I'm reminded of that aphorism in reading Ashton v Pratt (No 2) [2012] NSWSC 3, a dispute over the wealth of colourful entrepreneur Richard Pratt.
The ABC reports that -
A former Penthouse Pet and mistress to the late cardboard mogul Richard Pratt has lost her multi-million-dollar claim on his estate.The judgment is more interesting, bother for its affirmation of a range of legal principles and for reported conversations that on occasion read as bad soap opera. Do people really speak that way?
The New South Wales Supreme Court ruled that Madison Ashton and her billionaire lover did not intend to enter into a legally binding relationship.
It also found a $100,000 payment she accepted from Mr Pratt finalised any deal made between the pair.
The Court indicates that -
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:Fans of 'lives of the rich & famous' will presumably enjoy passages such as1) Whether (as a matter of fact) Mr Pratt made the alleged promises;
2) 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;
3) If not enforceable in contract, whether the promises are enforceable by way of equitable estoppel; and
4) Whether Ms Ashton's claims are not maintainable by reason of having been previously compromised and released, in February 2005 or November 2005.
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.I am more enthused by the restatement of law, such as -
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.In considering claims regarding a contract between the cardboard czar and Ms Ashton the Court comments that -
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].
18In 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) 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 177; Weeks v Hrubala [2008] NSWSC 162, [20] (Young CJ in Eq)].
19In 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) 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].
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.
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.
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.
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.
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. ...
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.
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]].What about public policy?
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) 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.In Jones v Padavatton [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.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 259; Buckpitt v Oates [1968] 1 All ER 1145; and Parker v Clark [1960] 1 All ER 93].
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) 183; Todd v Nicol [1957] SASR 72; Parker v Clark; Schaefer v Schumann [1972] AC 572; Tanner v Tanner [1975] 1 WLR 1346; Raffaele v Raffaele [1962] WAR 29; Re Gonin (deceased) [1979] Ch 16]. In 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]].
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. ...
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.
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 ...The Court's conclusion is that -
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.
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.... 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, 5th ed, [25-32]]. But the old rule has not been completely obliterated. The question is, what is its remaining content?
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 19th 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.
In England, in Horrocks v Forray [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.... 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. ...
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. ...
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 45, s 46]. But as the relationship between Mr Pratt and Ms Ashton did not contemplate cohabitation, it was not a domestic relationship within the Act.
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.
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.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.
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) 23 ER 756 suggest 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.
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.
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 public policy denies enforceability to any such contract as alleged.
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.
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.
