Sullivan v Sullivan

Julie Anne Sullivan - Plaintiff Robert Brian Sullivan - First Defendant PARTIES : Donna Avelyn Sullivan - Second Defendant Spiralling Coil Pty Limited - Third Defendant

R D Wilson - Plaintiff COUNSEL : R R Harper SC; T T Bors - Defendants

Brazel Moore Lawyers - Plaintiff SOLICITORS : Blunden & Ferguson - Defendants

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

2476/04 JULIE ANNE SULLIVAN v ROBERT BRIAN SULLIVAN & ORS JUDGMENT 1 HIS HONOUR: The plaintiff in this case is the sister of the first defendant. The second defendant is the wife of the first defendant. The third defendant is a company of which the first and second defendants are the sole directors and shareholders. The third defendant is also the trustee of a discretionary trust which benefits members of the first defendant's family. 2 The plaintiff is aged 38. She has, now, five children. In about 1984, not long after her eldest child was born, she applied for subsidised accommodation with the Housing Commission, and put her name on the Housing Commission list for such accommodation. After being on that list and waiting for a period of about seven years, she obtained accommodation from the Housing Commission in a three bedroom house at 11 Citrus Close, Wyoming, which is outside Gosford. In about 1990 she moved into 11 Citrus Close, Wyoming, and commenced to pay rent to the Housing Commission. She continued living there from about 1990, with such children as she had from time to time. She had a daughter Koe, born on 27 February 1990, and another daughter, Tory, born on 30 June 1995. In 1995 she was living with a man called Nathan. Circumstances of Purchase of the Green Point House 3 On Christmas Day 1995 the first defendant gave the plaintiff a Christmas card. Its front page was headed "With Love Dear Sister", and contained the start of a verse, which continued over another two pages, which elaborated upon how specially she was regarded. An unprinted page of the card had various small pictures of houses, of the kind one finds in brochures advertising real estate for sale, stuck to it. It also contained a handwritten letter as follows: "This is your Christmas present. Donna & I & you & Nathan ASAP will look for a home of your/our choice for you to live in as long as you like. It'll be a modern & good quality home in a good location for schools transport etc. You won't have to pay any rent for the first 12 months & at that time we'll consider your financial situation and have you pay a minimal comfortable rent from then on. We want you to look at it as your home & take pride in it accordingly. You can do 'almost' anything you like to it, modifications design, painting etc & make it your style. Naturally, as the owners we will want you to abide by certain basic conditions which I'm sure you'll agree with, but it is you [sic] home for life. Now I say the following causiously [sic] & cannot promise that what I'm about to say will happen, but it's possible that after a period of time Donna & I would consider our & your situation & if we feel it appropriate would allow you to buy the home off us at a realistic & reduced payment schedule. Julie, this comes from our heart, we have been fortunate financially & want to share some with you & make life a little more comfortable for you & the kids. Love from Robert & Donna X X"

Donna is the first defendant's wife. 4 The plaintiff thanked them effusively, and the first defendant said "Donna and I are happy to do this to get you out of the Housing Commission and to give you something you couldn't give to yourself and the children." 5 The first defendant says that at the time of giving her the card he said: "For the first year, I won't charge you any rent. After that, I will charge you a small rent based on your financial situation. We will expect you to keep the place properly maintained."

The plaintiff denies that there was any discussion of an expectation to keep the place properly maintained. The first defendant struck me as someone whose recollection was not as good as that of the plaintiff. I accept the plaintiff's denial of words about maintenance of the place being said. 6 During January 1996 the plaintiff and Nathan began looking for a home. They found a home at 24 Greenvale Road, Green Point which had four bedrooms, was opposite a park, was about four or five years old, and had a swimming pool. They inspected that house in February 1996, and told the first defendant and his wife about it. 7 In February 1996 the third defendant purchased that house for $215,000. The purchase price was made up of $45,000 which was paid from trust funds held by the third defendant, and $170,000 which the third defendant borrowed from the Commonwealth Bank of Australia on a 25-year loan. The interest was fixed for the first two years. The initial monthly repayments on that loan were $1,364. 8 In March 1996 the plaintiff gave up her Housing Commission home, and moved, with Nathan and her three children, into the home at Green Point. For the first twelve months she did not pay rent. From early 1997, by agreement with the first defendant, she paid rent at the rate of $50 per week. Payments for Work Done at the Green Point House 9 The first defendant lived overseas from August 1998 until October 2000. After he returned from overseas, he reimbursed the plaintiff $1,000 for amounts she had spent on the garden of the property. The first and second defendants ordered, and paid for, the installation of down lights, repairs to the clothesline, and repaired doors to the TV room. They organised and paid for the installation of a new hot water system. 10 The plaintiff, for her part, carried out various items of work at the home. She caused the whole of the house to be painted inside. The painting was done by herself and various friends and family members, at a cost of about $500 for paint. Four bedrooms have been recently carpeted, at a cost of $800. After Christmas 2003 the home was tiled throughout at a cost of $4,000 (a cost covering both tiles and labour). The bathroom was renovated, at a cost of $1,000. As well, she has carried out various items of work in the garden. Though there was no specific cross-examination on this topic, in light of the first defendant's evidence that he paid her $1,000 for her work in the garden, the plaintiff has not proved that she did any work in, or expended any money in connection with, the garden which has not been paid for by the first defendant. Payment of Rental 11 The rental remained at $50 per week until about May 2003, when the first defendant raised the rent to $65 per week. This occurred after the first and second defendants had visited the house, and been dissatisfied with some aspects of its maintenance. The first defendant told the plaintiff that $65 per week would barely cover the council rates and insurance. He said to her: "I expect that from now on, you will pay for all maintenance and repairs, as that was our original offer. I am happy to not make money on the house while you are living here - but I don't think that it should cost me money to have you living here. I am very disappointed at the state that this house is in." 12 There has been a significant dispute about whether the plaintiff is up to date in paying rental. On the view which I take of the case, this dispute does not affect the outcome, but I make findings about it in case the Court of Appeal takes a different view to me. 13 For some years the plaintiff paid the rent by asking her mother to transfer money from the mother's bank account to the first defendant's bank account, and by the plaintiff reimbursing her mother. Part of the reason for adopting this procedure is that the plaintiff is visually impaired, and has difficulty dealing with ordinary bank forms. However, there have been three times when the plaintiff endeavoured unsuccessfully to set up a system for directly debiting her own credit union account with the rent payable. On each of those three occasions her attempt failed. The result was that, during a period from May to December 2001, during a period of several months commencing May 2003, and during another period of several months commencing August 2003, the rent was not paid on time. 14 The plaintiff's mother gave the following evidence. On 23 April 2003 the plaintiff's mother withdrew money from her own bank account, and gave $1,000 to the first defendant to pay what she understood were the then arrears. In January 2004 the first defendant claimed that $3,000 of arrears had built up. The plaintiff's mother telephoned the first defendant's accountant, Mr Bennetts, sent Mr Bennetts various deposit receipts which she had, and received a telephone call from Mr Bennetts in which he stated that he had studied the documents and that $1,840 was the amount owing. On 19 February 2004 the plaintiff's mother paid $1,840 into the first defendant's account. 15 The plaintiff's mother was not cross-examined on this evidence. There was nothing in the demeanour of the plaintiff's mother to cause me to doubt her word, and no inherent unlikelihood in the evidence she gave. Mr Bennetts was in Court on the day of the hearing, and no attempt was made to call him to contradict the evidence of the plaintiff's mother on this score. The first defendant accepted in cross-examination, that he did not have a precise recollection of what was paid, or when. He is a man who relies on his accountant, and gives his accountant authority to deal with debtors. In these circumstances I find that the payment of $1,840 cleared all arrears to the time the payment was made. 16 The plaintiff tendered the statements of her credit union account from 1 January 2004 to 3 November 2004. Those statements identified each payment to the first defendant by the notation "Tfr to Rb Sullivan CTB SA". The statements showed that a total of $2,430 had been transferred to the first defendant's account in this fashion up to 3 November 2004. As well, the deposit receipt was tendered for a payment of $105 made on 4 November 2004. That establishes that a total of $2,535 was paid up to 4 November 2004. I accept that plaintiff's evidence that she has paid $65 per week from 4 November 2004 to the time of the hearing, making a further $130. I accept that that is a payment of the amount which accrued due, at $65 per week, over the period from 5 February 2004 until the time of the hearing. 17 The first defendant's bank statements for the period 31 January 2004 to 29 October 2004 were tendered. The submission was made that not all payments coming out of the plaintiff's bank account had been received. I have checked the two sets of bank accounts, and there is no payment shown in the plaintiff's account as going to the defendant's account which is not also shown in the defendant's account as having been received from the plaintiff, during the period covered by the first defendant's bank account records which were tendered. The submission that there was any such discrepancy is an irresponsible one, which should not have been made. 18 In these circumstances I find that the plaintiff had no arrears of rental at the date of the hearing. 19 I record that the plaintiff proffered an undertaking that if I should find any rent was outstanding, she would pay it forthwith. In light of my finding, there is no occasion to accept that undertaking. Legal Basis of the Plaintiff's Claim 20 The plaintiff's claim is based upon an equitable estoppel. She says that in reliance on the representations in the Christmas card, she acted to her detriment both by giving up her Housing Commission property, and also by moving into the Green Point property and spending money on improving it. The plaintiff submits that the interest in the property to which she is entitled is a personal right to stay in the property for as long as she wishes. The terms of that occupancy are that she should pay a minimum amount which is consistent with her financial position - Mr Wilson, for the plaintiff, suggested that perhaps $65 per week subject to CPI increases would be a proper way of quantifying that amount, or perhaps, instead, it could be quantified by imposing on her an obligation to pay rates, taxes, insurance and repairs. Clarity of the Representation 21 It is well established that an estoppel of this type requires a representation which is sufficiently clear and unambiguous to give rise to the estoppel. As the Court of Appeal has held in Galaxidis v Galaxidis [2004] NSWCA 111 at [82] - [93] that does not mean that the representation must be clear and precise in all respects. Rather, what is needed is a representation which is of such a nature that it would have misled any reasonable person, and that the plaintiff was in fact misled by it. Tobias JA (with whom Giles and Hodgson JJA agreed on this matter) concluded, at [93]: "… even if a representation is insufficiently precise to give rise to a contract (as in the present case), that fact does not necessarily disqualify the representation from founding a promissory estoppel. Much will depend upon the circumstances in which the representation is made and the context against which it is to be considered. In its context, the representation is sufficiently clear and unambiguous if it is reasonable for the representee to have interpreted the interpretation in a particular way being a meaning which it is clearly capable of bearing and upon which it is reasonable for the representee to rely. In these circumstances, it would be unconscionable for the representor to deny responsibility for the detriment that arises because of that reliance." 22 I have some doubt about whether the terms of the "Christmas present" offered by the Christmas card meet that test, when those terms included "certain basic conditions which I am sure you'll agree with", which were not articulated in any way. The plaintiff has not given evidence of her understanding of what the conditions of occupancy were to be, so I am not in a position to decide whether her understanding was one which the representation made by the Christmas card was capable of bearing, and on which it was reasonable for her to rely. 23 Notwithstanding these doubts, I shall assume, without deciding, that the representation was sufficiently precise to be able to give rise to an estoppel. Position of the Third Defendant 24 Mr Harper SC, counsel for the defendants, pointed out that the Christmas card contemplated a house being purchased by the first and second defendants, whereas the house was in fact purchased by the third defendant. He pointed out that the third defendant was trustee of a discretionary trust, under which it had limited powers, and that there was no evidence that the third defendant had adopted the terms of the Christmas card. Rather, Mr Harper submitted, the third defendant had become the registered proprietor of the property, which was Real Property Act 1900 land, and held it free of any equity which might have existed between the plaintiff and the first and second defendants, arising from the Christmas card. 25 These are arguments of law, which the Court of Appeal will be in a position to resolve, should it be necessary for it to do so, without the need for any findings by me about disputed matters of fact. There is no dispute that it is the third defendant which is, and at all relevant times has been, the registered proprietor, that the third defendant provided the purchase price of the house, nor about the terms of the discretionary trust. I shall assume, without deciding, that the fact that the third defendant is completely under the control of the first and second defendant, and that the third defendant purchased the house so that the first and second defendant could carry through the plan outlined in the Christmas card, have the consequence that third defendant is bound by any equity which exists between the plaintiff on the one hand, and the first and second defendants on the other. Reliance, Detriment and Unconscionability 26 There is uncertainty in the law at present concerning whether a plaintiff who invokes the law of proprietary estoppel must prove not only reliance on an encouraged assumption in circumstances where departure from the assumption would be unconscionable, but also that the reliance was detrimental, in order to be entitled to relief. In Galaxidis v Galaxidis [2001] NSWSC 1123 at [142] - [157] Austin J reviewed the cases which have resulted in that uncertainty. When Galaxidis went to the Court of Appeal (Galaxidis v Galaxidis [2004] NSWCA 111) the Court of Appeal did not resolve that uncertainty, though Tobias JA (with whom Giles and Hodgson JJA agreed on this point) said, at [118]: "In my opinion, it is unnecessary finally to determine whether or not reliance to the representee's detriment is a requirement to be satisfied before equity will grant relief. In all probability it is, for equity generally only relieves the representee from that detriment. In other words, the relief equity will afford is only that which is necessary to avoid the detriment suffered as a consequence of the representee's reliance."

I shall assume, without deciding, that detriment is not a separate element. 27 Here, the plaintiff has relied upon the representation of the first and second defendants in moving out of the Housing Commission house, and into the Green Point house. The plaintiff has the onus of showing facts which made it unconscionable for the defendants to go back on their representation. She has had the occupancy of the house for nearly nine years, at a rental well below market rental. Considered by itself, that looks like a significant act of generosity on the part of the defendants. The plaintiff has the onus of proving facts which show that notwithstanding this apparent generosity, her moving out of the Housing Commission house involved her putting herself in a position such that it would be unconscionable for the defendants not to keep on allowing her to live in the house. There is no evidence concerning the rent she was paying to the Housing Commission, nor concerning what, if any, security of tenure she had in the Housing Commission house. Nor is there any evidence of the practices or policies of the Housing Commission, which might have given some feel for what the plaintiff might, in reality, have had happen to her if she had not given up the Housing Commission house, regardless of whether she had a legal entitlement to be so treated by the Housing Commission. In these circumstances, the plaintiff has not established that her giving up the Housing Commission house at the instigation of the first and second defendants, is something which makes it unconscionable for the first and second defendants to now go back on their representation that the house would be hers to live in for life. 28 The work which the plaintiff has done on the house (itemised in para [10] above) has resulted in her being $6,300 out of pocket. However, the plaintiff has not established, in my view, that it would be inequitable for the first and second defendants to fail to carry out their representation about the home being hers for life, because she has spent that $6,300. Nor has she established that it would be inequitable for the first and second defendants to resile from their representation without repaying her that $6,300. The items of work on the home which the plaintiff has carried out are not all strictly items of repair or maintenance, but they are all of a type which houses commonly have carried out periodically when lived in. They have not been shown to result in any improvement in the value of the house. They are not shown to have been carried out at either the request or the insistence of the defendants. 29 Further, the expenditure by the plaintiff was made after the first defendant had written her a letter, on 20 November 2003, which included: "You remember our talk a few months ago in the house & Mum & Dad were present. We discussed the financial arrangements & I recall we all agreed that what I said was reasonable. I said the $65 pw you are paying covers house insurance & rates that I pay. I didn't want to make money on the house, but I also didn't want to lose. So you were responsible for all maintenance. Literally everything, to live in the house. I said that obviously I'd get things fixed with insurance if there was a major catastrophe. So I want to make it super clear that you cover EVERYTHING because if you try & find something that seems to be an exception to the rule, something you perceive as totally out of control & something that you believe I should pay for, I guess I have to tell you don't fix it, wait 'til you can afford it, because otherwise I'll be paying for more than insurance & rates & I'm not using the house, or I could put the rent up to cover the cost. The bottom line is this. You have a totally free house, all you have to do is cover your own wear & tear in terms of the entire house."

The plaintiff has not shown that the expenditure which she made was of a type which went beyond making good ordinary wear and tear on the house during the period since March 1996 that she has been occupying it. Given that the defendants also had work done at the house (para [9] above) it is not as though the plaintiff has even paid for all the usual expenditure on the fabric of the house during the time of her occupancy. 30 The first and second defendants paid the cost of the plaintiff and her family flying to America for a holiday at a time, between August 1999 and October 2000, when the first and second defendants were living in America. This was so that the plaintiff and her family could have a holiday. In deciding whether the plaintiff has any equitable entitlements concerning the house, I leave this separate act of generosity on the part of the first and second defendants to one side. 31 I conclude that the plaintiff has no entitlement to any personal right of occupancy in the house, nor to any charge against the house. Orders

1. Claims for relief in paragraphs B 1-6 Statement of Claim dismissed.

2. Direct that if any application for consequential orders is to be made by any party an appointment be made with my Associate, on or prior to 16 February 2005, for the fixing of a date for hearing of any such application. **********

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