. A The bins were a private sale. Q You didn't sign a purchase agreement for them, did you. A No. There was no purchase agreement for them. Q You told us what you say happened in 2019 about these discussions. Then in 2020 there were significant payments made in relation to the shed, particularly the base to start with, but also with Spanlift; that's right, isn't it. A Yep. Q The topic of an agreement, a potential agreement, was again raised by Ms Munro. A No. A She said to you 'Where's the agreement, where's the written agreement' didn't she. There was no discussion of a written agreement at that time. Q. So, you didn't do anything about preparing or having prepared a written agreement until after the separation of your father and Merradith Munro. A Correct. Q You didn't see the need to do so before that. A Merradith come to me and said when they separated 'Can we please get something written up' and I said 'We need to work out what's come out of your account directly'. Q My question was, you didn't see any need to do that beforehand, before the separation. A I wasn't asked to. Q And you didn't see any need to yourself. A No. I had - Q Because, as far as you were concerned, you weren't paying any interest on what she'd provided and it was easy money. A No, that's not true, I never treated it as easy money. Q In 2020 on 9 May, or around about then, you asked Merradith Munro to buy the Catford 30 land roller from Richardson Farming, didn't you. A No, Merradith offered to buy that. Q There was a conversation on about 9 May - A She said if - -- 62 of 77 -- [2024] SADC 147 59 176 It was apparent, that Ryan Kelly agreed with the proposition that, for example, Ms Munro had purchased the grain belt header because it was in her name. 177 Ryan Kelly agreed that he did not do anything about preparing any form of written agreement about any aspect of his relationship with Ms Munro until his father and Ms Munro had separated. He denied that he treated the money available from Ms Munro as ‘easy money’.109 I am unable to accept that evidence. For example, he agreed that Ms Munro offered to purchase the Catford land roller on 9 May 2020 and then insisted that in allowing her to do that, the expression ‘loan’ was used in the discussion.110 In Exhibit A1, page 358, there is an email from Mr Nigel Phillips at Vater & Co to Ms Munro with a copy to Ryan Kelly. It attaches contracts for Ms Munro to purchase of the New Holland Header, the 36-foot Honey Bee Front and 14-foot Rake. She was asked to sign the contracts and return if she is satisfied with the pricing. An invoice for the Honey Bee Front is enclosed for immediate payment, there would be an extra $20,000 deposit for the other items and that the settlement for the header and the rake up will be in September this year. Ms Munro is directed to make payments by one of several methods and Ryan Kelly is thanked for his business. 178 All of these items which are reflected in item 1 of the alleged loan agreement were all paid for by Ms Munro and the arrangements for purchase were all made directly with Ms Munro. Ryan Kelly agreed that, notwithstanding, he had retained possession of all of this plant and equipment, his justification for saying that it belonged to him was because the money had been loaned to him by Ms Munro.111 He said that the word ‘loan’ was frequently used.112 I am unable to accept this evidence and it is inconsistent with the contemporaneous documents in respect of those items of plant and equipment. 179 Ryan Kelly was then referred to his letter dated 13 October 2021 to the solicitors for Ms Munro. He agreed that this letter was on the Tabu Soro Farming letterhead and that it had been prepared by his solicitors. He agreed that he had threatened a counterclaim against Ms Munro for a breach of agreement to provide him with habitable accommodation, the funding for a completed machinery shed, fuel and other accommodation to enable off farm contracting and any other relief a court would deem fair and reasonable. That letter is not consistent with the version of events now contended for by Ryan Kelly. 180 I am not prepared to accept the evidence of Ryan Kelly save and except where his evidence is corroborated by contemporaneous documents. In my assessment of the evidence, I have identified the inconsistencies between the evidence of Ryan Kelly and the contemporaneous documents which I have considered within exhibit A1. The culmination of those inconsistencies is the letter dated 13 October 2021 109 T319.30. 110 T319.34-321.7. 111 T322.5. 112 T322.34. -- 63 of 77 -- [2024] SADC 147 60 from Ryan Kelly to Swan Family Lawyers.113 The first principal sentence of that letter reads:- ‘As your client’s contention is not to sign the Loan Agreement, I formerly rescind the Loan Agreement delivered to her…’. 181 If the loan agreement had not been executed as a form of binding agreement between the parties, it could not be rescinded. In any event, the loan agreement was presented to Ms Munro for her consideration as a record of the parties’ agreement. I am satisfied that Ms Munro had been requesting a form of agreement from Ryan Kelly for a long time. He had not complied with her requests. The document proffered to Ms Munro was the first time that Ryan Kelly had attempted to formalise the parties’ agreement. 182 I am satisfied that the document does not reflect any form of agreement reached between Ryan Kelly and Ms Munro. To the contrary, the document only reflects the realisation of Ryan Kelly that he needed to formulate a document which was substantially in his favour in the hope that its detail may escape the attention of Ms Munro. It did not escape her attention. She was alert to the agreement that had been made with Ryan Kelly and rejected the form of agreement proffered to her because it did not reflect their agreement. 183 I have found that the evidence given by Ms Munro was credible. There are some inconsistencies within her evidence which I have discussed and which I have taken into account in my assessment of her evidence and the whole of the evidence generally. However, the overall impression that I have formed of Ms Munro was that she was genuinely trying to tell me the truth, she was an honest witness and that the version of events that she gave was truthful, credible and reliable. I have accepted her evidence. 184 Counsel for Ryan Kelly, Mr Catterwell first addressed the debt claim. He said that the fundamental response of Ryan Kelly was that the debt is owed but it is not now due and payable. He contended that this was the agreement made between the parties between October 2019 and March/April 2020. I am unable to accept that submission. In my view, there is no evidence to satisfy me that an arrangement was made for a loan over a ten-year term. I am satisfied that any loan made between Ms Munro and Ryan Kelly is due and payable upon demand. 185 Counsel then submitted that if the first defence of Ryan Kelly fails, then significant deductions must be made from the pleaded quantum of the debt claim. He contended that the conversion claim pleaded in statement of claim paragraphs 4B-4H must fail because a finding is open that Ryan Kelly bought the machinery using funds lent to him by Ms Munro. He contended that such a finding is open despite the invoices directed to Ms Munro. He contended that Ryan Kelly is a more reliable witness both on the debt claim and the plant and equipment claim. I am unable to accept that submission. I have earlier discussed the weaknesses which I 113 Exhibit A1, page 382. -- 64 of 77 -- [2024] SADC 147 61 have identified in the evidence of Ms Munro and some of the inconsistencies which have been highlighted by his counsel. However, for the reasons that I have earlier outlined, I found that Ryan Kelly was not a credible or reliable witness. 186 I accept counsel’s submissions that Ms Munro must establish both that a debt claim has accrued due, and that the quantum of that debt claim must be established. I have already found that the debt claim is made out as having accrued due. I accept the submissions of counsel that the quantum must be established. I am unable to accept counsel’s submissions, that, as Ryan Kelly said in his evidence, it was in October 2019 that there were initial discussions about helping Ryan Kelly get back on his feet, and then later, when there was discussion about purchases of substantial machinery items, which was when the alleged ten-year agreement crystalised. 187 Counsel then submitted that there are some contemporaneous documents which support the version of events given by Ryan Kelly. He relied upon the consistent account having been given by Ryan Kelly about the alleged loan term. He then relied upon the corroboration which might be taken from the Tabu Soro Trust financial statements. He emphasised that the financial statements record the loans as a non-current liability. As I have earlier discussed, those financial statements do not assist Ryan Kelly. They were prepared well after the event and are not documents that bind Ms Munro. They were not prepared with her input nor has she consented to them. They do not assist the case put by Ryan Kelly. 188 Counsel then contended that there was an inconsistency in the version put by Ms Munro about when the loan would be repaid. He emphasised that there were a number of versions given by Ms Munro from time to time which were recorded in documents. The first was the debt would be repayable upon the demand. 189 A letter from Swan Lawyers dated 6 October 2021,114 alleges that the debt is repayable upon demand. Counsel then referred to the purported rescission letter sent by Ryan Kelly.115 The letter of response alleges a loan repayable upon demand. Counsel contended that Ryan Kelly spent all of his time in 2021 putting together a draft loan agreement reconciling the documentation he had and calculating the loan sum. He then formulated the loan agreement and sent it to Ms Munro. It is difficult to understand why this took so long and why the document could not be said to reflect the parties’ oral agreements. 190 Counsel then contended that a second version put forward by Ms Munro was that the loans would be repayable upon demand once the Rabobank loans were sorted out.116 The third was that the loans would be repayable once Ryan Kelly obtained a loan from Westpac.117 The final version, on counsel’s submissions was that the loan was repayable in three years.118 He then submitted that the Rabobank 114 Exhibit A1, page 379. 115 Exhibit A1, page 382. 116 T49.18-.29. 117 T46.14-.19; T47.1-.3. 118 T142.10-.12. -- 65 of 77 -- [2024] SADC 147 62 litigation had been resolved by October 2019. There was a resolution in 2018 and that resolution was implemented by about October/November 2019.119 Counsel then contended that the Rabobank explanation was not plausible, nor is the Westpac bank explanation plausible. He asked me to infer that Ryan Kelly did not have a meeting with Westpac as contended for by Ms Munro. 191 I am unable to accept the submissions of counsel. I accept that there is some inconsistency in the version given by Ms Munro. She admitted the deficiencies in her own memory. However, the submission of counsel overlooked the quite fundamental issue at the heart of this evidence namely that there was no ten-year loan and that any arrangement made between Ms Munro and Ryan Kelly was short term. I have little doubt that in the course of the relationship, there were discussions about when the increasing amount of the debt may be repaid and what follows from each party’s perspective. I am satisfied that in none of these discussions (and it is to be recalled that the parties met every day) was there any mention of a ten- year loan. I am satisfied that the first suggestion of a ten-year loan period came at the time when Ryan Kelly first proffered his loan agreement. 192 It therefore follows that although Ms Munro may have been in error about what discussions may have taken place, the topics of the discussions and the end result of those discussions, nothing changed about the requirement for Ryan Kelly to repay the loans made to him in the short term. In those circumstances, I am unable to accept counsel’s submissions that the only version was that there was a ten-year loan. To the contrary, I am satisfied that the loan was repayable in the short term and no later than within three years. If I am wrong about that matter, there is no term agreed and the loans are repayable upon demand. 193 Although this finding deals with that aspect of the matter there is a further consideration. It appears to be common ground that interest was always payable on the outstanding loans made by Ms Munro. No interest payments have ever been made by Ryan Kelly. The financial statements which record the loan do not carry any entry reflecting an unpaid interest expense. In my view, this failure is a fundamental breach of the obligations of Ryan Kelly, even on his own case. 194 Counsel then made submissions in relation to a number of debt claims made by Ms Munro that are described in paragraph 4 of the statement of claim (Revision 5). I leave aside the calves agreement which I will address in due course. 195 I reject the claim dated 25 May 2020 in relation to a payment of $1,090. I also reject the claim made for a payment on 10 August 2020 in the sum of $6,000. I further reject the claim dated 4 August 2020 paragraph 2 (GA Harding) in the sum of $27,2224. I accept the enforceability of the claims of 6 August 2018 for $500, 23 August 2018 for $250, 30 August 2018 for $850, 4 October 2018 for $250. 119 Exhibit A1, page 400-407; page 413. -- 66 of 77 -- [2024] SADC 147 63 196 Counsel then contended that in relation to all payments made prior to October 2019, there can be no liability upon the respondent because the farm was operated under the trading name of PS & HG Kelly. The effect of this submission was that the amount loaned could only have been loaned to the proprietors’ business because it was a business expense and therefore there could be no liability upon the respondent as he was not then a proprietor of the business. I accept that at that time, that is prior to October 2019 (the time of the settlement of the Rabobank debt) the proprietors of the business were the parents of the respondent. I am satisfied from the evidence that in light of the agreements made between Ms Munro and Ryan Kelly, that at the relevant time the respondent was in charge of the operations of the farm and that his mother Helen Kelly had long departed from the farming business. It was at that time that his parents were in the process of their matrimonial settlement and it is accepted that the proprietorship by the respondent (or his interests) of the farming business was a stipulation made by Winsec as the fresh interim financier of the farming business in the settlement with Rabobank. There is no clear evidence of the precise terms of this stipulation. It is not necessary that I make findings in relation to it because from a contractual point of view, merely because there were other proprietors of the farming business does not exclude any liability for loans made by the applicant to the respondent at the request of the respondent. If it were otherwise the case, and that submission had any particular weight, then it would be expected that the loan would have been discharged by the previous proprietors. It was not. I am satisfied that the loan arrangements were made directly between the applicant and the respondent. I am also satisfied on all of the evidence, that the respondent accepted a personal liability for the loans made in connection with the farming business and that, in the settlement of the Rabobank/Winsec issues for resolution, it was a matter for the respondent to ensure that his parents indemnified him in relation to any expenses that he incurred on their behalf. 197 Ms Munro also claims for a payment of $34,568 made on 1 April 2020. Her explanation was that it was to pay off a Landmark debt.120 The records disclose only that it was a withdrawal made by Ms Munro. I am not satisfied on the evidence that this payment was connected with a Landmark debt. There were no documents to support the claim. 198 I am not prepared to accept the claim for $1,000 payments made on 23 July 2020, 24 July 2020 and 24 December 2020.121 The evidence of Ms Munro was that she could not recall any other reason why those monies would have been withdrawn. She concluded that they must have been for the benefit of the respondent. I am unable to make a finding in connection with that claim in favour of the applicant. 120 Exhibit A1, page 261. 121 Exhibit A1, pages 282; page 294. -- 67 of 77 -- [2024] SADC 147 64 199 Finally, I refer to the loan of $2,970 dated 26 August 2020.122 I accept the submissions of counsel that there is no basis to make any finding on the balance of probabilities that is a debt owed by Ryan Kelly. 200 I turn then to the claims made in relation to the calves. I have accepted the evidence of Ms Munro (and therefore have rejected the evidence of Ryan Kelly to the contrary) that the initial arrangements made for the purchase of the calves was that Ms Munro would pay for the costs of purchase and the costs of keeping and rearing the calves preparatory to their sale. I am satisfied that the payments claimed in paragraph 3B of the statement of claim are those which have been made by Ms Munro in connection with the purchase and maintenance of the calves and their growth to marketable steers. I am also satisfied from the information which is contained in Exhibit R6 that cattle sales of almost $23,000 were achieved. I am not satisfied that there has been a complete recording of cattle sales, but I will leave that issue to one side. I am satisfied on the evidence that the amount claimed within paragraph 3B of the statement of claim has not been repaid. However, I am also satisfied that the applicant has deliberately not claimed that amount and has, effectively, elected or waived the obligation of the respondent to make those payments. In this context, it is not possible to point to any particular aspect of consideration which is generally required when there is a discharge or variation of a contract. It is incorrect to say that the principles in relation to the concept of ‘election and waiver’ are well settled. They have been correctly described as ‘troublesome’ principles.123 Waiver can arise by an election between two inconsistent rights or by means of an estoppel under which it would be unfair, inequitable or unconscionable for the promise to insist upon the right.124 201 In general, there are two forms of waiver, the first arising in contract under principles connected with the election by one party to relinquish rights and the second, by equitable estoppel under the principles discussed for example in Waltons Stores (Interstate) Ltd v Maher.125 202 In Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd126 at [113], Finn and Sundberg JJ held that the most accurate assessment of waiver was that it:- ‘…applies to those circumstances in which the law recognises a voluntary or intentional relinquishment or renunciation of a known right, claim or privilege…’ 203 There must be some distinct act done to constitute the waiver, it must be intentional, and it must be with knowledge.127 A waiver by election will focus upon 122 Exhibit A1, page 266; withdrawal from account 47474. 123 JW Carter: Contract law in Australia (6th Edition (LexisNexus Butterworths)) paragraph 7-26. 124 Ibid at 7-27; 7-28; Laaratt v Bankers and Traders Insurance Co Ltd [1941] 41 SR (NSW) 215 at 227. 125 (1988) 164 CLR 387 at 414. 126 (2006) 149 FCR 395. 127 Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326. -- 68 of 77 -- [2024] SADC 147 65 the words or conduct of the promise. The person waiving the right will abandon the right if a person:- ‘…Is entitled to alternative rights inconsistent with one another such as the right to insist to performance of a contract and the right to rescind for essential breach…’128. 204 The decision to waive the right must be irrevocable so that it constitutes a binding election.129 205 In relation to the doctrine of equitable estoppel, in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd130 at [424] – [426], Finn J said:- ‘In my opinion to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has introduced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise…’. 206 I do not think that it is necessary that I give further consideration to the principles of equitable estoppel. I am satisfied that the decision made by Ms Munro to waive her claim for payment of the loans in relation to the calves was intentional, was made with knowledge, and it was the intentional relinquishment or renunciation of a known contractual right on her part. I accept that there has been no pleading of a waiver. There was unchallenged evidence before the court on the topic and I have made finding based on the facts established by the evidence. I am not limited to the making of findings upon the causes identified by counsel.131 207 This discussion must also be viewed in the background of the factual circumstances of the parties’ relationship. This was a farming enterprise in marginal country. It was an unsuccessful farm; it was undercapitalised and was not profitable. The intention of the applicant (both in her relationship with her partner 128 Commonwealth v Verwayen (1990) 170 CLR 394 at 406-407. 129 Freshmark Ltd v Mercantile Mutual Insurance (Aust) Ltd [1994] 2 Qd R 390 at 392. 130 (2003) 128 FCR 1. 131 S P Hywood Pty Ltd v Standard Chartered Bank Ltd SCGRG 92/678, s3733; 21 December 1992, Perry J. -- 69 of 77 -- [2024] SADC 147 66 Shane and with the respondent Ryan Kelly) was to give whatever assistance possible to bring the farming enterprise to profitability. I am satisfied that, in the context of all of the facts as they developed over a period of time, the applicant made a decision, relied upon by the respondent, not to insist upon her strict legal rights in relation to the calf venture. That was despite the fact that there is evidence of the profitability of that venture, as reflected in Exhibit R6. In the view that I have formed, that was a matter entirely for the applicant. On the evidence, I am satisfied that the respondent was aware that he had an obligation to make repayment to the applicant, Ms Munro, for the money that she had provided. I find that he did not do so but that was in the context of a decision by Ms Munro not to insist upon her strict legal rights under the terms of their arrangements and following her decision to communicate a decision to give up her strict legal rights. 208 This was a decision made by Ms Munro in the context of the farming enterprise as it existed, its deficiencies and lack of success and what by then was a failing relationship between Ms Munro and Shane. It was impossible to completely reconcile the legal position of Ms Munro and the emotional strain under which she was operating. There may have been many reasons for her decision, but its effect was that she decided not to insist upon her strict legal rights of the loans for calves out of the proceeds of sale of the cattle. 209 I therefore find that albeit arrangements between the parties required the repayment of the advances made by Ms Munro during the calf venture with Ryan Kelly, there is no legal obligation upon Ryan Kelly to make that payment. I therefore dismiss the claim of the applicant under paragraph 3B and 3C of the statement of claim. 210 Counsel then addressed the loan amounts for the sheds. His submission was that as the land in which the sheds were built, the Alford Road Farm, is owned by Brofern Pty Ltd and, as at the time Ryan Kelly was a director of Brofern Pty Ltd, those loans could only have been made for the benefit of Brofern Pty Ltd and therefore for the benefit of the trust. This submission was not put with particular force. That proposition was not put to Ms Munro in cross-examination, and I am unable to accept the submission. I am satisfied that the loan arrangements in relation to the building of the sheds were made between Ms Munro and Ryan Kelly. It was a matter for Ryan Kelly how he treated the obligation upon him to repay the debt to Ms Munro connected with the sheds. Any liability of Brofern Pty Ltd was in connection with the relationship between Ryan Kelly and Brofern Pty Ltd. I am satisfied on the evidence that at no time was there any discussion between Ryan Kelly and Ms Munro that any obligation to repay debts associated with the construction of the sheds rested with Brofern Pty Ltd as the owner of the property. As I have earlier recounted, the sheds are a fixture upon the land and are the property of Brofern Pty Ltd however, the liability in relation to the debt associated with the procuration of the construction of the sheds upon the land is an entirely different matter. I am satisfied that this debt was an obligation between Ryan Kelly and Ms Munro, and it was a matter for Ryan Kelly how he dealt with that capital -- 70 of 77 -- [2024] SADC 147 67 contribution to the land of Brofern Pty Ltd in the accounts of that company, which he controlled. I am unable to accept submission of counsel. 211 Counsel then addressed the claim in conversion. He addressed that claim on two bases. The first was the necessity for Ms Munro to establish her claim for possession of the property which she contended had been converted. The second, following the refusal to return the property, was to establish a claim in loss and damage. 212 I have earlier recounted the evidence in relation to the purchase of the plant and equipment which comprises this claim. I have accepted the evidence of Ms Munro and have rejected the evidence of Ryan Kelly in relation to the arrangements between the parties. The evidence satisfies me that Ms Munro, did not, in her own right, purchase the ClipEx fencing stock yard for a cost of $16,607. The evidence of purchase discloses an invoice directed to Ryan Kelly as the purchaser. This is the best evidence of the actual arrangements made. The involvement of Ms Munro was as a lender. I am satisfied that Ms Munro purchased the Honey Bee 94C38G Front header serial number 3655103171 from Vater Machinery for the sum of $55,000 and permitted the respondent to use that machinery in the farming business. This machinery belongs to Ms Munro. I am satisfied in the evidence that Ms Munro purchased the New Holland CR9080\76C 9080 header machine for $120,000 from Vater Machinery. I am also satisfied that she permitted the respondent to employ that machine in his farming business and in his harvesting business. I am satisfied that the applicant Ms Munro purchased a New Holland 9080\76 combine/Rake up serial number YGB114510 from Vater Machinery for $132,000 and that she permitted Ryan Kelly to employ that part in the farming business and in his contracting business. This belongs to Ms Munro. I am satisfied on the evidence that in April 2020, Ms Munro purchased a TriAxle drop semi-trailer and a Freight Master 44-foot drop axle trailer for $135,382 and that she permitted Ryan Kelly to employ that plant in his farming business and in his harvest contracting business. This machinery all belongs to Ms Munro. 213 I am not satisfied on the evidence that in April 2020, Ms Munro purchased a 1985 Venning Chaser Bin or the two Moohna engineering field bins. I am satisfied on the evidence that these items were all purchased by Ryan Kelly using funds loaned to him by Ms Munro. In her evidence, Ms Munro admitted these arrangements. In the result, Ms Munro is confined to a debt claim against Ryan Kelly. 214 I am not satisfied on the evidence that on 21 April 2020, Ms Munro purchased a Trail Master Tip Trailer for $85,260. In her evidence Ms Munro agreed that she had loaned money to Ryan Kelly to purchase this trailer. Consistent with my earlier finding, I am satisfied that the purchaser of this trailer was Ryan Kelly, using loan funds provided by Ms Munro. In her evidence Ms Munro admitted these arrangements. -- 71 of 77 -- [2024] SADC 147 68 215 I am satisfied on the evidence that on or about 9 May 2020, Ryan Kelly purchased a Catford 30 Land Roller from Richardson Farming Pty Ltd for $10,000 using funds provided to him by Ms Munro. In her evidence Ms Munro agreed that this was the arrangement. I am satisfied that between 21 April 2020 and 15 January 2021, Ms Munro loaned to Ryan Kelly the sum of $196,666.77 for use by Ryan Kelly in and about the construction of machinery sheds upon the Alford Road property and that such loan is repayable upon demand. 216 I am satisfied on the evidence that on 13 September 2022, by letter from Swan Lawyers from Ryan Kelly C/- CCK Lawyers, Ryan Kelly’s then solicitors, Ms Munro demanded the return of the New Holland Header; the Honey Bee grain belt header front with trailer; the ClipEx portable sheep yards; the two Moohna Engineering chassis bins, the 1985 Venning chassis bins; the two 2020 Freight Master Tri Axle Drop Deck Semi Trailer; the Freight Master Tip Trailer; and the Catford 30’ Land Roller. For the reason stated Ms Munro had no right to demand the return of the Clipex Sheep yards, the Freight Master Tip Trailer or the Catford 30’ Land Roller. I am also satisfied that the other plant and equipment and property has not been returned to Ms Munro by the respondents. I am satisfied that no payment has ever been made by Ryan Kelly to Ms Munro in respect of this other plant and equipment. 217 I turn to my findings in relation to the allegation of Ms Munro that her plant and machinery namely the header, the header comb, the header rake and the drop deck trailer have been converted by Ryan Kelly. As I have found, Ms Munro has demanded the return of her chattels from Ryan Kelly and he has refused that request. I have also found that the chattels belong to Ms Munro and that she has always had an immediate right to possession of those chattels. There has not been any form of ongoing bailment of those chattels under an agreement between Ms Munro and Ryan Kelly. 218 The definition of conversion is that the party in the wrong, in this case Ryan Kelly, intentionally exercised control over chattels belonging to Ms Munro so that he interferes with the right of Ms Munro to control those chattels. In this case, the interference is complete and therefore it is a serious interference. I am satisfied the above-mentioned plant and equipment are in the possession of Ryan Kelly. Those chattels are capable of being converted by Ryan Kelly.132 219 Notwithstanding some discussion to the contrary,133 I am satisfied that in order for the tort of conversion to be established, it is necessary to prove an intentional act on the part of the person who has interfered with the rights of the true owner. That may manifest by, for example, proof of an intention to deal with the chattels by exercising dominion over them. I am also satisfied that conversion does not arise, for example, through negligent loss or destruction of a chattel. In the case at bar, I am satisfied that Ryan Kelly intentionally maintained possession 132 Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204. 133 Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87 at [162]. -- 72 of 77 -- [2024] SADC 147 69 of the chattels belonging to Ms Munro and he therefore intentionally interfered with those chattels by exercising dominion or control over them for his own benefit. 220 At the time that he took possession of this plant and equipment, Ryan Kelly was lawfully in possession pursuant to an agreement made with Ms Munro. He had lawfully acquired possession of the chattels under the agreement that he made. Those circumstances changed at the time that Ms Munro moved out of the Kelly Road farm after the end of her relationship with Shane and after she left the area altogether. She moved to live at Swifts Creek in Victoria. In that situation, Ryan Kelly was not a bailee who held over for the benefit of Ms Munro because if he was a bailee holding over, he would not be manifesting some intention to retain possession of the chattels to the detriment of Ms Munro. I am satisfied that from no later than the letter of demand of the solicitors from Ms Munro,134 Ryan Kelly was withholding possession of the chattels from Ms Munro. He was acting contrary to the possessory and proprietary rights of Ms Munro by refusing to return the chattels belonging to her after she demanded their return. 221 I am satisfied that no later than, say, within one month of the date of the solicitor’s letter, Ms Munro was entitled to immediate possession of the chattels. She held both a proprietary right by her ownership of the chattels and a possessory right because of her demand for the return of the chattels. She had a right to immediate possession as the owner. 222 I am satisfied that the chattels have not been returned. The reasons given are that Ryan Kelly (wrongly) claims a proprietary interest in the chattels notwithstanding his admission in evidence that the chattels belonged to Ms Munro. I have earlier made separate findings about those other farm items which were purchased by Ryan Kelly using funds loaned to him personally by Ms Munro. I have rejected any claim in tort connected with those items because I am satisfied that the proprietary right in them is vested in Ryan Kelly. Differently, here, there can be no doubt that the chattels belonged to Ms Munro which, despite requests, have not been returned. Subject to the question of damages, in relation to those chattels to which reference have earlier been made, I am satisfied that Ms Munro has proved on the balance of probabilities, each of the integers of the tort of conversion. 223 The assessment of damages under the tort of conversion requires an applicant to identify the full value of the chattel which is being converted. In order for a court to be in a position to provide a remedy, it is necessary for Ms Munro to prove the value of the chattels. It is also possible to claim consequential losses and in some cases exemplary damages. In this case, there is no claim for exemplary damages. The evidence before the court discloses the purchase price of the chattels. 134 Exhibit A1, page 383: letter Swan Family Lawyers to Mr Ryan Kelly dated 13 September 2022. -- 73 of 77 -- [2024] SADC 147 70 This purchase price is reflected in the invoices form Vater & Co, but that is only proof of the purchase price. 224 There appears to be some differences of opinion about the date of the calculation of the assessment of the damages. There seems to be two alternatives which are often discussed, namely: the date of the wrong; or the date of the judgment. There is a third alternative of making an assessment of damages at some other time. I will leave that matter to one side. I am satisfied that the appropriate date to measure damages in conversion is the date of the wrong.135 That said, I think there is also, in more modern times, a significantly more flexible approach in relation to the loss actually suffered by a wronged applicant. If, for example, an applicant could show that a valuation of a chattel at a later time than the time of the wrong would properly compensate the wronged person for the loss, then that date could be relied upon. This discussion generally involves damages assessed in a rising market in the value of the goods and the influence of inflation. There is no evidence before me on these topics and I will leave them to one side. In the case at bar, there is no evidence of the value of the goods at the time of the wrong. As I have said, the only evidence is the costs of purchase of the goods at the date of purchase. It will be necessary to hear the parties further in relation to that matter. 225 That is important because the principles in relation to damages for conversion also recognise that if no market value can be established, the court may award damages which are equivalent to the cost of the purchase of the goods in similar condition.136 Also, the courts generally recognise the possibility of awarding damages for consequential loss. I am satisfied that the header, the comb, the rake and the trailer have been employed by Ryan Kelly both in his farming enterprise and in his contracting business. The evidence is that from as late as 2020, the contractor paid to harvest the crop on the Kelly land was paid in the order of $26,000 for that task. There is no evidence before the court about the profit earned by Ryan Kelly by the use of the converted chattels in his own business. An example of the broadening of the scope of damages assessments under this tort is the decision of the NSW Court of Appeal that the hire value to someone such as Ryan Kelly using these chattels is properly the basis for an award of damages.137 226 In Strand Electric and Engineering Co Ltd v Brisford Entertainments Limited,138 Denning LJ said at page 254:- ‘If a wrongdoer has made use of goods for his own purposes, then he must pay a reasonable hire for them even though the owner has, in fact, suffered no loss. It may be that the owner would not have used the goods himself, or that he had a substitute readily available that he used without extra cost to himself. Nevertheless, the owner is entitled to a reasonable hire. If the wrongdoer had asked the owner for permission to use the goods the owner would be entitled to ask for a reasonable remuneration as the price of his permission. The wrongdoer cannot be better off because he did not ask permission. He cannot be better off by doing 135 Wade Sawmill v Colenden [2007] QCA 455. 136 JE Hall Limited v Barclay [1937] 3 All ER 620 at 624 per Greer LJ. 137 Sadcas Pty Ltd v Business and Professional Finance Pty Ltd [2011] NSW CA 267 at [78] per Giles JA. 138 [1952] 2 QB 246, CA. -- 74 of 77 -- [2024] SADC 147 71 wrong than he would be by doing right. He must, therefore, pay a reasonable hire. This will cover, of course, the wear and tear which is ordinarily included in a hiring charge, but for any further damage, the wrongdoer must pay extra.’ 227 In this case, I have not been able to identify any evidence to support an assessment of consequential losses on this basis. The only evidence in relation to aspects of profit/costs in connection with these chattels is an amount in the order of $26,000 paid to the contract harvester on the Kelly property. It will be necessary to hear the parties further in relation to that matter. 228 Counsel for Ryan Kelly submitted that there is no evidence of any right to possession of this plant and equipment. I am unable to accept that submission. He correctly submitted that the tort of conversion requires first a right to possession of the plant and equipment 229 I am satisfied that at all material times, including now, Ms Munro owns the plant and equipment which I have specified above. It was in the possession of the respondent by the permission of Ms Munro. I reject the submission of Counsel that the obvious conclusion is that Ryan Kelly borrowed funds to buy the plant and equipment. I have earlier made findings in relation to all of these purchases. 230 Notwithstanding those findings, I am satisfied that the loans in relation to each of those items purchased by Ryan Kelly form part of the loan arrangements made between Ms Munro and Ryan Kelly and that those loans are immediately repayable. 231 Counsel then addressed the tender book at Exhibit A1 page 345 which is a document he described as the ‘Point Riley Invoice’. He asked me to prefer the evidence of Ryan Kelly that he provided this invoice at the request of Ms Munro. I am unable to accept that evidence because I have very significant doubts about this evidence of Ryan Kelly in relation to this document. I accept the evidence of Ms Munro that she had never seen the document before. In my opinion, it is a device created by Ryan Kelly to obviate the difficulties that he saw himself being in at the time of the separation of his father and Ms Munro. 232 I turn finally to the question of interest. The parties’ contention in relation to interest are that Ms Munro claims that there was an agreed interest rate of 4 % whereas Ryan Kelly contends that the agreed interest rate was 3.5 % per annum. There is a peculiarity about the position taken by Ryan Kelly. No interest has ever been paid on any aspect of any part of the loan, even that amount for which he contends was the loan. No explanation was ever given about why the interest amount was not paid. Conversely, there has been no evidence given by Ms Munro that at any time she made a claim upon Ryan Kelly for the payment of interest. 233 At a number of levels, this may not have been surprising. Counsel placed particular emphasis upon the evidence given by Ms Munro about what was described as (a particular amount) falling into the ‘farm loan’. I consider that this was really a shorthand expression which in a very limited way expresses the -- 75 of 77 -- [2024] SADC 147 72 relationship between parties mutually involved in a farming enterprise. I think that Counsel is correct in his description that the relationship was ‘fluid’ in nature but as I put to him at the time, this does not assist Ryan Kelly. The success or otherwise of a farming enterprise is dependent upon many variables including the vagaries of weather. These variables, in the end, demand a fluidity of approach. That is largely dependent upon the continuation of relationships and in this instance, the relationship ended both as between Ms Munro and Shane and Ms Munro and Ryan Kelly. In those circumstances, there has been no proper explanation about why no amount of interest has been paid when such an obligation has been conceded, at least implicitly by Ryan Kelly who contends for a 3.5 % interest rate. All of that said, I have rejected the evidence given by Ryan Kelly in large part, because of his lack of credibility, because his evidence was largely unreliable and in part was not truthful. In the absence of any other evidence or any other indication of an agreed interest rate, it is difficult to do more than to say that, in my judgment, because of the reliability of the version given by Ms Munro, her version in relation to interest should be preferred. I find that the appropriate rate of interest applicable in relation to these loans is 4% per annum. 234 In the circumstances I make the following orders:- 1. I reject the claim made by the applicant in relation to the ‘calves agreement’ as reflected in paragraph 3B and 3C of the statement of claim. 2. I accept the claim of the applicant under paragraph 4 of the statement of claim except those items which I have set out above which I reject. The total amount payable in respect of those claims is due and payable forthwith. 3. I reject the applicant’s claim in conversion in relation to paragraph 4B. I am satisfied that the amount paid forms part of the loan arrangements between Ms Munro and Ryan Kelly. That amount is due and payable forthwith. 4. I am satisfied that the applicant is entitled to immediate possession of the items described in paragraph 4C of the statement of claim. 5. The applicant is entitled to immediate possession of the items described in paragraph 4D of the statement of claim. 6. I reject the applicant’s claim set out in paragraph 4E of the statement of claim. 7. I am satisfied that the amount of $48,000 forms part of the loan arrangements between Ms Munro and Ryan Kelly. That amount is payable forthwith. -- 76 of 77 -- [2024] SADC 147 73 8. I reject the claim of the applicant as set out in paragraph 4F. I am satisfied that the amount of $46,000 forms part of the loan arrangements made between Ms Munro and Ryan Kelly. I am satisfied that amount is payable forthwith. 9. I reject the claim of the applicant as set out in paragraph 4G of the statement of claim. I am satisfied that the sum of $85,260 therein forms part of the loan arrangements made between the applicant Ms Munro and Ryan Kelly and is payable forthwith. 10. I reject the claim of the applicant as described in paragraph 4H of the statement of claim. The amount of $10,000 referred to therein forms part of the loan arrangements between Ms Munro and Ryan Kelly. That amount is payable forthwith. 11. I accept the claim of the applicant as described in paragraph 4I of the statement of claim and that the amount of $196,666.77 is due and payable forthwith. 12. I will hear the parties further in relation to damages, the calculation of interest and costs. -- 77 of 77 --