Analysis
45 It is necessary to bear in mind that it was inherent in the arrangements made between Doris, Frank, Marian and Hermann that Marian and Hermann would receive the benefit of the expenditure on their property at some stage. I am satisfied that Doris at least appreciated this at all times. In this case, and in those circumstances, I think that the word "windfall" is inappropriate to describe the situation that arose.
46 I am satisfied that the relationship between Doris, Marian and Hermann has broken down, if and only to the extent that the word "relationship" is used to denote the arrangements that were made back in 2001. In other words, I am satisfied that there is no real prospect that Doris will ever move back to the Londonderry property, and resume occupation of what had been her half of the new house.
47 Doris is now settled in a retirement village in Bega, for which privilege she has paid a substantial premium. Her health is not now good. It is likely that if she moves again, it would be to premises that can offer more intensive care.
48 I am satisfied also that the breakdown or failure of the arrangements occurred without attributable blame, in the sense that I do not think that it was caused by the behaviour of Marian and Hermann. The reality, I think, is that Doris was deeply unhappy and depressed after Frank's death; that there were unhappy interactions between her and Marian; but that John in effect decided that Doris should leave Marian and Hermann and move to Bega. Having said that, I conclude also that in her own mind Doris thought that she had some reason to do so.
49 It is necessary to bear in mind also that the arrangements made between Doris, Frank, Marian and Hermann contemplated that Doris or Frank might need to move out once they could no longer live at the Londonderry property with such support and care as would be there available. Indeed, this occurred in Frank's case. Thus, it is not correct to say that the arrangements contemplated that Doris and Frank would of necessity live their lives out with Marian and Hermann at the Londonderry property.
50 The arrangements have come to an end undoubtedly earlier than the parties back in 2001 might have contemplated. They came to an end for a reason that the parties did in general contemplate - that Doris might decide to move out. Having said that, I am satisfied that the parties did not contemplate (nor was there any reason for them to do so) that Doris would move out in the precise circumstances, or for the precise alleged reasons, that prevailed.
51 It is therefore necessary to ask whether in those circumstances Marian and Hermann have received a benefit that it would be unconscionable for them to retain. Clearly, it was intended that they should receive the full benefit of the improvements, without having to house or care for Doris, at some time. But they have received that full benefit earlier than intended, in circumstances where, but for the breakdown, Doris in all likelihood would still be living at the Londonderry property.
52 The question thus focuses attention on the circumstances in which Doris left. As her case was put in final submissions, she was not expelled - actually or (if it be a correct use of language) constructively.
53 If Doris left without any cause - i.e, if she left at a time when all was sweetness and light, and the arrangements were working perfectly - it would be difficult to see how that could impose any obligation of conscience on Marian and Hermann in relation to the benefit of the improvements. But, on reflection, I do not think that this is a correct characterisation of the circumstances in which Doris departed.
54 It is clear that John and Lynne thought that Doris was being treated badly, and that this had caused her distress, to the point where she felt that she did not want to continue to live with Marian and Hermann. Doris gave evidence of continued rude and abusive behaviour, especially on the part of Marian. Marian denied that, as did Hermann. Nonetheless, and making allowance for Doris' understandable feelings after Frank's death, I think that there was, or developed, some tension in the relationship between Doris, Marian and Hermann. I think that the tension may have been exacerbated by Doris' alarm at what she had spent. I suspect that it may have been fed by John and Lynne telling Doris, in effect, that she should not have to put up with what they perceived to be the situation at the Londonderry property.
55 Thus, I think, it is correct to say that the arrangements between Doris, Marian and Hermann broke down. Further, I think, it cannot be said that the arrangements simply terminated as a result of some unforced and unreasoned decision on the part of Doris to move to Bega.
56 In this context, it is important to recall that Doris (and, during his lifetime, Frank) felt particularly responsible for Stuart. As I have said, when there were discussions as to the future in 2000 and 2001, Doris and Frank rejected proposals that would require them to move away from Stuart. In those circumstances, I find it difficult to believe that, three or four years later, Doris would have decided to move away from Sydney, and therefore away from Stuart, unless she thought she had no real alternative.
57 In my view, Doris moved away from Londonderry because in her mind she felt that she could not continue to live there. I do not think that, viewed objectively, this was the case. Nor do I find that, viewed objectively, the behaviour of Marian and Hermann was such as might have been expected to cause Doris to leave. But I do find, that in her own mind, Doris left for reasons that indicated to her that she could not continue to live at Londonderry.
58 I therefore find that the arrangements made between Doris, Frank, Marian and Hermann broke down when Doris left to move to Bega in January 2004, or relatively shortly thereafter, and that they did so without attributable blame. As a result, Marian and Hermann have received the full benefit of the improvements earlier than otherwise would have been the case.
59 On the authorities to which I have referred, those conclusions mean that it is unconscionable, as equity uses that term, for Marian and Hermann to retain the benefit. As the case was put, and consistently with the reasoning of McLelland J in Morris and Young CJ in Eq in Henderson, the appropriate remedy is an equitable charge to the extent of the benefit thus received.
60 It was common ground, based on uncontested valuation evidence, that the value of the improvements as at September 2002 was $50,000.00, and at today's date $100,000.00. Those figures were derived in effect by comparing the market value of the Londonderry property at the relevant times with the improvements, and without the improvements but with the bunkhouse. The fact that the benefit of the improvements does not equal the amount spent is not a matter of concern, or at least a matter of relevance in these proceedings.
61 Mr White submitted that Doris was entitled to an equitable charge reflecting the value of her interest in the value of the improvements. The way in which he put this aspect of his case varied, but as it was last put, he relied on Doris' life expectancy as at September 2002, when she moved into her half of the new house. At that time, she was aged 80 and her life expectancy, it was agreed, was some 10.75 years, or 129 months.
62 Mr White accepted that Doris had had the benefit of the arrangement for some 15 months. Thus, he submitted, she was entitled to a charge representing the value of 10.75 years "purchase" of the benefit, discounted by 15/129, discounted again to allow for contingencies, but with interest from January 2004 when the relationship broke down.
63 Mr M K Rollinson of counsel, who appeared for Marian and Hermann, did not dispute that, if I were to conclude that Doris is entitled to some relief, it should be assessed in principle in the way that I have outlined. Mr Rollinson did put submissions based on the fact that the arrangements had worked themselves out in Frank's case. That may be accepted, but it does not bear on the assessment of the relief to which Doris is entitled. It is the breakdown of the arrangements insofar as they concerned her that engenders the entitlement to relief; and it is the circumstances as they pertain to her that govern the moulding of that relief.
64 Mr White submitted that the charge should extend to the full value of the improvements. In essence, his case was that it was unconscionable for Marian and Hermann to retain the full value of those improvements once the relationship had broken down. I do not accept that submission. It was an integral part of the arrangements made that Marian and Hermann should have the right of full use and enjoyment of their one half of the new house once it was ready to occupy. The breakdown of the arrangements has had no impact on that right. It has not accelerated their receipt of the benefit of that right. In my view it has no impact on, nor does it render unconscionable, their continued enjoyment of that right.
65 Thus, I conclude, Doris is entitled to an equitable charge over the Londonderry property in a sum to be calculated by reference to one half the value of the improvements effected with the use of her money. The calculation is to be carried out as at September 2002. (Mr White had submitted in the alternative that it might be carried out at August 2001, when Doris and Frank moved to Londonderry. But it seems to me that the equity arises by the combination of the expenditure of money on the new house and the circumstances in which the relationship relating to that new house broke down, so that the calculation should be carried out as at September 2002.)
66 For the reasons that I have indicated, that charge should extend only to one half of the value as at September 2002; i.e to $25,000.00. In conceptual terms, the charge would be for X per cent of $25,000.00, where X represents the percentage value of Doris' agreed life expectancy. As I have said, whatever is the result of that calculation should be reduced by 15/129.
67 It should be reduced further by some contingency figure to reflect the prospect that Doris might not have lived out her years in the Londonderry property, for example because of increasing ill health. The selection of a contingency figure is, in the absence of evidence, an entirely arbitrary exercise. In circumstances where the parties did not put any evidence before me that would assist me in making the calculation, but bearing in mind Doris' age, I think that an appropriate contingency allowance is 5 per cent.
68 That leaves the question of interest. Mr White submitted that interest should run from January 2004, when Doris vacated the property. I think that is in principle correct. It should run at the rates from time to time applicable under schedule five to the Uniform Civil Procedure Rules. The charge should extend to interest thus calculated.
69 As I think I have made clear, the evidence does not permit me to quantify the value of the charge having regard to the principles that I have set out. At this stage, I propose to stand the proceedings over to 9.30am on Wednesday 5 September 2007 before me, and to direct the parties to bring in short minutes of order to give effect to these reasons. I so order.
70 I order also that the exhibits remain with the papers for 28 days from 5 September 2007, and that thereafter they be dealt with in accordance with the rules.
71 I will hear the parties on costs.
(For submissions on costs see separate transcript.)
72 Mr White submits that the plaintiff has succeeded and that costs should follow the event. Mr Rollinson accepts that the plaintiff has had some success, but points out that it was minimal compared to the pleaded case.
73 In her statement of claim filed on 2 May 2006, the plaintiff claimed reimbursement of some $344,000.00, comprised of $319,000.00 that she said she had spent on the construction of the new house together with some $15,000.00 said to have been spent on the renovation of the old house and the $10,000.00 balance of the $30,000.00 that she gave to the defendants in the circumstances that I have described.
74 As the plaintiff's claim was pleaded, it relied on contract, constructive trust, and some form of proprietary estoppel. All those pleaded bases were abandoned. The concept of the "windfall equity," and the plaintiff's reliance on it, was articulated for the first time in final submissions.
75 I accept that in the usual case a successful party is entitled to costs. However, that really raises the question of what success might mean in the context of this case. It is likely that the full extent of the plaintiff's charge will fall between $15,000.00 and $20,000.00. I cannot believe that if the case had been articulated in that way from the outset, it would nonetheless have required the Court's decision.
76 Mr Rollinson pointed to a "Calderbank" offer made on 12 June 2007. That offered the plaintiff the opportunity, open for 28 days, to walk away on the basis that she and the defendants would each bear their own costs.
77 Mr Rollinson submitted that the Calderbank offer contained an element of compromise, because the defendants were foregoing their prospective entitlement to costs. That seems to me to be an attempt to put the best possible face on a less than satisfactory base. The reality is that the plaintiff has done somewhat better, so far as the outcome is concerned, than was offered by that Calderbank letter.
(Further submissions on costs.)
78 Mr White belatedly sought to rely on a letter of 3 August 2005 (written some 10 months before the proceedings were commenced) in which the plaintiff offered to settle for $155,000.00. The plaintiff has done significantly less well than that. The letter in question did not appear to take account of the relevant principles. I do not regard it as any real basis, any more than the Calderbank letter to which I have referred, to mould an appropriate costs order.
79 In my view, it would be entirely inappropriate in this case to order that costs should follow the event when, as I have said, the plaintiff's success has been so minimal. Equally, the plaintiff having succeeded, there is no basis on which the defendants should have their costs. As I hope I have made clear, I do not regard the Calderbank letter as leading to that conclusion.