Cierpiatka v Cierpiatka and Cierpiatka
[1999] FamCA 1286
•17 September 1999
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT SYDNEY
Appeal No. EA 23 of 1999
File No. SY 2421 of 1997
IN THE MATTER OF:
ZBIGNIEW JOACHIM CIERPIATKA
Appellant/Husband
- and -
FAYE MARIE CIERPIATKA
Respondent/Wife
- and -
GISELLE CIERPIATKA
Second Respondent
REASONS FOR JUDGMENT OF THE FULL COURT
BEFORE: Lindenmayer, Finn and Morgan JJ.
DATE OF HEARING: 8 June 1999
DATE OF ORDERS: 16 June 1999
DATE OF PUBLICATION OF REASONS FOR JUDGMENT: 17 September 1999
APPEARANCES: Mr Aldridge of Counsel (instructed by McKells, Suite 302, 135 Macquarie Street, Sydney, NSW, 2000), appeared on behalf of the appellant husband.
Mr Mater of Counsel (instructed by Simpson & Harrison, 2/20 Montgomery Street, Kogarah, NSW, 2217), appeared on behalf of the respondent wife.
Mrs G. Cierpiatka, the Second Respondent, appeared in person.
Mrs Cierpiatka’s Address for Service is:
58 Green Street, Kogarah, NSW, 2217.
CATCHWORDS: PROPERTY SETTLEMENT – TRUSTS – express trust -
declaration of trust in relation to land v. licence to use the land - constructive trust - equitable charge - Giumelli v. Giumelli (1999) 161 ALR 473; 73 ALJR 547
This is an appeal by the husband against orders made by Cohen J. on 25 February 1999. The proceedings were between:
a)the husband and the wife, who made competing claims for a property settlement under s.79 of the Family Law Act 1975 (“the Act”); and
b)the wife and the husband as first respondents, and his mother as second respondent, for certain declarations with respect to the beneficial ownership of a property at Kogarah (“the property”), of which the second respondent is the registered proprietor. Those latter proceedings were brought pursuant to the Jurisdiction of Courts (Cross Vesting) Act 1987 (N.S.W.). The property is a sub-divided portion of a larger block of land owned by the second respondent.
His Honour declared that the second respondent held “her right title and interest at law and in equity” in the property on trust for the husband. His Honour ordered that the second respondent transfer her interest in the property to the husband within 2 months, and that the husband pay $132,789 to the wife by way of property settlement.
His Honour found, as between the husband and the wife, that they had property available for division between them worth $326,387 and that their contributions were equal. After considering the s.75(2) factors, his Honour made an adjustment of 12% in favour of the husband leading to a distribution of 62% to the husband and 38% to the wife.
The husband’s appeal concerned the cross-vested claim against the second respondent only. On 16 June, 1999, the Full Court made orders allowing the appeal, setting aside certain of his Honour’s orders, and substituting other orders, the substance of which was to declare that the second respondent holds the property subject to an equitable charge in the sum of $155,000 in favour of the husband and the wife, and requiring the husband to pay to the wife the sum of $68,189 (in lieu of the $132,789 provided for by his Honour’s orders) in exchange for a transfer to him of her interest in that charge. (It should be noted that the Full Court's orders were made prior to the handing down by the High Court, on 17 June, 1999, of its decision in the matter of Re Wakim; Ex parte McNally & Anor and Related Cases [1999] HCA 27, declaring invalid so much of the cross-vesting legislation of the Commonwealth and the various States as purported to confer jurisdiction in State matters on Federal Courts, including this Court.)
His Honour found that after the marriage, the husband and the wife and the husband’s parents had discussions about providing a separate home for the former on the parents' property (which was large enough to subdivide). The husband’s parents were registered proprietors as joint tenants. His Honour made findings as to three specific statements made by the husband’s parents. On appeal, the husband did not assert that these statements were not made. In summary, his approach was to challenge his Honour’s findings as to the effect of those statements insofar as the wife’s claim was concerned.
HELD, allowing the appeal:
In relation to his Honour's finding that an express trust arose:
There are 3 requirements for the creation of an express trust, namely:
(a) There must be a manifest intention to create a trust.
The question is whether there is language or conduct showing a clear intention forthwith to create a trust. Counsel for the husband submitted, in the Full Court's view correctly, that the statements made by the husband's parents were no more than an expression of intention of what might happen in the future rather than “the land is yours now”. It was conceded for the husband that the statements may give rise to other relief but not by way of an express trust.Further, the husband’s parents held the land as joint tenants and thus neither their deaths nor the execution of new Wills could vest any title in the husband.
(b) There must be certainty as to subject matter.
If there is no property which can be identified, there can be no trust. When the last of the three statements was made, the land had not been subdivided. The Full Court accepted the submission of Counsel for the husband that until that occurred, the subject matter of the alleged trust could not be identified. The nature and extent of the subdivision and whether it would be approved was not known.
(c) The purpose of the trust and the extent of the benefit must be known.
The Full Court rejected the submission made by Counsel for the wife that the test was satisfied because the purpose was clear, namely to house the family nearby, and that the intended benefit was a fee simple interest.
It was quite unclear when and what interest was intended to pass.
In relation to his Honour's finding that a constructive trust arose:
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 (such as an equitable charge): Giumelli v. Giumelli (1999) 161 ALR 473; 73 ALJR 547 followed. Here the appellant did not assert a mere licence to remain but conceded that his equity should be satisfied by the imposition of a charge. The Full Court found the second respondent holds the property subject to an equitable charge in favour of the husband and the wife: Morris v Morris [1982] 1 NSWLR 61 approved.
Inwards v Baker [1965] 2 QB 29; Dillwyn v Llewelyn (1862) 45 ER 1285; Plimmer v Wellington Corp. (1884) 9 App Cas 699; and Ramsden v Dyson (1866) LR 1 HL 129, cited.
The value of the charge is the sum expended by the husband and the wife ($64,666), together with interest at a rate between 8% and 10%, calculated from the date of the expenditure (1983) to the date of judgment. The value of the charge is therefore about $155,000. After the adjustment of the total net assets to reflect that figure, the husband is required to pay the wife $68,189, in lieu of the $132,789 referred to in the trial Judge’s orders.
Costs certificates granted.
REPORTABLE
This is an appeal by the husband against orders made by Cohen J. on 25 February 1999. The proceedings were between:
a) the husband and the wife who made competing claims for a property settlement under s.79 of the Family Law Act 1975 (“the Act”); and
b) the wife and the husband as first respondent and the second respondent for certain declarations with respect to the beneficial ownership of a property at 58A Green Street, Kogarah (“the property”), of which the second respondent, who is the husband’s mother, is the registered proprietor. Those latter proceedings were brought pursuant to the Jurisdiction of Courts (Cross Vesting) Act 1987 (N.S.W.).
His Honour declared that the second respondent held “her right title and interest at law and in equity” in the property on trust for the husband. His Honour ordered that the second respondent transfer her interest in the property to the husband within 2 months, and that the husband pay $132,789 to the wife by way of property settlement.
His Honour found, as between the husband and the wife, they had property available for division between them worth $326,387 and that their contributions were equal. After considering the s.75(2) factors, his Honour made an adjustment of 12% in favour of the husband leading to a distribution of 62% to the husband and 38% to the wife.
The husband did not pursue his appeal in respect of his Honour’s findings as to the proportions in which the parties' assets should be distributed. Thus the husband’s appeal concerned the cross-vested claim against the second respondent only. The second respondent did not appeal. There was no cross-appeal by the wife.
This appeal was heard on 8 June, 1999, at the conclusion of which we reserved our decision. On 16 June, 1999, we made orders allowing the appeal, setting aside paragraphs 1 to 7 of his Honour’s orders of 25 February, 1999, and substituting other orders, the substance of which was to declare that the second respondent holds the property subject to an equitable charge in the sum of $155,000 in favour of the husband and wife, and requiring the husband to pay to the wife the sum of $68,189 (in lieu of the $132,789 provided for by his Honour’s orders) in exchange for a transfer to him of her interest in that charge. At the time of the making of those orders we indicated that we would publish our reasons for judgment at a later time. These, then, are the reasons supporting the orders which we then made. It should be noted that our orders were made prior to the handing down by the High Court, on 17 June, 1999, of its decision in the matter of Re Wakim; Ex parte McNally & Anor and Related Cases [1999] HCA 27, declaring invalid so much of the cross-vesting legislation of the Commonwealth and the various States as purported to confer jurisdiction in State matters on Federal Courts, including this Court.
Historical background
The following are the facts found by the trial Judge which are relevant to the cross-vested proceedings. These findings of fact were not significantly challenged by the parties to the appeal. The husband was born on 16 May 1947 and is now 52. The wife was born on 16 June 1957 and is now almost 42. They commenced cohabitation at the husband’s parents’ home at 58 Green Street, Kogarah in May 1980 and married on 1 May 1981. There are 2 children of the marriage, L. born 12 July 1987 and J. born 20 December 1993. The husband and wife separated on 27 September 1996.
His Honour found that after the marriage the husband and wife and the husband’s parents had discussions about providing a separate home for the former on the property known as 58 Green Street, Kogarah. It was large enough to subdivide. The husband’s parents were registered proprietors as joint tenants.
His Honour made findings as to certain specific statements by the husband’s parents. On appeal the husband did not assert that these statements were not made. In summary, his approach was to challenge his Honour’s findings as to the effect of those statements insofar as the wife’s claim was concerned.
The statements
The first statement
The wife in her O.30 affidavit alleged that in September 1981 the husband’s father said:
“We have decided to subdivide our existing block of land at 58 Green St., Kogarah for the purpose of providing the opportunity for the two of you to build your own family home adjacent to ours. The resulting subdivision (to be designated as 58A Green St., Kogarah) will be clearly defined, having fences and adequate vehicular access. This is a double block which we can have subdivided and we would like you to build your house here because we would like the two of you to live close to us. After all we are family and should stay together.” (at AB 132, reproduced at AB 14)
10. His Honour doubted that these were the precise words used but accepted the wife’s recollection of the substance of the conversation.
The second statement
11. The wife said that in September 1981 the husband’s father said to her and the husband:
“The land will be subdivided and one block will be yours Joe, for you and Faye to build your home on and the other block with our house will be ours.” (AB 15)
The third statement
12. The wife said that in about October 1981 the husband’s mother said:
“Transferring the land would require you to pay duty despite the fact that the land was given to you both at no cost. As you will get the lot when we die anyway, this is an unnecessary expense which you do not need right now. Our wills are going to be altered so that when either one of us dies, the land that your house is situated on will pass to Joe.” (AB 15-16)
[“Joe” is the husband]
13. The land was subdivided and the plan was registered on 20 July 1982. The husband and wife commenced construction of a home in October 1982 and completed it in March 1983. It cost $64,666 including the costs of the subdivision. That was financed by the parties’ joint savings, loans from the husband’s parents and a loan from the Sydney Credit Union secured by a mortgage over 58A Green Street. In the loan application, the husband asserted that he owned the property and listed it as an asset.
14. The husband and wife moved into the property in June 1983 and thereafter expended moneys on improvements. The loan to the Credit Union was paid off by them and they also paid the insurance payments on the building.
15. The husband’s father died on 17 November 1993. He left all his property to his wife. His Will which was executed in 1989 was thus inconsistent with the agreement alleged by the wife in these proceedings. The husband’s mother became the sole proprietor of 58 and 58A Green Street by survivorship.
The trial Judge’s findings
16. The trial Judge found that the “plan” which all four persons had was to transfer the property to the husband once the subdivision was completed so that he could use it to borrow funds to permit the husband and wife to build their home on the land. He found that the plan was changed to save stamp duty on the transfer.
17. His Honour found that the evidence was insufficient to displace his conviction that “the husband’s parents gave the land to the husband before the house was built on the understanding that they would leave the legal title to him when the first of them died as a way of achieving their intent that he have absolute title to it yet save stamp duty on the transfer from them”.
18. His Honour was satisfied that the husband’s father expressed an intent that the husband have the land once the subdivision was created. After the subdivision was complete, his Honour found that in all probability, “the land had been given to the husband and the change in plans [to transfer the land absolutely to the husband at that time] merely meant that the husband’s parents would hold the legal title for him until the first of them died. They declared their intention to do so rather than complete the formalities to have the gifts recognised at law and pay stamp duty on the transfer.”.
19. His Honour went on to find that the fact the husband treated the land as his own when he obtained insurance and loans strengthened his Honour’s conviction that there was a declaration of trust.
20. His Honour noted that if the parents intended the husband to obtain the title to the land on the death of the first of them, they needed to do more than make wills to avoid stamp duty being payable by the husband on the transfer.
21. His Honour found that when the arrangement was made between the parties and the husband’s parents, the parents “did intend him to inherit the legal title to the land on the death of the first of them”. He found that an express trust was created “when it was decided to hold the legal title until the death of the first parent rather than immediately carry out the transfer needed to perfect the gift which had been made”.
22. His Honour went on to find:
“[The] failure of the husband’s parents to do what was necessary to transfer their interest in 58A to the husband at the time of death of the husband’s father means that the second respondent holds her current interest in the land on trust for the husband. That trust is enforceable, although it is not evidenced in writing signed by the donors as required for enforcement by s.23C of the Conveyancing Act, 1919 (N.S.W.), because to permit the husband or second respondent to rely on s.23C would mean that the statute would be used to aid a fraud on the wife who probably built the home as a joint enterprise with the husband only because the husband had already been given the land and in the belief that he had been given it”. (AB 29)
23. His Honour then went on to consider whether there was another basis for a finding that a trust of the property existed in the event that his conclusion that there was an express trust was erroneous. He first considered whether there was an implied trust and concluded that an implied trust is created “not by an expression of actual intent by the donor, but by the law presuming what the donor’s wish was in the light of his actions”. He went on to state that a circumstance “which creates an implied trust is where a person gives away property, real or personal, yet he has not said, nor can it be inferred from his conduct and the facts, that he intended the recipient to retain the property for the recipient’s benefit” (that is, a “resulting trust”, because the effect of the trust is that the property is returned to the donor). In this case, his Honour found that when the parties built their house on 58A, the parents did not intend to recover the land.
24. His Honour then considered whether a constructive trust should be imposed on the second respondent. He said that a constructive trust arises where “it would constitute equitable fraud for a party to deny its existence”. He noted that a constructive trust had similar purpose/effect as s.23C of the Conveyancing Act.
25. His Honour referred to the High Court decision of Baumgartner (1987) 164 CLR 137 at 147 where the majority referred to the decision of Muschinski v Dodds (1985) 160 CLR 583. He noted that the husband and the wife built their home in the expectation that the land would one day be the husband’s (either by transfer or by inheritance). He found that “it would therefore be unconscionable not to regard the second respondent as holding the proportion of 58A which is the same as the proportion the amount the husband and wife spent on building the home is to the sum of that amount and value of the vacant land at the time of contribution on trust for the husband and wife”.
26. His Honour found it was unnecessary to decide the value of the land at the time the home was constructed because he had already found the second respondent held her interest in the whole of 58A Green Street for the husband. Nonetheless his Honour valued the land at 58A at $50,000 at the time the home was constructed.
27. On the basis the parties paid $64,666 to erect the home, his Honour found the second respondent held 56.4% of the land on trust for the parties (if there had not been an express trust giving the husband the whole beneficial interest). On the basis of his finding that the property at 58A is now worth $320,000, his Honour determined that the second respondent would have to pay the parties $180,480 to purchase their interest (if there is no express trust).
28. His Honour then went on to consider matters pertaining to the s.79 applications.
The grounds of appeal
29. The final amended grounds of the husband’s appeal were as follows:
His Honour erred in holding that any one or more of the following statements, namely:
(1)The appellant’s father’s statement of September 1981 (reproduced in paragraph 9 of the judgment);
(2)The appellant’s father’s further statement of September 1981 (reproduced in paragraph 12 of the judgment); and
(3)The appellant’s mother’s statement of October 1981 (reproduced in paragraph 15 of the judgment),
constituted an express declaration of trust of the appellant’s father’s and mother’s land in favour of the appellant and/or the respondent:
(1)The statements do not show that the appellant’s father and mother intended to bind themselves, immediately and irrevocably, to hold the land on trust in favour of the appellant and/or the respondent;
(2)The land that was to be the subject of the trust was uncertain, in that it was a portion of subdivided land that had not been specifically identified; and
(3)The obligations and duties of the appellant’s father and mother as trustees were not defined, alternatively were not sufficiently defined.
His Honour erred in holding that the appellant’s mother’s statement referred to in paragraph 1(3) above was an admission that, at the time she made the statement, the appellant’s father and mother had given the land to the appellant and/or the respondent.
Accordingly, his Honour erred in holding that the appellant’s father and mother had, [by] express declaration, constituted fully a trust of the land in favour of the appellant and/or the respondent.
Further and alternatively:
(1)His Honour erred in law in applying to the facts of the present case the principle that a declaration of trust respecting land or an interest in land is enforceable, notwithstanding that it is not evidenced in writing, if the legal owner’s assertion of title free of equitable obligations assumed or imposed when the land was transferred to him or her would be fraudulent.
(2)Accordingly, his Honour should have held that, as the declaration of trust for which the respondent contended was not evidenced in writing, it could not be proved by oral evidence and was unenforceable.
His Honour should have held that the appellant’s father’s and mother’s statements referred to in paragraph 1 above were either:
(1)Declarations of intentions to make a [gift] to the appellant in the future of part of the land, the identity of which would fall to be determined in the future; or
(2)The grant of a licence to use the land to construct a house and thereafter to use and occupy the house for as long as he wished to do so.
Further, his Honour should have held that:
(1)The gift or licence, as the case may be, was voluntary;
(2)The court would not perfect the gift by ordering specific performance or imposing or applying any other equitable remedy; and
(3)The appellant’s equity, raised by the construction of the house on the land, was satisfied by either:
(a)A declaration that during his lifetime, he was entitled to use and occupy the house and land as his home for as long as he wished to do so; or
(b)A declaration that the land was subject to an equitable charge, securing repayment to the appellant and the respondent of all their expenditure in constructing the house and improving the land.
Preliminary matters
30. We raised with Counsel the question of whether the wife had standing to seek a declaration that the husband had a beneficial interest in the property. That was the only ground upon which her application against the second respondent was successful at first instance.
31. However, Counsel for the husband did not take the point and it was not a ground of his appeal. We therefore do not need to consider that matter further.
32. We also raised the question of whether the husband had standing to appeal an order which is prima facie in his favour. However, wWe are of the view that the husband is affected by his Honour’s declaration because it was critical to the determination of the asset pool in the s.79 proceedings and thus the husband’s liability to pay money to the wife. Thus the matter is outside the principles expressed in Peter v. Shipway (1908) 7 CLR 232.
33. Counsel for the wife submitted that the husband could not be heard to challenge his Honour’s finding that he had a beneficial interest in the property. He relied on the principles expressed in Elias and Elias (1977) FLC 90-267 and subsequent authorities. He said that the husband could not advance a proposition contrary to his statement in the loan application to Sydney Credit Union.
34. We do not accept that the principles expressed in Elias constitute an absolute exclusionary rule applicable in all circumstancescross-vested proceedings.
Grounds 1 – 3
35. These may conveniently be dealt with together as they challenge his Honour’s findings that the statements constituted an express declaration of trust by the husband’s parents in favour of the husband.
36. There are 3 requirements for the creation of an express trust. These are obvious when it is borne in mind that a duly constituted express trust entitles the beneficiary (if sui juris) forthwith to call for a transfer of the legal title to the subject matter of the trust.
A. A manifest intention to create a trust
37. The question is whether there is language or conduct showing a clear intention forthwith to create a trust. Counsel for the husband submitted, in our view correctly, that the statements were no more than an expression of intention of what might happen in the future rather than “the land is yours now”. It was conceded for the husband that the statements may give rise to other relief but not by way of an express trust.
38. His Honour said:
“I think it is much more likely than not that, at the relevant time, the time when the arrangement was made and acted upon, the husband’s parents did intend him to inherit the legal title to the land on the death of the first of them. I also think that, in all probability, the husband and wife had the same understanding of the husband’s parents’ intention when they decided to and did build the home on the land. An express trust was, in my view, created by the words used by the second respondent when it was decided to hold the legal title until the death of the first parent rather than immediately carry out the transfer needed to perfect the gift which had been made The actions of the wife, the husband and his parents are consistent with this.” (AB 20 paragraph 55)
39. In our view that finding is quite inconsistent with any finding that the first two statements manifested a present intention to vest a beneficial interest forthwith in the husband. Insofar as his Honour appears to find that the 3rd statement gave rise to an express trust, then that finding is entirely contradictory to the finding that it was decided to hold the legal title until the death of the first parent. That statement makes it clear that no interest has passed. Further, the husband’s parents held the land as joint tenants and thus neither their deaths nor the execution of new Wills could vest any title in the husband.
B. There must be certainty as to subject matter.
40. If there is no property which can be identified, there can be no trust. When the last of the 3 statements was made, the land had not been subdivided. We accept the submission of Counsel for the husband that until that occurred the subject matter of the alleged trust could not be identified. The nature and extent of the subdivision and whether it would be approved was not known.
C. The purpose of the trust and the extent of the benefit must be known.
41. Counsel for the wife submitted that the test was satisfied because the purpose was clear, namely to house the family nearby, and he said the intended benefit was a fee simple interest.
42. In our view the extent of the benefit to be conferred is not ascertainable from the three conversations. It is quite unclear when and what interest was intended to pass. In our view the trial Judge was in error in finding that an express trust was created and Grounds 1-3 must succeed.
Ground 4
43. If there were a declaration of an express trust, then it is not in writing and offends s.23C of the Conveyancing Act 1919 (N.S.W.) His Honour said that the trust was nevertheless enforceable because to permit the husband or the second respondent to rely upon it would be used to aid a fraud on the wife.
44. Given that we have concluded his Honour was in error in concluding that an express trust had been created it is unnecessary that we discuss Ground 4. However we note that if there were an express trust, neither his Honour nor Counsel for the wife referred to any authority for the proposition that a statutory provision can be avoided because of an alleged fraud on a third party.
Grounds 5 and 6
45. These grounds relate to his Honour’s finding that a constructive trust arose. In general terms that was because the husband, in erecting the house, had acted to his detriment in building the house in the expectation of acquiring an interest in the property. It was conceded in his grounds of appeal by the husband that there was an appropriate remedy in the form of an equitable charge. Thus it was conceded that the husband had had the expectation of acquiring an interest in the property and had acted to his detriment in reliance thereon. In oral submissions the concession became one to the effect that the appropriate remedy was not the imposition of a constructive trust but rather an equitable charge to compensate for the loss suffered. It was put for the husband that that remedy was available as a result of the application of the principles relating to the equity of acquiescence (as in Inwards v. Baker [1965] 21 QB 29) or proprietary estoppel as it has more recently been termed (as in Crabb v Arun District Council [1976] 1 CH 197; [1975] 3 All ER 865).
46. These principles have recently been considered by the High Court in Giumelli v. Giumelli (1999) 161 ALR 473; 73 ALJR 547. In that case the respondent was the son of the appellants. He worked on a property without wages and built a house on it in reliance upon promises that the appellants would give him the land upon which the house was built and subdivide it. The relief granted by the Full Court of the Supreme Court of Western Australia was by way of a constructive trust. The High Court allowed the appeal and said that the Full Court erred in the measure of relief granted.
47. After considering Dillwyn v. Llewelyn (1862) 45 ER 1285 and Riches v. Hogben [1985] 2 Qd R 292 , the majority of the High Court said (at 475):
“[6] In these cases, the equity which founded the relief obtained was found in an assumption as to the 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 very active steps by the defendant.”
48. Their Honours went on to say (at 476):
“[10] The present case fell within the category identified by the Privy Council in Plimmer v Mayor, Councillors and Citizens of the City of Wellington [(1884) 9 App Cas 699 at 714] 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.”
49. The Court then returned to Riches v. Hogben and cited with approval the following statements of McPherson J.:
“A consequence of applying the principle may be to complete an otherwise imperfect gift, as in Dillwyn v Llewelyn, or to give effect to an agreement that, for want of certainty or consideration or of some other essential element, falls short of constituting an enforceable contract. Many of the reported cases are concerned with imperfect gifts; but there is of course a sense in which all agreements made or promises given without consideration are imperfect gifts of the benefits they purport to confer. 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. In that respect it represents the precise converse of what was said by Jessel MR in Ungley v Ungley to be the basis for enforcing the contract in that case. 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. That is why in Dillwyn v Llewelyn, where the son built on land promised but not effectively conveyed to him by a memorandum signed by his father, Lord Westbury LC said that the only inquiry was “whether the son’s expenditure, on the faith of the memorandum, supplied a valuable consideration, and created a binding obligation”.”
50. The High Court also cited the observation of Gaudron J. in The Commonwealth v. Verwayen (1990) 170 CLR 394 at 487 that “the substantive doctrine of estoppel permits a court to do what is required to avoid detriment and does not, in every case, require the making good of the assumption”.
51. Thus acting to one’s detriment in reliance upon an expectation does not necessarily require
the making good of a representation. Before taking that step the Court should consider if there is an appropriate equitable remedy falling short of a constructive trust.
Lord Denning, in Inwards v Baker (op cit), having referred to Dillwyn v Llewelyn, Plimmer v Wellington Corp. and Ramsden v Dyson, said (at 36-37):-.
“It is quite plain from those authorities that if the owner of land requests another, or indeed allows another, to expend money on the land under an expectation created or encouraged by the landlord that he will be able to remain there, that raises an equity in the licensee such as to entitle him to stay. He has a licence coupled with an equity. Mr Goodhart urged before us that the licensee could not stay indefinitely. The principle only applied, he said, when there was an expectation of some precise legal term. But it seems to me, from Plimmer’s case in particular, that the equity arising from the expenditure on land need not fail ‘merely on the ground that the interest to be secured has not been expressly indicated... the court must look at the circumstances in each case to decide in what way the equity can be satisfied’: (1844) 9 App Cas 699, 713-4.
So in this case, even though there is no binding contract to grant any particular interest to the licensee, nevertheless the court can look at the circumstances and see whether there is an equity arising out of the expenditure of money. All that is necessary is that the licensee should, at the request or with the encouragement of the landlord, have spent the money in the expectation of being allowed to stay there. If so, the court will not allow that expectation to be defeated where it would be inequitable so to do.”
52. 51. His Lordship went on to say (at 37):
“It is an equity well recognised in law. It arises from the expenditure of money by a person in actual occupation of land when he is led to believe that, as the result of that expenditure, he will be allowed to remain there.
It is for the court to say in what way the equity can be satisfied”.
53. In GiumelliGuillermi, in the passage cited at paragraph 487, the High Court cited with approval the expression of this principle in Plimmer v Wellington Corporation.
54. 53. On the basis of the authorities to which we have referred, and particularly GiumelliGuillermi, we are satisfied that there is an appropriate remedy which falls short of the imposition of a trust. The facts of this case also fall within “the category identified by the Privy Council” in Plimmer and the principles enunciated in Giumelli.Guillermi
55. The appellant did not assert a mere licence to remain but conceded that his equity should be satisfied by the imposition of a charge. This is clear from the notice of appeal. In Morris v Morris ([1982] 1 INSWLR 61) the plaintiff spent money on an extension to the home of his son and daughter-in-law in the expectation of being permitted to live there. McClelland J. held that it would be unconscionable and inequitable for the defendants to retain the benefit of that expenditure and that “consequently an equity arises in favour of the plaintiff and the court must determine how, in all the circumstances, justice requires that that equity be satisfied. What, that a plaintiff in a case such as this should receive will not necessarily correspond with what, when the relevant expenditure was made, he expected to receive”.
56. His Honour found that the plaintiff’s equity would be satisfied by his having an equitable charge. We consider that this would also be so in the present case. Accordingly we find that in this case the second respondent holds the property subject to an equitable charge in favour of the husband and the wife.
The Value of the Charge
57. In Morris, McClelland J. calculated the value of the charge as the sum expended plus
interest at 10% from the date of the commencement of proceedings. In that case the
expenditure was made between late 1978 and early 1979 and thus shortly before the trial
which commenced in December 1981.
58. In this case, equity requires that the interest be calculated from the date of expenditure (1983) to the date of judgment. In our judgment, tThe appropriate rate to span that period is between 8% and 10%. The trial Judge found the amountd expended by the husband and the wife to be $64,666. The addition of interest at the rate suggested brings the sum to about $155,000. After the adjustment of the total net assets to reflect that figure the husband will be required to pay the wife $68,189, in lieu of the $132,789 referred to in the trial Judge’s orders.
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