O'Neill v Williams [2006] NSWSC 707 | Case summary

3654/03 Patricia Ann O'Neill v Graham Williams & anor JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiff Patricia Ann O'Neill claims that she is entitled to remain indefinitely in 25 Bilkurra Street, Queanbeyan, which she currently occupies as her home as a result of arrangements made in 1992 between herself and her late husband, Mr Brian O'Neill, on the one hand, and the defendants, her son-in-law Mr Graham Williams and daughter Mrs Aleta Williams, who are the registered proprietors of the property. 2 In 1982, Mr and Mrs Williams bought land at 114 Cooma Road, Queanbeyan, on which they built a home. Mrs O'Neill's late husband Brian did the carpentry and their son Geoffrey, also since deceased, did the bricklaying. It is common ground that Mr O'Neill did the carpentry without remuneration. The Williams say that Geoffrey was paid for the bricklaying, although not for a brick feature wall and fireplace. Although Mrs O'Neill says that Geoffrey was not paid, on this issue I think that the Williams are in a superior position to know, as they were directly involved and their knowledge is firsthand, whereas that of Mrs O'Neill is hearsay, and it is more probable than not that Geoffrey was paid, although ultimately little, if anything, turns on this. 3 In or about early 1990, the Williams sold Cooma Street and purchased land in Heatherbelle Place, Queanbeyan. They continued to occupy Cooma Street, as tenants, while they constructed a house at Heatherbelle Place. Mr O'Neill did the carpentry for the Heatherbelle Place house. There is a dispute as to whether he was paid, but the Williams say that he was paid $900 per week, half in cash and half by cheque, and that there was some considerable dissatisfaction on their part with his approach to the job. Once again, their involvement was direct and their knowledge firsthand, and there are reasons why Mr O'Neill might not have disclosed to his wife that he was being paid, and I accept that more probably than not he was paid as the Williams assert, although once again this is of little ultimate significance. 4 The Williams discharged their mortgage of Heatherbelle Place in February 1992, only two years after they had acquired it. Mr Williams has explained, understandably, that he dislikes owing money and paying interest, and that he and Mrs Williams endeavoured to pay off their mortgage of Heatherbelle Place as quickly as they could, applying all available funds for that purpose. 5 At this time, in 1992, Mr and Mrs O'Neill lived in substandard rental accommodation at 81 Campbell Street, Queanbeyan. Their son Geoffrey died suddenly in February 1992, following which Mrs O'Neill became depressed. According to Mrs O'Neill, Mr and Mrs Williams came to her and her husband with a proposal that they find a house for the O'Neills. Initially, no particular house or location was identified. She says that there was first an idea of building a duplex on a block of land, one apartment to be for Mr Williams' parents and the other for the O'Neills. When that did not proceed, they looked at houses and at a block of land. Then, says Mrs O'Neill, Mrs Williams told the O'Neills that they had found the Bilkurra Street property, but pointed out that it was near the cemetery where Geoffrey was buried, saying that if the O'Neills were not happy with that, they would not go ahead with Bilkurra Street. 6 The Williams offer a different version of how the proposal arose. They say that by 1992 they had accumulated some savings, which they wished to invest in a house that they proposed to lease long-term through the Defence Housing Authority (for an agent of which Mr Williams worked), and that Mrs Williams told her father of their plan and sought his advice as to the cost of carpentry. Mr O'Neill responded with the suggestion that he do the carpentry work for nothing, and that in return the O'Neills be permitted to live in the house at a reduced rent. 7 Having regard to the evidence of the Williams' son Adam, it is more probable than not that the Williams initially contemplated an investment property, to be let to the DHA. In the light of what they subsequently agreed, it is unnecessary to resolve whether the initiative to have the O'Neills occupy it at a reduced rent came from the O'Neills or the Williams. 8 In any event, the Williams purchased the property in or about June 1992 for $53,000. They borrowed $100,000, and the surplus of about $47,000 was used to fund the construction of the house on the property. It is likely that as well as that $47,000, further funds - perhaps a further $45,000 - were in due course applied by the Williams towards the construction of the house on the property. 9 When they applied for the loan, the Williams represented to the bank that they would be owner-occupiers, notwithstanding that they lived in Heatherbelle Place and intended to continue to live there and did not intend to occupy the Bilkurra Street property. They say, and I accept, that they did this at the suggestion of a bank officer, in order to avoid having to offer Heatherbelle Place as security for the loan. Although I do not place much significance on it in resolving conflicts in the evidence, this illustrates (which is not unique to the Williams), that there has been at least one occasion on which they have been prepared to make an untrue statement in order to obtain some benefit; and I cannot therefore uncritically accept their evidence where their own interests are at stake, although in many respects I do. 10 According to Mrs O'Neill, at about the time of the purchase of 25 Bilkurra Street, Mrs Williams said to her words to the following effect: Mum, we have bought the land for $52,000 and have taken out a mortgage. We have borrowed about $100,000. We applied as an owner-occupier because the rate was really good. We thought Dad could build the house. It would be nice for the children to visit their grandmother in their own home and one which the grandchildren would be proud of. 11 The Williams deny such a conversation, but at this point it is relevant to observe that the Williams had indeed bought the land, albeit for $53,000 as opposed to the $52,000 which Mrs O'Neill recalled in her affidavit; that, as Mrs O'Neill reported she had been told, the Williams had indeed borrowed about $100,000; and that, as Mrs O'Neill reported having been told, they had indeed applied as owner-occupiers. The only apparent source of Mrs O'Neill's knowledge of those matters is the Williams, and the coincidence of the truth of those underlying facts with what Mrs O'Neill reports she was told by Mrs Williams tends to support the accuracy of Mrs O'Neill's version of that conversation. 12 According to Mrs O'Neill, the parties subsequently sat down and worked out an agreement. She says that, in the course of doing so, Mrs Williams said, in the presence of Mr Williams, to Mr and Mrs O'Neill words to the following effect: You and dad will live in the house, but we think you should contribute towards the mortgage for the first five years which should end around 1998. We will pay around $500 a month and you too can pay $600 every four weeks. That should get it paid out in five years. At the end of the first five years you and dad will stop paying the mortgage but starting paying the insurance, rates and maintenance for the rest of your life. Of course if dad gets more contract work he can pay the loan to get the loan finished quicker. 13 The Williams also deny this conversation. According to them, they proposed a reduced rent of $150 per week - against what they understood to be a market rent of about $225 per week - which, says Mrs Williams, Mr O'Neill accepted. At this stage it might be observed, however, that it is common ground that there was a proposal that, in return for Mr O'Neill performing the carpentry work free of charge, the O'Neills would be permitted to occupy Bilkurra Street for a concessional rent of $600 every four weeks (or $150 every week). 14 The purchase was completed in about October 1992, when construction of the home commenced. It is common ground that Mr O'Neill was on-site, doing the carpentry, and that he was not paid for it. There is a dispute as to the extent of what further work he performed, and as to the extent to which he supplied materials. The O'Neill's nephew, Christopher Mercieca, worked on the job fulltime for eight weeks. He described Mr O'Neill as having superintendence of the project, although Mr and Mrs Williams were sometimes involved in giving directions. He confirmed that Mr O'Neill provided sometimes funds for purchases, though sometimes Mr or Mrs Williams did so, and he acknowledged that he was not aware of what, if any, arrangements were in place for reimbursement to Mr O'Neill for funds expended by him. I accept, however, that Mr O'Neill at least provided the carpentry labour, and general supervision of other subcontractors on the site during the construction project. Ultimately, the Williams accepted that the O'Neills provided some of the timber, though not structural timber, and installed a wall furnace, ceiling fans and a vegetable garden; and I accept also that Mr O'Neill installed insulation in the garage. 15 During the period that he was working on the property, Mr Mercieca heard a number of conversations between the Williams and the O'Neills, the essence of which was that the Williams, particularly Mrs Williams, said that Mr O'Neill was building the house "so that you" - the O'Neills - "would have somewhere to live until you die" or "until you end up in an old home or buried", "or until the day you die". Mrs Eunice Watson and her daughter Karen visited the O'Neills at their then Campbell Street home on 21 December 1992, a day which she recalls clearly because it was later that day that her son was killed in a motor vehicle accident. Mrs Williams was also present and, in the presence of the O'Neills, told Mrs Watson that they were building a house for the O'Neills to live in "for the rest of their lives" or "until they died". Mrs Watson says that reference was also made to the O'Neills making monthly payments for five years by when the mortgage would be paid off, and thereafter being responsible only for maintenance. In the course of her cross-examination, she described those monthly payments as rent, and although she was equivocal on this topic, I think the preferable view of her evidence is that he best recollection is that in the conversation she heard, they were described as rent. Mrs Williams says she does not recall any such conversation and does not believe that she would have ever used such words - as, she says, they did not reflect what she understood to be the agreement with her parents - but her affidavit does not go so far as specifically to deny that she said any such thing as Mrs Watson attributed to her. 16 A certificate of occupancy in respect of the property was issued in or about February 1993, and the O'Neills moved into Bilkurra Street at about that time. They commenced to pay the Williams $600 each four weeks, and although they were occasionally late with payments, they continued to do so until Mr O'Neill's death in 1997. Mrs Williams issued receipts for those payments, some of which bore the endorsement "rent". The Williams treated the payments received by them as rent in their tax returns. 17 The mortgage account statements reveal that there were periodical reductions in the mortgage of $450 per fortnight, and in addition occasional substantial lump sum reductions. By 5 July 1996, that is a period of three and a half years after the O'Neills had moved into occupation, the mortgage had been reduced, by more than half, to $45,980. However, on or about 28 August 1996, the Williams refinanced with a Viridian line of credit from the State Bank of $112,000, of which $45,000 approximately was applied to repay the existing State Bank housing loan on Bilkurra Street, while the balance provided operating funds for the Williams, for purposes not apparently related to Bilkurra Street, including for the purchase of a new motor vehicle. 18 The evidence as to what happened to the mortgage after that date is vague, but Mr Williams gave evidence that at one later point it had been reduced to about $30,000. Since the mortgage had been refinanced to $112,000 by the borrowing of an additional $67,000, then if it had at one point thereafter been reduced to about $30,000, that would represent a total repayment of the amount used to refinance the original housing loan, and partial repayment of the additional $67,000. Mrs O'Neill did not learn that the mortgage had been refinanced or repaid until, in the course of these proceedings, documents were produced to solicitors then acting for her which revealed those facts. 19 Mr O'Neill died on 17 August 1997. About two days before that, according to Mrs O'Neill, a conversation took place between Mrs Williams and her father in which Mrs Williams said: "You will have to keep paying the $600 per month until the day you die". Mr O'Neill is said to have responded: "That was not the agreement, that was not the agreement. I am not paying anymore after 14 February 1998", to which Mrs Williams rejoined: "You will keep paying after that". Mrs Williams denies that conversation and says that her father was very ill at the time, and that she did not have any discussion with him about the premises, but I am inclined to prefer Mrs O'Neill's version: there is a thread of consistency between her version of the 1992 conversations, including a reference to a five year period; this conversation; her response on October 2002 (referred to below) to the request that she leave, when she mentioned that Brian had foreshadowed it before his death; and her solicitors' letter (also referred to below) of October 2002. 20 After Mr O'Neill's death, according to Mrs O'Neill, Mr Williams came to the Bilkurra Street property and said: "Don't worry about the house payments anymore, Aleta and I will look after you from now on", to which Mrs O'Neill says she responded: "No, I will keep paying my $300 every month." Mr Williams is said to have replied: "Okay". Mrs O'Neill says that she continued to make the payments because she assumed that the mortgage had not been repaid and "It was the right thing to do". 21 The Williams' version is different. Mrs Williams says that she learnt from her brother Norman that her mother had been left with a car loan on a station wagon, and could not in those circumstances also afford the $150 weekly rent, and that following discussion with her husband Graham they went to see Mrs O'Neill and said: "Graham and I have talked about the rent. Would it help if we knocked the rent down to $70 a week until the car loan is paid off? We will look at it again when the car loan is paid off." They say Mrs O'Neill replied: "Okay, good." They say that thereafter until May 2000 Mrs O'Neill paid $70 a week for rent, for which receipts were issued. 22 In fact, the evidence shows that Mrs Williams paid $75 per week, which is more consistent with her version that she would continue to pay $300 four-weekly than it is with the Williams' version. There is an absence of receipts for a lengthy part of the period from 1998 until at least 2000, although the Williams continued to disclose the full (not reduced) rental income in their tax returns during that period. In addition, at least for a period in 1997/98, Norman O'Neill also lived in the property, or part of it, with his mother, and for sometime paid rent of $80 per week over and above the monthly payments being made by his mother. As I have said, the objective fact of the amounts of rent actually paid is more consistent with Mrs O'Neill's version than with the Williams' version, and for that reason I think her version is the more probable one. 23 Mrs O'Neill continued to make payments of $300 four-weekly until about May 2000. In May 2000, Mrs Williams says that she learnt from her brother Norman that the car loan had been paid off, and as a result proposed to Mrs O'Neill that the rent be increased, by $20 a week, to $90 weekly. Mrs Williams says that Mrs O'Neill responded that she could not afford it and became upset, and that they did not speak for about six weeks, following which there was a further conversation in which Mrs O'Neill agreed to pay $90 per week. On any view, Mrs O'Neill sooner or later agreed to pay $90 a week in substitution for the previous arrangements, and the evidence shows that from about May 2000 she was paying $380 four-weekly, and that receipts were issued in that amount. Mrs O'Neill was that the mortgage had been refinanced and reduced. 24 In about September 2001, Mrs O'Neill approached Mrs Williams with a document, being an application for rental assistance from Centrelink, which Mrs O'Neill asked Mrs Williams to sign as landlord. The document contained a statement that Mrs O'Neill was paying rent of $150 per week. Mrs Williams objected to certifying the document, which overstated the amount that Mrs O'Neill was paying. She says that Mr Norman O'Neill encouraged her nonetheless to sign the document. Mrs O'Neill says that the document was mistaken in referring to $150 per week, rather than $150 per fortnight, and that she later substituted a corrected document. I must say I have some considerable reservations about her evidence in this respect, since she was at this time paying $90, not $75, per week, and I regard this matter in much the same way as I do the Williams' applying for the mortgage as owner-occupiers: though not attracting much significance, it shows that there has been at least an occasion on which Mrs O'Neill appears to have been prepared to make a false statement to obtain a benefit, so that I cannot uncritically accept her evidence where her interests are at stake. 25 In July 2002, Mrs Williams became aware that her brother Norman had moved back into the property. She says that she was unhappy about that but was prepared to allow him to stay provided that he contributed to rental payments. She says she approached Norman, confirmed that he was living in the Bilkurra Street property, and said, "You can pay $80 per week towards the rent", to which he did not respond. When he proposed putting a flat in the garage, she said that he could not. Although the evidence does not disclose completely why the relationship between the parties has deteriorated as it has, it seems that it was from about this point that there serious discord in the affairs of the family arose. 26 Matters came to a head in early October 2002. On or about 5 October 2002 Mr and Mrs Williams went to the Bilkurra Street property, and spoke to Mrs O'Neill. According to Mrs O'Neill, Mrs Williams said: We want to terminate your possession of this property because Graham's unwell. We don't want to see you out of pocket so we'll give you $5,000 to relocate. We'll come and see you about it later in the week. 27 Mrs O'Neill says she responded: It's a funny thing, Brian told me about this before he died. I wondered how long I'd be here. The house could go up with me in it for all I care but I'm not moving without $35,000. 28 Mrs Williams' version is somewhat different, but not materially so. She says her words were to the following effect: Mum, we can't do this any more. We have carried you for a while to help you but we can't continue to do it. We would like you to move out. It's a burden, Mum. Graham has been unwell and we are sick of the stress of all of this. We will help you with the cost of relocating and we have discussed it and we will give you $5,000 to help you move. 29 Mrs O'Neill is said to have responded: I want $35,000 and if I don't get it, the place can burn. 30 I do not think anything turns on the differences of recollection of this conversation, which are no more than to be expected. The substance of what both parties recall is basically the same. 31 On 14 October 2002, solicitors acting for Mr and Mrs Williams, Baker Deane and Nutt, sent a letter and a Notice of Termination of Tenancy to Mrs O'Neill: Notice of Termination Residential Premises Situated at 25 Bilkurra Street, Queanbeyan NSW We refer to the above and advise that we act for Graham and Aleta Williams. We understand that you have been residing at the above premises, as tenant, for a significant length of time. Further, we understand that Mr and Mrs Williams have previously informed you of their desire to reoccupy the above property on a number of occasions, most recently on or about 2 October 2002. In addition, we understand as part of their most recent request, Mr and Mrs Williams offered you the sum of $5,000.00 to assist you in relocating to a new premises. Further, we understand that you rejected this latest offer. As such, please find enclosed a Formal Notice of Termination. We advise that if you fail to comply with the enclosed notice, we have been instructed to make an application to the Residential Tenancies Tribunal for an order of eviction. Kindly direct all enquiries relating to this matter and the enclosed notice to this office. 32 Mrs O'Neill then consulted solicitors, Sneddon Hall & Gallop, who initially had a telephone conversation on 22 October 2002 with the Williams' solicitors, and then wrote a letter on 24 October 2002, setting out in some considerable detail the basis of a contention that Mrs O'Neill had an equitable proprietary interest in Bilkurra Street, which they asserted might be somewhere between 60 per cent to 80 per cent of the equity. The letter also set out a number of the contentions that ultimately found their way into Mrs O'Neill's affidavit evidence, to which I shall have to return. 33 On 11 February 2003, new solicitors acting for the Williams, Vandenberg Reid, replied to Sneddon Hall & Gallop, with a replacement termination notice in place of the original termination notice. The replacement termination notice, dated 20 February 2003, was personally served on Mrs O'Neill on 23 February 2003. On 28 February 2003, Vandenberg Reid informed Sneddon Hall & Gallop that the notice had been served and: We have been instructed to advise that our clients will not accept rental during the period of the notice and any rental payments will be retained by us in trust so as to be disbursed at your client's direction. If your client requires reimbursement of the funds, please advise. 34 Sneddon Hall & Gallop responded on 11 March 2003: My client will continue to make the house payments as she has done for many years. It is a matter for you as to how those payments are retained. 35 Subsequently, the Williams initiated proceedings for possession of the property in the Tenancy Tribunal. By summons filed on 7 April 2003, Mrs Williams instituted these proceedings, claiming a declaration that she was beneficially entitled to Bilkurra Street, and an order for its transfer to her. The Tenancy Tribunal proceedings have been deferred, pending the determination of these proceedings. These proceedings have had an unhappy history of delay, due to Mrs O'Neill's claims of ill health and inability to obtain legal representation but, at least for the most part, that history is not relevant to the matters which now have to be decided. 36 For some time after 27 February 2003, Mrs O'Neill continued to make payments of $380 four-weekly, which were deposited in Vandenberg Reid's trust account. At some stage in the course of these proceedings, Mrs O'Neill requested repayment of the funds held in that trust account, which Vandenberg Reid have apparently released, and which I would infer have been applied by Sneddon Hall & Gallop to their costs; at least that is the most likely explanation of what has become of them. 37 The only evidence I have of the value of the property is a drive-by valuation, which suggests that it was worth about $325,000 in June 2003, and hearsay evidence given by the Williams that they have ascertained that it has a current rental value of between $300 and $330 per week. 38 Although the summons, when filed, claimed a declaration that Mrs O'Neill was, in effect, the beneficial owner of the property and an order for transfer of it to her, the case was not opened or presented on that basis and, as the proceedings were conducted, her claim was limited to an equitable right of residence for life. Mrs O'Neill and her son, Mr Norman O'Neill, who appeared as her McKenzie Friend and conducted the proceedings on her behalf, eschewed any suggestion that Mrs O'Neill was entitled to be the owner of the property, or to have it transferred to her, and she resisted any suggestion that she had ever expected that it would be. 39 The basis in equity of Mrs O'Neill's claim is properly to be seen as falling in the rubric of equitable proprietary estoppel. Equity comes to the relief of a plaintiff who has acted to his or her detriment on the basis of a fundamental assumption in the adoption of which the defendant has played such a part that it would be unfair or unjust if he or she were left free to ignore it on the footing that it would be unconscionable for the defendant to deny the assumption [Grundt v Great Boulder Gold Mines Limited (1937) 59 CLR 641, 675; Thompson v Palmer (1933) 49 CLR 507, 547; Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387, 404 (Mason CJ and Wilson J)]. It is essential to an equitable estoppel that the defendant knows or intends that the party who adopts the assumption will act or abstain from acting in reliance on it [see Crabb v Arun District Council (1976) Ch 179, 188; Waltons v Maher, 423 (Brennan J)]. Such knowledge or intention may easily be inferred where the adoption, assumption or expectation is induced by the making of a promise, though it may also be found where the defendant encourages a plaintiff to adhere to an assumption or expectation already formed or acquiesces in an assumption or expectation when, in conscience objection ought to be stated [Waltons v Maher, 423 (Brennan J)]. The unconscionability which attracts the intervention of equity is the defendant's failure, having induced or acquiesced in the adoption of the assumption or expectation, with knowledge that it would be relied on, to fulfil the assumption or expectation or otherwise to avoid the detriment which that failure would occasion [Waltons v Maher, 423 (Brennan J)]. 40 Numerous judicial and academic attempts have been made over the years to catalogue the elements of an estoppel of this type: see, for example, Fry J's five probanda in Willmott v Barber (1880) 15 ChD 96; Brennan J's six proofs in Waltons v Maher; Priestley JA's seven propositions in Silovi Pty Limited v Barbaro (1988) 13 NSWLR 466, as modified in Austotel Pty Limited v Franklins Selfserve Pty Limited (1989) 16 NSWLR 582; and Meagher, Gummow and Lehane's six common factors in Equity Doctrines and Remedies, 4th Edition (2002) [17-105]. But, at least generally speaking, the matters that a plaintiff must establish to found such an equitable estoppel may be characterised as including certain conduct of the plaintiff, certain conduct of the defendant, and certain qualities of the subject matter, which, for present purposes, may sufficiently be summarised as follows. First, as to the conduct of the plaintiff, that the plaintiff acted, or abstained from acting, in reliance upon an assumption or expectation that a particular legal relationship existed, or would exist, between the plaintiff and the defendant, or that the plaintiff had or would acquire some interest in the defendant's property. Secondly, as to the conduct of the defendant, that the defendant induced the plaintiff to adopt the assumption or expectation and encouraged the reliant activity of the plaintiff, or at least failed to deny the assumption or expectation with knowledge that the plaintiff was relying on it to the plaintiff's potential detriment and that the expectation could be fulfilled only by transfer of the defendant's property, a diminution of the defendant's rights or an increase in the defendant's obligations. Thirdly, as to the subject matter, that the assumption or expectation in respect of it was one that the defendant could lawfully satisfy [see generally Waltons v Maher, 428-429 (Brennan J); Meagher, Gummow & Lehane, [17-105]]. 41 One form that this equity sometimes takes is to convert a revocable licence to occupy premises into an irrevocable, or permanent, one. Thus in Vinden v Vinden [1982] 1 NSWLR 618, Needham J considered circumstances in which a licence to occupy property, which was expressed to be subject to the licensee making contributions to mortgage payments and rates, would become irrevocable by the licensee (in Vinden, the defendant, whom the plaintiff owner was endeavouring to eject) acting to his detriment on the expectation that he would be permitted to remain in the property indefinitely. His Honour referred to Plimmer v Mayor of Wellington (1884) 9 App Cas 699, in which a revocable licence to occupy a jetty was held by the Privy Council to have become irrevocable by reason of the licensee incurring expenditure on improvements in the expectation, encouraged by the licensor, of being permitted to remain indefinitely. Plimmer and Vinden both illustrate that an owner of land may become bound by an equitable obligation to permit an occupier to remain permanently, if the occupier, to the knowledge of the owner, acts to his or her detriment in reliance on an expectation of being permitted to remain indefinitely - and that the occupier acquires a corresponding equitable right to remain. 42 In some cases, an equity that arises by estoppel in this way may be conditional on the performance by the plaintiff of certain obligations. Vinden also indicates that where there are conditions attached to the expectation - such as contributing to outgoings - the equity is subject to performance of those conditions by the licensee. As Needham J said (at 625B, emphasis added): In my opinion, while the defendant continued or remained willing to meet those obligations , his licence was irrevocable - or, to put it another way, an equity arose which could be satisfied only by holding the plaintiff estopped from denying that the licence was irrevocable. 43 That a plaintiff cannot enforce an equitable interest arising by way of proprietary estoppel so long as he or she is in default of a condition attached to the enjoyment of the equity appears also from Wood v Browne [1984] 2 QdR 593 and Beaton v McDivitt (1985) 13 NSWLR 134, 157C-D. 44 However, the plaintiff can be relieved from performance of such conditions, by conduct of the defendant. Thus in Vinden the conditions that the occupier (the defendant in that case) was bound to perform included paying council rates, household expenses and mortgage repayments. The plaintiff owner, through an agent, made it impossible for the defendant to pay the rates, by re-directing the rate notices. The plaintiff also made winnings on the horse races, and re-paid the mortgage himself, so that there was no further need for the defendant to make mortgage payments. Needham J said (at 625C): The evidence is, as I have already stated, that, without the defendant's knowledge or consent, the plaintiff, through Mrs Sullivan, put it out of the defendant's power to continue to make some of the payments; further, the betting success of the plaintiff made it unnecessary for the defendant to make further payments off the mortgage. But the defendant is meeting all other obligations and has been frustrated in his efforts to pay the rates. It is my opinion that, while the defendant meets those obligations which the plaintiff permits him to meet, being obligations accepted by him in 1975, the plaintiff is estopped from alleging that the defendant's licence to reside in the house is revocable. 45 In my opinion, if such conditions can be released or modified by unilateral conduct of the owner that renders performance impossible or unnecessary, they can equally be released or modified by agreement, or even by acquiescence. 46 In the present case there is no doubt that if the relevant expectation was a lifetime right of residence, it was one that the Williams could lawfully satisfy. This case turns on whether the O'Neills entertained and acted on a relevant expectation, and whether the Williams induced them to adopt it and encouraged their reliant activities. It is necessary to determine (1) what, if any, expectation the O'Neills entertained and acted upon, including whether it was subject to any and if so what conditions; (2) whether their expectation and reliant activity was encouraged by the Williams, and (3) whether any conditions to which the expectation was subject have been performed, in their original or any modified form. 47 Resolution of those issues turns largely on the discussions that took place in 1992. Although there are differences, and some significant differences, between the accounts given by the respective witnesses to the 1992 arrangements, there are significant common features, in particular that Mr O'Neill was to perform the carpentry for the new house free of charge, and that in return for him performing that carpentry free of charge, he and Mrs O'Neill would be permitted to occupy Bilkurra Street at a concessional rate of $150 per week. This mutual understanding of the parties created a corresponding expectation on the part of the O'Neills, on which they acted to their detriment by performing the carpentry and other work on the property, and then moving into the house from their previous accommodation. The mutual character of this understanding, to the creation of which the Williams were party, means that it may readily be concluded that the Williams knew and intended that the O'Neills would rely on the expectation. 48 But there is dispute as to two important aspects of the understanding and expectation: the duration of the O'Neills' entitlement to occupy the property, and the duration of their obligation to pay "rent". 49 The Williams say that they did not turn their minds to the duration of the arrangement, but in their oral evidence both accepted, and I think quite correctly, that as a matter of fairness (which, in equitable terms, might be described as good conscience), it would not have been open to them, shortly after February 1993, to turnaround to the O'Neills, having just assumed occupation of Bilkurra Street after completing the carpentry, and say: "Well, there was no agreement as to how long this concessional rate was to last, and you should pay a market rate or get out now". That illustrates powerfully, not only that equitable obligations arose from the arrangements in 1992, but also that, even if there was no express reference to terms such as "for life" or "until you die or go into an old people's home", there was an expectation that the O'Neills would be entitled to remain indefinitely in the property, at least so long as they met the condition to which their occupation was subject, namely, payment of the concessional rent of $150 per week. The age of the O'Neills and their general circumstances reinforce that view. 50 However, Mrs O'Neill contends that the arrangements made in 1992 explicitly referred to the O'Neills remaining for life or equivalent, and limited the obligation to pay the concessional rent to a period of five years or the duration of the mortgage, after which their obligation would be to pay rates and insurance. In circumstances where, for reasons already explained, I cannot uncritically accept the evidence of either party as being unaffected by the possibility that they might make a false statement for their own benefit, I must consider the criticism advanced of Mrs O'Neill's evidence, and be guided by the more satisfactory and objective indicia of the overall probabilities, including consistency and the presence or absence of corroborating evidence. 51 Mr Pappas, who appeared for the Williams, submitted that Mrs O'Neill's evidence should be regarded as unreliable, because the claim for a transfer contained in the summons, reflected to some extent in her first affidavit, must have depended upon facts different from those now asserted by her. In the summons, she claimed to be beneficially entitled to the property, and to a transfer of it to her - a much larger interest than she now maintains. In her first affidavit, Mrs O'Neill used terminology consistent with that larger claim. 52 It is true that a claim to a proprietorial interest was advanced in the summons, and it is true, as Mr Pappas forcefully points, out that it was a radically different case that was opened and pressed before me. Mrs O'Neill's then solicitors first advanced the claim to a proprietorial interest, in their letter of 24 October 2002. That letter has all the hallmarks of being a product of the mind of the lawyer who wrote it, making the most out of such facts as he was given. It is particularly significant that the way in which the claim to a proprietary interest was formulated in that letter is not based on any expectation or representation that there would be a beneficial proprietary interest (in which case there would have been a strong case for supposing that Mrs O'Neill had given instructions about expectations and representations different from those on which she now relies), but on an argument for an interest in the nature of a resulting trust derived from contributions to the mortgage repayments (which does not imply any such instructions from Mrs O'Neill). I doubt, and do not accept, that Mrs O'Neill's understanding extended to appreciating the basis on which her solicitors were propounding her claim, in the 24 October 2002 letter or in the summons. In answer to the suggestion that she had once asserted a proprietorial interest, she said: "To a certain extent, but we were never to own it", which is a fair lay description of an equitable lifetime right of residence. 53 In her affidavit, Mrs O'Neill referred to conversations in which she and Mr O'Neill had described the property to their grandchildren, the Williams' children, as being "for you after we're gone". It was suggested, inconsistently with the contention that she had a life interest only, that this conveyed a claim to be entitled to devise the property. Mrs O'Neill claimed no such entitlement at the hearing, and indeed repeatedly and robustly denied it. She said that those words used to the grandchildren were "just a saying". It is of some significance it was said only to those of her grandchildren, who are children of the Williams, and not to her other grandchildren. As Mrs O'Neill explained, their parents, Mr and Mrs Williams, had another home, Heatherbelle Place. I accept that by saying that the house would one day be theirs, Mrs O'Neill was not intending to convey an entitlement on her part to leave the house as she pleased, but only that in all the circumstances it was likely that eventually Bilkurra Street would pass to those grandchildren. 54 As Mr Pappas also pointed out, Mrs O'Neill referred in her first affidavit to Bilkurra Street as "our home". In her oral evidence, she sought to qualify this by adding the phrase "till the day I die". To my mind, description "our home" has many meanings, not necessarily proprietorial. It means "the place we live:" rather than "the place we own". Mr Pappas rightly points out that in her affidavit, Mrs O'Neill distinguished this home from earlier homes, on the basis that they had never previously owned a home and that this was to be "our home". Nonetheless, I think it is understandable that where a couple, who have not previously always rented, are to move into a home owned by their children for which they are to pay rent for a few years and then occupy rent free for the rest of their lives, they might well refer to it as "our home", without contemplating that they would acquire ownership. 55 Then there was the inconsistency between Mrs O'Neill's current insistence that she was making mortgage payments, with the references in the receipts, and in the Centrelink application, to rent. Mr Adam Williams, whose evidence there is no reason at all to doubt, confirms that Mrs O'Neill often spoke to him of "rent" and "your mum's rent". As I have already said, I think it more probable than not that in the discussion that Mrs Watson heard, the payments were described as rent. Indeed, I think it more probable than not that in the early days of the arrangements all parties referred to the payments as rent, but there was a link to the mortgage because of the idea that they would continue only so long as the mortgage was outstanding. I completely accept that the Williams regarded the payments as rent. I think it likely that the O'Neills regarded the payments as rent, but rent that served as a contribution to the repayment of the mortgage, those repayments being made by the Williams. As it turns out that would seem to be right, as the payments of rent went into a bank account from which the mortgage payments were deducted. Legally, the payments are correctly characterised as rent, but although there is now much focus on their characterisation, it is not at all clear that it was important to the parties at the outset how they were characterised. Nor would it make any difference to the legal consequences. If the O'Neills had an expectation that subject to paying an agreed amount each week, they would be able to remain in the property for life, it is irrelevant whether that agreed amount was characterised as rent or mortgage contributions. 56 Ultimately, therefore, I do not think that the criticisms that have been advanced of Mrs O'Neill's evidence detract greatly from what she says on the topic of the arrangements in 1992. 57 Mrs O'Neill's evidence that the arrangement was one by which the O'Neills would be entitled to remain at least indefinitely, if not for life, is corroborated by Mr Mercieca and by Mrs Watson, and her evidence that the arrangement was one by which the O'Neills would make payments in the nature of rent while the mortgage was outstanding for about the first five years, and thereafter pay maintenance only, is also corroborated by Mrs Watson. I see no reason not to accept the evidence of Mr Mercieca or Mrs Watson; indeed, I found their evidence persuasive. These crucial aspects of it, though referred to in their affidavits, emerged in their oral evidence almost co-incidentally, and certainly not as if they matters the potential importance of which the witnesses understood. It is significant that the conversations deposed to by Mr Mercieca and Mrs Watson in their affidavits never supported the higher case propounded by the plaintiff's then solicitors, which tends to suggest that the conversations they report are not reflective of the input of solicitors seeking to put a case at its highest, but are more likely to be reflective of what they truly recall. 58 It is also supportive of the accuracy of Mrs O'Neill's evidence that so much of what she attributes to Mrs Williams is objectively correct, for which her only apparent source could be the Williams: I have already referred to the consistency between the early conversations to which she deposes and the facts as they have ultimately emerged as to the price of the property, the amount of the mortgage, the amount of the rental payments, the amount applied to the building, and that the Williams applied for their loan as owner-occupiers. 59 It is also supportive of Mrs Williams' evidence that the arrangement was one by which the O'Neills would make payments in the nature of rent while the mortgage was outstanding for about the first five years, and thereafter pay maintenance only, that this contention emerged in detail, and very promptly, on 24 October 2002 and is set out in Sneddon Hall & Gallop's letter of that date. It was an immediate response to the Notice of Termination, and not something thought of only later in the course of the proceedings. It is also consistent with what was attributed by Mrs O'Neill to Mr O'Neill in the conversation he had with the Williams a couple of days before his death. 60 That the original arrangements contemplated rent payments for five years while the mortgage was outstanding is supported also by Mr Williams' evidence, already mentioned, that he does not like owing money, and was keen to re-pay the mortgage more rapidly than its 15 year term; that the Williams had a track record of applying all available money to repayment of mortgages and paying them off as quickly as possible; and, above all, that at least until 1996, when Bilkurra Street was re-financed to raise additional money for other apparently unrelated purposes, the mortgage was indeed being re-paid at a rate which would have seen it paid off in five years or so from February 1993. 61 Moreover, in my view there is a high degree of improbability that the O'Neills would have expended Mr O'Neill's labour, and to some extent his money, not just to build a house, but in some respects to make it suitable for their particular whims, at some cost to himself, if the Williams were to be at liberty to eject them thereafter at their whim, even if they continued to pay the agreed rent. As I have said, I think the Williams' concessions in their oral evidence reflect this, and detract from the force of Mr Pappas' submission that it is improbable that the Williams would have agreed to tie up their own investment property (for what might turn out to be thirty years, having regard to the life expectancy of the O'Neills in 1993). Ultimately, it is clear enough that the Williams at least contemplated that the O'Neills would remain there indefinitely, and given their ages and circumstances it must have been contemplated that that might well be for life. 62 In any event, I accept the direct evidence of Mrs O'Neill, Mr Mercieca and Mrs Watson that express reference was made to "for life", or equivalent. I also accept the direct evidence of Mrs O'Neill and Mrs Watson that express reference was made to rent payments while the mortgage remained on foot for about five years. 63 I therefore conclude that, more probably than not: · The O'Neills, by building the house without remuneration and then incurring additional expenditure in labour in fitting it out in a manner which suited them, acted upon an expectation that in return for Mr O'Neill doing the carpentry free of charge, they would be permitted to occupy Bilkurra Street indefinitely, provided that they paid $600 each four weeks while the mortgage remained outstanding, a period which was anticipated to be about five years, and after they ceased to make those payments, paid the rates and insurance, and maintained the property; and · The Williams induced the O'Neills to adopt that expectation and encouraged their reliant activity by being party to the understanding from which the expectation arose, and thereafter did not deny it when, if they wished to do so, it was incumbent on them to tell the O'Neills before Mr O'Neill did the carpentry and they moved into the property. 64 In those circumstances, it would be unconscionable for the Williams to deny the truth of the expectation, so long as the O'Neills performed their obligations of paying the rent while it was payable, and thereafter the rates, insurances and maintenance. 65 It is then necessary to consider whether Mrs O'Neill is disentitled from enforcing her equity by reason of default in performance of any condition to which its enjoyment is subject. 66 Until Mr O'Neill's death in August 1997, the O'Neills paid $600 four-weekly. That was about six months short of the anticipated five-year period. Thereafter, until February 1998, when that five-year period expired, Mrs O'Neill paid less than the $600 four-weekly which had been originally agreed, but she did so with the agreement of the Williams. As Vinden shows, the obligation of the licensee to perform conditions can be affected by conduct on the part of the licensor, and as I have said above, in my view, it can plainly also be affected by subsequent agreement, if not acquiescence. It is clear that the parties agreed to substitute $300 per four weeks, at least temporarily, for $600 per four weeks. There was no suggestion that this was to affect Mrs O'Neill's entitlement to remain in occupation. On her version, which I have preferred, she offered to continue to pay in circumstances where the Williams had offered to relieve her of any obligation to do so. This could not be a default in performance of a condition to which her occupancy was subject. 67 Then, from May 2000, again by agreement, a sum of $95 per week, or $380 per four weeks, was substituted, which Mrs O'Neill (ignorant of what had happened with the mortgage) agreed to pay, and the Williams agreed to accept. Once again, this could not be a default in performance of a condition to which her occupancy was subject. At least so long as Mrs O'Neill paid the amount as substituted from time to time, it could not be said that she was in default of any relevant condition. 68 Mrs O'Neill continued until, as previously recorded, some time after these proceedings were commenced, Mrs O'Neill ceased to make payments, having been told that her payments would not be accepted and were being deposited into a trust account pending the outcome of these proceedings. [This was approximately contemporaneous with her learning that the mortgage had been refinanced, though she did not assert that there was a connection]. But regardless of the position with the mortgage, in my view the statement that her payments would not be accepted excused her from performance, just as did the conduct of the plaintiff's agent in Vinden, at least so long as she remained willing to make the payments if permitted to do so. 69 Accordingly, even if the obligation to pay rent continued up to the present, beyond the five-year period, Mrs O'Neill would not be disentitled by default in that obligation from enforcing her equity, although as a condition of relief she would be required to bring the rent up to date from 28 February 2003. 70 However, the various substituted rents to which Mrs O'Neill in the past agreed took place in the context that she was unaware of what had happened with the mortgage. On the view which I have taken of the condition which was attached to the expectation, the obligation to pay rent continued only so long as the mortgage remained outstanding, anticipated to be about five years; thereafter the obligation was one to pay rates, insurance and maintenance. Although the mortgage was not in fact discharged by 1998, it would have been shortly thereafter, had the Williams repaid the mortgage in accordance with the expectations that the parties shared in 1992, and not refinanced for unrelated purposes. Mrs O'Neill's entitlement should not be affected by the circumstance that, for their own separate purposes, the Williams refinanced for a much larger sum. But for that refinance, the mortgage would plainly have been discharged some years ago. 71 Where, until the breakdown of their relationship, the parties have accepted alternative arrangements in place of those to which they might have strictly been entitled under the original arrangements, some of which appear to have been to the advantage of one party, and some to the advantage of the other, equity does not require that there be any accounting for adjustments between August 1997 and February 2003, which was the effective date of payments ceasing. [Mrs O'Neill made payments for some time after that date, which were deposited to the Vandenberg Reid trust account, which she later recovered]. It is sufficient to recognise that each party accepted alternative arrangements in substitution for that to which they might strictly have been entitled. [If anyone were entitled to complain about this it would be Mrs O'Neill, who entered the alternative arrangements in ignorance of what had happened with the mortgage]. 72 The position since 28 February 2003 is different, because no payments have been made for rent, and Mrs O'Neill has not paid the rates or insurances. Ultimately Mr O'Neill, on Mrs O'Neill's behalf, accepted that as a condition of relief she must do equity by performing her remaining obligations, and paying or reimbursing the rates, insurances and maintenance incurred by the Williams during the period that she has not been making any payments - that is, the period from about 1 March 2003. 73 There remains some controversy as to whether, in this type of case, the plaintiff's prima facie entitlement is to relief based on the assumed or expected state of affairs which the defendant is estopped from denying [Commonwealth v Verwayen (1990) 170 CLR 394, 443 (Deane J)], or is limited to the minimum equity needed to avoid the detriment - which at least in some cases may still require nothing less than satisfaction of the expectation or assumption [Commonwealth v Verwayen, 412 (Mason CJ), 429 (Brennan J), 501 (McHugh J)]. In my view, in a proprietary estoppel case [as distinct from a windfall equity case, as to which see Henderson v Miles (No 2) [2005] NSWSC 867] - the expectation basis of the equity favours the view that the prima facie entitlement of a successful plaintiff is to satisfaction of the relevant expectation, although such a remedy may be declined in favour of a lesser one where it would be disproportionate to the requirements, in the circumstances, of conscionable behaviour [Giumelli v Giumelli (1999) 196 CLR 101, [48]-[50], [64]; Jennings v Rice [2002] EWCA Civ 159, [50]; Henderson v Miles, [57]-[89]]. 74 In this case I do not think that there are any circumstances that militate against holding the parties to the expectation created in 1992 on which they acted then and on which they continued to act until 2002 [cf Lieschke v Lieschke [2003] NSWSC 743]. Conscionable behaviour on the part of the Williams requires no less than satisfaction of the expectation, in the creation of which they participated. Ultimately, the Williams will have the benefit of the property in respect of which the carpentry work was performed free of charge by Mr O'Neill. 75 For those reasons, in my opinion the plaintiff is entitled to a declaration that she is entitled to continue to reside in the Bilkurra Street property whileever she pays or is willing to continue to pay the council and water rates levied on the property and keeps it insured and in good repair and subject to her reimbursing the defendants for any amounts expended on rates, insurance and maintenance during the period 1 March 2003 to date. She is also entitled to an order that the defendants be restrained from interfering with or suffering her residence of the premises to be interfered with. [DISCUSSION AS TO FORM OF ORDERS] 76 My orders are:

O'Neill v Williams

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Cases Cited (10)

Cited By (12)