Factual background
4The plaintiff was born in 1985. She met Jimi in 2000 and they commenced a de facto relationship in September 2001. They were married in November 2003. At that time, the plaintiff had two children by a former relationship and Jimi had one child by a former relationship. Jimi and the plaintiff had two further children following their marriage.
5Prior to 2005, the plaintiff and Jimi had been living in rented premises in Cooranbong. The first defendant, Jimi's father, visited them in about March 2005. During that visit, Jimi told his father that he was unhappy living in rented accommodation and they discussed how the first and second defendants might help him buy a house. Following that discussion, the first defendant discussed the matter with the second defendant. They agreed that they would give Jimi $30,000 as a deposit on a house. They applied to St George Bank for a $30,000 increase on their line of credit to permit them to do so.
6Shortly after the line of credit was approved, the first defendant spoke to Jimi and told him what he and the second defendant proposed. Subsequently, Jimi told the first defendant that he and the plaintiff were unable to get a housing loan because the plaintiff already had a $5,000 car loan. As a result, on or about 20 May 2005 the first and second defendants gave Jimi $5,000 for the purpose of paying out the car loan so that he could arrange a housing loan. The first defendant told Jimi that that meant that the first and second defendants could only give him $25,000 towards a deposit on a house.
7Despite paying out the car loan, Jimi and the plaintiff were still unable to arrange finance to buy a house. Jimi explained the position to the first defendant. Following that, the first and second defendants visited Jimi and the plaintiff at their house at Cooranbong at the end of May 2005. During that visit, there was a discussion around the dining room table concerning the plaintiff's and Jimi's future and how the first and second defendants might assist them.
8The second defendant gave evidence that, during that discussion, she said words to the following effect:
We will ask our bank to increase our loan so that we can buy a house that you and Amanda can live in and pay rent. You will have to pay rent equal to the interest on our loan and the other outgoings that we have to pay on the house but it should still be cheaper than you paying rent at Cooranbong. ... We would like you to continue to apply for your own loan so that you can buy the house we buy from us one day.
The first defendant gave evidence to the same effect. He also said to the plaintiff and Jimi that if they wanted to renovate the house they could do so, but it would have to be at their cost. Both the first and second defendants conceded in cross-examination that the arrangement was that the plaintiff and Jimi would be able to buy the house from them if they paid out the mortgage and the costs incurred by the first and second defendants in acquiring the house.
9The plaintiff denies that the second defendant said words to the effect of those set out in the previous paragraph, although she did not give evidence herself of the second defendant's initial explanation of the proposal. She did, however, say that the first and second defendants said:
If you are stuck for money at any time we will help you pay the mortgage.
And that:
There will be a clause in our Wills that says that the house is yours so it could not be taken from you in the event that something was to happen to us.
And also that:
The house will be yours until such time as you want to put it into your names, or if you decide that you want to sell it for some reason. If up [sic] want to have the property put in your own names then you would pay the expenses of transferring it and pay out the loan which will be in our names. You'd only ever pay whatever the outstanding loan amount was at the time we to [sic] transfer it into your names.
The plaintiff says that the first and second defendants made a number of similar remarks on other occasions.
10Both the first and second defendants deny that they made these statements. According to the second defendant, she told Jimi and the plaintiff that she and the first defendant wanted to be told if Jimi and the plaintiff failed to make a mortgage repayment because they did not want the mortgage to be in default. Both the first and second defendants deny saying anything about their wills at all and both deny making the third statement that the plaintiff attributes to them.
11I prefer the evidence of the first and second defendants in relation to these issues. In my opinion, they were more credible witnesses than the plaintiff. The plaintiff tended to be an advocate in her own cause and to overstate her case. For example, she was asked in cross-examination whether she believed that she was entitled to the property when she moved in. She said that she was and that she did not believe that that entitlement was subject to a condition. It was only after her attention was drawn to the amended statement of claim that she accepted that her right to acquire the property was conditional on payment of the mortgage. When asked what she thought would happen if the property was sold she said that that was something that had been discussed with the first and second defendants and that it had been agreed that they would negotiate the outcome, although there was no reference to that agreement in any of her affidavits. Some other examples are given later in this judgment.
12The first and second defendants, on the other hand, answered questions candidly and were willing to make important concessions concerning their case. In particular, in a letter dated 3 November 2010 from their solicitors to the plaintiff's solicitors, their solicitors stated that, on their instructions, the first and second defendants had at no time made any promises to the plaintiff in respect of the property. Both the first and second defendants candidly admitted that that letter was not correct, although the first defendant sought initially to avoid answering the question. Both defendants admitted that they had promised to transfer the property if the plaintiff and Jimi repaid the mortgage and reimbursed them for the costs of acquiring the property.
13Moreover, I think it is inherently unlikely that the first and second defendants made the statements attributed to them. Although there is no detailed evidence concerning the first and second defendants' financial position, the evidence suggests that it was modest. At the time the property was bought, the first defendant had retired. The second defendant had a job as a contract teacher, which was not secure. They had several investment properties. However, when they initially proposed to give Jimi and the plaintiff $30,000 to be used as a deposit, they borrowed the whole amount. When they gave Jimi $5,000 from that amount, the first defendant told him that that meant that they were only willing to give him a further $25,000. When they bought the property in question, they borrowed the total purchase price secured against other property that they owned and they said that they were only willing to transfer it to Jimi and the plaintiff if they paid out the mortgage and reimbursed the first and second defendants for the costs of acquiring the property. It is unlikely in those circumstances that they would have given what on the plaintiff's evidence was an open-ended commitment to assist Jimi and the plaintiff with the mortgage payments. Moreover, such a term is not pleaded to be part of the agreement allegedly reached between the parties.
14Similarly, I think it is unlikely that the first and second defendants said anything about their wills or leaving the property to Jimi. They had a daughter. Their own needs in the future were uncertain. The assistance that they were willing to provide to Jimi and the plaintiff was quite specific. It strikes me as improbable in that context that they would have promised to leave the whole property to Jimi if something happened to them. The likelihood is that there was no discussion of what would happen to the house if something happened to the first and second defendants before Jimi and the plaintiff were able to buy the house, just as there was no discussion of what would happen if, for example, Jimi and the plaintiff separated. Again, no such term is pleaded.
15Lastly, in my opinion, it is improbable that the first and second defendants said that the house would be the plaintiff's and Jimi's. The plaintiff's and Jimi's application for a loan had already been rejected. There was no certainty that they would get a loan in the future; and there was no question that they would be entitled to the property unless they were in a position to pay out the existing mortgage and reimburse the first and second defendants for the costs of acquiring the property. It would make no sense to say in that context that the house would be the plaintiff's and Jimi's. Whether or not it would be theirs would depend on whether the plaintiff and Jimi could obtain a loan.
16Following the conversation in late May, the plaintiff and Jimi and the first and second defendants started looking for properties particularly in Kurri Kurri. In June 2005, Jimi suggested that his parents look at the property that was eventually bought, which they did. It was agreed that it was suitable. The first and second defendants applied for an increase of $165,000 to their existing line of credit with St George Bank. The loan was an interest only one. It was secured against the property and other property owned by the first and second defendants. The purchase price of the property was $190,000. The first and second defendants used the additional line of credit together with the $25,000 remaining from the original line of credit to pay the purchase price.
17Contracts for the purchase of the property were exchanged and settlement occurred on 25 July 2005. In addition to the purchase price, the first and second defendants paid stamp duty, legal costs and other costs associated with the purchase which totalled $9,936.99.
18Following settlement, Jimi and the plaintiff and their children moved into the property.
19In accordance with the terms of their loan from St George Bank, the first and second defendants insured the house on the property. In the first two years, the house was insured with CGU, but in subsequent years it was insured with Suncorp. It was insured for its replacement value.
20The second defendant sent Jimi or the plaintiff the bank statements in respect of the loan showing the amount due under the mortgage and, for the most part, Jimi and the plaintiff paid those amounts together with other outgoings in respect of the property. However, the first and second defendants did pay some of the mortgage payments and rates. There is a dispute concerning precisely how much was paid by the first and second defendants. However, I accept that the schedules prepared by the second defendant from the bank records showing the amount of payments are correct. According to those records, between the time of settlement and 29 April 2010, which is when the house was destroyed by fire, the total amount of interest paid by the first and second defendants was $14,879.45 and the total amount paid by them in respect of rates was $1,651.53.
21After moving into the property, Jimi and the plaintiff started to renovate it. There is a dispute about the extent of those renovations and when they commenced. The plaintiff says that she and Jimi started work on the renovations around Christmas 2005, although she gives no details of what was done at that time. According to the first defendant, Jimi first raised with him the possibility of doing some renovations in December 2007. The work involved removing cladding from the existing roof and timber wall frame and replacing it with secondhand vinyl cladding consistent with the rest of the house. According to the first defendant, the replacement cladding cost approximately $200. The alterations also involved dividing a bedroom with a partition, building and installing a remodelled linen closet, moving kitchen appliances to the back room of the house to allow the old kitchen space to be used as an additional bedroom and installing new flooring in the hallway.
22The first defendant says that he helped build the linen closet and cupboards in the kitchen using materials moved from the original kitchen area and a second-hand kitchen that Jimi had purchased cheaply. He says that he also did the plumbing work that was required to relocate the kitchen and that he and the second defendant purchased materials for the new flooring in the hallway for approximately $300, which was installed by Jimi and the plaintiff. The first defendant estimates the costs of the material used in the alterations was no more than $5,000 and that the first and second defendants paid for some of the materials directly and in addition gave Jimi Bunning's gift cards totalling approximately $2,000.
23The plaintiff says that in addition to the work described by the first and second defendants, she and Jimi opened the hallway and added a laundry which involved replacing the second toilet. She says they also moved a water tank, built a cubbyhouse with a sandcastle for the children, improved the garden and removed a greenhouse/shade area attached to the house. The plaintiff says that she and Jimi laid new carpets in the children's bedrooms and three of the five rooms were freshly painted. New blinds and curtains were installed in the rooms and Jimi installed new flooring in the dining and kitchen area. She and Jimi also added new downlights throughout the living areas and installed a new dishwasher and new locks and deadbolts to every external door. In addition, the lounge room was modernised with a fireplace for heating. The plaintiff estimates the overall cost to be in the order of $10,000 and says that the value of the Bunning's gift cards was $1,000, not $2,000.
24The first and second defendants dispute some of the evidence given by the plaintiff. According to the first and second defendants, when they visited the property on or about 17 March 2010, none of the repairs and alterations which had been commenced were complete and the house looked in disrepair. It required painting, the floor coverings needed to be replaced and the cladding on the outside of the house needed to repaired and a couple of windows had been broken which required new glass. The first defendant says that he never saw evidence of new carpets in any part of the house or evidence of new flooring in the kitchen or dining room. In addition, he saw no evidence of new locks and deadbolts. According to him, the fireplace that had been installed was a second hand combustion fire which Jimi told him had been purchased for the sum of $50.
25Again, I prefer the evidence of the first and second defendants on the extent of the renovations and, in particular, the costs. The first defendant was clearly heavily involved in the renovations. For the reasons I have given, I think that the first and second defendants were more reliable witnesses than the plaintiff. Between them, Jimi and the plaintiff had five children. It appears that the plaintiff did not work, although she says that she had an interest in a cleaning business that she and Jimi operated for a period. Jimi himself was unemployed for part of the period between when the house was bought and when he died in March 2009. The plaintiff and Jimi were unable to borrow the funds necessary to buy the house themselves, and they were unable on occasions to pay the mortgage payments which, although variable, were in the order of $260 per week. As I have said, between the time the house was bought and April 2010, the first and second defendants paid $14,879.45 in respect of the mortgage. In 2006, they paid $2,467.29. In 2007, they paid $4,044.95 and in 2008, when much of the renovation work was done, they paid $6,172.17.
26It is clear from this evidence that Jimi's and the plaintiff's financial resources were very limited and that they would have had little to spend on the renovations. According to the plaintiff, following Jimi's death the local Lions Club helped with work on the house, although she says that the renovations were nearly completed by that time. If the club had done a substantial amount of work, there appears to be no reason why it was not open to the plaintiff to call evidence from one of those involved to contradict the evidence given by the first and second defendants concerning the state of repair of the property. Having regard to these matters, I accept the first defendant's evidence that the plaintiff and Jimi are unlikely to have spent more than about $5,000 on the renovations, although I accept that they did substantial work on the property.
27In about March 2008, Jimi made a further attempt to obtain finance to pay out the existing mortgage. The second defendant prepared a contract for sale to Jimi and the plaintiff showing a purchase price of $270,000. The plaintiff says that that amount was proposed by the second defendant. However, the second defendant says the price was proposed by Jimi. The contract stated that the deposit was $54,000, which was described as a gift. The first and second defendants also signed a statutory declaration stating that the deposit was a gift. The second defendant said that she was happy to sell the house on those terms because that meant that she and the first defendant would receive $216,000, which would be sufficient to pay out their loan and the other amounts owed to them, together with the capital gains tax that would be payable on the sale. According to the plaintiff, it was agreed that, despite what was said in the contract Jimi and she would only pay a sum sufficient to repay the $165,000 plus the interest payments that they had not made. In my opinion, the likelihood is that Jimi proposed the sale price and he did so as a means of raising additional cash. However, nothing turns on the resolution of this issue. Jimi and the plaintiff were unable to obtain finance on the terms proposed and nothing came of the contract for sale.
28There is an issue about the insurance over the property. According to the plaintiff, she was originally told by the first and second defendants that the insurance on the property was free for the first two years from St George Bank. Following the first two years, the plaintiff says that the first and second defendants complained about having to pay the insurance. She says the conversation ended with an agreement that she and Jimi would pay the insurance costs once they were told how much those costs were, but they heard nothing further from the first and second defendants about it. I do not accept this evidence. St George Bank did not offer free insurance. The first and second defendants obtained insurance from CGU in the first two years and then from Suncorp. It makes no sense that they would say that the insurance was free when they had arranged to obtain it from CGU. I accept the second defendant's evidence that she and the first defendant paid the insurance because the property was theirs and they were responsible for the repayment of the St George Bank mortgage if anything happened to it.
29The plaintiff and Jimi separated in late 2008 and Jimi moved in with a next door neighbour, Mr Wamsley, although he continued to see the plaintiff frequently and they went to counselling together. In March 2009, Jimi committed suicide.
30On 11 November 2009, the plaintiff signed a lease to rent the property from the first and second defendants. The lease operated as a weekly tenancy. The rent was expressed to be $260 per week. The plaintiff says that she did not receive independent legal advice before signing the lease and that she felt uncomfortable and intimidated when she was asked to do so. The plaintiff also said in cross-examination that it was a mistake to say that what she was asked to sign was a lease. What she says she was asked to sign was "paperwork". In giving this evidence, the plaintiff was obviously concerned that her signing a lease was inconsistent with her claim that the property was held on trust for her and Jimi's estate. In her first affidavit, the plaintiff says that she was asked to sign the lease in front of the second defendant and the second defendant's sisters and mother. In a later affidavit, the plaintiff says that only the second defendant was present when she discussed the lease with the second defendant and signed it. In cross-examination, she sought to reconcile this conflicting evidence by saying that the request to sign paperwork was made in the presence of the second defendant's sisters and mother but that she actually signed the document only in the presence of the second defendant. This evidence appears contrived and is, in my opinion, another example of the plaintiff tailoring the evidence she gave to suit her case, although, as will become apparent, nothing in my view turns on it.
31Following the signing of the lease, the plaintiff says she continued to pay the council and water rates and the amount due under the mortgage rather than the $260 per week provided for in the lease, although the first and second defendants stopped sending bank statements to her. She says the last mortgage payment made by her in relation to the property was in March 2010.
32On 29 April 2010, the house was severely damaged by fire which it appears was the result of arson.
33Following investigation, Suncorp paid the first and second defendants the sum of $233,480 which was calculated as follows:
The amount equal to the reinstatement value of the house $228,800.00
Less excess $ 500.00
$228,300.00
Plus 6 months rent $ 6,760.00
Less rent already paid $ 1,580.00
$233,480.00