Kriezis v Kriezis

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3349/03 Sofia Kriezis v Helen Kriezis JUDGMENT 1 His Honour: As Greeks have done for two and a half millennia, in 1965, Michael Kriezis and Helen Kriezis (his wife who is the defendant), with all but one of their young family, left their native Corinth for new opportunity overseas. They came to Australia, to Sydney, where Michael (then aged 45) obtained work as a labourer on the roads and his sons Jim (born 28 October 1950) and Peter (born 14 February 1952) did labouring work. All the wages were pooled, in order to save as rapidly as possible to buy a house. A daughter, Angela (usually called Kula), aged 17 years, married within a year and left the family, so she could not have contributed significantly to this aim, and a younger daughter, Evangelia (born 5 October 1956), was at school. Helen Kriezis, who has never learned English, stayed at home, occupied with domestic duties. In 1966, a house was purchased at Drummoyne for about $14,500, of which $13,000 was provided by mortgage. Jim's and Peter's earnings continued to be pooled with their father's, and he allowed them only pocket money, so that the mortgage could be paid off. In 1967, their oldest brother George (born 20 September 1946), who had remained behind in Greece to fulfil his military service obligation, finally arrived in Australia with his wife, but they only stayed with Michael and Helen Kriezis for six months before finding their own accommodation. 2 In 1969, Jim Kriezis married the plaintiff Sofia Kriezis and brought her to live with his family in the house at Drummoyne. Sofia Kriezis paid for the wedding because Jim Kriezis still had no money except pocket money. After her marriage, Sofia Kriezis also handed over her earnings to Michael Kriezis; but within some months, she fell pregnant, so she left her employment. A daughter, Helen Kriezis, was born on 13 March 1970, and Sofia Kriezis resumed employment, again handing her wage over to her father-in-law and receiving pocket money through her husband. 3 Early in 1971, Jim and Sofia Kriezis decided to return to Greece with their daughter. But late in the year they came back to Australia, to stay with Sofia's brother, Steve Pappas, in Rozelle for the next eight or nine months. While they were living there, in 1972, Peter Kriezis got married and left the home at Drummoyne to live with his wife elsewhere. That left Michael Kriezis with the full burden of repaying the balance of the mortgage over the house out of his earnings as a labourer without any contribution from his sons. There is evidence that he came to Rozelle seeking financial assistance on several occasions, and I infer he had difficulty coping with the demands he had to meet. 4 A family gathering was called by Michael Kriezis in 1972 to consider the situation. Present were Michael and Helen Kriezis, Jim and Sofia, Peter and his wife Sophia, George and his wife Dina, and Evangelia who, at sixteen, had nothing to say. Michael and Helen Kriezis wanted Peter and Sophia to live with them and assist them, but Peter and Sophia were adamant in their refusal. George was already buying his own house at Ryde. Michael Kriezis said to Jim: "Jim, if you come back and pay out Peter, we can live together, you and Sofia can pay off the mortgage, and when we die the house will be yours and your family's." As Peter has confirmed in an affidavit in this proceeding between his sister-in-law and his mother, both George and Peter expressed agreement that if Jim reimbursed Peter for the moneys he had contributed to the house at Drummoyne and stayed there to look after their parents, the house would be left to Jim for his family. The brothers and their parents sat down and worked out how much Peter had contributed, and they fixed upon a sum of $6,000. Jim and Sofia obtained a personal loan in that amount, in order to make payment to Peter. They moved back into the house at Drummoyne, taking over the repayment of the mortgage and the payment of the other outgoings. 5 In 1973, Michael Kriezis, although still only in his early fifties, stopped work by reason of an accident for which he subsequently received compensation. 6 On 2 April 1974, Sofia gave birth to a son, Vasilios Bill Kriezis (known as Bill). 7 In 1975, the need for a larger home came up for discussion. Peter Kriezis, whom counsel for the defendant elected not to cross-examine, gave evidence that his father and mother agreed to the proposition put by Jim that they would "continue to live with [Jim's family] but we need to buy a bigger house. I will agree so long as the Drummoyne property is sold and the money goes to buying the new house. You [Michael and Helen Kriezis] can live there as long as you want and we [Jim and Sofia] will take care of all the bills but when you pass away the house must pass to me and my family." Sofia gave evidence that Jim also said, with his parents' agreement: "Sofia and I will take out a mortgage for the extra money we need and pay it off ourselves." 8 Following these arrangements, a suitable house was found at Gladesville, and also a buyer for the house at Drummoyne. But before the transactions were finalised, there was a hitch. Michael Kriezis announced a change of mind and a desire to leave his share of the house to be divided more widely amongst his children. After mediation by George, it was again affirmed by Jim in the presence of George, Peter and his parents: "I will take responsibility to look after our parents in their old age, the house [at Drummoyne being] sold and the proceeds of sale be[ing] used to buy the house at Gladesville. We will take out a mortgage for the rest of the money we need and pay it off. The Gladesville house will be left to me, my wife and children when mum and dad pass away." All the others agreed. 9 In August 1975, the Drummoyne house was sold for $29,000 (from which a net figure of $26,500 was realised) and the Gladesville house was purchased for $39,000, the title being taken in the names of Michael Kriezis, Helen Kriezis, Jim Kriezis and Sofia Kriezis as joint tenants. As the possibility that Jim or Sofia might die before either of Jim's parents was not seriously entertained, this, they were advised by a solicitor, was a convenient way of giving effect to their arrangement. They all entered into a mortgage in the sum of $12,500, the balance required to be paid of the sum of $39,000 after the utilisation of the sum of $26,500 received from the sale of the Drummoyne property. Although all four were mortgagors, it was the clear arrangement between them that only Jim and Sofia would be responsible for repayment, and in fact they assumed that burden. Jim was earning as a building foreman and Sofia as a cleaner. They paid off the mortgage in about two years. 10 It will be appreciated that, notwithstanding the arrangements between the parties looked to the future old age of Michael and Helen Kriezis, as well as to Michael's then present inability to cope alone with the costs involved in home ownership, they were in 1975 far from aged. Michael Kriezis was then aged 55 and his wife 57. They lived in the house at Gladesville until 1979, when Michael Kriezis received a lump sum redemption in respect of his worker's compensation claim which he decided to use for a trip home to Greece with Helen Kriezis. They had a house available to them in Corinth that belonged to George. So they left in the same year for a stay which became extended over about seven years, until 1986. While they were away, Jim and Sofia enlarged and renovated the Gladesville house, adding an extra bedroom, new kitchen, new dining room, new TV room and patio, and making other improvements. The cost was about $60,000 of which half was raised by a mortgage executed by Jim and Sofia in Australia and by Michael and Helen Kriezis in Greece. When they returned in 1986, Michael and Helen Kriezis went into a new room. 11 In 1988, Jim and Sofia Kriezis went to Greece with their children for six months, and purchased some land in Corinth. Family ties with Greece were strong. 12 In 1989 Michael and Helen Kriezis returned to Greece for a further one and a half years till mid 1990. 13 In 1991 Jim Kriezis became seriously ill with severe heart disease for which he received a disability pension upon an assessment of 85% disability. Sofia Kriezis ceased work to care for him, receiving a supporting spouse's pension. Jim Kriezis wished to spend his remaining time in Greece, so they went to Greece in that year. Also in 1991, their daughter Helen married and moved away to live in Germany. 14 In 1994, Jim and Sofia came back to Australia to live for six months in the Gladesville home. Later in the year, they returned to Greece. Their son Bill went there also, staying for sixteen months during which he did his six months military service; and then in 1995 Bill arrived back in the Gladesville home, where he carried out further renovations and repainted the entire house. 15 In 1997 Jim and Sofia returned to Australia for seven months, during which Jim underwent surgery. Also in 1997, Bill married a girl of Spanish descent named Gema, who came to live with him in the Gladesville home. Bill continued to carry out improvements, renewing the doors and light fittings and renovating the master bedroom. In 1999 he and Gema visited his parents in Greece for three months, but otherwise they remained in the house where he did more work, including building a new bathroom. 16 On 20 February 2000, Jim died in Greece at the age of 49. His brothers and a sister came for the funeral, but Michael and Helen Kriezis stayed at home. 17 In October 2001 Sofia came back to Australia from Greece. Shortly after, in November, Gema left Bill, who became depressed, and announced the intention of leaving to live alone. Helen Kriezis pleaded for him to stay, and he did. That Helen Kriezis should have concerned herself with Bill's troubled state in this grandmotherly way is an indication that the hostility she later expressed towards him, and the complaints she made about him, were probably exaggerated by the perceived pressures of the case. Sofia Kriezis was also depressed. She had felt closer to her deceased husband in Greece, and in May 2002 she returned there. 18 It was during this period that, in April 2002, Michael Kriezis was found to be suffering from cancer. His son George came to stay in the house to be with his father; others of the children rallied round; and a nurse attended daily. Sofia Kriezis claims there was not much she could do, and she spoke to him of her feelings about Jim, receiving the reply: "Go to your husband, light a candle for him from me and go with my blessing." After she had left, Michael Kriezis died on 6 June 2002. 19 In October 2002, Sofia returned to the Gladesville house, but on 20 September Helen Kriezis had left. She is living with her son George, but she gave emphatic evidence through an interpreter that she does not now wish to live with any of her children. She has recently severed the joint tenancy, and what she wants to do is to force a sale of the house at Gladesville, the title to which, of course, presently stands in the names of herself and Sofia pursuant to the joint tenancy that formerly subsisted, and to use her half of the proceeds to buy a small house or unit for herself. The plaintiff, on the other hand, is seeking various alternative forms of relief to enforce rights alleged to have arisen from the arrangements made in 1972 and 1975 and the steps taken on the faith of those arrangements. For the plaintiff, it is argued that there was a contract which was part performed; that the plaintiff has the benefit of an equitable estoppel arising from the creation and encouragement of an assumption that an interest would be granted, relied upon in circumstances where departure from that assumption now, after all that has happened and after the accretion of enlarged interests in the house by survivorship from Jim Kriezis and Michael Kriezis, would be unconscionable; and that a constructive trust should be held to bind the defendant on the basis explained in Muschinski v Dodds (1985) 160 CLR 583 at 620, 623; Baumgartner v Baumgartner (1987) 164 CLR 137 at 147-149; and Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516 at 525, 555, 557. 20 It is a sad case of a breakdown in family relations and of disappointed expectations. Plainly, the serious illness and early death of Jim Kriezis was not anticipated when the arrangements were made, and great strain was imposed on the family by these events. The plaintiff, her son Bill, and the defendant were all cross-examined at some length. But, as I have pointed out, Peter Kriezis was not challenged and his evidence supports the plaintiff on the essential basis and terms of the arrangements. The evidence of the other three must be scrutinised with care, for they are very interested parties whose attitudes are inevitably coloured by strong emotions. I place less reliance on the evidence of Helen Kriezis than I do on that of Sofia Kriezis and Bill Kriezis, partly because I think her memory is less reliable and partly because she appeared to me at some points in her evidence to be prevaricating about the family arrangements that were made, and to show a tendency to make statements she thought would damage the plaintiff's case without real regard to their truth. I do not accept, for instance, that her complaints about the conduct of the plaintiff and Bill Kriezis were other than greatly exaggerated, although I do accept that they failed to achieve the level of tolerance that was required to maintain harmony with a very difficult old woman. I am left with the conclusion that there were problems on all sides, although I also find that these problems, while perhaps troublesome, were not too serious to prevent the maintenance of joint, and generally reasonably harmonious, occupation of the house during the lifetime of Michael Kriezis. I do not accept the picture drawn by the defendant of "a lot of hatred". The long interruptions in the joint occupation of the house were caused by the strong attachment of all parties to Greece and by the unforeseen grave illness of Jim Kriezis. 21 The primary contention urged by counsel for the plaintiff, that the problem is to be solved by a simple enforcement of a contract made in 1975, seems to me to be met by insuperable problems. For Sofia Kriezis to continue now to "look after" her mother-in-law has become impossible by reason of a complete breakdown in their relationship. That I do not think this breakdown is to be attributed to fault on her part is not to the point. The fact is she cannot fulfil the required role, being barred by a wall of personal antagonism if not, as the defendant melodramatically asserts, by hatred. 22 But the very breakdown in relations which has erected a barrier against one solution to the case opens a gateway to another. Where an interest in property is put in the name of one party on the basis and for the purposes of a relationship with another party, who pays for that interest in property, and the substratum of the relationship is removed without attributable blame, so that unless equity intervenes, the former party would enjoy the benefit of the property in circumstances in which it was not specifically intended or specially provided he or she should enjoy it, the Court may hold that for him or her to so would be unconscientious. This principle has been laid down in the three High Court cases to which reference has already been made, and applied in such other cases as Kais v Turvey (1994) 11 WAR 357 at 364 and Lloyd v Tedesco (2002) 25 WAR 360 at 363, 368 - 369. I applied it recently in Thornton v Hyde [2004] NSWSC 125. See also the earlier decision of McLelland J in Morris v Morris (1982) 1 NSWLR 61 at 63-64, in which an equitable charge was found a sufficient remedy in the particular circumstances, but the flexibility of the principle was stated, so that, "in some circumstances", it was said, "the appropriate remedy may well be the imposition of a constructive trust". 23 An interesting application of the same principle was made by Bryson J in Bennett v Horgan (unreported, 3 June 1994), where his Honour said: "The concept of attributable blame must be understood and applied with some tolerance; in my view it does not call for a judgment attributing blame among members of a family for the continuing relationship becoming intolerable, unless perhaps in particularly gross cases… Leaving gross cases involving criminality or similarly reprehensible behaviour on one side, it should usually be understood, in my opinion, that where personal relationships deteriorate and the sharing of a dwelling becomes intolerable to some or all of those concerned, there is, within the meaning of Deane J's expressions, no attributable blame and the case is one for equitable adjustment." I express my complete and respectful agreement, only adding that the variety and unpredictability of human relationships and of the arrangements they engender, and also of the circumstances and ways in which those arrangements may come to be dissevered, require that the means of equitable adjustment to be adopted by the Court should be adopted, not by an attempt to fit the facts to some pre-existing template, but broadly and flexibly to meet the particular situation. A similar view has been taken by the English Court of Appeal, in Gillett v Holt (2001) Ch 210 at 225-226, in relation to the analogous doctrine of equitable estoppel. 24 Applying the principle to the present case, Jim and Sofia expended substantial sums, over and above what would have purchased the half interest transferred to them, upon the acquisition of the house at Gladesville which was put, as to a half interest, into the names of Michael and Helen Kriezis. They did so upon the basis and for the purposes of the family relationship between aging parents, on the one hand, and son and daughter-in-law on the other. An unforeseen death and the deterioration of the relationship between mother and daughter-in-law have taken away the foundation of the arrangement with respect to the property. It was not specifically intended or specially provided that, in these circumstances, Helen Kriezis should retain for realisation one-half of the beneficial interest in the house. An equitable adjustment is required. 25 After such a long time since the acquisition of the property, I do not think an equitable charge to secure a monetary adjustment would be appropriate in this case. Sydney suburban house values have notoriously undergone great changes, usually in the direction of inflation. This house has been substantially modified and improved by the work done by Jim Kriezis and his son Bill. In my opinion, the plaintiff is entitled to the remedy of a constructive trust to increase the quantum of her beneficial interest by an appropriate measure. That would be in keeping with what Austin J, in Galaxidis v Galaxidis No. 2 [2002] NSWSC 831 at [52] - [55] held to be the prima facie remedy in a case of equitable estoppel. 26 The final task is to assess that measure. It is necessary to apportion the moneys that were provided for the purchase of the house at Gladesville. It was purchased in 1975 for $39,000. Of that price, $26,500 was provided by the sale of the house at Drummoyne. Those involved engaged in a near contemporaneous effort to assess Peter Kriezis's share of the contributions made to the acquisition of the house at Drummoyne in order that Jim and Sofia Kriezis might purchase that share. It was assessed at $6,000 which Jim and Sofia Kriezis then paid. If it be assumed that Jim Kriezis, who was about one year and three months older than his brother Peter and assumed the whole burden of the mortgage over the house at Drummoyne for the final three years before its sale, contributed at least as much himself, his own share was also $6,000. On that basis, $12,000 (half of it by original contribution and half by purchase of Peter's contribution) of the sum of $26,500 that flowed from the sale of the house at Drummoyne was contributed by Jim Kriezis to the new purchase. Then, although the mortgage was in all four names, it was expressly agreed that it should be entirely the responsibility of Jim and Sofia Kriezis. In the usual case of the purchase of a house by a couple as a house to live in, it has been held that a resulting trust would rarely be quantified by mortgage payments: Calverley v Green (1984) 155 CLR 242 at 263. But here the Court is imposing a constructive trust in circumstances which include an agreement to bear the whole of the mortgage payments, and the more relevant authorities are Bloch v Bloch (1981) 37 ALR 55 at 64, where Brennan J cited a dictum of Lord Diplock in Gissing v Gissing [1971] AC 886 at 906 giving weight to "the payment of the mortgage instalments", and Thornton v Hyde at [13] where, in circumstances analogous to the present, payment of the mortgage instalments was treated as decisive. Accordingly, the total portion of the price of $39,000 that was borne by Jim and Sofia Kriezis, when the property at Drummoyne was purchased, was $24,500, leaving $14,500 as the portion provided by Michael and Helen Kriezis. 27 But this is not all. The plaintiff also relies on the principle of equitable estoppel on the basis that Jim Kriezis and she were led to expend $60,000 on improvements to the house upon the basis, as I infer they were, of the promises made to them. If, because of the destruction of the relationship previously discussed, the original expectation cannot be enforced, does it follow this expenditure, and later similar expenditure upon the house, must be ignored? In Gillett v Holt at 235, 237 the Court of Appeal affirmed the "wide range of possible relief" on the ground of this equity, stating that the aim was, as was said in Plimmer v Mayor of Wellington (1884) 9 App Cas 699 at 714, to "look at the circumstances in each case to decide in what way the equity can be satisfied". See also Giumelli v Giumelli (1999) 196 CLR 101 at 113, 125, where a "breakdown in family relationships" was one of the factors that denied the respondent an order to enforce fulfilment of the promise that had been made to him, but he succeeded in obtaining alternative relief. 28 Some evidence was led on behalf of the plaintiff, to which objection was taken, from a real estate agent, a Mr Fred Jabbour. Mr Jabbour is a director of Richardson and Wrench Gladesville, has been a licensed real estate agent for twenty years, and has worked in the Gladesville area for twelve years. He is a member of the Real Estate Institute of New South Wales, and he prepared an expert opinion in relation to this matter, having regard to the Supreme Court's Code of Conduct for expert witnesses. However, he does not profess to be a valuer, nor was he asked to prepare a valuation in the true sense, based on the well recognised principles of valuation. What Mr Jabbour has done is to consider the nature of the extensions and renovations done by Jim Kriezis and his son Bill, as described in the evidence, and to make an appraisal, based on his experience as a real estate agent in the area and "on recent comparable sales, the state of the current market and our hands on knowledge of the area", of the effect of the extensions and renovations in question upon the current market price likely to be realised upon a sale of the property. That has involved him in a comparison between the present state of the property, which he inspected on 13 May 2003, and the hypothetical condition of the property had the work done by Jim and Bill Kriezis not been carried out. On this basis, Mr Jabbour estimates that the property's "current reasonable selling price" is "in the vicinity of $900,000 to $940,000" and that the hypothetical price it would have been capable of fetching on the assumption made is "in the vicinity of $800,000 to $830,000". It follows that, in very broad terms, if this approach is adopted, the work in question should be regarded as having contributed, in approximate round figures, one tenth of the sum that would be likely to be realised upon a sale of the house at Gladesville. In my opinion, the evidence objected to was admissible for the purpose to which I have referred. It is, in any case, consistent with the inferences that I would have considered it appropriate to draw from the evidence. While I do not think it would have been right to infer, in the absence of expert guidance, that some very large increase in the value of the property was wrought by the work, it would also not have been right to have ignored the evidence that the work was done in accordance with professionally drawn up plans, at a cost of about $60,000 some twenty years ago, with more recent renovations, renewals and painting, and, certainly for the most part, under the control of Jim Kriezis who was a building foreman by occupation, and otherwise by Bill Kriezis who is also a construction foreman. There was some complaint about the generality of Mr Jabbour's reference to "comparable sales", but this was a matter of which details could have been sought: cf Appleby v Pursell [1973] 2 NSWLR 879, where Reynolds JA (at 891) referred to a similarly broad statement of opinion as an "ultimate compendious statement", but held it admissible as it could be "tested by cross-examination and the steps leading to [it] may be examined and exposed", while Bowen JA (as he then was) also affirmed the admissibility of "general evidence", commenting (at 896-897) that its generality went to its weight and that the appellant's argument, which was to the same effect as the defendant's here, involved "too meticulous an approach to the ordinary affairs of life". 29 In my opinion, it would be appropriate to quantify the constructive trust which the Court should declare by a calculation in two steps: first, a one tenth beneficial interest should be apportioned to Sofia Kriezis upon the principle of equitable estoppel as a result of the work done in reliance on the promises I have found to have been made; and then, as to the remaining 90% interest, it should be divided by allowing to Sofia Kriezis, upon the principle of Muschinski v Dodds, twenty-four and one half thirty-ninths of that 90% and by allowing to Helen Kriezis the remainder, that is fourteen and one half thirty-ninths of that 90%. It will be declared that they hold the land and house at Gladesville the subject of the proceeding beneficially as tenants in common in the shares so determined. I will leave it to counsel to make the calculations, and the only formal order I make at this stage is to direct the plaintiff to bring in, on a date to be fixed, short minutes of orders to reflect these reasons. Since the defendant retains a significant beneficial interest as tenant in common, it will prima facie be appropriate, subject to any agreement between the parties, also to make orders pursuant to the cross-claim which seeks relief under s 66G of the Conveyancing Act 1919, but I will allow some time for consideration of alternatives by the parties before making those orders.

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