Repatriation Commission v Tsourounakis

THE FACTS 69 We have chosen to outline the history of these proceedings before going to the detailed facts of the case. In the course of that history such facts have been canvassed in two decisions in the Tribunal and one in the Full Court. For present purposes we adopt the facts as they appear from the reasons for the decision of the Senior Member which is the subject of this appeal. 70 Prior to 1991 Michael had an interest in a business which manufactured sauce. In 1991 the business failed. Michael had guaranteed certain of the business debts and mortgaged his family home at The Gap as security. In attempting to meet his obligations, he sold the home. At that time, Mr Emmanouil Tsourounakis told Michael that as the property would, in any event, be left to him, there was no reason why he should not have it now. He invited Michael to move into the property and to 'consider it as his own to do with as he wished'. The property needed substantial repair. They agreed, or understood, that the property would not, at that time, be transferred to Michael because of the risk that his creditors would have recourse to it, leaving his family without a place to live. Michael claimed that his parents were to retain title to the property until he emerged from his financial difficulties. Michael and his family moved into the property in 1991 and have resided there ever since, save when building works have compelled them to vacate it. They have not paid rent, but Michael has paid all rates and other outgoings. He and his wife have also incurred substantial renovation costs. In December 1994 Michael became bankrupt on his own petition. He did not disclose any interest in the property as an asset in his statement of affairs. He was discharged from bankruptcy in 1997. 71 In 2000 Michael and his wife wished to carry out further renovations. They sought a loan from the National Australia Bank. The bank was prepared to lend the necessary funds, but it required a mortgage over the property as security. The property was still registered in the names of Mr and Mrs Emmanouil Tsourounakis, and they were unwilling to give such security. They said that the property belonged to Michael, and that the proposed renovations were none of their concern. They were not willing to act as guarantors. Curiously, the parties did not identify the apparently easy solution of transferring the property to Michael. Rather, Mary Tsourounakis' father, Mr Carter, borrowed $100 000 in July 2001 and a further $30 000 in December 2001. Those funds were applied to the renovations. Michael and Mary agreed with Mr Carter that they would pay the interest and repay the principal. Mr and Mrs Emmanouil Tsourounakis had no involvement in that arrangement. The property is insured in the name of Mr Emmanouil Tsourounakis. The contents are insured in Michael's name. Michael pays both premiums. Since 1991 he has considered the property to be his home. He said that he would not otherwise have spent time, energy and money in renovating it and living in it. 72 On 27 September 2001 Mr and Mrs Emmanouil Tsourounakis made wills in favour of each other. Each will leaves everything to the spouse, provided that he or she survives the testator for thirty days. In the event that the spouse does not so survive, parts of each estate are to pass to identified children. The property is to go to Michael.

ENTITLEMENT TO A PENSION 73 Mr Emmanouil Tsourounakis satisfies the requirements of s 36 of the Act in that he is a veteran who has rendered qualifying service and has reached pension age. However s 36A provides that apension will not be payable 'if the veteran's age service pension rate' is nil. Pursuant to s 36N the age service pension rate is calculated by reference to the 'rate calculator' which is to be found in Sch 6 Pt 2 of the Act. Steps 7 and 8 of Module A provide for an adjustment to reflect the value of assets, which adjustment is to be calculated in accordance with Module F. This aspect is of primary importance for present purposes. Steps 5 and 6 provide for an adjustment based on income, which adjustment is to be calculated in accordance with Module E. This aspect is of marginal relevance for present purposes. We assume that Mrs Tsourounakis has been joined as a party because she will derive some benefit should Mr Tsourounakis be awarded a pension. 74 Module F provides that where the relevant veteran is a "member of a couple" (eg: husband and wife), the value of such member's assets is 50 percent of the value of his or her assets and of the value of his or her partner's assets (par SCH 6-F2). 75 Step 1 of Module F requires that the value of the relevant person's assets be ascertained. Pursuant to s 5L(1) the word 'asset' means 'property or money (including property or money outside Australia).' Subsection 5L(2) provides that where a particular asset is owned jointly or in common with another person or persons, the value to the relevant person is 'a reference to the value of the person's interest in the asset.' Subsection 52C(1) provides that: 'Where there is a charge or encumbrance over particular assets of the person, the value of the assets, for the purposes of calculating the value of a person's assets for the purposes of this Act … is to be reduced by the value of that charge or encumbrance.' 76 Pursuant to subs 5L(3): 'A reference in this 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 or persons, a reference to the value of that charge or encumbrance insofar as it relates to the person's interest in the asset.' 77 The Tribunal concluded that the property was not charged or encumbered. We will return to that question at a later stage.

CLAIMS FOR THE PENSION 78 On 18 March 1992 Mr Emmanouil Tsourounakis claimed a pension. In so doing he was obliged to disclose his assets. He disclosed ownership of the property, saying that he and his wife each owned 50 percent. The estimated value at that time was $65 000. He was eventually granted a pension on that basis. In November 1992 he sought review of his pension and subsequently disclosed that he and his wife owned the property, then valued at $70 000. He also disclosed that Michael lived in the premises and did not pay rent. Until 2002, Mr Emmanouil Tsourounakis received a service pension at varying rates. On 22 August 2002 he submitted a further claim, indicating that he and his wife owned the property in equal shares. Again, he indicated that Michael resided in it but asserted that it was not let. He estimated the current value of the property at $150 000. The Commission obtained a valuation of the property as at 30 September 2002 in the amount of $570 000. On that basis Mr Tsourounakis was told that his pension would be reduced to nil. On 15 November 2002 Michael wrote to the Commission on behalf of his parents. This letter was treated as a request for review of the decision to reduce the pension to nil. Concerning the property he said: 'The property at 16 Ganges Street, West End whilst in my parents name 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 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 to $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. … 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 liveable 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 in 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 in to improving the property. In Summary The valuation of the property per local real estate agent (copy attached) $550,000 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. … 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 79 There seems to be a clear conflict between the assertion that the property is held in trust for Michael and the assertion that his parents have an equity in it to the extent of $200 000. Attached to the letter was a list of expenses incurred in connection with renovations, rates and insurance. Michael subsequently furnished further details of the expenses which he had incurred in connection with the property. On 18 December 2002 an officer of the Commission advised the Service Pension Review Officer that: '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 email. 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.' 80 On 12 March 2003 a delegate of the Commission determined that the value of the property was $540 000, and that Mr and Mrs Emmanouil Tsourounakis owned 61.87 percent of the property, valued at $334 109.42. This sum appears to have been derived by deducting outgoings incurred by Michael ($325 118) from the valuation ($540 000) and adding foregone rental in the amount of $119 227.42. Mr and Mrs Emmanouil Tsourounakis applied to the Tribunal for a review of that decision. The subsequent history has previously been outlined.

THE BANKRUPTCY 81 In his bankruptcy, Michael did not disclose the property as an asset. He identified it as his current residential address but in answer to the question, 'Do you own or are your purchasing the above property?' he replied 'No'. He has subsequently explained this answer by saying: 'When I opted for bankruptcy I didn't declare the house as an asset. If I had done so then the house could still have been taken off me and any improvements that I had made would have been for nothing. I would have gone back to square one and I would have nowhere for my family to live.' 82 The Senior Member, in his reasons, referred to the following extract from Michael's oral evidence: 'With respect, I would like you to address the question more closely. What I was putting to you: did you understand back in 1994 when you said that you owned no property, that you didn't have a house of your own, that perhaps the ---? The title hadn't passed to me. That is right? --- It was my house. That is right. It was going to be your house when your father passed away. Is that is what you were told? --- No. It was my house. Well your statement says: "That my father said to me that one day the house was going to be mine". You were told that it was going to be left to you in a will? --- In the context of the will. Yes? --- You were at your lowest point, son. The house is always going to be yours. It is always willed to you. It is yours now; I am happy I can offer it to you. Do with it what you like. That is the context. And my question is this: When he said to you do with it what you like, it was in the context that one day when he passed away it would be yours, but you didn't see fit to disclose it in your bankruptcy because it legally wasn't yours? --- Say that one again. There is a difference, is there not ---? Title had not passed. Correct. Just listen to this carefully. There's a difference, is there not, between a family arrangement where you were given free use of a property because one day its going to be yours - that's one scenario. And there's another scenario, where you are being given full, complete ownership of the property. What do you understand the situation to be? --- I understand ownership. Well why is it that you didn't disclose it in your bankruptcy? --- Because I just lost one house. I wasn't going to repay my family by losing another one in the time they were trying to support me and I don't know what the - I don't know what's so hard to understand there. So you were prepared to defraud your creditors back in 1994? I'm not saying I defrauded my creditors. I wasn't going to repay my family support by losing another property.'

THE SENIOR MEMBER'S FINDINGS 83 The Senior Member rejected the suggestion that the property or any part of it had been effectively given to Michael prior to his discharge from bankruptcy. The evidence demonstrated that Mr and Mrs Emmanouil Tsourounakis had not intended to transfer the property whilst there was any risk of Michael's going into bankruptcy. The Senior Member then considered whether, as a result of expenditure on the property prior to, or during his bankruptcy, in reliance upon the statements made to him by Mr Emmanouil Tsourounakis, he had acquired any interest. At [109] and [110] the Senior Member observed: '109. It would not be fair to Mr Michael Tsourounakis if I were to notionally allow Mr Michael Tsourounakis the existence of an equitable interest during his bankruptcy as that disclosure would necessarily involve a finding that he had not made disclosure of his assets as required by the Bankruptcy Act.' 110. It would also not be fair to his creditors if I were in these proceedings to notionally allow Mr Michael Tsourounakis the existence of an equitable interest that he denied to his creditors at the time of his bankruptcy.' 84 With all respect to the Senior Member, the question of "fairness" was not relevant to his duty to determine the facts. He subsequently found that after Michael's discharge from bankruptcy he and Mary had expended money and effort in reliance on Mr Emmanouil Tsourounakis's statements. If that finding is correct, then it is likely that in expending money and time in renovation prior to, and during the bankruptcy, they were also acting in reliance upon such statements. Michael seems to have claimed as much in his letter of 15 November 2002. If, prior to his bankruptcy, Michael had acquired any equity, it may have passed to his trustee in bankruptcy pursuant to s 58 of the Bankruptcy Act 1966 (Cth) (the "Bankruptcy Act"). The Senior Member seems to have accepted as much, despite the statements at [109]-[110]. At [111] he recorded that a substantial amount of money had also been expended on the property during the bankruptcy, that money apparently coming from Michael. If such money was derived by Michael as income during his bankruptcy, it would not have vested in the trustee. See Re Gillies; ex parte Official Trustee in Bankruptcy v Gillies (1993) 42 FCR 571 at 576-577. However any asset acquired during the bankruptcy, using such income, would have vested in the trustee. See Gillies at 577 and O'Brien v Sheahan [2002] FCA 1292. It is therefore likely that any equity which arose during the bankruptcy vested in the trustee. Even at this late stage it is appropriate to refer these matters to the trustee or Official Trustee, in case it should be thought appropriate that steps be taken to advance the interests of unpaid creditors. 85 We should make two other points at this stage. Firstly, we do not understand any party to assert that Mary Tsourounakis acquired a relevant equity. There has been no suggestion that any representation was made directly to her by Mr Emmanouil Tsourounakis. The matter seems to have proceeded upon the basis that the expenditure of time and money by her and Michael created an equity in him rather than in both of them. Secondly, the purpose of these proceedings is to determine the extent of the interest in the property presently held jointly by Mr and Mrs Emmanouil Tsourounakis, not the extent of the interest held by Michael. 86 The Senior Member then considered the effect of the expense and time involved in the renovations executed in 2001 and thereafter, using funds borrowed by Mr Carter. He found that Mr and Mrs Emmanouil Tsourounakis had stood by while Michael and his wife performed those renovations. He inferred that this was a case 'where a court of equity would require the applicants to compensate Mr Michael Tsourounakis if they sold the property.' The Senior Member considered that equity would not prevent Mr and Mrs Emmanouil Tsourounakis from selling the property. He also concluded that equity would not insist that Michael be permitted to live there indefinitely. He considered that the case would be decided by a court of equity 'on equitable notions of unconscionability', the test being 'whether upon the facts of the particular case the situation has become such that it would be dishonest or unconscionable for the … person seeking to have the right sought to be enforced, to continue to seek to enforce it.' At [145], he concluded that: 'In this particular case it would in my opinion be most unconscionable for the applicants to assert their legal title over the Property without compensating Mr Michael Tsourounakis for the Phase 2 renovations.' 87 The Senior Member sought to identify the order which would be made in equity, concluding at [150] that: 'I am of the opinion that in this case a court of equity would require the plaintiffs to pay compensation as a condition of being permitted to assert their legal rights over the Property. This possibility was adverted to by the Federal Court of Australia. The reasons for judgment of the Full Court include this passage: "The court may require that a sum of money be paid to compensate a claimant as a consequence of the departure from the assumption". 88 At [153]-[155] the Senior Member observed: '153. One possible remedy … is to impose a lien which reflects the expenditure of Mr Michael Tsourounakis and his family … . If this approach were adopted it is my opinion that the amount of compensation would reflect the cost of the phase two renovations, any interest payments, the actual physical labour of Mr Michael Tsourounakis as well as rates and insurance costs. 154. If I were attempting to calculate compensation on that basis I make some comments on some elements (which) make up the quantum of compensation. The actual building costs of the Phase 2 renovations is in the region of $160,000 … . The interest costs of the loan to finance the Phase 2 renovations to date would exceed $20,000. The costs of rates and insurances since the phase two renovations commenced could be quantified. There is no estimate of the labour of Mr Michael Tsourounakis or the Phase 2 renovations. No diary which discloses the contribution of Mr Michael Tsourounakis was tendered and available. I have kept in mind that any assessment of labour must be reasonable … . 155. I do not favour the imposition of a lien as a just order. This would in my opinion be inadequate for reflecting the value of any emotional investment by Mr Michael Tsourounakis. The photographs tendered to the Tribunal bear testimony to the importance of the home to the Tsourounakis family. How can one properly place a value on that emotional investment? Imposing a lien would also not in my view adequately reflect the increased value of the home caused by the Phase 2 renovations. It is also difficult to assess the continuing obligations of Mr Michael Tsourounakis to repay Mr Carter. Interest costs will change and there may be circumstances where Mr Michael Tsourounakis is unable to make the required periodic payments.' 89 The Senior Member then considered the possibility of an award of "damages" 'of the market value of the house exclusive of the land' but did not adopt that approach. At [157]-[158] he observed: '157. I have taken the view that in the hypothetical family situation such as this, a court of equity would not be disposed to make a precise equity accounting. 158. I consider that in this case a court of equity would more likely apply the maxim "equity is equality". "It has long been a principle of equity that in the absence of sufficient reasons for any division, those who are entitled to property should have the certainty and fairness of equal division; for equity did delight in equality" ….' 90 The Senior Member adopted that approach. He also indicated that there should be an adjustment for foregone rental pursuant to s 48 of the Act. See [165]. We will return to this question. At [164] the Senior Member observed that: 'There is also another aspect of this matter. I do not consider that it is fair for the Commission to resile from the recognition of the existence of an equitable interest of the son. Mr Emmanouil Tsourounakis is an elderly veteran who is not in good health. This in my opinion does not accord with what Smithers J referred to as "standards of good government" … For the Commission to now resile from the recognition of an equitable interest may have prejudiced the applicants who could have taken other steps if the respondent's present attitude was earlier made clear.' 91 It is difficult to know what this means. It may be that the Commission had, in the earlier proceedings, in the Tribunal and in the Full Court, accepted the existence of an equity in Michael, but denied it before the Senior Member. It probably does not matter for present purposes.

GROUNDS OF APPEAL 92 Pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the "AAT Act"): '1. A party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding.' 93 Although the Commission, in its notice of appeal, has purported to identify questions of law, it is difficult to escape the conclusion that it really seeks a review of the merits of the decision. In par 1.1 the Commission raises, as a question of law, the 'proper construction and operation of ss 5L and 52(c)(1)' of the Act. Paragraph 1.2 raises as a question of law: '… the circumstances in which a court of equity would recognize that a family arrangement relating to an item of real property, made in circumstances where no intention to create a legal or equitable interest in the property would be imputed, can give rise to an equitable interest in the property … .' 94 Paragraph 1.3 raises, as a question of law: '… whether, on the facts as found by the Tribunal, a court of equity would conclude that: (a) it would be unconscionable for the Respondents to assert their ownership of the Property without compensating Michael Tsourounakis for his expenditure on the Property; (b) if the respondents were to assert their ownership of the Property, Michael Tsourounakis would have a cause of action against the Respondents resting on proprietary estoppel; (c) the maxim "equity is equality" would be applied to determine the amount of compensation to be paid by the Respondents, or the quantum of Michael Tsourounakis's interest in the Property; (d) Michael Tsourounakis has a beneficial interest in the Property to the extent of one half of the value of the Property … .' 95 Paragraph 1.4 raises, as a question of law: '… whether the facts as found by the Tribunal would only support a finding by a court of equity that the arrangement between the Respondents and Michael Tsourounakis was no more than a family arrangement to assist Michael Tsourounakis when he was experiencing severe financial difficulties, being an arrangement that was not intended to create, and did not create, any beneficial interest in the Property on the part of Michael Tsourounakis.' 96 Paragraphs 1.2, 1.3 and 1.4 appear to invite review of the finding that, on the facts of the case, Michael has acquired an equity. Whilst it may be appropriate to examine the decision to ensure that the Senior Member understood and applied the correct equitable principles, these "questions of law" should not be taken as inviting a general review of inferences drawn by him unless it be shown that they were simply unavailable on the evidence. It is also necessary to keep in mind the discretionary nature of equitable relief. Neither the drawing of inferences nor the exercise of a discretion is readily identifiable as involving a question of law.

GROUNDS OF CROSS-APPEAL 97 Mr and Mrs Emmanouil Tsourounakis cross-appealed, alleging the following questions of law: '1.1 whether the Tribunal erred in its direction that Michael Tsourounakis had a beneficial interest in the property to the extent of one half of the value of the property only. 1.2 whether, either having regard to the decision of the first Full Court, Repatriation Commission v Tsourounakis [2004] FCAFC 332 (Q 75 of 2004), or in any event, the Tribunal erred in law in conceiving that the expression "charge or encumbrance" in s 52C of the (Act) did not extend to an "unsecured liability". 1.3 more particularly, on the true construction of s 52C did the tribunal err in failing to conclude that the equitable interest in Michael Tsourounakis in the property constituted a "charge or encumbrance" over the property.' 98 Mr and Mrs Emmanouil Tsourounakis assert that their remaining interest in the property should be valued at nil or at some other amount less than 50 percent of its value. In addition to these "questions of law", they assert, as does the Commission, that the Senior Member erred in his application of the maxim "equity is equality". Obviously, the limitations upon the Commission's right of appeal, to which we have referred, apply equally to the cross-appeal.

QUESTIONS OF LAW 99 We identify the following questions of law arising from the notices of appeal and cross-appeal, informed by our understanding of the facts of the case and counsel's argument: · whether the Senior Member misunderstood, and therefore wrongly applied the equitable maxim "equity is equality"; and · whether any estoppel arising in favour of Michael (or his trustee) and against Mr and Mrs Tsourounakis constitutes a charge or encumbrance for the purposes of s 52C of the Act.

DID MICHAEL ACQUIRE AN EQUITY? 100 Mr and Mrs Emmanouil Tsourounakis submit that they may not now depart from the promise made to Michael that the property would be his, and that he might do with it as he wished, particularly having regard to their conduct in standing by whilst he and his wife spent substantial amounts of money and effort on renovation of the property. In support of this proposition they rely upon the decision of the High Court in Waltons Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR 387, especially at 404 (per Mason CJ and Wilson J). Their Honours said: 'One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has "played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it" … . Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption.' 101 See also Giumelli v Giumelli (1999) 196 CLR 101. 102 The Commission does not challenge the general principles established by these and other decisions of the High Court. It rather submits that the requirement of detriment has not been satisfied in this case. It points out that Michael and his family have lived, rent-free, in the property since 1991 and will probably continue to do so. As previously mentioned, the Senior Member understood that there should be an adjustment for rental foregone pursuant to s 48 of the Act. That section is in Division 7 of Pt IIIB of the Act, dealing with income adjustment pursuant to Steps 5 and 6 in Module A, rather than asset adjustment pursuant to Steps 7 and 8. Step 9 directs that the provisional pension rate will be the lower of the income reduced rate (calculated pursuant to Steps 5 and 6) and the assets reduced rate (calculated pursuant to Steps 7 and 8). In other words, Steps 5 and 6, on the one hand, and Steps 7 and 8 on the other, offer alternative bases of calculation for the purposes of Module A. Section 48 plays no part in the calculation prescribed for the purposes of Steps 7 and 8. However, it does not follow that such rent-free occupation is irrelevant for present purposes. 103 In Giumelli (supra) the majority of the High Court (Gleeson CJ, McHugh, Gummow and Callinan JJ) referred, at [40] - [47], to various passages from the earlier decision of the High Court in The Commonwealth v Verwayen (1990) 170 CLR 394. Those passages demonstrate that where a person acts to his or her detriment in the circumstances contemplated in Waltons, equitable relief will be moulded to avoid that detriment. In this case, the detriment is primarily the expenditure of money and time in maintaining and improving the property. The benefit derived by Michael from the rent-free occupation of the property mitigated that detriment and should be taken into account in formulating the appropriate equitable relief. To that extent we accept the Commission's submission that Michael's occupation of the property was relevant to the extent of his equity, but that does not lead to the conclusion that he suffered no detriment as a result of his expenditure of time and money on it. 104 Secondly, the Commission submits that there has been no detriment because there has been no threat by Mr and Mrs Emmanouil Tsourounakis to depart from the relevant assumed state of affairs. A similar argument was raised in the earlier Full Court proceedings and was perfunctorily dismissed by the Court. There may be no basis for seeking equitable relief until such time as Mr and Mrs Emmanouil Tsourounakis threaten to depart from the represented state of affairs, but that is no bar to a collateral inquiry as to Michael's entitlement in equity, if that question is relevant to the proceedings in question. The absence of any threat may also be relevant to quantification of detriment. We will return to that matter. 105 Thirdly, the Commission submits that the arrangements between Michael and his parents were purely "familial" and not enforceable in equity. With all due respect, the question is whether the parties' conduct was such as to raise an enforceable equity and not as to alternative ways of describing it. 106 We reject these specific arguments concerning detriment. We do not understand there to be any dispute that Michael acted in reliance on his father's representation. To the extent that he will suffer detriment should his parents depart from that representation, he is entitled to equitable relief, save to the extent that such entitlement has passed to his trustee. At a later stage, we will consider the ways in which equity might vindicate his equitable right.

PROPER CONSTRUCTION OF STEP 6 OF MODULE F AND S 52C 107 The Commission submits that Step 1 of Module F requires calculation of the market value of the asset in question and adoption of that value for all relevant purposes, subject only to s 52C of the Act. That section provides for reduction of such value by the "value" of any charge or encumbrance over the asset. It also submitted that any equity vested in Michael was neither a charge nor an encumbrance. Mr and Mrs Tsourounakis submit to the contrary. The Commission's argument seems to be that the expression includes only securities for the payment of money. It relies upon the decision of the High Court in Davies v Littlejohn (1924) 34 CLR 174 in support of its submission. We find little support for the submission in that decision. 108 By his will a testator had directed his trustees, until the 'charges or encumbrances' on his station properties had been entirely liquidated, to appropriate the income of his residuary estate towards payment of those charges or encumbrances. At the time of his death he was purchasing land forming part of his station properties from the Crown, under an instalment purchase contract pursuant to the terms of the 'Crown Lands Consolidation Act 1913'. The question was whether outstanding instalments of the purchase price comprised charges or encumbrances upon his station properties for the purposes of the will. The Judge at first instance held that the Crown had an unpaid vendor's lien over the relevant land and that such lien constituted a charge or encumbrance. On appeal the High Court concluded that the Crown had no such lien. Alternatively, it was submitted that the Crown had a charge over all real property of its debtors and/or that, pursuant to the Crown Lands Consolidation Act, there was a liability to forfeiture of the relevant land for non-payment of instalments, such liability being a charge or encumbrance for the purposes of the will. 109 At 185-186, Isaacs J said: 'I cannot agree that the Crown has an ordinary vendor's lien. The doctrine of "vendor's lien" is one created by equity as part of a scheme of equitable adjustment of mutual rights and obligations applying, unless negatived, to every ordinary contract of sale of land. In Re Thackwray and Young's Contract … Chitty J says:- "As is well known, where there is a contract for sale which is valid and can be specifically performed the equitable interest in the lands at once passes to the purchaser subject to his payment of the money, and, on the other hand, the vendor has a lien on the land for the unpaid purchase money. … A "vendor's lien" is thus one of the equitable rights recognized in the scheme for the protection of the vendor's own interest.' 110 At 190-191, Isaacs J continued: '… An encumbrance, whatever else it may connote, involves at least this, that it is distinct from the thing it encumbers or burdens. In Jones v Barnett … Romer J says: "In Wharton's Law Lexicon I find "encumbrance" defined as being "a claim, lien, or liability attached to property." " That indicates that conceivably the "encumbrance" could be removed and the "property" left intact. A mortgage is an encumbrance on the clean title otherwise existing, and you must be able to conceive of the principal object freed of the encumbrance. So of a charge on property, or a lien of any description, the "property" must be capable of having existed in a condition free of the encumbrance. The load is not an essential part of the thing it bears upon. But a clause for re-entry in a lease, thus making the term a defeasible term, or a rescission clause in a contract making the bargain a defeasible bargain, or the forfeiture clause (sec. 55) making the statutory right a defeasible right, are not independent creations; they are not burdens or encumbrances placed on the lease or the contract or the conditional purchase. They are essential parts of the thing itself, helping to mould its character, and, if omitted, the thing itself would be different.' 111 Higgins J said at 196-197: 'In the case of Wallace v Love … I dealt at some length with the technical meaning of "encumbrance"; and although two of my learned colleagues thought that that meaning was not the meaning in the particular will then under consideration, I do not understand them to reject my view as to the technical meaning. The Oxford Dictionary, when speaking of the word "encumbrance" as used in law, defines it as a burden on property; and, quoting from Wharton's Law Lexicon, "a claim, lien, or liability attached to the property; as a mortgage, a registered judgment, &c." The Standard Dictionary defines it as "a paramount claim or interest resting as a charge upon land, lessening its value to the owner or tenant; any lien or liability attached to real property". If the test of lessening the value to the owner (the owner of the conditional purchase) be applied, it is clear that the value of the conditional purchase title - the only title held by the testator - is not lessened by the fact that if future instalments are not paid the holder of the conditional purchase title cannot get the fee simpe and at a price of Ł1 per acre, fixed irrespective of value. The word "charges" in this will has to be examined from a different aspect. Is the liability of the holder of a conditional purchase from time to time to pay future instalments, becoming due while he is holder, a "charge" on his conditional title? According to the Oxford Dictionary a charge, in the relevant sense, is "a liability to pay money laid upon a person or estate." We may ignore liability laid upon a person, in construing this will; for the will refers to liability laid upon estate only. The direction to apply the income is "until the charges or encumbrance on my said station properties respectively shall be entirely liquidated." ' 112 In Wallace v Love (1922) 31 CLR 156, Knox CJ and Starke J held at 164: 'The word "encumbrances" in its ordinary connotation, means that a person or estate is burdened with debts, obligations or responsibilities. True, the word is in law especially used to indicate a burden on property, a claim, lien or liability attached to property (see Oxford Dictionary under title "Encumbrance"). But when we remember that the whole estate of the testator is liable in the hands of his executor for payment of debts and the expense of administering his estate, it is not an extravagant use of language to say that his "whole estate is not free from encumbrances" until those debts and expenses are paid. The estate would, in fact, be burdened with those debts, and no technical use of the word "encumbrance" can alter that result.' 113 In Wallace v Love Higgins J referred to the dictionary definitions to which he subsequently referred in Davies v Littlejohn. The Oxford English Dictionary still offers the same definitions. The word "charge" as a noun is defined relevantly as 'a liability to pay money laid upon a person or estate.' The word "encumbrance" is described as 'a burden on property: a claim, lien, liability attached to property; as a mortgage, a registered judgment, etc …'. 114 Both cases demonstrate that a "claim", a "burden" or a "responsibility" may be an encumbrance. There is no suggestion that it must relate to the payment of money. We see no reason to exclude a claim in equity from that list of "encumbrances". However the claim must 'rest as a charge upon land, lessening its value to the owner …' or be a "burden" upon it. To say that a property is burdened with an obligation or responsibility generally means that a particular person's interest in that property is so burdened. As Isaacs J said in Davies, the encumbrance is 'on the clean title otherwise existing'. One is generally speaking of an impediment to the exercise of proprietary or other rights in the property. That point was also made by Knox CJ and Starke J in Wallace v Love. In the present case, equity will impose upon Mr and Mrs Emmanouil Tsourounakis an obligation not to act, with regard to the property, in a way which would be inconsistent with any equity held by Michael as a result of detriment arising, or likely to arise, from his having acted in reliance upon his father's statements. Such an obligation would be a clear limitation upon Mr and Mrs Tsourounakis' proprietary rights over the property, lessening its value to them. We consider that to be an encumbrance upon the property for the purposes of s 52C. In concluding to the contrary, the Senior Member misconstrued the expression "charge or encumbrance". 115 That conclusion means that we need not consider the other aspect of the submission, that the reference in Step 1 of Module F to the "value" of an asset is to its market value, regardless of any limitation upon the owner's interest in it. However we wish to say a little more about that subject. The question is whether, in Step 1 of Module F, the value of a person's assets is nett of liabilities or gross. Were it not for the notes, one might be inclined to infer that a person's "worth" is the nett value of his or her assets, and that Step 1 probably refers to that nett worth. However the notes are part of the Step (s 5U). Note 3 strongly suggests that any deduction on account of a liability is to be pursuant to s 52C or s 52CA. The decisions in Re Samek v Secretary Department of Social Security (1988) 16 ALD 295 and Radamovic v Secretary, Department of Family and Community Services (2001) 61 ALD 530 demonstrate the difficulties inherent in making allowance for liabilities in exercises of the kind prescribed by Step 1. For reasons which we have given, it is not necessary to take this matter further.

"EQUITY IS EQUALITY" 116 In seeking to identify the order which a court of equity might make to vindicate Michael's equity, the Senior Member relied upon the maxim "equity is equality". This led him to the somewhat arbitrary conclusion that Michael was entitled to a half interest in the property. The Commission and Mr and Mrs Tsourounakis appeal and cross-appeal respectively against his application of the maxim. 117 The Senior Member referred to a number of cases concerning the maxim. However those cases offer no substantial support for his application of it. In Rimmer v Rimmer [1952] 2 All ER 863 the Court of Appeal applied the maxim in circumstances in which it was impossible to ascertain the proportions in which the parties had contributed to the acquisition of the property, but the Master of the Rolls warned, at 867: 'I appreciate that to fall back on what may be called a Solomonesque judgment is, as counsel for the husband said, perhaps to yield to obvious temptation to shirk more difficult computations … .' 118 Macdonald v Macdonald [1957] 2 All ER 690 was also a case in which precise calculation was not possible. In Cobb v Cobb [1955] 1 WLR 731 the Court found an intention, at the time of acquisition, that the home be held in equal shares. In those circumstances the maxim did not apply. The decision of the Court of Appeal in Fribance v Fribance (No 2) [1957] 1 WLR 384 appears to have depended upon a finding that the whole of the resources of the husband and wife were 'expended for their joint benefit - either in food and clothes and living expenses for which there was nothing to see or in the house and furniture which are family assets - and the product should belong to them jointly. It belongs to them in equal shares' (per Denning LJ at 387). In Jackson v Crosby (No 2) (1978) 21 SASR 280, the Court concluded that the parties had agreed that the relevant property should be held in equal shares. 119 These cases indicate that the maxim should only be applied when it is otherwise not possible to determine the respective equities. Such an approach is consistent with the treatment of the maxim in Snell's Equity, 31st ed where, at par 5-20, it is said that: 'It has long been a principle of equity that in the absence of sufficient reasons for any other basis of division, those who are entitled to property should have the certainty and fairness of equal division; for "equity did delight in equality." The maxim is "equality is equity", and this has been applied in a variety of ways.' 120 Similarly at par 5-23 it is said that: 'In addition to equity's ancient dislike of a joint tenancy, the maxim "equality is equity" may be illustrated by a number of more modern instances. In general, the maxim will be applied whenever property is to be distributed between rival claimants and there is no other basis for division. "I think that the principle which applies here is Plato's definition of equality as a "sort of justice": if you cannot find any other, equality is the proper basis." ' 121 A somewhat different approach to the maxim is taken by the learned authors of Meagher, Gummow and Lehane's Equity, Doctrines and Remedies, 4th ed, at par 3-145, where they cite with apparent approval the following passage from Halsbury's Laws of England, 4th ed, 1992, re-issue, vol 16 par 747: 'The maxim that equality is equity expresses in a general way the object both of law and equity, namely to effect a distribution of property and losses proportionate to the several claims or to the several liabilities of the persons concerned. Equality in this connection does not necessarily mean literal equality, but may mean proportionate equality. This doctrine of equality, however, operated more effectually in a court of equity than a court of law, and is exemplified in many departments of equity jurisdiction.' 122 In a case which depends upon demonstrated detriment, avoidance of that detriment will be the primary basis for the determination of respective equities. If the primary detriment is the payment of money or investment of time, then the remedy will focus on those aspects. The Senior Member seems to have thought that Michael had suffered some additional detriment. In par 155, the Senior Member identified the following aspects: · his emotional investment; · the increase in value of the house; and · his continuing obligation to Mr Carter. 123 If these are aspects of detriment, then they must be remedied. However such aspects must be evaluated in order to ascertain the appropriate way in which Michael's equity can be protected. Recourse to the maxim "equity is equality" will not achieve that result. We conclude that the Senior Member's reliance on the maxim was based on a misunderstanding of its meaning.

OUTCOME 124 Having identified errors of law we should set aside the decision unless we consider that those errors did not affect the outcome. As we understand it, both parties accept that the decision should be set aside. The next question is whether we should remit the matter to the Tribunal for further determination in accordance with law, or whether we should fix the extent of Mr and Mrs Emmanouil Tsourounakis's interest in the property and remit the matter to the Commission. Since the matter was considered by the Full Court in 2004, s 44 of the AAT Act has been amended by the addition of subss (7) and (8). Those subsections authorize this Court to make appropriate findings of fact not inconsistent with those made by the Tribunal. The parties effectively invite us to adopt that course. See the Commission's submissions at par 1(b) and the respondents' submissions at par 30. Given the history of this matter (the decision was notified to Mr Tsourounakis in October 2002) it is desirable that we finally resolve the matter if that is possible. However it will be necessary to address a number of issues before deciding upon the preferable course.

MR AND MRS TSOUROUNAKIS' PRESENT INTEREST 125 Prima facie Mr and Mrs Emmanouil Tsourounakis are the registered proprietors of the property, but they deny any beneficial interest in it. The evidence contradicts that denial. Whilst one may accept that from 1991 until 1997 there was good reason to refrain from transferring the property to Michael, by 2001 the position was otherwise. Had it been so transferred, it could have been made available to the bank as security. There seems to have been no suggestion at that time that there be such a transfer. Michael said that title was unimportant in a family such as his, but that explanation hardly holds water, given the consequences. Instead of the property being used to secure Michael's borrowings, Mr Carter became the borrower. That is not consistent with a shared belief (between Michael and his parents) that the property was Michael's. Even now, the property has not been transferred. Mr and Mrs Tsourounakis clearly intend that Michael take title only after they have both died. Further, in Michael's letter of 15 November 2002, he calculated his parents' interest in the property at $200 000. Prior to that letter they had consistently claimed to own the property. However, as we have observed, it seems likely that the conduct of Michael and his parents has led to the creation of an equity in Michael affecting Mr and Mrs Tsourounakis's interest in the property. It is therefore necessary that we consider the effect of the bankruptcy upon that interest. 126 Much of Michael's relevant conduct occurred prior to, or during his bankruptcy. The Tribunal concluded that it should make no allowance in Michael's favour based upon contributions made prior to his discharge in 1997. The Commission submits that this is the correct approach. Mr and Mrs Tsourounakis' position is not so clear. At par 29 of their written submissions it is said that neither side 'encouraged' the Tribunal in its 'excursion into the laws of bankruptcy', and that the parties were not afforded an opportunity to be heard on whether such "excursion" was "necessary" However, before this Court, Mr and Mrs Tsourounakis have not sought to demonstrate that such interest as had accrued to Michael prior to his discharge did not pass to his trustee. Rather, they submit that the question is irrelevant because any interest vested in the trustee would, nonetheless, go in diminution of their interest in the property. They also submit that Michael's interest in 2002 and 2005 was 'qualitatively different' from any interest acquired by the trustee prior to his discharge from bankruptcy. 127 If the trustee had demonstrated an intention to establish and enforce such an interest, it may well have gone in diminution of the value of Mr and Mrs Tsourounakis' interest in the property. We will return to that matter at a later stage. As to the submission of qualitative change in the nature of Michael's interest, we see no such change. Michael's claim rests upon his conduct in reliance on the representations made by his father, leading to a demonstrable detriment in the event that Mr and Mrs Tsourounakis seek to depart from those representations. Michael's relevant conduct was the investment of time and money. His right must be proportionate to the investment. We consider that such right increased rateably with his continued investment of time and money. Thus, part of that right had vested in him prior to his discharge. It is therefore necessary that we consider the effect of Michael's bankruptcy upon the present proceedings. The Commission clearly submits that the bankruptcy is relevant to the valuation of Mr and Mrs Tsourounakis' interest. They, without conceding its relevance, advance no argument either as to the effect of the bankruptcy upon Michael's equitable right, or as to the way in which such effect should be reflected in the valuation of their interest in the property.

EFFECT OF MICHAEL'S BANKRUPTCY 128 We turn to consider whether Michael's right, as at the commencement of his bankruptcy or as acquired prior to discharge, vested in the trustee. The starting point is subs 58(1) of the Bankruptcy Act which provides: 'Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of s 156A, in that registered trustee; and (b) after acquired property of the bankrupt vests, as soon as it is acquired by or devolves on the bankrupt in the Official Trustee or if a registered trustee is the trustee of the estate of the bankrupt in that registered trustee.' 129 The expression "the property of the bankrupt" is defined in s 5 to mean: '(a) except in subsections 58(3) and (4) (i) the property divisible among the bankrupt's creditors; and (ii) any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; and (b) in subsections 58(3) and (4) …' 130 The term "property"is defined to mean: '… real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property …' 131 Subsection 116(1) provides: (1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; (b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; (c) ... (d) … is property divisible amongst the creditors of the bankrupt.' 132 Thus the property which vests pursuant to s 58 is identified by reference to ss 5 and 116. We should mention two cases which concern those sections. In Davies v The English, Scottish and Australian Bank Ltd (1934) 7 ABC 210 at 214-6, Richards J concluded that a bare right of action, vested in a bankrupt, which, if enforced, would not provide 'any benefit to any person who can exercise it' was not property divisible amongst creditors. The second decision, that of the High Court in Cummings v Claremont Petroleum NL (1995-1996) 185 CLR 124, is relevant to the understanding of one aspect of subs 116(1). Paragraph 116(1)(b) provides that: 'The capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge is property divisible amongst the creditors.' 133 Superficially, this suggests a substantial expansion of the meaning of the term "property". However the decision in Cummings (at 133) establishes that the reference to "powers" is a reference to a power to dispose of property or an interest in property for the benefit of the donee of the power or some other person. Thus the provision is of no present assistance. 134 The relevant effect of Michael's bankruptcy depends on whether the equitable rights which he had at the commencement of the bankruptcy, or which accrued to him prior to his discharge, passed to the trustee. That may depend upon the nature of such rights.

THE NATURE OF THE EQUITABLE RIGHT 135 In the previous Full Court proceedings, the Court held that Michael was not the beneficial owner of the property. Mr and Mrs Tsourounakis now assert that equity would recognize Michael's rights by imposing a constructive trust upon the property for his benefit. We do not accept that assertion. We consider that the equitable rights which Michael acquired, before and after his discharge, would lead a court of equity to require Mr and Mrs Tsourounakis, as a condition of permitting them to depart from the representation made by Mr Tsourounakis, to pay to him (or his trustee) an amount representing the financial detriment which he would suffer as a result of his having acted in reliance on that representation. We will discuss our reasons for reaching that view at a later stage. Such right is an equitable chose in action which has value. In those circumstances, the decision in Davies does not apply. In this respect we should mention one other matter. It is necessary to distinguish the present case from that in which a bankrupt holds only a mere expectation of a benefit under a will. There is authority for the proposition that a mere expectancy does not vest in the trustee. See, for example, Johnson v Smiley (1853) 17 Beav 223 at 230; 51 ER 1019 at 1022. However, in the present case, Michael had more than a mere expectancy. The estoppel prevented his parents from acting contrary to the representation. It is that valuable right, and not his expectancy, which is presently under consideration. 136 Although Mr and Mrs Tsourounakis did not really challenge the proposition that any right arising out of Michael's conduct vested in the trustee, it is appropriate that we consider some of the cases concerning the effect of bankruptcy upon choses in action, especially equitable choses in action held by the bankrupt at the commencement of the bankruptcy, or acquired prior to discharge. 137 In Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458 at 468, Nicholson J held that: 'In relation to s 58(1)(a) "the property of the bankrupt" as defined in par 116(1)(a) would include any choses in action which the applicants had to enforce equitable rights. Such rights, being property being divisible among the creditors of the bankrupt, would vest in the Official Trustee.' 138 We see no reason to doubt this proposition, but there is little direct authority on the point. In Estoppel by Conduct and Election by the Hon Mr Justice K R Handley (Sweet & Maxwell, London, 2006), at 6-004, the learned author observes: 'A trustee in bankruptcy, liquidator, or receiver takes the benefit of any relevant estoppel in favour of the bankrupt or the company.' 139 Two authorities are cited in support of this proposition. The first is Parker v Manning (1798) 7 TR 537 at 539; 101 ER 119. That case concerned an attempt by a tenant to deny the title of his landlord who was in bankruptcy. As against the landlord, he was estopped from so doing. It was held that the landlord's assignee in bankruptcy was entitled to set up the estoppel as against the tenant. 140 In Re Central Klondyke Gold Mining and Trading Co Ltd (Savigny's case) (1898) 5 Mans 336 concerned a claim by a liquidator against a person who had been allotted shares in a company under an alias. The Court considered that as against the liquidator, the subscriber was estopped from denying that he took the shares. 141 In Williams and Muir Hunter The Law and Practice in Bankruptcy (19th ed) at 292, the learned authors assert: 'The right of a lessee to be relieved from a forfeiture vests in the trustee, who can sell such right and assign it to a purchaser … .' 142 The authority for this is said to be the decision in Howard v Fanshawe [1895] 2 Ch 581. However the decision seems to assume the proposition rather than establish it. 143 Finally, in Official Receiver in Bankruptcy v Schulz (1990) 170 CLR 306, the High Court considered the interest of a beneficiary under a will. The beneficiary was bankrupted prior to completion of the administration of the estate. The Court concluded that the beneficiary had acquired a chose in action, namely the right to have the deceased estate administered in accordance with the duties of the executors. This chose in action passed to the trustee in bankruptcy. 144 There are, of course, many other cases in which equitable rights and interests have been held to pass to trustees in bankruptcy. The cases which we have cited concern equitable or other rights similar in nature to those with which we are presently concerned. We conclude that the equitable right, held by Michael at the commencement of the bankruptcy and/or acquired thereafter and prior to his discharge, vested in the trustee.

PROPERTY VESTED IN THE TRUSTEE 145 We should explain the nature of the rights as against Mr and Mrs Tsourounakis which vested in the trustee upon, or during, Michael's bankruptcy. There were two representations: firstly, that Michael would inherit the property upon the death of both parents and secondly, that in the meantime, he and his family would be allowed to live there rent-free. In the event, Michael and his family have lived in the property since 1991. During the bankruptcy there was, no doubt, some benefit to the trustee in this arrangement in that Michael did not have to use such income as he had in order to meet rental costs. We need not consider whether the trustee could have ejected Michael and his family and let the property. Had Michael inherited the property prior to, or during his bankruptcy, it would have vested in the trustee. Had Mr and Mrs Tsourounakis, during the bankruptcy, sought to depart from either representation, the trustee may have sought to restrain them from so doing, or from so doing other than upon conditions which would probably have involved a compensatory payment. Such compensation would have been calculated having regard to Michael's prior contribution of money and time. Of course, any payment would have belonged to the trustee. 146 Michael's equity having vested in the trustee, it did not divest upon termination of the bankruptcy. See Bagshaw v Scott (2002) 126 FCR 27. Mr and Mrs Tsourounakis' present submissions assume that if Michael's right vested in the trustee, and if it did not revert to Michael upon his discharge, then it is still enforceable by the trustee, and thus goes in reduction of the value of their interest in the property. Such enforcement would presumably be subject to the time limitation imposed by s 127 of the Bankruptcy Act. 147 There are, however, conceptual difficulties in identifying the extent to which the trustee may still enforce Michael's right. The relevant equity is to prevent departure from the representation. The question is whether the trustee, after discharge, could derive any benefit from reliance upon the equity. If not, then it could not adversely affect the value of Mr and Mrs Tsourounakis' interest in the property. In the event that Michael inherits the property at some time in the future, neither s 58 nor s 116 of the Bankruptcy Act will operate to vest it in the trustee unless the trustee retains some enforceable right derived prior to discharge. One might expect that the estoppel would have no operation if Michael's parents acted in accordance with the representation by leaving the property to him. On the other hand, the right which vested in the trustee recognized Michael's substantial financial investment in the property. Fairness to creditors might suggest that they should have a proportionate share of any benefit which he derives from his pre-discharge expenditure, even after discharge. 148 The decision in Schultz suggests one basis for such a claim. In that case the High Court said at 314: 'Nevertheless, Mrs. Schultz acquired upon the death of Mrs. Pereira a right to have the deceased estate administered in accordance with the duties of the executors. Though not the legal or equitable owner of the assets which were the subject of the devise and bequest in her favour, she had, by virtue of the chose in action created by that devise and bequest, an expectation that the assets would pass to her upon completion of the administration, subject to their being realized to meet any outstanding liabilities and to defray the costs of administration, and an interest in respect of those assets. That interest was derived from and dependent upon the chose in action. The interest is of such a kind that, when a beneficiary transmits a chose in action (or part thereof), or that chose in action passes by operation of law, such as under the Bankruptcy Act, that transmission naturally encompasses not only the chose in action but also the expected fruits of that chose in action: … .' 149 It may be arguable that transfer of Michael's equity to the trustee had the same effect, both as to the equitable estoppel and as to the property. If so, then it may be arguable that the trustee is entitled to assert that the equity prevents Mr and Mrs Tsourounakis from transferring the property other than to him (as Michael's trustee), save upon the basis of an appropriate payment which recognizes Michael's pre-discharge contribution. However there is one, possibly significant, difference between the position in Schultz and the present case. There, the testator had died prior to the commencement of the bankruptcy. Thus the bankrupt's "expectation" was conditional only upon administration of the estate. It may be arguable that such an interest is a form of property rather than a mere expectation of benefit under the will. Whilst the relevant testator is still alive, there is the chance that the will may be amended or revoked. For that reason a potential beneficiary has a mere expectancy. Assignment of such an expectancy is not enforceable at law, but equity will enforce an agreement to assign, provided that there is consideration. However, as we have said, we consider that the equitable estoppel conferred something more than a bare expectancy. Further, it may be that vesting under the Bankruptcy Act should be treated as akin to an agreement to transfer for consideration, given that it leads to release from indebtedness. 150 The question is difficult and, in the absence of submissions, we are not willing finally to decide it in these proceedings. It is only necessary that we recognize that the trustee may have some outstanding claim against Mr and Mrs Tsourounakis, or perhaps against Michael, in the event that he succeeds to the property. In so doing we put Mr and Mrs Tsourounakis' case at its highest.

VALUATION OF MR AND MRS TSOUROUNAKIS' INTEREST IN THE PROPERTY 151 If Michael sought to enforce any equity based upon expenditure prior to his discharge, Mr and Mrs Tsourounakis (if they and Michael were at arm's length) would take all reasonable steps to defend their own interests. Whilst they might fairly concede Michael's claim as against them, they would recognize that, prima facie, his right had vested in the trustee. They would therefore be anxious to ensure that whatever the outcome of the proceedings between them and Michael, it would not leave them exposed to a claim by the trustee. In order to achieve that result they would take appropriate steps to ensure that any such claim was raised and determined in the same proceedings as was Michael's claim. In that way, if in no other, the trustee would become aware of his potential interest in the matter. 152 How the trustee would respond is more difficult to predict. In most circumstances, it would be appropriate to infer that the trustee would enforce his right. However, given that nine years have passed without action, it is not possible to draw that inference in this case. One reason for this failure to take action is almost certainly the fact that Michael did not inform the trustee of his right. Another is that Mr and Mrs Tsourounakis have not given any cause for such proceedings. Even if there were cause, it may not be possible for the trustee to proceed successfully in this case. At least three factors may militate against that result. Firstly, the trustee may have to rely upon the co-operation of Michael and/or Mr and Mrs Tsourounakis. The evidence in these proceedings may be sufficient, but it is more likely that further evidence would be necessary. Secondly, the trustee would have to obtain appropriate legal advice. Such advice may not favour proceeding with the claim. Thirdly, the trustee will have to raise sufficient funds to obtain such advice and conduct the proceedings. All of this assumes that Mr and Mrs Tsourounakis and Michael do not concede that the trustee has acquired Michael's pre-discharge right. In the circumstances, it is difficult, at this stage, to attribute any value to the trustee's possible claim. If it has no value, then its existence does not reduce the value of Mr and Mrs Tsourounakis' interest. It may be, however, that this question should not be finally determined until the trustee has indicated his intentions. 153 In the valuation evidence provided to the Tribunal, the valuer identified the market value of the property and then sought to value Michael's "interest" in it on the assumptions that he had a right to receive the property upon the death of both of his parents and that in the meantime, he was entitled to live rent-free in the premises. At one stage, Michael's "interest" was described as an "expectancy" and in the language of estoppel. However the valuation appears to have been based on the assumption that he had an actual entitlement. The valuation took no account of the existence of any right vested in the trustee, nor of the possibility that such right might not be enforced. In our view the value of Mr and Mrs Tsourounakis' interest in the property should be valued by ascertaining the market value and deducting from it the value of any equitable right now vested in Michael. Some adjustment should be made for the value of the interest vested in the trustee, but it is presently difficult to value that interest. 154 In performing that exercise it is necessary to decide how a court of equity would vindicate Michael's right. The Senior Member found that since Michael's discharge he has spent approximately $160 000 on renovations. Presumably, there have also been other outgoings such as rates and insurance. If there is evidence of those amounts, they should also be included in the calculation. There should be some allowance for Michael's labour in connection with the renovations, but it seems that there is no evidence in that regard. Since his discharge from bankruptcy Michael and his family have continued to live, rent-free, in the property. In calculating detriment the commercial rental payable for that period should go in reduction of the amount of his overall investment in the property. 155 Michael has been paying interest on borrowings since 2001. The Tribunal found that such interest amounted to about $20 000. To the extent that Michael met outgoings in connection with the property, he also lost the benefit of earning interest on the amounts paid. On the other hand, to the extent that he paid no rental, he had the opportunity of earning interest on the amounts saved. It will be necessary to strike a balance between interest incurred or lost on the one hand, and interest saved on the other. This may be a quite complex exercise, but perhaps the parties will be able to agree. 156 As we have previously mentioned, the Senior Member also identified certain other aspects said to be relevant to the formulation of appropriate relief in this case. The first was Michael's so-called emotional investment in the property. In the earlier judgment the Full Court observed at [56], that a relevant matter might be '… 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.' The Senior Member considered that it was not possible to '… place a value on that emotional investment'. He appears to have treated such emotional investment as a reason for awarding Michael a half interest in the property. However such an order would almost certainly result in sale and division of the proceeds. It would not vindicate Michael's emotional investment. Dispossession might be avoided by recognizing Michael as beneficial owner of the property or by an order recognizing a right to occupation. Money would not help. The question, then, is whether Michael's emotional investment, taken with the other facts of the case, should lead to an order that he be permitted to reside permanently in the property or to an order that the property be held on trust for him. 157 The primary evidence of Michael's emotional investment appears in pars 7 and 8 of his statement dated 19 May 2005, filed for the purposes of the hearing before the Senior Member. He refers to his childhood association with the house, which association is not presently relevant. Nor should his occupation of the house prior to his discharge from bankruptcy be taken into account.. No doubt Michael has a degree of attachment to the property, and no doubt part of that attachment is attributable to his family's occupation of it. The question is whether disruption of such attachment should be recognized as a detriment to be avoided by depriving his parents of their proprietary and associated rights. 158 The second matter raised by the Senior Member was the increased value of the home 'caused by the phase two renovations'. Mr Kevin Walsh, a certified practising valuer, estimated and/or valued the property as at 1 October 1991, 30 September 2002 and 13 April 2005 both 'in poor condition' (as he assumed it was as at 1 October 1991) and 'in good condition' as at 2002 and 2005. His valuations were: 1.10.1991 30.9.2002 13.4.2005 Poor condition, ie as existed at 1.10.1991 $90,000 $350,000 $450,000 Refurbished - good condition, ie the same as existed in 2002 and 2005 $500,000 $650,000

159 In his letter of 15 November 2002, Michael claimed to have performed renovation works to a total value of $350 000 over the period from 1991 until 2002. As the difference in value between the property in poor condition and as it was in 2002 is only $150 000, we infer that the renovations did not produce a proportionate increase in the value of the property. That was also the position in 2005. We infer that most, if not all, of the renovations had been completed by September 2002, and that the subsequent increase in value reflected an upward trend in property values. We are unable to see any evidence of a significance increase in value as a result of the renovations beyond the cost of effecting them. If Michael were compensated for such cost there would be no warrant for making any further allowance to represent associated capital gain, assuming that such allowance could otherwise properly be made in order to avoid detriment. 160 Thirdly, the Senior Member referred to 'the continuing obligations of Mr Michael Tsourounakis to repay Mr Carter'. He pointed out that interest rates might change and that Michael might, for some reason, become unable to continue to make periodic payments. It is difficult to see how this matter can have any significant effect upon the appropriate order. If Michael were to receive the nett amount of his contributions, plus interest to date, subject to the adjustments to which we have referred, he might well be able substantially to reduce any residual indebtedness. It is conceivable that some further detriment could arise if he and his family were no longer permitted to live in the property and had to find other accommodation. Michael would still have to meet his commitments to Mr Carter to repay the loan and pay interest thereon. However we were not referred to evidence as to the current outstanding balance. It is therefore difficult to assess the extent of this obligation. The calculation which we have described above is designed to put him in the position in which he would have been had he not acted in reliance on his father's statements. We see no reason for making further allowance for contingencies to which he would probably have been exposed in any event, had he provided housing for his family in some other way. 161 The primary position urged by Mr and Mrs Tsourounakis is that a court of equity would recognize Michael's equity by awarding him beneficial ownership of the property. The Senior Member rejected that view when he found that there was no basis for restraining Mr and Mrs Tsourounakis from disposing of the property. We consider that conclusion to be correct. When one keeps in mind the fact that Mr and Mrs Tsourounakis purchased the property and owned it for many years prior to 1991, it cannot be said that they should retain no proprietary interest in it. Although Michael has, since 1997, contributed substantially to its current value, there has also been a substantial increase in value attributable to increases in property values generally. It would confer a substantial windfall benefit upon Michael if he were to be awarded the whole interest in the property, far beyond any detriment suffered by him. If one were to take into account the totality of expenditure since 1991 (that is ignoring the consequences of his bankruptcy) then the position would scarcely be any better from his point of view. Similar comments apply to an order for permanent occupation of the property. The other factors to which we have referred should not weigh heavily in the balance. In our view a court of equity would, as a condition of permitting departure from their representations, order Mr and Mr Tsourounakis to make a cash payment to Michael, calculated in the manner explained above.

ORDERS 162 Both the appeal and cross-appeal should be allowed and the orders below set aside. The precise orders which should be made are a little difficult to formulate. The complexity of the case has led the parties to adopt approaches which do not reflect all of its difficulties. For that reason, and despite our desire to finalize the matter, it will be better if it is referred back to the Tribunal. The primary exercise will be to identify the nett value to Mr and Mrs Tsourounakis of their property. That should be done by calculating the amount attributable to Michael's equity in the way which we have indicated, and deducting that sum from the valuation as at the relevant date. Some further adjustment might then be made to reflect any possible claim by the trustee. It may be better if the matter is deferred until the trustee has been notified pursuant to the order which we are about to make, and has had an opportunity to decide upon a course of action. Perhaps, with the benefit of these reasons, the parties may be able to reach agreement. To that end, upon publication of these reasons, we will adjourn the matter for a period of fourteen days to allow them to consider whether that is possible. If they are unable to agree on appropriate orders, the matter will be remitted to the Tribunal for further consideration. In that event the parties should be at liberty to lead further evidence. 163 We understand that the Commission has agreed to pay Mr and Mrs Tsourounakis's taxed costs of the appeal, regardless of the outcome. We do not know whether that agreement extends to the cross-appeal. The parties should, within fourteen days, provide consent orders as to costs. Alternatively, they should provide written submissions as to appropriate orders. 164 We direct the District Registrar to forward copies of these reasons to the Official Trustee in Bankruptcy and to the former trustee of the bankrupt estate of Michael Tsourounakis. We further direct the District Registrar to make available to either or both of those persons copies of such documents on the Court file as either or both may request. 165 There will be liberty to apply.

I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Dowsett and Edmonds.

Counsel for the Appellant: Mr G Gibson QC Ms E Ford

Solicitor for the Appellant: Australian Government Solicitor

Counsel for the Respondents: Mr J Logan SC Mr D O'Gorman SC