Wallis v Rudek - [2020] NSWCA 207 - NSWCA 2020 case summary — Zoe

NSWNSWCA

Wallis v Rudek

[2020] NSWCA 207

Court of Appeal (NSW)|2020-05-29|Before: White JA, Parker J

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At a glance

Source facts

Court

Court of Appeal (NSW)

Decision date

2020-05-29

Before

White JA, Parker J

Catchwords

[1987] HCA 59 Calderbank v Calderbank [1976] Fam 93
(1975) 3 All ER 333 Muschinski v Dodds (1985) 160 CLR 583

Source

Original judgment source is linked above.

Catchwords

[1987] HCA 59 Calderbank v Calderbank [1976] Fam 93(1975) 3 All ER 333 Muschinski v Dodds (1985) 160 CLR 583

Judgment (15 paragraphs)

[1]

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

[2]

HEADNOTE [This headnote is not to be read as part of the judgment] A mother and father entered into an arrangement with their adult daughter. The parties disagreed on the precise terms of the arrangement. Under the arrangement, the daughter paid $827,498.27 to discharge the balance of her parents' mortgage and her parents transferred ownership of the home to her. Further, the daughter and her immediate family moved into the home and the parents continued to reside on the ground floor. At some point, a licence agreement was prepared for the parents to sign but they refused to do so. Difficulties emerged between the parents, on the one hand, and their daughter and her family on the other, resulting in the daughter giving notice to her parents requiring them to vacate the ground floor of the house. The parents resisted the notice on various equitable grounds. Critical to these claims was an alleged promise by their daughter that they would live in the ground floor of the house until they died, that they would not pay any rent and that their daughter would live in the upstairs part of the house. Alternatively, the parents sought the difference between the amount paid by their daughter to discharge their mortgage and an asserted value of the home in the sum of $1,050,000. The primary judge found that the parties clearly understood that there was no commitment that the parents would have an unqualified right to reside in the property for the rest of their lives. His Honour ordered the daughter to pay equitable compensation to her parents amounting to the difference between what she had paid to discharge their mortgage and $950,000 which was the uncontested value of the house accepted at trial. The parents appealed from the primary judge's finding that there was no binding agreement that they could reside on the ground floor of the home. The principal issues before the Court were: (i) Whether the primary judge erred in finding that there was no binding agreement for the parents to reside on the ground floor of the home; (ii) Whether the primary judge erred in assessing equitable compensation by reference to a property value of $950,000; and (iii) Whether the primary judge erred in awarding costs in favour of the daughter on the indemnity basis. The Court, dismissing the appeal (White JA at [10], Emmett AJA at [118], Simpson AJA at [119]), held: As to issue (i), per Emmett AJA (White JA and Simpson AJA agreeing):

[3]

Judgment

WHITE JA: The facts giving rise to this appeal are set out in the reasons for judgment of Emmett AJA which I have had the advantage of reading in draft. I agree with Emmett AJA's reasons and the orders his Honour proposes. The following observations do not qualify my agreement with the reasons of Emmett AJA.
As Emmett AJA has explained, the appellants' pleaded case was that the respondent had promised that if the appellants transferred the Property to her, she would discharge their loan to the ANZ Bank and permit them to reside in the ground floor unit for their lifetimes at no charge.
The primary judge found that no such promise was made.
As Emmett AJA explains (at [60]-[67]) there was evidence that the appellants made known to the respondent that they assumed that they would be entitled to live in the property for the rest of their lives.
No case of estoppel by acquiescence was pleaded. The primary judge's rejection of the case that was pleaded depended upon the primary judge's assessment of the credibility of the witnesses.
The appellants complained that the primary judge admitted evidence of behaviour of the appellants, in particular Mr Wallis, that created conflict between the appellants and the respondent and her family. The primary judge referred to evidence that some years before the transfer, the council had issued notices to the Wallises as owners to undertake rectification works to the property because of a failure to comply with the terms of a development approval (J [86]). His Honour said that Mr Wallis' response was that he did not know at the time of the transaction that there was an outstanding problem with the council, but this was a source of tension between the parties (J [87]). The primary judge referred to evidence that Mr Wallis interfered with Mr Rudek's attempt to prune trees and that Mr Wallis picked a fight with a neighbour over a dividing fence (J [90]). The primary judge referred Mr Wallis' storing junk in the swimming pool and other day-to-day matters creating conflict between the respondent and her family and the appellants.
The respondent did not plead that the appellants were not entitled to the equitable relief they claimed because of Mr Wallis' behaviour.
The appellants submitted that this evidence was irrelevant to any issue in the proceeding and should not have been admitted over objection.
The primary judge's assessment of the parties' credit for the purpose of deciding whether the representation on which the appellants say they relied was in fact made by the respondent did not depend on, nor has it been shown to have been materially affected by, his Honour's assessment of the evidence of Mr Wallis' later misbehaviour. This is clear from the reasons of Emmett AJA at [68]-[73].
Accordingly, for the reasons of Emmett AJA, I would dismiss the appeal.
EMMETT AJA:

[4]

Introduction This appeal concerns an alleged agreement between the appellants, Yuri Wallace (Yuri) and Olga Wallace (Olga) and their daughter, Suzanne Rudek (Suzanne) as to the terms on which Yuri and Olga would be entitled, following the transfer of the Property to Suzanne by Yuri and Olga, to occupy a self-contained ground flat of 2 bedrooms, bathroom, kitchen and laundry (the Ground Floor Unit) of a house erected on a parcel of land situated in Schofield Place Pennant Hills (the Property). It is convenient, without intending any disrespect, to refer to the parties and certain witnesses by their first names.

Yuri and Olga bought the Property as a vacant block in 1975. In 1985, they commenced the construction of a two-level house on the Property. In 2008, they borrowed approximately $500,000 from Australia and New Zealand Banking Group Limited (ANZ) to finance the construction of a third level for the house. The loan was secured by a mortgage of the Property to ANZ (the Mortgage).
Yuri was self-employed as a builder. However, in 2012, he developed a serious heart condition and underwent heart surgery. He could not work for 12 months after that and was forced to retire. As a consequence, he and Olga could not afford to meet the repayments on the loan from ANZ that was secured by the Mortgage. By 2013, the indebtedness to ANZ secured by the Mortgage amounted to more than $800,000. Yuri and Olga received a letter from ANZ threatening to take eviction proceedings under the Mortgage.
Against that background, in May or June 2013, discussions took place between Yuri and Olga, on the one side, and Suzanne and her husband, Vass Rudek (Vass), on the other. While it is common ground that discussions occurred, a critical factual dispute exists as to the terms of the discussions. Thus, it is common ground that the discussions concerned the transfer of the Property to Suzanne by Yuri and Olga on the basis that Suzanne would pay to ANZ the amount secured by the Mortgage. It also appears to be common ground that there was discussion concerning the basis upon which Yuri and Olga would continue to reside on the ground floor of the house constructed on the Property. Yuri and Olga assert that Suzanne promised that they would be entitled to continue to reside in the ground floor without payment of any rent or contribution to outgoings and that that entitlement would continue for the life of the survivor of them. Suzanne and Vass denied that any such promise was made.
The transfer was completed on 16 August 2013, when Yuri and Olga vacated the upper two storeys of the house and commenced residing on the ground floor. Shortly thereafter, Suzanne and Vass and their children vacated their house at Baulkham Hills, and moved into the upper storeys where they have resided ever since. They let their house at Baulkham Hills to tenants.
Yuri and Olga remained in occupation of the ground floor of the house on the Property and continue to remain in occupation. However, differences developed between Yuri and Olga, on the one hand, and Suzanne and Vass, on the other, to which reference will be made below. The differences resulted in Suzanne giving notice to Yuri and Olga on 20 February 2018 requiring them to vacate the ground floor of the house within 60 days.
That prompted Yuri and Olga to commence proceedings in the Equity Division of the Supreme Court. By their amended statement of claim filed on 31 October 2018, Yuri and Olga sought declarations that Suzanne holds the Property on the following terms: i. During the lifetime of [Yuri and Olga], [Yuri and Olga] have, free of any liability for payment of a licence fee or for any rates, taxes or outgoings an irrevocable, exclusive licence to occupy as a residence for themselves that [the Ground Floor Unit] together with access to, from and in the vicinity of that area as may be reasonably required to permit [Yuri and Olga] to enjoy quiet possession of the Ground Floor Unit; ii. Subject to [Yuri and Olga]'s entitlement to occupy the Ground Floor Unit described in order 1(a)(i) above, [Suzanne] is entitled to enjoy quiet possession of the whole of the Property and the rents and profits thereof; and iii. In the event that any mortgagee to whom Suzanne is indebted shall sell the whole of the Property or any part thereof during the life of [Yuri and Olga] then [Yuri and Olga] are each entitled to immediate repayment by [Suzanne] of fair compensation for the loss of their right to occupy the Ground Floor Unit for the remainder of the life of [Yuri and Olga], such compensation to be determined by a licenced valuer jointly appointed by [Yuri and Olga] and [Suzanne] or their respective personal representatives and, in default, by the Registrar, Equity Division.
Yuri and Olga also sought a declaration that they and Suzanne entered into a binding agreement by which, in consideration of transferring the Property to Suzanne, Suzanne would pay off their loan to ANZ and permit them to reside in the Ground Floor Unit of the Property for their lifetimes at no charge. They also sought in the alternative, a declaration that Suzanne is estopped from denying such an agreement and again, in the alternative, a declaration that she holds her title and interest in the Property on trust for Yuri, Olga and Suzanne in such proportions as to the Court seems just. Finally, they sought a declaration that they have an equitable lien over the Property to secure the payment to them of the sum of $212,907.84 plus interest.
In addition, Yuri and Olga sought orders that Suzanne be restrained from evicting them or in the alternative an order that she enter into a registrable lease or irrevocable licence permitting them to reside in the Ground Floor Unit of the Property on such terms and for such period as the Court thinks fit. In the alternative, they sought damages or equitable compensation and, again in the alternative, an order that Suzanne pay to them the sum of $212,907.84. Finally, they sought an order that the Property be charged to the extent necessary to give effect to the equities of Yuri and Olga and, in the alternative, an order for the judicial sale of the Property.
Suzanne filed a cross-claim seeking, relevantly:

a declaration that she is entitled to vacant possession of the Ground Floor Unit in the Property;
an order that Yuri and Olga provide vacant possession of the Ground Floor Unit;
an order that Yuri and Olga remove all furniture, art and artefacts;
in the alternative, judgment for possession of the Ground Floor Unit;
a declaration that there was no legally binding agreement between Yuri and Olga and Suzanne for want of consideration;
equitable compensation equivalent to rent of the Ground Floor Unit for the period from 16 August 2013 to 6 September 2018 and continuing; and
equitable compensation equal to the proportion of rates, utilities and outgoings for the period commencing 16 August 2013 to 6 September 2018 and continuing.

On 5 March 2020, for reasons published on 26 February 2020, a judge of the Equity Division (the primary judge):

ordered Suzanne to pay to Yuri and Olga the sum of $124,287.75;
declared that Suzanne is entitled to vacant possession of the Ground Floor Unit;
ordered Yuri and Olga to provide vacant possession of the Ground Floor Unit within 28 days; and
ordered Yuri and Olga to pay Suzanne's costs of the proceedings including the cross-claim on an indemnity basis.

By notice of appeal filed on 1 April 2020, Yuri and Olga appeal from the orders made by the primary judge. By notice of contention filed on 20 April 2020, Suzanne raised alternative grounds upon which his Honour's orders should be affirmed. Before dealing with the grounds of appeal, it is necessary to deal with the pleadings, the evidence as to the arrangement between Suzanne and Yuri and Olga and the reasons of the primary judge.

[5]

The Pleadings

The allegations made by Yuri and Olga in their amended statement of claim may be restated as follows:

In about May or June 2013, in the context of a discussion relating to Yuri and Olga's loan arrears and the commencement of eviction proceedings by ANZ, Suzanne promised to Yuri and Olga that, if they transferred the Property to her, she would discharge their loan to ANZ and then permit them to reside in the Ground Floor Unit for their lifetimes at no charge (the Promise);
The Promise was repeated by Suzanne in the presence of Ms Nicole Webster of "Auswide Conveyancing" in Kellyville Ridge;
While at the office of Ms Webster, Yuri and Olga, at the request of Ms Webster, executed a transfer form which provided for the transfer of their entire interest in the Property to Suzanne in consideration of an amount stated to be $1,050,000 (the Transfer);
The Transfer was later used to transfer the entire interest in the Property of Yuri and Olga to Suzanne;
At the time the Transfer was executed, Yuri and Olga and Suzanne requested Ms Webster to prepare a document whereby the agreement permitting Yuri and Olga to reside in the Ground Floor Unit for their lifetimes at no charge would be reduced to writing;
In reliance on and induced by the Promise and with the encouragement of Suzanne, Yuri and Olga: ○ agreed to transfer their title to the Property to Suzanne; ○ did not take steps to appoint their own conveyance or solicitor; ○ did not seek independent legal advice; ○ did not seek independent financial advice; ○ executed the Transfer and provided it to Ms Webster without reservation or restriction; ○ accepted Ms Webster's recommendation that the stated consideration in the Transfer should be the sum of $1,050,000 being the sum proposed by Suzanne's Bank; ○ did not take steps to obtain a proper or formal valuation of the Property as at the date of the Transfer; ○ did not try to negotiate or sell the Property for an amount higher than $1,050,000; ○ permitted Suzanne to retain the sum of $212,907.84 (the Retained Sum), being the difference between the consideration of $1,050,000 stated in the Transfer and the indebtedness of Yuri and Olga to ANZ less the relevant disbursements and adjustments;
On 2 August 2013, Suzanne paid the sum of $105,000 in part repayment of Yuri and Olga's indebtedness to ANZ;
On 16 August 2013, the balance of Yuri and Olga's indebtedness to ANZ of $722,498.27 was fully discharged by Suzanne;
The Retained Sum was retained by Suzanne on completion of the transfer of title to the Property on 16 August 2013;
On 23 August 2013, the legal title to the Property was transferred to Suzanne and a mortgage in favour of AMP Bank Limited was registered;
In early September 2013, Yuri and Olga commenced residing in the Ground Floor Unit leaving the upper storeys of the Property vacant;
In early September 2013, Suzanne and her family commenced residing in the upper storeys of the Property;
Since early September 2013, Yuri and Olga have resided in the Ground Floor Unit without payment of any licence fee or charge to Suzanne;
In the premises set out above, Yuri and Olga entered into an agreement with Suzanne whereby, in consideration of their transferring the Property to Suzanne, Suzanne would fully discharge their loan to ANZ and permit them to reside in the Ground Floor Unit for their respective lifetimes at no charge (the Agreement to Transfer the Property);
It was a term of the Agreement to Transfer the Property that Yuri and Olga would be permitted to keep their furniture, art, artefacts, taxidermy and books in the upper storeys at no charge for their respective lifetimes;
On 20 February 2018, Yuri and Olga received a handwritten notice from Suzanne directing them to vacate the Ground Floor Unit within 60 days;
The issue of that notice to Yuri and Olga by Suzanne constituted a breach of the Agreement to Transfer the Property;
Acting in reliance on the Promise and induced thereby, Yuri and Olga assumed or expected that they would be permitted by Suzanne to reside in the Ground Floor Unit for the remainder of their respective lifetimes at no cost or charge;
On the basis of the assumption or expectation referred to above, Yuri and Olga: ○ agreed to transfer their title to the Property to Suzanne; ○ did not take steps to appoint their own conveyancer or solicitor; ○ did not execute a formal contract of sale for the Property; ○ left all their furniture, art, artefacts, taxidermy and books in the upstairs part of the Property; ○ did not seek independent legal advice; ○ did not seek independent financial advice; ○ executed the Transfer and provided it to Ms Webster without reservation or restriction; ○ accepted Ms Webster's recommendation that the stated consideration in the Transfer should be the sum of $1,050,000; ○ did not take steps to obtain a proper form of valuation of the Property as at the date of the transfer; ○ did not try to negotiate or sell the Property for an amount higher than $1,050,000; ○ permitted Suzanne to retain the Retained Sum; and ○ paid to Suzanne the sum of $2000 in 2015 for costs of repairs to the Property;
In acting in the manner set out above, Yuri and Olga suffered loss of the opportunity to sell the Property for an amount in excess of $1,050,000, lost the equity in the Property which exceeded the amount of $1,050,000 and lost the Retained Sum and interest on the Retained Sum;
By reason of the above, Suzanne is estopped from departing or denying the above-mentioned assumption or expectation, which was adopted by Yuri and Olga as the basis of action and Suzanne is precluded from adopting a course of conduct that is inconsistent with the Promise;
In the alternative, Yuri and Olga and Suzanne, in or about May or June 2013, entered into a joint relationship or endeavour, the purposes of which were: ○ to provide Yuri and Olga with accommodation in the Property in their retirement and until their respective deaths; ○ to provide Suzanne and her family with accommodation so that they could rent out their Baulkham Hills property; ○ to combine their resources for the purposes of enhancing their wealth and welfare;
Pursuant to the said joint relationship or endeavour: ○ the parties did engage in such endeavour; ○ the parties did combine their resources for the purposes of enhancing their wealth and welfare; ○ Yuri and Olga contributed to the joint endeavour by their actions set out above;
During the later period of 2017, the relationship between the parties came to an end and the stratum of the said joint endeavour was removed without attributable blame;
Suzanne remains the sole registered proprietor of the Property;
In the circumstances, it would be unconscionable for Suzanne to deny to Yuri and Olga that they hold a beneficial interest in the Property; and
In the premises, Suzanne holds her interest in the Property subject to a constructive trust in favour of Yuri and Olga and Suzanne in proportions equivalent to their respective contributions but subject to a lien in favour of Yuri and Olga in respect of their disproportionate contributions.

In her defence, Suzanne:

admitted that she was told that Yuri and Olga were having difficulties in repaying their indebtedness to ANZ;
admitted that she was advised that ANZ had commenced proceedings for possession of the Property;
admitted that she agreed to discharge Yuri and Olga's indebtedness to ANZ;
denied that there was any offer, promise, representation or agreement that she would permit Yuri and Olga to reside in the Ground Floor Unit for their respective lifetimes at no charge;
said that there was an agreement between Suzanne and Yuri and Olga that Yuri and Olga would be permitted to reside in the Ground Floor Unit on an "at will basis" and on terms;
said that Yuri and Olga encountered financial difficulties by reason of refinancing the Property to effect renovations and extensions;
said that the extensions and renovations were undertaken without proper Council approval;
denied the existence of the Agreement to Transfer the Property as alleged; and
said that if such an agreement was made, there was no consideration supporting the agreement, rendering it unenforceable.

In her cross-claim, Suzanne alleged that, on 16 August 2013, she granted to Yuri and Olga a licence to occupy the Ground Floor Unit for a period of one year and then on a month-by-month basis and that it was a term and condition of the licence agreement that she could terminate it without cause after 16 August 2014. Suzanne then alleged that, on 20 February 2018, she served a notice terminating the licence agreement and that Yuri and Olga were no longer entitled to continue to occupy the Ground Floor Unit. Suzanne also alleged that, if the Retained Sum should be held to be due and payable to Yuri and Olga, it would be unfair and unjust for them to rely on any licence agreement because they would receive an undeserved windfall, being the benefit of exclusive use and occupancy of the Ground Floor Unit for over five years at no cost. She also asserted that, in those circumstances, Yuri and Olga should make restitution for unjust enrichment in a sum equal to the fair market rate for rental of the Ground Floor Unit, storage cost of artefacts referred to in the statement of claim and a proportion of the rates, utilities and outgoings of the Property attributable to the Ground Floor Unit for a period of five years. In addition, she claimed equitable compensation equivalent to a proportion of rates, utilities and outgoings for the period commencing 16 August 2013 to 6 September 2018 and continuing.

[6]

The Arrangement

The evidence in chief was given by affidavit, the usual procedure in the Equity Division even with disputed evidence as to conversations and conduct. The deponents were then cross-examined on their affidavit evidence. It is not an ideal procedure.
Yuri's evidence in chief was that, in May or June 2013, Suzanne and Vass came to see Olga and him at the Property, when Suzanne said that she and Vass wanted to make an agreement with them. He said that Suzanne proposed that she would pay off their loan to ANZ and they would transfer the Property to her. He said that Suzanne said that she and her family would move in and live upstairs and Yuri and Olga could move to the ground floor and live there for life at no charge. Yuri said that he and Olga agreed and that he told Suzanne that he could continue to do the gardening and some home maintenance. He also said that he told Suzanne that they had a lot of furniture upstairs as well as his collection of paintings, books and taxidermy. He said that Suzanne replied that that was okay that those items could stay upstairs and that she and Vass would make use of them. Yuri said that Vass was very happy and hugged Olga, saying that he was the best son-in-law that they could hope for and that he was helping them by paying out their debt to ANZ. Yuri said that he replied that he would be happy too if he was Vass and said to Vass: "You are getting our house and only paying a quarter of its value."
Olga said in her affidavit that, after they realised they could not meet the repayments to ANZ, she told Suzanne and Vass that they were having problems with ANZ and that they did not have enough money to repay the debt. She said that she told Suzanne and Vass that they would be evicted because they owed $830,000. Olga said that, in May or June, Suzanne and Vass came to visit Yuri and her at the Property when Suzanne said: "If we pay off your debt to [ANZ] and you transfer the house to me, then you can move and live in the flat downstairs until you die and you pay nothing." Olga said that she replied that that would be good and that the Property would be worth double the amount that they owed to ANZ. She said that Vass smiled and looked very happy and hugged and kissed her. Olga said that Suzanne told Yuri and her that she would pick them up later and they would go and see "the conveyancer" and sign "the transfer and the agreement".
Suzanne said in her affidavit that, in May or June 2013, Olga came to her family home in Baulkham Hills and told them that ANZ had commenced foreclosure proceedings and that ANZ was going to throw them out of their home. Suzanne said that Olga said to her and Vass: "Can you please buy our house and then we can live together? As [ANZ] is taking it off us and we will have nowhere else to live."
Suzanne said that she and Vass reluctantly agreed that, if Suzanne was able to obtain the finances from a bank, they would buy the Property. She told them that, given that proceedings by ANZ against Yuri and Olga were on foot, she needed to obtain finances as quickly as possible. On the following day, Suzanne and Olga attended the branch of the Commonwealth Bank at Castle Towers Shopping Centre, where Suzanne made an application for a home loan. She said that the Commonwealth Bank arranged a valuation of the Property and that about a week or two after her application, a valuation was received in the sum of $950,000, representing $520,000 for the land and $430,000 for improvements.
Suzanne said in her affidavit that, at no stage, was there any conversation that she would be purchasing the Property on the proviso or understanding that she would allow Yuri and Olga to reside there for the rest of their lives. She said that she was simply trying to avoid ANZ forcing them from the Property. Later in her affidavit, Suzanne said that she was prepared to allow Yuri and Olga to reside with her in the Property on a "see as we go basis". However, she said that, at no time, was she purchasing the Property on the proviso that she was agreeing to provide a "'life estate' as has been alleged in these proceedings". Suzanne said that, at no stage, did she indicate to either Yuri or Olga that she would enter into such an arrangement.
Vass said in his affidavit that, in May 2013, Olga approached Suzanne and him and asked them to buy her and Yuri's home because they had defaulted on their home loan and the Property was going to be sold by the mortgagee. Vass said that it was not agreed that the Property was being purchased on the proviso that Yuri and Olga would have the right to remain in the Property for the rest of their lives and that that was never discussed or considered. He said that he and Suzanne purchased the Property instead of someone else buying it and Yuri and Olga becoming immediately forced on the street. He said that, had they not purchased the Property, Yuri and Olga would have been on the street.

[7]

The Documentation of the Arrangement

Yuri said in his affidavit that, in June or July 2013, Suzanne drove Yuri and Olga to the office of Auswide Conveyancing in Kellyville Ridge, where they were introduced to Ms Webster. He said that Suzanne told Ms Webster that she was paying off her parents' indebtedness to ANZ and that their house would be transferred to her. He also said that Suzanne told Ms Webster that they were making an arrangement whereby Suzanne's parents would live in the downstairs part of the house until they died, they would not pay any rent and she would live in the upstairs part of the house.
Yuri said that he told Ms Webster that that was the agreement and asked her to type up the agreement and they would sign it when they signed the transfer. He said that Olga also said to Ms Webster that they would like to sign the agreement that day. Yuri said that Ms Webster responded that she was very busy at the moment and had not prepared an agreement yet. He said that Ms Webster said: "It is a very strange agreement. I have not seen anything like it before. I think it will have to be a licence agreement and say that you are paying a fee of $1 per week. I will prepare the agreement and post it to you."
Yuri said that Ms Webster then showed them a transfer, which she had already prepared. He said that the transfer stated that the Property was being transferred by Yuri and Olga to Suzanne for a consideration of $1,050,000. Yuri said that he asked Ms Webster why the amount of the consideration was so low and that Ms Webster replied that that was the amount of the valuation obtained by Suzanne's mortgagee. Yuri said that he and Olga then signed the transfer and Ms Webster witnessed their signature.
Olga said in her affidavit that Suzanne drove Yuri and her to the office of Auswide Conveyancing, where they were introduced to Ms Webster, who produced a transfer of the Property. Olga said that she and Yuri then signed the transfer, when Suzanne said to Ms Webster: "Yuri and Olga are going to live downstairs for the rest of their lives free of charge."
Olga said that she asked Ms Webster whether they should sign the agreement now in her office and Ms Webster replied no, that she had not prepared it yet and that she would send it to them. Olga said that Ms Webster said that she was surprised that they were not being charged rent.
Suzanne said in her affidavit that, after a valuation of the Property was received, the Commonwealth Bank manager told her that her application had been rejected as, based on the valuation, there was not enough equity in the Property. She said that the Commonwealth Bank manager suggested they contact a mortgage broker and that they use Ms Webster of Auswide Conveyancing for the conveyancing aspect of the purchase of the Property. Suzanne annexed to her affidavit a copy of a valuation from API Property Pro dated 1 July 2013 expressing the opinion that the market value of the Property was $950,000.
Suzanne said that, on 1 July 2013, she contacted the mortgage broker recommended by the Commonwealth Bank manager and that the mortgage broker recommended that Suzanne attempt to obtain finance through AMP Bank Limited (AMP). The mortgage broker told Suzanne that he needed to tell the valuer about her parents' situation and that it was crucial that the valuation did not arrive at a figure lower than $1,050,000. Suzanne said that the mortgage broker arranged for the valuer who had made the valuation on behalf of the Commonwealth Bank to attend the Property. Suzanne said that she explained to the valuer her parents' situation and showed him the correspondence from ANZ.
On 15 July 2013, the mortgage broker sent an email to Ms Webster saying: "Just a reminder, please don't forget about the transfer doc for Suzanne. Consideration amount for $1.05M which is in line with the val. I need that for the deal and you can treat as a COS for the purposes of the OSR." On 17 July 2013, Suzanne sent an email to Ms Webster asking when they could sign the contract and whether she had contacted the solicitors for ANZ. On 19 July 2017, Ms Webster sent an email to the mortgage broker asking him to let her know what was happening with "Suzanne's loan", saying that they only "have until today" with ANZ's solicitors.
Suzanne said in her affidavit that, on 19 July 2013, she, together with Yuri and Olga, met with Ms Webster, at Ms Webster's office and that during the meeting Ms Webster asked a number of questions of Yuri and Olga relating to the condition of the Property including wear and tear, light fittings and pool. Suzanne said that she, Yuri and Olga "signed the paperwork" and Yuri and Olga also signed a transfer. Suzanne said that she instructed Ms Webster to prepare a licence agreement in respect of Yuri and Olga's residing in a portion of the Property.
On 22 July 2013, Ms Webster sent an email to Suzanne saying that she had not heard anything from ANZ's solicitors and that she had again faxed to them the copy of the front page of the signed contracts, Suzanne's unconditional loan approval and the signed transfer. On 29 July 2013, Suzanne sent an email to Ms Webster asking whether ANZ's solicitors had given her "the final payout". Later on 29 July 2013, Ms Webster sent an email to Suzanne saying that she had just heard from Yuri who still wanted to exchange contracts. Ms Webster asked Suzanne whether she was happy to proceed and whether she should exchange contracts on the following morning.
On 2 August 2013, Ms Webster wrote to Yuri and Olga relevantly saying as follows: "Congratulations, we confirm that contracts with regard to your sale of the above property were unconditionally exchanged on 31 July 2013 for $1,050,000.00 in accordance with your instructions. The $105,000.00 deposit has been paid to the bank's administrator which will be held by them for investment until settlement takes place. Settlement is due to take place on Friday, 16 August 2013 …. There is no need for you to be present at settlement as we will act as your representative. We note that if settlement has not occurred by 30 August 2013, then an eviction notice is in place to evict you from your home. We now enclose a copy of the front page of the exchanged contract for your information. We note that Suzanne is allowing you to remain in possession of the bottom half the house following completion. Please ensure that the upstairs part of the house is left vacant by 16 August 2013 as agreed. Please find attached Licence Agreement for your signatures and return to me as soon as possible. …" Attached to the letter was the front page of the contract for the sale of the Property baring the date 31 July 2013. That page indicated that the contract was in the form of the 2005 edition published by the Law Society of New South Wales and the Real Estate Institute of New South Wales. That form provides for various boxes to be ticked. Relevantly, the box showing that the Property was sold with "vacant possession" was checked. No more than the front page of the contract was in evidence.
On 2 August 2013, Ms Webster sent an email to Suzanne attaching a draft licence agreement, being the draft enclosed with the letter of 2 August 2013 to Yuri and Olga. Ms Webster's email relevantly said: "Please see attached occupation to occupy the premises as discussed. Also, please ensure that you arrange insurance for [the Property] at a replacement building cost of not less than $1,130,000 and noting AMP BANK LIMITED as mortgagee. …"
The licence agreement that was sent by Ms Webster to both Yuri and Olga and to Suzanne was expressed to be between Suzanne, as licensor, and Yuri and Olga, as licensee. The licence agreement recited that by contract for sale dated 31 July 2013 the licensee agreed to sell and the licensor agreed to purchase the Property and that the parties had agreed to modify the contract by allowing the vendor to retain possession following completion, on the terms and conditions of the licence agreement. The licence agreement also recited that the sale was due for completion on 16 August 2013.
Clause 1 of the licence agreement provided as follows: "The licensor grants the licensee a licence to occupy the part of the Property on the bottom level of the residence at a weekly licence fee of $1 from the date of settlement until 16 August 2014 and following this time, indefinitely on a month by month basis." Clause 3 provided, relevantly, that in the event of breach of any of the provisions of the licence by the licensee, the licensor would be entitled to serve a notice of termination requiring the licensee to vacate the Property within 48 hours of service of the notice. Clause 4 provided that the agreement was personal to the licensee and could not be assigned. Clause 5 provided that the licensee must not make any additions or alterations to the Property without prior written approval of the licensor and cl 6 provided that the licensee must keep the Property in the condition and state of repair as at the date of the agreement.
On 7 August 2013, Ms Webster sent an email to Suzanne saying that AMP was ready to settle and that she had booked settlement for 16 August 2013. The email then went on to say as follows: "Further, it is recommended not to allow anybody to live in any property you own without an agreement for extended periods of time. As discussed, if your parents live in the Property for 10 years or more without any agreement, they may claim an easement in equity to remain in the Property as previously allowed. However, should they not wish to allow sign [sic] the Licence Agreement, then you will be able to request your parents vacate at any time." There is a certain degree of inelegance in the language of that email as well as an indication of a fairly basic want of legal principle.
Ms Webster also wrote to Yuri and Olga on 7 August 2013 confirming that settlement had been booked to take place on 8 August 2013. That appears to have been an error for 16 August 2013. The letter then went on to say as follows: "As of this time, your loan with ANZ over this Property will be discharged in full. Please ensure you have vacated the top level of the Property by 8 August 2013 [sic] to allow Suzanne to move into the Property following settlement. Please also forward us the following as soon as possible: 1. Copy of Licence for Yuri; and 2. Signed Licence Agreement. We note that should you remain in the Property without the benefit of the licence agreement, then you will be doing so only due to the goodwill of your daughter. I understand you wished to remain in the Property for as long as possible and recommend that you sign the agreement which would allow you to remain in the Property for at least 12 months at a cost of $1 per week. Suzanne would not be able to request that you move prior to this time provided you comply with the terms of the licence."
On 15 August 2013, Ms Webster wrote to Yuri and Olga relevantly saying as follows: "Settlement of your above sale has been booked to take place at 2:00 pm on Friday, 16 August 2013. … As can be seen from the settlement sheet, an amount of $946,405.60 is payable to you on settlement. Cheques will be drawn as follows: Auswide Conveyancing $990.00 ANZ Banking Group Ltd $722,498.27 Kemp Strang [ANZ's solicitor] $7,114.10 Hornsby Shire Council $2,671.23 Sydney Water $169.16 Spectrum Client Solutions $55.00 Allowance for minimum rent $212,907.84. We confirm that agreeing to settle tomorrow would mean that you accept the conditions as previously stated, including not receiving an amount of $212,907.84 from the purchaser as agreed between families. Should you not agree to settle, then the purchaser is willing to forfeit her rights under the contract. However, we must note that the $105,000 deposit will be refunded to her and ANZ Bank have intentions to proceed with an evacuation on 30 August 2013. An amount of $105,000.00 is being held by ANZ's solicitor as a deposit under the contract. This will be released to ANZ following settlement. Please ensure that you have vacated the upper part of the Property by 2:00 pm tomorrow. We note that we have not received a signed Licence Agreement from you. Accordingly, we note that the purchaser can request that you vacate the Property at any time. We now enclose our memorandum of costs and disbursements which we note will be paid in full on settlement. If you have any queries, please do not hesitate to contact me."
On 15 August 2013, Ms Webster also wrote to Suzanne relevantly saying as follows: "We refer to our previous correspondence and confirm that settlement is due to take place on Friday, 16 August 2013 at 2:00 pm. As from the time the Property will be yours to move into. … Prior to settlement, preferably morning of settlement, a final inspection should be arranged with the real estate agent. This inspection is to make sure that the Property is in the same condition as it was at the time we exchanged contracts. … We shall arrange and attend settlement on Friday, 16 August 2013 and inform you once [settlement] has taken place. Once we have advised you that settlement has taken place you will then be entitled to obtain the keys from the agent and move into your new home. We note that it has been agreed between yourself and your parents that the vendor is able to remain in the bottom half of the house following settlement at a rental fee of $1.00 per week for as long as you wish them to stay. The first year's rent has been allocated in the attachment settlement adjustment sheet. Further, the vendors have agreed not to accept full payment under the contract as a result of the reduced rent they are receiving. … We note that in accordance with the settlement adjustment sheet, you owe to the vendor an amount of $946,405.60. Accordingly, the vendor has allowed an amount of $212,907.84 to be allocated as rental fees for the term that you wish to allow them to stay in the underneath area of the Property. Please find enclosed our settlement sheet showing the breakdown of what is payable to the vendor on settlement. …"
The references in the correspondence to the sum of $212,907.84 are curious. The licence agreement that had been forwarded on 2 August 2013 to Yuri and Olga and to Suzanne referred to a licence fee of $1 per week. No explanation was proffered as to how the figure of $212,907.84, the Retained Sum, could be attributable to rent. It is in fact simply a balancing figure representing the difference between the amounts paid by Suzanne to ANZ and the purchase price under the contract for sale of $1,050,000.
There was evidence that Yuri and Olga subsequently obtained an allowance from Centrelink in respect of rent payable to Suzanne although the evidence indicated that no rent was in fact paid, except to the extent that the "allowance for minimal rent" could be regarded as a payment of rent to Suzanne by Yuri and Olga. There was, however, no evidence that Suzanne treated that payment in any way as income. Further, the evidence indicated that Yuri and Olga are in the process of repaying the amount of the allowance that they received from Centrelink, apparently on the basis that they were not entitled to the allowance.

[8]

Credibility of the Witnesses

The primary judge was not impressed with Yuri's demeanour and his performance during cross-examination. His Honour accepted the evidence of Suzanne that Yuri was "fixated" with the Property and considered that Yuri was completely focused on saying what he thought he needed to say to support his claim in the proceedings so that he could stay in the Ground Floor Unit as he wished. His Honour had no real confidence in the reliability of Yuri's evidence.
The primary judge formed the impression of Olga that she saw it as her responsibility to do Yuri's bidding, without inquiring too deeply about the propriety or legitimacy of what he was asking. That caused his Honour some disquiet about whether Olga maintained the same attitude in giving evidence. His Honour found Olga's evidence vague on matters of detail and was not satisfied that it was reliable. His Honour did not think that it would be safe to rely on her evidence on any disputed issue of fact.
Vass was also cross-examined. The primary judge saw no reason to question the honesty of his evidence. His Honour considered that Vass showed commendable restraint in being forced to relive incidents that had clearly been painful and humiliating for him. His Honour had no difficulty whatsoever in accepting the broad thrust of the evidence given by Vass.
The primary judge referred to matters that might potentially affect Suzanne's credit. The first concerned her involvement in obtaining the valuation of $1,050,000. His Honour considered that it was clear that Suzanne did not herself believe that the Property had increased in value by $100,000 over a period of several weeks and that all she was really interested in was getting a valuation that would be sufficient to support the proposed loan from AMP. His Honour considered that Suzanne was indifferent as to the true value of the Property and perfectly happy for AMP to lend more on the Property than it was truly worth. However, his Honour said, the responsibility of the valuation ultimately lay with the valuer, who was not before the Court. His Honour did not see how Suzanne could be held responsible even if the valuation was overstated.
The second matter to which the primary judge referred was Suzanne's involvement in obtaining a Centrelink benefit for Olga. On her own account, she signed false papers at Yuri's request with a view to obtaining a benefit that she must have appreciated her parents were not entitled to. I have already referred to the characterisation in the settlement letter from Ms Webster of the Retained Sum as being an "allowance for minimal rent". If the Retained Sum was truly an allowance for rent and was not intended to be paid, it could fairly be said to represent consideration for the occupation of the Ground Floor Unit by Yuri and Olga, at least for some period of time, if not for life.
While the primary judge considered that the two incidents just described did Suzanne no credit, his Honour did not think that they had any serious effect on the overall reliability of her evidence. His Honour found Suzanne's demeanour in the witness box to be serious but candid. He considered that, while Suzanne may not be correct in every detail of her evidence, in general, her evidence was reliable. In particular, his Honour found her account of the difficulties in which she was placed by the behaviour of her parents compelling and credible.
The primary judge referred to the apparent concession by Suzanne under cross-examination that, at the first meeting, Yuri said that he wished to stay at the house for the rest of his life and that she agreed. Thus, when asked whether Suzanne still wanted to look after her parents and to do the right thing by them, she said that she always felt that it was her obligation to do so and that she always wanted to assist them. She agreed that she knew that there was really no way they would be able to pay off the debt to ANZ other than if she helped them out.
Suzanne agreed that she said to her parents that she and Vass wanted to make an agreement with them. She agreed that she told them that she and Vass would pay off their loan if they transferred the Property to her. She accepted that she eventually agreed to move upstairs and that they live downstairs. She accepted that she knew that they wanted to stay living in the Property for the rest of their lives and that she told them that they could live in the flat downstairs. While she would not agree that she told them that they could live there for life at no charge, she accepted that she knew at that time that they wanted to live there for life. She said that she did not say that they would live there for life at no charge and that living there for free was not discussed. She explained that she did not know how she was going to handle a $1 million mortgage since their mortgage on the Baulkham Hills property was around $150,000. She said that on the main, she was the breadwinner in the family, at that time, and she had "no guarantee".
Suzanne also accepted in cross-examination that, when she discussed the proposal with her parents, she did not know whether or not she was going to be able to get a loan but that she agreed on what the terms were going to be if she could get a loan. She also agreed that the terms were that she would pay off their loan and they would transfer the Property. She insisted that her parents were fully aware that, if she was to purchase the Property, it was "on my terms". Suzanne also agreed in cross-examination that Yuri said that he would do all the maintenance and repairs on the Property in relation to their living on the Property.
When asked whether she knew that Yuri and Olga assumed at the time that they would be entitled to live in the Property for the rest of their lives, Suzanne answered that her parents were always fixated on the house and still are. When asked whether, if she intended that they would not live there for the rest of their lives, she said she had good, sincere intentions but with her father and his dealings, mannerisms and troublemaking, she could not guarantee that he could stay there for life. When asked whether, if it was their assumption that they were going to live there for life and that were the case, she would at that time have raised that it was not her intention, Suzanne responded that one does not raise that with "the type of parents" her parents are. Suzanne also agreed in cross-examination that she knew that her parents expected to live in the Property for the rest of their lives. While she asserted that she told them that she had a different intention, she accepted that she did not do so at that specific time.
When asked whether her parents told her that they wanted to live in the house for the rest of their lives, Suzanne responded that they always wanted to live in the house and still wanted to live in the house for the rest of their lives. She agreed that they did not even need to tell her that because she always knew that that was what they wanted to do. However, she denied that she promised them that they could live there for the rest of their lives and that she did not provide or suggest any alternate terms according to which they could live there.
When asked whether she provided her parents with any proposed licence agreement at that time, Suzanne responded that nothing was clear. Suzanne also agreed that she did not tell her parents that they could only live there for a year. She agreed that she never had a discussion with them that they could live there for a year only.
Suzanne also agreed that she did not have a discussion about her parents paying any rent prior to seeing Ms Webster. When asked whether the licence agreement was Ms Webster's idea, Suzanne responded that her parents wanted to stay there for life so Ms Webster made a licence agreement for them to sign if they wanted to continue to live there. She said that that was not discussed at the conference with Ms Webster. When asked whether they told Ms Webster that there was an agreement that they could live there for life, Suzanne responded that there was no agreement that they could live there for life and that is not what they told Ms Webster.
Suzanne said that, at the meeting with Ms Webster, she proposed an alternative arrangement for how long her parents could live there. She said that she told Yuri that if Yuri wanted her to buy the Property it would have to be on her terms not on his terms. She said that, when they were in Ms Webster's office, she said that her parents were selling the Property on her terms and that it was "on a see as we go basis". She asserted that it was not for the rest of their life because she did not know whether or not she could afford $1 million when at that stage she was currently only paying off a $140,000 mortgage.
The primary judge observed that, while Suzanne appeared to concede that she agreed with her father's statement that he wished to stay at the house for the rest of his life, she insisted that, by the time the transaction came to be completed, that was no longer the case. His Honour found that Suzanne made it clear to her father that she was buying the Property on her terms not his and that she would not agree to any such lifetime arrangement because she had no idea whether she would be able to service such a large mortgage.

[9]

Reasons of the Primary Judge

The primary judge pointed to four factors that he took into account in evaluating the conflict of evidence between Suzanne and her parents. The first was the context of the transaction in relation to a previous loan of $26,000 made by Suzanne to her parents. Suzanne said that that loan was made only after she was importuned by Olga to make the loan, who promised that it would be swiftly repaid. Suzanne asserted that that promise was accompanied by emotional blackmail in which Olga said that Suzanne's uncle had provided a loan and therefore she should do so as well. His Honour observed that Olga did not deny that in cross-examination and Suzanne's version was not challenged when cross-examined. His Honour considered that those circumstances made it unlikely that Yuri was correct in asserting that it was Suzanne who approached him to buy the Property rather than the other way around.
The second factor referred to by the primary judge was that the evidence given by Suzanne about Yuri's chequered career really amounted to saying that she did not trust him financially. His Honour observed that both Suzanne and Vass gave evidence that they specifically asked Yuri whether there were any problems with the Council arising out of the work that he had carried out on the Property and were expressly told that there were no problems. His Honour considered that those questions reinforced the conclusion that Suzanne was wary of financial entanglement with her parents.
The third and most important factor for the primary judge was the contemporaneous written evidence. His Honour considered that it was clear from Ms Webster's correspondence and from the draft licence agreement that she prepared that she did not understand that Yuri and Olga were to have a life interest. His Honour observed that it was not easy to know precisely what Ms Webster had in mind in preparing the licence agreement, which his Honour characterised as "somewhat amateurish in form". His Honour also observed that Ms Webster put herself in a difficult position by acting for both parties. However, his Honour did not consider that that gave reason to think that Ms Webster misunderstood her instructions, let alone that she misunderstood them in the fundamental way required by Yuri's account of events.
The fourth factor taken into account by the primary judge was the general credit of the witnesses as indicated above. His Honour confirmed that he considered that the evidence given by Yuri and Olga was generally unreliable and that the evidence given by Suzanne and Vass was generally reliable. Ultimately, his Honour did not consider it necessary to decide whether Suzanne in fact agreed at the first meeting that her parents should be entitled to stay for life because all of the factors to which his Honour referred supported the thrust of the rest of Suzanne's evidence, namely, that by the time the contract for sale was signed, Yuri and Olga clearly understood that there was no commitment that they could stay at the Property for the rest of their lives.
The primary judge did not doubt that Yuri and Olga wanted and hoped that they could stay at the Property for the rest of their lives. However, his Honour considered that it was quite clear from the evidence that, when they asked for that commitment, it was refused. His Honour suspected that the real reason why they did not sign the licence agreement was that Yuri knew very well that, if he did, he would be formally accepting something inconsistent with what he wanted. His Honour was not satisfied that a promise was made to Yuri and Olga of a lifetime interest as part of the transaction.
The primary judge then referred to evidence of conflict between Yuri and Olga, on the one hand, and Suzanne and Vass and their family, on the other, after Suzanne and Vass and their family moved into the Property. His Honour was satisfied that Yuri's behaviour after that time was "wholly unreasonable" and represented a substantial interference with Suzanne and her family's enjoyment of their home.
There was considerable argument concerning the admissibility of the evidence concerning the conflict between Yuri, on the one hand, and Suzanne and her family on the other, after the Property was transferred to Suzanne. Ultimately, it is not necessary for this Court to resolve that question. However, the failure to do so should not be taken as an endorsement of the course adopted by the primary judge.
The primary judge concluded that the claim by Yuri and Olga that there was a contractually binding agreement capable of specific performance for them to stay in the Property for the rest of their lives failed. Accordingly, it was unnecessary for his Honour to consider the possible application of the Statute of Frauds and the doctrine of part performance, matters raised in the pleadings. His Honour's finding was based on his conclusions as to the facts as outlined above.
The primary judge then addressed the question of proprietary estoppel. His Honour concluded that, given that there was no promise that Yuri and Olga were entitled to stay in the Property for the rest of their lives, that claim must also fail. However, even if his Honour had taken a different view, his Honour would not have granted relief that would have had the effect of securing a right on the part of Yuri and Olga of continued occupation of the Property. His Honour was not satisfied that Yuri and Olga could be trusted to change their ways. His Honour considered that Yuri must have a fixation about the Property that caused him to behave in what his Honour characterised as the "obnoxious fashion" revealed by the evidence and he simply could not help himself.
That finding by the primary judge was challenged in the appeal. However, having regard to the conclusion reached below, that the alleged promise or representation was not made, it is unnecessary to deal with this question further. Failing to do so should not be taken as an endorsement or criticism of the approach adopted by the primary judge.
The primary judge then dealt with the claim by Yuri and Olga that the circumstances gave rise to a "common intention constructive trust", being a pooling of financial assets that are then used to acquire a property in the name of one of the parties from a third party as a matrimonial home. [1] While his Honour acknowledged the distinction between those principles and the present case, his Honour observed that the transaction resulted in Suzanne becoming the sole registered proprietor of the Property for which she did not pay full value. His Honour characterised the financial effect of the transaction as being that additional equity, in effect the Retained Sum, was contributed by Yuri and Olga. That conclusion, of course, ignores the characterisation of the Retained Sum as "allowance for minimal rent". If that was in fact a contribution by Yuri and Olga for the right to reside rent-free in the Ground Floor Unit, they may well have received full value for the Property in so far as they have remained there free of charge since August 2013.
Nevertheless, the primary judge considered that there had been a pooling of assets between Yuri and Olga, on the one hand, and Suzanne, on the other, and that there was no reason in principle to confine the doctrine briefly outlined above to cases where the Property is acquired from a third party. His Honour considered that the doctrine rested on the inequity that would arise if an asset acquired with joint contributions falls to the party who is the registered proprietor on the breakdown of the relationship. His Honour concluded that that element was present in this case. His Honour considered that, if Suzanne was entitled on the day after settlement to exclude her parents from the Property, there being no express agreement between the parties as to when their occupation would come to an end, the inequity of the position would be manifest. His Honour then considered the question as to what equitable relief would be available in those circumstances.
His Honour then referred to the fact that Yuri and Olga would have a perfectly good contractual cause of action against Suzanne for the payment of the Retained Sum. Under the contract for sale, she was obliged to pay the sum of $1,050,000, which she did not do, which his Honour characterised as a "curiosity" about the case. His Honour observed that, on the face of it, the obvious solution did not involve the application of any equitable doctrine but that it would be open to Yuri and Olga to amend their statement of claim so as to include the claim for the unpaid balance plus interest. Of course, it was unnecessary for any amendment to be made. The amended statement of claim sought an order that Suzanne pay the Retained Sum to Yuri and Olga and also claimed interest.
The primary judge said that it would then be a matter for them to enforce their rights at law. However, when his Honour raised that matter with counsel for Yuri and Olga, his Honour was told that they did not wish to take that course. Having expressed mystification by the instructions given by Yuri and Olga, his Honour concluded that it was not for him to force on the parties an approach that neither of them wished to follow. His Honour, therefore, proceeded to consider the amount of equitable compensation that Suzanne should pay to her parents to reflect the value of their contribution to the Property.
Neither the valuation prepared for the Commonwealth Bank of Australia nor the valuation prepared for AMP was in evidence. However, a valuer called on behalf of Suzanne valued the Property at $950,000 at the time of the contract with her parents. The primary judge considered that the proper measure of equitable compensation was the difference between $950,000 and the amount paid by Suzanne to discharge the liabilities of Yuri and Olga to ANZ. His Honour considered that it would be unreal to impose a liability on Suzanne for interest on the assumption that she received a benefit from the transaction in the form of lower borrowings or greater interest earnings than she would otherwise have received. His Honour considered that the proper measure of interest was to index the amount paid according to the consumer price index and enter judgment for the indexed amount.
The primary judge then referred to the claim made by Yuri and Olga for rental assistance from Centrelink. His Honour considered that the fact that they had obtained public benefits to which they were not entitled did not entirely prevent the grant of equitable relief. His Honour therefore proposed to make the grant of relief conditional upon their undertaking to repay all rental assistance, welfare payments received in connection with the occupation of the Property together with any interest and penalties associated with such repayments.

[10]

The Appeal

Grounds 1, 2, 4 and 5 relied upon by Yuri and Olga relate generally to alleged errors on the part of the primary judge in finding that there was no binding agreement that they could stay in the Ground Floor Unit for the rest of their lives and that there was no promise or representation to that effect that gave rise to an estoppel. That is the principal issue in the appeal. Ground 10, which challenges the conclusions of the primary judge on questions of credibility, is tied up with grounds 1, 2, 4 and 5 since the conclusion by the primary judge that there was no binding agreement and no promise or representation was very much based on his Honour's credibility findings. Yuri and Olga contend that his Honour's conclusion was not supported by the content, scope or manner of the evidence given by the relevant witnesses.
Ground 6 is that the primary judge erred in determining the amount of equitable compensation payable to Yuri and Olga by Suzanne and, in doing so, made findings that were beyond the scope of, or contrary to, the pleadings. Finally, ground 11 is that his Honour erred in ordering costs on an indemnity basis against Yuri and Olga.
Grounds 3, 7 and 8 concern alleged errors on the part of his Honour in determining that he would not have allowed Yuri and Olga to continue to occupy the Ground Floor Unit even if he had found a proprietary estoppel. Having regard to the conclusion that I have reached concerning grounds 1, 2, 4 and 5, grounds 3, 7 and 8 do not arise.
Ground 9 is that his Honour erred in giving weight and making findings in relation to the post transfer actions and conduct of Yuri, which were not specifically pleaded by Suzanne, notwithstanding an observation made by his Honour that the case would be decided on the pleadings. Again, having regard to the conclusion reached in relation to grounds 1, 2, 4 and 5, this ground does not arise.
The grounds of the notice of contention that were pressed were dependent upon Yuri and Olga succeeding in establishing that there was a binding agreement or promise or that his Honour erred in awarding equitable compensation. Having regard to the conclusions reached below in relation to grounds 1, 2, 4 and 5, it is necessary to consider only one of the grounds raised in the notice of contention, namely, that in assessing equitable compensation, it is appropriate to have regard to the fact that Yuri and Olga have had the benefit of rent-free occupation of the Ground Floor Unit since 16 August 2013.

[11]

Contract or Promise

The credibility findings very much underlie the conclusions reached by his Honour that there was no binding contract and no promise or representation capable of giving rise to an estoppel. Yuri and Olga contend that the factors relied upon by the primary judge in concluding that he had no real confidence in the reliability of Yuri were "misconstrued, incorrect and/or unsupportable for the reasons provided".
First, Yuri and Olga challenged the observation by the primary judge that Yuri gave evidence on a number of points that were demonstrably incorrect. His Honour gave only one example of such points, which arose in cross-examination of Yuri. Yuri was asked whether he presently had any other houses and responded "no". He then agreed that, in 2013, it was fair to say that he considered the Property to be his last house and that he was therefore interested in keeping that last house. Later, when it was suggested to him that it was his evidence that he did not own any other properties, Yuri responded "no". That appears to be an agreement with the proposition that was put to him. Of course, the first question was whether he owned "any other houses", not properties. Later still, Yuri was asked whether "during the course of these proceedings" he had owned any other properties and he answered "no". The following question was put to him: "Q. So during the course of these proceedings you have not owned any other property that we have not mentioned?" The response was "no". The cross-examiner then said that he was going to show Yuri a document. Apparently, before actually seeing the document, Yuri said: "You mean the land in Victoria? … What property do you mean?" The primary judge then said: "No. At any point during the course of these proceedings … have you owned any other property?" Yuri responded: "Yes. I own a block of land in Victoria." He agreed that he still owned that block of land. Yuri was then shown a title search from Victoria and agreed that it was a reference to the land that he owned in Victoria.
Yuri was then asked about evidence that he had given that, at one stage in the proceedings, he had been assisted by Legal Aid. He agreed that Legal Aid had ceased to pay his legal expenses because he had not disclosed to Legal Aid that he owned that land in Victoria. Yuri said that Legal Aid wanted the money back and that he was paying back the money.
It may be that Yuri misunderstood the purport of the questioning put by the cross-examiner concerning owning any other "houses" or "property". The thrust of the cross-examination, however, was the lack of frankness or lack of disclosure in Yuri's dealings with Legal Aid. Even if Yuri understood the questions concerning the ownership of other "property" as referring to "houses", the ultimate result was a matter that went to his discredit, namely, his failure to disclose to Legal Aid that he owned the land in Victoria. That is a matter that went to his discredit.
The second matter that the primary judge took into account in dealing with credibility was the claim by Olga for rental assistance from Centrelink. It appears that a claim was made for rental assistance on the basis that Yuri and Olga were paying rent for their occupation of the Ground Floor Unit. Suzanne claimed that Yuri and Olga had claimed Centrelink allowances to which they were not entitled. Yuri and Olga accepted that Olga, but not Yuri, received the allowance. But whether the allowance was received only by Olga or both of them is of little moment as Yuri knew of the circumstances in which the claim was made. That is a matter that might be considered to go to their discredit.
Finally, the primary judge said he was not impressed with Yuri's demeanour and his performance during cross-examination and that he seemed to be completely focused on saying what he thought he needed to say to support his claim. Much of the cross-examination of Yuri focused heavily on the evidence concerning conflict between Yuri, on the one hand, and Suzanne and her family, on the other, after Suzanne and her family moved into the upper floors of the house on the Property. Yuri and Olga point out that Yuri made a number of admissions that were clearly against his interest in relation to those matters even though the primary judge indicated in open court that such evidence might have a bearing on the question of whether he would allow Yuri and Olga to continue to live in the Ground Floor Unit if he otherwise accepted their estoppel claim. However, his Honour did not rely on the facts of the dispute as a basis for rejecting Yuri's evidence.
Yuri and Olga also complain about the statement by the primary judge that he had formed the impression that Olga saw it as her responsibility to do her husband's bidding, without inquiring too deeply about the propriety or legitimacy of what he was asking for. It may be that his Honour had in mind the response given by Olga when she was asked whether she lived with her husband. Her response was: "Yes I live my husband, but he does everything what he decide." When asked whether Olga wanted to protect her right to stay in the Property so much that she had lodged a caveat she responded: "No. That's not me". When asked whether lawyers that she had previously engaged lodged a caveat over the Property, her response was: "I don't know, because I didn't do that." When she was asked whether she was responsible for some of the steps in the sale of the Property to Suzanne and went to visit a bank with Suzanne, Olga's response was: "No. I never go into the finances. She go. We go together. … I stay in the corridor and she went to the Bank." When asked whether she and Suzanne went to a bank prior to the sale of the Property, Olga's response was: "It's nothing to do with me." Olga also agreed that many times she had conversations with Suzanne without Yuri being present. However, she said that she did not know whether Yuri was the only person to speak to Suzanne about the transaction. When Olga was shown a copy of the letter of 2 August 2013, she said that she could not remember it. The evidence summarised above is capable of supporting a conclusion by the primary judge that Olga was disposed to do her husband's bidding.
The primary judge had the advantage, which of course is not decisive, of considering the demeanour of both Yuri and Olga. I am not persuaded that his Honour erred in his assessment of their credibility. For the reasons just indicated, there was material before his Honour that was well capable of supporting the conclusion that he reached that he preferred the evidence of Suzanne and Vass over that of Yuri and Olga as to the discussions concerning the basis upon which Yuri and Olga would be entitled to remain in occupation of the Ground Floor Unit.
Once it is accepted that the evidence given by Yuri and Olga lacked credibility and was not reliable, the contemporaneous material becomes critical. That material consists of the correspondence from Ms Webster. Ms Webster was not called to give evidence by either party. She had been retained by Suzanne and not by Yuri and Olga. Accordingly, no adverse inference should be drawn against Yuri and Olga by reason of their failure to call Ms Webster to give evidence. However, one can draw inferences from her correspondence as to the evidence that she may have given if called.
The meeting with Ms Webster attended by Yuri and Olga took place prior to 31 July 2013, the date that Ms Webster placed on the contract for the sale of the Property. As I have said, only the cover page of that contract is in evidence. It is a matter of speculation as to what other special conditions might have been contained in the contract, quite apart from the printed conditions that form part of the form published by the Law Society and the Real Estate Institute. However, no contentions were advanced on behalf of Suzanne to the effect that an inference should be drawn that the contract, at the time when it was signed, was intended to contain the whole of the contractual terms of the arrangement between the parties. As I have said, the cover page of the contract provided that vacant possession of the Property was to be given to Suzanne. There is considerable tension between that provision and the existence of an arrangement whereby Yuri and Olga would not give vacant possession of the Ground Floor Unit.
On 2 August 2013, Ms Webster wrote to Yuri and Olga enclosing a form of licence agreement. The licence agreement enclosed was not signed by Yuri and Olga. It is significant that the licence recited that the parties had agreed to "modify" the contract for sale by allowing Yuri and Olga to retain possession following completion. While the licence was not signed by Yuri and Olga, the inclusion of such a recital indicates that it was Ms Webster's understanding that the terms of the contract for sale, which was dated 31 July 2013, had been modified such that vacant possession was no longer to be given to Suzanne on completion.
Yuri had had some commercial experience as a builder and it has not been suggested that Yuri and Olga were not capable of reading and understanding the licence agreement. The agreement is only two pages in length and is a comparatively simple and straightforward document. It clearly indicates that the right to occupy the Ground Floor Unit was limited to a period of 12 months. If indeed Yuri and Olga genuinely believed that they had an arrangement with Suzanne whereby they would be entitled to remain in occupation for life without charge, it is very curious that they did not raise that matter with Ms Webster when they received the draft licence agreement under cover of the letter from Ms Webster to Yuri and Olga of 2 August 2013, or the letter of 7 August 2013, which said that, should they remain in the Property without the benefit of the licence agreement, they would do so only "due to the goodwill" of Suzanne. One would expect that, if Yuri and Olga genuinely believed that they had a binding arrangement with Suzanne, they would have taken the matter up with Ms Webster or with Suzanne. There is no evidence that any complaint about that matter was made.
Finally, there is the curious reference in the letter of 15 August 2013 to "allowance for minimal rent" in referring to the Retained Amount of $212,907.84. As I have said, that characterisation of the Retained Amount has not been explained. There was no evidence as to the market rent for occupation of the Ground Floor Unit, although at one stage Suzanne referred to a sum of $800 per week. Certainly, the draft licence agreement referred to a fee of $1 per week. It may be that an inference can be drawn that the reference to "allowance for minimal rent" signified that the Retained Sum would be retained by Suzanne to be credited against an occupation fee for Yuri and Olga. However, there was no evidence as to the period for which that sum could be treated as a market rent.
Analysis of the correspondence received by Yuri and Olga and their failure to take any steps to correct what, on their case, was a significant misstatement of the arrangement, would justify the conclusion by the primary judge that no such arrangement was made. I do not consider that his Honour erred in concluding that there was no promise or representation made by Suzanne that was capable of giving rise to a binding contract or an estoppel such as is pleaded.
I referred above to evidence given by Suzanne to the effect that she believed that her parents wanted to remain in the ground floor indefinitely. However, the case pleaded by Yuri and Olga made no suggestion of an estoppel by acquiescence. That is to say, it may have been possible to mount a case on the basis that Suzanne knew that Yuri and Olga assumed that they would be permitted to remain in occupation for their respective lives and that that assumption underlaid their entry into the contract for sale and forgoing of the payment of the full purchase price provided for in the contract. The case alleged, however, is that there was either a binding contract or a positive promise by Suzanne. The primary judge did not err in concluding that there was no binding contract and that no express promise or representation was made by Suzanne. I do not consider that grounds 1, 2, 4 or 5 have been made out.

[13]

Costs

On 5 March 2020, the primary judge published his reasons for ordering that Yuri and Olga pay Suzanne's costs of the proceedings, including the cross-claim, on the indemnity basis. His Honour rejected the contention advanced on behalf of Yuri and Olga that Suzanne should pay their costs because they had been successful in obtaining relief in the form of a judgment by way of equitable compensation. His Honour did so because of his Honour's assessment that, although Yuri and Olga succeeded in obtaining that judgment, that was very much a final fall back on their part. That is to say, the whole thrust of their case, at an evidentiary level, was the allegation that a promise or representation had been made that would allow them to remain in the Ground Floor Unit indefinitely.
The primary judge referred to the contention advanced on behalf of Yuri and Olga that the Court might readily have awarded a larger amount by way of equitable compensation, perhaps calculated by reference to the current value of the Property. However, as his Honour pointed out, there was no evidence of the current value of the Property and at no stage was that put forward as the measure of compensation that was appropriate. That, his Honour considered, confirmed that equitable compensation was a last resort.
Suzanne sought an order that her costs be paid by her parents. However, she also sought an order that the costs be paid on the indemnity basis. That contention was based on correspondence between solicitors acting for the parties in 2018 prior to commencement of the proceedings.
On 19 March 2018, solicitors acting for Yuri and Olga wrote to Suzanne in connection with their claim for an equitable charge over the Property. The letter referred to a conversation between Suzanne, on the one hand, and Yuri and Olga, on the other, "in which [Suzanne] promised to pay out the loan and discharge the mortgage to [ANZ]". The letter asserted that, in return, the Property would be transferred into Suzanne's name. The letter then asserted that Suzanne had promised Yuri and Olga that they would have a right of residence for life in the downstairs part of the Property. It said that, in consideration of Suzanne's promise, Yuri and Olga suffered a detriment in that they did not receive from Suzanne the amount of their equity in the Property after the mortgage to ANZ was discharged and the Property was transferred into Suzanne's name. The letter sought an undertaking that Suzanne would "honour the promise" made to Yuri and Olga and desist from any action to evict them. Thus, the letter of 19 March 2018 foreshadowed the primary relief sought by Yuri and Olga in their amended statement of claim.
It appears that there was an exchange of correspondence between solicitors acting for Yuri and Olga and solicitors acting for Suzanne on 21 March 2018 and 22 March 2018. However, neither of those letters is in evidence.
On 17 April 2018, Suzanne's solicitors wrote to the solicitors acting for Yuri and Olga, referring to the correspondence of 21 March 2018 and 22 March 2018. The letter asserted that Suzanne considered that her parents' claim against her for an equitable charge on the Property was baseless and could not succeed. Detailed reasons were then sent out. The letter said that Suzanne was very confident of her legal position and would not be swayed by the conduct of her parents. The letter asserted that there was no evidence that "the Life Estate" was ever offered and that the real position of the parties was well documented and dealt with in the correspondence from Ms Webster. The letter then referred to the alleged conduct on the part of Yuri that was characterised as "ongoing harassment, threats, lies, abuse, unwelcome contact and unacceptable behaviours". The letter then said that, on 20 February 2018, "in an effort to minimise any further animosity or hostility between the family", Suzanne had offered to give Yuri and Olga $200,000 to vacate the Property. The letter said that Yuri had rejected the offer on the basis that Suzanne owed "interest on top". The letter then referred to Suzanne's notice of 20 February 2018 requiring Yuri and Olga to vacate the Property within 60 days.
The letter of 17 April 2018 then offered to pay to Yuri and Olga the sum of $191,432.93 "to resolve this matter now". That figure was said to represent the initial offer of $200,000 less the amount of a debt borrowed by Suzanne for the benefit of Yuri and Olga. The letter said that the offer was made on the basis of Calderbank v Calderbank principles [2] and would remain open for acceptance for 28 days. The letter said that, if the offer was rejected and Suzanne was successful in any hearing, the letter would be relied upon in support of an application for an order for costs on an indemnity basis.
The primary judge accepted that the mere fact that the ultimate judgment proved to be less favourable than the terms of the offer did not of itself mean that refusal of the offer was unreasonable. His Honour considered the question of reasonableness should be determined as a matter of substance, looking at the circumstances of the case at the time of the offer "in the broad".
The primary judge concluded that Yuri and Olga were not prepared to agree to any settlement that did not give them the right to continue to live at the Property and that the substantial issue litigated to the proceedings was whether they had such a right. On that issue, they failed, his Honour having found that no promise or representation had been made by Suzanne in the terms alleged. His Honour concluded that the costs of the proceedings were attributable to the determination of Yuri and Olga, against the merits as they were revealed by the evidence, to remain in the Property. His Honour considered that the result of the case demonstrated the unreasonableness of their position and concluded that it was appropriate to make the order that costs be paid to Suzanne on the indemnity basis.
Yuri and Olga complain that they were successful in the proceedings and should not be deprived of their cost unless they had engaged in some form of disentitling conduct, noting that the purpose of an order for costs was to compensate and not punish. They asserted to this Court that they succeeded in obtaining equitable compensation from Suzanne and that Suzanne failed entirely in her cross-claim in that the primary judge did not find that there was a licence agreement between the parties as alleged in the cross-claim.
However, the primary relief sought in the cross-claim, as indicated above, was a declaration that Suzanne was entitled to vacant possession of the Ground Floor Unit and an order that Yuri and Olga provide vacant possession to Suzanne. Whether Suzanne was entitled to that relief by reason of a licence agreement in the form drafted by Ms Webster, as the cross-claim pleaded, or by reason of the absence of any licence other than a licence at will is not to the point. Suzanne succeeded in obtaining the relief that she sought by the cross-claim.
I do not consider that there was any error on the part of the primary judge in the exercise of his discretion as to costs. The offer made by Suzanne prior to the commencement of the proceedings canvassed all of the issues that were raised in the proceedings. On 5 June 2018, the solicitors for Yuri and Olga responded to the letter of 17 April 2018. It is clear from the exchange that the solicitors for Yuri and Olga understood both the issues raised by their clients and the response to those issues communicated on Suzanne's behalf. It is clear that Suzanne's offer was read and understood by the solicitors acting for Yuri and Olga. In the light of the response of 5 June 2018, there is no reason to doubt that Yuri and Olga received appropriate advice. Ground 11 is not made out by Yuri and Olga.

Wallis v Rudek

At a glance

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Judgment (15 paragraphs)

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Cases Cited (6)

Cited By (3)