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Supreme Court of New South Wales=Between about 1995 and 1997, the plaintiff Madison Ashton provided what are euphemistically called escort services to the late Richard Pratt, a married man of exceptional wealth, from time to time, for reward. This came to an end when Ms Ashton married a third party in April 1997. Following the breakdown of her marriage, and of a subsequent de facto relationship, contact between Ms Ashton and Mr Pratt resumed in October 2003. Ms Ashton contends that in a conversation between them in November 2003, Mr Pratt promised her that, in consideration of her not returning to the escort industry but providing services (non-exclusively) to him as his mistress on occasions when he was in Sydney (which was typically one and sometimes two nights per week), he would settle $2.5 million upon trust for each of her two children, pay her an allowance of $500,000 per annum, and in addition pay her $36,000 per annum for her rental accommodation and $30,000 per annum for travel expenses in connection with her proposed business. Ms Ashton now sues Mr Pratt’s widow, as the executor of his estate, on those promises, in contract and alternatively equitable estoppel. The main issues are: Whether (as a matter of fact) Mr Pratt made the alleged promises; If so: (a) whether the promises were sufficiently certain to amount to a contract; (b) whether they were intended to create legal relations; and (c) whether they are unenforceable for public policy reasons; If not enforceable in contract, whether the promises are enforceable by way of equitable estoppel; and Whether Ms Ashton’s claims are not maintainable by reason of having been previously compromised and released, in February 2005 or November 2005.

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Ashton v Pratt (No 2) [2012] NSWSC 3 (16 January 2012)

Last Updated: 17 January 2012

 
 

Supreme Court

Case Title:
Ashton v Pratt (No 2)
   
[2012] NSWSC 3
   
Hearing Date(s):
12, 13, 14 and 15 September 2011
   
Decision Date:
16 January 2012
   
Jurisdiction:
Equity Division
   
Before:
Brereton J
   
Decision:
Judgment for the defendant with costs
   
Catchwords:
CONTRACTS – Whether deceased made certain promises to plaintiff in 2003 in consideration of her leaving escort industry to become his non-exclusive mistress -alleged promises include establishment of multi-million dollar trust funds for plaintiff’s children, and half a million dollar annual allowance and allowances for accommodation and business expenses for plaintiff – whether deceased made promises question of fact – defendant calls no evidence, save for tendering some documents – plaintiff’s evidence challenged but uncontradicted – cases against deceased estates founded on oral utterances of deceased which only deceased can refute require Court to closely scrutinise plaintiff’s evidence – no legal requirement for corroboration but corroboration ordinarily sought – plaintiff’s version of events of doubtful reliability – in context of a case involving extraordinary wealth deceased who had other “mistress” relationships plaintiff’s evidence not inherently incredible – some limited corroboration of plaintiff’s version – plaintiff consulted solicitors about claim prior to death of deceased – defendant could have called associate of deceased to deny subsequent conversation detailing promises allegedly made to plaintiff – witness in defendant’s camp and practically available to defendant – Jones v Dunkel inference drawn that associate’s evidence would not have assisted defendant’s case – held that deceased made promises as alleged in 2003 conversation.
CONTRACTS – Certainty – terms of agreement discussed in 2003 conversation sufficiently certain and complete.
CONTRACTS – Intention to create legal relations – absence of express statement that arrangements are legally binding -inference of fact whether intention to create legal relations – intention objectively determined – parties to family, social and domestic arrangements or agreements generally do not intend to create legal relations – rebuttable presumption that in such contexts parties do not intend arrangements and agreements to be legally binding – creation of “mistress” relationship determines that context of present case social – not obvious plaintiff relied on enforceable promise – parties did not seek legal advice and agreement not recorded in writing – incongruous to assume deceased could have obtained injunction restraining plaintiff from returning to escort industry or claimed damages for disappointment if plaintiff did not adequately discharge “mistress” role – subsequent conduct considered in assessing whether legally binding agreement intended – plaintiff’s subsequent letter to deceased does not assert legal right to performance of promise – presumption no intention to create legal relations not rebutted – parties did not intend to make contract.
CONTRACTS – Contracts that are void, illegal or unenforceable on grounds of public policy – contracts that are sexually immoral and/or prejudicial to the status of marriage – historically contracts for an ‘immoral purpose’ unenforceable – changing social mores result in liberalised attitude to extramarital cohabitation – rule as to unenforceability of contracts that are sexually immoral and/or prejudicial to status of marriage still pertains – content of rule – authorities establish two classes of case where contract will be not be void: where contract does not bring about state of extramarital cohabitation but makes provision for extant one; and/or where sexual relationship part of wider relationship including cohabitation and mutual support – contracts to provide meretricious sexual services contrary to public policy and illegal – arrangements between plaintiff and deceased not made to facilitate continuation of extant cohabitation or for a relationship beyond sexual services – contract void as contrary to public policy.
ESTOPPEL – Equitable estoppel – plaintiff must establish that she acted to her detriment on basis of assumption adopted by reason of the conduct or acquiescence of the defendant in circumstances where unconscionable for defendant to deny assumption – plaintiff claims suffered detriment by reason of giving up escort business, closing accessories business and not documenting agreement with deceased in writing – plaintiff had left escort business six years prior to arrangement – no evidence deceased asked plaintiff to close accessories business – omission to record agreement in writing not relevant detriment – detrimental reliance not established – rule that courts will refuse to enforce rights where enforcement would offend public policy equally applicable to claims arising in estoppel as in contract – plaintiff’s claim in equity also fails on public policy grounds.
CONTRACT – Whether plaintiff’s claim not maintainable by reason of an accord and satisfaction said to have occurred in February 2005 – plaintiff offered via email $100,000 and transfer of ownership in a car “in full and final settlement” of all claims against the deceased – plaintiff accepts moneys and car – accord and satisfaction requires sufficient material in relevant documents so that it is seen that acceptance of payment will be in full and final settlement of claim – any reasonable reader would have construed payment to be made in full and final settlement of all claims – plaintiff’s reply to email that she “accepted” and “acknowledged” the communication evince agreement to its terms – plaintiff’s claims not maintainable.
CONTRACT – Whether plaintiff’s claim not maintainable by reason of an accord and satisfaction said to have occurred in November 2005 – plaintiff offered, via document provided to her by associate of deceased, $50,000 “in full and final settlement of all current and future claims” against deceased – plaintiff denies reading document – highly improbably plaintiff did not read document as corrected spelling of her name and signed it – no application to set aside release – plaintiff again released claims in November 2005.
   
Legislation Cited:
   
Cases Cited:
Andrews v Parker [1973] Qd R 93
Balfour v Balfour [1919] 2 KB 571
Baltic Shipping Co v Dillon [1993] HCA 4(1993) 176 CLR 344
Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88(1908) 5 CLR 647
Bovaird v Frost [2009] NSWSC 337
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61(2001) 53 NSWLR 153
Buckpitt v Oates [1968] 1 All ER 1145
Cohen v Cohen [1929] HCA 15(1929) 42 CLR 91
Coward v Motor Insurer’s Bureau [1963] 1 QB 259
Darmanin v Cowan [2010] NSWSC 1118
Ermogenous v Greek Orthodox Community of SA Inc(2002) 209 CLR 95
Fender v St. John-Mildmay [1938] AC 1
Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd(1979) 1 BPR 9251
Girardy v Richardson (1793) 1 Esp Cas 13, 170 ER 275
Grundt v The Great Boulder Proprietary Gold Mines Limited [1937] HCA 58(1937) 59 CLR 641
Horrocks v Forray [1975] EWCA Civ 9[1976] 1 WLR 230
Hyde Park Residence Ltd v Yelland [2001] Ch 143
Jones v Padavatton [1968] EWCA Civ 4[1969] 2 All ER 616
Jones v Dunkel [1959] HCA 8(1959) 101 CLR 298
J P Morgan Australia Ltd v Consolidated Minerals Pty Ltd [2011] NSWCA 3
Markulin v Drew (New South Wales Supreme Coucrt, Young J, 12 August 1993, unreported)
Marvin v Marvin 18 Cal. 3d 660557 P. 2d 106134 Cal.Rptr. 815 (1976)
Nichols v Nichols (Supreme Court of New South Wales, Needham J, 12 December 1986, unreported)
Parker v Clark [1960] 1 All ER 93
Payne v Parker [1976] 1 NSWLR 191
Pearce v Brooks (1866) LR 1 Exch 213
Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154
Plunkett v Ball [1915] HCA 14(1915) 19 CLR 544
Raffaele v Raffaele [1962] WAR 29
Re Gonin (deceased) [1979] Ch 16
Re Hodgson (1886) 31 ChD 177
Rustenburg Platinum Mines Ltd v South African Airways [1979] 1 Lloyd’s Rep 19
Schaefer v Schumann [1972] AC 572
Seidler v Schallhofer [1982] 2 NSWLR 80
Tanner v Tanner [1975] EWCA Civ 4[1975] 1 WLR 1346
Teen Ranch Pty Ltd v Brown (1995) 87 IR 308
Thompson v Palmer [1933] HCA 61(1933) 49 CLR 507
Todd v Nicol [1957] SASR 72
Upfill v Wright [1911] 1 KB 506
Varma v Varma [2010] NSWSC 786
Vukic v Luca Grbin & Ors; Estate of Zvonko Grbin[2006] NSWSC 41
Wakeling v Ripley (1951) 51 SR (NSW) 183
Waltons Stores (Interstate) Limited v Maher [1988] HCA 7(1988) 164 CLR 387
Watson v Foxman (1995) 49 NSWLR 315
Weeks v Hrubala [2008] NSWSC 162
   
Texts Cited:
Carter Peden and Tolhurst, Contract Law in Australia, 5th ed
Meagher, Gummow & Lehane, Equity: Doctrines & Remedies, (4th ed., 2002)
Treitel on Contracts, 8th ed
   
Category:
Principal judgment
   
Parties:
Madison Ashton (plaintiff)
Jeanne Pratt (defendant)
   
Representation
   
– Counsel:
Counsel:
Mr F. M. Douglas QC, Mr R. K. Newton and Mr T French (plaintiff)
Mr R. Richter QC, Mr N. J. Clelland SC and Mr M. S. Henry (defendant)
   
– Solicitors:
Solicitors:
David Legal (plaintiff)
Arnold Bloch Leibler (defendant)
   
File number(s):
2010/56518
 
Publication Restriction:
 

JUDGMENT

  1. Between about 1995 and 1997, the plaintiff Madison Ashton provided what are euphemistically called escort services to the late Richard Pratt, a married man of exceptional wealth, from time to time, for reward. This came to an end when Ms Ashton married a third party in April 1997. Following the breakdown of her marriage, and of a subsequent de facto relationship, contact between Ms Ashton and Mr Pratt resumed in October 2003. Ms Ashton contends that in a conversation between them in November 2003, Mr Pratt promised her that, in consideration of her not returning to the escort industry but providing services (non-exclusively) to him as his mistress on occasions when he was in Sydney (which was typically one and sometimes two nights per week), he would settle $2.5 million upon trust for each of her two children, pay her an allowance of $500,000 per annum, and in addition pay her $36,000 per annum for her rental accommodation and $30,000 per annum for travel expenses in connection with her proposed business. Ms Ashton now sues Mr Pratt’s widow, as the executor of his estate, on those promises, in contract and alternatively equitable estoppel. The main issues are:

Whether (as a matter of fact) Mr Pratt made the alleged promises;

If so:

(a) whether the promises were sufficiently certain to amount to a contract;

(b) whether they were intended to create legal relations; and

(c) whether they are unenforceable for public policy reasons;

If not enforceable in contract, whether the promises are enforceable by way of equitable estoppel; and

Whether Ms Ashton’s claims are not maintainable by reason of having been previously compromised and released, in February 2005 or November 2005.

The November 2003 conversation

  1. According to Ms Ashton, in early October 2003, she and Mr Pratt had a conversation at his Sydney penthouse apartment, to the following effect:

Pratt: Darling, you look good, you are absolutely gorgeous.

Ashton: Thank you.

Pratt: How are your children?

Ashton: Well. How are you going?

Pratt: I am not good. I am extremely lonely and that blonde bitch [a reference to his mistress Shari-Lea Hitchcock, with whom he had a daughter Paula] you know she has left me…

Ashton: Yes I know. I have also left Liam and I have nothing in my name and I want to restart my life again.

Pratt: Ah, you have come to your senses.

Ashton: Yes, you were right and I was wrong.

Pratt: What can I do to help you start your life again? Are you thinking of going into some sort of business?

Ashton: Yes, I have a little business that I want to develop and you told me some time ago that if I ever needed your help I should come and see you and this would be that time.

Pratt: I am pleased to hear that from you. What is this business darling?

Ashton: I am attempting to start an accessory business which I want to sell to retail shops.

Pratt: How much do you need to support this business?

Ashton: I don’t know, around $200,000 – $250,000.

Pratt: I’m happy to help you with your business and I will support you all the way financially. My advice to you is start small and build up the business and for that I will give you money from time to time to grow your business.

Ashton: That’s fine. That’s perfect.

Pratt: You know that the position of mistress is now available.

Ashton: What do you mean?

Pratt: I need you to replace Shari. I need the physical contact from you.

Ashton: Okay.

  1. Mr Pratt then gave her $20,000 in cash, which was deposited to her account on 8 October 2003. Their sexual relationship thereupon resumed, following which Mr Pratt said to her:

Pratt: Mardi [as Ms Ashton was then known], I am serious about my relationship with you. I have finished with Shari and I want you to be my mistress. I am here usually on Tuesdays and Saturdays and I want you around in that time and I am happy to financially support you as I have in the past done for Shari.

Ashton: I have to think about the issue of the mistress. It is a big step for me.

  1. According to Ms Ashton, in early November 2003 she and Mr Pratt had another conversation or conversations at his Sydney penthouse apartment, to the following effect:

Pratt: Mardi, I am going to give you some money and it would be really good if you could spend it on the way you dress.

Pratt: I will be happy if you could spend some of that money I’m giving to you on your presentation. I want you to spend some money on haute couture.

Ashton: It is very expensive.

Pratt: Please spend the money.

Ashton: Okay.

Pratt: How are you coping?

Ashton: Pretty stressed out, because both of my exes provide no financial assistance to me in respect of my children and I am thinking about going back into the escort business.

Pratt: As I told you in the past, both of your partners were losers.

Ashton: Yes I agree with you, but love is blind.

Pratt: Love has nothing to do with financial support. Both of your ex partners had no substance in them but not all is lost. As I promised you in the past, and I will honour that promise, I care a lot for you and for that reason I am prepared to financially support you and your children and you don’t need to go back into the escort business. You are too beautiful and good to waste your time in that business.

Ashton: What do you mean?

Pratt: I will establish a trust for your children and I will give each of them $2.5 million.

Ashton: Are you serious? If you are I am really thankful but I don’t really need your support, except for what you have offered in the past in respect of my business.

Pratt: I want to do this for you. I am happy to help you. I want you to totally forget about the escort business and I want to support your business venture because I want you to be with me. I want you to do the same thing that Shari did and I want to provide you the luxurious lifestyle that you deserve.

Ashton: How will the trust work?

Pratt: I will make sure that this trust is established and at a mature age they can then have that money for their future life, which you don’t need to be concerned as to how to provide financial support for them. In the meantime, I will financially support you on a day to day basis by providing you with a certain income.

Ashton: Nobody has ever done anything like this for me in my life. Thank you. I am in shock. This is a really big thing for me. I can’t believe what you have offered me.

Pratt: Money is not an issue for me. I have billions. The only thing I don’t have in my life is somebody like you who can provide me with affection and love. I would do anything for you because from the first time I met you I have loved you and whenever you were away all those years I dreamt the day that we would be back together and this time I will make sure that I don’t lose you.

Ashton: I didn’t know you cared for me so much.

Pratt: I know that you don’t love me and I understand that because of the idiots in your life but you need to know that there are some good people in the world who are not just there to use you but to help you and I hope I am one of those people.

Ashton: Thank you.

Pratt: As to the trust for your children, don’t worry about that. I have people who look after this kind of stuff and they will put it all together for you.

Pratt: Mardi, I want to continue with this relationship and I need to have some sort of idea of the kind of money that you need to have so that you can support yourself.

Ashton: I really haven’t thought about it.

Pratt: Well what would be your average expenses say for the year?

Ashton: That is very hard to answer because it all depends on whether I am in the escort business or not. If I’m not in business then I would need some sort of income.

Pratt: Would you be happy with say $500,000 per year.

Ashton: Yeah, that would be fantastic?

Pratt: Tax free. I pay more for girls that I don’t know compared to what I am paying you and at least I know that I’ve secured your relationship.

Ashton: If I worked in the escort industry I would get that kind of money, possibly more.

Pratt: And that is the reason I have suggested $500,000. I don’t want you to work in that industry ever again. I want you to only concentrate on my needs and wants.

Ashton: That’s fine, I wouldn’t complain.

Pratt: I’m sure you won’t.

Ashton: How would I be paid?

Pratt: I will have it sorted out through Visy. It’s my company. I can do anything I want with it.

Ashton: Okay. But I would like to work on my accessories business. That will keep me busy between the times that I don’t see you.

Pratt: That’s fine I will help you in every way I can. I will support you both emotionally and financially and advise you on it if you need my help.

Ashton: That would be great.

Pratt: How about I put aside $30,000 a year separate to the half a million to run your business activities such as for your trips overseas and payment of rent for the business.

Ashton: That would be great.

Pratt: I also want you out of your current apartment and I am prepared to fund you up to $36,000 per year for your rent.

Ashton: That would be fantastic.

Pratt: What is wrong?

Ashton: I can’t believe what you’re offering me.

Pratt: This is nothing to what I have given Shari in the past. I am happy to give this to you anytime.

Ashton: Thank you, thank you very much. I am indebted to you for the rest of my life, I know that.

Pratt: You are not indebted to me. I want to do this for you and I want to have a relationship with you and I don’t want you to be out of my life ever again.

Pratt (after Ashton had hugged, kissed and thanked him): I’m hungry. Let’s eat.

  1. They then went out and purchased clothing for Ms Ashton.
  1. In her affidavit, Ms Ashton says that she and Mr Pratt had a further conversation in mid November 2003, to the following effect:

Pratt: You need a car.

Ashton: No it’s okay, I can manage.

Pratt: No, why don’t you go and find a car. When you find it, just contact Tony or myself and we will organise to buy it for you.

  1. In late November 2003, Ms Ashton selected a second hand Mercedes Benz CLK convertible from a dealership and paid a deposit of $1,000 from her own savings account, and subsequently on 12 December paid a further $9,000. She then had a conversation with Mr Pratt to the following effect:

Ashton: Richard I have found a car that I want and I have put a deposit on it.

Pratt: Good, where from?

Ashton: Rick Damelian in Leichhardt. It is a Mercedes Benz CLK.

Pratt: Leave it with me. I will get it fixed up so you can have the car in the next day or so.

  1. A few days later, she received a call from the dealer advising that the car was ready for collection.
  1. Business records tendered in the defendant’s case, which I prefer in this respect to Ms Ashton’s affidavit evidence, establish that between February and April 2004, Mr Pratt paid Ms Ashton a further $115,000: $10,000 on 12 February, $5,000 on 4 March, $25,000 on 18 March, another $25,000 on 23 April, when he also bought her a computer, and $50,000 on 13 May. As I will later explain, it is probable that relations between them ceased, or at least very substantially declined, at about this time. Nonetheless, Between July 2004 and October 2004, Mr Pratt caused her to be paid a further $50,000: $10,000 on 19 July, $10,000 on 2 August, $10,000 on 1 September, and $20,000 on 4 October.
  1. Ms Ashton was adamant that her obligations to Mr Pratt did not require that her relationship with him be exclusive, so that she was at liberty to bestow her favours on others also. In about February 2004, Ms Ashton commenced – she says with Mr Pratt’s concurrence – a sexual relationship with one Mr Sean Bowman, a bodyguard of Mr Pratt who had apparently intimidating qualities, which relationship continued, at varying degrees of intensity, until mid to late 2005.
  1. Ms Ashton says that in about December 2004 she and Mr Pratt had a conversation to the following effect:

Pratt: Mardi, I have gone back to Shari.

Ashton: What?

Pratt: Yeah, it’s all because of Paula. I want to spend time with her.

Ashton: What about us?

Pratt: I still love you and I will still honour my promise to you. I can easily afford to continue to support you financially; after all, I am Richard Pratt, one of the richest men in Australia. I would love to be with you, but Shari won’t allow it.

Ashton: I’m confused.

Pratt: Don’t be. I want to be with you but I am stuck. I have no choice, she has me over a barrel. I promise I’ll see you soon and we will talk, okay? I won’t cut you off financially if that is your concern. I will keep supporting you.

  1. According to Ms Ashton, on 19 January 2005 she sent by facsimile to Mr Pratt a letter as follows (sic):

To Richard,

This is the outline of promises to me and my family.

Upon our first meeting to discuss our agreed arrangement in November 2003.

You outlined a bequethment to my children,

– Xavier $2.5 million

– Indra $2.4 million

To myself –

– Mercedes Benz in total ownership, will return the car in exchange for $75k + $10k deposit

– My rent $36k

– Travel $30k

I would like you to consider a payment figure for the position in which is the equavilant of social suicide, of my children are not able to attend schools of my choosing, eastern suburbs private, through fear of bullying & harrasment.

Also a large impact on my Social & Business life. Due to Shari’s efforts to damage my reputation and good name of myself and children. It is hard to put a cost on this.

I am forced to ask for your financial help, being that you put my family & myself in the awful position.

  1. According to Ms Ashton, after she had sent that letter she received a telephone call from Mr Pratt, to the following effect:

Pratt: I’ve received your fax and I have asked Tony (Gray) to act on it immediately.

Ashton: Thanks.

Pratt: Mardi, I know I promised what has been put in your fax. I have been under a great deal of pressure from Visy, both internal and external, I will still honour my promise to you. You just have to be patient. I have told Tony to get you $100,000.00 at this stage.

Ashton: Richard, I forgot to put in my letter two items, if you want I can refax it to you.

Pratt: No don’t worry about it, what are they?

Ashton: You recall that you promised me $500,000.00 annually if I stopped working in the adult industry.

Pratt: Yes.

Ashton: Well I forgot to put that in my letter to you.

Pratt: That is fine. I know about that and I will deal with it. No problems.

Ashton: Richard, a side issue, even though it may not be important, you may recall that I initially paid the deposit for the car.

Pratt: Yes, how much was that for?

Ashton: $10,000.00 all up.

Pratt: That’s fine. I will also advise Tony to pay out the lease on the car so the ownership can be transferred to you without any lease repayment by you.

Ashton: Oh, I didn’t know the car was under lease.

Pratt: As far as I am aware it was and Visy was responsible for the payment.

Ashton: Do you want me to re-send my letter with these changes so you don’t forget.

Pratt: No, no. There is no need. I have made a note of it and I remember the agreement so don’t trouble yourself any further resending me the letter.

Ashton: That’s fine Richard. As long as I know you will honour your promise to me, I am happy to wait.

Pratt: It won’t be long before you will be paid, okay?

Ashton: No problem.

  1. Ms Ashton’s telephone accounts evidence a call, made by her to Mr Pratt, on 19 January 2005 at 11.46am for one minutes. On 20 January 2005, Mr Pratt caused Visy to reimburse to Ms Ashton the $10,000 she had paid by way of deposit on the Mercedes.
  1. According to Ms Ashton, in early February 2005, she met Mr Pratt’s associate Tony Gray at the Wentworth Sheraton Hotel in Sydney, when they had a conversation to the following effect:

Gray: I am sick and tired of bailing Richard out of these messes. Visy has got special accounts to deal with matters like this.

Ashton: What do you mean, matters like this.

Gray: The family is constantly trying to keep people like you and Shari out of Richard’s life. The company keeps paying for all of Richard’s indiscretions. Millions of dollars have been paid out in the past.

Ashton: I am not asking for anything that I was not promised by Richard.

Gray: I don’t doubt your sincerity but Richard will say anything and will do anything to have people like you in the sack. I don’t deny that Richard has promised what he has said to you and that is why I have been asked to see you. What will it take for you to go away?

Ashton: Whatever I have been promised by Richard. That is all that I want. I don’t want anything else.

Gray: What did Richard promise you?

Ashton: He promised he was going to look after my children by setting up a trust fund of $2.5 million for each of my children until they reach a mature age and claim their entitlement. He was going to give me half a million dollars a year and he was going to pay for my rental apartment or buy me a house in the Eastern suburbs so that I could live with my children and pay me for my business. I think all of this was in my letter to him, except the half a million per year.

Gray: I see. Let me go back to Melbourne. I will have a talk to Richard and see how we can sort this out. But if we do, I want you to sign an agreement with us. Richard may trust you but I have learnt from the past that these kinds of matters can come back and haunt people like Richard.

Ashton: I have no problem with that.

  1. Save for tendering some documents, the defendant called no evidence. Mr Gray had sworn an affidavit which had been filed and served, but ultimately was not read. Ms Ashton’s evidence therefore was, although strongly challenged, uncontradicted. In these circumstances, it is worth recording the approach of the court to the finding of facts.
  1. The plaintiff bears the onus of proof. In a civil case such as this, the standard to which she must prove her case is the balance of probabilities, but this nonetheless involves “actual persuasion” [ Watson v Foxman (1995) 49 NSWLR 315, 319].
  1. In the case of a claim against a deceased estate founded on the oral utterances of the deceased, which only the deceased could have denied, the Court scrutinises the claimant’s evidence closely [ Plunkett v Ball [1915] HCA 14(1915) 19 CLR 544, 548-549 (Isaacs J); Bovaird v Frost [2009] NSWSC 337, [45]; Varma v Varma [2010] NSWSC 786, [418]-[422]], and although there is no absolute legal requirement for it, ordinarily looks for some corroboration [ Re Hodgson (1886) 31 Ch D 177Weeks v Hrubala [2008] NSWSC 162, [20] (Young CJ in Eq)].
  1. In certain circumstances, a court may infer from a party’s failure to call a relevant witness that the evidence such a witness would have given would not have assisted the party’s case, so as to enable the more ready drawing of adverse inferences otherwise available on the evidence [ Jones v Dunkel [1959] HCA 8(1959) 101 CLR 298]. This does not arise unless it is established that the relevant witness has relevant knowledge to put before the Court, and is under the control of the party who might be expected to have called that witness, or at least is not practically available to the other party [ Payne v Parker[1976] 1 NSWLR 191, 196, 197].
  1. There are many reasons for doubting the reliability of Ms Ashton’s version. These include that she (orally) denied having had a drug habit in late 2004 and 2005, when her affidavit evidence referred to “my habit at that time” – which she incredibly explained as a reference to her not having a drug habit at the time; that she denied any knowledge of Mr Bowman seeing a woman by the name Michelle, when in a statement to police in early 2006 she had asserted that he was doing so; and that she was unable to explain why her claim included $500,000 per annum allowance for some years after Mr Pratt’s death. Further, for reasons that will appear, I have found myself quite unable to accept Ms Ashton’s claims to have had a telephone conversation as she claims with Mr Pratt on 11 February 2005.
  1. More fundamentally, while Ms Ashton’s Statement of Claim pleaded that the relationship came to an end in 2004, and her affidavit evidence was to the same general effect, her oral evidence was that their relationship continued, albeit much more sporadically, until late 2005. However, the telephone records of the parties provides strong evidence that their “relationship”, such as it was, had concluded by about April 2004, which corresponds with when Mr Pratt resumed his relationship with Ms Hitchcock, and Ms Ashton commenced a relationship with Mr Pratt’s bodyguard, Mr Bowman. Between 7 May and 19 July 2004, there was telephone contact between them on only three days. Thereafter, the next telephone contact was on 17 January 2005. The tenor of Ms Ashton’s 19 January 2005 letter is against there being an on-going “mistress” relationship at that time. The records evidence one short (1 minute) telephone call by Ms Ashton to Mr Pratt on 19 January 2005, another (2 minutes) on 25 January, and several on 7 February 2005, but none thereafter. As well as the telephone records being devoid of any evidence of later contact between them, Ms Ashton was unable to name any person who saw them together after mid 2004 – which was not assisted by her unconvincing resort to Mr Pratt’s driver and concierge, when she was later to say that they did not in any event meet at his apartment at that time. I therefore do not accept her assertion of an on-going relationship with Mr Pratt after mid-2004.
  1. Moreover, as was pointed out on behalf of the defendant, there were some differences between the version in Ms Ashton’s affidavit, and the version in her verified pleading. The pleaded version was that Mr Pratt promised to establish a trust fund of $2.5 million for each of her two children “to be managed by the plaintiff for the benefit of the said children who are presently minors” – not that he would make the arrangements for setting up of the trust, as her affidavit version describes. Secondly, it was pleaded that Mr Pratt would pay the rent on her rented apartment, when the affidavit version was that he would pay rent for her if she moved out of that apartment. But I do not find those discrepancies particularly telling. Reference was also made to the circumstance that the pleading referred to a “retainer of $500,000 nett of taxation”, while the affidavit referred to it being “tax free”; I see no significance at all in this supposed discrepancy.
  1. On the other hand, in the context of the extraordinary wealth involved and the extraordinary circumstances of this extraordinary case, including the evidence bearing on Mr Pratts’ relationship with Ms Hitchcock, I do not accept that Ms Ashton’s account is inherently incredible. Some corroboration, albeit not independent, of Ms Ashton’s version of the critical November 2003 conversation is provided by her letter of 19 January 2005. About it, the following observations must be made. First, it does not refer to the alleged allowance of $500,000 per annum, which – at least on one view – was the most significant of the alleged promises. Ms Ashton says that she raised this in her subsequent telephone conversation with Mr Pratt, and described its omission from the letter as a “huge mistake”. Secondly, the letter does not assert an entitlement to be paid in accordance with the promises, but seeks a “payment figure” by way of “financial help”; it asks for a payment in the light of damage to Ms Ashton’s reputation said to have been inflicted by Ms Hitchcock. This tends against a view that the promises were intended to be legally binding and enforceable.
  1. Similarly, some further corroboration is afforded by the circumstance that Ms Ashton consulted solicitors with a view to initiating the present claim in January 2009, while Mr Pratt was alive, at a time when she could not have known that he would soon die, although it was not formally asserted until December 2009, after his death. Nonetheless the claim had been raised by Ms Ashton against Mr Pratt during his lifetime, in the 19 January 2005 letter, at a time when he was able to answer it, and in circumstances in which, even after his death, Mr Gray became sufficiently appraised of it to be able to answer it. At least to an extent, this distinguishes her claim from those which typically attract the rigours of Plunkett v Ball and Re Hodgson.
  1. Some slight further corroboration is provided by the telephone record of the 19 January 2005 telephone call and the $10,000 payment made by Mr Pratt in reimbursement of the Mercedes deposit on 20 January 2005.
  1. Moreover, Mr Gray was ultimately not called to deny the conversation of early February 2005. He easily could have done so. He is undoubtedly a witness in the defendant’s camp – indeed, he swore an affidavit, which was served, but ultimately was not read. In those circumstances, I should infer that his evidence on the topic would not have assisted the defendant’s case, and I should accept Ms Ashton’s account of the February 2005 conversation between her and Mr Gray.
  1. This has at least the following significant consequences. The first is that I should accept that Mr Gray said words to the effect “I don’t deny that Richard has promised what he has said to you and that is why I have been asked to see you. What will it take for you to go away?”. The second is that I should accept that in that conversation Ms Ashton referred to the trust funds of $2.5 million for each of her children, to the allowance of $500,000 per year, to rental accommodation (or buying a house in the eastern suburbs), and business expenses. The third is that I infer that Mr Gray would have obtained (as he told Ms Ashton he would) Mr Pratt’s instructions on Ms Ashton’s allegations, and could have given evidence of Mr Pratt’s response. The fourth is that Mr Pratt’s response to Mr Gray when confronted with Ms Ashton’s allegations would not have assisted the defendant’s case.
  1. I therefore find, on balance, that Ms Ashton and Mr Pratt had a conversation in or about November 2003 substantially to the effect deposed to by Ms Ashton, in which he told her that he would establish trusts of $2.5 million for each of her two children, pay her an allowance of $500,000 per year, pay up to $36,000 per annum for rental accommodation for her (or buy her a house in the eastern suburbs), and pay $30,000 per annum for her business expenses, particularly travel.

Contract

  1. I do not accept that the terms of the arrangements discussed in the November 2003 conversation are too uncertain and incomplete to make a contract. Nonetheless, I am unpersuaded that Mr Pratt and Ms Ashton intended to make a contract. In the absence of express statement that their arrangements were or were not intended to be legally binding, intention to create legal relations is an inference of fact, determined objectively; accordingly, Ms Ashton’s subjective intentions in that respect are not relevant [ Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, 105-7, [24]-[28];Darmanin v Cowan [2010] NSWSC 1118, [204]-[215]].
  1. Family, social, and domestic arrangements do not normally give rise to binding contracts, because the parties lack the necessary intention [ Teen Ranch Pty Ltd v Brown (1995) 87 IR 308, 310 (Handley JA, referring to Balfour v Balfour [1919] 2 KB 571)]. In Balfour , a husband’s promise to pay his wife an allowance of 30 per month until she could rejoin him in Ceylon was held not binding for lack of intent that it be legally enforceable. In Cohen v Cohen [1929] HCA 15(1929) 42 CLR 91, Dixon J (as he then was) held an arrangement between intending husband and wife as to a dress allowance to be not a contract (at 96):

The parties did no more, in my view, than discuss and concur in a proposal for the regular allowance to the wife of a sum which they considered appropriate to their circumstances at the time of marriage.

  1. In Jones v Padavatton [1968] EWCA Civ 4[1969] 2 All ER 616, a mother’s promise to maintain her daughter at a specified rate if she would go to England and read for the Bar with a view to later practising in Trinidad was held not legally binding, notwithstanding that performance would necessitate the daughter abandoning secure accommodation and employment in Washington and her teenage son’s education there. The court found that the arrangement between the mother and daughter was a family arrangement depending on the good faith of the parties in keeping the promises made and was not intended to be a binding agreement. The daughter’s claim thus failed. Salmon LJ said (at 621):

Did the parties intend the arrangement to be legally binding? This question has to be solved by applying what is sometimes (although perhaps unfortunately) called an objective test. The court has to consider what the parties said and wrote in light of all the surrounding circumstances, and then decide whether the true inference is that the ordinary man and woman, speaking or writing thus in such circumstances, would have intended to create a legally binding agreement .

  1. As Ward J has recently explained in Darmanin (at [206]), there is a rebuttable presumption of fact that arrangements or agreements made in a family are not intended to have legal force, the rationale being that, at the time of making the alleged promise, the parties would not have regarded their arrangements in terms of legal consequences. As her Honour also explained (at [207]), this presumption has been applied beyond the family context to other social and domestic arrangements [citing, as examples, Coward v Motor Insurer’s Bureau [1963] 1 QB 259Buckpitt v Oates [1968] 1 All ER 1145; andParker v Clark [1960] 1 All ER 93] .
  1. As I observed in Bovaird v Frost (at [52]), there are of course many examples of cases involving promises to confer benefits on a friend or relative, in consideration of the latter taking up residence with the former or rendering household or personal services, in which the requisite intention to create legal rights and obligations has been found – particularly where implementation of the arrangement involved the promisee leaving existing advantages or selling an existing residence [ Wakeling v Ripley (1951) 51 SR (NSW) 183Todd v Nicol [1957] SASR 72Parker v Clark Schaefer v Schumann [1972] AC 572Tanner v Tanner [1975] EWCA Civ 4[1975] 1 WLR 1346Raffaele v Raffaele [1962] WAR 29Re Gonin (deceased) [1979] Ch 16]. I n Wakeling v Ripely, the act of the plaintiff in leaving a salaried position in Cambridge on the faith of a promise to take up accommodation in Bowral, was considered so serious that it would have been obvious to the defendants that the plaintiffs were relying upon what was considered a definite assurance and a definite agreement, such that it could be inferred that there was an intention to create legal relations; this may be contrasted with Jones v Padavatton,supra . But in this context it is also recognised that a sacrifice might be made in reliance upon a promise on the basis simply of trust in the promisor to honour the promise of support, not because of an intention to create legally binding relations [see Jones v Padavatton , 625 ( Fenton Atkinson LJ);Darmanin, [209]].
  1. In the present case, the intent of the arrangements was to establish the basis of the relationship of “mistress”. The context was social. Although Ms Ashton agreed not to return to the escort industry, she had already left it and was already embarked on establishing an alternative business, so it was not as if it was obvious that she was relying on an enforceable promise. The parties neither sought legal advice, nor recorded their agreement in writing. Ordinary people in their position would not have intended that in the event that either did not fulfil their respective promises, the other could enforce the promise in a court. There is considerable force in the defendant’s submission that it would not have been envisaged that, if Ms Ashton returned to the escort industry, Mr Pratt could obtain an injunction to restrain her; nor that if she did not fully perform the role of “mistress”, he could claim damages for disappointment.
  1. Subsequent conduct or communications may be considered when considering whether a binding agreement has been reached [ Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88(1908) 5 CLR 647Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61(2001) 53, NSWLR 153, 164 [26]; Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154, [59]; Darmanin, [221]-[222]]. As I have observed, Ms Ashton’s 19 January 2005 letter does not assert a legal right to performance of the promises; it seeks a “payment figure” as compensation for the damage done by Ms Hitchcock.
  1. While in my view this is a case in which the presumption applies and is not rebutted, I am in any event satisfied that the parties did not in November 2003 intend to make a contract. The conclusion which I have reached below on the public policy issue also favours the view that the parties did not intend to create legal relations.

Public policy

  1. The defendant did not plead a defence that any such contract as was asserted by the plaintiff was void, illegal or unenforceable on grounds of public policy. However, in my opinion, where a court forms the view that a contract may be void, illegal or unenforceable on public policy grounds, it is bound to address the issue, even if the parties prefer to ignore it [cf Hyde Park Residence Ltd v Yelland [2001] Ch 143, 160 [44]]. In this case, the attention of the parties was drawn to the matter and submissions on it invited; and although not adopted by the defendant, senior counsel for the plaintiff in response made oral and written submissions and referred to some relevant authorities on the issue [see Outline of Closing Submissions on behalf of the Plaintiff,para 56 and fn 55].
  1. One of the heads of public policy under which contracts have traditionally and conventionally been held void and illegal is that they are sexually immoral and/or prejudicial to the status of marriage. In Girardy v Richardson (1793) 1 Esp Cas 13, 170 ER 275, Lord Kenyon CJ held that where the wife of the plaintiff – who managed the business of his house in letting the lodgings – let rooms to the defendant who was a “woman of the town”, knowing of the defendant’s mode of life, the contract for use and occupation of the rooms upon which the plaintiff sued was ” contra bonos mores ” and could not found an action. The classic case is Pearce v Brooks (1866) LR 1 Exch 213, in which the plaintiffs let on hire to the defendant, a prostitute, a new horse-drawn vehicle, with knowledge that it was to be used in the course of her trade. The contract was held illegal on the ground of sexual immorality. In Upfill v Wright [1911] 1 KB 506, the plaintiff by his agent let a flat to the defendant for a term of three years, the agent knowing that the defendant was the mistress of a certain man, and assuming that the rent would be provided by that man on account of her being a “kept woman”. The court held that as the flat was let for an immoral purpose, the plaintiff was not entitled to recover the rent.
  1. In more modern times, the House of Lords in Fender v St. John-Mildmay [1938] AC 1 held that a promise made by a spouse, after a decree nisi for the dissolution of the marriage had been pronounced, to marry a third person after the decree became absolute, was not void as being against public policy. But Lord Wright explained (at 42) (emphasis added):

The law will not enforce an immoral promise, such as a promise between a man and woman to live together without being married, or to pay a sum of money or to give some other consideration in return for immoral association . But nothing of the sort was suggested in this case. On the contrary, the promise, if carried out, would have regularized an immoral association. English law recognises the right of divorced people to marry though their former consorts are alive. The law has furthermore sacrificed a rigid idea of morality to the idea of making reparation by enforcing obligations under seal by a man to pay money to a woman in respect of past immoral cohabitation, though it might have been said that to enforce such obligations tended to encourage immorality.

  1. Later, his Lordship said (at 49):

Of course if the promise is given in consideration of future immoral relations it is illegal and void on that ground , but I cannot see any implied general tendency to immorality in such a promise. If the guilty parties are living together in immoral relations, the promise points to moral relations being established by marriage in the near future, when the decree is made absolute. If the parties are acting morally, I cannot see why the promise after decree nisi should lead them into immorality.

  1. Lord Thankerton said (at 26):

There remains the question of immorality, and it is in this regard that I find a vital distinction between a promise to marry on the contingency of a dies incertus and a promise to marry on the decree nisi, already in existence, being made absolute . The general tendency of the latter, I should assume, will be to promote patience until the expiry of a period, which, in the vast number of cases, is practically mechanical in its operation.

  1. Changes in social mores have resulted in a more liberal attitude to contracts providing for or relating to extramarital cohabitation, such that a contract is no longer to be regarded as contrary to public policy merely because the parties are living together in a de facto relationship [Carter Peden and Tolhurst,Contract Law in Australia, 5 th ed, [25-32]]. But the old rule has not been completely obliterated. The question is, what is its remaining content?
  1. In Queensland, in Andrews v Parker [1973] Qd R 93, the parties lived together in a de facto relationship. Subsequently, the man agreed to transfer title in his house to the woman subject to terms including that she reconvey the title if she returned to her husband. In due course she did, and asked the plaintiff to leave the house, offering to pay $4,000. The man left but the woman failed to pay. Stable J held that the original agreement to transfer the house was not contrary to public policy as it did not bring about a state of extramarital cohabitation , because one already existed. His Honour said that the court was not to judge the actions of the parties in the light of the 19 th century cases, and was bound to apply the public policy of the day and to consider contemporary moral standards. An important point, however, is that the contract did not bring about a state of extramarital cohabitation: it already existed.
  1. In England, in Horrocks v Forray [1975] EWCA Civ 9[1976] 1 WLR 230, the defendant – the mistress of a man – bore him a daughter, whom the man thereafter wholly maintained and supported providing living accommodation, clothing, holidays and day-to-day expenses. He subsequently bought a house and told the solicitor that it was for the defendant and her daughter, whom he installed in it, though not conveying it to her. Upon his death in a motor vehicle accident, by his will all his estate devolved on his wife; neither she nor his executors had known of his association with the defendant nor of the purchase of the house. The executors brought an action for possession of the premises on the ground that the defendant’s licence terminated on the man’s death. She contended that she had a contractual licence to live there for life or while her daughter was of school age. The Court of Appeal upheld the County Court judge’s decision that the circumstance that the man intended to provide some security for the defendant was insufficient to bring into existence a binding contract in the nature of a licence, and in all the circumstances there was no evidence justifying the inference that she had a contractual licence. This result was reached without reliance on public policy considerations, but Scarman LJ said (at 239):

When an illegitimate child has been born, there is certainly nothing contrary to public policy in the parents coming to an agreement, which they intend to be binding in law, for the maintenance of the child and the mother. Parents of an illegitimate child have obligations towards the child. So far from its being contrary to public policy that those obligations should be regulated by contract, I would have thought it was in the public interest that they should be so.

  1. The Supreme Court of California, in Marvin v Marvin 18 Cal. 3d 660557 P. 2d 106134 Cal. Rptr. 815 (1976) – in which a woman sued her estranged de facto husband on an oral contract said to provide that she should be entitled to half the property that had been acquired in his name during the period of their cohabitation, and to support payments – rejected a submission that a contract between non-marital partners was unenforceable if it involved or was made in contemplation of an illicit relationship, holding (at 669, 112, 821) that the cases in that state disclosed a narrower and more precise test, namely that a contract between non-marital partners was unenforceable only to the extent that it explicitly rested upon the immoral and illicit consideration of meretricious sexual services. After reviewing the authorities and the changes in social mores, the majority opinion (Tobriner J; Wright CJ, McComb, Mosk, Sullivan and Richardson JJ concurring; Clark J concurring and dissenting) concluded (at 684, 122, 831) (emphasis added):

We conclude that the judicial barriers that may stand in the way of a policy based upon the fulfilment of the reasonable expectations of the parties to a nonmarital relationship should be removed. As we have explained, the courts now hold that express agreements will be enforced unless they rest on an unlawful meretricious consideration.

  1. The New South Wales Court of Appeal held, in Seidler v Schallhofer [1982] 2 NSWLR 80, that an agreement which provided for the continuation of a de facto relationship for a specified period and thereafter for marriage or separation was not void as being contrary to public policy, because the “immorality” of the relationship was already in existence when the agreement was executed, so that the agreement merely formalised what was to happen to the financial aspects of the relationship once the cohabitation came to an end. Further, it was said that the concept of public policy had changed – as appeared from, amongst other factors, Commonwealth and State legislation which ameliorated the consequences of extramarital associations – at least to the extent of allowing such an agreement to be enforced. Hope JA, as he then was – with whom Reynolds JA (at 95) agreed – said (at 88-90) (emphasis added):

Going then to the area of sexual morality, there is no doubt that a contract to provide meretricious sexual services is and has long been regarded as contrary to public policy and illegal . The Supreme Court of California, in a decision which has had far reaching consequences in the United States, has held that this is as far as the law goes in this regard: Marvin v Marvin (1976) 18 Cal 3d 660134 Cal Rptr 815. However the present agreement did not involve meretricious sexual services, but a sexual relationship as part only of a wider relationship . In past generations agreements for, or tending to encourage, cohabitation, outside marriage, between a man and a woman in the future have commonly, although, as Fender v St John-Mildmay shows, not always, been held to be void as against public policy. On the assumption which for present purposes I make that in the past “… some definite and governing principle which the community as a whole … adopted either formally by law or tacitly by its general course of corporate life …”: Wilkinson v Osborne [1915] HCA 92(1915) 21 CLR 89, at p 97, per Isaacs J would have operated to invalidate an agreement providing for cohabitation for the period and purpose that the subject agreement does, can it be said that public policy

has now changed in a way to allow such an agreement to be enforced. As a preliminary question it must be asked to what can regard be had to see whether or to what extent public policy has changed?

Put another way, and relating the question to the present case, what has to be decided is whether an agreement of the kind entered into between the parties should still be considered so contrary to the ideas prevailing in this community as to the conditions necessary for its welfare: Re Jacob Morris (Deceased) (1943) 43 SR (NSW) 352, at p 355; 60 WN 201, that the court should refuse to enforce it as contrary to public policy.

The conclusion to which all this material, including the legislation, leads is that the ideas prevailing in this community as to the conditions necessary for its welfare have changed, at least to some extent, in so far as they relate to extra-marital cohabitation. It may be that they have changed to the extent that the living together of a man and woman, without marriage, will not generally be regarded as infringing the acceptable standards required by the community . It is however not necessary to decide this question; it is only necessary to consider whether an agreement for, or tending to promote, the continuation of a cohabitation, already commenced, for a limited period in order to end it by marriage or separation is not contrary to those ideas.

  1. In Nichols v Nichols (Supreme Court of New South Wales, Needham J, 12 December 1986, unreported) the plaintiff who lived principally with his wife and family had a sexual relationship with the defendant, whom he supported including by paying her rent; they had children, whom he also supported. He purchased a flat and installed the defendant and their sons in it, where he spent at least one night per week. His Honour said:

The defendant raised three special defences. The first was estoppel. In my opinion, there is no substance in this defence. She did not alter her position to her detriment. The next defence was that enforcement of the agreement claimed by the plaintiff should be refused on the ground that the agreement was for immoral purposes.

The defendant referred to Upfill v Wright [1911] 1 KB 506. Much water has run under that particular bridge since 1911 – see Seidler v Schallhofer [1982] 2 NSWLR 80, Andrews v Parker [1973] Qd R 93Tanner v Tanner [1975] EWCA Civ 4[1975] 1 WLR 1346Horrocks v Forray [1975] EWCA Civ 9;[1976] 1 WLR 230.

The court’s refusal to enforce rights, which would otherwise be enforceable, based on the rule ex turpi causa non oritur actio , was justified by Diplock LJ inHardy v Motor Insurers’ Bureau [1964] 2 QB 745 at p 767, in the following terms:- “All that the rule means is that the courts will not enforce a right which would otherwise be enforceable if the right arises out of an act committed by the person asserting the right … which is regarded by the court as sufficiently anti-social to justify the court’s refusing to enforce that right.”

The principle is not limited to rights arising under contracts. But Diplock LJ added a further statement of principle (at pp 767-8):- “The court’s refusal to assert a right, even against the person who has committed the anti-social act, will depend not only on the nature of the anti-social act but also on the right asserted. The court has to weigh the gravity of the anti-social act and the extent to which it will be encouraged by enforcing the right sought to be asserted against the social harm which will be caused if the right is not enforced.”

Stable J, in Andrews v Parker (above) applied that principle to the facts before him, as did Jacobs J in Money v Money (No 2) [1966] 1 NSWR 348, at p 351.

I think the principle is applicable here, even if it were to be held that the agreement between the parties was unlawful because it was based on an immoral consideration. As the plaintiff submitted, there must be considerable doubt, in the present social circumstances, whether an agreement such as the present would be struck down as being anti-social. It is further to be doubted whether, in this case, the right asserted by the plaintiff “arises out of an act committed by the person asserting the right.” The right arises, rather, out of the defendant’s termination of the relationship and her subsequent assertion of her legal title to the exclusion of the plaintiff.

But whether the right asserted by the plaintiff be said to arise out of an anti-social act (and Scarman LJ in Horrocks v Forray above, at p 239, did not seem to think the arrangement in that case for maintenance of a mistress and her child was anti-social), I think refusal to grant some relief to the plaintiff would create greater social harm than if such relief were granted.

  1. It is now provided by statute that notwithstanding any rule of public policy to the contrary, two persons who are not married may enter into a domestic relationship agreement or termination agreement which is enforceable in accordance with the law of contract [(NSW) Property (Relationships) Act 1984,s 45s 46]. But as the relationship between Mr Pratt and Ms Ashton did not contemplate cohabitation, it was not a domestic relationship within the Act.
  1. In the more recent cases to which reference has been made, there are two notable features that have saved the relevant contract from illegality on the grounds of immorality: the first is that the contract did not bring about a state of extramarital cohabitation, but made provision in respect of one that already existed; and the second is that it did not involve meretricious sexual services, but a sexual relationship as part only of a wider relationship that included cohabitation and aspects of mutual support. As Hope JA pointed out in Seidler v Schallhofer (at 87), the effect of what Lord Wright said in Fender was that the agreement was not illegal as tending to encourage sexual immorality because the immorality already existed, and although the effect of the promise would be to continue it, the purpose of the promise was to bring it to an end after the divorce decree became absolute.
  1. So far as I can tell, no case stands contrary to the proposition that it is still the law that a contract to provide meretricious sexual services is contrary to public policy and illegal. Seidler v Schallhofer said as much in 1982, as did Marvin v Marvin in 1976 in California. While social mores have no doubt continued to change, as authority stands such a contract remains contrary to public policy and illegal. This view of the law is confirmed by Markulin v Drew (New South Wales Supreme Court, Young J, 12 August 1993, unreported), which bears considerable similarity to the present case. The plaintiff (woman) alleged a contract whereby she was “to see the deceased every three months as well as telephoning him occasionally, and the deceased would pay her $40,000 clear per year, purchase her a ‘top’ car and a beautiful home anywhere in Sydney she’d like to live, as well as providing a large sum of money which would be sufficient for the plaintiff to live on for the rest of her life without working for a living”. Illegality (for promoting sexual immorality) was pleaded as a defence. Young J (as his Honour then was) reviewed the authorities, and, adopting the statement in Treitel on Contracts, 8 th ed, 390-392, that “a distinction is now drawn between contracts with purely meretricious purposes and those which are intended to regulate stable extra marital relationships”, accepted that neither in England nor Australia did the law now refuse to enforce as illegal contracts which involved cohabitation between people who are not married to each other – even if one or both of them is married to someone else – but also observed that the former rule had not been completely deprived of content. His Honour explained:

Accordingly the distinction that Treitel is making is between a man and a woman who are sharing a life together though not married including sexual relations on the one hand and a man and a woman who are living independent lives but the man is rewarding the woman for sexual services which she provides from time to time. Indeed, in this modern age it may be that it is the woman who is rewarding the man for sexual services he provides from time to time.

It should be remembered, however, that traditionally there were in fact three classes of cases: (i) a contract of cohabitation; (ii) a contract by a man with a woman to provide occasional sexual services; and (iii) an agreement with a common prostitute. Cases such as Bainham v Manning [1691] EngR 66(1691) 23 ER 756suggest that while relief would not be given to a man against a bond he had given to a common strumpet or prostitute, equity would not countenance a transaction whereby a man had given a bond to a housekeeper to secure a sum of money to her if she provided “secret services”, presuming attending on her master for sex if required. Accordingly, “meretricious” probably means not a contract with a prostitute, but a contract treating a woman as if she were a prostitute.

  1. His Honour concluded that, if the contract were as pleaded:

One can only assume that sexual services were to be provided by the plaintiff and not take the view that she later merely gave sex as an optional extra. On this basis the contract was meretricious within the rule. … Accordingly, the defence of illegality would succeed.

  1. The arrangements between Ms Ashton and Mr Pratt involved none of the saving graces which enabled a different result to be reached in the cases to which I have referred. Those arrangements were not made to facilitate continuation of an existing cohabitation, but to establish the “mistress relationship”. The evidence does not reveal a relationship, or consideration, beyond “meretricious sexual services”. In my view, on the current state of the authorities, the arrangements were contrary to public policy and illegal in the relevant sense. Had they otherwise constituted a contract, it would have been void as contrary to public policy.

Estoppel

  1. In submissions, Ms Ashton’s case was put primarily on the basis of equitable estoppel. E quity comes to the relief of a plaintiff who has acted to its detriment on the basis of a fundamental assumption in the adoption of which the defendant has played such a part that it would be unfair or unjust if it were left free to ignore it, on the footing that it would be unconscionable for the defendant to deny the assumption [ Grundt v The Great Boulder Proprietary Gold Mines Limited [1937] HCA 58(1937) 59 CLR 641, 675; Thompson v Palmer [1933] HCA 61(1933) 49 CLR 507, 547; Waltons Stores (Interstate) Limited v Maher [1988] HCA 7(1988) 164 CLR 387, 404 (Mason CJ and Wilson J)]. The unconscionability which attracts the intervention of equity is the defendant’s failure, having induced or acquiesced in the adoption of the assumption or expectation, with knowledge that it would be relied on, to fulfil the assumption or expectation or otherwise to avoid the detriment which that failure would occasion [ Waltons v Maher , 423 (Brennan J)].
  1. The matters which a plaintiff must establish to found an equitable estoppel may, for present purposes, conveniently be summarised as follows [ see generally, Waltons v Maher , 428-429 (Brennan J); Meagher, Gummow & Lehane, Equity: Doctrines & Remedies, (4th ed., 2002), [17-105]; Vukic v Luca Grbin & Ors; Estate of Zvonko Grbin [2006] NSWSC 41, [28]] :-

First , in relation to the plaintiff’s conduct: that the plaintiff acted (or abstained from acting) in reliance upon an assumption or expectation that a particular legal relationship existed or would exist between the plaintiff and the defendant, or that the plaintiff had or would acquire some interest in the defendant’s property;

Secondly, in relation to the defendant’s conduct: that the defendant induced the plaintiff to adopt the assumption or expectation and encouraged the reliant activities of the plaintiff, or at least failed to deny the assumption or expectation with knowledge that the plaintiff was relying on it to the plaintiff’s potential detriment and that it could be fulfilled only by transfer of the defendant’s property, a diminution of the defendant’s rights or an increase in the defendant’s obligations;

Thirdly, in relation to the interest or property: that the assumption or expectation was one which the defendant could lawfully satisfy.

  1. For Ms Ashton, it was contended that:

from late 2003 she acted in reliance on the assumption that she was, and the expectation that she would remain, Mr Pratt’s mistress, on the terms identified in the November 2003 conversation; and

that Mr Pratt induced her to adopt that assumption and expectation, and did nothing to disabuse her of it when he must have known that she was acting on it to her detriment.

  1. Ms Ashton’s claim of detriment is that she gave up a remunerative escort business, closed her fledgling accessories business, and took no steps to document or formalise their arrangements. However, she had left the escort industry in the late 1990s at the time of her marriage – more than six years prior to the November 2003 conversation – and had not returned to it; she did not do so until March 2006. She had already embarked on establishing the accessories business, and Mr Pratt provided funding to assist its establishment and operation, and offered to provide advice in connection with it. There is no evidence that he asked her to close it – and it was, in any event, making a loss. Accordingly, neither abandonment of the accessories business, nor the losses incurred in operating it, were detriment attributable to reliance on any promise of Mr Pratt. The omission to take steps to formalise their agreement is not relevant detriment.
  1. Accordingly, Ms Ashton incurred no relevant detriment, and her estoppel claim must fail. It is thus unnecessary to consider the additional argument advanced by the defendant that any equitable compensation should not involve enforcement of the promises but only the minimum necessary to avoid detriment.
  1. Moreover, as Needham J observed in Nichols v Nichols , the rule ex turpi causa non oritur actio – that the courts will not enforce a right which would otherwise be enforceable if the right arises out of an act committed by the person asserting the right that is regarded by the court as sufficiently anti-social to justify the court’s refusing to enforce that right – is not limited to rights arising under contracts. Equitable estoppel does not afford a means for circumventing the requirements of public policy. The doctrine that holds that agreements to provide meretricious sexual services are contrary to public policy, void and illegal is not limited to contracts, and is equally applicable to alternative bases of claim, such as by way of estoppel. Accordingly, even if Ms Ashton established relevant detriment, her equitable claim would also fail on the same public policy grounds that defeat her contract claim.

The February 2005 settlement

  1. At 12:38 am on Friday 11 February 2005, Mr Bowman forwarded to Ms Ashton an email he had received earlier that morning from Tony Gray, in the following terms:

ATTN Ms Mardi Heslop-Kelly

Dear Mardi,

Thank you for your Feb 9 text message to Sean Bowman.

On the basis of this message and your undertakings we expect that you will:

1. keep confidential and not disclose any information about the business or private affairs of Richard Pratt

2. not make any statements or engage in any behaviour which will impact negatively on Richard Pratt, his family or business interests.

I have arranged for the transfer of the car plus $100,000 into your nominated account in full and final settlement of all claims against Richard Pratt, his family or the Pratt family

Account details:

Ms Mardi Heslop-Kelly

ANZ BSB 102 362

A/c XXXX XXXXX

In order to enable the transfer to occur please acknowledge your acceptance of this communication and confirm the above bank account details as soon as possible

Sincerely

Tony Gray

  1. The 9 February text message is not in evidence.
  1. On the same day, at 1:55 pm, Ms Ashton sent to Mr Gray an email in the following terms:

To Tony,

I have acknowledged your email. The account details are correct.

Regards Mardi Heslop

  1. Payment of $100,000 was deposited into Ms Ashton’s nominated account that day, and subsequently the motor vehicle was transferred into her name.
  1. Ms Ashton says that she did not agree with the statement that the payment was in “full and final settlement of all issues”, and that before responding to the email she had a conversation with Mr Pratt, to the following effect:

Pratt: Have you received a communication from Tony?

Ashton: Yes, an email.

Pratt: I have confirmed with Tony my financial arrangement with you. You just have to be patient and I will address all of the issues raised in your letter including the ones that are not in your letter. I will also speak to Shari to stop her belligerent behaviour towards you. You have to appreciate that she is jealous of you because I have given you the attention for the past year or so. I’ll have a talk to her and calm her down about you. Okay?

Ashton: I have no issue with what you have said and I appreciate your involvement, but Tony in his email says that the $100,000 is in full and final settlement.

Pratt: No, he doesn’t know what he is talking about. Don’t worry about that. I will pay you regardless of what is said in the email. You know that, so don’t worry about it.

  1. Initially, Ms Ashton said that she was unsure who had initiated the call on 11 February 2005 [T62.17-18]. Later, in cross-examination, she said that Mr Pratt had initiated the call, possibly from a withheld number [T113.09]. In my view, it is highly improbable that there was any such conversation. There is no record of any such telephone call in the telephone records of any party. Ms Ashton made no call to Mr Pratt at that time. Mr Pratt made a call on his mobile to Mr Gray at 2:24pm, but none to Ms Ashton. While Ms Ashton suggested that Mr Pratt may have made the call from a blocked number, his telephone records disclose what telephone he was using throughout the day and at about the times in question. I do not believe that there was any such conversation.
  1. According to Ms Ashton, she later received a telephone call from Mr Pratt and had a conversation with him to the following effect:

Pratt: I know that you have now been paid $100,000 and the car has been transferred into your name.

Ashton: Yes, thank you.

Pratt: I have spoken to Shari and hopefully she will behave herself in respect of you. I really still want to see you, but the blonde bitch is blackmailing me that she will refuse me access to Paula. So I need to please her and at this stage I can’t handle too many personal issues.

Ashton: It’s none of my business what you do Richard. I’m happy for you and for Shari.

Pratt: I haven’t forgotten my promise to you. I’ve got some issues with ACCC and some of my directors. As soon as I have sorted those out, I will make sure that I honour my promise to you, just be a little bit patient.

Ashton: No problem.

  1. She claims that there were various further telephone conversations between them between February and November 2005, but there is no telephone record of any conversation between Ms Ashton and Mr Pratt after 7 February 2005, and I do not accept her evidence in this respect.
  1. The elements of an accord and satisfaction were expounded by the Court of Appeal of England and Wales in Rustenburg Platinum Mines Ltd v South African Airways [1979] 1 Lloyd’s Rep 19, in which the defendant had sent the plaintiffs a cheque for less than the full amount to which the plaintiffs had claimed to be entitled. The plaintiffs banked the cheque after signing the form of receipt on its reverse, which stated “[r]eceived with thanks from SA Airways [the defendant] … in payment of claim TC 1546/70”. The Court of Appeal held that there was no accord and satisfaction precluding the plaintiffs pursuing the balance of their claim. Lord Denning MR said (at 22-3) that the signature of the form of receipt was insufficient to be a settlement of the case, and that:

… the mere offer of payment of a sum which is received is not in itself an accord and satisfaction. There must be sufficient material in the documents to be seen that it is paid and accepted in full and final settlement. There is nothing here, it seems to me, to come up to that standard at all.

  1. Eveleigh LJ said that he did not consider that the banking of the cheque and the signing of the form of receipt indicated “an acceptance on the basis of full and final satisfaction”. His Lordship elaborated (at 24):

If necessary, I would be prepared to hold that the payment into the bank was explicable on the basis that the parties recognised that at least that sum of money was recoverable. In other words, that that would be the minimum as to which part there was no dispute between the parties.

  1. Sir David Cairns said (at 25) that the letter enclosing the cheque “did not make it at all plain that the [sum of money] was offered in full and final settlement”.
  1. In the present case, the payment was offered explicitly on the basis that it was “in full and final settlement of all” Ms Ashton’s claims against Mr Pratt and his interests. As I cannot accept that she had any such conversation at that time with Mr Pratt as she alleges, she must have accepted the payment knowing that that was the basis on which it was tendered.
  1. The plaintiff invoked the judgment of the Court of Appeal in J P Morgan Australia Ltd v Consolidated Minerals Pty Ltd [2011] NSWCA 3 , as supporting the view that there was no accord and satisfaction, but in my view the contrasts between that case and this tend to fortify the view that in the present case there was an accord and satisfaction. In J P Morgan, Consolidated Minerals had on 6 February 2008 sent to J P Morgan a letter marked “Without Prejudice” in the following terms:

We refer to our previous correspondence concerning the fees payable by Consolidated Minerals Limited to JP Morgan Australia Limited pursuant to an engagement letter executed in September 2006.

We note your letter of 18 December 2007 and your invoice of 8 January 2008. As foreshadowed in our letter of 24 December 2007, we do not accept the quantum of fees JP Morgan is claiming as payable.

We have reviewed the engagement letter and we consider that an appropriate payment in respect of the transaction is $20,000,000.00.

Accordingly, we are pleased to enclose a cheque for $20,000,000.00 in full and final settlement of this matter.

We trust that this brings this issue to a close.

  1. In response to Consolidated Minerals’ argument that the banking of the cheque amounted to an accord and satisfaction, Macfarlan JA, with whom Campbell JA and Young JA agreed, said (emphasis added) (at [98]-[101]):

To establish the existence of an accord and satisfaction it was necessary for Consolidated Minerals to show as a first and essential step in its argument that JP Morgan agreed to forego the unpaid balance. Consolidated Minerals said that this had occurred by reason of JP Morgan’s acceptance of an offer made by Consolidated Minerals in its letter of 6 February 2008 (see [26] above) to pay JP Morgan $20,000,000 (by means of the cheque enclosed with that letter) if JP Morgan agreed to give up its claim for the balance of the invoiced fees.

I agree with the conclusion of the primary judge that on its proper construction the letter of 6 February 2008 did not make that offer. As a result, JP Morgan’s banking of the cheque enclosed with that letter did not result in it foregoing the balance of its claim.

In the second paragraph of the letter of 6 February 2008 Consolidated Minerals stated its disagreement with JP Morgan’s claim . In the third paragraph it stated its view about the level of JP Morgan’s entitlement. That paragraph was not expressed in terms of an offer of compromise of a claim but as an assertion of a view The word “[a]ccordingly” indicated that the enclosed cheque there referred to was designed to give effect to that view about what was owed The words “in full and final settlement of this matter” would in my view have been regarded by a reasonable reader of the letter as indicating that Consolidated Minerals was paying the full amount to which it considered JP Morgan was entitled and that JP Morgan should understand that Consolidated Minerals would not pay any more. The final paragraph reinforced this interpretation of what went earlier as I consider that the effect of what it said was that Consolidated Minerals hoped (and perhaps, anticipated) that in light of the view that Consolidated Minerals had expressed and its payment of $20,000,000 JP Morgan would not attempt to pursue its claim for the balance of its invoiced fees .

I see nothing in the letter to indicate that Consolidated Minerals was expressly or impliedly asserting that if JP Morgan banked the cheque it would be taken to have agreed not to pursue the balance of its claim or that Consolidated Minerals was offering to pay $20,000,000 in return for JP Morgan agreeing not to pursue its claim .

  1. His Honour then referred to Rustenburg Platinum Mines Ltd v South African Airways, and in particular the passages cited above, and continued (at [111]-[112]):

These views are in my opinion consistent with those that I have earlier expressed in relation to the facts of the present case. To adopt the words of Sir David Cairns, Consolidated Minerals’ letter of 6 February 2008 “did not make it at all plain that [the sum of $20,000,000] was offered in full and final settlement”.

Consolidated Minerals emphasised in its submissions that its letter of 6 February 2008 used the expression “in full and final settlement” and submitted that the judgment of Denning MR (and I add, that of Sir David Cairns) contemplated that use of that expression would indicate that an accord and satisfaction had been achieved, or at least intended. However the situation that the English Court of Appeal contemplated would need to exist if an accord and satisfaction were to be found (but which was not in fact found to exist in that case) was one where on its true construction the relevant communication offered to make a part payment upon the basis that, if accepted, it would be received “in full and final settlement” of the claim in question. As I have sought to demonstrate, the expression “in full and final settlement” was here used in a different fashion. Here it was used as an adamant statement that Consolidated Minerals would pay no more than the amount of the cheque enclosed with the letter .

  1. The email communications in the present case admits of no such construction. Far from merely expressing that Mr Pratt would pay no more, Mr Gray’s email followed negotiations between the parties, and referred to, and stipulated for, undertakings to be given by Ms Ashton; it could not have been contemplated by any reader that he was willing to make the payment other than on those terms. This was made all the plainer by the circumstance that in it, she was asked to acknowledge not receipt but “acceptance of this communication”, and her response “I have acknowledged” conveys agreement to its terms. The absence of any caveat on Ms Ashton’s responsive email of 11 February 2005 at 1:55 pm is striking.
  1. In my view, this was an accord and satisfaction. Her claims are not maintainable, because she accepted $100,000 in full and final satisfaction of them in February 2005. (She does not suggest that at this time she was in any particular fear of Mr Bowman).

The November 2005 settlement

  1. Ms Ashton says that in or about November 2005 she received a phone call from Mr Pratt, and that they had a conversation to the following effect:

Pratt: Darling, I’m about to finalise our agreement but before I do, my lawyers are insisting that I have you sign an agreement.

Ashton: Sure.

Pratt: I’ll have the document dropped off to you.

  1. There is no record of any such telephone call in either Ms Ashton’s or Mr Pratt’s telephone accounts.
  1. Ms Ashton says that at about that time, Mr Bowman attended at her apartment and they had a conversation as follows:

Bowman: Tony has asked me to get you to sign this document.

Ashton: What is it?

Bowman: It’s about Richard’s payment to you.

  1. The document tendered to her by Mr Bowman was as follows:

I, Ms Mardi Heslop acknowledge that I have made certain financial claims against Richard Pratt and that Richard Pratt strenuously denies the legitimacy of these claims.

I acknowledge that Richard Pratt has nevertheless expressed a desire to assist me in my current personal situation with the sum of $50,000. I acknowledge receipt of these monies and understand that this assistance has been given solely on an ex-gratia basis and is not due to nor does it imply any commitment by Mr Pratt nor any obligation on him.

I acknowledge that receipt of these monies is in full and final settlement of all current and future claims I have made or may make against Mr Richard Pratt and all individuals and companies associated with him.

I undertake:

1. to keep this payment strictly confidential.

2. not to contact Mr Pratt or any of his representatives in future.

3. not to make any statements nor engage in any behaviour which may impact negatively on Mr Pratt, his family or business interests.

I further acknowledge that any further contact and/or demands will be viewed as attempted extortion and result in legal action and/or complaints to the relevant authorities.

I acknowledge that should I breach these undertakings I am liable to repay the $50,000 on demand and this Acknowledgement and Release may be produced as evidence in any legal proceedings.

  1. Ms Ashton says that because of her fear of Mr Bowman (which developed after February 2005) she signed this document without reading it. However, in cross-examination she agreed that he did not force or pressure her to do so: she said that Mr Bowman told her “This is about Dick Pratt’s payment” and she took it to be payment in accordance with the promises, and “I just signed it because I didn’t want Sean Bowman to hurt me or my family anymore”. She thought it finalised her whole claim and that she was receiving a great deal of money as a result, yet denies that she read it, or gave consideration or attention to just how much she was to be paid. But she at least read enough of it to correct her name at the top of the document, and to sign at its foot. And it is highly improbable that she did not examine the document to ascertain how many million dollars she was in fact going to receive.
  1. Ms Ashton denies that she received the sum of $50,000 referred to in the document, and thus disputes that there was any consideration for the release. Business records of Visy prove that the Pratt interests drew a sum of $50,000 in cash at the time, though they do not prove that sum was received by her. However, contrary to the plaintiff’s submission that there is no evidence of payment to her of that sum, the document contains her signed acknowledgment of its receipt.
  1. I do not accept that Mr Bowman is in the defendant’s camp, such that the defendant ought to have been expected to call him. Mr Bowman had left the Visy Group some years ago. There had been a settlement with him. He was no longer “in the camp” of the defendant. Given what was known of him, I do not think that the defendant could be expected to put him forward as a witness of truth. I am not prepared to draw any adverse inference from the circumstance that he was not called.
  1. Subsequently, Ms Ashton did not pursue her claim, when no further payment was forthcoming. Although she says that she did not have the confidence to do so, and I do not underestimate the potential impact of the power imbalance between her and Mr Pratt, neither lack of confidence nor her inferior bargaining position had prevented her from advancing her claims in the past, in particular in her 19 January 2005 letter. Even when she later spoke to Mr Gray to seek his assistance in obtaining an AVO against Mr Bowman, when she was broke and returning to the escort industry for those reasons, she did not raise with him the question of any outstanding obligation of Mr Pratt. The probable explanation for this otherwise incredible omission is that she knew that she had released all claims.
  1. No application was made to set aside the release, under the (NSW) Contracts Review Act 1980 or otherwise [cf Baltic Shipping Co v Dillon [1993] HCA 4(1993) 176 CLR 344].
  1. Ms Ashton’s claims are not maintainable, because she released them in November 2005.

Conclusion

  1. My conclusions may be summarised as follows:
  1. Ms Ashton and Mr Pratt had a conversation in or about November 2003 substantially to the effect deposed to by Ms Ashton, in which he told her that he would establish trusts of $2.5 million for each of her two children, pay her an allowance of $500,000 per year, pay up to $36,000 per annum for rental accommodation for her (or buy her a house in the eastern suburbs), and pay $30,000 per annum for her business expenses, particularly travel.
  1. However, Ms Ashton’s case in contract fails – although the terms of those arrangements were not too uncertain and incomplete to amount to a contract – first because Mr Pratt and Ms Ashton did not intend to enter into binding and enforceable legal relations, and secondly because p ublic policy denies enforceability to any such contract as alleged.
  1. Ms Ashton’s estoppel claim also fails, first because she incurred no relevant detriment, and secondly because of the same public policy, the operation of which is not limited to contractual claims.
  1. Moreover, Ms Ashton’s claims are not maintainable, because they were the subject of an accord and satisfaction in February 2005, when she accepted $100,000 in full and final satisfaction of all her claims against Mr Pratt; and they were again released in November 2005.
  1. I therefore give judgment for the defendant, with costs.

**********

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