Repatriation Commission v Tsourounakis

Federal Court of Australia (Full Court)|2004-12-20|Before: Emmett JJ

REASONS FOR JUDGMENT THE COURT: 1 This appeal concerns the question of whether the respondents, Emmanouil and Vasiliki Tsourounakis ('Mr and Mrs Tsourounakis'), are the beneficial owners, free of any encumbrance or claim, of a Brisbane suburban property situated at 16 Ganges Street, West End ('the Property'). The question arises in the context of determining the entitlement of Mr and Mrs Tsourounakis to a service pension under the Veterans' Entitlements Act 1986 (Cth) ('the Act'). Mr and Mrs Tsourounakis claim that they have effectively alienated the whole or a substantial part of the beneficial ownership of the Property in favour of their son, Michael Tsourounakis ('Michael'). The applicant, the Repatriation Commission ('the Commission'), on the other hand, asserts that Mr and Mrs Tsourounakis are the beneficial owners of the Property, free of any encumbrance or claim.

STATUTORY FRAMEWORK 2 Under s 36 of the Act, a person is entitled to an age service pension if the person is a veteran who has rendered qualifying service and has reached retirement age. There is no dispute that Mr Tsourounakis satisfies both of those requirements. However, under s 36A(2) of the Act, an age service pension is not payable to a veteran if the veteran's age service pension rate would be nil. Under s 36N of the Act, a veteran's age service pension rate is worked out in accordance with the Rate Calculator. 3 The Rate Calculator consists of the steps set out in Part 2 of Schedule 6 to the Act. The Rate Calculator is divided into modules. Each module of the Rate Calculator is divided into points. Module A describes the overall rate calculation process. Module B describes the maximum basic rate. Module C deals with rent assistance. Module D deals with pharmaceutical allowance. Module E deals with ordinary/adjusted income test. Module F describes an assets test. Module G deals with remote area allowance. 4 Module A provides that the rate of pension is an annual rate. The rate of service pension for a person such as Mr Tsourounakis is to be worked out in accordance with Method Statement 1, which is set out as part of Module A. Step 1 of Method Statement 1 is to work out the maximum basic rate using Module B. Additions are then made using Modules BA, C and D, resulting in the maximum payment rate. Step 7 then requires the application of the assets test using Module F to work out the reduction for assets. Step 8 requires the reduction for assets to be taken away from the maximum payment rate. Further adjustments are then to be made to arrive at the rate of service pension. 5 The question in the appeal arises out of the application of Module F, which describes how to work out the effect of a person's assets on the person's maximum payment rate. Module F contains a method statement consisting of six steps as follows: 1. Work out the value of the person's assets. 2. Work out the person's assets value limit in accordance with the table in Module F. 3. Work out whether the value of the person's assets exceeds the person's assets value limit. 4. If the value of the person's assets does not exceed the person's assets value limit, the person's assets excess is nil. 5. If the value of the person's assets exceeds the person's assets value limit, the person's assets excess is the value of the person's assets less the person's assets value limit. 6. Use the person's assets excess to work out the person's reduction for assets using the formula set out in Module F. 6 Module F provides for the treatment of the assets of members of a couple. The value of the assets of a member of a couple is taken to be 50 per cent of the value of the person's assets and the value of the person's partner's assets. Since Mr and Mrs Tsourounakis own their principal home and are legally married and living together, Mr Tsourounakis's assets value limit is $88,000. Under the formula referred to in step 6, his reduction for assets is 7.8 per cent of his assets excess. 7 Under s 5L(1) of the Act, unless the contrary intention appears, asset means property or money. Under s 5L(2) a reference to the value of a particular asset of a person is, if the asset is owned by the person jointly or in common with another person, a reference to the value of the person's interest in the asset. Under s 5L(3), a reference in the Act to the value of a charge or encumbrance on an asset of a person is, if the asset is owned by the person jointly or in common with another person, a reference to the value of that charge or encumbrance in so far as it relates to the person's interest in the asset. 8 Under s 52C(1) of the Act, where there is a charge or encumbrance over particular assets of a person, the value of the assets, for the purposes of calculating the value of the person's assets for the purposes of the Act, is to be reduced by the value of that charge or encumbrance. There is no definition of the expressions 'charge' or 'encumbrance'. The terms must therefore be given their normal meaning as a matter of English in the context in which they are to be found. 9 The effect of those provisions is that, in order to determine the rate of pension to which Mr Tsourounakis is entitled, if any, it is necessary to arrive at a value of his interest in any assets, including assets that he and Mrs Tsourounakis own jointly.

BACKGROUND FACTS 10 The Tribunal accepted that the witnesses who gave evidence on behalf of Mr and Mrs Tsourounakis were witnesses of truth and should be believed. The Tribunal had evidence from Mr and Mrs Tsourounakis, Michael Tsourounakis('Michael'), Mary Tsourounakis ('Mary'), who is Michael's wife and Mr William Carter, who is Mary's father. All gave evidence as to the circumstances in which Michael and Mary became the occupants of the Property and expended time, energy and money on its renovation and improvement. 11 Mr and Mrs Tsourounakis bought the Property in about 1966. Since then, they have at all times been the registered owners, as joint tenants, of an estate in fee simple in the Property. The Property was originally their family home but, at some time before 1991, it ceased to be their home, when it was let to tenants at arms length. 12 In 1990, Michael had an interest in a company that manufactured sauce. In 1991 the business of the company failed with substantial unpaid liabilities. Michael had given a guarantee in respect of certain of those liabilities and had granted security over his family home in respect of the liabilities. When the business failed, Michael was left to deal with the creditors alone. In order to meet his obligations, he sold his family home with the hope of avoiding bankruptcy. 13 At about that time in 1991, Mr Tsourounakis told Michael that he knew that Michael was having trouble finding somewhere to live, having sold his family home and that, since the Property would one day be Michael's anyway, he thought there was no reason not to give it to Michael then. Mr Tsourounakis told Michael that it was intended that the Property would be left to Michael in his will. Mr Tsourounakis suggested that Michael move into the house on the Property and that he consider it as his own to do with as he wished. Mr Tsourounakis said that the Property was very run down and would need a lot of repairs. 14 There was a discussion between Mr Tsourounakis and Michael to the effect that the Property could not be transferred into Michael's name because his creditors would then simply take it to pay off his liabilities and his family would again be left without a place to live. Michael said that the arrangement was that Mr and Mrs Tsourounakis would retain title until Michael had emerged from his financial difficulties and he was in a position to have the Property transferred to him. Mr Tsourounakis referred to the arrangement as 'helping the family out'. Michael confirmed that Mr Tsourounakis said that he did not want any money for the Property and that Michael should treat it as his own. 15 Michael and Mary moved into the property in 1991 and have remained in possession ever since, although there were times when they could not live in the house on the Property because of building works. When they moved in, the Property was in a state of complete disrepair. It was in such bad condition that Mary and Michael had to begin immediately to make renovations. Detailed evidence was given of the improvements that they made and the costs incurred in doing so. No arrangement was made to pay rent for occupation of the property and none was ever paid. However, from 1991, Michael has paid all rates and other outgoings in respect of the Property. 16 Between 1991 and 1994, Michael did his best to meet his liabilities. However, he reached a point where he considered he had no option but to present a debtor's petition and he became bankrupt in December 1994. The Property was not disclosed as an asset in the Statement of Affairs submitted to his trustee in bankruptcy. Michael was discharged from bankruptcy in 1997. By that time, Michael and Mary had occupied the Property for over six years. During that time they had borne all expenses and outgoings involved in maintaining the Property although they paid no rent. However, no steps were taken to deal with the title to the Property. 17 In early 2000, Michael and Mary wished to carry out further renovations and improvements to the Property. Michael approached National Australia Bank with a view to borrowing $100,000 for that purpose. While the bank was prepared to lend that sum, they required security over the Property. However, since the Property was registered in the names of Mr and Mrs Tsourounakis, the bank required guarantees from them and a mortgage of the Property as security under their guarantees. Mr and Mrs Tsourounakis were not prepared to give guarantees. They considered that the Property belonged to Michael and that his proposed renovations were no concern of theirs. They said that they had nothing to do with the Property and they did not want to have to worry about acting as guarantors at their stage of life. 18 Accordingly, Michael discussed the matter with Mr Carter, who suggested that he would obtain a loan. Mr Carter borrowed $100,000 in or around January 2002 and borrowed a further $30,000 at the end of January 2002. The arrangement made between Michael and Mary, on the one hand, and Mr Carter, on the other, was that while Mr Carter would borrow the money, Michael and Mary would repay the loans together with the interest payable on the loans. They have done so to date. Mr and Mrs Tsourounakis have had no involvement in the arrangement with Mr Carter. 19 Mr and Mrs Tsourounakis have made no contribution to the considerable cost of the substantial renovations and improvements carried out on the Property by Michael and Mary. Nor has their permission been sought for any of the work. 20 The property is insured in the name of Mr Tsourounakis. Michael could not obtain insurance in his own name because the property is not registered in his name. However, contents insurance has been effected in Michael's name. Premiums for both kinds of insurance have been borne by Michael. 21 Michael and Mary have invested a huge amount of time, energy and money in the Property. Michael considers that it would be 'incredible' to suggest that he would have done so if he did not consider the Property to be his own. He said that in all respects he considers the Property to be his own and has acted accordingly for 13 years. He said that he would not have spent the time, energy and money that he did renovating and living in the Property if he did not consider it to be his own. Mary also gave unchallenged evidence that she and Michael spent a large amount of time, energy and money in repairing and renovating the Property on the basis that the Property was theirs. 22 On 27 September 2001 each of Mr and Mrs Tsouounakis made a will. Each devised the whole of his or her estate to the other provided the other survived for a period of 30 days. If not, various parts of the estate were to pass to their children. In particular, the Property was to be given to Michael absolutely.

MR TSOUROUNAKIS'S PENSION 23 On 18 March 1992, Mr Tsourounakis made a claim for a service pension under the Act. He completed the appropriate form, which required disclosure of particulars of assets owned by him. He disclosed that he owned real estate, apart from the home that he lived in, and, accordingly, completed a further form relating to real estate. In that further form, Mr Tsourounakis set out particulars of the Property and said that he and his wife each owned 50 per cent of it. The estimated value of the Property was shown as $65,000. Although Mr Tsourounakis's application was originally refused, the Commission, by letter of 6 May 1992, informed him that he had been granted a service pension. The letter set out details of Mr Tsourounakis's income and assets. Those details included particulars of the Property with a net market value of $65,000. 24 In November 1992, Mr Tsourounakis requested a review of his service pension following cessation of workers compensation benefits. On 11 December 1992, the Commission requested Mr Tsourounakis to provide an up dated income and assets statement. He completed and returned the statement on 16 December 1992. Part D of the statement disclosed the Property as being 100 per cent owned by him and Mrs Tsourounakis and as having a current market value of $70,000. Part D contained a note saying: 'Our son lives & no rent is paid.' Mr Tsourounakis continued to receive a service pension at varying rates until the making of the decision to which this appeal relates. 25 In 2002, Mr Tsourounakis was required to complete a form in connection with the assessment of his continuing eligibility for a service pension under the Act. On 22 August 2002 he submitted the appropriate form to the Commission duly completed. One of the questions in the form enquired as to whether Mr Tsourounakis owned or partly owned any real estate other than the home in which he was living. That question was answered 'yes' and, accordingly, Part D of the form required completion. Mr Tsourounakis completed Part D with particulars of the Property, showing that it was owned 50/50 with Mrs Tsourounakis. In the section of Part D requiring annual expenses and outgoings to be listed, Mr Tsourounakis inserted the following: 'Nil My son resides in this dwelling not letted, as assistance to his family.' Mr Tsourounakis estimated the current market value of the Property as $150,000. 26 The Commission obtained a valuation of the property at $570,000 as at 30 September 2002. On 7 October 2002, the Commission wrote to Mr Tsourounakis saying that his service pension had been reduced to nil with effect from 1 October 2002. Attached to the letter was an income and assets statement disclosing the Property as having a net market value of $570,000. It is common ground that, if Mr and Mrs Tsourounakis are the beneficial owners of the Property free from any charge or encumbrance, Mr Tsourounakis would be ineligible for a service pension. 27 On 15 November 2002, Michael wrote to the Commission in response to the letter of 7 October 2002. The letter has been treated as a request for a review under s 57 of the Act. Section 57 of the Act provides that a claimant who is dissatisfied with certain decisions of the Commission may request the Commission to review the decision. Under s 57B(1), if the Commission reviews a decision, the Commission must affirm the decision or set it aside. Under s 57B(2), if the Commission sets the decision aside it must substitute a new decision in accordance with the Act. 28 Michael's letter of 15 November 2002 relevantly said as follows: 'The property at 16 Ganges Street, West End whilst in my parents names is in fact held in trust for myself. The background is as follows: In 1990 I was a director of a business that failed (largely due to the fraud of my fellow director). Pursuant to guarantees I had given the Bank and Finance Companies the house owned by my wife, Mary and myself in The Gap was sold. I battled on for some years attempting to repay the Finance Companies but was forced into Bankruptcy in 1994. After the The Gap home was sold I had to find somewhere to live. My parents owned a rental property in Ganges Street, which they offered to me as a home for my family. The property would then have been worth $70 000 - 80 000. The Ganges Street property was originally our family home. At the time my family and I moved into it, it had been rented for many years and was very run down and dilapidated. I attach photos of the state of the property around that time. The property required complete restumping, roofing and some reflooring to ensure structural security and to ward off termite activity and leaking. A substantial amount of money and my time and that of my wife was spent in making the property livable and improving it over the years to accommodate my growing family. I attach a summary of the costs incurred in repairing and improving the property. Owing to my bankruptcy the legal title to the property remained in my parents name and willed to me. What was meant to happen (when my Bankruptcy finished in 1997) was for title I the property to be transferred to my wife and I. It was overlooked. My parents have always openly placed value on their stake in the property whilst acknowledging it as in trust to myself and taking into account the work and cost my wife and I put into improving the property. In Summary The valuation of the property per local real estate agent $550,000 (copy attached) Please note: My parents and my concern about this agent's quote. Their prediction of a $500 000 -600 000 sale of a similarly featured house in our street resulted in a $491 000 sale over the weekend. (photos attached) Owing to my wife and I on account of work and costs incurred in repairing and improving the property $350,000 (not including appreciation to the property) Net Equity attributable to my parents $200,000' 29 Attached to the letter was a summary of expenses amounting to the sum of $352,523 under the following heads: Building improvements: $208,118 Restumping: $6,500 Re-roofing: $3,500 Rates: $19,268 Insurance: $4,637 Labour: $110,500

A valuation of the Property at $550,000 was also enclosed. On 12 December 2002, Michael furnished further details of the expenses that were summarised in his earlier letter. 30 On 18 December 2002, a service pension review officer within the Commission was furnished with a minute giving advice regarding whether any reduction should be made to the value of Mr Tsourounakis's assets for the purposes of calculating his entitlement to a service pension. The conclusion in the minute was as follows: 'Mr Michael Tsourounakis holds an equitable interest in the property, which allows a reduction in the held asset value of the property in his parent's assessment. This reduction is itself reduced by the foregone rental income during the period of occupancy. The determination of the son's equitable interest will reasonably include all the amounts as described in your e-mail. Apart from general house maintenance, any contribution made by the son to the property's value may be considered. This is because any in-kind contribution is regarded as valuable consideration, which must be fairly considered given that it acts to reduce the extent of foregone rental income.' 31 On 23 January 2003, the Commission wrote to Michael in order to provide an explanation of the method to be used to calculate the value of the Property for the purposes of assessment of Mr Tsourounakis's entitlement to a service pension. The letter indicated that the value of the Property had been set at $540,000 and requested further details of the contribution made by Michael to its value. Michael responded on 31 January 2003, enclosing copies of documents evidencing the expenses that had been incurred in the previous twelve years or so in renovating and improving the Property. 32 On 12 March 2003, a service pension review officer, being a delegate of the Commission, set aside the decision of 7 October 2002. In place of that decision, the reviewing delegate made a determination that the value of the Property is $540,000 and that the share of Mr and Mrs Tsourounakis in the Property is 61.87 per cent or $334,109.42. That figure was calculated as set out in Schedule 1 to these reasons. 33 Mr and Mrs Tsourounakis filed an application with the Administrative Appeals Tribunal ('the Tribunal') for review of the decision of 7 October 2002 as set aside upon review on 12 March 2003. On 18 March 2004, the Tribunal: (1) set aside the decision under review; (2) in substitution determined that Mr and Mrs Tsourounakis disposed of the Property in 1992 by giving it to Michael and that the Property has not constituted part of their assets from that time on; (3) remitted the matter to the Commission for reassessment of service pension payable to Mr and Mrs Tsourounakis in the light of that decision.

34 In the course of its reasons for that decision, the Tribunal made the findings set out in Schedule 2 to these reasons. The Tribunal then went on to say: '7. Over the last 12 years the Applicants have regularly complied with the requirements associated with the receipt of their pensions by completing forms in which their assets and incomes have been declared. They have on each of those occasions declared themselves to be the owners of the Ganges Street house. They have done so because they are still registered as the owners. Up until 2002, the value of the house was not a significant factor in the assessment of their rates of pension, nor was the ownership of it. 8. However, irrespective of what the documentation may say, I find that Emmanouil and Vasiliki gave the Ganges Street house to Michael in 1992. 9. I find that in 1992, Emmanouil and Vasiliki Tsourounakis divested themselves of an asset worth $70,000 at that time.' 35 The decision of the Tribunal was given orally. The reasons for the decision were subsequently reduced to writing and were furnished to the Commission on 31 March 2004.

THE APPEAL 36 On 21 April 2004, the Commission filed a notice of appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) from the decision of the Tribunal of 18 March 2004. By its notice of appeal, the Commission claimed orders that: (1) the appeal be allowed; (2) the decision of the Tribunal be set aside and the decision of the commission be restored; (3) alternatively that the matter be remitted to the Tribunal for determination according to law.

The Commission made clear on the hearing of the appeal that the reference to the decision of the Commission to be restored was intended to be a reference to the decision of 7 October 2002 that the Property be treated as an asset of Mr and Mrs Tsourounakis with a value of $570,000. In the alternative, the Commission invited the Court to make a determination of the value of the Property. The Commission indicated that it regarded the appeal as one of considerable importance to the Commission. For that reason, the Commission agreed that it should bear the costs of the appeal in any event. 37 Mr and Mrs Tsourounakis also invited the Court, if it were of the view that the appeal should be upheld in any respect, to make a determination without remitting the matter to the Tribunal for further consideration. For reasons that will appear below, the Court considers the appeal should be upheld and that the determination of the Tribunal should be set aside. However, it is inappropriate for the Court to make any order other than an order that the matter be remitted to the Tribunal for determination according to law. 38 The grounds of appeal relied on by the Commission in its notice of appeal are as follows: (1) By failing to consider the Commission's submission that there was significant evidence that was inconsistent with the finding that the Property was given to Michael and by failing to address the provisions of the Property Law Act 1974 (Qld) (' the Property Law Act'), the Tribunal: (a) failed to provide reasons for its decision, in contravention of the requirements of s 43(2) of the Administrative Appeals Tribunal Act 1975; or (b) brought about a miscarriage of justice. (2) The Tribunal erred in law by finding that Mr and Mrs Tsourounakis had divested themselves of the property, given the absence of any evidence of compliance with ss 11 and 200 of the Property Law Act. (3) The Tribunal's finding that Mr and Mrs Tsourounakis had divested themselves of the Property was so unreasonable that no reasonable Tribunal could have made that finding.

NO GIFT 39 It is difficult to see how the Tribunal reached its conclusions that Mr and Mrs Tsourounakis had divested themselves of the Property in 1992 by giving it to Michael. There is simply no evidence capable of supporting that conclusion. The Tribunal's reasons certainly do not explain how its findings led to that conclusion. 40 Every piece of objective evidence is inconsistent with a conclusion that, in 1992, Mr and Mrs Tsourounakis intended to divest themselves, at that time, of a proprietary interest in the Property. The evidence cannot support a conclusion that they did in fact divest themselves of a proprietary interest at that time. They have remained the legal owners as joint tenants of the fee simple throughout the whole of the period. They asserted that they were the only owners of the Property in the claim for a service pension in March 1992. That was confirmed in their income and assets statements of 16 December 1992 and 22 August 2002. 41 It would have been quite inconsistent with the desire of Michael and his parents, that the Property not be available to Michael's creditors, that he be given a proprietary interest of any sort in the Property in 1992. When Michael became bankrupt in 1994, he did not disclose the Property as an asset. Failure to do so, if he did in fact have any interest in the Property, would have been a serious breach of his obligations under the Bankruptcy Act 1966 (Cth). 42 When Michael wanted to borrow money in 2000 on the security of the Property, it would have been a simple matter for Mr and Mrs Tsourounakis to transfer legal title to him if, at that time, he was already the beneficial owner. The terms of the wills made by Mr and Mrs Tsourounakis in 2002 suggest that at that stage they still regarded themselves as the beneficial owners of the Property. 43 Section 11 of the Property Law Act provides that no interest in land can, inter alia, be disposed of except by writing signed by the person conveying the same. Under s 200 of the Property Law Act, a voluntary assignment of property is effective in equity only when the assignor has done everything within his or her power to transfer title to the assignee such that the transfer of title can be carried out without the further intervention of the assignor. There has never been any attempt at any time to satisfy either of those requirements. 44 The evidence is consistent only with a conclusion that Mr and Mrs Tsourounakis had no intention in 1992 of parting with any proprietary interest in the Property. However, they were prepared to let Michael and his family occupy the Property free of any obligation to pay rent, on the basis that Michael would bear the outgoings and could do with the Property what he wanted. They intended that, while they would retain full beneficial ownership, they would arrange for the Property to pass to Michael upon the death of the survivor of them. They are the only findings supportable by the evidence.

PROPRIETARY ESTOPPEL 45 The real debate on the hearing of the appeal was not directed to the correctness of the Tribunal's decision. Counsel for Mr and Mrs Tsourounakis, quite properly, made no concerted effort to support the decision of the Tribunal. The real debate concerned the extent to which it would have been open to the Tribunal to conclude that the value of the interest of Mr and Mrs Tsourounakis in the Property should be treated as diminished by reason of the contribution made by Michael and Mary to the renovation and improvement of the Property. In essence, the question is whether Mr and Mrs Tsourounakis are free to dispose of the Property and to retain the whole of the proceeds of sale for their own benefit or whether, by reason of their conduct, their freedom to deal with the Property as their own has been severely constrained. 46 In essence, Mr and Mrs Tsourounakis contend that Michael has acquired an interest in the Property by the operation of the doctrine of proprietary estoppel, which finds its origin in the 19th Century (see Dillwyn v Llewelyn (1862) 45 ER 1285 and Ramsden v Dyson (1866) LR 1 E&IA 129). The attraction of that doctrine would require the establishment of the following matters (see Dinyarrak Investments Pty Ltd v Amoco Australia Ltd (1982) 45 ALR 214): (a) an expectation or belief by Michael, created and encouraged by Mr Tsourounakis, that Mr and Mrs Tsourounakis will give the Property to him on the death of the survivor of them and will, in the meantime, permit him and his family to live there free of interest on the basis that he will bear all outgoings in respect of the Property and is otherwise free to do with the Property what he likes; (b) knowledge by Mr and Mrs Tsourounakis of Michael's expectation or belief; (c) expenditure of time, energy and money by Michael in reliance upon that expectation or belief; (d) knowledge by Mr and Mrs Tsourounakis of Michael's expenditure of time, energy and money, coupled with a failure to assert any title to the Property, such that it would be fraudulent for them to rely on their legal ownership to defeat the expectation and belief encouraged by their conduct or the lack of conduct on their part. 47 Mr and Mrs Tsourounakis contend that the evidence supports a finding that it would be unconscionable to treat them as having any remaining beneficial interest in the Property. They say that Michael and Mary have contributed time, effort and money in renovating and improving the Property and treating it as their family home in reliance upon the assurances given by Mr and Mrs Tsourounakis that they should treat the Property as their own and that it would be given to Michael absolutely upon the death of the survivor of Mr and Mrs Tsourounakis. 48 Accordingly, Mr and Mrs Tsourounakis say, it would be unconscionable for them to assert their legal ownership of the Property to dispossess Michael and his family and that they would be restrained by a court of equity from doing so. Alternatively, Mr and Mrs Tsourounakis say that, even if they should not be treated as bare trustees of the Property, a court of equity would intervene to restrain them from dispossessing Michael and his family and selling the property unless they provided appropriate compensation to him for the expenditure that he has made in improving the Property. It may be that the evidence is capable of supporting such a conclusion. It may be that that is what the Tribunal had in mind in the conclusion that it reached. However, no findings were made by the Tribunal that would enable such a conclusion to be drawn. 49 The Commission contends that the evidence would not support such findings. While the evidence leaves something to be desired in terms of a suit in equity between Michael on the one hand and his parents on the other, there was material before the Tribunal that is capable of supporting a finding that Michael and Mary expended considerable time, energy and money in reliance upon the statements made by Mr Tsourounakis in 1992 that Michael could treat the Property as his own. 50 Thus, Michael said that he would not have spent the time and money that he did renovating and living in the Property if he did not consider it his own house. He said that it was incredible to suggest that he would have done such a thing if he did not consider the Property to be his. In all respects, he considered the Property to be his own and has acted accordingly for a 13 year period. He always understood that, should the Property be sold, the entire profit from the sale would be his to dispose of as he wished. Mary said that she and Michael spent a large amount of time, energy and money repairing and renovating the Property and that everything was done on the basis that the Property was theirs. 51 The Commission contended that there has been no attempt by Mr and Mrs Tsourounakis to resile from the assurances that they gave in 1991 and thereafter and that, accordingly, Michael has no cause of action that would result in his being recognised as having any equitable claim or interest in respect of the Property. That contention is somewhat facile. The question is not whether Mr and Mrs Tsourounakis are threatening to act in an unconscionable manner. The question is whether, if they did, Michael would be entitled in equity to restrain them from doing so. If he would, the value of the Property to Mr and Mrs Tsourounakis must be diminished to the extent that they would be required to compensate Michael as a term of avoiding any restraint by a court of equity. If a court of equity would treat Michael as the beneficial owner of the Property, the value of the interest of Mr and Mrs Tsourounakis must be regarded as nil. 52 The object of the remedy that might be ordered by a court of equity in a case of proprietary estoppel is not necessarily to make good the belief and expectation encouraged by the conduct of the owner, but to recompense the claimant for the expenditure or other detriment suffered as a consequence of reliance on the belief and expectation so encouraged. In many cases where the requirements summarised above are satisfied, it will be possible for the owner of property to fulfil the equitable obligation owed only by conveyance or transfer of the interest, the expectation of which was encouraged by the owner's conduct. However, in other cases, it will be appropriate for lesser relief to be awarded. For example, where the expenditure or detriment is slight in comparison to the value of the property in question, it would be inappropriate to penalise the owner by depriving the owner of full ownership of the property. 53 The task of the Tribunal on reconsideration of the matter according to law would be to examine the extent to which a court of equity would require Mr and Mrs Tsourounakis to compensate Michael as a term of being permitted to dispossess him and his family and to sell the Property. That is to say, it would be necessary to enquire whether the assurances that were given by Mr Tsourounakis in 1992 and the conduct of Mr and Mrs Tsourounakis since that time have given rise to an estoppel against their assertion of full beneficial ownership in the Property. At one end of the spectrum, a court of equity may impose a constructive trust, if that is the only way in which equity can be done as between Mr and Mrs Tsourounakis on the one hand and Michael on the other. However, a court must first decide whether there is an appropriate equitable remedy that falls short of the imposition of a trust: see Giumelli v Giumelli (1999) 196 CLR 101 at [10]. 54 It is clear that there is no legally binding promise involved in the arrangements between Mr and Mrs Tsourounakis on the one hand and Michael on the other. If there were, resort could be had to the law of contract in order to enforce the promise. The function of equity is to supplement the law, not to replace it. What creates the equity in such a situation as this is not a promise or assurance of itself but the expectation that any such promise or assurance created and the inequity that would result from the legal owner resiling from that promise or assurance. The equitable principle, of course, would have no application where the transaction remained wholly executory. It is not the existence of an unperformed promise or assurance that invites the intervention of equity but the conduct of a claimant in acting upon the expectation to which the promise or assurance gives rise: Giumelli v Giumelli (supra) at [35]. 55 Cases of proprietary estoppel involve a situation where departure from an assumed state of affairs would be contrary to the requirements of conscience. Whether departure is to be permitted, and the extent to which it is to be permitted depends upon all of the circumstances of the case. In some cases a court may require the party estopped to make good the assumption: see Commonwealth v Verwayen (1990) 170 CLR 304. Alternatively, the court may, in an appropriate case, impose terms upon departure from the assumption, determining that some lesser relief is appropriate. The court may require that a sum of money be paid to compensate a claimant as a consequence of the departure from the assumption. 56 Those questions would need to be investigated by the Tribunal on the evidence before it. Issues of some complexity could arise in that regard. For example, consideration may need to be given to the following matters:

the value of the Property at the time at which expenditure was incurred and the relationship between the amount of the expenditure and any increase in the value of the Property as a consequence of the expenditure;
the extent to which Michael and Mary have lost the use of funds that were expended in carrying out renovations of or improvements to the Property;
the value to Mary and Michael of their occupation of the Property on the basis that they bear rates and other outgoings;
whether any compensation for occupation of the Property free of rent should be made, having regard to the extent of the expenditure on improvements, on maintenance of the Property, and on outgoings; and if so, what compensation;
the extent to which dispossession of Michael and his family would be unconscionable having regard to any emotional investment that they have put into the Property in reliance upon the assurances of Mr and Mrs Tsourounakis. There may also be other factors that need to be taken into account. 57 In circumstances where Michael and his family have treated the Property as their home for more than 13 years and have incurred expenditure that has increased its value to a very significant degree, it may be that the only appropriate order is to treat Michael as having an entitlement to remain in possession of the Property for the lifetime of the survivor of his parents and to be given the property by testamentary devise by the survivor. Such a conclusion may mean that the value of the interest of Mr and Mrs Tsourounakis in the Property would be very close to nil. On the other hand, it may be significant that, in his letter to the Commission of 15 November 2002, Michael asserted that his parents still had a net equity in the Property of $200,000. The appropriate diminution in the value of the interest of Mr and Mrs Tsourounakis would be a matter for the Tribunal.

CONCLUSION 58 The appeal must be upheld. The orders of the Tribunal must be set aside and the matter must be remitted to the Tribunal for reconsideration according to law in accordance with these reasons. In accordance with the agreement of the parties, the Commission should pay the costs of Mr and Mrs Tsourounakis. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Associate: Dated: 20 December 2004 Counsel for the Applicant: Mr P. Keane QC, with Miss E. Ford

Solicitor for the Applicant: Australian Government Solicitors

Counsel for the Respondent: Mr J. Logan SC, with Mr D.P. O'Gorman

Solicitor for the Respondent: Gilshenan & Luton Lawyers

SCHEDULE 1 Son's interest … The son's interest is based on capital improvements and is calculated as follows: Building Improvements $208,118 Restumping$ 6,500 Re-roofing $ 3,500 Labour (original estimate $110,500 less $107,000 $3,500 for general maintenance)_____________ $325,118 Foregone rent National Office advised that the deduction for improvements made by the son and his wife, is to be offset "by the notional rent amount which has been foregone during the son's occupancy" in accordance with Section 48 of the VEA. … The AVO has estimated the notional market rental for the property from 14 May 1992 to 30 September 2002 as $163,800 in total… This takes into account the changing condition of the property over that period. It is recognised that there were periods when major works were carried out, and it would have been impractical for the dwelling to be rented out. … the AVO assessed 62 weeks as being an appropriate period of rental loss caused by major renovation and extension works… I accept the AVO estimate as being fair and reasonable and determine the notional value of rental loss as follows: Number of weeks from 14 May 1992 to 30 September 2002 14 May 1992 to 13 May 2002 (10 years) 520 weeks plus 14 May 2002 to 30 September 2002 20 weeks = 540 weeks Period of rental loss as proportion of total period: 62 / 540 = 11.48% Proportion of period that house could be rented: 100% - 11.48% = 88.52% Notional rental during period that house could be rented: 88.52% X $163,800 = $144,955.76 A deduction will be allowed for the son's in-kind contribution to rent in the form of rates, insurance, general maintenance labour costs. Expenses prior to 14 May 1992 are disregarded, because there is no consideration of notional rent prior to that date. In-kind rental contributions from 14 May 2992 to 30 September 2002: Rates estimate by son: $19,268 less rates before 14 May 1992 - $1,366.66 * *(1991: $250X4 = $1,000 plus January to April 1992 = $275 X 4/3 = $366.66) ___________ = $17,901.34 Insurance estimate by son: $4,637 less insurance before 14 May 1992 $ 270 *(1991: $200 plus January to April 1992 $210/3 = $70) ___________ = $4,367 Labour costs general maintenance = $3,500 (above) $25,768.34 Notional rent for period when house could be rented $144,995.76 Less in kind rental contributions $ 25,768.34 $119,227.42 Following is a calculation of Mr and Mrs Tsourounakis' interest in asset value of property using the above figures: Total value of property - (Son's interest - Foregone Rent) $540,000 - ($325,118 - $119,227.42) $540,000 - $205,890.58 = $334,109.42 When converted to a percentage, the parent's interest is: $334,109.42 / $540,000 X 100 = 61.87%

SCHEDULE 2 (a) Emmanouil Tsourounakis was born in Crete on 4 March 1930. (b) Vasiliki Tsourounakis was born in Crete on 9 April 1929. (c) Emmanouil served in the Greek Army in Korea from 20 December 1953 to 9 August 1954. (d) Emmanouil rendered "qualifying service" for the purposes of the Veterans' Entitlements Act 1986. (e) Emmanouil and Vasiliki migrated to Australia in the early 1960s. (f) In about 1966, Emmanouil and Vasiliki bought the house at Ganges Street for approximately Ł3,000. This house became their family home until 1988. It is where they raised their two children, Michael and his sister. (g) In 1988, Emmanouil and Vasiliki bought a house at Sunnybank and moved there to live. (h) They had tenants move into the Ganges Street house. (i) In about 1990, Michael experienced financial difficulties. He had guaranteed a business loan which was not repaid. He ultimately lost his home in which he, his wife and children had been living. Michael and his family were initially able to move into the home of his wife's parents, Mr. and Mrs. Carter, whilst Mr. Carter was away working in Tasmania from March until October 1991. (j) Upon the return to Brisbane of Mr. and Mrs. Carter, Michael had to find alternative accommodation for his family. (k) Emmanouil and Vasiliki came to the rescue of Michael. They asked the tenants of the Ganges Street house to go. They offered the house to Michael and his family. They told Michael that it was their intention that he would eventually be given the house, and that, since he had fallen on hard times, he might as well have it at that time, that is, at the end of 1991. They told Michael that he would not be charged any rent because the house was his and that as far as they were concerned he could do with it what he wanted. They told Michael that hence-forth they would not spend a cent on the house, nor on any maintenance, rates or outgoings of any description. (l) The house was in a very run-down, dilapidated condition. Rain came through the roof; the stumps needed replacing; the sewerage pipes needed replacing. (m) The title to the house at Ganges Street was not transferred to Michael because it was feared that his creditors may take it. (n) From early 1992, Emmanouil and Vasiliki have had nothing to do with the house. They have not spent one cent on it. They have taken no proprietary interest in it. (o) In March 1992, Emmanouil and Vasiliki applied for the service pension. At that time they declared ownership of the house at Ganges Street and estimated the value to be $65,000. They were granted the service pension with effect from 6 May 1992. (p) The house was later valued in November 1992 as being worth $70,000. That value did not affect the service pension because the threshold at the time was about $225,000. (q) Michael was made bankrupt in 1994. (r) From 1992 until the present, Michael, his wife, and his parents in law have spent over $350,000 on the house, including labour and $208,000 worth of materials. They have done renovations, repairs and extensions. (s) The house at Ganges Street is now worth $540,000. A high percentage of the increase in value is probably due to the extensive work done on the house, but there has also been a significant increase in value due to the location of the house.

At a glance

Court

Decision date

Before

Source

Judgment (17 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (3)