Donis v Donis (No 2)
[2006] VSC 125
•7 April 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 7524 of 2001
| SUSIE DONIS | Plaintiff |
| v | |
| VICTOR DONIS & ORS | Defendants |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 December 2005 | |
DATE OF JUDGMENT: | 7 April 2006 | |
CASE MAY BE CITED AS: | Donis v Donis (No 2) | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 125 | |
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Equity – Estoppel – Promise to transfer interest in land on marriage – Promise not fulfilled – Claim upheld – Relief.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R J Spicer | Pearce Webster Dugdales |
| For the Defendants | Mr P C Golombek | Victor C Andreou |
HIS HONOUR:
I gave judgment in this proceeding on 16 September 2005[1]. I concluded that the defendants had broken their promise to the plaintiff that when she married Steven she would be made an owner with him of one-half of the land at Plenty Road, Mernda, and that she acted on that promise to her detriment.
[1]Donis v Donis [2005] VSC 365.
The detriment was of a financial and non-financial nature the several aspects of which I dealt with at [365]-[391] and which I refer to below in dealing with the plaintiff’s submissions. In summary I concluded as follows.
As to the financial contributions, I concluded (at [373]) that approximately $40,000 was spent on the items referred to by the plaintiff. The value or benefit of these items was lost to the plaintiff when the parties separated. That figure did not include the value of contributions Steven made towards paying the first and second defendants’ mortgage on the property[2]; I concluded that I was not able to find the amount of that contribution. The non-financial contributions were constituted by the efforts of the plaintiff and her family and Steven to clean up and improve the house and its surrounds. There were additional aspects of detriment which I discussed at [377] – [391]. At [391] – [392] I concluded that the plaintiff had suffered substantial detriment as a result of relying on the defendants’ statements and promises and that the elements of equitable estoppel were made out.
[2]At [375].
The question then was, what was required to satisfy the equity that has arisen?[3] As I pointed out in my judgment, the plaintiff did not seek mere recompense for the loss of the value or benefit of the financial contributions to the property or other detriment, apart from the loss of the interest in the property. Nor was it part of her case that the value of the Mernda property, or the house thereon that she and Steven had occupied, was increased by any particular amount by reason of the financial and non-financial contributions, or that by reason of the contributions Victor and Rosa (the first and second defendants) obtained a financial benefit on the sale of the property[4]. Indeed neither party suggested that a relevant advantage to the defendants or detriment to the plaintiff was to be found there. Rather, the plaintiff sought payment of one-quarter of the net proceeds of sale of the property in accordance with the defendants’ promise[5]. The defendants submitted[6] alternative bases for relief, namely payment of one-quarter of the value of the improvements to the property, or one-quarter of $350,000 being the value of the property at the time of making the alleged promise. There was a further alternative that is not relevant as it was premised on a promise that was not made.
[3]At [393].
[4]At [367].
[5]At [365].
[6]At [379].
Proceeding to consider the matter of relief, it was immediately apparent that there was a difficulty. The difficulty was this. The only evidence of the value of the Mernda land was that constituted by the July 1995 purchase price of $350,000 (which the defendants relied on) and the October 2002 sale price of $3,797,110 (which the plaintiff relied on). I did not have evidence of the value of the land at, for instance, the time of the marriage, the date of separation or any other time. And, while the October 2002 sale price evidenced the then value I did not have evidence as to the extent to which the rezoning of the land had affected the 2002 sale price. I interpolate that I had been led at trial to understand that a rezoning had increased the value of the land. It was thus that at [28] I said that a rezoning had permitted residential subdivision. In the defendants’ outline of submission at the trial, para 37, it is stated that “The value of the property was dramatically increased by an unexpected planning zone change after the parties separated and prior to their divorce”, to which proposition the plaintiff did not demur. That fed what had seemed an assumed position at the trial. The consequence of this was to lead me to the view expressed at [394]-[398], which view was urged by counsel for the defendants in para 37 of their outline of submission, that it seemed inappropriate that the plaintiff receive the full benefit of the increase in value of the property that resulted from the rezoning. That was because that full benefit was in the nature of a windfall gain to the owner of the property (the first and second defendants being the registered proprietors)[7]. I also said that it did not seem just in satisfying the equity to award an amount based on the July 1995 purchase price which, of course, preceded the making of the promises, the marriage, and the incurring of the detriment the burden of which the plaintiff continued to bear[8].
[7]At [396].
[8]At [397].
I concluded that further evidence was required to aid in enabling ascertainment of the amount that was appropriate to satisfy the equity. For this reason, having published my judgment, I adjourned the further hearing of the proceeding to 21 October 2005 on which day I directed the filing of affidavits in relation to the valuation of the property, ordered that the valuers who swore such affidavits confer, and adjourned the further hearing of the proceeding to 9 December 2005.
The plaintiff and the defendants each engaged a valuer. In the case of the plaintiff the valuer was Mr D Matler of BMT Valuers, and in the case of the defendants the valuer was Mr B W Papworth of Charter Keck Cramer. Each valuer prepared a report and the reports were filed, that of Mr Matler as an exhibit to an affidavit, and that of Mr Papworth as a preliminary report. Mr Papworth’s full report, dated 10 November 2005, was provided to me during the hearing and placed on the file.
Pursuant to my order the valuers conferred as to their valuations and differences between them. At the conference the valuers compromised their differences and agreed on “mutually acceptable” amounts. These amounts were set out in a report which they prepared and signed and which was filed on 7 December 2005. The mutually agreed valuations are:
(a) as at 16 February 1997, being the date of marriage - $370,000;
(b) as at 1 February 2000, being the date of separation - $1,100,000; and
(c) as at 10 October 2002, being the date of sale of the property - $3,183,865.
It is important to explain how the 10 October 2002 valuation was arrived at. The rival valuations were $3,797,110 (being the actual sale price) by the plaintiff’s valuer and $3,000,000 by the defendants’ valuer. As a compromise, by adopting a discount rate of 8 percent for the terms contract to provide a present value, the valuers arrived at a mutually acceptable amended sworn valuation of $3,183,865 as the value at 10 October 2002. At [17] below I set out the amount, and date for payment, of the instalments of purchase price under the contract of sale of the land.
It was in light of this further evidence that I heard counsel on the matter of relief on 9 December 2005. Again, as at the trial, there was no dispute as to the applicable legal principles, the issue addressed by counsel being what was required to satisfy the equity. I had identified this question at [393] in my judgment where I also referred to Giumelli v Giumelli[9], Flinn v Flinn[10] and Commonwealth of Australia v Verwayen[11]. Counsel also referred to my judgment in Rogers v Rogers[12].
[9](1999) 196 CLR 101.
[10][1999] 3 VR 712.
[11](1990) 170 CLR 394.
[12][2001] VSC 141.
I now refer to the submissions of counsel commencing with the plaintiff.
At the outset of his submissions counsel for the plaintiff raised the matter of the rezoning of the land. He frankly said that at the trial, in light of the value of the land having increased so much in a short time, he had assumed that the land had been rezoned, but he had not opened that as a fact; indeed perusal of the opening shows that he did not mention the matter of rezoning. Counsel then informed me that in fact the land had not been rezoned. Hence, it had not been correct to describe the increase in the value of the land as having been in the nature of a windfall gain resulting from rezoning, as I had done at [396] of my judgment. Counsel submitted that all that had happened was that the value of the land had increased in the market. In addition to this being the fact, the evidence disclosed that it was the expectation and belief of the defendants that that would happen. That is to say, the evidence at the trial, being evidence which I accept, disclosed that at all relevant times and to the knowledge of the plaintiff the defendants had the belief and expectation that the land would significantly increase in value, to the point of being worth “millions”, or a “fortune”. Thus understood, counsel submitted, it is seen that when in fact the land turned out to be worth millions, that accorded with the defendants’ prior and stated expectation. Furthermore, counsel pointed out for the purpose of keeping things in perspective, in theory the value of the land could have fallen by reason of some fact that affected value, just as it increased. This is a risk inherent in the ownership of an asset.
Moreover, it is to be remembered that come what may “the Donis family” (to quote counsel) have the benefit of three-quarters of the increased value.
Counsel next referred to the specific terms of the promise made to the plaintiff that she would be on title after marriage as to a one-quarter interest. Having regard to the specific terms of the promise and in light of all the facts of the case including the defendants’ expectations as to the land increasing in value, justice between the parties required that the promise be perfected by recognising that interest in the proceeds of sale. There was no proper basis on which to discount the amount that represented her interest.
In further support of that submission, counsel then addressed the respects in which I had found that the plaintiff suffered detriment, identifying each aspect thereof in the sequence dealt with in my judgment. In summary, he referred to the following findings:
(a)At [373], that approximately $40,000 was spent on the items referred to by the plaintiff. The value or benefit of these items was lost to the plaintiff when the parties separated.
(b)At [375], the financial contributions included payments by Steven to the mortgage on the land, the amount of which I could not find. This was not included in the above $40,000. Those moneys would otherwise have been available for the benefit of the plaintiff and Steven.
(c)At [376] and [387], the non-financial contribution of the plaintiff and her family, and Steven also, cleaning up and improving the house and its surrounds. The plaintiff and Steven spent a substantial amount of their money but I could not quantify it.
(d)That apropos of the reference in [380] to the plaintiff not having been made an owner with Steven of one-half of the land, as a result of Steven not being on the title to the land as a one-third owner with his parents, the plaintiff is disadvantaged because Steven has no interest in the land which can be brought to account in her claim for a property settlement in the Family Court.
(e)At [384], that the plaintiff had preferred that she and Steven purchase a home in the suburbs rather than live in a more remote area at the Mernda property. That was a factor leading to the defendants making the statements to the plaintiff that led her to live at the Mernda property when she and Steven could have financed the purchase of their own home. There was thus non-financial and financial loss or detriment: remote living and no title in their own home. These matters were also stated at [86].
(f)At [386] (and see also [86] for some of the matters discussed at [386]), that the effect of the statements and promises of the defendants, including as to the future value of the property, was that the plaintiff, believing in and relying on the promises, agreed to live at the Mernda property, married earlier than she and Steven might otherwise have done, and the plaintiff became pregnant on their honeymoon. The result was that she did not set out on and establish herself in her chosen career as a teacher, being able to do only a little amount of teaching before having to stop when about six months into her pregnancy. She did not work again before the separation. She has always been the primary care giver of the child, and performed that role in difficult financial circumstances.
(g)At [390], shortly after separation the plaintiff found the house “stripped” of property and possessions with little being left, and with no recompense to the plaintiff in respect of anything taken. This is an aspect of the loss to her of the value or benefit of contributions.
(h)At [391], I concluded that all told the plaintiff had suffered substantial detriment as a result of relying on the defendants’ statements and promises.
I should say as to these matters that it is necessary to read the judgment to properly appreciate the various aspects of the detriment suffered by the plaintiff in the context of the circumstances disclosed by the evidence.
Furthermore, counsel submitted, there was no detriment on the defendants’ side save for that which might follow under the judgment of the court in consequence of their broken promise.
Counsel concluded with an alternative submission should the promise not be enforced, namely that there should be very substantial relief in money terms. As to that he referred to the sum of $450,000 retained in a trust account since the removal of the plaintiff’s caveat; see the reference at [30] in my judgment. Counsel then submitted that as the first and second defendants had received half of the purchase price it would be just and equitable that the balance of any order in favour of the plaintiff be paid from the next instalment due on 10 October 2006. Counsel then informed me of the dates or times stipulated in the contract for payment of the purchase price, a matter which was not clear from that part of the contract tendered at the trial[13]. The position was this, and it was not disputed by counsel for the defendants, that the contract stipulated a deposit of 10 percent and the balance of the purchase price as follows:
·20% at the expiration of six months from the day of sale,
·20% within 12 months from the day of sale,
·20% within 48 months from the day of sale,
·30% within 60 months from the day of sale.
The day of the sale was 10 October 2002. Pursuant to the contract 50 percent of the purchase price has been paid. I do not know on what dates the two instalments were actually paid. The last two instalments of purchase price are payable are 10 October 2006 and 10 October 2007 respectively. I note that the part of the contract tendered does not contain any provision for the payment of interest on the instalments. I am not able to infer that there is such provision. Of course it is probable that the contract makes provision for interest in the event of default in payment of an instalment, but that is a different matter.
[13]Exhibit X.
I now refer to the submissions of counsel for the defendants.
At the outset counsel submitted that in determining the relief to be granted, the Court has regard to “the minimum equity”, referring in this respect to the judgment of Deane J in Verwayen[14]. Counsel said that the relief should not be disproportionate to the detriment suffered, having regard to the circumstances of the case. He relied on the following matters as being relevant to consider in this respect.
[14](1990) 170 CLR 394 at 441-443.
The first matter was the zoning of the land. The evidence of the experts showed that in 1995 the Mernda property was zoned Urban Development which did not permit subdivision. On 17 July 1999 the zoning was changed to Residential 1 but subdivision was not permitted. However, counsel stated, developers would regard land zoned as Residential 1 as having potential for subdivision, although subdivision did not become possible until adoption of a rezoning amendment on 25 October 2004. Hence, counsel stated, what happened here was that with the Mernda land having the potential for subdivision a developer came in and bought up a tract of land (including the first and second defendants’ land) with a view to development when subdivision was permitted. That was the correct position, and on that basis what I had said in my judgment remained pertinent. By that counsel meant the observations at [394] and [396]:
(a)that the 2002 purchase price of the land was greater than it otherwise would have been as a result of the land having been rezoned and purchased along with other land by a developer, and
(b)that increase in value was in the nature of a windfall gain to the property owner, and it would not be just to award the plaintiff the full benefit of that gain.
In short, counsel submitted, to measure the equity by reference to the October 2002 sale price would give the plaintiff the benefit of a windfall gain which would not be just and equitable as between the parties. It would be well above the minimum equity. In making this submission, counsel supported the submission he had made at trial which I referred to earlier in this judgment. Counsel concluded this part of his submissions by noting that the evidence of the valuers was not determinative of the value of the land but was there to assist the Court.
Counsel then proceeded to identify a series of matters to be considered in deciding upon the minimum equity.
First, when the promise was made the parties would have believed that the marriage would last a long time, the lifetime of the couple. If they had thought early separation or divorce was possible the promise would probably not have been made or if made it would have been conditional on the marriage lasting.
Secondly, when the promise was made the parties did not know that in a few years the property would dramatically increase in value. He submitted that the evidence to the contrary relied on by the plaintiff would have been pie in the sky rather than a real belief. It was improbable that it was the defendants’ belief as, if it was, it was improbable that they would have made the promise.
Thirdly, it was the idea and decision of the first and second defendants to purchase the property and they took the investment risk. Further, the first and second defendants paid all the money for the property; as to that I refer to my finding that Steven made an unspecified contribution to the mortgage.
Fourthly, the plaintiff’s detriment did not cause the property to increase in value. The property was sold as broad acres to a developer. I note that that proposition is not challenged. As I noted above it was not part of the plaintiff’s case that her contributions or any aspect of her detriment otherwise caused the increase in value.
Fifthly, the promise was broken on the plaintiff not being on title at or shortly after the time of the marriage. The minimum equity should be determined as at that time, taking the then value of the property. To the amount thus established interest could be added to compensate for the passage of time to the present. An appropriate rate would be about 7 percent, not the penalty interest rate although that rate would apply to the judgment amount. However, interest should not be allowed in respect of the period when the plaintiff lived at the property rent free, that is from marriage in February 1997 to final departure from the property in February 2000.
Sixthly, it was relevant to consider the first and second defendants’ younger son Michael who would probably have some sort of expectation of benefit from his parents in due course and the reduction in the amount he might receive by reason of the amount awarded to the plaintiff.
Finally, there should be a stay on payment of any amount ordered until the determination of the proceedings between the plaintiff and Steven in the Family Court. This had been proposed by counsel for the plaintiff in his written submission at trial, para 44. Counsel queried whether that remained the plaintiff’s position as it seemed a contrary position was now being taken. Even if the plaintiff had changed her position and wanted the amount awarded to be paid pending conclusion in the Family Court, counsel for the defendants submitted that there should be a stay on payment. He submitted that it would be appropriate for the amount to be placed in an interest bearing account.
Counsel for the plaintiff then addressed some submissions in reply. They dealt with two matters, the zoning of the land and a stay on payment. On the first matter of zoning, counsel submitted, by reference to the report of the defendants’ expert, Mr Papworth[15], that at all relevant times the Mernda land was amenable to subdivision with a permit. It was therefore not correct for the defendants to say that when the land was acquired it could not be subdivided. It is important to note that at this point counsel for the defendants interrupted to concede that counsel for the plaintiff was correct. The materials[16] showed that the land could be subdivided, although a local structure plan was required to be implemented and none had been up to the time when the land was rezoned to Residential 1. Nevertheless, as counsel for the plaintiff repeated, without denial by counsel for the defendants, in principle the land was subdividable. It was just that until a developer became interested and purchased the land in 2002 no-one had taken the steps necessary to do so.
[15]See his report, Sections 1.6, 3.3, and cl 125A-2 headed Subdivision on the third page of the annexure relating to Planning Details.
[16]Section 3.3 of Mr Papworth’s report.
It thus became clear that the submission of the defendants at trial and continued on 9 December until abandoned in the course of the plaintiff’s reply, that the value of the property increased by reason of an unexpected planning zone change after the parties separated and prior to divorce was erroneous and misleading with the capacity to prejudice the plaintiff. The point is important and should be developed.
In the first place, even if there had been a planning zone change as stated by counsel for the defendants, the submission that that change caused the “dramatically increased” value in the property was mere assertion that was not supported by evidence. There was no evidence from the purchaser that explained how the purchase price was calculated. Indeed, my recollection from the trial is that I was told by counsel that the price was affected by the fact that the developer purchased other adjacent properties at the same time and by the provision for payment by extended instalments. Even as to that though, the defendants did not call the purchaser or its solicitors to seek to provide an evidentiary foundation for these explanations.
However, and this is the second point, the terms of the submission misstated the legal position, as counsel for the defendants immediately conceded when I was taken to the terms of his clients’ expert’s report. The defendants’ point was there had been a rezoning which permitted residential subdivision and a purchaser had acquired the subject land with a view to such subdivision. That is what I stated, as a finding, at [28] of my judgment. It was that which had led to the increase in value of the land, or windfall gain, and to which I referred at [394] and [396]. It is to be recognised that in so stating in my judgment I acted on what I was told by the defendants’ counsel who, I think, sought to minimise expense in the case and thus (I would infer) did not call valuation evidence or give sufficient attention to the relevant planning provisions. This would also explain the failure to call evidence to establish how the purchaser arrived at the purchase price. In the end, as I have said, in this area matters were put, and I was left to decide the case, without a proper evidentiary foundation. But, at the death knock, it became clear that the fundamental premise of the defendants’ submission that the land could not be subdivided was wrong. The contrary was the case. It is true that a local structure plan was required but that was not the defendants’ point. Indeed as expressed the defendants’ submission was inconsistent with the actual facts of the planning situation. I do not overlook that counsel for the defendants ultimately came to rely on the fact of the requirement of a local structure plan but when he did the reference to it was like a reflex reaction to counsel for the plaintiff having taken me to the expert’s report where the planning position was set out.
In these circumstances, and for these reasons, I conclude, as I now do, that I reject the defendants’ submission that the “value of the property was dramatically increased by an unexpected planning zone change after the parties separated and prior to their divorce”. Furthermore, in these circumstances and for these reasons, it is apparent that certain observations I made at [394] and [396] of my judgment were incorrect and I recall them. In [394] that is the statement that the net purchase price “is greater than it otherwise would have been as a result of the land having been rezoned … “ and that that was a relevant circumstance. In [396] it is the statement that it did not seem appropriate that the plaintiff receive the full benefit of the gain in the value of the land as rezoned because the increase in value was in the nature of a windfall gain to the property owner. What I there said was based on the value of the land having been affected by rezoning. Whatever amount is appropriate for the plaintiff to receive must be determined in light of the relevant facts and circumstances which will not include that the land was rezoned to permit subdivision and that such rezoning resulted in the amount paid by the purchaser being an amount greater than would otherwise have been paid. As to the value of the Mernda property I note that the valuation agreed on by the valuers is $613,245 less than the actual sale price but that reduction is by reason only that the valuers achieved a compromise by discounting the sale price to arrive at a present value as at the date of the sale.
The second point mentioned by counsel for the plaintiff in his reply concerned the question of a stay on payment of the judgment sum. Counsel could not recall why he had proposed a stay in his written submission at trial. However, in the absence of a suggestion that the plaintiff was likely to dissipate the judgment amount there was no good reason why the order to be made should not be complied with forthwith.
Decision
I commence with some comments on counsel’s submissions in addition to those already made above.
The point to note about the submissions of counsel for the plaintiff, apart from those concerning the matter of rezoning and a stay on payment, is that they relied on evidence I had accepted and findings made in my earlier judgment. It was by reference to these matters considered in the circumstances of the case that he submitted that the Court should conclude that the appropriate way in which to satisfy the equity was by payment to the plaintiff of the amount which represented one-quarter of the 2002 sale price or, in the alternative, a lesser but very substantial amount.
As to the defendants’ submissions, it is correct that in principle the valuation evidence is not determinative of the issue of valuation. Expert evidence is provided to assist the Court and at the end of the case it is for the judge to decide the issue and in that determination the judge is not bound to act on the opinion of the expert. Nevertheless, while that is so, the only evidence I have as to the value of the Mernda land is that constituted by the July 1995 purchase price, the 2002 sale price, and the agreed valuations set out at [8] above. Putting aside for the moment the difference between the 10 October 2002 purchase price and the lesser amount agreed on by the valuers as the value of the land at that date, I have no objective criteria by reference to which I could differ from the July 1995 purchase price or the other agreed values.
As to the value at 10 October 2002, the agreed value is simply the result of discounting the terms contract to arrive at a value as at 10 October 2002. The question that arises is whether in considering the amount that would satisfy the plaintiff’s equity I should have regard to the agreed value or the actual sale price as the value of the land. Counsel did not address me on this issue. Addressing the submissions that they made, I was, in the context of those submissions and the circumstances of the case overall, left to determine the amount that would satisfy the plaintiff’s equity. Nevertheless, the subject point should be addressed. It seems to me that it is the actual sale price to which regard should be had. That seems to me to be just and equitable as between the parties. The first and second defendants have received 50 percent of the purchase price, the last instalment having been received as long ago as 10 October 2003[17]. The gross amount of the deposit and first two instalments is $1,898,555. At [27] of my earlier judgment I noted that the net deposit received by the first and second defendants was $313,551.69, after allowing for commission, advertising and related expenses of the agent, and that in addition there were legal costs on the sale of $2,327.75. I have no evidence of additional costs and expenses of the sale paid or payable by the first and second defendants. Thus, on the evidence the first and second defendants have borne costs of $68,087.06 which may be presumed to have been paid out of or borne by the deposit. Hence, disregarding the odd cents and subject only to one other matter the first and second defendants have received and had the benefit of the net deposit plus two instalments of purchase price, a total of $1,830,468. The other matter is the amount of $450,000 which pursuant to an agreement between the parties was placed in an interest bearing trust account on condition of which payment the plaintiff withdrew a caveat on title to permit the sale to proceed. I referred to this at [30] of my earlier judgment where I noted that the caveat was withdrawn in December 2002. Although at that time only the deposit had been received it is reasonable to treat the $450,000 as having been paid out of the purchase price. Certainly the defendants did not seek to establish that they had suffered financial disadvantage by setting that sum aside, bearing in mind of course that the fund is bearing interest.
[17]That was the contractual date for payment and I assume payment was made on or by that date.
Then, looking forward, the first and second defendants will receive, and have the benefit of, the instalments of purchase price payable on 10 October 2006 and 2007, subject to the order in this proceeding. The discounted value of the entire contract sum as at 10 October 2002 is irrelevant to the amount of those instalments, just as it was irrelevant to the instalments of purchase price already paid. That is, the amounts paid and to be paid are those stipulated in the contract.
From her point of view the plaintiff has not received any amount. Furthermore, she will not receive any amount until the Court determines her entitlement and in accordance with its order. Her entitlement, and the receipt by her of any amount in accordance with the order I make, is prospective.
Regarding the circumstances overall it seems to me that the agreed discounted value of the contract price is irrelevant to the parties. The entitlement of the first and second defendants to receive the balance of the sale price in accordance with the contract is not affected by the discounted value of that price. It necessarily follows that it would be unjust to the plaintiff to confine regard to the discounted value of the sale price. To do so would have the consequence that the plaintiff’s claim was considered on the basis that the land was worth $613,245 less than the actual sale price. One quarter of that amount is $153,311.25. It is immediately apparent that to act on the lower value could only prejudice the plaintiff and advantage the first and second defendants. There is no justice in that in the circumstances. Furthermore, as Brooking JA so clearly pointed out in Flinn[18], the question as to what relief is appropriate to satisfy the plaintiff’s equity is to be determined at the date of judgment.
[18][1999] 3 VR 712 at 752, [128].
I turn then to the other matters relied on by the defendants. The first point rested on the parties having the belief that the marriage would last a long time, the lifetime of the couple. That is what counsel said but there is a difference between a marriage lasting a long time and a marriage lasting until the death of one of the spouses. Therein lies an inherent difficulty in the submission because a marriage that may last a long time may also last a short time or somewhere in between and in the experience of life these things are hard to predict. But, passing over that difficulty, let the premise be accepted that the parties believed that the marriage would be long lasting. The critical point lies in the next step that if early separation or divorce had been thought possible the promise would probably not have been made or, if made, would have been conditional on the marriage lasting. This step does not follow from the premise. In the first place, I have found that the promise was made. Having been made, and acted on by the plaintiff to her detriment, it cannot now be undone. In the second place, the marriage was of two young people in a society in which the incidence of separation and divorce is notoriously high. Doubtless, the couple and their families had the expectation of a long, happy and successful marriage. Unfortunately the marriage failed. That failure was foreseeable to the defendants as a possibility when the subject promise was made. Yet, with such awareness, the promise was made. It was, of course, entirely a matter for the first and second defendants whether to make the promise. They chose to do so. It was their voluntary act made in the circumstances and for the reasons discussed in my judgment. They conditioned the promise on marriage but not otherwise, and the promise or its performance was not deferred for any period or dependant on the occurrence of any other event. In short, the defendants or, more particularly, the first and second defendants, took the risk of the marriage failing.
The next contention was that when the promise was made the parties did not know that the land would dramatically increase in value. The submission was that the evidence to the contrary relied on by the plaintiff – that is, the statements that the land will be worth millions, a fortune - should be regarded as puffery or hope rather than a real belief. If the defendants had held that belief it was improbable that they would have made the promise. The last part of this contention was in effect a back door way of challenging my finding of a promise and I reject it accordingly. Otherwise the contention, regarding it as a whole, seems to be this, that the defendants or, more particularly, the first and second defendants, did not have a belief that the land might in the time involved increase in value as much as it did. There is much difficulty in this submission. The first and second defendants had prior experience in buying land, although not in broad acres. The first and second defendants were hard workers who impressed me as street smart and as understanding the value of land as an investment. I accept as a fact that they spoke of the land one day being worth millions, and a fortune, and I find that that was their belief, a belief that was vindicated in a relatively short time. I further find that they had this belief when the promise was made. It is then important to note the submission’s use of the word “dramatically” to describe the increase in value. The Oxford Dictionary relevantly defines the word “dramatic” as “sudden and striking”. In context, the use of the word dramatic is a layman’s adjectival reaction, and as such and on its own is an assertion that establishes nothing. Of course the increase in value was substantial and it may have been greater than the first and second defendants might have guessed or hoped might be the case in the time involved assuming that they put their mind to the matter in a precise way. But, strictly speaking, whether or not the increase in value in the period between 11 July 1995 and 10 October 2002 is to be described as “dramatic” may be a matter of semantics and argument, the argument doubtless depending on evidence as to movements in the value of land over time and in context.
The final point to note about the submission is that it contains within it elements of the windfall argument. That is, that in assessing that which is appropriate to satisfy the plaintiff’s equity regard should be had to the magnitude of the increase in value and that it was unexpected. I take account of the former in considering the balance of justice between the parties in the circumstances. As to the increase being unexpected, I refer to the above discussion.
The next factor is that it was the first and second defendants’ idea to purchase the land and that they took the investment risk. This is correct. As mentioned earlier, the first and second defendants paid for the land apart from Steven’s contribution to the mortgage[19], the amount of which I was unable to assess. It is to be noted that the first and second defendants’ mortgage was paid out on 4 August 1997[20]. The amount paid on that day to clear the mortgage was $89,105.15. I note that the statement of account[21] states that at 16 February 1997 the date on which the plaintiff and Steven married, the amount owing under the mortgage was $96,982.91, the difference between that amount and the amount paid to clear the mortgage being $7,877.76.
[19]Referred to at [23] and [24] in my earlier judgment.
[20]See Exhibit 16.
[21]Exhibit 16.
Passing by the point that the plaintiff’s contributions did not cause the property to increase in value, it was next submitted that the amount required to satisfy the plaintiff’s equity should be determined at or shortly after the marriage. I deal with this below.
The next point concerns the effect of an order on the expectation of the younger son Michael. While I do not overlook his position as a son in the family, I am yet concerned with the consequence in equity of detriment suffered by the plaintiff as a result of the breach of a specific promise made to her by Michael’s parents. Furthermore, it is not as though the order to be made in this case will leave the first and second defendants without appreciable assets. At the worst they will have the benefit of three-quarters of the purchase price which is what they would have had if they had honoured their promise to place the plaintiff on title. As counsel for the plaintiff pointed out, the only prejudice they suffer is that which is consequent on the allowance of the amount assessed as sufficient to satisfy the equity arising in favour of the plaintiff as a result of their breach of promise.
The final point concerns a stay on payment. I deal with that later.
I return then to the question I posed in my earlier judgment at [393], what is required to satisfy the equity that has arisen? And, as I said, by reference to Giumelli[22], in deciding this question regard must be had to the circumstances of the case. Each case turns on its own facts. The defendants’ submissions referred, time and again, to the relief to which the plaintiff was entitled as being that which was the minimum necessary to satisfy the equity. The expression “minimum relief” is to be found in the authorities, including in the judgment of Mason CJ in Verwayen where he referred to the task of ascertaining the minimum relief necessary to “do justice” between the parties.[23] It was this that Deane J addressed in Verwayen[24]. In each case the task is, in light of the relevant circumstances of the case, to ascertain the relief that is appropriate to do justice between the parties.
[22](1999) 196 CLR 101 at 113, [10].
[23](1990) 170 CLR 394 at 416.
[24]At 441-443.
In the present case the defendants submit, in essence, that to enforce the promise by requiring payment of the amount that represents one-quarter of the 2002 sale price would be disproportionate to the detriment suffered by the plaintiff. It was this issue which Deane J referred to in Verwayen (at 442) when he said:
“Even in a case where an estoppel by conduct is established and would prima facie operate to preclude departure from the assumed state of affairs, the circumstances may be such that to grant unqualified relief on that basis would exceed any requirements of good conscience and be unduly oppressive of the other party. ‘Of all doctrines, equitable estoppel’ – and, I would add, equitable relief based on the assumed state of affairs – ‘is surely one of the most flexible’ (see Texas Bank [1982] 1 QB at p 103; Taylors Fashions [1982] 1 QB at p 153.
There is clear support in the cases and learned writings for the view that, in this as in other fields, equitable relief must be moulded to do justice between the parties and to prevent a doctrine based on good conscience from being made an instrument of injustice or oppression. That being so, it should be accepted that the prima facie entitlement to relief based on the assumed state of affairs must, under a doctrine which is of general application in a system where equity prevails, be qualified if it appears that that relief would exceed what could be justified by the requirements of conscientious conduct and would be unjust to the estopped party.”
Deane J was there addressing estoppel by conduct and thus the reference to an assumed state of affairs. However the same approach is taken in a case such as the present. That is, that relief is granted, or moulded, as is just and appropriate between the parties in the circumstances. In some cases that may mean enforcing a promise according to its terms and granting proprietary or compensatory relief accordingly. In other cases something less will be assessed as appropriate to do justice between the parties and satisfy the equity. It is in this sense that there is reference to the minimum equity to do justice between the parties.
In the present case there is, on the one hand, a specific promise that was not honoured and, on the other hand, the suffering of consequential detriment. The promise was dishonoured by not placing the plaintiff on title to the extent of a one-quarter interest, regarding the land overall, in accordance with the terms of the promise. In terms of the 2002 sale price that equates to $949,277.50. The plaintiff’s detriment was financial and non-financial. That which can be ascertained in dollar terms is modest in amount relative to one-quarter of the 2002 sale price. But those components of the detriment not assessed or assessable with a dollar value are of a substantial and lasting nature. However the matter be regarded, the defendants’ submission that the plaintiff’s equity would be appropriately satisfied by payment of one-quarter of the value of the improvements to the property would deny to the plaintiff allowance for the greater part of her detriment considered overall and impose on her a substantial injustice. That is clearly inappropriate.
The alternative submission of the defendants at trial (the submissions at which were relied on by the defendants at the hearing on 9 December 2005) was that the plaintiff receive one-quarter of $350,000 that being said to be the value of the property at the time of making the alleged promise. That was the price paid by the first and second defendants to purchase the property on 11 July 1995. The submission assumed that that remained the value of the property at all times when the promise was made. However, it is not the making of the promise alone that is the relevant event, but its dishonour (with the suffering of detriment) which occurred subsequent to the marriage on 16 February 1997.
So much was recognised by counsel for the defendants when he submitted at the hearing on 9 December 2005 that the plaintiff’s equity should be determined at the time when the promise was broken, which was at or shortly after the time of the marriage by when the plaintiff should have been on title. And, he said, interest should be allowed from then to the present.
The first thing to note about this is that the agreed value of the property at the date of marriage was $370,000. I accept that valuation.
Then the following matters are to be noted. It is true that observance of the letter of the promise would have had the plaintiff on title within a reasonable time of her marriage to Steven. That did not occur. But, relying on the promise and believing it would be honoured, the plaintiff did the things and occasioned detriment as referred to in my judgment. Then the marriage broke down and the parties separated on 18 January 2000 when Steven left the home after telling the plaintiff “for the first time that the property was not ours”, that their names were not on the title. I referred to the plaintiff’s evidence of Steven’s statements at [70] of my earlier judgment. To make it clear, I accept that evidence. Subsequently, on 1 February 2000 the plaintiff received a written demand from the first and second defendants to vacate the property, which she did on 5 February 2000[25].
[25]See at [73] of my earlier judgment.
Thus, the first intimation to the plaintiff that she had not been placed on the title was given by Steven in an argument on 18 January 2000. I would infer that by August 2000 when proceedings were commenced in the Family Court the plaintiff would have had the benefit of a search of the title of the property. Perhaps it was a little later as her caveat on title, dated 25 October 2000, was lodged on her behalf on 15 November 2000, as referred to at [29] of my earlier judgment. The title search would have confirmed the truth of Steven’s statement on 18 January 2000 and informed the plaintiff that the promise had not been honoured.
To complete the picture it is necessary to refer to the plaintiff’s application for a property settlement which she commenced in the Family Court on 29 August 2000. In that claim she sought such amount as the Court deemed appropriate, referring to Steven having an interest in the property. On the defendants denying that Steven had any interest in the property the plaintiff commenced the present proceeding on 11 September 2001.
In these circumstances it can be seen that the plaintiff was driven to this proceeding by the first and second defendants’ continued dishonour of their promise which had the consequence of continuing aggravation of the plaintiff’s detriment considered in its several respects.
In the course of these events the property increased in value. I accept that at 1 February 2000, that being treated as the date of separation, the value was $1,100,000. From the plaintiff’s point of view it did not matter, I find, if there was delay in placing her on title. But the sting came when she and Steven separated and she found that she was not on title, and subsequently when it was denied that Steven had an interest in the property. When the title search confirmed Steven’s angry statement the plaintiff knew that the first and second defendants had reneged on their promise. It was then that the sting in the several aspects of her detriment struck. In the absence of specific evidence I would infer that the value of the property in the latter half of 2000 increased beyond $1,100,000 although it would be speculative for me to assess a figure.
Then, subsequent to the commencement of this proceeding, on 10 October 2002, the first and second defendants sold the property.
I have already referred to the amounts so far payable under the contract and which have been received by the first and second defendants. Save for the amount of $450,000 set aside the first and second defendants have had the use of the money so received. They have been able to apply the money so far received to their advantage, while at the same time wrongly denying the plaintiff any entitlement. Thus the plaintiff has not received a cent and in her parlous financial circumstances has had to undergo the cost and vexation of litigation.
It will be recalled that counsel for the plaintiff submitted that, regarding the plaintiff’s interest as being in the proceeds of sale of the property, her one-quarter interest could be satisfied by a combination of the $450,000 presently set aside in a trust account and to the extent necessary the instalment to be received on 10 October 2006.
It remains, however, to determine the amount sufficient to satisfy the plaintiff’s equity. It can be said immediately that the 1995 purchase price and the value at the date of marriage are not appropriate by reason of the significant preponderance of injustice to the plaintiff in determining the relevant amount on the basis of or by reference to either of those bases.
It is then instructive to consider the parameters on the other bases of valuation, taking first the value at the date of separation (1 February 2000) and secondly the sale price (at 10 October 2002). In gross terms, at these dates a one-quarter interest was $275,000 and $949,277.50 respectively.
Taking first the figure of $275,000, the first question that arises is whether it should be reduced by one-quarter of the amount of the costs of sale borne by the first and second defendants, namely $17,022. In my view it should not because the effect of adopting the value of the land at the date of separation for the purpose of assessing the amount to satisfy the equity is to take the plaintiff back to a time prior to the sale, when there was no question of a sale. In other words, the first and second defendants could not have it both ways. If the value determined by the 2002 sale price was adopted for these purposes it would be proper that the plaintiff allow a one-quarter share of the cost of sale. But it would be quite unfair to do so in the situation I am presently considering. The 2002 sale is irrelevant to the value at separation.
I should add, however, that whether the matter is considered from the point of view of the value at separation or the 2002 sale price, it would be proper to allow off an amount as representing a share of the burden of the mortgage following the marriage. I would allow only a modest amount of $2,000 on this account. I would not allow any other amount in respect of the mortgage in view of the specific terms of the promise and that part of the situation between the defendants was that Steven was contributing to the mortgage.
The next question is the allowance of interest. At this point I am considering only that which would be appropriate if the value at separation is taken. On that approach it is clear that interest must be allowed. For the plaintiff is to be compensated in an amount assessed by reference to the value of the land at 1 February 2000 yet will not receive payment until 2006. I add as to that that on the defendants’ submission the amount payable to the plaintiff is to be held in an account earning interest and not paid to her until some indefinite time in the future. As to the rate at which interest should be allowed, counsel for the defendants suggested 7 percent which seems reasonable and I would allow interest at that rate. I note that counsel for the plaintiff said nothing as to the rate. As I calculate it, interest at 7 percent per annum on $275,000 from 1 February 2000 to 7 April 2006 is $118,986 which would increase the total amount to $393,986. If, however, interest is calculated on a compound basis the total amount produced is $417,758. If account is taken of the allowance for the mortgage those amounts reduce to $391,158 and $414,719 respectively.
Of course the plaintiff would in principle be entitled to interest on judgment which counsel for the defendants conceded would be at the rate prescribed under the Penalty Interest Rates Act 1983. For the moment however I put that aspect of interest, and other machinery orders, aside.
The next step in the exercise is to consider the situation from the point of view of the value determined by the 2002 sale price, one-quarter of which is $949,277.50. If the plaintiff is to have the benefit of the sale price it would be appropriate to allow off a one-quarter share of the costs of sale. I would also allow the amount of $2,000 in respect of the mortgage. This would produce an amount of $930,478.
Then it would be necessary to consider whether interest should be allowed. In my view interest should not be allowed save as might be payable on the judgment. My reasons for that conclusion are as follows. I accept the submission of counsel for the plaintiff that the amount determined as payable to the plaintiff be paid in the first instance by payment of the amount held in the trust account (which would include the interest earned thereon) and the balance out of the instalment of purchase price due on 10 October 2006. In this situation the question becomes whether the plaintiff should have interest on the total amount or on the balance to be paid out of the instalment. As mentioned earlier, it would seem that the instalments of the purchase price do not carry interest, which may explain why counsel for the plaintiff did not seek interest beyond that accrued on the $450,000 in the trust account. Furthermore, there would be difficulty in calculating interest as it would have to relate to a one-quarter share of the deposit and the first two instalments but also making allowance for the $450,000 taken as borne from the sale price and the interest earned thereon. I do not know at what rate interest has been earned on the $450,000. In principle, if such interest has accrued at less than 7 percent consideration could be given to requiring payment of the difference.
However, it is to be remembered that approaching the matter from the point of view of the 2002 sale price, the plaintiff has the advantage of in effect placing herself in that contract with the advantage of its terms. That contract, as I understand it, does not provide for interest on instalment. Hence, although on the one hand the plaintiff has been kept out of her money (one-quarter of the amount received so far by the first and second defendants being $457,617 which may be regarded, in the round, as being covered by the amount held in trust with accrued interest), on the other hand the first and second defendants have not received interest on the unpaid instalments. Although so regarded the balance of these scales is in favour of the first and second defendants as they have had the use of their money, yet the plaintiff has the advantage of the promise and security of payment. I do not overlook that her detriment is unable to be satisfactorily measured in money terms. Regarding the circumstances overall however, I consider it would not be appropriate to allow interest if the matter is approached from the point of view of the 2002 sale price.
In my view the present problem is not satisfactorily resolved on an attempted simple arithmetical basis and, for reasons mentioned it could not be. That is by reason of the nature of the detriment on the one hand, and the specific promise and the value of the land in the various attendant circumstances on the other hand. Taking all relevant matters into account I consider that the amount required to satisfy the plaintiff’s equity is not appropriately assessed through or by the channel of the value at separation or on the sale in 2002 as discussed above. In other words, it is not one or the other. Whereas in my assessment the former carries with it injustice to the plaintiff the latter carries with it injustice to the first and second defendants to a degree in each case that is disproportionate and unjust. The true and just position is between those positions at a point that cannot be calculated with precision as to amount for the reasons discussed. Regarding all the relevant circumstances, in my view the plaintiff’s equity is appropriately and justly, considering the prejudice on each side, assessed at $600,000.
I do not consider that there is in this amount a disproportion between the detriment suffered by the plaintiff and a consequence to the first and second defendants in the sense discussed by Deane J in Verwayen. It is impossible to be exact as a matter of arithmetic. The result I have indicated is just as between the parties, in my view. It appropriately satisfies the equity while, stopping well short of enforcing the promise according to its terms, contains no element of undue prejudice to the first and second defendants.
There will accordingly be an order for payment to the plaintiff of the sum of $600,000.
For better securing payment I propose to order that the amount of $450,000 held in the trust account together with interest earned thereon be forthwith paid to the plaintiff and that the balance owing under the judgment together with interest thereon under the Penalty Interest Rates Act 1983 be paid out of the instalment due on 10 October 2006. I will make appropriate orders restraining any contrary disposition of the proceeds.
Finally, I would not order a stay on compliance with the orders. In my view there is no proper reason to do so. Indeed, to do so and thereby to keep the plaintiff out of that to which she is entitled would constitute a significant further injustice to her. That is so even if the entire judgment amount was to be held in an interest bearing account pending some further or other event or order as it would continue to deny the plaintiff access to money to which she is entitled.
I will hear counsel on the terms of the orders and as to costs.
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