Tadrous v Tadrous

Court of Appeal (NSW)|2011-08-24|Before: Young JA, Meagher JA, Pembroke J

(Appellant) J G Renwick, E Peden (Respondent) Solicitors: Proctor & Associates (Appellant) Wyatt Attorneys (Respondent) File Number(s): CA 2007/258058 Decision under appeal Citation: Tanya Tadrous v Michael Tadrous [2010] NSWSC 1388 Date of Decision: 2010-12-03 00:00:00 Before: Pembroke J File Number(s): SC 2007/258058

Judgment 1YOUNG JA : I agree with Meagher JA. 2MEAGHER JA : The respondent and her late husband, Charlie Tadrous, advanced $561,360 to the appellant over a period from 20 March 2001 to 20 February 2003 to enable the redevelopment of his residential property at William Street, Yagoona by the construction of three townhouses. It was the respondent's case before the primary judge (Pembroke J) that this money was paid following oral assurances by the appellant to the respondent and her husband that on completion of the redevelopment they would receive their money back plus they would be able to acquire one of the three townhouses at cost. 3Charlie Tadrous committed suicide in mid-April 2003. The respondent's claim was made for herself and as administrator of her husband's estate. She alleged an agreement between the parties or, alternatively that, she and her husband had the benefit of an estoppel by encouragement. The claim to repayment of the moneys was also put on other bases. The primary judge rejected the contract claim and upheld the claim to an equitable proprietary estoppel. To satisfy that equity, he ordered that the respondent have an equitable charge over the appellant's property at William Street, Yagoona to secure the sum of $561,360 together with a further sum representing compound interest on that amount from 10 June 2003 calculated at a rate of 8.75 percent on yearly rests.

The decision in the court below 4The primary judge found that the discussions resulting in those assurances concluded in about October 1999 by which time the respondent and her husband had agreed to finance the development on the basis that they would get "every cent back plus a property at cost": [35]. To provide the funds, the respondent and her husband borrowed moneys from RAMS Home Loans Pty Limited ( RAMS ) secured by mortgage over three townhouses which they owned in Jean Street, Greenacre. Those townhouses had been the subject of a redevelopment undertaken by the respondent's husband between November 1997 and late 1999. Those moneys were paid into an account of the respondent and her husband with the Commonwealth Bank. In July 2001 the respondent was made a signatory to and authorised to operate that account. That was necessary because by this time the respondent and Charlie Tadrous were living in Singapore, where he worked for Unilever. 5The primary judge made the following finding as to the arrangement between the parties: "[32] During 1999 the [appellant] and Charlie had numerous discussions about the [appellant's] aspiration to re-develop the William Street property. Many of these conversations were between each other. Some were in the presence of the [respondent]. And some were reported by Charlie to the [respondent]. I accept the [respondent's] evidence of the substance of these conversations. Naturally, I have principally relied on the evidence of the conversations in her presence." 6The primary judge made express findings as to the respondent's credibility. He observed that she "knew as a joint borrower and co-owner she would be personally exposed if the [appellant] did not fulfil the assurances that he gave to her and Charlie: [45]. He concluded that her evidence was careful and credible and that she was a truthful and honest witness. 7The respondent's husband, with the knowledge and agreement of the appellant, maintained a continuous record of the moneys spent on the redevelopment project. Charlie Tadrous was a "meticulous, thorough and careful" bookkeeper and record keeper: [20]. The appellant gave him invoices and receipts and he kept, on an ongoing basis, a record of all payments made from the bank account in the period between March 2001 and February 2003. That record was described by its heading: "Mick & Chas' 3 Cluster Home Development Project 199 William Street Yagoona 2200" Individual payments were listed under two columns headed "Mick's Mny" and "Chas' Mny". The amount appearing at the top of the column headed "Chas' Mny" in the final version of the schedule produced was $561,360: [39]. The last payment using funds from the bank account was made on 22 February 2003. 8The appellant denied that there was any arrangement made or assurance given in the terms alleged. His case was that the moneys advanced by his brother were paid in return for financial assistance which the appellant had rendered in the past. He said that he had provided financial assistance to his brother in connection with a menswear business known as "Michaz"' which they operated between 1988 and 1991 and, in a much more significant way, towards the acquisition and redevelopment of the property in Jean Street, Yagoona. Consistent with this being the position, his evidence was that when his brother telephoned him in January 2003 to request that the appellant return the chequebook and bank keycard which gave him access to the Commonwealth Bank account, he also said we "are even now". 9The primary judge rejected this version of events. He made a number of observations about the appellant's credibility. He did not regard the appellant's evidence as reliable or as always truthful and expressed no confidence in it except where it was corroborated or accorded with the probabilities. Specifically, he made the following findings, none of which is challenged on appeal. First, the appellant may have contributed more money than his brother to the "Michaz" business. No finding was made as to the amount: [23]. Secondly, the appellant had provided some financial assistance to his brother in relation to the Jean Street property but not more than $124,528. Thirdly, the appellant's assertion that his brother owed him $300,000 prior to the redevelopment of William Street was rejected. Finally, the appellant's evidence suggesting that his brother only advanced $400,982 to him in relation to that development was also rejected. 10Significantly, the primary judge found: "[25] ... there was no monetary equivalence between the amount contributed by the [appellant] toward the Jean Street property and the substantial payments subsequently made by the [respondent] and her husband towards the [appellant's] William Street property. The latter were not intended to be a repayment of the former. They were of a different order and were made on a different basis. The [appellant] may have assisted Charlie by making some modest contributions towards Jean Street. However, Charlie assisted the [appellant] by making possible the redevelopment of the William Street property." and "[54] ... nor was there any direct relationship, or monetary equivalence, between those moneys and the assistance that had been rendered by the defendant in connection with the Jean Street property." 11A number of friends and members of the families of the parties also gave evidence. That evidence, to varying degrees, supported one or other of the different versions of events contended for. The respondent's sister and father and two friends gave evidence of conversations in which Charlie Tadrous had reported an arrangement with his brother. In the appellant's case, the respondent's sister-in-law and Charlie Tadrous' sister also gave evidence of conversations with Charlie in early 2003 in which he said that he and his brother were "even now". 12The primary judge was not persuaded by any of this evidence. He described it as "infected by doubts as to its veracity and concerns as to the witness's motive": [50]. None of it led to the conclusion that the sum of $561,360 was a gift from the respondent and her husband to the appellant.

The issues on appeal 13The primary judge's findings, with respect to conversations and events which had occurred about 10 years earlier, were based upon his assessment of the witnesses and their evidence against limited contemporary materials, some objectively established facts and the probabilities. The appellant makes a limited attack upon the primary judge's findings. When addressing them it is necessary for this Court, as part of its review of the evidence, to consider whether they are contrary to "incontrovertible" facts or "glaringly improbable": Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [29]. 14The appellant identifies three respects in which it is said the primary judge erred in accepting the respondent's evidence and rejecting the appellant's case that the funding was in the nature of the gift with no obligation of recoupment. Those arguments are made in support of grounds 1(a) and (b) of the Further Amended Notice of Appeal. 15The first is that the primary judge overlooked or failed to give consideration to evidence of the appellant and two other witnesses that at different times in early 2003, Charlie Tadrous had said to each of them that he and his brother were "even now". This evidence was said to support the appellant's version of events. 16The second is that when considering the respondent's evidence, the primary judge did not have sufficient regard to inconsistencies between her affidavit and oral evidence and also between that evidence and the contents of two documents created in June and July 2003. The documents are an affidavit sworn on 10 July 2003 by the respondent and a letter of demand written on behalf of the estate and dated 20 June 2003. 17The third is that the primary judge should have treated the fact that the respondent had not discussed the arrangement with the appellant's wife and her own brother as more consistent with there not having been such an arrangement. 18The appellant also argues that the primary judge made three errors of law. Those arguments are made in support of grounds 1(c), 1(d), 1(e) and 2 of the Further Amended Notice of Appeal and on the assumption that the primary judge's findings of fact are upheld. 19First, it is said that having held that the parties had no intention to create legal relations, the primary judge should have concluded that any assurance or expectation relied on was not capable of giving rise to an estoppel by encouragement. Secondly, it is said that the primary judge erred in ordering that the respondent have an equitable charge to secure the amount advanced plus interest. Instead, it is contended that the primary judge should have imposed a constructive trust over the William Street property on terms that it be subdivided and the appellant convey one of the units to the respondent at cost. 20Thirdly, it is said that the primary judge erred in awarding interest from 10 June 2003 at 8.75 percent compounding on a yearly basis. The appellant contends that any award of interest should have been of simple interest at a rate equivalent to the rate paid by the respondent and her husband to borrow funds from RAMS. The evidence indicated that between April 2003 and May 2004 interest was charged on the RAMS borrowing at a rate of between 6.24 and 6.5 percent. 21It is convenient to deal with these arguments in the order in which they are summarised above.

Consideration of evidence that "even now" 22The appellant's sister, Caroline Kostano, and the respondent's sister-in-law, Christina Safar, gave evidence of conversations with Charlie Tadrous in early 2003 in which he said, in relation to funding provided to his brother, that they were "even now". That evidence corroborated the appellant's evidence as to his arrangement with his brother. In cross-examination Christina Safar maintained she had a recollection of the conversation but accepted that the first time she had been asked to recall it was after the proceedings had been commenced in 2007. Caroline Kostano was not cross-examined about the particular conversation. She was, however, cross-examined about earlier conversations and asserted a recollection in 2010 of exact words used in conversations in 1985, when she was 16 or 17 years old. Her evidence was of an "even now" conversation with Charlie in April 2003 whilst he was in St John of God Hospital in Burwood following an earlier attempt at suicide. 23Although he did not deal with this evidence in detail, it is sufficiently clear that the primary judge did not overlook it and that he did not regard it as necessarily inconsistent with the respondent's case. When addressing the credibility of these witnesses he observed that their evidence "consisted largely of generalised statements attributed to Charlie acknowledging some indebtedness or obligation by him to the defendant. None of it was necessarily inconsistent with, nor clearly undermined, the plaintiff's case": [50]. The evidence relied upon by the appellant answers that description. 24The primary judge found that whilst the appellant provided some financial assistance, it did not exceed $124,528 which bore no relationship to the amount of $561,360 provided by the respondent and her husband. It followed that there was no monetary equivalence between the amount contributed towards the Jean Street property and the substantial payments made in respect of the William Street property: [25], [50]. An arrangement that Charlie Tadrous and the respondent would make advances until they were equal to the earlier financial assistance made by the appellant would not have resulted in the payments in fact made. In the circumstances, it was open to the primary judge to treat the evidence as not necessarily inconsistent with the respondent's case. A statement that the brothers were "even now" was not inconsistent with financial assistance having been provided on a basis which required repayment and provided an opportunity to acquire one townhouse at cost.

Consideration of inconsistencies in the respondent's evidence 25In her affidavit evidence, the respondent said that the question of providing financial assistance was raised by the appellant with her husband in July 1999, that there were a number of discussions about that subject in the period leading to October 1999 and that in October 1999 there was a particular occasion when she was present at which the arrangement was firmed up. She recalled that at that time the appellant and his wife, Nidal, were living in the Jean Street Property. She said that the arrangement included that the appellant pay back the moneys borrowed from RAMS "plus the interest" charged by RAMS and that during the period that she and her husband were living in Singapore, the appellant and his wife would pay rent when residing in the Jean Street property. The arrangement was described as one between the three parties (with the references in the conversation being to "we"). 26In her oral evidence, the respondent agreed that the conversations took place over a period of time and maintained that the meeting during which the "terms" were discussed took place on a particular evening. Her oral evidence was consistent with her affidavit evidence as to the basis of the arrangement except that in her oral evidence she made no reference to the payment of any interest. 27After her husband died, the respondent gave instructions for a letter of demand from Teece Hodgson & Ward to the appellant dated 10 June 2003. That letter was written on behalf of the estate and said: "We are instructed that there was an agreement between yourself and the late Mr Charlie Tadrous to develop the land at 199 William Street, Yagoona, owned by you, by building a complex of three townhouses and that on completion of the work and approval by Council for habitation, one of the units would be transferred to Mr Tadrous at cost price and that all moneys advanced by him towards the project together with the interest he and Mrs Tadrous paid on the sum of $350,000 borrowed by them on the security of their home, would be repaid to him. It appears from your brother's records that he has advanced a total of $561,359.90 towards the project." In an affidavit sworn on 10 July 2003 in support of her application for a grant of letters of administration of her husband's estate, the respondent attached as annexure "G" a "statement of all assets of the deceased" which included the following description under the heading "Other": "Money paid in respect of development of townhouses on 199 William Street, Yagoona in joint venture with Michael Tadrous the terms of which agreement are not known." 28The respondent was cross-examined about that annexure and the content of the letter of demand. In relation to the former she gave an ambiguous answer which was not clarified. On one interpretation of the answer she is to be taken to have agreed that the annexure stated her understanding of the "position as at the date" she swore that affidavit. If that is how the answer is to be understood it was plainly wrong because the earlier letter of demand contained details of the terms of the arrangement with the appellant. The primary judge was entitled to conclude, as he did, that the reference in the annexure did "not reflect on the reliability of her evidence generally:" [46]. 29The respondent was also cross-examined as to the fact that the letter of demand asserted an agreement between the appellant and her husband and not one to which she also was a party. She maintained that she had instructed the solicitor that she was a party to the agreement. In response to the suggestion that in that case the letter was not in accordance with her instructions, she said that after the suicide of her husband she was "quite blase". By this she presumably meant to convey that she was unfocused or distracted and upset which is in accord with the primary judge's finding that at this time she was "understandably emotionally distressed": [46]. She also said that she understood the letter to be focusing on the position of the estate, to have been written on behalf of the estate and not to have been addressing her position. For that reason she was not concerned if the letter did not refer to her. The primary judge was entitled to treat each of these explanations as plausible. 30The appellant also relied on telephone records as indicating that he and his wife did not commence living in the Jean Street property until February 2000. The respondent was not, however, cross-examined to suggest that she was wrong about the date of the October 1999 discussion. No doubt that was because the appellant's case was that the conversation did not happen at all. 31The primary judge dealt with these conflicts in the evidence as follows. He accepted the respondent's evidence as to the conversations and discussions during 1999. He found that the discussions took place over a period of time rather than on one occasion although they concluded in about October 1999: [34], [45]. Those findings were consistent with the respondent's oral evidence, as was the finding that the arrangement was made between the three interested parties. None of those findings was inconsistent with any objectively established or contemporaneous material. On the contrary, as I explain below, the existence of an arrangement, albeit not necessarily one to which the respondent was a party, was clearly indicated by the terms of the record kept by Charlie Tadrous. The fact that the financial assistance was being provided from funds borrowed by the respondent and her husband made it likely that she would be a party to any such arrangement. 32The primary judge did not accept the respondent's affidavit evidence as to the obligation to pay interest. In that respect, he preferred her version of the conversations given orally. That finding is not contradicted by objectively established material or improbable. Charlie Tadrous and the respondent had the opportunity to receive some return on their investment by the purchase of one townhouse at cost. It was not obvious that they would also be entitled to interest. 33The primary judge did not specifically address whether the respondent was wrong in her recollection that the appellant and his wife were living in Jean Street in October 1999. He made a finding about the date and substance of the conversation. After 10 years it was most unlikely that witnesses would have recalled much detail of the relevant events. It was not suggested by the appellant that this detail was critical to the respondent's version of events. It was equally consistent with her recollection that the appellant or the appellant and his wife were visiting her home on the occasion of the relevant conversation. 34Finally, the primary judge was not satisfied that there was any arrangement for the payment of rent by the appellant and his wife whilst living in the Jean Street property. He described the respondent's evidence as "unconvincing" and not in accordance with the probabilities: [34]. The existence of such an arrangement also was not critical to the respondent's version of events. 35The primary judge was prepared to accept that version to the extent that it "accorded with the probabilities and the objective facts": [51]. The objectively established and non-controversial facts (including those not challenged on appeal) and the probabilities provided a sound basis for the primary judge's acceptance of the respondent's evidence as to the existence of an arrangement (albeit contractually non-binding) between the parties. The record kept by Charlie Tadrous referred to "Mick & Chas'" development project and Charlie maintained a continuous record of expenditure and divided it between himself and his brother. That record was regularly discussed. It is not consistent with Charlie Tadrous having no financial interest in the development that it was described in the record as a project of both of them. Secondly, the respondent and her husband borrowed a substantial sum of money against the security of their own home to make the payments. It is unlikely that they would have done so and provided access to their bank account if the funds were not being used to participate in a joint investment. Thirdly, the appellant could not easily raise money from a commercial lender and it is unlikely that he would have committed himself to proceeding with the project without some assurance of substantial funding. Fourthly, there was no equivalence between any financial assistance previously provided by the appellant to his brother and the advances made to him, which might otherwise explain what happened.

Significance of absence of discussion of arrangement with members of respondent's family 36The respondent agreed that she did not mention the terms of the arrangement to the appellant's wife, Nidal, or to any other member of her family including her brother (Carl Safar) and her husband's sister (Caroline Kostano) notwithstanding that they were regular visitors to her home. In response to a submission that it was unlikely, if these arrangements were made, that they would not have been discussed, the primary judge observed (at [45]): "There was no reason at all why she should have discussed the arrangement with the [appellant's] wife or her own brother." That conclusion was an available one on the evidence. The evidence indicated that the brothers were close and often had plans to do things that others knew nothing about. There was a reason why the respondent as a borrower and funder should know of this arrangement and no good reason why any others needed to know of it. The appellant points to no evidence which is inconsistent with the primary judge's conclusion or which makes it improbable. In the circumstances, no error is demonstrated.

The expectation found was sufficient to give rise to an equitable estoppel 37The appellant argues that it follows from the primary judge's conclusion that the arrangement was "founded on trust not on [an] enforceable contractual obligation" ([6]) that there was no sufficient expectation to give rise to an equitable estoppel. That argument must be rejected. 38One feature that distinguishes the equitable principle from the enforcement of a contractual obligation is the absence of a legally binding promise. What attracts that principle is an assurance or encouragement which creates an expectation that a interest will be granted and conduct in reliance upon that expectation: Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 at [35] quoting McPherson J in Riches v Hogben [1985] 2 Qd R 292 at 300-301. It is sufficient to give rise to the equity that between the parties the expectation is created and acted upon on the basis that it will be made good: Ramsden v Dyson (1866) LR 1 HL 129 at 170 per Lord Kingsdown. 39An equitable estoppel can be established notwithstanding that the expectation contains elements that would not be sufficiently certain to amount to a valid contract or is formed on the basis of vague assurances: Gillett v Holt [2001] Ch 210 at 226 per Robert Walker LJ. This is particularly so in circumstances, such as in the present case, where the estoppel arises in a domestic or family context. 40In Cobbe v Yeoman's Row Management Ltd [2008] 1 WLR 1752, Lord Walker referred to a number of cases answering this description: "[66] ... It does not appear so often in cases with more of a domestic or family flavour, from Inwards v Baker and Pascoe v Turner to Windeler v Whitehall , Gillett v Holt , Grundy v Ottey ; Jennings v Rice and Lissimore v Downing . The son who built the bungalow in Inwards v Baker , the young farm manager in Gillett v Holt , the elderly country neighbour in Jennings v Rice and the female companions in the other three cases almost certainly did not take any legal advice until after the events relied on as creating the estoppel. They may not have had a clear idea of the quantum of what they expected to get .... But in those cases in which an estoppel was established, the claimant believed that the assurance on which he or she relied was binding and irrevocable." 41In Thorner v Major [2009] 1 WLR 776 the party claiming the estoppel sought to enforce an expectation of inheritance. It was sufficient that clear and unambiguous assurances were made to him that he would be left the farm and that he reasonably relied on and acted to his detriment on the basis of those assurances over a long period (at [97]). 42The primary judge's findings justify his conclusion that the respondent was entitled to an equitable estoppel. "52. On the facts that I have found, the [appellant] made a promise to the [respondent] and Charlie, knowing that they would act to their detriment in reliance on that promise by borrowing substantial moneys and further encumbering the existing mortgage security over their home. The [appellant] has resiled from that promise and seeks to benefit from doing so. He promised that they would 'get every cent back plus a property at cost'. He offered them an interest in the William Street property on favourable terms and promised to repay their investment." The respondent and her husband acted on the expectation that they would receive their money back plus a property at cost by borrowing substantial moneys secured by mortgage over their property and advancing those moneys to the appellant over a period of time.

Relief by way of an equitable charge 43In Plimmer v Mayor of Wellington (1884) LR 9 App Cas 699 it was said (at 714) that "the Court must look at the circumstances in each case to decide in what way the equity can be satisfied". That passage is cited with approval in Giumelli v Giumelli at [10] where it is also said that before imposing a constructive trust the Court should first decide whether there is an appropriate equitable remedy which falls short of the imposition of a trust. 44In Chalmers v Pardoe [1963] 1 WLR 677 the appellant expended moneys on building a residence on leasehold land of the respondent who subsequently resiled from an undertaking to apply for consent to the transfer of this part of the land to the appellant. The Privy Council said at 618: "There can be no doubt upon the authorities that where an owner of land has invited or expressly encouraged another to expend money upon part of his land upon the faith of an assurance or promise that that part of the land will be made over to the person so expending his money, a court of equity will prima facie require the owner by appropriate conveyance to fulfil his obligation; and when, for example, for reasons of title, no such conveyance can effectively be made, a court of equity may declare that the person who has expended the money is entitled to an equitable charge or lien for the amount so expended. That was in fact the order in the Unity Joint Stock Banking case, though it appeared in that case that the landowner had never actually engaged or promised to make over the appropriate land." 45The reference to the Unity Joint Stock Banking Case is to The Unity Joint Stock Mutual Banking Association v King (1858) 25 Beav 72 [53 ER 563]. A father had permitted his sons to erect two granaries and a coal shed on land which he had contracted to buy. Sir John Romilly MR observed (at 77-78 [565]) that the father "could not have taken possession of that land again, without allowing to his sons the amount of the money they had laid out upon it ... [and] that the money laid out by the sons was a lien and charge upon it, as against the father". 46In Morris v Morris [1982] 1 NSWLR 61, McLelland J, applied Chalmers v Pardoe in circumstances where the plaintiff had paid money towards an extension to a home jointly owned by his son and daughter-in-law on an assurance that they would provide accommodation to him. There was subsequently a breakdown in the relationship between them. Having set out the passage referred to above he said: "The principle illustrated by this extract is a flexible one and has been applied in a great variety of situations. In the present case the assurance or promise to the plaintiff of an indefinite right of residence in the defendants' property is the operative equivalent of the assurance or promise to make over part of the land referred to in the extract from Chalmers v Pardoe ." 47This decision and other decisions in which a charge or lien has been ordered in cases where moneys have been paid or labour and materials expended on property of another are cited in Giumelli v Giumelli at [31] as "authorities in this field". Those decisions include In re Whitehead, Whitehead v Whitehead [1948] NZLR 1066 at 1071 and the decision of Young J (as he then was) in Cadorange Pty Ltd (In Liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 at 38, 40. 48As Allsop P (with whom Giles JA agreed) said in Delaforce v Simpson-Cook [2010] NSWCA 84 at [3]: "Equity will look at all the relevant circumstances that touch upon the conscionability (or not) of resiling from the encouragement or representation previously made, including the nature and character of the detriment, how it can be cured, its proportionality to the terms and character of the encouragement or representation and the conformity with good conscience of keeping a party to any relevant representation or promise made, even if not contractual in character." 49It is also relevant to consider whether the relief proposed would impact adversely on other persons: Giumelli v Giumelli at [10], [50]. There the Court declared a lien over a larger parcel of land rather than order a transfer of the promised lot to take account of the circumstances including an unresolved partnership action and to avoid relief which went beyond what was required for conscientious conduct: at [49]-[50]. 50The appellant encouraged an expectation in the respondent and her husband that when the redevelopment was completed, they would receive every cent back plus a "property at cost". In reliance on that expectation they borrowed money and advanced $561,360. That money was spent in constructing three units on the property. 51As a result, the appellant has the benefit of the redevelopment and of the moneys advanced to him. From the respondent's perspective those moneys would not have been advanced in the absence of the full assurance on which she and her husband acted. The detriment they have suffered was to pay away the money and to pay interest on the loan which it was necessary to take in order to make the advance. Had their expectation been fulfilled they would have received the principal sum back plus a townhouse at cost. The amount by which the value of that townhouse might have exceeded that cost is not the subject of findings by the primary judge. 52A conveyance of one of the townhouses could not be made without a subdivision and such a conveyance at cost would not do justice between the parties because it would leave the appellant with the benefit of funds expended on his property in circumstances where he would not have had the benefit of those improvements without encouraging the expectation from which he has resiled. It would also likely leave the respondent in a position where she and her husband would have continued to suffer detriment because of a shortfall between the difference in cost and value of any townhouse acquired and the amount advanced. 53In the circumstances, the primary judge did not err in ordering that the respondent have an equitable charge over the property to secure the sum advanced on the basis that this would fulfil a significant part of the expectation which was acted upon.

Compound interest 54It remains to be considered whether the charge should have extended to interest calculated on a compound basis from 10 June 2003. The question whether interest should be awarded and at what rate and calculated on what basis must be addressed by reference to the same principles as are set out above. 55The primary judge awarded compound interest on the basis that it was not to punish the appellant but to give the respondent "the most complete remedy appropriate in the circumstances": [64]. He awarded interest from 10 June 2003 which was before the time when the evidence suggested that the development had been completed on the basis that to do so would favour the appellant, presumably because the primary judge considered that the respondent was entitled to interest from the date when moneys were first paid to the appellant. He awarded compound interest at 8.75 percent with yearly rests on the basis that 8.75 percent was the pre-judgment interest rate current as at 10 June 2003 and that an award of compound interest would compensate the respondent for the "true loss that has been suffered": [62]. 56The only evidence that the primary judge had as to the interest rate being paid by the respondent to RAMS indicated that this rate fluctuated between 6.24 percent and 6.5 percent between April 2003 and May 2004. There was no evidence as to any particular commercial interest rate whether simple or compound, which the respondent may have earned on the money had it been received in December 2003 when the evidence suggested that the development was concluded. 57In these circumstances, there was not an evidentiary basis upon which the primary judge could conclude that an award of compound interest at 8.75 percent would do no more than properly compensate the respondent for not having received payment in December 2003. That would be the date from which interest should be calculated if the remedy was to fulfil the expectation created by the appellant's conduct that the respondent would receive "every cent back" when the development was finished. In the absence of an evidentiary basis for doing so and where the evidence indicated that the interest rate paid by the respondent was less than that awarded, the primary judge erred in awarding compound interest at 8.75 percent. 58Without such evidence, I consider the Court should apply the pre-judgment interest rates provided for by UCPR, r 6.12.8. Those rates should be applied from 1 December 2003 which would give effect to the expectation that the money be repaid at the time the development was completed. I do not think that account should be taken, when awarding interest, of the fact that the respondent has not acquired a townhouse at cost. The respondent does not challenge the primary judge's decision not to award relief on a basis which enabled that to occur and should not be granted relief which seeks to address that part of the expectation in some other way.

Proposed orders 59The appellant has failed on all grounds argued except that relating to the award of compound interest. In the circumstances, the appellant should pay 90 percent of the costs of the respondent of the appeal. 60The orders I propose are as follows: (1)Appeal allowed in part. (2)Set aside Order 2 made by Pembroke J on 3 December 2010. (3)Order that the charge secure $561,360 together with interest on that amount at the pre-judgment rates calculated in accordance with UCPR, r 6.12.8 from 1 December 2003 to 23 February 2012 and thereafter together with interest on the whole sum pursuant to s 101 of the Civil Procedure Act 2005 until discharged. (4)If the parties are able to agree as to the amount, inclusive of pre-judgment interest, that should be ordered in accordance with Order 3, the parties should within 14 days of this judgment lodge with the Court a form setting out consent orders to be made by the Court in chambers which gives effect to that order. (5)If the parties are unable to so agree within that period, they should lodge written submissions as to the orders that should be made, the respondent within 7 days after the time for agreement has expired and the appellant within 7 days thereafter. The Court will then determine what orders should be made on the basis of those submissions. (6)The appellant to pay 90 percent of the respondent's costs of the appeal. 61HANDLEY AJA : I agree with the orders proposed by Meagher JA for the reasons he gives.

Amendments 24 April 2012 - UCPR, r 5.12.8 should readUCPR, r 6.12.8 Amended paragraphs: Decision on coversheet, Order 3 and paragraph 60, Order 3 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 April 2012

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