Henderson v Miles [2005] NSWSC 867 | Case summary

2219/03 - HENDERSON v MILES (NO 2) JUDGMENT 1 HIS HONOUR: I gave judgment in this matter on 20 July 2005; [2005] NSWSC 710. I indicated that in my view the only relief to which the plaintiff was entitled was an equitable charge on the defendants' property based on the formula $39,000 multiplied by X, minus Y where X was the percentage value of the life estate of the plaintiff and Y was a discount for contingencies, the principal contingency being that the plaintiff might have quit the premises before her death. 2 The order I envisaged, accordingly, was that a writ of possession would issue and that upon the plaintiff vacating she would be paid that sum with interest not to run until the date of vacation. 3 When the matter came into the list for short minutes to be considered, no form of short minutes was proffered. 4 However, Miss Pentelow for the plaintiff, then submitted both in written submissions and orally, that that is quite the wrong way of approaching it. Mr Gorrick for the defendant, protested that I had already decided the matter and Miss Pentelow should not be allowed to re-agitate it. 5 Miss Pentelow would have the amount of the charge calculated not based on the difference of value between the defendants' land with the plaintiff's dwelling and the land without the dwelling, but rather on the capitalised value of substitute accommodation for the plaintiff for 22 years, or alternatively, the capitalised value of the rent which the defendants can obtain from the plaintiff's dwelling for 22 years less the appropriate figure for vicissitudes. 6 There was some argument about this, but as it seemed to me that Miss Pentelow's arguments were wholly misdirected, I must confess I reached the stage of wondering whether my own memory of what the applicable law was might need to be refreshed. As there was only 10 minutes set aside for oral argument, I reserved my judgment. 7 I was asked to leave the question of costs until after the further judgment was delivered. 8 Accordingly, what I intend to do in these reasons is to analyse the various cases referred to by Miss Pentelow in her submissions of 27 July and consider whether I should reopen the question of the basis on which the equitable charge should be calculated. 9 When I commenced considering the matter, I became concerned that not only was it necessary to consider the material discussed by Miss Pentelow in her submissions, but it was also necessary to consider wider questions. 10 I will shortly consider the cases to which Miss Pentelow referred me, but before doing so, it is necessary to go back to the reasons for decision and note the type of equity with which the court was dealing. 11 The basal facts were that, in 1985, the plaintiff was dissatisfied with her accommodation and asked the defendants whether she could build a house for herself on their land. Mrs Miles was reluctant to accede to her mother's request, Mr Miles, more so, but they agreed to the proposal requested. In 2002 the parties fell out in a big way. 12 The relationship broke down as a result of suspicions reasonably engendered in the defendants because of the plaintiff's conduct. The defendants considered that the plaintiff had stolen money from them and their children and this was reinforced when they saw the plaintiff with their money box. The plaintiff denied any dishonesty and said that she was only handling the money box because she wanted change. Although this was hard to accept, I did not make any finding as to whether the plaintiff was dishonest or not. I did not need to do so, and experience tells me that where I do not have to do so in a family dispute, it is wiser not to make a finding in the hope that family harmony might one day be restored. 13 Where a family joint venture breaks down without attributable blame, it is unconscionable for one of the parties to retain a windfall which the parties never contemplated that that party would receive. 14 This equity was first identified in modern times by Deane J (with whom Mason J agreed) in Muschinski v Dodds (1985) 160 CLR 583 at 620, who thus expressed the principle: "the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specifically provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do." 15 Deane J cited immediately after that statement some partnership cases such as Atwood v Maude (1868) LR 3 Ch App 369 at 374-5 and Lyon v Tweddell (1881) 17 Ch D 529. 16 The passage has been applied on many occasions since, see eg Baumgartner v Baumgartner (1987) 164 CLR 137 at 147-8 and Luke v Chamberlain [2000] NSWSC 626 discussed later in these reasons. 17 In Lyon v Tweddell (1881) 17 Ch D 529 the partnership agreement between the parties required the plaintiff to pay a premium of 600 pounds in 1875 and a further 500 pounds in 1879. In 1880 as a result of constant disagreements between the partners, the partnership was dissolved. At that stage, Bacon VC ordered that, on taking accounts, the unpaid portion of the premiums should not be charged to the plaintiff and this was upheld on appeal. Atwood v Maude was a similar case. 18 As can be seen from its roots in cases such as Lyon v Tweddell, the expression "without attributable blame" in the standard formula does not mean that the court must try and work out which of the parties in a domestic relationship was of the greater fault; see Callaghan v Callaghan (1995) 64 SASR 396 at 407, where Perry J said that the question as to whether equity gives relief does not turn on the nice question as to where the blame lies. 19 I will refer to the equity identified in Muschinski v Dodds as "the Windfall Equity". It would be classed as a general equity. Other general equities are Proprietary Estoppel, Promissory Estoppel and the Ocean Island Equity based on the unconscionability of a person who has taken the benefit of a transaction while not assuming its burden; see Tito v Waddell (No 2) [1977] Ch 106. 20 However, it should not be assumed that the remedy for each general equity is the same. This is so even though: (i) the remedy in each case is prescribed as "the minimum equity" to assuage the defendant's conscience; and (ii) there are unifying processes at work with respect to the different types of estoppel at equity and common law. 21 In particular, one must note the late Professor Birk's comment as to where one draws the line between making an order which fulfils expectations and one which atones for detriment. He said in his "Introduction to the Law of Restitution" (Clarendon Press, Oxford, 1985) at p 291 that the only justification for regarding expectations is that the defendant did something to induce those expectations. At p 293 he said that courts must distinguish between cases based on promise and the cause of action based on free acceptance. 22 I will now analyse the authorities relied on by Miss Pentelow in the order in which she noted them to see whether, if properly analysed, they give support to her proposition that the minimum equity that the plaintiff should obtain is the value of the rented premises for the expected term of her life. 23 However, I should note at once that there is a basic fallacy in this approach. Most of the authorities relied on by Miss Pentelow are proprietary estoppel cases strictly so called. These raise equities based on unfulfilled promises. The windfall equity is quite different: the promise has been fulfilled, but the resultant arrangement has come to an end in circumstances not contemplated by the parties, leaving the legal interests in one party who, if equity were not to intervene, would obtain an unconscionable benefit. 24 With this warning, I will pursue the analysis, and, after I have done so, further explain the point I have just made. 25 The first case relied on by Miss Pentelow is Chalmers v Pardoe [1963] 1 WLR 677, especially at 681-2; [1963] 3 All ER 552 especially at 555. In that case Chalmers and Pardoe made an arrangement that Chalmers could build buildings on Pardoe's land. Chalmers erected six buildings. The arrangement was not able to proceed because the appropriate statutory consent was not obtained. The Privy Council on appeal from Fiji held that equity would prevent Pardoe from obtaining for nothing the buildings that Chalmers had erected. However, because the whole dealing was illegal, equity did not in that case give any relief. 26 Miss Pentelow submitted that the Privy Council had said that the plaintiff was entitled to an equitable charge or lien for the amount he had spent. This is an overstatement. The Board said that "A court of equity may declare that a person who has expended the money is entitled to an equitable charge or lien for the amount so expended". 27 Two things should be noted. First, the case was clearly one of proprietary estoppel. Secondly, the statement I have quoted was made with reference to Unity Joint Stock Mutual Banking Association v King (1858) 25 Beav 72; 53 ER 563 which the Privy Council said involved unusual facts and which was decided on the detriment/reliance approach (a term I will define later in these reasons). 28 The Privy Council also quoted from its decision in Plimmer v Mayor of Wellington (1884) 9 App Cas 699 at 714 (in the All England Report of Chalmers falsely attributed to Lord Romilly in the Unity Bank case) that "The court must look at the circumstances in each case to decide in what way the equity can be satisfied." 29 The next case Miss Pentelow mentioned was Morris v Morris [1982] 1 NSWLR 61. In that case the plaintiff contributed $28,000 towards an extension of the defendant's house on the basis that he would continue to live in it. The relationship soured. McLelland J said that the principle was a flexible one and, although I would not class those proceedings as a proprietary estoppel case, the judge applied like principle and followed Chalmers v Pardoe. He held that in the case before him, the plaintiff's equity would be satisfied by having an equitable charge for $28,000 plus interest as from the date of commencement of the proceedings. The plaintiff was not living in the house at the time when the suit began. It seems to me that this was just a one-off case and does not give any particular guidance as to the form of order that should be made generally. 30 In Jennings v Dixon (21 February 1983, unreported) Powell J held that the plaintiff had a contractual but irrevocable licence to remain in her relatives' home. Powell J considered the various remedies and said that "The only remedy which can provide justice for the Plaintiff … is one which will enable her to obtain from the Defendants a refund of the moneys which were contributed by her pursuant to the agreement … those moneys bearing interest as from the date on which the defendants effectively ousted the plaintiff." The basis for this was the same as his Honour later explained in Hall v Goulding (Powell J, 23 March 1983, unreported). 31 Hall v Goulding is again a granny flat case involving an elderly mother who moved in with her daughter having contributed $15,000 towards the cost of the building. 32 Powell J dealt with the matter as a trust case. There was a trust in favour of the plaintiff of a right to occupy for her life. However, the court needed to be practical and, following what Needham J had done in Malsbury v Malsbury (1979) [1982] 1 NSWLR 226; 1 BPR 9550, equity demanded that the trust having become impossible, the defendants ought to be regarded as holding the $15,000 on trust to be repaid if the principal trust became impossible. Thus, he ordered the return of the plaintiff's $15,000. The plaintiff asked for interest, but the learned Judge gave interest only from the date of her vacation. 33 Powell J considered the case in proprietary estoppel, but did not embrace it. However, he said, "The recognition and enforcement of 'proprietary estoppel' does not inevitably carry with it title to the property, or to some estate or interest in it; while, in any particular case, the remedy that is, in fact, awarded may lead to the grant or conveyance of an estate or interest in the subject property, the principle is that the equity is enforced in whatever seems to the Court to be, in all the circumstances of the particular case, the most appropriate way." 34 None of these cases seem to set down any principle apart from reaffirming what I have quoted from Plimmer's case above. 35 Miss Pentelow then cites a series of cases where repayment of expenditure was not the order that was made. She commences with Tanner v Tanner [1975] 1 WLR 1346; [1975] 3 All ER 776. That was a case of man and mistress. The mistress moved into the man's house giving up her rent controlled flat, the relationship soured and the man sought to evict the woman. 36 The man succeeded at first instance. The Housing Authority provided the woman with accommodation and she moved out of the house. 37 The Court of Appeal considered that the woman had an irrevocable licence for value and that an injunction should have gone to protect her rights. However, as circumstances had now overtaken this, the man had received an unjust enrichment in having the house free from the woman's licence. 38 Thus the Court of Appeal reached the conclusion that the appropriate order was to pay the mistress £2,000 cash. Lord Denning said (with which Browne LJ and Brightman J agreed): "The plaintiff has obtained an unjust benefit and should make restitution. In the circumstances the court can and should assess compensation to be paid by him. … It seems to me a reasonable sum for loss of this licence (which the defendant ought not to have lost) would be £2,000." 39 Miss Pentelow argues that in the present case a parity of reasoning would produce the result that her client should receive compensation for the loss of her licence to occupy. With respect, when properly analysed, Tanner's case was decided on principles which have no similarity with the present case. 40 It should be noted that all of the cases which I have reviewed to date from Miss Pentelow's list were decided before Muschinski v Dodds. 41 The next case to which Miss Pentelow referred was Baker v Baker [1993] TLR 95, apparently only reported in the extracts we have from the Times Law Reports apart from a couple of series in England, the Family Law Reports and the Housing Law Reports which are not readily available to me. 42 The basal facts were that a father had given up a secure tenancy and moved in with his son and daughter in law to a house which was partially purchased with the father' money. Relationships soured. The trial judge awarded the plaintiff a charge for the value of his expenditure. However, the Court of Appeal set this aside because the value of his interest, namely the right to live rent free in the property for the rest of his life was worth less than the amount which he had originally spent. 43 The case reinforces the view that if the detriment exceeds the expectation the court ordinarily awards the expectation. The case, accordingly, is no guide in the instant situation. 44 Miss Pentelow then relied on Callaghan v Callaghan (1995) 64 SASR 396. There a man spent money towards the purchase of a house in the name of his daughter with the intention that he would be entitled to live in a detached flat at the rear for the rest of his life. Perry J said that despite the fact that no counsel had argued this way, it was a case of equitable estoppel. With great respect, this conclusion is hard to support, but it does show how the judge arrived at the proper remedy. 45 Perry J said that the promise was to provide the flat and that in the case before him the proper order was a payment to compensate for the loss of the rental value of the flat capitalised at an appropriate discount. 46 The Judge referred to three cases, Nichols v Nichols (1986) 4 BPR 9240; Pearce v Pearce [1977] 1 NSWLR 170 and Riches v Hogben [1985] 2 Qd R 292. None of these really support the proposition that it is an ordinary consequence in this sort of case that the plaintiff receive compensation for the value of what she has lost as opposed to the lesser of either what she has lost or what the defendant has gained by the arrangement coming to a premature end. 47 Nichols was a very interesting case. It was a man and mistress case. The man had over-capitalised the mistress's property on Lord Howe Island, the mistress alone having the right to live on Lord Howe Island. There were children of the relationship and the parties had intended the home to be a home for the children. 48 The man submitted that the appropriate remedy was to grant him a charge on the land for his expenditure and an order for sale or at least a charge over the proceeds of sale proportionate to his expenditure. The woman submitted that the remedy should be limited to an order which took account of what the plaintiff had lost by the termination of the relationship. 49 Needham J classed the case as a Windfall Equity case. He decided that neither was the appropriate method of dealing with the problem in that case. Instead he ordered that the property be sold and the proceeds be divided in such a way that the woman retained sufficient funds to provide an adequate house for herself and her children with the balance to go to the man. 50 Pearce does not seem to me to provide any guidance. In that case, no order for compensation was made, merely a declaration that the de facto wife held an irrevocable licence to stay in the house. 51 In Riches, McPherson J dealt with a promise that if the plaintiff emigrated to Australia the defendant would buy him a house and put it in his name. His Honour held that there was a binding contract and granted specific performance. However, his Honour said further that, if he were wrong on this, the case would be a clear one of proprietary estoppel and the appropriate relief would be the same. The only way to compensate for that promise was to order that the property be put in the name of the plaintiff. 52 In my view, none of the cases cited by Perry J in Callaghan supports the sort of order he made in that case though it may well be that the order he made was in fact the appropriate order to be made on the facts before him. 53 The next case referred to by Miss Pentelow is Stoklasa v Stoklasa [2004] NSWSC 518. That was a very odd case. The defendant had a house transferred to him at an under-value on the basis that he would care for the plaintiff. The relationship broke down. Gzell J said, "It would be unconscionable and inequitable for him to retain the benefit of the transfer of the house at an under-value freed from the obligation of providing care and accommodation" [40]. In those circumstances, Gzell J considered it to be appropriate to grant an equitable charge for the value of the obligation. 54 This would seem to be in accordance with principle. There had been no expenditure as such by the plaintiff, but he had caused the defendant to have the house at an under-value. It was not unconscionable for the defendant to retain the benefit of the transfer at an under-value [41]; accordingly the only way of dealing with the matter would be to grant a charge for the value of the extra benefit that the defendant had gained. 55 With great respect, it is not of much value to pick out a series of cases which have diverse facts and attempt to say that one ordinarily satisfies the general equity created by proprietary estoppel, let alone the general windfall equity, by giving to the plaintiff what she has lost. 56 In fact there are quite a number of authoritative cases and writings which do attempt an analysis. I will endeavour to mention some of these shortly. 57 Proprietary estoppel was defined in Taylor Fashions Ltd v Liverpool Victoria Trustee Co Ltd [1982] QB 133 at 144 (a 1979 decision of Oliver J sitting in Chancery) as follows, "if A under an expectation created or encouraged by B that A shall have a certain interest in land, thereafter, on the faith of such expectation and with the knowledge of B and without objection from him, acts to his detriment in connection with such land, a Court of Equity will compel B to give effect to such expectation." 58 Snell's Equity, 31st ed p275 says of this statement, "This remains the most important and authoritative modern statement of the doctrine although it must now be qualified by the proposition that the relief granted by the court must be proportionate to the detriment suffered and that the court is not always required to satisfy his or her expectation by awarding the promised or expected interest in the land." The doctrine also extends beyond interests in land. 59 Furthermore the English view may need slight modification in Australia to add the element that, in the light of the High Court's decision in Svenson v Payne (1945) 71 CLR 531, it is necessary that B knows what his property rights are. 60 As Robert Walker LJ pointed out in what seems to be the leading modern English case (though it has never been reported) of Jennings v Rice [2002] EWCA Civ 159 [54], there is a divergence in approach between Australian and English Courts as to the appropriate order that might ordinarily be made in proprietary estoppel cases. 61 This comes about because of the divergent approaches of the justices of the High Court in Commonwealth v Verwayen (1990) 170 CLR 394. 62 All are agreed that the appropriate relief is the minimum equity to atone for the unconscionabilty or, as it is sometimes put, the minimum equity to do justice. This expression "minimum equity" seems to have originated in the judgment of Scarman LJ in Crabb v Arun DC [1976] Ch 179 and has been constantly employed ever since. 63 There are three ways of approaching the assessment of the minimum equity to do justice. First, the court may compensate the plaintiff for the detriment he or she has suffered because of his or her reliance on the promise (the detriment/reliance approach). Secondly, the court may order that the plaintiff's expectation be fulfilled (the expectation approach) or thirdly, the court may mould a special remedy to meet the particular case. 64 In Commonwealth v Verwayen, four judges, Mason CJ, Brennan, Dawson & McHugh JJ favoured the detriment/reliance approach, Deane J favoured the expectation approach and two others, Toohey and Gaudron JJ decided the case on another basis. Dawson J held, however, that to atone for the detriment in that case required fulfilment of the expectation. The nett result of the case was in accordance with the opinions of Deane, Dawson, Toohey and Gaudron JJ, but the majority on the present point was the other way. 65 I will return to Verwayen shortly. However, it is useful first to consider the earlier High Court decision in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. 66 The judgment in that case which gave the deepest consideration to the present problem is that of Brennan J. His Honour said at p 423: "The object of the equity is not to compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes unfulfilled, will be suffered by the party who has been induced to act or to abstain from acting thereon." 67 In Verwayen at p 411 Mason CJ said:

"Equity was concerned, not to make good the assumption but to do what was necessary to prevent the suffering of detriment. To do more would sit uncomfortably with a general principle whose underlying foundation was the concept of unconscionability." 68 At page 413, Mason CJ said that a court: "may do what is required, but not more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs…which assumption the party estopped has induced him to hold, from suffering detriment in reliance upon the assumption as a result of the denial of its correctness. A central element of that doctrine is that there must be a proportionality between the remedy and the detriment which is its (estoppel's) purpose to avoid. It would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption." 69 In the same case, Brennan J said at 429: "The remedy is to affect what Scarman LJ called 'the minimum equity to do justice' in Crabb v Arun District Council [1976] Ch 179 at p 198 … . The remedy is not designed to enforce the promise although, in some situations … the minimum equity will not be satisfied by anything short of enforcing the promise." 70 In Verwayen, Dawson J said at 454 that the view in Waltons Stores (Interstate) Ltd v Maher at 404-5 was that an estoppel in equity may not entitle the party raising it to the full benefit of the assumption upon which he relied. The equity was to avoid the detriment and while this may require a party to make good the assumption, the relief required may be considerably less. 71 McHugh J at p 501 spoke in terms of the detriment ceasing or being paid for and that what will be required depends on the circumstances. 72 Thus the Australian preference is not to fulfil the plaintiff's expectation but to analyse what is the detriment suffered by the plaintiff from doing acts and things which she might not otherwise have done because of the promise. 73 However, an article by Andrew Robertson in (1996) 20 MULR 805, "Satisfying The Minimum Equity: Equitable Estoppel Remedies after Verwayen" analyses 26 post Verwayen cases (listed with references at page 829) and notes that in 24 of those cases, the expectation was actually fulfilled. He says at 833-4 that this was because: "In most of the cases, that relief can be justified on the basis that the detriment suffered by the representee in reliance on the relevant assumption could not be quantified, because expectation relief neatly avoids a detriment which would be difficult to quantify, or because the reliance and expectation interests coincided." 74 However, Michael Spence in "Protecting Reliance" (Hart, Oxford and Portland Oregon, 1999) p 69 says that this merely shows that Australian Courts may have been too ready to enforce expectations. 75 As I noted earlier, the English have gone their own way on this aspect of proprietary estoppel. However they have done so to a great extent by following the words of Mason CJ in Verwayen and disregarding the thoughts of the other judges. 76 English decisions in the middle 20th century such as Crabb v Arun DC give the impression that the detriment/reliance principle was ordinarily applicable. However, later English cases tend to diverge towards expectation. 77 Jennings v Rice [2002] EWCA Civ 159 is a decision of Aldous, Mantell and Robert Walker LJJ. In that case, a gardener had cared for a millionairess who became afraid of the dark after a burglary and he had the expectation that he would be left a sizable part of the millionairess' estate. The house concerned was worth £420,000. The trial judge considered that the cost of full-time nursing care was about £200,000 for the period in question. He thought that the gardener could buy a house for £150,000 and made an award of £200,000. 78 In the Court of Appeal Aldous LJ analysed the recent cases. He noted that the most essential requirement was that there must be proportionality between the expectation and the detriment. He rejected the approach that the way in which the courts must approach these problems is to satisfy the plaintiff's expectation, whatever the circumstances. 79 Robert Walker LJ said that the problem was whether the fundamental aim is to fulfil the claimant's expectations or to compensate him for his detrimental reliance on the defendant's non-contractual assurances, or is there some intermediate objective. He said at [44]: "The need to search for the right principles cannot be avoided. But it is unlikely to be a short or simple search, because (as appears from both the English and the Australian authorities) proprietary estoppel can apply in a wide variety of factual situations, and any summary formula is likely to prove to be an over-simplification. The cases show a wide range of variation in both of the main elements, that is the quality of the assurances which give rise to the claimant's expectations and the extent of the claimant's detrimental reliance on the assurances. The doctrine applies only if these elements, in combination, make it unconscionable for the person giving the assurances … to go back on them." 80 Robert Walker LJ then said at [49]: "It is no coincidence that these statements of principle refer to satisfying the equity (rather than satisfying, or vindicating, the claimant's expectations). The equity arises not from the claimant's expectations alone, but from the combination of expectations, detrimental reliance, and the unconscionableness of allowing the benefactor … to go back on the assurances." 81 Robert Walker LJ continued at [50]: "There is a category of case in which the benefactor and the claimant have reached a mutual understanding which is in reasonably clear terms, but does not amount to a contract. I have already referred to the typical case of a carer who has the expectation of coming into the benefactor's house either outright or for life. In such a case the court's natural response is to fulfil the claimant's expectations. But if the claimant's expectations are uncertain, or extravagant, or out of all proportion to the detriment which the claimant has suffered, the court can and should recognise that the claimant's equity should be satisfied in another (and generally more limited) way." 82 His Lordship then said at [52] that it would be unwise to attempt any comprehensive enumeration of the factors relevant to the exercise of the court's discretion, or to suggest any hierarchy of factors. However, they include, but are not limited to, misconduct of the claimant or particularly oppressive conduct on behalf of the defendant, the need for a clean break between people who cannot live together, alterations in the state of the benefactor's assets and circumstances, the likely effect of taxation and other claims on the benefactor or his or her estate. 83 Thus, even in England, it is not necessarily the result of a successful proprietary estoppel claim that the expectation will be fulfilled; see for instance Bawden v Bawden [1997] EWCA Civ 2664. However, one can make out a case on the English authorities that in proprietary estoppel cases, the expectation approach is the ordinary rule; see the article "The Remedial Discretion in Proprietary Estoppel" (1999) 115 LQR 438 written by Simon Gardner of Lincoln College, Oxford. See also Sledmore v Dalby (1996) 72 P & CR 196; Gillett v Holt [2001] Ch 210 and Ottey v Grundy [2003] EWCA Civ 1176. 84 However, even in the case of proprietary estoppel, it is not at all clear that the fulfilment of the expectation will necessarily be the way to provide the minimum equity. Indeed as Bright and McFarlane point out in their article "Personal Liability in Proprietary Estoppel" (2005) 3 (2) TQR 27, a strong case may be made out for remedying unconscionability in such a case by imposing a personal liability on the promisor; see Holiday Inns Inc v Broadhead (1974) 232 EG 951. 85 Returning to Australian authorities, a good example of literally applying the majority approach in Verwayen is Public Trustee v Wadley (1997) 7 Tas R 35. In that case a daughter had worked for the testator in the expectation that she would receive his house or a substantial benefit. When he died and she did not receive anything, the trial judge gave her half the value of the house. However, on appeal the majority Crawford and Zeeman JJ, held that the relief should not extend beyond the compensation for the relevant detriment suffered by the daughter. Domestic services were worth about $10 an hour and the appropriate multiplier gave her $15,000 and not the $32,000 that the trial judge had awarded. 86 In Bennett v Horgan (3 June 1994, unreported) Bryson J said: "Prima facie the plaintiff's entitlement is to a proportionate repayment of their capital contribution on the premature collapse of the venture, but the true remedy is such order as will prevent the defendants from retaining the benefit of the property to the extent that it would be unconscionable for them to retain it." 87 Finally, Master Macready gave a valuable exposition in Luke v Chamberlain [2000] NSWSC 626. In that case a woman and her children on her divorce moved in with her next door neighbours. Subsequently, the plaintiff paid for renovations which increased the value of the property by $42,500. She did this under a loose arrangement that she would be paid back when the house was sold or when she left the premises. Relationships broke down. 88 The defendants argued that the value of the possession which the plaintiff had already enjoyed was more than what she spent on renovations. The Master considered this irrelevant as the parties had never discussed rent. The Master considered the base figure of $42,500 and awarded an equitable charge for a slightly discounted figure plus interest. (The plaintiff had already vacated). 89 To summarize, the cases cited by Miss Pentelow, read in conjunction with the other cases and materials that I have digested, might provide some support for her basal proposition, at least if this were a proprietary estoppel case (which it is not) and if one did not follow the majority in Verwayen. 90 If this were a proprietary estoppel case, one might also argue that, even if the court looked to detriment rather than expectation, the detriment suffered by the plaintiff is in not having accommodation for the rest of her life. 91 However, if this were a proprietary estoppel case, that would not be a relevant detriment. As Brennan J pointed out Verwayen at 429 there is a distinction between detriments which flowed from the defendant's failure to fulfil its promise as opposed to acts done or omitted by the plaintiff in reliance on making the promise. The former are not relevant detriments. 92 The present case is not a proprietary estoppel case strictly so called. It is not a case where the promise has been wholly unfulfilled. The arrangement was consummated, but has fallen apart as a result of unforeseen problems in its working out. 93 Earlier in these reasons, I noted the philosophic distinction made by Professors Birks between promise and promissory estoppel cases on the one hand and cases where there was no promise by the defendant which could be said to induce an expectation. This is a further reason in principle for drawing a line between the general equity arising from a proprietary estoppel case strictly so called and a general equity case resulting from an unconscionably retained windfall. 94 The present case clearly falls into the latter category. There has been no broken promise by the defendants nor any unfair inducement by them to bring the plaintiff to her present position. 95 By analogy, in windfall cases, one looks not to the detriment that might be suffered because the arrangement did not continue, but merely to the detriment of losing a fund to the other party to the arrangement through unexpected circumstances, where such loss would result in the other having an unconscionable gain. 96 The remedy given in Muschinski v Dodds was that each party should have returned to them their respective contributions to the joint property and then share in the surplus equally. 97 That will not always be the appropriate way of dealing with a problem in this area of the law. I am mindful of the principles expressed in cases such as Forgeard v Shanahan (1994) 35 NSWLR 206 (though a different equity was there involved), that it is usually proper to allow the lesser of the costs and improved value when taking accounts between co-owners where one owner has spent money on improving the property. 98 What then was the windfall that would be unconscionably retained by the defendants when the relationship failed if no order were made? 99 One way of assessing the windfall would be to say that they now have a property which is $39,000 more valuable than had the plaintiff not built her house. 100 My earlier reasons said that this was the correct way of looking at the situation. However, as in any event, the defendants were to receive the house on the plaintiff's death or permanent removal, the benefit was $39,000 less the adjustments mentioned earlier in these reasons. 101 Miss Pentelow would put it that the defendants have a windfall of having property which they can let at so much per week free from the obligation to provide accommodation for the plaintiff. They would have had that obligation for 22 years (the plaintiff's life expectancy) so that their windfall is the present value of the release of that obligation (or the value of being able to let the house for 22 years at a commercial rent which should be much the same thing) which she values at $103,000. 102 In no windfall case of which I am aware has a court considered potential windfall. To adopt the capitalization of future rents approach would be to charge the defendants now with a benefit that they would not be able to realize until future dates. Tanner v Tanner (supra) comes close to this, but there the defendant had realized his property. 103 Next, the evidence tends to suggest that the defendants would like to sell the property. The increased market price will be their gain, not the value of what might be obtained for the house as a separate letting proposition.

Henderson v Miles

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Judgment (12 paragraphs)

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Cases Cited (11)

Cited By (21)