Waaka v Francois [2017] NSWSC 744 | Case summary

Determination

The elements of an equitable estoppel by encouragement were famously described by Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129 at 170: If a man, under a verbal agreement with a landlord for a certain interest in land, or what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation.
The above statement was described by Handley JA in Sullivan v Sullivan (supra) at [11] as the "classic statement" of the ingredients of an estoppel by encouragement (see also DHJPM Pty Ltd v Blackthorn Resources Ltd (supra) at [53]; Doueihi v Construction Technologies Australia Pty Ltd (supra) at [61]).
The circumstances in which a proprietary estoppel will arise include those in which assurances are given so as to create or encourage an assumption that "a particular legal relationship would be established" or "an interest" would be granted (see Doueihi v Construction Technologies Australia Pty Ltd (supra) at [154]). In any case where such an estoppel is sought to be established, it is necessary to pay careful attention to the identification of the assumption or expectation which the object of the estoppel is said to be estopped from denying or asserting (see DHJPM Pty Ltd v Blackthorn Resources Ltd (supra) at [44]).
The alleged estoppel largely rests upon the discussion that occurred on 30 March 2014 concerning the possibility of a sale of the property to the Waakas. I have found Ms Francois' account of that discussion to be essentially accurate and reliable.
The terms of the discussion make it clear that Ms Francois wanted to sell the property as soon as possible. Mrs Waaka accepted that when the text messages were exchanged on the following morning, she knew that to be the case. The terms of the discussion also made it clear that the Waakas required some time in which to save more money and "get a loan" before they could buy the house. In that context, the parties addressed the question of how long it would take the Waakas to be in a position to be able to buy the property.
I have found that Mrs Waaka told Ms Francois that they would be able to buy the house "at the latest by July when [Mr Waaka] does his taxes". That statement would reasonably have been understood as conveying that by that time the Waakas would have sufficient funds of their own (including Mr Waaka's taxation refund) and finance in place to enable them to enter into a contract of purchase. In these circumstances, Ms Francois should not be taken to have accepted that the Waakas could have a "reasonable time" to secure finance. Neither should she be taken to have accepted that "July when [Mr Waaka] does his taxes" was merely a desirable outcome rather than a condition of the arrangement. In my opinion, that time was put forward by Mrs Waaka as the latest time within which the Waakas would be in a position to buy, and may be taken to have been accepted as such.
Other aspects of the arrangement that were agreed or accepted included the purchase price of $320,000 and the Waakas becoming tenants paying $320 per week in rent. The terms of the tenancy were further discussed on 6 April 2014 in terms which reveal that Mrs Waaka appreciated that if approval for a loan was not obtained, Ms Francois might sell the property to someone else.
Based on the terms of the discussion that occurred on 30 March 2014, and taking into account that the parties were friends discussing a significant property transaction in a relatively informal manner, I consider that Ms Francois thereby created or encouraged an assumption or expectation that she would enter into a contract to sell the property to the Waakas for $320,000, provided that such contract was entered into no later than about July 2014 when Mr Waaka obtained his taxation refund. The Waakas could reasonably expect that during that time Ms Francois would keep the property available for sale to them.
I do not accept that it would have been reasonable, based on Ms Francois' conduct, to assume or expect that she would sell the property to the Waakas when they had raised the funds to do so (as submitted by Mr Batley) or once the Waakas had arranged finances (as deposed to by Mr Waaka) without any limitation as to time. I note that Mr Waaka accepted in cross-examination that Ms Francois had not given them unlimited time to arrange finances.
I do accept that in reliance upon what Ms Francois said in the discussion on 30 March 2014 the Waakas moved into the property and gave up their Housing NSW tenancy. I further accept that in so acting, the Waakas gave up a relatively secure tenancy (likely to be one treated as a "continuous lease" under applicable Housing NSW policies) in favour of a twelve month private tenancy at an increased rent, and would be unlikely to be able to readily obtain a new Housing NSW tenancy. Moreover, those acts of reliance were known by Ms Francois and were indeed inherent in the arrangements she made with the Waakas. By reason of those acts of reliance, the Waakas would suffer detriment were Ms Francois to depart from the assumption or expectation I have identified.
The Waakas' subsequent undertaking of works at the property may also be regarded as acts of reliance upon what Ms Francois said in the discussion on 30 March 2014. In my view, those works were undertaken by the Waakas in the belief that they would have the opportunity to purchase the property as discussed with Ms Francois. Even though the Waakas were not required or requested to carry out the works, and they must have appreciated that there was a risk that they would not become the owners of the property, the works ought be seen as acts done by the Waakas in furtherance of the arrangements and in the hope that they would later own the property. The conduct of Ms Francois can thus be seen as having played a part in the decisions of the Waakas to undertake the works (see Sidhu v Van Dyke (supra) at [71]-[73]). Ms Francois gave permission to the Waakas to perform various works and was aware of them taking place. Again, by reason of their efforts in that regard, the Waakas would suffer detriment were Ms Francois to depart from the assumption or expectation I have identified.
Nevertheless, I do not think that Ms Francois has departed from the assumption or expectation that she would enter into a contract to sell the property to the Waakas provided such contract was entered into no later than about July 2014 when Mr Waaka obtained his taxation refund. In circumstances where Mr Waaka, with Ms Francois' assistance, lodged his taxation return on about 8 August 2014 and would have received his taxation refund two weeks later, the period of time allowed by the proviso could be regarded as extending to about late August 2014. However, from at least that time, the Waakas could not reasonably have expected that Ms Francois would keep the property available for sale to them. They could not reasonably have expected that Ms Francois would thereafter remain obliged, in any legal or moral sense, to sell the property to them. In short, the time within which the opportunity to purchase the property was given had passed.
It is true that Ms Francois did not then state that the opportunity had passed. Rather, she afforded further time to the Waakas to get into a position to be able to buy the property. In September 2014 she provided assistance to the Waakas in their attempts to obtain finance. These actions of Ms Francois do not change the nature of the assumption or expectation that arose out of the discussion of 30 March 2014.
The position announced by Ms Francois on 17 October 2014 to the effect that she was putting the property on the market generally did not involve a departure from the assumption or expectation. It is noteworthy that Mrs Waaka did not suggest there was any departure at the time. She pleaded with Ms Francois for a bit more time, but appreciated that this was "a big ask". Similarly, Ms Francois' statement the next day that she had decided that she would not sell the property to the Waakas did not involve any departure from the assumption or expectation. That would be the case even if the Waakas had by then secured finance.
In my opinion, Ms Francois acted consistently with the assumption or expectation. She provided the Waakas with the opportunity to become the purchasers of the property, in accordance with the arrangements made. It is unfortunate that the Waakas were unable to take advantage of that opportunity.
As there was adherence to the assumption, the Waakas, who altered their position on the faith of it, cannot complain (see the statement of Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674-675 - a statement of principle recently cited in Sidhu v Van Dyke (supra) at [80]-[81] which has been applied in the context of equitable estoppel including in this State in Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84 at [42]-[44]; Sullivan v Sullivan (supra) at [18]-[19]). The underlying purpose of the estoppel is to protect a plaintiff against the detriment which would flow from reliance upon an assumption or expectation created by a defendant were the assumption or expectation to be deserted by the defendant.
Moreover, in circumstances where the improvements made to the property were undertaken by the Waakas on their own initiative and in the knowledge that they might not become the owners of the property, Ms Francois was not obliged to offer any recompense to the Waakas in respect of such works when she decided not to sell the property to them.
For the above reasons, the plaintiffs' estoppel case has not been established.
It is not necessary to deal with various factual controversies, including the dispute concerning the state of the property around late March/early April 2014. Mr Batley accepted that it was not necessary for the Court to make findings on that issue. I should note, however, that some of the evidence given about the dirty, rundown and even squalid condition of the premises struck me as highly exaggerated, particularly the evidence given by Ms Karaitana and Ms Haenga (who was nonetheless upset when she found out that Ms Francois would not be renting the property to her). I preferred the evidence given by Mr Lagoutaris, a real estate agent who inspected the property on 2 April 2014.
I should also state that I found the evidence given by Mr Allen concerning the work he performed on the kitchen at the property (including as to the time he and others spent on the job, and the payment arrangements) to be most unimpressive.
The Court will order that the Amended Statement of Claim be dismissed. The Court will also order that the plaintiffs withdraw the caveat (AJ492365) they lodged in respect of the property. The plaintiffs will be ordered to pay the defendant's costs of the proceedings.

Waaka v Francois

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