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[1999] HCA 10
mixed. Appeal allowed; orders 2, 8 and 9 of the Full Court set aside and replaced with orders setting aside Nicholson J's orders 1 and 2; declaration made that the respondent is entitled to a monetary sum...
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Robert Giumelli worked for years on his parents' orchard properties without proper wages after his parents promised him a specific lot on the Dwellingup land. He built a house there, turned down another job, and planted trees in reliance on those promises. When his parents went back on their word after he married someone they disliked, the court agreed he had been unfairly disadvantaged. However, the High Court decided that forcing the parents to subdivide and hand over the actual land would be unfair to Robert's brother Steven, who lived there with his family and had also improved the land, and would complicate the still-pending partnership accounts. Instead, the parents must pay Robert a sum equal to the current value of that promised lot (worked out later by a judge after looking at all the competing claims, profits, improvements and other factors), and that money is secured by a charge over the entire Dwellingup property.
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The Giumelli family operated an orchard business through a partnership at two rural properties in Western Australia: the Pickering Brook property and the larger Dwellingup property of approximately 338 acres purchased in 1966. The first appellant, Giovanni Giumelli (who died after the High Court hearing but before final orders), and his wife Rosa held the registered title to the Dwellingup property, which was never formally an asset of the partnership although partnership funds were used for its development. Their son Robert (the respondent) left school in 1971 and worked full-time for the partnership without wages, receiving only pocket-money and necessities. He was admitted to the partnership in 1973 on the advice of the family accountant for tax reasons, without payment of goodwill or capital.
The primary judge (Nicholson J) identified three alleged promises. The "general promise" made around 1974 was that Robert (and his elder brother Tony) would receive part of the Dwellingup property to compensate for working without wages and for the partnership meeting development costs. The "second promise" in 1980 was made when Robert wished to marry and build a house; his parents selected a site with him and promised him the house and surrounding land. Robert expended approximately $25,000 advanced from the partnership plus his own labour to build a three-bedroom brick and tile house valued at about $47,000. The "third promise", made after his 1981 marriage, was that the Dwellingup property would be subdivided to create a northern lot including the house and orchard if Robert stayed rather than accept an offer from his father-in-law; he was reassured after marital separation that the property would be transferred on divorce. In reliance, Robert rejected the job offer, returned to the property, and planted a new orchard. After he announced plans to remarry a woman of whom his parents disapproved, they required him to choose; he left the property in May 1985. His brother Steven married in 1985, lived on the promised lot with his family in a transportable home previously occupied by Robert, and made further improvements including coolrooms and 1,000 new trees.
In 1986 Robert commenced the partnership action seeking winding-up and a declaration of charge over both properties for improvements. That action remained unresolved at the time of the equity proceedings. Pidgeon J determined the partnership ended on 14 May 1986. Master Bredmeyer gave judgment for $55,106 plus interest on the basis of equal sharing under s 34(1) of the Partnership Act 1895 (WA), but accounts were taken only to June 1986. Nicholson J, after a five-day trial in 1993, found that the third promise had been made and that Robert had been induced to adopt the relevant expectations and had acted in reliance. However, his Honour held that Robert had not suffered detriment in the required sense from rejecting the job offer or continuing in the partnership, nor from planting the orchard (which benefited the partnership of which he was a member). Relief was confined to the second promise and limited to the house. After valuation evidence, Nicholson J ordered the appellants to pay $66,071 (house value $66,000 plus nominal land value of $71 for the footprint only), with interest under s 32 of the Supreme Court Act 1935 (WA) from 10 September 1993, but made no charging order over the land.
The Full Court (Rowland, Franklyn and Ipp JJ) allowed Robert's appeal, upheld an equity arising from the third promise, and imposed a constructive trust over the whole Dwellingup property. The appellants were ordered to do all things necessary to subdivide and convey the promised lot (including obtaining State Planning Commission approval), with liberty to apply if subdivision proved impossible. The High Court (Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ) upheld the finding that the third promise created an equity but held that the Full Court had erred in the measure of relief. The appeal was allowed in part. Orders 2, 8 and 9 of the Full Court and orders 1 and 2 of Nicholson J were set aside. In their place the High Court declared that Robert is entitled to a sum representing the present value of the promised lot, to be fixed by a single judge taking into account all considerations necessary to do equity between the parties and relevant third parties on such further evidence as the court allows. That sum, once ascertained, is charged on the whole Dwellingup property with interest under s 32 of the Supreme Court Act as fixed by the court. Costs of the Full Court appeal and cross-appeal were reserved to the remaining proceedings; there was no order as to the costs of the High Court appeal. After Giovanni Giumelli's death, Rosa was joined as executrix before final orders.
The High Court accepted that Robert had established an equity arising from the third promise. Both Rowland J and Ipp J in the Full Court had correctly identified detriment: even if Robert had not suffered immediate loss of income, he lost the opportunity of a different career path, gave up the chance to obtain a proprietary interest in land he helped improve, and continued in a partnership that had no security of tenure over the real estate and that terminated before the new orchard became productive. The primary judge had placed undue weight on the partnership accounting process and had failed to recognise that Robert would not have remained had the promise not been made. The equity was therefore more than a "defensive equity" and required positive relief.
However, the court emphasised that relief must be fashioned by reference to all the circumstances so as to do equity. The Full Court's order for subdivision and conveyance reflected the prima facie position identified by Deane J in The Commonwealth v Verwayen (1990) 170 CLR 394 at 443 that an estoppel by conduct precludes departure from the assumed state of affairs. Yet that prima facie entitlement may be qualified where specific relief would be inequitably harsh or would fail to account for the position of third parties. Here, several factors required qualification. First, the partnership action remained on foot; accounts had been taken only to June 1986 and Robert may have claims for unpaid profits or rent from the house. Second, Steven and his family resided on the promised lot and Steven had made substantial post-1986 improvements (coolrooms, 1,000 trees, water systems) funded in part by partnership resources. Third, the breakdown in family relationships and the fact that all development costs had been met by the partnership (of which Robert was a member) meant that a bare order for conveyance would not do equity between all interested persons. Fourth, the use of partnership funds for the house and orchard development meant that any windfall to Robert had to be balanced against the interests of other partners.
The court therefore concluded that a constructive trust requiring active steps to subdivide and convey went beyond what was required for conscientious conduct by the appellants. Drawing on the approach in Plimmer v Mayor of Wellington (1884) 9 App Cas 699 at 714 and the need identified at paragraph 10 to consider whether a lesser remedy suffices before imposing a trust, the court substituted a monetary award representing the present value of the promised lot. That sum is to be ascertained on remitter, taking into account (among other matters) possible allowances for lost profits from the partnership attributable to the promised lot, rent from the house since 1985, improvements by Steven, and any share of anticipated future profits for a limited period. To secure the payment, the sum is charged on the whole Dwellingup property with interest under s 32 of the Supreme Court Act. This approach avoids injustice to Steven while still satisfying the equity without outflanking the requirement of consideration in contract law. The court expressly declined to limit relief to mere reversal of detriment, consistent with the broader reading of Verwayen advanced in the joint judgment.
Prior to Giumelli v Giumelli, Australian law on equitable estoppel had been significantly shaped by The Commonwealth v Verwayen (1990) 170 CLR 394. That case produced divergent views on whether relief is limited to reversing the detriment suffered or may extend to making good the expectation created by the promise. Mason CJ had stated that equitable estoppel permits a court to do what is required to avoid detriment but no more, although in appropriate cases that might require holding the promisor to the assumption. Deane J emphasised that the prima facie operation of estoppel by conduct is to preclude departure from the assumed state of affairs, with lesser relief granted only if the prima facie remedy would be inequitably harsh. Dawson J and McHugh J also accepted that avoidance of detriment may sometimes require making good the assumption. The present judgment builds on those statements at paragraphs 42–47, rejecting the appellants' submission that Verwayen mandates relief no greater than reversal of detriment. Instead, the court treats Verwayen as leaving open a remedial discretion informed by all circumstances, including third-party effects.
The judgment also draws on older authorities such as Dillwyn v Llewelyn (1862) 4 De GF & J 517, where Lord Westbury LC enforced an imperfect gift after the son had built on the land in reliance, and Riches v Hogben [1985] 2 Qd R 292, where McPherson J explained that the equity arises from the expectation created and the plaintiff's conduct in acting upon it, not from a binding contract. Plimmer v Mayor of Wellington supplied the governing proposition that the court must examine the circumstances to decide how the equity can be satisfied. The court distinguished Baumgartner v Baumgartner (1987) 164 CLR 137 at 148, confirming that the joint endeavour constructive trust principle was not the basis of relief here; the case was one of promissory inducement and detrimental reliance rather than failed joint endeavour contributions.
After Giumelli, the law is clearer that while the minimum equity needed to avoid detriment remains the guiding concern, courts are not confined to a "reversal of detriment" measure in every case. Where expectation relief is disproportionate or affects third parties, a monetary equivalent charged on the property may be ordered. The remedial constructive trust is confirmed as proprietary in nature when it attaches to identified land, but it is not to be imposed automatically; a charge or equitable compensation is preferred where it sufficiently satisfies the equity without creating administrative burdens or affecting non-parties. The requirement at paragraph 10 that a court first consider whether a lesser remedy suffices before imposing a trust has become a settled precondition. The decision also underscores that pending related litigation (here the partnership action) and improvements or occupation by family members are relevant "circumstances of the case" that may compel a monetary rather than proprietary outcome.
Paragraph 10 is central: "In the present case, the constructive trust is proprietary in nature. It attaches to the Dwellingup property. Such a trust does not necessarily impose upon the holder of the legal title the various administrative duties and fiduciary obligations which attend the settlement of property to be held by a trustee upon an express trust for successive interests. Rather, the order made by the Full Court is akin to orders for conveyance made by Lord Westbury LC in Dillwyn v Llewelyn and, more recently, by McPherson J in Riches v Hogben." Plain-English translation: When equity steps in because of broken promises about land, it can give the claimant an ownership interest in the actual property rather than just a right to money. But that ownership interest does not automatically turn the owners into full trustees with all the usual duties. The Full Court went too far by ordering subdivision and immediate transfer; the High Court preferred a more flexible remedy.
At paragraph 10 the court states: "Before a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust." Translation: Judges must ask whether a simpler fix (such as ordering the parents to pay the land's value) would be fair before they force the owners to give up title. This prevents equity from being heavier-handed than necessary.
Paragraph 42 quotes Deane J from Verwayen: "Prima facie, the operation of an estoppel by conduct is to preclude departure from the assumed state of affairs. It is only where relief framed on the basis of that assumed state of affairs would be inequitably harsh, that some lesser form of relief should be awarded." Translation: Normally, if you have induced someone to believe they will get the land and they have acted on that belief to their cost, you should be held to your word. But if giving them the land would be unfairly harsh on you or others, the court can order something less drastic, such as payment of money instead.
Paragraph 50 summarises the outcome: "When these matters are taken into account, it is apparent that the order made by the Full Court reflected what in Verwayen was described as the prima facie entitlement of Robert. However, qualification was necessary both to avoid injustice to others, particularly Steven and his family, and to avoid relief which went beyond what was required for conscientious conduct by Mr and Mrs Giumelli. The result points inexorably to relief expressed not in terms of acquisition of title to land but in a money sum." Translation: The Full Court gave Robert what he had been promised, but that ignored the practical problems for his brother and the unfinished partnership dispute. The fairer solution is to calculate the land's value, order the parents to pay that sum, and secure the debt against the whole farm.
Paragraph 51 adds: "This is a case for the fixing of a money sum to represent the value of the equitable claim of the respondent to the promised lot. It will be necessary for the matter to be remitted to a judge of the Supreme Court to take that step. The amount so ascertained, with interest, should be charged upon the whole of the Dwellingup property." Translation: Instead of subdividing, a judge must now work out a cash figure that puts Robert in roughly the position he would have been in had the promise been kept, after adjusting for everyone's contributions and losses. That cash debt is to be secured by a charge over all the land so Robert is protected if the property is sold.
Giumelli is triggered where a promisor (often a parent) induces a promisee (often a child) to believe they will receive an interest in identified land, the promisee acts to their detriment in reliance (by forgoing other opportunities, performing unpaid labour, or expending money), and the promisor later resiles. The equity is strengthened where the promisee has improved the land at the promisor's encouragement and the promisor has obtained the benefit of that improvement. However, the precedent emphasises that the court will not automatically order conveyance. Relief is calibrated by reference to third-party occupation or improvements, the existence of related unresolved litigation (especially partnership or accounting disputes), the source of funds used for improvements (partnership versus personal), and the extent to which a monetary charge would sufficiently prevent unconscionability without disrupting family living arrangements or creating subdivision difficulties.
The case is particularly apt where the promised land forms part of a larger undivided rural holding, where family members other than the promisee have lived on or improved the site, and where partnership or trust accounting remains outstanding. It is not limited to family disputes; the principles apply whenever detrimental reliance on a representation as to future proprietary interest creates an equity that must be satisfied in a manner that does equity to all affected persons. The requirement to consider a charge rather than a trust arises whenever specific performance would affect non-parties or produce practical inconvenience (access, planning approval, or fragmentation of title). Conversely, if no third-party interests are affected and the promisor can readily convey without injustice, Dillwyn-style specific relief remains available.
The joint judgment's treatment of Verwayen has been taken as confirming that Australian law does not impose a rigid "minimum equity" rule that confines relief to detriment reversal in every case. The court noted at paragraph 33 that post-Verwayen decisions such as Blazely v Whiley (1995) 5 Tas R 254, Forbes v Australian Yachting Federation Inc (1996) 131 FLR 241 and Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 97,590 illustrate that relief fulfilling the expectation is granted in all but rare cases. Giumelli itself is cited for the proposition that the court must weigh all circumstances, including third-party effects, before selecting the remedy. The emphasis at paragraph 10 on first considering a remedy falling short of a trust has guided courts to prefer monetary relief secured by charge where subdivision is impracticable or occupation by others would be disturbed.
The requirement that relief be moulded to do equity between the parties and "all relevant third parties" has been applied where siblings or spouses have improved or reside on the land. The court's direction that the partnership action be brought on concurrently with the equity claim has reinforced the need to resolve related accounting disputes before quantifying the monetary sum. Kirby J's concurrence at paragraphs 64–65 reinforces that the existence of outstanding partnership proceedings and improvements by other family members will ordinarily prevent a bare conveyance order. Overall, the decision has narrowed the circumstances in which a remedial constructive trust will be imposed in favour of a charge or equitable compensation where that suffices to prevent unconscionability.
The judgment leaves open the precise list of allowances to be made when quantifying the monetary sum. At paragraph 52 the court declined to fix any "closed list", noting that further evidence and submissions will be required on matters such as lost partnership profits from the promised lot, rent from the house since 1985, the value of Steven's post-1986 improvements, expenditure on water systems, and possible future profit shares contingent on the joint lives of the parents. Whether the charge should rank in priority to any security interests created after 1986 is not addressed.
The interaction between the equitable charge and the pending partnership accounting remains unresolved; the court expressed no concluded view on whether Robert has been deprived of a share of profits earned from the promised lot for twelve years. The extent to which partnership funds used for development must be brought to account before the "present value" is fixed is left to the remitter judge. The decision does not finally determine whether an order for subdivision could ever be made where third-party occupation exists but adequate compensation can be paid to those parties. Finally, the precise scope of "relevant third parties" whose interests must be considered is not exhaustively defined, although Steven's position is the obvious example. These matters will require careful factual evaluation on remitter, illustrating that Giumelli provides a framework rather than a mechanical formula for relief in family estoppel cases.
High Court of Australia Gleeson CJ McHugh, Gummow Kirby and Callinan JJ Giumelli v Giumelli (P55/1997) [1999] HCA 10
ORDER Appeal stood over to a date to be fixed for the making of orders joining as a party to the appeal the legal personal representative or representatives of the first appellant and for the making of final orders disposing of the appeal. After hearing further submissions The Court pronounced the following orders: -
That orders 2, 8 and 9 of the orders of the Full Court of the Supreme Court of Western Australia made on 12 March 1997 be set aside and, in place thereof, orders 1 and 2 of the orders made by Nicholson J on 26 May 1994 are set aside.
(a) the respondent is entitled to payment by the appellants of a sum representing the present value of the promised lot to be determined by a judge of the Supreme Court in accordance with the reasons of this Court, taking into account all considerations for which allowances should be made in calculating that sum, so as to do equity between the parties to the action and all relevant third parties, and upon such further evidence as that Court may allow; and
(b) such sum when so ascertained and made payable by the appellants will be charged upon the whole of the Dwellingup property with interest under s 32 of the Supreme Court Act as fixed by that Court.
24 March 1999 Gleeson CJ, McHugh, Gummow and Callinan JJ.
that in the event that subdivision cannot be effected or State Planning Commission approval cannot be obtained or in the event that for some other reason the Promised Lot cannot be conveyed to [the respondent, he] be at liberty to apply to a single Judge of this Honourable Court. 1. Giumelli v Giumelli (1996) 17 WAR 159.
It is sometimes said that when there are sufficient grounds for imposing a constructive trust, the court "constructs a trust". The expression is, of course, absurd. The word "constructive" is derived from the verb "construe", not from the verb "construct" The court construes the circumstances in the sense that it explains or interprets them; it does not construct them. The relief granted by the Full Court involved a trust that was "constructive" in that way. The Full Court so interpreted the circumstances as obliging the appellants, in good conscience, not to retain their beneficial interest in the whole of the Dwellingup property and as requiring them to answer the respondent's equity by bringing about a subdivision of the promised lot and conveying the title to it. The equity of the respondent was seen by the Full Court as sufficiently strong as not only to prevent the appellants from insisting upon their strict legal rights but also, in respect of the promised lot, to convey it to the respondent. 1. Scott on Trusts, 4th ed (1989), vol 5, s462.4.
In their notice of appeal, the appellants seek the dismissal of the respondent's claim. However, in their written and oral submissions, they accept that, at least in respect of what was identified as the second promise, the respondent had an equity to some relief. They submit that this fell short of an order for a subdivision and the conveyance of the promised lot.
The respondent, whom we shall call Robert, is the son of the appellants, Mr and Mrs Giumelli. Mr Giumelli was born in Italy in 1924. He came to Australia in 1949. Mrs Giumelli was also born in Italy, in 1930, and she came to Australia in 1950. Mr and Mrs Giumelli were married in 1951. There are five children of the marriage. The eldest, Tony, was born in 1953; Robert was born in 1956; Steven in 1959; Sandra in 1965; and Diana in 1968. The family lived on a property at Pickering Brook (the Pickering Brook property). This comprised about 16 acres. The title was held in the name of Mr Giumelli. Mr and Mrs Giumelli developed the property as an orchard and they conducted a business there under the name "G Giumelli & Co" by means of a partnership between them. The partnership was established on the advice of their accountant, Mr Gelle. There was no written partnership agreement.
In 1966, Mr and Mrs Giumelli purchased the Dwellingup property and they retain the registered title to it. The land is about 100 kms equidistant from Perth and from the Pickering Brook property. The Dwellingup property comprises an area of about 338 acres, of which only 10 acres were completely cleared when it was purchased. Mr Giumelli commenced development of the property by planting trees on the 10 acres and installing irrigation. Although partnership activities have been conducted there, the Dwellingup property itself has never been an asset of the partnership.
The eldest child, Tony, left school in 1968 and worked with his father at the Pickering Brook and Dwellingup properties. Robert left school in 1971 and commenced full-time work for the partnership. Up to that time, he had worked at the Pickering Brook and Dwellingup properties, along with other members of his family, in a manner and to a degree consistent with the capabilities of his age. Robert worked two hours daily outside of school hours and sometimes all Saturday and half of Sunday. He received no wages, but was paid pocket-money and received the necessities of life.
In July 1973, Robert and Tony were admitted to the partnership after advice by Mr Gelle to the effect that there were tax advantages in doing so. The two sons were admitted without payment of goodwill or subscription of capital. Robert worked for the partnership without wages but was credited with earnings in the partnership accounts. He continued to receive pocket-money and the necessities of life. He was engaged with other family members in development and improvement work on the Dwellingup property. All expenses for materials and charges for the contractors for this work were paid by the partnership. This is a circumstance of some importance in a consideration of the appropriate remedy in this litigation.
In 1974, the third child, Steven, left school and commenced fulltime work for the partnership on wages, working initially at both properties but later moving to the Dwellingup property. In 1978, Tony left the partnership and ceased to do any work on the Dwellingup property. In about 1982, Steven became a partner.
The primary judge delivered his reasons for judgment on 10 September 1993 after a five day trial in August 1993. His Honour did not determine the precise extent to which the development and improvement of the Dwellingup property took place as a result of Robert's labours. The primary judge did find that Robert had worked hard and had made a major contribution to the development and that other members of Robert's family had done likewise.
The primary judge made findings with respect to three alleged promises made to Robert by his parents concerning the provision to him of ownership of part of the Dwellingup property. His Honour identified these as "the general promise", "the second promise" and "the third promise". His Honour found that Mr and Mrs Giumelli made a general promise to Robert (and also to Tony) at a youthful age and without reference to any particular portion of the Dwellingup property. The promise to Robert was made in approximately 1974, when he was eighteen years of age. It was to the effect that his parents would give him part of the Dwellingup property to compensate him for working without wages, for the effort he was putting into the development and improvements and, later, for the fact that the costs of those matters were being met from funds of the partnership.
The second promise relied upon by Robert was said to have been made in 1980. Robert claimed that, having told his parents that he intended to marry and wished to build a house for his matrimonial home, they agreed that he should build a house on the Dwellingup property, they joined with him in selecting a site and they promised him that the house and the land on which it stood (including the orchard) would be his. Robert claimed that, in reliance upon that promise, he engaged a builder and worked with him in constructing on the site a three bedroom brick and tile house to the value of $47,000 (the house). Initially, the partnership advanced to Robert the sum of $25,000 against his account with the partnership. He expended that sum on the cost of construction and materials for the house.
The primary judge found that Robert had not established the factual foundation for a finding in terms of the second promise as pleaded so far as it related to land including the orchard. His Honour held that Robert had made out the pleading that he was promised "the house" and added that the critical issue in relation to this second promise was the way in which it was understood by the parties.
In the Full Court, Rowland J encapsulated as follows the findings of the primary judge with respect to the third promise [17] :
After his marriage in July 1981, a promise was made to [Robert] that the [Dwellingup] property would be subdivided to create a lot on the northern section of the property to include the house and orchard if he agreed to stay on the property and not accept an offer to work for his father-in-law and, if the house and land could be subdivided, he would have the orchard as well. On this basis, he was prepared to stay, on the property. Subsequently, [Robert] separated from his wife and he returned to the property. On his return he was reassured that, on his divorce, the property would be transferred. In reliance on this promise, [Robert] stayed and planted the new orchard. He was divorced in 1983. Thereafter, Robert decided to remarry, but to a woman of whom his parents disapproved. In May 1985, his parents told him to choose between his proposed new wife and the Dwellingup property. Robert chose to go ahead with the marriage and left the Dwellingup property. He has been living since then about 2 kms away. 1. Giumelli (1996) 17 WAR 159 at 162-163.
Steven married in 1985 and has lived with his wife and children at the Dwellingup property. They have occupied what was identified as a transportable house which was brought to the promised lot in 1976 and thereafter extended and occupied by Robert until 1981. Steven and his family have not occupied the house referred to in the second and third promises and also situated on the promised lot. Steven has made various improvements to the promised lot, including the building of coolrooms and the planting of 1,000 new trees.
On 7 May 1986, Robert instituted an action (the partnership action) in the Supreme Court of Western Australia against his parents and his two brothers seeking, among other relief, an order that the partnership between Robert, his parents and Steven be wound up. He also sought a declaration that the partnership had a charge over the Pickering Brook property and the Dwellingup property to the extent of the value of improvements thereto. It should be noted that neither of Robert's brothers is a party to the other action, that giving rise to the appeal to this Court.
The partnership action has yet to come to trial. However, in 1990, Pidgeon J determined, as a preliminary matter, that the partnership had been determined on 14 May 1986, this being the date of the service of the writ. Thereafter, Master White made orders relating to the taking of accounts to enable Robert's entitlement to be ascertained. In 1991, Master Bredmeyer entered judgment for Robert against his parents and brothers in the sum of $55,106, together with interest from 14 May 1986 until judgment, in part satisfaction of Robert's interest in the partnership. In doing so, the Master proceeded on the footing, which was not challenged, that, pursuant to s 34(1) of the Partnership Act 1895 WA, the partnership assets and profits were to be shared equally between the partners.
With respect to the third promise, Nicholson J found as follows:
I consider that [Robert] has established that the third promise was made in terms which obliged [Mr and Mrs Giumelli] to create a lot on the northern section of the Dwellingup property to include the house and orchard.
I am satisfied that [Mr and Mrs Giumelli] induced [Robert] to adopt the expectations in the second and third promises, [Robert] acted in reliance on them; was intended so to do by [Mr and Mrs Giumelli]; and that [Mr and Mrs Giumelli] did not act to fulfil the assumption or expectation. In the case of the second promise reliance is established by the expenditure of [Robert's] money and labour on the building of the house and in the case of the third promise the reliance is shown by [Robert's] rejection of the job offer, his return to the property and, it is claimed, his work in establishing the new orchard.
His Honour said that there remained for demonstration what he identified as "the element of detriment" and continued:
In the case of the second promise the detriment to [Robert] is constituted by the expenditure of money and labour on the house without the acquisition of title to it. This is a detriment which [Mr and Mrs Giumelli] failed to act to avoid.
In the case of the third promise it has not been shown that by the rejection of the job offer and return to work in the partnership [Robert] has suffered a detriment. [Robert] was a member of the partnership and chose to continue in it. The consequence of the third promise was that he did not relinquish his partnership. In my view that cannot be a detriment in itself.
His work for the partnership is a matter for the taking of account as between him and the partnership, in respect of which [Robert] has another action on foot.
In my opinion the development of the new orchard was executed in the interests of the partnership of which [Robert] was a member. If the development improved the profitability of the partnership [Robert] stood to gain not to lose. It was not a detriment in the required sense.
In this respect, we prefer the conclusions reached by Rowland J and Ipp J in the Full Court. Rowland J approached the matter on the footing that, even if it be conceded that Robert had not suffered an appreciable loss of income by remaining in the partnership, the detriment suffered by him was the loss of the property which he worked to improve, not to obtain immediate income from that exercise but to gain the proprietary interest [18] . For that, Robert gave up the opportunity of a different career path. Ipp J pointed out that the reasoning of the primary judge placed no weight upon the circumstance that the partnership had no security of tenure and did not own the real estate [19] . His Honour continued [20] :
Accordingly, had [Mr and Mrs Giumelli] not undertaken to transfer the [p]romised [l]ot to [Robert], he would not have remained in the partnership and worked on improving the new orchard. The work done on the Dwellingup property by [Robert], at the expense of the partnership (including [Robert's] share), while benefiting [Mr and Mrs Giumelli] (by adding to the capital value of their property) only stood to benefit [Robert] if the partnership continued for a sufficiently long period, and if [Mr and Mrs Giumelli] honoured their promises to him. As the partnership terminated (through no fault on the part of [Robert]) before the new orchard became productive, [Robert] in fact received little, if any, benefit from developing the new orchard. It was because [Robert] had foreseen this very possibility, and was therefore reluctant to continue as a partner, that [Mr and Mrs Giumelli] had made their promises on which he relied. 1. Giumelli (1996) 17 WAR 159 at 166. 2. Giumelli (1996) 17 WAR 159 at 174. 3. Giumelli (1996) 17 WAR 159 at 174-175.
Nicholson J determined the appropriate measure of relief by reference to his findings as to the second promise. His Honour's findings with respect to the third promise led to the dismissal of that aspect of the case from consideration. With respect to the second promise, the finding in favour of Robert as to the house but not the orchard led his Honour to conclude:
In my opinion it is not appropriate that an order be made that title in the land on which the house is situated be vested in [Robert]. The difficulties of access and use are patent. This appears to me to be a case where it is arguable that [Robert's] expectation can be met by a monetary payment determined in the light of the findings I have made. Subject to what may later be submitted, I consider that the money payment should be either the amount expended by [Robert] on the house or the present value of the house and land on which it is situate, whichever is the greater. After receipt of further submissions, his Honour ordered that a sworn valuation be prepared, following the receipt of which the court would determine the amount for which Robert might enter judgment against the appellants. The valuation was to indicate: "(a) the market value and replacement value of the house constructed in 1980 and land on which the house is built (only the land situated directly beneath the house)[; and] (b) the annual rental since 1985 representing the amount which might have been paid by a tenant occupying the house on the basis that a tenant was paying a sum which was reasonable having regard to the amenities of the house, the position of the house and any other relevant factors the valuer may regard as appropriate."
After provision of the valuation and following additional argument and the provision of reasons to supplement those which had been delivered on 10 September 1993, the primary judge, on 26 May 1994, ordered that the appellants pay to Robert the sum of $66,071. The order provided that, for the purposes of the calculation of interest thereon pursuant to s 32 of the Supreme Court Act 1935 WA, the date of judgment be deemed to be 10 September 1993. The figure of $66,071 represented the valuation as at 1993 of the house at $66,000 and the land at $71. The small sum in respect of the land represents the curiosity involved in valuing only that area of the promised lot upon which there stood the house.
In his supplementary reasons, the primary judge said that the compensation to which Robert was entitled in respect of the second promise was that sum which would place him in the position he would be in if he owned the house on the land on which it was situated and was able now to realise that asset. The relief sought on the pleadings did not independently extend to loss of rent from the house from the date of Robert's exclusion and this was not a matter which could be taken into account "in the award of equitable compensation for loss of the house and the land on which it stands".
His Honour did not make any order which would have had the effect of charging upon the Dwellingup property, or the promised lot, or any portion thereof, the amount for which he entered judgment and interest thereon. Such a charge or lien has been ordered in various decisions which are authorities in this field. They include, in the Privy Council, Chalmers v Pardoe [21] ; in New Zealand, In re Whitehead, Whitehead v Whitehead [22] and Stratulatos v Stratulatos [23] ; and, in the Supreme Court of New South Wales, Morris v Morris [24] and Cadorange Pty Ltd (In liq) v Tanga Holdings Pty Ltd [25] .
In their submissions, the appellants stress the need to limit the measure of equitable relief lest the requirement for consideration to support a contractual promise be outflanked and direct enforcement be given to promises which did not give rise to legal rights. However, in Verwayen [29] , Dawson J, after pointing out that at common law the role of estoppel was largely as a rule of evidence, stated that in equity its role has been vastly expanded to raise questions of substance. His Honour continued [30] :
At the same time, the discretionary nature of the relief in equity marks a further reason why the fear of the common law that promissory estoppel would undermine the doctrine of consideration is unwarranted. 1. (1990) 170 CLR 394 at 454. 2. Verwayen (1990) 170 CLR 394 at 454.
The matter was taken further by McPherson J in Riches v Hogben [31] . His Honour noted that the critical element is the conduct of the defendant after the representation in encouraging the plaintiff to act upon it [32] and continued [33] :
A consequence of applying the principle may be to complete an otherwise imperfect gift, as in Dillwyn v Llewelyn [34] , or to give effect to an agreement that, for want of certainty or consideration or of some other essential element, falls short of constituting an enforceable contract. Many of the reported cases are concerned with imperfect gifts; but there is of course a sense in which all agreements made or promises given without consideration are imperfect gifts of the benefits they purport to confer. What distinguishes the equitable principle from the enforcement of contractual obligations is, in the first place, that there is no legally binding promise. If there is such a promise, then the plaintiff must resort to the law of contract in order to enforce it, it being the function of equity to supplement the law not to replace it. The second distinguishing feature is that what attracts the principle is not the promise itself but the expectation which it creates. In that respect it represents the precise converse of what was said by Jessel MR in Ungley v Ungley [35] to be the basis for enforcing the contract in that case. Finally, the equitable principle has no application where the transaction remains wholly executory on the plaintiff's part. It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise. That is why in Dillwyn v Llewelyn [36] , where the son built on land promised but not effectively conveyed to him by a memorandum signed by his father, Lord Westbury LC said that the only inquiry was "whether the son's expenditure, on the faith of the memorandum, supplied a valuable consideration, and created a binding obligation". 1. [1985] 2 Qd R 292. See also Halliwell, Estoppel: unconscionability as a cause of action Legal Studies, vol 14 (1994) 15, at pp 17, 20-22 ; Smith, How Proprietary Is Proprietary Estoppel?, in Rose (ed), Consensus Ad Idem (1996) 235, at pp 239-243 . 2. Riches [1985] 2 Qd R 292 at 300. 3. Riches [1985] 2 Qd R 292 at 300-301. 4. (1862) 4 De GF & J 517 [45 ER 1285]. 5. (1877) 5 Ch D 887 at 891. [The Master of the Rolls there described acts of part performance of the plaintiff which prevented the setting up of the Statute of Frauds as a bar to the specific enforcement of a parol contract respecting an interest in land as indicative of "not a mere expectation, but an actual promise". See also, as to this distinction between promise and expectation as foundations of obligations, McBride, The Classification of Obligations and Legal Education in Birks (ed), The Classification of Obligations (1997) 71, at pp 75-77 .] 6. (1862) 4 De GF & J 517 at 522-523 [45 ER 1285 at 1287].
In Olsson v Dyson [37] , Kitto J observed that the judgment of the Lord Chancellor in Dillwyn v Llewelyn seemed to contain two concurrent lines of reasoning. One was that, assuming there was no contract, nevertheless the conduct of the father was such as to bind him in conscience to make the legal situation correspond with the implication and the encouragement given the son to lay out the money. The other was that the father's conduct in encouraging the son to build the house on the footing that the land would be his, when acted upon by the son, created an equity which bound the father to make good the son's expectation.
It is necessary now to say something as to the circumstances which gave rise to the litigation in Verwayen, upon which decision the appellants place much reliance. By its defence to an action in tort brought against it by a former naval serviceman, the Commonwealth admitted liability and did not plead that the action was statute-barred or that it had owed no duty of care to the plaintiff because he was injured whilst acting as a serviceman in the course of combat exercises. The failure to plead such defences was in accordance with the then stated policy of the Commonwealth. The question of damages remained in issue. Following a change in that policy, the Commonwealth applied to a Master for leave to amend its defence so as to raise both defences. Leave was opposed [38] but was granted. There does not appear to have been any appeal brought from the Master's decision. The reports of the litigation in this Court do not disclose any reasons given by the Master.
It would seem that in the exercise of the discretion upon opposition to the grant of such leave, a question arose as to whether, in the light of the past conduct by the Commonwealth of the litigation, leave should be refused. That presented to the Court the task not of adjudicating legal or equitable rights but of assessing the relevant factors. In a comparable situation in England, the House of Lords in Roebuck v Mungovin [39] spoke of the decision upon such an application as "a classic exercise of a discretion [by] simply taking the defendants' conduct into account".
However that may be, leave was granted to amend so as to raise both defences. By his reply the plaintiff pleaded that the Commonwealth had waived the two defences and that it was estopped from relying on either. After an interlocutory excursion to the Full Court of the Supreme Court of Victoria [40] , arguments raised by the pleadings were dealt with by the trial judge before a jury was empanelled and as matters of law on agreed facts. The trial judge entered judgment for the Commonwealth [41] .
Prima facie, the operation of an estoppel by conduct is to preclude departure from the assumed state of affairs. It is only where relief framed on the basis of that assumed state of affairs would be inequitably harsh, that some lesser form of relief should be awarded. His Honour added that ultimately [45] : the question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted. The prima facie entitlement to which his Honour had referred would be qualified if that relief would "exceed what could be justified by the requirements of conscientious conduct and would be unjust to the estopped party"; an appropriate qualification might be a requirement that the party relying upon the estoppel do equity [46] . 1. Verwayen (1990) 170 CLR 394 at 443. 2. Verwayen (1990) 170 CLR 394 at 445. 3. Verwayen (1990) 170 CLR 394 at 442. See, as to the imposition of terms in such a case, S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637 at 653, 656-657.
Brennan J held that the case before the Court was not one where "the minimum equity needed to avoid the relevant detriment" was the holding of the Commonwealth to its promises by the entry of an interlocutory judgment for the plaintiff and an order for the assessment of his damages [53] .
McHugh J concluded that what will be required to satisfy the equity which arises against the party estopped depends on the circumstances and that, whilst often the only way to prevent the promisee suffering detriment will be to enforce the promise, in the present case there was no equitable estoppel established because there had been no representation by the Commonwealth as to present or past facts [54] .
The upshot is that the respondent is correct in his submissions that the reasoning in the judgments in Verwayen does not foreclose, as a matter of doctrine, the making in the present case of an order of the nature made by the Full Court.
However, the appellants correctly challenge the Full Court order on other grounds. Before making an order designed to bring about a conveyance of the promised lot to the respondent, the Full Court was obliged to consider all the circumstances of the case. These circumstances included the still pending partnership action, the improvements to the promised lot by family members other than Robert, both before and after his residency there, the breakdown in family relationships and the continued residence on the promised lot of Steven and his family. It will be recalled that Steven is a party to the partnership action but not to the present action.
When these matters are taken into account, it is apparent that the order made by the Full Court reflected what in Verwayen was described as the prima facie entitlement of Robert. However, qualification was necessary both to avoid injustice to others, particularly Steven and his family, and to avoid relief which went beyond what was required for conscientious conduct by Mr and Mrs Giumelli. The result points inexorably to relief expressed not in terms of acquisition of title to land but in a money sum. This would reflect, with respect to the third promise, the approach taken by Nicholson J when giving relief in respect of the second promise.
Whilst the holding of the Full Court with respect to the third promise should be upheld, the Full Court erred in the measure of relief which it granted in respect of the promised lot. This is a case for the fixing of a money sum to represent the value of the equitable claim of the respondent to the promised lot. It will be necessary for the matter to be remitted to a judge of the Supreme Court to take that step. The amount so ascertained, with interest, should be charged upon the whole of the Dwellingup property. There will be no requirement of a subdivision of the promised lot as part of the remedy.
Fixing of the amount will require the making of valuations and allowances for a range of matters, some of which have been indicated above. It is neither possible nor appropriate now to fix any closed list of matters properly to be taken into account when the matter is remitted [55] . Further submissions and, if that court so chooses, additional evidence will be needed.
We should note that the judgment of Master Bredmeyer took matters of partnership accounting only up to June 1986 and, in any event, did not deal fully with all matters in dispute.
On one view, as to which we express no decision, for what is now some twelve years, the respondent has been deprived of a share of profits earned by the partnership from the promised lot and of rent from the house. Further, in fixing the sum to represent an appropriate monetary order there may be a case for an allowance in his favour representing a share of anticipated profits from the partnership in relation to the promised lot for a specified period of future years, perhaps contingent upon the joint lives of Mr and Mrs Giumelli.
On the other hand, an allowance would have to be made for the improvement to the value of the land since 1986 brought about, in particular, by Steven's work. In addition to the planting of fruit trees and the construction of sheds and coolrooms, the appellants contend there has been significant expenditure on water supply and storage systems.
To enable the matter to be dealt with adequately, it would be appropriate for the partnership action to be brought on concurrently for trial of remaining issues. The moving party in that action is the present respondent and he should be required by the Supreme Court, by direction in the present action, to take the necessary steps to prosecute to trial all remaining issues in the partnership action.
As we have indicated, the court seized with the present action should, as to it appears fit, grant leave for further evidence to be led upon the issues going to the computation of monetary relief. It may also be appropriate to adapt the procedure taken by Nicholson J at an earlier stage for the provision of valuation evidence.
The Court should make orders to the following effect. The appeal to this Court should be allowed. Orders 2, 8 and 9 of the Orders of the Full Court made on 12 March 1997 should be set aside and in place thereof Orders 1 and 2 of the Orders made by Nicholson J on 26 May 1994 should be set aside. In place thereof it should be declared that (a) the respondent is entitled to payment by the appellants of a sum representing the present value of the promised lot, to be determined by a judge of the Supreme Court in accordance with the reasons of this Court, taking into account all considerations for which allowance should be made in calculating that sum so as to do equity between the parties to the action and all relevant third parties, and upon such further evidence as that Court may allow and (b) such sum, when so ascertained and made payable by the appellants, will be charged upon the whole of the Dwellingup property with interest under s 32 of the Supreme Court Act as fixed by the Supreme Court.
The respondent obtained a costs order in his favour of the action tried by Nicholson J. We would not disturb this order. Before this Court, neither side fully succeeded and we would make no order as to the costs of the appeal to this Court. The comprehensive picture which should be presented before costs of the proceedings in the Full Court of the Supreme Court are finally disposed of will be available only upon conclusion of the steps now to be taken before a judge of the Supreme Court. We would set aside Order 5 of the Orders of the Full Court and order that the costs of the appeal and cross-appeal to the Full Court be the costs of the remaining proceedings in this action in the Supreme Court.
Mr Giumelli, the first appellant, died on 21 January 1999 after the hearing of this appeal. That situation does not destroy or end the appeal but, before final orders are made, Mr Giumelli's legal personal representative or representatives should be made a party to the appeal [56] .
Giumelli
Giumelli
(1996) 17 WAR 159
(1990) 170 CLR 394
(1993) 177 CLR 485
(1987) 164 CLR 137
(1998) 195 CLR 566
(1990) 20 NSWLR 26
(1997) 44 NSWLR 46
(1985) 2 NSWLR 406
(1995) 5 Tas R 254
(1996) 131 FLR 241
(1998) 81 FCR 475
(1969) 120 CLR 365
(1994) 122 ALR 637
(1921) 29 CLR 527
Appeal allowed; orders 2, 8 and 9 of the Full Court set aside and replaced with orders setting aside Nicholson J's orders 1 and 2; declaration made that the respondent is entitled to a monetary sum representing the present value of the promised lot (to be determined by a single judge taking into account all considerations necessary to do equity between the parties and third parties) charged on the whole Dwellingup property with interest under s 32 of the Supreme Court Act 1935 (WA); costs of the Full Court appeal and cross-appeal made costs in the remaining proceedings; no order as to costs of the High Court appeal.