Galaxidis v Galaxidis No.2

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3884/98 JOHN GALAXIDIS & ANOR V ATHANASIOS GALAXIDIS & 3 ORS JUDGMENT (Revised to correct typographical errors 19 November 2002) 1 HIS HONOUR: I delivered my principal judgment in this matter on 6 December 2001. I found that Mr and Mrs Galaxidis ( the first and second defendants), by their words and conduct, had created or encouraged an assumption on the part of their three sons, John, Nikolaos and Antonios (the plaintiff, the fourth defendant and the third defendant) that they would make their sons the beneficial owners of a property at 8 Flinders Street North Wollongong. The three sons had relied on that assumption and had suffered detriment. Mr and Mrs Galaxidis had unconscionably departed from that encouraged assumption, and consequently the elements of the equitable doctrine commonly referred to as "proprietary estoppel" had been made out. 2 On the question of remedies, I held that the sons were entitled to more than a "defensive equity" to reverse their detriment, and that the proper relief was to order Mr and Mrs Galaxidis to transfer the legal and beneficial title to the property to their sons as tenants in common in equal shares. There were, however, some complications which have led to further submissions, directions hearings and ultimately a hearing on 6, 7 and 12 June 2002 at which substantial additional evidence was adduced. 3 The principal complication relates to my proposal to make orders for the preservation of an income stream for Mr and Mrs Galaxidis, with provision for the capital value of the income stream to be paid out by the sons in the event of sale of the property. My proposal was that the income stream should be measured by the rental being received from Mr and Mrs Galaxidis from external sources as at the date of my judgment, namely 6 December 2001. 4 The plaintiff says that orders of the kind I proposed in my principal judgment would destroy the benefit of the equitable estoppel that I found for the benefit of him and his brothers. Additional evidence was adduced at the hearing in June 2002, going to · the parts of the Flinders Street property that were rented as at 6 December 2001 and the gross and net amounts of the rentals; · methods of capitalising the rental stream; · the valuation of the Flinders Street property, and of life and residual (remainder) interests in it on certain assumptions. I shall consider each of the three areas and make findings of fact with respect to the new evidence. 5 I shall then consider, in light of the submissions of the parties at the June hearing, whether and in what manner I should depart from the proposed orders set out in my principal judgment and provide remedies on another basis. 6 I have received full submissions with respect to costs. However, since it will be necessary to settle orders to give effect to these reasons for judgment, and the outcome might affect the exercise of my discretion with respect to costs, I shall deal with the question of costs once the terms of my final orders have been decided. Occupation of the Flinders Street Property 7 The property at 8 Flinders Street has been informally subdivided into three parts, although there is a single title. The frontage to Flinders Street is to the east of the property. The northern part, No 8A, has been occupied under a lease by Budget Rent-a-Car since about 1994. The middle part, No 8B, has been used by Compact Car Rentals for no rent since about 1996. Compact Car Rentals is the business of Mr Galaxidis and Antonios. The southern part, No 8C, has sometimes been occupied but it has sometimes been vacant, as I shall explain. 8 Prior to the year 2000 Budget Rent-a-Car paid $1000 per week for No 8A. Mr and Mrs Galaxidis entered into a lease with the company for term from 1 August 2000 to 31 July 2002 for a base rent of $4600 per month, subject to rent review referable to the Consumer Price Index. The current rent at the time of the hearing was $58,800 per annum. The lessee was also obliged to pay GST and one-third of the account for water rates. At the time of the most recent hearing in June 2002, Mr and Mrs Galaxidis were negotiating with Budget Rent-a-Car for a new lease. The company had offered to increase the rent by 6% and to take a lease for four years. 9 No 8B was occupied by Eastern Suburbs Auto Rentals Pty Ltd under a lease granted by Mr and Mrs Galaxidis for the period from 1 March 1994 to 29 February 1996, at a monthly rent of $3033.33. Then Compact Car Rentals took up occupation and did not pay rent. 10 There is disputed evidence about the rental of No 8C. Having regard to my conclusions set out below, it is unnecessary for me to resolve the dispute. However, the matter was fully addressed at the hearing, and in case the proceedings should go further, I think it appropriate that I should make findings. 11 No 8C was occupied by AG Motors until 1996 when the business closed down in the circumstances described in my judgment of 6 December 2001. There is some evidence that arrangements were later made for occupation by Xcent Motors, but the evidence about this is unclear. Mr and Mrs Galaxidis granted a lease to Velj Pty Ltd trading as Tony's Car World for the period from 1 May 2000 to 30 April 2002 for $4500 per month, but it appears that rent was received for the month of May only. A letter of demand was written to Mr Veljanoski dated 20 July 2000, demanding rent for June and July 2000. 12 There is in evidence a document headed "A Gentleman's Agreement" dated 21 April 1999, expressed to be between Antonios, Mr Parvis Ghasemzadegan and Mr Monty Tortorella. It appears to be an arrangement for Mr Ghasemzadegan and Mr Tortorella to occupy premises at No 8C Flinders Street without rent. Mr Ghasemzadegan gave evidence that the arrangement made at the time was that if he sold cars he would pay commission to Mr Galaxidis and Antonios, and that commission was to be treated as "rent money". He also said that the business conducted in 1999 was totally different from a subsequent business conducted by him and another person at the same premises in 2001, and that the "Gentleman's Agreement" ceased some 10 or 11 months after it was made, when he and Mr Tortorella moved their business from 8 Flinders Street to another location. I have no reason to disbelieve Mr Ghasemzadegan's evidence on the subject. 13 In 2001 Mr Edmund Oleszczuk and Mr Ghasemzadegan were partners in a business called E & P Sports Cars Centre, occupying No 8C Flinders Street. It appears that the arrangement for occupation was made between Mr Oleszczuk and Mr Galaxidis. There was no written lease and their occupation was from week to week. 14 Mr Oleszczuk and Mr Ghasemzadegan commenced occupation of the premises in about March 2001. Mr Ghasemzadegan left the partnership with Mr Oleszczuk on 20 or 21 November 2001. Mr Ghasemzadegan gave evidence that when he later returned to the premises, just before New Year's Eve at the end of 2001, he met Mr Oleszczuk and observed Mr Oleszczuk was still trading at the premises as E & P Sports Cars. Mr Oleszczuk gave evidence that he left the premises on 6 January 2002, and rent for the last week of occupation was unpaid. Counsel for the plaintiff challenged this evidence, contending that I should find that no rent was being paid in respect of No 8C in the week including 6 December 2001. 15 Both Mr Oleszczuk and Mr Ghasemzadegan gave evidence that they were paying $1000 a week in rental during the period of occupation. Annexed to the affidavit of Mr Oleszczuk made on 14 March 2002 are copies of what he claimed to be receipts for the payment of rent. Each weekly receipt bears a printed number, beginning with No 1 for the period from 26 March to 1 April 2001 inclusive, and ending with No 40 for the period from 24 to 30 December 2001 inclusive. The photocopies appear to be a complete set covering each week from 26 March to 30 December 2001. Each bears an indecipherable signature that, according to the evidence of Mr Ghasemzadegan and Mr Oleszczuk, was the signature of Antonios. Most of the receipts also bear a handwritten endorsement of a four digit number (which, according to the evidence, is a cheque number) or else the word "cash". The dates on the receipts are not regular weekly dates. Sometimes two receipts bear the same date. Receipts Nos 34-39, relating to the period from 12 November to 23 December 2001 inclusive, each bear the word "cash", but in the case of receipts 34 to 37 a four digit number also appears on the receipt and has been crossed out. 16 Counsel for the plaintiff did not accept the authenticity of these photocopy receipts, and addressed questions in cross-examination to the location of the originals. Mr Ghasemzadegan produced what appear to be the original documents from which the photocopies were made, for receipts Nos 1 to 29. The bundle did not contain receipts for the weeks from 14 to 20 May 2001 inclusive, 21 to 27 May 2001 inclusive and 24 to 30 September 2001 inclusive, presumably Nos 8, 9 and 27. 17 In cross-examination Mr Oleszczuk produced two original receipts from his wallet, No 39 (17 to 23 December 2001 inclusive) and No 40 (24 to 30 December 2001 inclusive). He gave evidence that he paid cash for the rental for those two weeks. He said he gave the receipts in his possession to Antonios for preparation of his affidavit but he decided to keep the two receipts Nos 39 and 40, although he could give no reason for making that decision. 18 Thus there is no original receipt for the week that includes 6 December 2001, although there is a photocopy receipt for that week. 19 Mr Ghasemzadegan explained that most of the time, Mr Oleszczuk wrote out the cheque for rent, making it payable to cash, paid the rent (although it appears that Mr Ghasemzadegan was sometimes present), collected the receipt written out by Antonios, and placed the receipt in a file. According to Mr Ghasemzadegan, when the partnership was terminated on about 20 or 21 November, he took most of the partnership papers, including the file of receipts. He explained the absence of some original receipts by saying that Mr Oleszczuk was very unorganised. Receipts for any period of occupation after termination of the partnership would, presumably, have been retained by Mr Oleszczuk. 20 Mr Oleszczuk's evidence was not consistent with Mr Ghasemzadegan's evidence on this point. When asked by counsel in cross-examination how he obtained access to the receipts for the purpose of annexing photocopies to his affidavit, he said that they were in a file in his office, and that he gave them to Antonios for preparation of the affidavit. Mr Ghasemzadegan's evidence suggests that the receipts to November 2001 had been removed from the office and were in the possession of Mr Ghasemzadegan well before 14 March 2002, the date of Mr Oleszczuk"s affidavit. Later in cross-examination Mr Oleszczuk said he believed that his partner held the receipts. 21 Mr Ghasemzadegan was shown copies of bank statements and cheque butts for E & P Sports Cars Centre for the period to November 2001. He explained that sometimes rent was paid in cash rather than by cheque, but that a receipt was issued however payment was made. This material shows that cheques for $1000 or $2000 were drawn and paid on a fairly irregular basis, sometimes for weekly and sometimes fortnightly. The payee of the cheque is not identified on the cheque butt, but the word "rent" appears. 22 It is noteworthy that there were no cheque butts or bank statements for December 2001. I noted above that in the case of Receipts Nos 34-37, a four digit number (evidently the number of the cheque) has been written on the receipt and then crossed out, and the word "cash" written adjacent to it. The cheque butts corresponding with the numbers on those four receipts were not produced. 23 After some uncertainty, the hearing on 6 and 7 June 2002 proceeded on the basis that there was a book of duplicates of the receipts, which cannot now be found. 24 It does not appear that any tax invoices for rent were ever issued. On 16 May 2002, in response to a notice to produce issued by the plaintiffs in April 2002, the solicitors for Mr and Mrs Galaxidis produced Business Activity Statements for the partnership of Mr and Mrs Galaxidis for the quarters from July to September 2001 and October to December 2001, together with working papers used in preparing those returns. Neither the returns nor the working papers refer to the receipt of any rent from E & P Sports Cars Centre. Also produced was a copy of a letter to Mr and Mrs Galaxidis from their accountant, Mr Tambakis, dated 30 April 2002. The letter says that in accordance with their instructions, Mr Tambakis reviewed the BAS forms for the two quarters and noted some errors which required correction. In respect of each quarter, it was noted as an error that "rent for 13 weeks at $1000 per week from E & P Sports Cars Centre will need to be added." 25 Counsel for the plaintiff urged me to find that in fact no rent was being paid in respect of No 8C Flinders Street on 6 December or at any time during December 2001. That would involve my rejecting the contentions of the defendants and the evidence of their witnesses, Mr Ghasemzadegan and Mr Oleszczuk. In the circumstances, such a finding would imply that the defendants acted dishonestly and have deliberately misled the Court as to the income of Mr and Mrs Galaxidis. 26 Counsel for the plaintiff made the following submissions in support of his contention, namely that: · no evidence was given by Mr Galaxidis or Antonios with respect to receipt of rent for No 8C; · the Court should not accept evidence that income had been received in respect of No 8C when the evidence also showed that Mr and Mrs Galaxidis had not disclosed that income in their Business Activity Statements for the relevant quarters; · the original receipts for the first two weeks of December are missing, and the Court should infer that those receipts do not exist, notwithstanding that there were photocopies in evidence; · no satisfactory explanation has been given for the writing of cheques to "cash"; · cheques Nos 1601, 1602 and 1604, the numbers of which had been written on Receipts No 34-37 and then crossed out, have never been drawn - the last cheque butt that had been produced was No 1574, and Mr Oleszczuk conceded in cross-examination that those cheques had not been written out; · a schedule prepared by counsel showed that rent was persistently in arrears - it is implausible that Mr Oleszczuk should have been asked to leave early in January 2002 if his arrears of rental were only one week; · the Court has already made adverse findings as to the credit of the three defendants. 27 I agree with counsel for the plaintiff that the evidence tendered to show that Mr and Mrs Galaxidis received rent in respect of No 8C during December 2001 is far from strong, for the reasons he has given. In particular, there is a troubling discrepancy between the evidence of Mr Ghasemzadegan and Mr Oleszczuk and the Business Activity Statements. Nevertheless, the evidence of Mr Ghasemzadegan and Mr Oleszczuk was coherent and, for the most part, consistent. It cannot be denied that they were in occupation, paying $1000 per week in rent, until November 2001. I was persuaded by Mr Ghasemzadegan's evidence that he saw Mr Oleszczuk in occupation late in December, and in the circumstances the evidence does not warrant a finding that the two receipts produced by Mr Oleszczuk for late December were forgeries. If he was in occupation, after dissolution of the partnership, late in December 2001, the natural inference is that he was in occupation throughout December, paying the same rent. I find, on the balance of probabilities, that rent of $1000 per week was paid by Mr Oleszczuk to Mr and Mrs Galaxidis in respect of No 8C during December 2001, up to 30 December. Methods of capitalisation of rental income 28 James Walker-Powell is a certified financial planner. He gave evidence with respect to investment in a "joint lifetime guaranteed income stream". Such an investment is available for spouses, and guarantees an income for so long as one of the two spouses remains alive. Mr Walker-Powell said that this product can be purchased directly by an individual or through the advice of a financial adviser and in the latter case, a commission of 3.3% is paid to the financial adviser. He recommended a product by Challenger Life Limited called "Challenger Life - Income Choice Long Term". Mr Walker-Powell provided quotations for capital investments that would produce each of 5 annual income streams, ranging from $32,490 to $125,849. He gave two sets of quotations, one set applying if income is to be fixed, and the other applying if income is adjusted for inflation of 3% per annum. 29 Eric Ranson is a fellow of the Institute of Actuaries. He was retained by the defendants' solicitors to provide "a methodology of calculation" that could be applied to identify the capital sum required to produce a rental income for the lifetime of Mr and Mrs Galaxidis and the survivor of them. He produced a formula under which the net rental income is modified by a figure in which the variables relate to the expected interest rate (assumed to be 6.42% per annum if no allowance is made for inflation), the number of annuity payments per year and the total life expectancy (assumed to be 28 years). 30 As I shall explain, the application of Mr Ranson's formula does not produce any categorically different outcome from the application of Mr Walker-Powell's evidence. Valuation of the Property 31 Robert Ryan, a registered valuer, gave evidence on behalf of the plaintiffs. He reviewed the rental history of the property, discussed below. He noted that the only stable income from the property since 1994 had been on the tenancy of Budget Rent-a-Car, which had never had a lease for longer than a two-year period. Given the nature of the occupancies (namely for the sale of used cars and the hiring of rental cars), he expressed the opinion that the occupancies of the property were unstable and that vacancies in this type of property were frequent. His view was that if the property were to be marketed in its current state to a property investor, it would not be an attractive proposition. 32 In the circumstances, his view was that the best and fairest method of valuing the property would be by summation, taking the land value and adding the value of the improvements. Alternative approaches would be to value by reference to comparable sales, or by capitalisation of the rental income produced by the property. His valuations were: by summation $822,000, by direct comparison $840,000, and by capitalisation $954,000. His final valuation opinion (evidently taking into account these alternative methods and outcomes) was that the current market value as at 19 April 2002 was $897,000. 33 Mr Ryan also gave evidence as to the current market value of a life estate in each of the three sections of the property, limited by the life of the survivor of a man aged 70 years and a woman aged 58 years (the ages of Mr and Mrs Galaxidis). He said that the value of a life estate of the northern section (No 8A) was $733,000, the value of a life estate of the central section (No 8B) was $822,000 and the value of a life estate of the southern section (No 8C) was $727,000. 34 Mr Ryan also expressed opinions as to the value of the residual interest in the property as a whole. His opinions were directed towards the value of the fee simple interest assuming a charge for the payment of an annuity to a man and a woman aged 70 and 58 years respectively for their joint lives and the life of the survivor of them. First, he assumed that the amount of the annuity was $47,426 per annum and on that basis, he valued the residual interest at $175,000. Then he assumed that the value of the annuity was $125,849.41 (as contended for by the defendants) and he valued the residual interest at a negative figure. 35 Mr Ryan said that the current rental value per annum of No 8C was $58,593. 36 Mr Ryan's report was criticised by Mr Rodger Wall, a certified practising valuer who gave evidence on behalf of the defendants. Mr Wall's evidence was of limited utility because his report criticised Mr Ryan's valuation report but did not make an alternative valuation. 37 He said that Mr Ryan's report was unduly negative. He said that Mr Ryan had failed to consider that the "highest and best use" may be to a developer (a proposition challenged by Mr Ryan, in supplementary evidence, on the ground that a feasibility study would first be needed before a developer could realistically be considered as a potential buyer). He queried the appropriateness of some of the comparable sales evidence used by Mr Ryan, and Mr Ryan's interpretation of the evidence. He contended that in making his valuation using the capitalisation method, Mr Ryan had made excessive allowances for vacancies and agent management fees. He criticised Mr Ryan's calculation on the summation method because Mr Ryan excluded too much land on the basis that it was unusable. 38 I was impressed by the evidence of Mr Ryan. I gained the impression from him in the witness box that he had substantial experience in property valuation, and that he was doing his best to make a fair assessment of the value of the property, rather than to act as an advocate for those who retained him. My impression of Mr Wall was that he approached his task as an advocate for a point of view. Apart from the fact that his report did not include a valuation, the observational aspects of his evidence were undermined by the fact that he did not inspect the property, except by driving along the front driveway of it on one occasion at night. My conclusion is that Mr Ryan's evidence going to the value of the property as a whole was coherent and plausible. Mr Wall's evidence differed from Mr Ryan's largely on questions of judgment, upon which Mr Ryan's opinion was open to him on the evidence. In the result, I accept Mr Ryan's evidence on the valuation of the property without qualification. 39 However, I do not find Mr Ryan's evidence as to the value of life interests and residual interests to be of any assistance in determining the issues before me in this case. In the first place, it does not directly go to the questions which I have to resolve. The value of a life interest does strictly arise for consideration, but instead, I need to have regard to the capital value of an income stream which, once ascertained, is to be charged against the property. The evidence of Mr Ranson and Mr Walker-Powell is directly relevant, whereas the evidence of Mr Ryan has no more than significance by analogy. Secondly, I have some doubts about the rigour of Mr Ryan's methodology. In particular, it seems contrary to common sense that he would come up with a negative value for the residual interest in a case where the "life tenants'" income stream reflects the rental value of two-thirds of the property, given that the holder of the residual interest in that case would have the benefit of the income of the remaining one-third. Should my proposed remedial orders be varied? 40 In my principal judgment I held that · Mr and Mrs Galaxidis created and encouraged an expectation or assumption on the part of their sons that they would have an interest in the Flinders Street property; · they did so by making representations as part of an arrangement with their sons in 1994 (in light of earlier conversations) under which they would from that time hold an interest in the Flinders Street property for their sons, who would be permitted to take over the AG Motors business and continue it in operation on the property (paragraph 152); · the interest that Mr and Mrs Galaxidis encouraged their sons to expect by their representations was the whole beneficial interest in the Flinders Street property, subject to the sons allowing Mr and Mrs Galaxidis to receive the rental from the portion of the property that was externally rented (paragraphs 106, 107 and 153); · the sons relied on their parents' representations by implementing the arrangements made in 1994, which would have been substantially less beneficial to them than what they had already been promised, were it not for the acquisition of an interest in the Flinders Street property (paragraphs 103, 104, 155), and they had already suffered detriment by continuing to work in the business after earlier promises (paragraph 158); · Mr and Mrs Galaxidis destroyed the expectation they had created by their representations when they brought the AG Motors business to an end and excluded John and Nikolaos from the Flinders Street property (paragraph 159); · by their conduct Mr and Mrs Galaxidis freed themselves from the debt attaching to the Stafford Street property and their business debt, and a guarantee they had given, and after excluding John and Nikolaos from the Flinders Street property, they were able to develop with Antonios the new Compact Car Rentals business which operated profitably, using the Flinders Street property as security for borrowing to establish the new business, and later acquiring new properties (paragraph 160); · in this way Mr and Mrs Galaxidis made gains by destroying the expectation that they had encouraged their sons to make and rely on, and their conduct was therefore unconscionable (paragraph 160); · consequently the elements of equitable estoppel, summarised by Priestley JA in Austotel Pty Ltd v Franklin's Selfserve Pty Ltd (1989) 16 NSWLR 582, 610, had been made out. 41 At the hearing in June 2002 the defendants invited me to reconsider my findings on these matters, especially on the question of detriment. I see no reason to do so, and more importantly, my view is that it would be undesirable to revisit these basic conclusions simply on the basis of further submissions, when the additional evidence that I have heard does not go to these questions. 42 On the question of remedies, I held that the equity of the three sons should be reflected in an order for the transfer of the Flinders Street property to them as tenants in common in equal shares, subject to existing leases, and on terms that would exonerate the property from liability under an existing mortgage. 43 I then said: "166 Orders will need to be made to reflect the qualification or condition upon the encouraged assumption, with respect to the retention by Mr and Mrs Galaxidis of the income stream from the rental of part of the property. It seems to me that in principle, the amount of rental to which Mr and Mrs Galaxidis should be entitled under the orders should be the amount of rent currently being received by them, as at the date of this judgment. This is because the primary purpose of equity's intervention is to satisfy the plaintiff's equity as established at the date of judgment. "167. It seems to me that the income stream for Mr and Mrs Galaxidis could be preserved in the orders in a number of ways, as to which I am prepared to hear the submissions of the parties. Subject to any such submissions, I would be inclined to make orders charging the Flinders Street property in the hands of the sons with the obligation to pay Mr and Mrs Galaxidis an amount (payable monthly if the rent is currently paid monthly) equivalent to the present amount of rent received from external tenants, for the remainder of their joint lines and the life of the survivor of them. The orders should provide a facility for an independent valuer to place a capital value on the entitlement of Mr and Mrs Galaxidis so that their interest can be paid out in the event of sale of the property." 44 In a supplementary judgment with respect to orders dated 20 February 2002, I endeavoured to clarify my intention in these paragraphs. I said my intention had been that Mr and Mrs Galaxidis would receive the net annual rental in fact payable to them as at 6 December 2001 (paragraph 15 of that judgment; see also paragraph 20). I said that the orders proposed in paragraph 166 would require determination of the actual rental received for the Flinders Street property by Mr and Mrs Galaxidis as at 6 December 2001, net of annual expenses properly chargeable at that date to the lessors (paragraph 22). I commented: "Fixing a figure in that way removes the risk of further argument as to whether, in future, the property has been effectively marketed and tenanted with a view to maximising rental income. It also permits the three brothers to use the property as they wish, without any obligation to account to their parents for the actual income they receive." 45 I then said: "23 It was not clear to me from the evidence at the hearing whether all three portions of the Flinders Street property were leased regularly from 1996 onwards. … In the absence of clear evidence, I decided the most appropriate order would be to identify the rental income as at the date of my reasons for judgment, on the ground given in paragraph 166. "24. Evidence of actual rental income during the period from August 1996 to December 2001 might lead me to reconsider paragraph 166. If, for example, the evidence showed that two one-third portions of the property were regularly rented to 'external' tenants during that period, but because of a transition from one tenant to another, only one of those portions was rented and producing income on 6 December 2001, it would be unfair to limit the entitlement of the first and second defendants to the actual income received by them on that day. It is therefore appropriate for the parties, if they wish, to file further evidence about actual rental income …". 46 Pursuant to my directions and in light of these remarks, the evidence reviewed previously in these reasons for judgment was provided. The fresh evidence was provided on the understanding that it might induce me to alter my proposed orders with respect to the income entitlement of Mr and Mrs Galaxidis and the capitalisation of that entitlement. 47 The defendants submitted that the proper order would be to establish a charge over the property in favour of Mr and Mrs Galaxidis as joint tenants, to secure a capital sum to provide for a life annuity. Using the formula proposed by Mr Ranson, they submitted that the annual income to be capitalised should be $125,849.41, being (in their submission) the estimated rental value of two-thirds of the property less estimated outgoings referable to that portion. 48 The plaintiff contended that if income were capitalised on this basis, the plaintiff and his two brothers would be completely deprived of their interest in the property and they would have a liability for the deficiency. The sooner they could enforce a sale, the better off Mr and Mrs Galaxidis would be. Since each of the three brothers, being tenants in common, would be entitled to enforce the sale of the property under s 66G of the Conveyancing Act 1919 (NSW), and it could be expected that Antonios would support Mr and Mrs Galaxidis, a forced sale of the property would be likely sooner rather than later. The plaintiff submitted that this result would be an entirely unreasonable outcome, given that he had succeeded in establishing an equity against his parents for the benefit of himself and his brothers. 49 Counsel for the plaintiff calculated that if the actuarial formula provided by Mr Ranson were to be used, the present capital value of an annual income of $125,849.41 would be $2,261,688.88 if the annual amount were to be subject to indexation, and $1,630,792.61 if the annual amount were to be fixed. Those calculations were not contested and I accept them. Counsel for the plaintiff said that on the basis of Mr Walker-Powell's evidence as to the cost of annuities, the present capital value of the same annual income would be $2,620,832.50 if the annual amount were to be indexed, and $1,754,353.00 if the annual amount were to be fixed. These applications of Mr Walker-Powell's evidence were not challenged and I accept them. 50 Whether one adopts Mr Ranson's formula or Mr Walker-Powell's evidence, and regardless of whether one treats the annual income as indexed or fixed, the present capitalised value of the income figure proposed by the defendants would exceed the value of the property by a substantial margin. Mr Ryan's valuation evidence, which I have accepted, was that the value of the property was $897,000. The explanation for the enormous discrepancy between the capitalisation of rental income and the value of the property seems to be that an acceptable rate of return in the market for commercial leasehold property is in the range of 9% to 12%, according to Mr Ryan, whereas annuity income is based on the (presumably much lower) returns obtainable on the investments which cover financial products. 51 The plaintiff's argument thoroughly persuades me that it is necessary, in light of the evidence now before me, to vary my proposed orders so as not to produce the result that the successful parties obtain no benefit and indeed, become subject to a liability, by virtue of my orders. It is unnecessary for me to choose between the evidence of Mr Ranson and Mr Walker-Powell, or between indexed and fixed income, in order to reach that conclusion. 52 It is therefore necessary to consider again the appropriate orders to give effect to my findings. The starting point, in cases of equitable estoppel arising from an encouraged assumption, is to recognise that at least prima facie, the plaintiff's equity is to have the encouraged expectation made good. Where the encouraged expectation is that the plaintiff will have an interest in land, the appropriate remedy has often been to order that the interest be conveyed: as in the leading case, Dillwyn v Llewelyn (1862) 4 De G F & J 517; 45 ER 1285; and in the modern application in Pascoe v Turner [1979] 2 All ER 945. In Olsson v Dyson (1969) 120 CLR 365, 378 Kitto J saw the question as whether an equity had been created in the plaintiff to have the subject property (a debt) made over to her; if so, the debtor was in equity bound to make the payment to her. 53 Sometimes it is appropriate, having regard to the precise nature of the encouraged assumption, to order a conveyance on conditions, for example for the payment of money (as in Timber Top Realty Pty Ltd v Mullens [1974] VR 312). In the present case, some form of condition seems appropriate because the encouraged expectation appears to have been, on the evidence, subject to reservation of an income for the representors. I shall return to that evidence shortly. 54 On other occasions, where a conveyance cannot effectively be made (because, for example, of some supervening event) the plaintiff may receive something less than a conveyance, for example a charge or lien for expenditure: Unity Joint Stock Mutual Banking Association v King (1858) 25 Beav 72; 53 ER 563; Morris v Morris [1982] 1 NSWLR 61. It cannot be suggested that there is any such difficulty here. An order for conveyance of the property would be subject to any existing lease, and also subject to the existing mortgage, if the mortgage has not been discharged before the order takes effect. However, the interest of the sons is to be protected by orders exonerating the property from the mortgage as between the sons and their parents. 55 Some English cases appear to suggest that, in deciding on the most appropriate orders to be made to give effect to the equity, the court has a discretion to do what is fair in the circumstances, and may choose to limit the relief to reversal of the detriment suffered by the plaintiff, rather than making good the plaintiff's encouraged expectation: Crabb v Arun District Council [1976] Ch 179, and 193 per Scarman LJ; Griffiths v Williams (1978) 248 EG 947, at 949 per Goff LJ. The idea that the court has such a broad discretion, "unhindered by principle", has been strongly criticised: RP Meagher, WMC Gummow and JRF Lehane, Equity Doctrines and Remedies (3rd ed, 1994), paragraph 1722. Simon Gardner, "The Remedial Discretion in Proprietary Estoppel", (1999) 115 LQR 438, has made an illuminating analysis of the nature of the judicial discretion in such cases, having regard to the case law. His conclusion, which I find to be plausible and consistent with the case law applicable in this country, is that the law does not allow the court to adopt whatever style and measure of relief it thinks fit, for whatever reason it chooses. Instead, the approach taken by the cases is to vindicate the plaintiff's expectations, care being taken to achieve the best match between the details of the plaintiff's expectations and the possible legal responses. The plaintiff's expectations should be vindicated in specie if practicable, but otherwise in monetary form. However, some other quantum of recovery may be adopted if it is impracticable to give relief by way of the expectation measure. 56 In the present case there is no difficulty about adopting the expectation measure rather than some other form of recovery. The problem is to tailor the expectation measure to the precise expectation encouraged by the conduct of Mr and Mrs Galaxidis. The critically important task is to design a condition of the relief in terms that will give effect to the interest in income reserved by Mr and Mrs Galaxidis, without over or under-compensating them. 57 My finding that Mr and Mrs Galaxidis were entitled to retain an interest in income arose from the evidence given by the plaintiff in cross-examination, as I made clear at paragraph 105 of my principal judgment. It was not based on the case pleaded by the defendants. I have reviewed the transcript of his evidence, and also the evidence of his brother Nikolaos. The plaintiff's evidence was that the rights he asserted were not inconsistent with his father's rights to lease and receive income from the Flinders Street property. The arrangement was put to the plaintiff, according to his evidence, on the basis that his father would always get the income of the property, even after he retired. His assumption was that he would not throw his parents out into the street. Nikolaos's evidence was much less specific. However, he gave evidence to the effect that his father did not want the arrangements to be implemented legally until he died, in order to avoid stamp duty, although he did not accept that the arrangements would be implemented by his parents' wills. Considered as a whole, his evidence is consistent with the proposition that his father would retain the right to receive income from the rental of the property upon implementation of the arrangements between the parents and the sons. 58 Counsel for the plaintiff submitted that the parents' income right, if (contrary to the plaintiff's submission) there was one, was a right to income upon retirement. The right should therefore be suspended during periods when the parents continued to work. In my opinion that submission is inconsistent with the plaintiff's evidence. It emerges from the plaintiff's evidence that while the income right would protect his parents during their retirement, it was to arise forthwith upon implementation of the arrangements, and does not seem to have been conditional upon their actual retirement. 59 Counsel for the plaintiff also submitted that I should disregard the plaintiff's evidence, on the basis that there was no suggestion in his evidence or in the defendants' case that the financial consequences for the parents on retirement were actually discussed. The plaintiff's evidence was given in terms of assumptions, and he expressed incredulity at the concept that he would abandon his parents to destitution. He did not say that the matter was ever mentioned by his parents or any of the sons. Counsel submitted that the plaintiff's evidence should be treated as evidence of how he would have behaved, as a good son, in a position of secure title. 60 I agree that there was no evidence given of any conversation in which the income right was reserved to the parents. That does not mean, however, that in a case about encouraged assumptions I should exclude some of the evidence of the plaintiff about the content of the assumptions that were made. The fact that reservation of an income right was an assumption that went without saying makes it more rather than less worthy to be taken into account. 61 This is a case about family arrangements. Once it appears that the arrangements were intended to give rise to legal consequences, the court's task is to interpret and give flesh to the imprecise words and actions of the parties. A promise may be definite even though what is promised has not been precisely defined, as I pointed out at paragraph 148 of my principal judgment, citing Lord Kingsdown's observations in Ramsden v Dyson (1866) LR 1 HL 129, 170-171, and those of Brooking JA in Flinn v Flinn [1999] VSCA 109 (see now [1999] 3 VR 712). Having decided that the parents' representations, though loosely expressed and not fully articulated, have given rise to an equity, I see no logical basis for excluding from consideration the assumption about reservation of an income right which was part of the arrangements. I do not regard the plaintiff's evidence as merely evidence of his intended beneficence to his parents, once his title was made good. It was plain to me, listening to him in the witness box, that he was making an important concession about his parents' entitlement to income. 62 However, in light of the evidence that has emerged about rental of the southern one-third of the property (8C), I have decided it would be unjust to recognise an income right for the parents in that part of the property, and that it would be unnecessary to do so in order to give precise effect to the sons' equity. The parents' right should be limited to income measured by the net rental income for the northern one-third of the property. I have reached these conclusions for four reasons. 63 First, I take into account the fact that to do so would be to reserve for the parents a right the capital value of which would exceed the value of the property as a whole. Not only would that be an unfair result, but it would be a result that cannot possibly have been intended by the parties when they made the arrangements and acted on them. 64 Secondly, the evidence concerning rental of the southern one-third shows that it was leased only from time to time. That suggests that it would not have been in the contemplation of the parties that income from the southern one-third would provide a retirement income for the parents. In contrast, Budget Rent-a-Car occupied the northern one-third from 1994 onwards. 65 Thirdly, it is appropriate to take into account the state of affairs existing in 1994, when the arrangements were made. At the time when the arrangement was made, in April 1994, it is probable that the northern one-third of the Flinders Street site had been rented to Budget Rent-a-Car. The southern one-third was occupied by AG Motors, while the middle one-third was temporarily let. The plaintiff's evidence seems to be based on the proposition that he would expect his father to retain sufficient income for the financial support of himself and his wife during the remainder of their lives. In other words, the arrangement was for an income to cover retirement rather than a business income. A gross income in the vicinity of $120,000, representing rental for two-thirds of the property, seems to go beyond that expectation, and be inconsistent with the father's representation that the Flinders Street property was going to belong to the sons when the arrangement was implemented. 66 Fourthly, after reviewing the transcript of the plaintiff's evidence, I have decided that it was a mistake on my part to conclude that the income right which the plaintiff assumed to have been retained by his parents was the right to all externally-produced income, rather than to the income of the northern one-third that was under lease at the time when the arrangements were made. The plaintiff's evidence about the reserved right was bound up with his idea of family ties and family obligations, leading him to say that under the arrangements, his parents would retain enough for a retirement income. He did not say or imply that under the arrangements his parents would be entitled to whatever external rent they could derive from the property. 67 I turn to the question of measuring the parents' income right and making orders that will preserve their right without destroying or unduly limiting the sons' equity. 68 In the first place, it is necessary to make a finding as to the net income figure for the northern one-third part of the property. The gross rental income from Budget Rent-a-Car, according to the evidence, is $58,800 excluding GST. After the delivery of my principal judgment, the plaintiff proposed the figure of $47,426, based on the net rental for the year ended 30 June 1999, as disclosed in the latest partnership tax return. In his written submission, the plaintiff referred to a later tax return, for the year ended 30 June 2000, which disclosed a net rental income of $28,613. 69 The plaintiff submitted that the appropriate course would be to fix the rate of income as $58,800, less an assessment which the Court thinks appropriate for expenses in deriving rental income. I agree with that basic approach. I do not find the partnership income tax returns to be a useful guide for the identification of expenses. I would prefer to rely on the evidence of Mr Ryan, which is to the effect that the likely outgoings per annum for the northern section of the property in a commercial letting would be $11,185. This produces a net figure of $47,615. 70 However, Mr Ryan appears to have taken into account the water rates in that figure. Under the Budget lease, the tenant is obliged to pay one-third of the water rates. Water rates for the period from 1 October to 31 December 2001, together with a usage charge for the period from 4 July to 4 October 2001, amounted to $364.67. There was a miscellaneous credit of $120.20. A perusal of other water rate accounts for preceding quarters indicates that the miscellaneous credit was atypical. I therefore accept the figure of $364.67 per quarter ($1458.68 per year) as the applicable water rate for the property. The one-third borne by the northern section would therefore be $486.27. This amount should be added back to the net figure, producing an adjusted net income of $48,101.27. 71 Secondly, some allowance needs to be made for the fact that the parents' right is not to a guaranteed income free of the risks to which rental income is subject. Some reduction of the net figure should be made to reflect the risk of vacancy. One way of achieving this would be to limit the parents' rights to the net income figure without an allowance for inflation. On reflection, however, that seems to me an undesirable approach, because there is no logical connection between the risk of vacancy and the diminution in value of the income stream produced by not indexing it. In my opinion a better approach would be to regard the income right as appropriately indexed for inflation, but to discount the net income figure by a percentage intended to reflect, as well as one can, the vacancy risk. 72 The evidence of Mr Ryan is that he would make a vacant possession allowance of $12,250 per annum in relation to the northern section. Given the stability of the rental for that section, my opinion is that such a discount is too severe. Mr Wall said that a lower amount, of about half of that figure, would be appropriate. Doing the best I can, I have decided to fix on an allowance of $9818.50 per annum, midway between the two contentions. When that is deducted from the rental income net of expenses, the final figure is $38,282.77. 73 Unless further submissions are made to support some other method, I would regard it as appropriate that the net figure identified above should be reviewed annually, to be increased in the event that the Consumer Price Index rises, but otherwise to remain the same. I do not regard it as appropriate to measure any increases in the net figure by reference to actual rental received for the northern one-third of the property, because as owners of the property, the sons should be free to use any part of it for some other purpose if they wish. 74 Next, I must consider whether it is appropriate to make provision for the capitalisation of the income right in any circumstances. I expressed the view in my principal judgment that the income right should be capitalised so as to permit the sons to discharge their obligations to their parents, once and for all, upon the sale of the property. Counsel for the plaintiff submitted that it was no part of the arrangement that Mr and Mrs Galaxidis would be entitled to any share of the proceeds of a sale of the property. He contended that any expectation on their part to receive income from the property can only have been on the assumption that the property was still held. 75 I have decided, on reflection, that this submission is correct. My proposed order for capitalisation was intended to add to the arrangements of the parties by addressing a matter not foreseen by them, in a fashion that would permit a clean financial break between the plaintiff and his brother Nikolaos, on the one hand, and their parents and brother Antonios, on the other. In the absence of a provision for capitalisation, it will be necessary for the parties to negotiate the capital value of the income right should the sons ever wish to buy out the parents' interest. But that outcome is consistent with the arrangements that they have made. My attempt to provide for capitalisation has been shown to be unsuccessful, because the cost of capitalisation is greatly disproportionate to the value of the property. Additionally, given the statutory right of any of the co-owners including Antonios to cause the property to be sold, a capitalisation right could be oppressive upon the plaintiff and Nikolaos. 76 On the assumption that I might reach the conclusions that I have in fact reached, the plaintiff has proposed orders that the three sons pay their parents as joint tenants for life and during the life of the survivor of them, an income charged against the property, provided that the charge will not prevent the sons from granting prior ranking encumbrances to third party financiers. In my opinion orders to that effect are appropriate. 77 To preserve the parents' income entitlement in the event a sale, the plaintiff proposes that one-third of the net proceeds of sale be set aside and held on trust, to be invested in authorised investments (within the meaning of the Trustee Act, 1925 (NSW)). The plaintiff proposes that: (a) Mr and Mrs Galaxidis would receive, as joint tenants for life and for the lifetime of the survivor of them, the net income earned on the invested amount, subject to the annual ceiling reflected in the indexed net sum referred to above; (b) the remainder of the net income would be paid to the sons in equal shares as tenants in common; (c) upon the death of the survivor of Mr and Mrs Galaxidis, the capital and any further net income would be paid to the three sons in equal shares as tenants in common; (d) since Antonios has not demonstrated the qualities required to participate in the control of the investment, he should not be one of the trustees and instead, control of the investment should be vested in the plaintiff and Nikolaos or, if Nikolaos is unwilling, in the plaintiff alone. 78 I accept these proposals, subject to one qualification. To leave the trust fund in the control of the plaintiff, or the plaintiff and Nikolaos, could well lead to further disputation, given the poisonous nature of the relationship between the combatants. I would prefer to designate an officer of the court, such as a solicitor, to be the trustee. For the sake of simplicity I am content to allow the plaintiff and Nikolaos to nominate the trustee of their choice provided that person is an officer of the court. The trustee would be entitled to a reasonable fee for managing the investment, to be paid out of the investment income. 79 The plaintiff proposes that provision be made for the orders to operate in a modified way in the event of a partition. The proposed modification is to divide the obligations of the sons to provide income to their parents into three separate portions and provide for each son's obligation to be charged separately against his own portion. The object would be that in the event of partition, each son could deal with his own portion, on the basis that each son's obligation to his parents would not continue to be an encumbrance on the other sons' portions. Since there may well be continuing disagreement amongst the brothers as to the management of the property, my view is that such a provision for partition would be appropriate. Occupation fee 80 In my principal judgment, paragraph 170, I said that the plaintiff and Nikolaos should have the benefit of an order requiring Mr and Mrs Galaxidis and Antonios to pay them two-thirds of an occupation fee for use of the one-third of the Flinders Street property that AG Motors was to occupy, in respect of the period from exclusion of AG Motors from the site until the date of recovery of possession. In my supplementary reasons for judgment published on 20 February 2002 I said (paragraph 13) that the occupation fee should be two-thirds of the net market rental of the southern one-third of the property. 81 The defendants submitted that I should not make any order for compensation, on the ground that the business fell away once the sons were removed from the Flinders Street property, and in any event the sons needed their father's licence in order to conduct a retail business of the kind conducted by AG Motors. In my opinion these submissions invite me to reconsider matters determined in my principal judgment, as to whether there should be any compensation order at all. I see no reason to revisit the findings I made on that occasion. 82 As I have said, Mr Ryan has given evidence with respect to the rental value of that part of the property. I accept that evidence. He assessed the current market rental value of the southern one-third at $58,593 per annum. His estimates for outgoings, excluding agents' fees, come to $2,268. Agents' fees should be excluded because the compensation is for the plaintiff and Nikolaos being deprived of their own occupation. Thus, the net rental value is $56,325 per annum or $4,693.75 per month. 83 It follows that the compensation payable to the plaintiff and Nikolaos up to 30 April 2002, being two-thirds of these figures, is $124,713, and there is a continuing obligation to compensate the rate of $3129.17 per month until the plaintiff and Nikolaos are restored to possession. 84 The appropriate course is that provision should be made directing entry of judgment for the specified sum to 30 April 2002, reserving further consideration of the continued liability, which can be fixed by the Master once the date of restoration of possession is known. In the event of a lengthy delay, it may be necessary for an updated valuation to be obtained. Provision should be also made for interest at Supreme Court rates, as the plaintiff and Nikolaos have been deprived of the benefit of occupation of one-third of the property, which they could have turned to productive use. Conclusions 85 I have decided that provision should be made, along the lines submitted by the plaintiff, for an income entitlement to Mr and Mrs Galaxidis of $38,282.77, indexed for inflation, charged against the property, with provisions for sale and partition as proposed by the plaintiff. Judgment should be entered in favour of the plaintiff and Nikolaos against Mr and Mrs Galaxidis and Antonios for $124,713 plus interest, in respect of the occupation fee to 30 April 2002, with further consideration reserved as to the continuing occupation fee until recovery of possession. 86 I shall direct the plaintiff to prepare revised draft short minutes of orders, taking into account these reasons for judgment. The draft short minutes should be based on the draft prepared by the plaintiff in December 2001, except as otherwise indicated in these reasons for judgment and (subject to these reasons for judgment) in my supplementary reasons dated 20 February 2002. I have considered the detailed criticisms of the draft offered by the defendants in their written submissions, but I do not accept them, for the reasons given by the plaintiff in his written submissions. As requested by the plaintiff, I shall allow him to calculate interest in the course of preparing the draft short minutes. I shall bring the matter back before me for the purpose of making orders and dealing with the question of costs.

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