Awad v Awad

[2019] NSWSC 385

Supreme Court

New South Wales

Medium Neutral Citation:

Awad v Awad [2019] NSWSC 385

Hearing dates:

14-16 May 2018; 7 June 2018

Date of orders:

08 April 2019

Decision date:

08 April 2019

Jurisdiction:

Common Law

Before:

Walton J

Decision:

The Court makes the following orders:

 

(1) The first cross-defendant shall bring in short minutes of order reflecting this judgment within seven days of the publication of this judgment.

 

(2) The cross-claimant shall file and serve any written submissions in relation to the alternative relief in prayers 3 and 4 within 14 days of the publication of this judgment. Any application to adduce evidence or for an oral hearing should be made in those written submissions. If such an application is made it should be accompanied by submissions in support of the application together with, in the case of further evidence, the actual form of the evidence proposed to be led by the cross-claimant.

 

(3) The first cross-defendant shall file and serve any submissions in reply on or before 14 days after the receipt of submissions pursuant to order (2) above.

 (4) In the event that any application for leave to lead further evidence, the Court will determine that question together with any application for a further oral hearing on the papers.

Catchwords:

EQUITY – equitable estoppel – proprietary estoppel – cross-claim – oral promise – father deceased – mother incapacitated – successsorship – whether personal equity enforceable against mother – credibility of witnesses – whether promise made – reliance – whether departure from promise would be unconscionable – significance of terms of wills on non-testamentary disposition – constructive trust – alternative relief – costs – orders

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Cases Cited:

Bofinger v Kingsway Group Limited (2009) 239 CLR 269; [2009] HCA 44
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26
Equititrust Ltd v Franks (2009) 258 ALR 388; [2009] NSWCA 128
Evans v Braddock [2015] NSWSC 249
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Farah Construction Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10
Hampson v Hampson (2010) 5 ASTLR 116; [2010] NSWCA 359
Lorena Zupicic v Angela La Camera Paino as Trustee for the Estate of the Late Mario Novick [2018] NSWSC 692
Plunkett v Bull (1915) 19 CLR 544; [1915] HCA 14
Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7

Category:

Principal judgment

Parties:

Michael Awad (Cross-Claimant)
Nouhad Awad by her tutor Zouha Habib (First Cross-Defendant)
Arze Awad (Second Cross-Defendant)

Representation:

Counsel:
P R Glissan (Cross-Claimant)
J D Williams (First Cross-Defendant )

  Solicitors:
Ivy Law Group (Cross-Claimant and Second Cross-Defendant)
Prominent Lawyers (First Cross-Defendant)

File Number(s):

2016/278389

TABLE OF CONTENTS

RELIEF SOUGHT - paragraph 8

COURSE OF THESE PROCEEDINGS AND RELATED PROCEEDINGS - paragraph 12

THE PROMISE AS STIPULATED IN MICHAEL’S CASE - paragraph 26

LEGAL PRINCIPLES - paragraph 38

SUBMISSIONS OF THE PARTIES

Cross-claimant Submissions

Core Submissions - paragraph 44

The first and second contention - paragraph 45

The third and fourth contention - paragraph 49

The fifth contention - paragraph 55

The sixth contention - paragraph 56

Further Submissions: Credibility, Succession and Alternative Relief

Credibility - paragraph 57

Succession - paragraph 58

Alternative Relief - paragraph 59

First Cross-Defendant Submissions

Core Submissions - paragraph 63

Contention 1 - paragraph 64

Contention 2 - paragraph 67

Contention 3 - paragraph 77

Further Submissions: Credibility, Succession and Alternative Relief

Credibility - paragraph 78

Succession - paragraph 79

Alternative Relief - paragraph 81

FACTUAL BACKGROUND AND DISCUSSION OF THE EVIDENCE

Introduction - paragraph 84

The Witnesses - paragraph 86

An Overarching View of the Factual Background before and after the Alleged Promise - paragraph 88

PARTICULAR EVIDENCE AS TO THE PROMISE AND SURROUNDING CIRCUMSTANCES

The Costs Liability: Nature and Resolution

The first issue - paragraph 120

The second issue - paragraph 127

The third issue - paragraph 132

The fourth issue - paragraph 135

The solicitor’s bill – credibility submission - paragraph 137

Evidence as to the Promise - paragraph 149

Evidence of Michael - paragraph 150

Jim’s Evidence - paragraph 214

Evidence of Any Recounting of the Promise by Tony after the Purported Promise - paragraph 222

The Evidence of Michael - paragraph 223

The Evidence of Arze - paragraph 225

The Evidence of Jim - paragraph 237

The Evidence of Joseph - paragraph 239

The Evidence of Paul - paragraph 241

The Evidence of Zouha - paragraph 243

The Loans

Documentary Evidence - paragraph 247

Nature and Amount of Arab Bank loan and the 1994 and 1998 Discharges - paragraph 253

The Evidence of Michael - paragraph 254

The Evidence of Arze - paragraph 265

The Evidence of Jim - paragraph 268

The Evidence of Joseph - paragraph 274

The Evidence of Paul - paragraph 280

The Evidence of Zouha - paragraph 283

What was the Arab Bank loan spent on?

Michael’s Case - paragraph 291

The Solicitor’s Bill - paragraph 295

The Renovations - paragraph 296

Repayment and Discharge of the Arab Bank loan

The Evidence of Michael - paragraph 323

The Evidence of Arze - paragraph 333

The Evidence of Jim - paragraph 335

The Evidence of Joseph - paragraph 338

The Evidence of Paul - paragraph 340

The Evidence of Zouha - paragraph 343

The Wills - paragraph 345

The 2003 wills - paragraph 346

The 2013 will - paragraph 356

The 2016 will - paragraph 361

CONSIDERATION

Credit

Credit of Michael - paragraph 362

Credit of Arze - paragraph 368

Credit of Michael’s Brothers - paragraph 370

Credit of Zouha - paragraph 371

The Promise - paragraph 372

Reliance - paragraph 381

Conclusion: Primary Relief Refused - paragraph 387

Alternative Relief - paragraph 388

Conclusion: Alternative Relief - paragraph 395

Costs - paragraph 396

ORDERS - paragraph 397

Judgment

1. HIS HONOUR: By a cross-claim filed 24 May 2017 (“the cross-claim”), the cross-claimant Michael Awad (“Michael”) sought, inter alia, a declaration that he had a beneficial one-half interest in the property at Bexley in the State of New South Wales (“the property”) owned by his mother, the first cross-defendant , Nouhad Awad (“Nouhad”).

2. At the outset, it should be noted that the parties and witnesses will be referred to by their first names, as was done during the course of the proceedings before the Court, noting that nearly all of the relevant persons have the same surname. The Court adopts that approach with no disrespect intended to the relevant persons.

3. Michael’s primary cause of action, as pleaded in the cross-claim, was based upon proprietary estoppel. In summary, Michael’s case was that in 1994 his parents, Tony Awad (“Tony”) and Nouhad, were registered proprietors of the property as joint tenants. At that time, Nouhad had a debt of $28,000 owed for legal costs arising from an unsuccessful workers compensation application by her. A solicitor’s bill was received from G H Healey & Co Solicitors (“G H Healey & Co”) about September 1994 (“the solicitor’s bill”) in which a demand was made for payment within 28 days (“the demand”). That, it was submitted, constituted an “emergency” because Tony and Nouhad were not working; they were pensioners. It was alleged that Tony, in Nouhad’s presence and with her express approval, orally represented to Michael that, if he paid the legal costs and also paid costs of renovating the property, Tony and Nouhad would give Michael a beneficial one-half interest in the property and allow him to reside there during their lifetimes.

4. It was contended that Michael was induced by and relied upon that representation or promise (the precise terms of which are discussed below). It was pleaded that he paid the $28,000 legal costs, resided at the property until he and his wife were ejected on 25 January 2017 and took out a $90,000 loan from Arab Bank Australia Ltd (“Arab Bank”) (notwithstanding any contentions as to the amount, the Arab Bank loan will hereinafter be referred to as “the Arab Bank loan”). He used $40,000 of the loaned money to discharge an existing mortgage to Westpac Bank, $50,000 on renovations to the property, paid monthly instalments on the Arab Bank loan and subsequently repaid the full principal and interest remaining under the Arab Bank loan of $81,024. Michael also paid other substantial amounts from time to time to benefit Nouhad and Tony.

5. Tony died in 2004 and his interest in the property passed to Nouhad. Since 2004, Nouhad had been suffering from dementia and had headaches and forgetfulness. Since at least 2009 she had been suffering from Alzheimer-type dementia. Michael’s sister and Nouhad’s daughter, Zouha Habib (“Zouha”), is Nouhad’s tutor and has been Nouhad’s enduring guardian and attorney since 23 February 2013.

6. Michael’s other siblings, Jim Awad (“Jim”), Joseph Awad (“Joseph”) and Paul Awad (“Paul”), all gave evidence in the proceedings (collectively, “Michael’s brothers”).

7. There was no documentary evidence as to the existence of the representation as such, although the parties referred to documentary evidence said to have a bearing upon the resolution of the primary claim including wills made in 2003, 2013 and 2016, respectively (collectively, “the wills”).

RELIEF SOUGHT

8. Michael sought the following relief in the cross-claim:

1. A declaration that the Cross-claimant is the owner of a beneficial one-half interest in [the property].

2. A declaration that the First cross-defendant holds the Property on constructive trust beneficially for herself and the Cross-claimant in equal one-half shares as tenants in common.

3. Alternatively to paragraphs 1 and 2 above, an order that an enquiry be held as to the amounts of all payments made by the Cross-claimant since 1994 on behalf of the First cross-defendant and her deceased husband Tony Awad (the Cross-claimant's father), including payments of the First cross-defendant's legal costs, costs of renovating the Property, and principal and interest under loans secured by mortgage on the Property.

4. Alternatively to paragraphs 1 and 2 above, a declaration that the First cross-defendant holds the Property on constructive trust for herself and the Cross-claimant beneficially in such proportions as may be found by the Court.

5. An order that the Real Property Act 1900 Register be rectified to reflect the First cross-defendant's and the Cross-claimant's respective beneficial ownership in the Property as found by the Court.

6. A declaration that the Cross-claimant and the Second cross-defendant are entitled to reside at the Property for the remainder of the First cross-defendant's life.

7. An order that the First cross-defendant do all necessary acts and execute all necessary documents to permit the Cross-claimant and the Second cross-defendant to reside again at the Property for the remainder of the First cross-defendant 's life.

8. Such further or other order as the Court thinks fit.

9. Alternatively, equitable damages.

10. Interest.

11. Costs.

9. It should be noted that the relief claimed in the sixth and seventh prayers for relief, namely, relief enabling Michael and his wife, Arze Awad (“Arze”), the second cross-defendant, to reside at the property, were no longer pursued. (It should also be noted “Arze” was also spelt “Arzi” in some documents in the proceedings. The Court will adopt the spelling used in her affidavit).

10. Nouhad opposed the cross-claim by her tutor although, as the cross-claimant correctly identified, Zouha had no “direct knowledge of the promise”.

11. Michael sought to defer the hearing of the claims in 3 and 4 of the relief claimed until the determination of the primary claims for relief. That approach was opposed. Supplementary written submissions were addressed to that question to which I shall return.

COURSE OF THESE PROCEEDINGS AND RELATED PROCEEDINGS

12. Michael lodged a tenancy application on 7 February 2016. On 18 April 2016, the New South Wales Civil and Administrative Tribunal (“NCAT”) ordered that it did not have jurisdiction to determine the application.

13. On 14 September 2016, NCAT carried out a review the enduring power of attorney made by Nouhad. Michael’s brothers submitted to NCAT that they supported Zouha continuing to have power of attorney and enduring guardianship for Nouhad. NCAT confirmed the appointment of Zouha as Nouhad’s enduring guardian.

14. On 23 September 2016, an amended statement of claim was filed on behalf of Nouhad against Michael and Arze seeking possession of the property (“the amended statement of claim”). The amended statement of claim was served 24 September.

15. A notice of motion was filed seeking default judgment. That notice of motion was heard before M Adams J on 17-18 November 2016. Michael was unrepresented and Arze did not appear.

16. On 18 November 2016, his Honour ordered, inter alia, the following:

1. Grant the declaration that the plaintiff is the owner of the land comprised in [the property]. This declaration does not preclude or determine any equitable interest that another person might have in the Property.

2. Judgment for the plaintiff for possession of the Property.

3. Leave to issue writ of possession.

4. The first and second defendants are to pay the plaintiff’s costs.

5. Leave granted to plaintiff to file notice of motion in Court, noting the usual undertaking as to damages in the notice of motion.

6. Leave granted to file in Court the affidavit of Zouha Habib dated 18 November 2016.

7. The defendants are referred to the Registrar for referral to a barrister or solicitor on the Pro Bono Panel for legal assistance in respect of further litigation of the statement of claim and the freezing order.

17. On 6 December 2016, a writ of possession was issued notifying that Michael and Arze were to vacate the property by 12:00pm on Friday, 13 January 2017.

18. On 23 December 2016, Michael lodged a caveat (registered number AM23835) (“the caveat”), over the property.

19. On 25 January 2017, Michael and Arze moved from the property.

20. On 10 March 2017, the Registrar-General at Land and Property Information served Michael with a Notice of Proposed Lapsing of a Caveat, with respect to the caveat (“the lapsing notice”).

21. On 13 March 2017, the cross-claim was signed by Michael (but not filed).

22. On 28 March 2017, Michael filed a summons in the Equity Division (proceedings no 2017/94057, hereafter “the Equity proceedings”) claiming, inter alia, an order extending the operation of the caveat until further order of the Court.

23. On 30 March 2017, Lindsay J made orders by consent including, inter alia, extending the caveat by consent and that the Equity proceedings be referred to the Registrar to be appointed a date for a court annexed mediation.

24. On 17 May 2017, the court annexed mediation took place where a number of issues were settled at that time. However, Michael’s claim for a beneficial interest in the property was not settled.

25. Hence, on 24 May 2017, the cross-claim was filed. On 28 August 2017, the defence to the first cross-claim was filed on behalf of Nouhad.

THE PROMISE AS STIPULATED IN MICHAEL’S CASE

26. Counsel for Michael, Mr P R Glissan, stated that the relief sought by Michael was based on equitable estoppel and, in that respect, he relied upon a “representation as to [a] future matter, but… in the nature of a promise”.

27. Notwithstanding that characterisation, counsel for the cross-claimant tended to employ the word “representation” to describe that which created the expectation relied upon by him which was said to be to his detriment (an approach mirrored by counsel for the first cross-defendant). The better approach, and one more consistent with an action predicated upon equitable estoppel is to refer to a “promise”, being a voluntary promise about a speaker’s future conduct: Equititrust Ltd v Franks (2009) 258 ALR 388; [2009] NSWCA 128 at [73] per Handley AJA. Michael’s case was that there was an unperformed promise which was stipulated by his counsel as, based on his evidence, consisting of the components set out below. I shall hereinafter refer to that promise, so described and stipulated by counsel below, as “the promise”.

28. Michael relied upon two formulations of the promise as expressed in Michael’s evidence as discussed below both constituting one promise. The first formulation of the promise is to be found in his affidavit filed 28 December 2016 (“the December affidavit”) (at [29]) and was in the following terms:

My father said: “If you can help us by paying this debt and renovate the home we will give you half of the home and you can stay here until we die.”

(It may be noted that immediately following the passage Michael stated Nouhad said, “Please help us Michael”).

29. Counsel for the cross-claimant also relied upon Michael’s evidence of, as he put it, a “slightly more detailed formulation” of the promise which Michael included in his affidavit sworn 28 March 2017 (“the March 2017 affidavit”) (at para 8). It should be noted that Michael also swore an affidavit on 13 April 2017 (“the April 2017 affidavit”) in which the promise was expressed in identical terms (at para 10) to the March affidavit. Paragraph 8 of the March affidavit was as follows:

8. Shortly afterwards Mum and Dad had a conversation with me at the property in words to the effect:

[Tony]: “Michael, if you pay Mum’s legal costs to G. H. Healey & Co and pay the costs of renovating the house (“the renovation costs”), Mum and I will give you half the house, and you can live here with us until we both die.”

[Nouhad]: “Yes, Michael, can you please help us, otherwise my Solicitors could make me bankrupt, and then we’ll lose the house.”

30. The promise was said by counsel for the cross-claimant to be constituted by the statement made by Michael’s father. In written submissions, counsel referred to the statement of “the same clear and unequivocal promise or assurance.”

31. As mentioned, despite the differences as to the terms of the promise as expressed in the December affidavit and the March 2017 affidavit (or the April 2017 affidavit) above, Michael’s counsel contended that his case was there was only one representation made on a single occurrence. Counsel for Michael also contended that the promise was made by Tony around September 1994 in the presence of Nouhad and with her express approval. Thus, the promise was, it was submitted, as much Nouhad’s as it was Tony’s, and Nouhad was personally – not vicariously – liable. The claim against her is not a derivative from Tony.

32. Michael’s case was that there was created an “expectation” by the promise with no precise indication as to when the expectation would be fulfilled. The representation did not depend upon the operation of a will.

33. It may be observed, at this juncture, that Michael gave evidence-in-chief and under cross-examination as to the promise that was inconsistent; both as to the circumstances in which the representation was given and as to the contents of the promise. The inconsistencies were also both internal in the sense of the viva voce evidence before this Court being inconsistent, and inconsistent with the stated form of the promise as conveyed by his counsel by reference to his affidavit evidence.

34. Further, Michael gave evidence that at a time later to the giving of the promise, Tony indicated that he had given Michael half of the house in the presence of Michael and all of his siblings. This was disputed by Michael’s siblings. I will return to these issues in more detail below.

35. Counsel for Michael also contended that Tony and Nouhad were registered proprietors of the family home as joint tenants and that, on Tony’s death, the ownership of the home passed by survivorship to Nouhad. It was contended that Michael’s “legal half-share of the home passed by survivorship to Nouhad but that Nouhad denied the beneficial half-share of the home”. Justice required, it was submitted, that Nouhad be estopped from denying the correctness of the expectations created by the promise in order to prevent Michael from suffering detriment as a result of him having relied upon the promise by paying the legal costs and repaying the Arab Bank loan he had taken out.

30. It was further contended by counsel for Michael that the significance of Nouhad's successorship to Tony's legal half-share of the home was that his half-share can be traced into Nouhad's present legal ownership, resulting in there being no impediment to the Court granting relief to Michael by way of proprietary constructive trust, contrary to the position that would have arisen if the home had been sold to a third party purchaser for value without notice of Michael's estoppel-based claim to equitable relief. This issue of successorship will be addressed further below, however, for present purposes, the cross-claimant’s case was that the right under the promise materialised where there was a departure from the promise. The lapsing notice represented such a departure, that is, an action to lapse the caveat in circumstances where there was no present intention to sell the property, but merely a claimed caveatable interest.

31. On the other hand, the first cross-defendant contended that, even if Tony made the promise, no personal equity attached to Nouhad as there was no evidence of express approval and agreement as to the promise by her.

LEGAL PRINCIPLES

38. The relevant legal principles in relation to equitable estoppel and constructive trusts was recently discussed by Sackar J in Lorena Zupicic v Angela La Camera Paino as Trustee for the Estate of the Late Mario Novick [2018] NSWSC 692 (“Zupicic”) at [67]-[75] as follows:

[67] The general nature of constructive trusts and equitable estoppel was set out by Gleeson CJ, McHugh, Gummow and Callinan JJ in Giumelli v Giumelli (1999) 196 CLR 101 at 111-2; [1999] HCA 10 as follows (citations omitted):

In submissions to this Court, the term “constructive trust” was used to identify the nature of the equitable remedy granted by the Full Court. Care is required in the use of the term “constructive” in this context. Professor Scott has pointed out:

“It is sometimes said that when there are sufficient grounds for imposing a constructive trust, the court ‘constructs a trust’. The expression is, of course, absurd. The word ‘constructive’ is derived from the verb ‘construe’, not from the verb ‘construct’ ... The court construes the circumstances in the sense that it explains or interprets them; it does not construct them.”

The relief granted by the Full Court involved a trust that was “constructive” in that way. The Full Court so interpreted the circumstances as obliging the appellants, in good conscience, not to retain their beneficial interest in the whole of the Dwellingup property and as requiring them to answer the respondent's equity by bringing about a subdivision of the promised lot and conveying the title to it.

The equity of the respondent was seen by the Full Court as sufficiently strong as not only to prevent the appellants from insisting upon their strict legal rights but also, in respect of the promised lot, to convey it to the respondent.

A constructive trust of this nature is a remedial response to the claim to equitable intervention made out by the plaintiff. It obliges the holder of the legal title to surrender the property in question, thereby bringing about a determination of the rights and titles of the parties.

[68] Importantly for the purposes of this case, their Honours noted (at 113-4) (citations omitted):

The present case fell within the category identified by the Privy Council in Plimmer v Mayor, &c, of Wellington where “the Court must look at the circumstances in each case to decide in what way the equity can be satisfied”. Before a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust. At the heart of this appeal is the question whether the relief granted by the Full Court was appropriate and whether sufficient weight was given by the Full Court to the various factors to be taken into account, including the impact upon relevant third parties, in determining the nature and quantum of the equitable relief to be granted.

[69] In Giumelli v Giumelli (1999) 196 CLR 101 at 121; [1999] HCA 10, their Honours also observed with approval McPherson J’s analysis in Riches v Hogben [1985] 2 Qd R 292 at 301 of the distinction between equitable principles and the enforcement of contractual obligations:

What distinguishes the equitable principle from the enforcement of contractual obligations is, in the first place, that there is no legally binding promise. If there is such a promise, then the plaintiff must resort to the law of contract in order to enforce it, it being the function of equity to supplement the law not to replace it. The second distinguishing feature is that what attracts the principle is not the promise itself but the expectation which it creates … Finally, the equitable principle has no application where the transaction remains wholly executory on the plaintiff's part. It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise.

[70] See also generally Muschinski v Dodds (1985) 160 CLR 583 at 614-20; [1985] HCA 78 and Baumgartner v Baumgartner (1987) 164 CLR 137 at 146-8; [1987] HCA 59.

[71] In Sidhu v Van Dyke (2014) 251 CLR 505 at 511; [2014] HCA 19, French CJ, Kiefel, Bell and Keane JJ observed (citations omitted):

In The Commonwealth v Verwayen, Mason CJ described estoppel as “a label which covers a complex array of rules spanning various categories”. His Honour went on to say of “titles such as promissory estoppel, proprietary estoppel and estoppel by acquiescence” that they are all “intended to serve the same fundamental purpose, namely ‘protection against the detriment which would flow from a party’s change of position if the assumption (or expectation) that led to it were deserted’”.

In Giumelli v Giumelli, it was said that the category of equitable estoppel that is usually traced back to the decisions in Dillwyn v Llewelyn and Ramsden v Dyson is now a “well recognised variety of estoppel as understood in equity”, which affords relief “found in an assumption as to the future acquisition of ownership of property … induced by representations upon which there had been detrimental reliance by the plaintiff”. The questions which arise in this appeal concern the sufficiency of proof of detrimental reliance required to give rise to a sound claim for relief based on that category of estoppel; and the appropriate measure of equitable compensation where an order for the transfer of the property in question to the plaintiff is not made for reasons of hardship to a third party.

[72] Further in Sidhu v Van Dyke (2014) 251 CLR 505 at 521-4; [2014] HCA 19 their Honours also made it clear that there is no relationship that establishes a presumption of reliance (citations omitted):

The respondent sought to neutralise the appellant’s first submission by arguing that, in this case, the Court of Appeal did no more than apply what Brooking JA described in Flinn v Flinn as a “commonsense and rebuttable presumption of fact that may arise from the natural tendency of a promise”. This argument must be rejected. The observations by Brooking JA in Flinn v Flinn do not support the proposition accepted by Barrett JA that “[w]here inducement by the promise may be inferred from the claimant’s conduct … the onus or burden of proof shifts to the defendant to establish that the claimant did not rely on the promise”.

In Newbon v City Mutual Life Assurance Society Ltd, Rich, Dixon and Evatt JJ, speaking of a case where the party setting up the estoppel asserted a failure to take action in reliance upon an assumption allegedly induced by the conduct of the defendant, said:

“Where inaction is the natural consequence of the assumption, the prima facie inference may be drawn in favour of the causal connection … Any general presumptive connection between inaction and a belief in a state of facts must depend upon probabilities which arise from the common course of affairs, and accordingly must be governed by circumstances.”

In Gould v Vaggelas, Wilson J, with whom Gibbs and Dawson JJ agreed, speaking of an action in deceit, said:

“If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.”

It is apparent that in the passage cited from the plurality judgment in Newbon v City Mutual Life Assurance Society Ltd, their Honours were speaking of a “presumptive connection” as the equivalent of the “fair inference” of which Wilson J spoke.

In Gould v Vaggelas, Brennan J said:

“An inference of inducement may be drawn when a party enters into a contract after a material representation has been made to him, but it is no more than an inference of fact and it is settled law that such an inference may be rebutted by the facts of the case.”

Nothing in the judgments in Gould v Vaggelas suggests that the onus of proof in relation to detrimental reliance shifts to the defendant in any circumstances.

…

In point of principle, to speak of deploying a presumption of reliance in the context of equitable estoppel is to fail to recognise that it is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money by dispensing with the need for consideration if a promise is to be enforceable as a contract. It is not the breach of promise, but the promisor’s responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise. In Giumelli v Giumelli, Gleeson CJ, McHugh, Gummow and Callinan JJ approved the statement of McPherson J in Riches v Hogben that:

“It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise.”

…

Be that as it may, this aspect of the appellant’s submission must be accepted. The approach suggested by Lord Denning should not be applied in Australia. The legal burden of proof borne by a plaintiff did not shift. To speak of a shifting onus of proof is both wrong in principle and contrary to authority. The respondent at all times bore the legal burden of proving that she had been induced to rely upon the appellant’s promises.

…

The real question was as to the appropriate inference to be drawn from the whole of the evidence, including the answers elicited from the respondent in the course of cross-examination. In that regard, as was said by Gummow, Hayne, Heydon and Kiefel JJ in Campbell v Backoffice Investments Pty Ltd, consideration of the application of the process of reasoning adumbrated by Wilson J in Gould v Vaggelas “must always attend closely to all of the evidence that is adduced that bears upon the question being examined”.

[73] Their Honours also noted (at 526-8):

Her Honour’s finding that the appellant’s promises “played a part in her willingness to spend time and effort in the maintenance and improvement of The Oaks Cottage and assisted on the Burra Station property” warranted the conclusion that the respondent had discharged the onus she bore on the basis that to establish estoppel by encouragement it is not necessary that the conduct of the party estopped should be the sole inducement operating on the mind of the party setting up the estoppel. Counsel for the appellant disputed this proposition but did not cite any authority in support of their position. The respondent’s position is amply supported by authority.

…

This category of equitable estoppel serves to vindicate the expectations of the representee against a party who seeks unconscionably to resile from an expectation he or she has created. The extent to which it is unconscionable of the appellant to seek to resile from the position expressed in his assurances to the respondent may be gauged by reflecting on the likely response of the respondent if the appellant had told her in January 1998: “I am happy for you to remain at Oaks Cottage, but only for so long as it suits me and my wife to have you here; and, while you remain on the property, you must care for it as if you were the owner of the property and do unpaid work on parts of Burra Station other than the property. Until I make the property over to you, you must pay rent sufficient to content my wife. Should you choose to leave, you will leave with nothing in return for the value of your work here.”

[74] With respect to the nature of relief granted by equitable estoppel, in Sidhu v Van Dyke 251 CLR 505 at 529; [2014] HCA 19, their Honours said (citations omitted):

In Giumelli v Giumelli, Gleeson CJ, McHugh, Gummow and Callinan JJ held that, because the fundamental purpose of equitable estoppel is to protect the plaintiff from the detriment which would flow from the defendant’s change of position if the defendant were to be permitted to resile from his or her promise, the relief granted may require the taking of active steps by the defendant including the performance of the promise and the performance of the expectation generated by the promise. That holding is supported by the leading decisions to which this category of equitable estoppel is usually traced.

The requirements of good conscience may mean that in some cases the value of the promise may not be the just measure of relief. In The Commonwealth v Verwayen, Deane J noted that:

“There could be circumstances in which the potential damage to an allegedly estopped party was disproportionately greater than any detriment which would be sustained by the other party to an extent that good conscience could not reasonably be seen as precluding a departure from the assumed state of affairs if adequate compensation were made or offered by the allegedly estopped party for any detriment sustained by the other party.”

[75] In the same case Gageler J observed (at 531) (citations omitted):

Paraphrasing Dixon J in Thompson v Palmer, the respondent bore the onus of establishing that she believed the appellant’s representations and that, on the faith of that belief, she took a course of action or inaction which would turn out to be to her detriment were the appellant to be permitted to depart from those representations. The respondent did not need to establish that the belief to which she was induced by the appellant’s representations was the sole or predominant cause of the course of action or inaction she took but, in the language of Rich, Dixon and Evatt JJ in Newbon v City Mutual Life Assurance Society Ltd, she did need to establish that the belief was a “contributing cause”.

To establish that the belief to which she was induced by the appellant’s representations was a contributing cause to the course of action or inaction which she took, the respondent needed to establish more than that she had the belief and took the belief into account when she acted or refrained from acting. She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction: that she would not have so acted or refrained from acting if she did not have the belief.

The need for the respondent to establish such a difference stems from what Dixon J described in Grundt v Great Boulder Pty Gold Mines Ltd as the “indispensable” condition that a party asserting an estoppel “must have so acted or abstained from acting upon the footing of the state of affairs assumed” that the party asserting the estoppel “would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption”. That is to say, “the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted”. There can be no real detriment if the party asserting the estoppel would have been in the same position in any event.

The question of causation is therefore ordinarily appropriately framed, as it was implicitly framed by the primary judge in the present case, as being: “Despite any other contributing factors, would the party seeking to establish the estoppel have adopted a different course (of either action or refraining from action) to that which [the party] did had the relevant assumption not been induced?”

39. Counsel for Michael also relied upon Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7 (“Waltons Stores”) at 428-429 as follows:

In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiffs action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiffs reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.

40. The passage from Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19, referred to in that passage from Sackar J’s judgment in Zupicic, makes clear that the onus of proof rests upon the cross-claimant to prove that he had been induced to rely upon the promise of Tony noting that what attracts the equitable principle is not the promise itself but the expectation that it creates.

41. The first cross-defendant emphasised that the alleged promise occurred over 20 years ago and that Tony is now deceased and Nouhad incapacitated. In that event, it was properly emphasised, by reliance upon Plunkett v Bull (1915) 19 CLR 544; [1915] HCA 14 at 548-549 (per Isaacs J); Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 789 (per McLelland CJ in Eq) and Evans v Braddock [2015] NSWSC 249 (“Evans”) at [68] (per Hallen J), there was a need for careful scrutiny of the evidence given at the time of the hearing as to conversation said to have occurred with the deceased at such an earlier time..

42. In Evans, Hallen J summarised the approach to be taken in cases such as the present one as follows (at [69]-[72]):

[69] Whelan J in Webb v Ryan [2012] VSC 377, at [22], referred to the difficulties in assessing evidence, in such circumstances, stating:

“An important matter which may arise in these kinds of cases is the difficulty of assessing evidence concerning things allegedly said by a person who is dead. The court can never be certain it knows all the circumstances, and more often than not one may be sure that the court knows few of them. It is impossible to hear what the other party to the conversation, the deceased, says about it. There is a significant risk of reconstruction. There are dangers in relying on evidence of what may have been a casual observation made to a person who at the time had no reason to remember the exact words used. In the light of these concerns, a substantial burden is placed upon an applicant whose case relies upon such evidence. Such evidence must be very carefully examined.”

[70] As was observed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315, at 318 - 319:

“Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances … Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

[71] In that case, his Honour was talking of a cause of action founded on s 52 of the Trade Practices Act 1974 (Cth) or s 42 of the Fair Trading Act 1987 (NSW): see the discussion by McDougall J in Harbour Port Consulting v NSW Maritime [2011] NSWSC 813, at [10]-[18]. However, as McLelland CJ in Eq also pointed out, the views apply to all types of litigation.

[72] I also remember what was said by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123; (2011) 297 ALR 56, at [48]:

“When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 3612).”

[73] The credibility of a witness and his, or her, veracity may also be tested by reference to the objective facts proved independently of the evidence given, in particular by reference to the documents in the case, by paying particular regard to his, or her, motives, and to the overall probabilities: Armagas Ltd v Mundogas S.A. (The “Ocean Frost”) [1985] 1 Lloyd’s Rep 1, per Robert Goff LJ, at 57. Also see, In the matter of Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547, per Black J, at [7].

43. Reference may also be made to Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [35]:

[35] It has long been recognised that for a representation to found an estoppel it must be clear. In Low v Bouverie it was said that the language used must be precise and unambiguous. This does not mean that the words used may not be open to different constructions, but rather that they must be able to be understood in a particular sense by the person to whom the words are addressed. The sense in which they may be understood provides the basis for the assumption or expectation upon which the person to whom they are addressed acts. The words must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled. The statement that the tenants would be “looked after at renewal time” is not capable of conveying to a reasonable person that the tenants would be offered a further lease.

[Footnotes omitted.]

SUBMISSIONS OF THE PARTIES

Cross-claimant Submissions

Core Submissions

44. The cross-claimant made six key contentions in support of Michael having established an equitable estoppel and thus being the beneficial owner of a one-half interest in the property:

1. In 1994, Michael expected that Tony and Nouhad would give to him a beneficial one-half interest in the property if he paid legal costs of $28,000, which G H Healey & Co were then demanding Nouhad pay within 28 days, and the costs of renovations to the property (including the installation of a new kitchen and other renovations). Tony and Nouhad were not free to withdraw from that expected relationship (of co-ownership) (“the first contention”).

2. Tony and Nouhad induced Michael to adopt that expectation, by making the promise (“the second contention”).

3. Michael acted in reliance on that expectation by paying the legal costs and the costs of the renovations (utilising the Arab Bank loan of $90,000 from Arab Bank, which he repaid in full, with interest) (“the third contention”).

4. Tony and Nouhad knew or intended Michael to so act (“the fourth contention”).

5. Michael's action will occasion detriment if the expectation is not fulfilled (“the fifth contention”).

6. Following Tony's death and the passing of the property to her by survivorship, Nouhad has failed to act to avoid the detriment by fulfilling the expectation by applying to lapse the Caveat and by defending this cross-claim (“the sixth contention”).

The first and second contention

45. As to the first two contentions, Michael relied upon the following.

1. Tony and Nouhad were registered proprietors of the property;

2. A $28,000 legal cost liability arose;

3. Tony, in Nouhad’s presence made a promise to Michael that if he paid the legal costs and renovated the property, he would be given half of the house;

4. Michael, in reliance on the promise, paid the legal costs and renovated the property using funds from the Arab Bank loan;

5. Michael made repayments on the Arab Bank loan and subsequently repaid it using a “Total Permanent Disability” payout.

46. It was also submitted in reply that Arze’s evidence corroborated Michael’s evidence in respect of the promise. Further, it was contended that both Michael and Arze were truthful and reliable witnesses.

47. It was submitted that evidence given by Michael’s siblings that they were not told of the promise has little weight in determining whether the promise did in fact occur.

48. It was submitted that the absence of provision for the promise in the 2003 and 2016 wills was not relevant as the promise’s existence was distinct from any testamentary disposition. The same was said of the 2013 will.

The third and fourth contention

49. As to the third and fourth contentions, counsel for the cross-claimant put the following submissions:

1. The solicitor’s letter of demand constituted an emergency for Tony and Nouhad. If legal action was brought to recover the $28,000, Tony and Nouhad could lose the house.

2. Further, Tony and Nouhad depended upon Michael to borrow and repay funds in order to repay the legal costs and to renovate the property. By 1994, both Tony and Nouhad were retired pensioners: Tony was aged 67 years, retired and an aged pensioner; and Nouhad was aged 58 years and had stopped work as a result of the work accident in 1990. Meanwhile, Michael was, at that time, employed. He earned $70,000 per annum. Joseph was also approached for help in the matter of paying the $28,000 but he was unable to assist as he had a mortgage of his own at that time.

3. Michael had to consider whether he was going to undertake the expenditure for a long time before committing, indicating a reliance on the promise.

4. The expenditure by Michael was aligned with the terms of the promise. Michael paid the $28,000 legal costs, borrowed $90,000 from Arab Bank to finance the cost of the renovations, made repayments on the Arab Bank loan and subsequently paid off the Arab Bank loan using his Total Permanent Disability payout. As will be discussed below, the documentary evidence relating to the Arab Bank loan only shows that stamp duty was paid on an amount of $50,000. It was the submission of the cross-claimant that this $50,000 amount represented an up-stamping and that the total amount borrowed was therefore $90,000.

50. The payment of the legal fees by Michael was evidenced by the affidavit of Arze dated 23 February 2017 (“Arze’s affidavit”), which corroborated Michael’s March 2017 affidavit. Additionally, the oral evidence of Paul corroborated Michael’s oral evidence. (The lack of primary documentation could be attributed to the passage of time in addition to Michael’s 1996 work accident and the fact that Michael lived mostly overseas from 2000-2012.

51. The submissions that Michael took out the Arab Bank loan was supported by the Arab Bank Mortgage document, which listed Michael as a customer and the “Land and Property Information New South Wales Historical Search” of 23 December 2016 on the property (“the property title search”) which also listed a mortgage having been granted on 27 September 1994. That was in addition to the consistent evidence of Michael, Paul, Jim and Zouha. It was submitted, however, that Arab Bank records could not be located due to the passage of time.

52. That the renovations occurred was supported by the evidence of Michael’s siblings in cross-examination, which will be detailed below.

53. The repayment of the Arab Bank loan by Michael was evidenced by the bank statements of Michael displaying a withdrawal of $81,024, a historical title search showing the discharge of a mortgage on 13 May 1998 and the affidavit of Arze dated 23 Feb 2017, which was consistent with Michael’s account, and the consistent oral evidence between Arze, Michael, and Paul.

54. Finally, it was submitted that, in this context, the expenditure by Michael was self-evident of reliance upon the promise. In reply, it was argued that the expenditure was much more substantial and was in a completely different nature to Michael’s usual gratuitous expenditure to family members.

The fifth contention

55. Turning to the fifth contention. In reply, it was submitted that despite Michael living rent-free in the property from 1978-2000, Michael did provide full consideration by paying all recurring household bills and by being very generous with his money towards his parents. Thus, it was submitted, it would be unconscionable to depart from the promise, as the amount expended then (said to be the $28,000 legal fees plus the $90,000 loan) was commensurate to half the value of the property. It was submitted that $90,000 in 1994 was worth $800,000 at the time of proceedings.

The sixth contention

56. As to the sixth contention, it was agreed by both the cross-claimant and the first cross-defendant that following Tony's death, the property passed to Nouhad by survivorship. It was also not contested that Nouhad failed to act to avoid the detriment by fulfilling the expectation, by applying to lapse the caveat and by defending the cross-claim.

Further Submissions: Credibility, Succession and Alternative Relief

Credibility

57. Michael put various submissions as to the reliability of the evidence given by his siblings. I will return separately to those issues.

Succession

58. The cross-claimant submitted that the significance of Nouhad's successorship to Tony's legal half-share of the home is that his half-share can be traced into Nouhad's present legal ownership, resulting in there being no impediment to the Court, if so minded, granting relief to Michael by way of proprietary constructive trust, contrary to the position that would have arisen if the home had been sold to a third party purchaser for value without notice of Michael's estoppel-based claim to equitable relief.

Alternative Relief

59. The principal issue, with respect to alternative relief, is whether Michael should be permitted to prosecute his alternative claims after the determination of the primary claim.

60. It was submitted that the alternative claim of beneficial co-ownership of the property in such proportions as may be found by the Court, could be made on the basis of a tenancy in common. It was submitted that claims for alternative relief to a constructive trust could be made in these proceedings in light of the following authorities:

1. In Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 (“Giumelli”), the High Court unanimously decided that relief by way of proprietary constructive trust granted by the Full Court of the Supreme Court of Western Australia, on the facts of that case, exceeded what justice required. Thus, the High Court found relief by way of payment of a money sum should be granted. Accordingly, the High Court set aside the orders of the Full Court below and remitted the matter to a Judge of the Supreme Court to determine a sum to be payable by the appellants to the respondent representing the present value of the unsubdivided lot of land on the appellants' rural property which they had promised to the respondent, "upon such further evidence as that Court may allow", such sum to be then charged upon the whole of the rural property, with interest to be fixed by the Court.

2. In Giumelli, Gleeson CJ, McHugh, Gummow and Callinan JJ made the following observations and findings:

1. Their Honour’s described the constructive trust granted by the Full Court below as “a remedial response to the claim to equitable intervention made out by the plaintiff” (at [3]).

2. Their Honours continued, “...the equity which founded the relief obtained was found in an assumption as to future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff. This is a well-recognised variety of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant” (at [6]).

3. Their Honours also said, however, “Before a constructive trust is imposed, the court should first decide whether having regard to the issues in the litigation there is an appropriate equitable remedy which falls short of the imposition of a trust” (at [10]).

4. In the result, their Honours decided that payment of a money sum representing the value of the promised lot, to be charged upon the whole of the rural properly, with interest to be fixed by the Court, was the appropriate remedy.

3. In Farah Construction Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (at [200]), Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ said:

[200] Ordinarily relief by way of constructive trust is imposed only if some other remedy is not suitable. In the present circumstances, what other remedy applied would depend on an election by Say-Dee between equitable compensation (which Say-Dee requested in the amended cross-claim) or an account of profits (which it did not).

4. In Bofinger v Kingsway Group Limited (2009) 239 CLR 269; [2009] HCA 44 (at [1]), Gummow, Hayne, Heydon, Kiefel and Bell JJ drew attention to “the cardinal principle of equity that the remedy must he fashioned to fit the nature of the case and the particular facts”.

5. In Sidhu v Van Dyke, a proprietary estoppel case, the High Court dismissed an appeal from a decision of the Court of Appeal of the Supreme Court of New South Wales that the appellant pay the respondent equitable compensation, the quantum of which was to be determined by a judge at first instance after remittal to the Equity Division.

61. It was submitted by the cross-claimant that those authorities showed that alternative claims for relief in cases such as the present are not only made but often need to be determined after further enquiry and hearing.

62. It may also be noted, it was submitted, that no further evidence was envisaged by the cross-claimant in order to advance the alternative claims.

First Cross-Defendant Submissions

Core Submissions

63. The first cross-defendant made three submissions as to why Michael is not entitled to beneficial ownership of a one-half interest in the property:

1. No promise was made to Michael in 1994 (“contention 1”);

2. Even if a promise was made, Michael did not rely on that promise to his detriment (“contention 2”); and

3. It would be unconscionable or unjust for Michael to be given a half share interest in the home, or some other form of equitable relief (“contention 3”).

Contention 1

64. As to contention 1, the first cross-defendant advanced the following submissions. First, the first cross-defendant submitted that evidence in support of the promise having been made was not credible and contended that it should be given no weight in light of the following factors:

1. There is no, or no reliable memory of the promise;

2. Michael was lying, either consciously or not, in his evidence;

3. Michael fabricated his evidence in relation to the promise;

4. The evidence of Arze is not credible;

5. The circumstances surrounding the promise seem unlikely; and

6. The promise was not provided for in the wills, save the 2013 will.

65. The credibility of the evidence will be discussed later in this judgment.

66. Secondly, in oral submissions, the first cross-defendant submitted that Tony and Nouhad had full equity of the house and could have drawn the funds themselves. It was contended that in this context, a promise of the type allegedly made to Michael would not have been made.

Contention 2

67. As to contention 2, the first cross-defendant relied upon the following submissions. First, the first cross-defendant submitted that “there was no or no sufficient evidence of any reliance on the representation, other than the cross-claimant’s, and in some respects, his wife’s, assertions made in their affidavit evidence and in cross-examination”. The first cross-defendant submitted that there was no contemporaneous evidence of:

1. the solicitor’s invoice;

2. any solicitors being paid in 1994;

3. the details of the renovations undertaken;

4. the cost of those renovations;

5. over what period of time the renovations were undertaken; or

6. a payment to the Arab Bank by the Cross-Claimant of any amounts.

68. In relation to the renovations, the first cross-defendant submitted that no evidence was provided in the form of photographs, invoices, quotes or bank statements indicating that amounts in the vicinity of $50,000 were spent by the cross-claimant (using the loaned monies) on those renovations. Further, it was submitted that no dates or details relating to any of the renovations were provided, nor evidence of the value of any particular item of renovation. Finally, it was submitted that the evidence of Jim, Paul, Joseph and Zouha that certain renovations in the house were done did not align with Michael’s evidence about the nature of the renovations done.

69. In relation to the Arab Bank loan, the first cross-defendant submitted that “the bank statement says nothing about a money transfer, or that the recipient of the money transfer was Arab Bank”. Additionally, it was submitted that the discharge document was unhelpful. The first cross-defendant submitted that there was no, or no adequate, explanation for the absence of this evidence. Finally, it was contended, in this respect, that the evidence of Joseph, Jim, Paul and Zouha pointed both ways and did not cure those evidentiary defects.

70. In relation to repayments on the Arab Bank loan, the first cross-defendant submitted that there was no evidence of repayments made between 1994 and 1998. It was further noted that Michael’s concession that Arze had been paying back the mortgage, was contrary to Michael’s reliance on the promise, supposedly to his detriment

71. Secondly, the first cross-defendant submitted that in circumstances where, on Michael’s evidence, he had a history of spending considerable money on his parents, it could not be said that the promise was a contributing cause to Michael promising to pay the legal fees and the renovation fees.

Reliance

381. In the light of the above finding, it is unnecessary to resolve the question of reliance, because there was no unperformed promise that invited the intervention of equity. There can be no expectation in the absence of a promise giving rise to an expectation.

382. However, some brief observations may be made as to the failure of the cross-claimant’s reliance case. In order to do so, attention should first be given to the issues associated with the solicitor’s bill and the loans or mortgages.

383. It is true, as I have found, that Michael paid the solicitor’s bill. The preponderance of the evidence earlier set out in this judgment is that there was a renovation of the kitchen and that a new carpet and lighting were installed.

384. As to the financial arrangements that were entered into from 1994, the evidence discloses, having regard to the findings made as to Michael’s credibility, the following:

1. A prior mortgage over the property to Westpac Bank was discharged, as proved by the documentary evidence.

2. There was no evidence as to the amount owing on the Westpac Bank loan upon its discharge. There was neither documentary evidence which detailed the amount owing, nor was the amount able to be inferred from the witness evidence which did not address this point. Michael did not provide that detail. His evidence was that an amount owing was $81,024 from the Arab Bank loan. Counsel for the cross-claimant asserted that the Westpac loan in 1994 had an amount owing of $40,000 but there is no evidence to support that submission.

3. A loan was taken out with the Arab Bank. Tony and Nouhad were listed as the mortgagors and Michael (together with Tony and Nouhad) was listed as the customer. This conclusion is supported by documentary evidence and the evidence that Michael’s siblings learnt of that fact.

4. It was contended by the cross-claimant that the Arab Bank loan was for $90,000. However, he did not establish that fact as the evidence is consistent with a $50,000 loan for the following reasons:

1. The only evidence which supports the amount of $90,000 is that which comes from Michael. His evidence regarding the amount of the mortgage is entirely inconsistent. As I have found, he is not a witness of credit.

2. Further, Joseph, who I did consider to be a truthful and reliable witness and the only sibling of Michael to provide evidence on the amount of the Arab Bank loan, stated that the amount was not $90,000 but rather no more than $50,000.

3. The documentary evidence also fails to substantiate that the amount of money borrowed under the Arab Bank loan was $90,000. At its highest, the documentary evidence supports that $50,000 was borrowed. No part of the evidence leads to the inference that the $50,000 referred to in the mortgage document represents the up-stamping of prior loan to Westpac such that the total amount borrowed from Arab Bank was $90,000.

4. The figure of $90,000 is a construct by Michael deriving from the use to which the money was to be put. For reasons discussed below that evidence cannot be accepted.

5. Both Arze and Michael made repayments on the Arab Bank loan, but that the amount of these repayments is unable to be determined due to the lack of evidence.

6. Michael discharged the Arab Bank loan using some of the proceeds from his superannuation payment. The witness evidence is largely consistent in this respect. Furthermore, Michael withdrew the sum of $81,024 from his bank account at or about the time of the discharge of the mortgage. Counsel for the cross-claimant contended that the Court should draw an inference based on the proximity of the withdrawal and the discharge of the mortgage. However, I do not find that the entire sum of $81,024 was used to discharge the Arab Bank loan. Save for Michael’s evidence, there was no direct evidence that the whole sum was paid. I have found above that the amount of the Arab Bank loan was not $90,000. It follows that the sum paid in discharge of the Arab Bank loan was not that amount. Further, there was no adequate explanation for the absence of evidence relating to the Arab Bank loan including evidence of repayments made between 1994 and 1998.

385. This brings forth consideration of the particular factors which would contribute to a rejection of Michael’s case on reliance. Those factors are as follows:

1. Michael’s evidence as to the use of the Arab Bank loan was inconsistent and predicated upon the existence of a $90,000 amount, which I have found was not available on the evidence.

2. It seems entirely unlikely that Tony and Nouhad would incorporate the obligation to renovate the property into a purported promise to Michael. Firstly, as mentioned previously, that proposition sits uncomfortably with the circumstances said to surround the making of the promise, namely, an emergency for Tony and Nouhad. Secondly, no evidence was proffered as to why Tony and Nouhad would be minded to undertake renovations in those circumstances. In fact, it is apparent on the evidence discussed earlier that, if anyone, Michael was the driver behind the renovations and a key beneficiary of them.

3. Similarly, the dominant purpose of the travel to Lebanon was, on the preponderance of the evidence, to provide a benefit to Michael (and Jim); that is, for them both to find wives and bring them to Australia in suitable accommodation. A direct correlative of this analysis is that a portion of the expenditure said to have been incurred by Michael was in relation to the weddings of himself and Jim.

4. Furthermore, on Michael’s evidence, as summarised by the first cross-defendant at [72], Michael was very generous in using his money to assist his family. The first cross-defendant accepted that Michael had paid all recurring household bills in addition to being very generous with his money towards his parents. No plausible explanation is proffered as to why the payment of the solicitor’s bill should represent a change in that practice. The existence of a purported emergency is just as likely to compel further generosity than an exchange resulting in a benefit.

5. Michael gave no evidence in his affidavits as to the acceptance of the promise, save for an unbelievable passage in his December affidavit in which he said:

I excepted [sic] my parents[’] offer, and by saying inter alia at the time: "Okay, we will obtain a loan and I will pay it off"

6. Michael’s conduct after the alleged promise was inconsistent with a genuine belief in the promise. He made no note of the terms of the promise and he did not seek a copy of the 2003 wills to ensure they reflected the promise.

7. Notwithstanding the fact that there is evidence of Michael being financially generous to his parents, the evidence does not support dependence by the parents on Michael. Nor was there any reasonable basis for Michael having that belief. As mentioned, the assistance Michael gave with the solicitor’s bill is not inconsistent with those prior acts of generosity and, in any event, the Arab Bank loan that he stated was taken to pay the solicitor’s bill was ultimately obtained in the context of a mortgage taken by the parents when there was plainly equity in the property. Further, as I will discuss later, it is clear that the steps taken by Michael in late 1994 were designed to, on his own case, meet his own needs such as the renovations, weddings and trips to Lebanon.

386. For completeness I note the cross-claimant contended that his contributions made under the purported promise were akin to the primary relief sought and that departure from the promise would therefore be unconscionable. There are two difficulties with this submission. The first is the difficulties associated with his reliance case. The second is that the cross-claimant brought no evidence as to the value of the property as at 1994 or at any later time.

Conclusion: Primary Relief Refused

387. The primary relief sought is refused. The prayers for relief 1, 2 and 5 should be rejected.

Alternative Relief

388. As mentioned at the outset of this judgment the cross-claimant sought to defer the hearing of the claims appearing in prayers 3 and 4 of the cross-claim, which are described as alternative claims for relief.

389. That application occurred at the final day for the hearing of the matter. The issue had not been raised previously in the hearing of the matter. No application was made at the outset of the hearing for the disposition of the cross-claim to be in two parts. That course was opposed by the first cross-defendant.

390. The Court permitted the parties to make supplementary submissions in writing as to any legal authority bearing upon whether the cross-claimant may be permitted to pursue the alternative relief at “this stage” of the proceedings. In the result, the Court received written submissions from the cross-claimant and the first cross-defendant which are summarised at [59]-[62] and [81]-[83] respectively, above.

391. It would appear that, having regard to the authorities relied upon by the cross-claimant, the Court has power to grant the alternative prayers for relief. The merits of such claims is another matter and will no doubt be impacted by the findings made in this judgment.

392. There is a further question, whether the cross-claimant should be permitted to prosecute the alternative claims in the circumstances in which the alternative claims were pursued. The first cross-defendant amply described the issue by submitting that the Court should consider why, in the circumstances, the cross-claimant should be given an indulgence to advance supplementary submissions as to the alternative relief sought when he had not raised the prospect of that approach until the close of the proceedings. It was also submitted that the cross-claimant had failed to explain why he had chosen not to deal with the alternative relief until that stage of the proceedings.

393. Clearly, the application made by the cross-claimant needs to be viewed through the prism of ss 56 and 57 of the Civil Procedure Act. The first cross-defendant was entitled to rely in that respect on upon wastage of time and costs associated with the conduct of the proceedings by the first cross-defendant in this respect. Reference was made to the first cross-defendant’s case being legal aid funded.

394. Those contentions by the first cross-defendant have some force. However, they need to be considered in the light of two additional factors. The first is that the cross-claimant has indicated that he did not envisage any further evidence being called in support of the alternative relief. Nor did the first cross-defendant envisage any further oral hearing. Further, the alternative claims will require consideration in the light of this judgment.

Conclusion: Alternative Relief

395. In my view, the balance of these issues in the interests of justice should be that the cross-claimant be permitted to prosecute the alternate forms of relief in prayers 3 and 4 provided that the following conditions apply to any further proceeding in that respect:

1. There should be no further evidence save by leave of the Court. The determination of the question of leave will be predicated on the concessions made by counsel for the cross-claimant on the final day of hearing of the matter. It may be noted that the first cross-defendant has not been heard as to any further evidence at this stage.

2. Submissions as to the alternative relief shall be in writing, save for leave of the Court to make oral submissions. Parties are at liberty to refer to further relevant authority bearing upon the alternative claims.

3. The prejudice to the first cross-defendant shall be met by orders for costs in relation to the alternative relief.

Costs

396. The costs of the hearing of the primary relief should be made in favour of the first cross-defendant. The costs of the alternative relief will ultimately be dealt with in the manner described above but for present purposes may be reserved, until the course of any further proceedings are finally known.

ORDERS

397. The Court makes the following orders:

1. The first cross-defendant shall bring in short minutes of order reflecting this judgment within seven days of the publication of this judgment.

2. The cross-claimant shall file and serve any written submissions in relation to the alternative relief in prayers 3 and 4 within 14 days of the publication of this judgment. Any application to adduce evidence or for an oral hearing should be made in those written submissions. If such an application is made it should be accompanied by submissions in support of the application together with, in the case of further evidence, the actual form of the evidence proposed to be led by the cross-claimant.

3. The first cross-defendant shall file and serve any submissions in reply on or before 14 days after the receipt of submissions pursuant to order (2) above.

4. In the event that any application for leave to lead further evidence, the Court will determine that question together with any application for a further oral hearing on the papers.

Decision last updated: 10 April 2019