Dunstan v Proudman

[2001] NSWSC 912

CITATION:	Dunstan v Proudman [2001] NSWSC 912
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 4911/00
HEARING DATE(S):	7, 8 August 2001
JUDGMENT DATE:	18 October 2001
PARTIES :	William John Dunstan (P1) David John Proudman (P2) Diane Lynette Proudman (D)
JUDGMENT OF:	Austin J

COUNSEL :	G M McGrath (P) T Hodgson (D)
SOLICITORS:	Packer & Austin (P) Vagg & Reynolds (D)
CATCHWORDS:	EQUITY - trusts, charges and proprietary estoppel - friend and wife move in with old man and pay for extension to his house, pursuant to oral agreements, and rent out their house - no promise representation or conduct to found trust, charge or proprietary estoppel.
CASES CITED:	Malsbury v Malsbury (1982) 1 NSWLR 226; Public Trustee v Kukula (1990) 14 FamLR 97
DECISION:	Declaration, as sought by plaintiffs, that the first plaintiff holds the Haberfield property as absolute owner, free of any interest, legal or equitable, including any equitable charge, in favour of the defendant.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

THURSDAY 18 OCTOBER 2001

4911/00 WILLIAM JOHN DUNSTAN & 1 OR V DIANE LYNETTE PROUDMAN

HIS HONOUR :
Introduction

1 The first plaintiff is a retired university lecturer aged about 78 years. He is the registered proprietor of a house and land at 9 Crescent Street Dobroyd Point, a suburb of Sydney, which he frequently refers to as Haberfield. Following his lead, I shall call this "the Haberfield house".

2 The families of the first and second plaintiffs have been associated for over five generations. The second plaintiff is aged about 46 years and has been a close friend of the first plaintiff since approximately 1965, when he was 9 years old. When his father died five years later, the first plaintiff helped to look after him. The first plaintiff has no immediate family and he describes the second plaintiff as his "social son", and as "a certain friend in uncertain times".

3 The defendant is the second plaintiff's estranged wife. Their marriage broke down in about February 2000. They have two children, Matthew (aged about 17) and Holly (aged about 14). The first plaintiff was Matthew's godfather, and he assisted at the baptism of Holly. He has remained close to the children since that time.

4 The case arises out of the living arrangements made by the parties. The second plaintiff and the defendant occupied the Haberfield house with the first plaintiff from early 1993 until July 2000, when the second plaintiff moved out in order to live with the woman with whom he had developed a relationship (whom I shall identify as "Jenny"), although he says he was separated from his wife from February 2000. When the proceedings were commenced, the first plaintiff shared the Haberfield house with the defendant in tense circumstances, and the plaintiffs sought to recover possession of the property for the first plaintiff. Subsequently the defendant moved out of the Haberfield house, but a dispute remained as to whether the arrangements and conduct with respect to occupation of the property have given rise to any proprietary interest on the part of the defendant. That is the issue to which these reasons for judgment are directed.

5 In their statement of claim the plaintiffs sought, in addition to the order for possession of the Haberfield house, which they no longer require, a declaration that the first plaintiff holds the Haberfield house as absolute owner free of any interest, legal or equitable, including any equitable charge. In the alternative, they seek a declaration as to the interests held by each party in the Haberfield house. The statement of claim makes assertions about the arrangements under which the parties came to occupy the Haberfield house together, which are denied by the defendant in her defence. Although she has not filed a cross-claim, her counsel contended at the hearing that she was entitled to an equitable proprietary interest in the Haberfield house on the basis of an oral partly performed agreement, or a common intention between the parties that she would derive a proprietary interest out of the arrangements for occupation of the house, or a proprietary estoppel arising out of representations made by the plaintiffs and acted upon by her to her detriment.

Facts

6 The Haberfield house is a large family home. It was valued by G W Heydon & Associates Pty Ltd in June 2001 at $950,000, and the valuer assigned a value of $595,000 to it as at May 1993, when the extension to which I shall refer was completed. The valuer does not say that the extension added to the value of the house - he points out that it rendered the air-conditioning system inoperable and required that the fourth bedroom be used for the staircase and that the roof be lowered.

7 The first plaintiff has lived in it at all material times. He purchased it from his aunt in the 1960s, having lived there with her in 1934. It is his sole substantial asset and is obviously very important to him. His mother also lived in the house for a time until her death in February 1979.

8 The first plaintiff's will dated 10 September 1976 (subsequently replaced in the circumstances described below), was to the effect that his estate would pass to trustees (including the second plaintiff) upon trust for the second plaintiff absolutely, in the event that (as happened) his mother should predecease him. At the date of the will the second plaintiff had not become involved with the defendant.

9 The second plaintiff and the defendant were married in March 1978. They lived in a rented flat in Ashfield for about a year. After the first plaintiff's mother died, the second plaintiff proposed that he and the defendant come and live with the first plaintiff in the Haberfield house so that they could save up enough to buy their own home. The first plaintiff agreed. He did not require them to pay rent or to contribute to rates or insurance, and they did not do so. He said to the second plaintiff, "I want you to be able to save and get ahead".

10 While they were living with the first plaintiff, the second plaintiff and the defendant were allocated a block of land at Frenchs Forest in a Land Commission ballot. They obtained a bank loan to assist them to acquire the land, and the first plaintiff acted as guarantor. They built a home on the land, borrowing more money for that purpose, and moved from the Haberfield house to their new home ("the Frenchs Forest house") early in 1983.

11 The first plaintiff gave evidence, which I accept, that the living arrangements worked well and everyone got along well together. There were no children at that stage. The second plaintiff gave evidence, which I accept, that he and the defendant were able to save a substantial amount of money while they were living with the first plaintiff.

12 Their departure left the first plaintiff living alone in a large house, from early 1983 until early 1993. He retired from the University of New South Wales in 1985. He had a part-time housekeeper to assist him, but in 1992 she told him that she wanted to retire from the job. There were gardens and a swimming pool to maintain. The second plaintiff occasionally helped him but there was substantial work to do for a person of advancing years, and the situation would only become more difficult as time passed.

13 In the second half of 1992 the parties had a series of discussions which led to arrangements pursuant to which the second plaintiff, the defendant and their children moved back into the Haberfield house with the first plaintiff. The exact content of their conversations is in dispute between the plaintiffs and the defendant, and the matter is of central significance for the outcome in this case. I shall deal with the arrangements reached in these conversations later, as a separate topic. For the time being, it is enough to say that the arrangements involved construction of an extension in the roof of the house, to be occupied by the first plaintiff, and to be paid for by the second plaintiff and the defendant from redundancy money to be received by the second plaintiff when he left his employment as a psychiatric nurse.

14 Plans were drawn up for the extension. The first plaintiff offered to move into the section of the house underneath the main level, but neither the second plaintiff nor the defendant liked the idea of the first plaintiff sleeping underneath the house and having no view from the window except to a brick wall. They preferred an extension built into the roof, largely self-contained and with pleasant views. As eventually constructed, the extension comprised a living-dining area, a bedroom, kitchenette and bathroom.

15 An application was made to Ashfield Council, supported by a document written by the first plaintiff and headed "Background to Proposal". The document set out to convey the first plaintiff's feeling of attachment to the property having regard to its historical and personal associations, and the importance of the success of the application as a means of enabling him to remain in occupation and to bring together two families long associated with the Ashfield region.

16 The document began with the sentence: "Advancing years and my general health are making it increasingly difficult and inadvisable for me to continue to live alone". In cross-examination the first plaintiff did not agree with the proposition that in 1992, his age and health had made it inadvisable for him to continue living alone. I accept the first plaintiff's evidence from the witness box. It seems to me that the first sentence of the document indulges in overstatement of a venial nature, not undermining the first plaintiff's credibility as a witness.

17 The document also said that there were only three bedrooms at that time, and the extension would provide a fourth bedroom. The first plaintiff was cross-examined about this, and said that there were in fact four bedrooms before the extension. Again, I accept his evidence from the witness box, that there were four bedrooms before the extension, one of which was used as a study, and was appropriated as space for the construction of the stairs to the new level. Once again, the statement in the "Background" document was incorrect, but not (in my opinion) in a manner which undermines the first plaintiff's credibility as a witness.

18 Council's development approval was granted on 22 September 1992, and building approval was given on 17 December 1992. The second plaintiff did not take redundancy until mid-1993, and so the second plaintiff and the defendant obtained a loan (with the first plaintiff providing third party security over the Haberfield house) for $70,000. Loan approval was received on 9 December 1992. The renovations cost about $65,000 but the second plaintiff and the defendant, with a contribution from the first plaintiff, spent about $80,000 in all, including fittings and furniture. The first plaintiff's contribution, made largely through selling some furniture and providing the proceeds of sale to the second plaintiff, amounted to about $8000.

19 The second plaintiff and the defendant and their children and au pair moved into the Haberfield house late in January 1993, in time for the children to start the new term at their new schools. Building work commenced shortly afterwards. The Frenchs Forest house was rented out on 17 February 1993 for $360 per week, and it remained occupied by rent-paying tenants until the defendant moved out of the Haberfield house and into the Frenchs Forest house in February 2001, in the circumstances that I shall describe. The weekly rental increased over time, and in cross-examination the defendant agreed with the proposition that the average gross annual rental for the 8 years in which rent was paid was approximately $20,000. Consequently, the second plaintiff and the defendant received something in the vicinity of $160,000 in rental during that period. The mortgage over the Frenchs Forest house was paid off late in 1999.

20 In her affidavit evidence the defendant denied that moving into the Haberfield house made things financially easier for the second plaintiff and herself. However, she admitted that this was so in cross-examination. It is clearly the case that the move into the Haberfield house, together with the renting of the Frenchs Forest house, was substantially advantageous to the second plaintiff and the defendant.

21 After the renovations were complete, in about May 1993 or perhaps later, the first plaintiff took occupation of the new extension upstairs and the second plaintiff and the defendant and their children occupied the middle level of the house. The downstairs section was shared, as were the laundry facilities, the terrace, gardens and pool area. The first plaintiff occasionally used the kitchen and bathroom on the main level. The first plaintiff ate with the family about twice per week at their invitation.

22 There was conflicting evidence as to whether the defendant ever cooked for the first plaintiff, and as to whether the defendant cared for the first plaintiff by washing his clothes. On balance, it seems to me likely that the second plaintiff, after his redundancy, did most of the cooking, including cooking when the first plaintiff was with the family; the defendant cooked only a very small number of meals for the first plaintiff; however the defendant took part in cooking when the family was entertaining outsiders; and the first plaintiff normally washed his own clothes, although for very short periods of time some of his clothes were washed by the defendant or the second plaintiff while he was in hospital.

23 It was not suggested that the defendant's contribution to cooking, or washing clothes, gave her a proprietary interest in the first plaintiff's house, or augmented any proprietary interest. The significance of the evidence about cooking and washing relates to the defendant's allegation that the arrangement between the parties included a commitment on the part of the second plaintiff and the defendant to look after the first plaintiff. The plaintiffs deny that there was any such commitment, and the first plaintiff asserts that apart from when he was in hospital, he looked after himself. In my opinion the first plaintiff's evidence on this point is to be accepted.

24 The second plaintiff took redundancy in mid-1993 and received a package of $120,000, including superannuation entitlements. After discharging the $70,000 loan obtained for the extension, and paying some other expenses, he had about $40,000 left over. He stayed at home to look after the children and the house, and the defendant continued working for about 32 hours per week.

25 Later in 1993 the first plaintiff decided to grant a power of attorney to the second plaintiff to enable the second plaintiff to deal with his affairs if he were to become incapable of doing so, and to consult a solicitor for the purpose. He suggested to the second plaintiff and the defendant that they should make wills, and might like to come with him to the solicitor, and they agreed. He also decided to revise his own will, given that his mother had died after his earlier will had been made, and some of its provisions had come to be out of date.

26 The defendant contends that the new will made by the first plaintiff, dated 27 October 1993, was made pursuant to, and reflected, the arrangements that had been made prior to the second plaintiff and the defendant moving into the Haberfield house earlier that year. The first plaintiff gave evidence denying that there was any connection between the new will and the previous arrangements. I accept the first plaintiff's evidence on this point. By October 1993, when the new will was made, the parties have been living together for several months. There were good reasons for the first plaintiff to grant a power of attorney to the second plaintiff and to see a solicitor for that purpose, having regard to his age and state of health. It is plausible that, having decided to do so, he should also decide to revise his will, given the intervening death of his mother and the out of date contents of the older will.

27 The new will provided that the whole of the first plaintiff's estate would pass to the second plaintiff if he survived the first plaintiff for 30 days. If not, then the bulk of the estate including the Haberfield house would be held in trust for the defendant during her lifetime, and thereafter for such of the two children as should survive the first plaintiff and obtain the age of 18 years, in equal shares if both survived. While the will gives a contingent life interest to the defendant, there is nothing in it to suggest that this provision was made in performance of any anterior agreement or arrangement. Indeed, the life interest contained in the will is significantly different from the proprietary interest claimed by the defendant’s counsel orally at the hearing, because it is contingent on the second plaintiff failing to survive the first plaintiff for 30 days, whereas the interest claimed by the defendant is apparently said to entitle her to occupation during the second plaintiff's lifetime.

28 The second plaintiff left the Haberfield house in the year 2000, probably in July (although the first plaintiff says it was in April). The departure surprised the first plaintiff, who had no idea that the marriage was in trouble. The second plaintiff's departure left the first plaintiff and the defendant in a difficult position. The first plaintiff says it was beyond contemplation that he would take up residence with the defendant without the second plaintiff being there too. No doubt the position was uncomfortable for the defendant and her children as well. The first plaintiff gave evidence of bad behaviour by Matthew, and of a particularly bad argument between him and the defendant on 12 November 2000. In both cases claims were made, in anger, to the effect that the first plaintiff no longer owned the Haberfield house. The affidavit evidence contains a great deal of material with respect to difficulties and arguments after the second plaintiff's departure, which was not read at the hearing since possession of the Haberfield house was no longer in issue.

29 Proceedings were commenced late in the year 2000. The plaintiffs' statement of claim was filed on 7 December 2000. By notice of motion filed on 7 February 2001, with abridgment of service, the first plaintiff sought an order for possession of the Haberfield house and leave to issue a writ of possession. The application was made returnable on the following day. On that day undertakings were given by the parties to Simos J having the effect of establishing interim living arrangements, and his Honour stood the matter over to the Duty Judge on 20 February 2001. On 20 February 2001 Hodgson CJ in Eq made orders by consent, including an order that the first plaintiff have possession of the Haberfield house on 24 April 2001, or earlier if the Frenchs Forest house became vacant. The defendant subsequently moved from the Haberfield house to the Frenchs Forest house, and the second plaintiff moved back into the Haberfield house with Jenny.

The arrangements for the second plaintiff and the defendant to resume occupation of the Haberfield house

30 The statement of claim alleged that late in 1992 the plaintiffs and the defendant reached an oral agreement concerning the occupation of the Haberfield house on terms as follows:

(a) the second plaintiff, the defendant and their children would reside with the first plaintiff in the Haberfield house;
(b) that occupation would be rent-free;
(c) there would be no specific term for that occupation. It would continue as long as everyone wanted it to and cease whenever anyone wanted it to;
(d) the second plaintiff and the defendant would organise and pay for the building of an extension to the Haberfield house involving additional rooms in the roof;

(e) the first plaintiff would use one of those rooms as his bedroom;
(f) the second plaintiff and the defendant would occupy one of the existing bedrooms and their children the other two existing bedrooms;
(g) all parties would share the entirety of the property including the kitchen and bathrooms having due respect for each other's privacy;
(h) the first plaintiff would pay one-third of Council rates, water rates, insurances and electricity and the second plaintiff and the defendant would pay for two-thirds of those charges;
(i) if the living arrangements proved unsatisfactory then the second plaintiff and the defendant would move out of the Dunstan home;
(j) the second plaintiff and the defendant would not be entitled to repayment of the amount expended by them in completing the extension or any interest in the Haberfield house. This applied even if the second plaintiff and the defendant had to move out before they had received more money from renting out their home than they had expended on the extension.

31 In her defence filed on 5 February 2001, the defendant contended that the arrangement between the parties was on the basis that the second plaintiff and the defendant would provide care and assistance for the first plaintiff. She admitted that there was an oral agreement between the first plaintiff on the one part, and the second plaintiff and the defendant on the other part, and that the terms of the oral agreement included paragraphs (a), (b), (d), (e), (f), (g) and (substantially) (h) (although she said that the first plaintiff did not always pay his one-third share of outgoings).

32 She denied paragraph (c), claiming that it was a term of the agreement that the second plaintiff and the defendant could live in the Haberfield house for the term of the lifetime of the first plaintiff and provide care for him in his ageing years, and she said that the termination of the arrangement was not specifically discussed. She denied paragraphs (i) and (j), saying it was a term of the agreement that the first plaintiff would execute a new will whereby he confirmed that he devised the Haberfield house to the second plaintiff and further made provision for a life interest in favour of the defendant in the event that the second plaintiff predeceased him. She said that the first plaintiff represented to her and the second plaintiff that in consideration of the payment by them of the cost of the extension and for their care of him, they had a right of occupation as well as the subsequent right of inheritance of the Haberfield house by the second plaintiff or granting a life interest to her in the house.

33 The principal issue raised by the pleadings relates to the termination arrangements of the oral agreement. Were the parties mutually at liberty to terminate the arrangements at will, as the plaintiffs contend, or did the first plaintiff promise that the second plaintiff and the defendant would have a right of occupation during his lifetime and that the second defendant would have a life interest under his will, as the defendant contends?

34 The second plaintiff and the defendant are both registered nurses. The defendant works with the developmentally disabled, and the second plaintiff is a psychiatric nurse. From 1987 onwards he became aware that he might be made redundant from his position at Gladesville Hospital. In 1992 he was offered a position at another facility and, not wanting to take it, he considered whether he should elect for redundancy. At that time the mortgage debt over the Frenchs Forest house stood at about $25,000. There is no dispute about these matters, but the parties have given in evidence three different versions of the conversations which then occurred. Since the second plaintiff's version of the events is more detailed than the first plaintiff's, though generally along the same lines, I shall begin with the second plaintiff's version.

a The second plaintiff's evidence

35 His evidence is that he conceived the idea of proposing to the first plaintiff that he and the defendant move into the Haberfield house again, with their children. He says he knew that the house would have to be altered to give his family privacy and enable everyone to live comfortably, and he knew that he and his wife would have to pay for the alterations, which would enable them to obtain rent-free accommodation and to rent out the Frenchs Forest house to recoup the cost of the alterations.

36 He says he discussed his redundancy problem and his ideas with the first plaintiff during a long lunch at the "Famish" restaurant near Enfield. He explained to the first plaintiff that he was thinking of taking redundancy. He says he said something to the following effect:

"If I do take redundancy I thought we should discuss the idea of Diane and I and the children moving in with you. It would help us financially as Diane and I could rent out Frenchs Forest. I've given it some thought and in order for it to work we would have to carry out some renovations so there would be more privacy for Diane. Diane would not be happy otherwise. Diane and I would pay for the renovations but it would still help us financially because we could rent out Frenchs Forest. We would get the money back we spent on the renovations within a few years from the rent. I could also help you with the maintenance and upkeep."

37 He says that the first plaintiff reacted favourably to the suggestion that the second plaintiff, the defendant and the children should move in with him. He said, "I am getting older and it will help me if I do not have to pay someone to do the lawns and gardens and pay all the rates". He discouraged the second plaintiff from taking redundancy, and said that if he did so, the redundancy money should not be spent on expensive renovations to the Haberfield house. He said, "As you know I am leaving the house to you in my will anyway, David, but it isn't right to spend your redundancy". He suggested that the underneath section of the house could be renovated and would be big enough to provide living quarters for the first plaintiff, leaving the second plaintiff and the defendant with the upstairs living and bedroom areas.

38 The second plaintiff says that he discussed the idea with the defendant shortly afterwards, along the following lines:

Second plaintiff: "If I take the redundancy and get my superannuation, our income will drop. We have several options. We could buy an investment unit or we could pay off the mortgage. I think we should also look at moving in with Bill and paying for extensions to Haberfield, out of the redundancy. I have discussed it with Bill and he is in favour of it. We should look at it and consider it. We would not have to pay Bill rent and we could rent out Frenchs Forest. With the rent from Frenchs Forest I think we would be better off after just a few years. Bill is leaving me the house in his will anyway, so I can't see how we can lose in that sense. But I don't want to do it, if it puts pressure on our marriage. I don't want us to move and then regret it, but I want you to be happy with the move. We can always move back to Frenchs Forest if it doesn't work, but I would rather we didn't have to do that."
Defendant: "I will need to feel that we have our own space for it to work. That's the only problem I can see. As you say we can always move back to Frenchs Forest if it does not work out. I will arrange for an agent to come round and give us an idea of how much rent we can get from Frenchs Forest. I will talk to Sue McKenzie. Her husband owns a real estate agency. We can then work out how much better off we will be."
Second plaintiff: "I think we should build up on top of Bill's home and create an area for him to live in, leaving us with privacy in the downstairs area. I will have to see if the Council would agree. We will have to check on how much it would cost, but with the rent from Frenchs Forest, I think it would only take just a few years to recoup what we spent. If we decide to move out earlier then I am getting the house anyway, so in the long run we can't lose."
Defendant: "I love living in Frenchs Forest but I can see the advantages of doing what you say."

39 There were further discussions amongst the parties. Agreement was reached on the extent to which the first plaintiff would have access to the kitchen and bathroom on the main level of the house. Agreement was also reached on the respective contributions of the first plaintiff, on the one hand, and the second plaintiff and the defendant on the other, with respect to rates and other outgoings, the agreed proportions being one-third and two-thirds. The three parties also discussed what would happen if the living arrangements did not work out.

40 The second plaintiff also gave evidence of a conversation along the following lines:

First plaintiff: "And what happens if it doesn't work out?"
Second plaintiff or defendant: "We can always go back to live at Frenchs Forest."
Defendant: "I arranged for an agent to give us an idea of the rent we would receive and it was more than we expected."
Second plaintiff: "We will be better off after just a few years, depending on how much the extensions cost, but I have a pretty good idea. If we all decide it is not working before we recoup the expense, then as you are leaving me the house in your will anyway, I don't think it matters."
First plaintiff: "Yes, I am leaving the house to David anyway, so I can see what you mean."

41 According to the second plaintiff's evidence, the first plaintiff also stipulated that it might be necessary for him to sell the Haberfield house in order to obtain satisfactory nursing home accommodation, if he became unwell. He said:

"Haberfield is my only large asset though. If I get ill and have to go into a nursing home and my super payments are not enough to cover the nursing home fees, I will have to sell Haberfield. You might both prefer to pay the difference though, so that you and the children could stay living at Haberfield while I am in the nursing home. I don't think there is much chance of that happening in the foreseeable future though. All my relatives are along lived. It sounds like you will make more by renting out Frenchs Forest in a couple of years than you would probably have to pay in nursing home fees anyway."

42 The first plaintiff's evidence of their discussions was to the effect that the arrangements were discussed amongst the three of them on several occasions, to the same effect. He recalled a conversation on one such occasion as follows:

First plaintiff: "And if things don't work out?"
Second plaintiff or defendant: "We can always move back to Frenchs Forest if it doesn't work out for any reason and unless something goes wrong we’ll still be ahead financially." (According to the first plaintiff, the other party would nod or say yes to this statement.)
First plaintiff: "And I have left the house to David in my will, anyway."

43 The first plaintiff says that around the same time there was a discussion amongst the three parties in which the second plaintiff said to him: "I will look after you when you are no longer able to. I don't want to see you pushed into a nursing home before it is really necessary." The first plaintiff replied: "If I do need that kind of care I'll have to sell the house to pay for it." The second plaintiff said "Yes of course."

44 The first plaintiff gave evidence of a conversation between him and the second plaintiff to the following effect:

First plaintiff: "you'll be getting rental from Frenchs Forest. Will I get some rental from you? How do you want to do it?"
Second plaintiff: "Because we are paying for the extensions out of the redundancy we will not pay any rental. We will split the rates, gas, electricity and insurance. We will pay two-thirds and you the other third. We will live on the middle level and you can have the bedroom and living area upstairs. We can all still move about the place so long as we respect each other’s privacy. We can all share the downstairs section under the house."
Second plaintiff: "I will undertake all the maintenance, look after the pool and keep the lawn and gardens looked after."
First plaintiff: "I will continue to plant the annuals and look after the flower beds."

45 It is plain from the evidence of the first and second plaintiffs that a marriage breakdown between the second plaintiff and the defendant was not contemplated in the discussions leading up to the new occupancy arrangements of January 1993, and was therefore not discussed.

46 In her affidavit made on 17 April 2001, the defendant deposed to discussions that she had with the first and second plaintiffs along the following lines:

First plaintiff: "I am finding it more and more difficult maintaining this home. You all know I have had financial setbacks. I think I will have to sell the home."
Second plaintiff and defendant: "Why don't you sell your home and come and live near us in Frenchs Forest. You will be able to buy a nice home there at considerably less cost than your existing home."
First plaintiff: "No I don't want to move out of my familiar area. How about you come and live with me again you can share the expenses with me and I won't have to sell."

47 She says the second plaintiff said to her at about this time: "Bill can't maintain his home anymore. He is getting older and he has lost a lot of his money in the stock market."

48 She says the later time the following conversation took place between her and her husband:

Second plaintiff: "Di, I’ve considered it all and I’ve come to an agreement with Bill about us moving in with him. We’ll do the extensions but we’ll make that money back on the rental from our house. It's a really good investment for us. Financially it will work out really well for us."
Defendant: "How will we live? There is not enough bedrooms for us, the kids and Bill?"
Second plaintiff: "Look it’s going to work out. We’ll likely add on some rooms in the roof for Bill and he'll be self-contained up there mainly. We’ll have the middle floor and it'll be private for us. I’ll make sure it works all right for us. I'm going to inherit the house anyway so any money we put into it is only adding to what will have."
Defendant: "OK David, it sounds good for us. Just as long as we can make the house work to give us some family privacy."

49 The defendant admits the contents of a conversation, deposed to by the first plaintiff, in which the first plaintiff asked the second plaintiff whether he would receive rental and the second plaintiff replied that outgoings would be split on a two-thirds one-third basis but there would be no rent. Although the second plaintiff denied that any such conversation occurred, it seems to me on balance that there was such a conversation, in light of the first plaintiff's and the defendant's evidence.

50 The defendant says she does not have any recollection of any conversation concerning the sale of the home to pay for nursing care. However, she recalls a number of arguments between the plaintiffs during which the second plaintiff said to the first plaintiff: "If you do not keep in line Bill, I'll leave this home and you will end up in a nursing home." This conversation is denied by the first and second plaintiffs.

Findings of fact and conclusions

51 Overall, taking into account the demeanour of the witnesses, I find the evidence of the first and second plaintiffs more plausible than the evidence of the defendant. I find that the conversations between the parties took place substantially in the terms deposed to by the second plaintiff, corroborated by the evidence of the first plaintiff, and supplemented by him to the extent that I shall indicate. I reject the account of the conversations given by the defendant, to the extent that it is consistent with the plaintiffs' evidence.

52 One point of difference between the plaintiffs and the defendant is that, according to the defendant, the discussions were initiated by the first plaintiff because he was having financial and other difficulties in looking after the Haberfield house and wanted them to care for him. Her claim that the first plaintiff was in financial difficulty because of some bad investment decisions was not supported by any external evidence, and was vigorously denied by the first and second plaintiffs. In the absence of external corroboration, I reject her evidence on that point.

53 I accept that it was becoming increasingly difficult for the first plaintiff to look after the Haberfield house, particularly after his housekeeper indicated that she would leave. It was therefore very convenient for him that the proposal arose for the first plaintiff and the defendant and their children to move in with him. But it seems to me unlikely that his difficulties led to his initiating the proposed move. The first plaintiff made a favourable impression on me in the witness box. I find it implausible that he would have initiated discussions with the second plaintiff and the defendant with a view to having them care for him. He strikes me as an independent-minded person who would not behave in that fashion.

54 It is more likely, in my view, that the prospect of a substantial redundancy payment which made it feasible for the second plaintiff and the defendant to construct an extension to the Haberfield house, was the trigger for the discussions to begin, and that they were initiated by the second plaintiff because he saw that the arrangements would be mutually advantageous and would involve substantial financial benefit to him and his wife. The first plaintiff responded very positively to the second plaintiff's suggestion, perceiving that it would be in his interests to share the outgoings and maintenance work, but it was no part of the arrangements that they gave any undertaking to care for him.

55 Both the first and second plaintiffs depose to conversations to the effect that it was mutually understood that the first plaintiff might need to sell the Haberfield house to pay for proper nursing accommodation. The defendant does not deny any such conversation, but merely says that she does not recall it and that during arguments the second plaintiff threatened to leave the Haberfield house with the result that the first plaintiff would have to move to a nursing home. It seems to me unlikely, observing them both in the witness box and noting their close relationship, that the second plaintiff would have deliberately spoken so cruelly to the first plaintiff, and I therefore reject the defendant's evidence that the conversation occurred. If it did, however, it would tend to reinforce the point that under the arrangements, as understood by the parties subsequently, the first plaintiff would be entitled to use the proceeds of sale of the Haberfield house to acquire nursing accommodation.

56 The defendant does not deny the second plaintiff's evidence of the conversation at Famish restaurant, which is substantially corroborated by the evidence of the first plaintiff. Her evidence tends to confirm that such a conversation occurred, for she says in her affidavit of 27 April 2001 that she recalls a conversation with the second plaintiff in which he informed her of these arrangements.

57 The defendant says she does not recall any conversation with the second plaintiff about "moving back to Frenchs Forest if it didn't work out". However, it seems to me plausible that the second plaintiff put this proposition to her when he explained the arrangements. The defendant denies certain parts of the conversation between her and the second plaintiff deposed to by the second plaintiff in paragraph 12 of his affidavit made on 9 April 2001, and set out above, but she does not offer any specific evidence of what was said during the conversation, and since I regard the second plaintiff's version of the conversation as plausible and consistent with the other evidence, I find that the conversation took place substantially as deposed to by the second plaintiff.

58 Generally speaking, I found the defendant's evidence to be imprecise and unconvincing, where it departed from the evidence of the first and second plaintiffs. The defendant says she recalls conversations about the first plaintiff making a will to provide her with a life estate if her husband predeceased her. She refers to a meeting at the offices of a firm of solicitors sometime after she and her husband and children moved into the Haberfield house, at which such matters were discussed. In my opinion the meeting to which she refers is the meeting at which she and her husband instructed the solicitors to prepare their wills, and the first plaintiff instructed the solicitors with respect to his new will, which was to include a contingent life estate for the defendant. The evidence on the subject is very vague, and even in its terms, does not allege a promise by the first plaintiff that he would make a will conferring on her a life estate and that he would not revoke it. I accept that she attended a meeting with the solicitors at which a life estate in her favour was discussed, but I reject any contention that a representation or promise was made by the first plaintiff to the effect that he would make and not revoke a will giving her a life estate.

59 It is unnecessary for me to decide whether the second plaintiff made any representations to the effect that his wife would be protected when they moved into the Haberfield house. If he did, there is no plausible evidence to suggest that he did so as agent on behalf of the first plaintiff. As far as the first plaintiff was concerned, the arrangement was simple and clear. He would allow the second plaintiff and the defendant to move into the Haberfield house with their children, and they would pay for an extension that would give him and them substantial privacy and independence from one another. The second plaintiff and the defendant would be free to rent the Frenchs Forest house and retain the rental, so that if they remained in occupation of the Haberfield house and in receipt of rental for long enough, they would gain financially from the arrangements.

60 I find it was a term of the arrangements that the second plaintiff and the defendant would be at liberty to return to the Frenchs Forest house if they or the first plaintiff took the view that the arrangements for living together were not working out. However, the parties did not expressly agree as to what would happen if the second plaintiff and the defendant moved out before recouping the cost of the extensions from rental payments for the Frenchs Forest house. I accept the first plaintiff’s oral evidence that this question was not thought about, it was an issue that was not reached in the arrangements between the parties. That being so, the only reasonable inference to draw is that the arrangements contain no provision to protect the second plaintiff and the defendant from financial loss should that occur. As the first plaintiff said in evidence, if the question arose they would negotiate about it in a reasonable manner, but the resolution of this matter was not part of the arrangements they made before the second plaintiff and the defendant moved in.

61 I find no plausible ground in the evidence to suggest that the first plaintiff promised or represented, by words or conduct, that the second plaintiff and the defendant would acquire any proprietary interest in the Haberfield house by carrying out the arrangements. There is no express or implied term of the oral agreement between the parties to that effect, nor any agreement or arrangement capable of giving rise to an equitable charge, nor any common intention of a kind that would give rise to a proprietary interest, nor any representation or acquiescing conduct founding a proprietary estoppel. There being no evidence that the construction of the extension added to the value of the Haberfield house, or that the defendant made any other contribution disproportionate to her obtaining rent-free accommodation for eight years, there is no factual foundation for a case of unjust enrichment. The arrangement between the first plaintiff, on the one hand, and the second plaintiff and the defendant, on the other hand, was one for the conferral of mutual benefits, but the benefits conferred on the second plaintiff and the defendant were financial benefits related to free accommodation and the derivation of rental income, rather than any proprietary interest in the Haberfield house.

62 Recognising that the decision in the present case was likely to turn on an analysis of the evidence and findings of fact, counsel for the parties did not find it necessary to refer extensively to reported cases. Counsel for the plaintiffs cited Public Trustee v Kukula (1990) 14 FamLR 97, especially at 103, and counsel for defendant cited Malsbury v Malsbury (1982) 1 NSWLR 226. In my opinion the facts of those cases are so substantially different from the facts of the present case, as I have found them, that neither case is of any assistance except for the general statements of principle that they contain.

63 In summary, there is on the evidence no basis for denying the plaintiffs claim to a declaration that the first plaintiff holds the Haberfield house as absolute owner free of any interest, legal or equitable, including any equitable charge, in favour of the defendant. Since she has asserted a form of proprietary life interest in the Haberfield house which the facts do not support, there is real utility in making such a declaration, and I shall do so.

64 Counsel for the defendant pointed out that as soon as the defendant vacated the Haberfield house, the second plaintiff moved back in, with his new de facto partner Jenny. He submitted that the proceedings were instituted in concert by the plaintiffs to have the defendant excluded so that the second plaintiff could return to the home with Jenny. In my opinion there is a more obvious and plausible explanation for the institution of the proceedings. There were heated arguments between the first plaintiff and the defendant and Matthew respectively, as I have said, in which it was contended that the first plaintiff was not the owner, or not the full owner, of the Haberfield house. Further, the occupation of the house by the defendant had become a source of considerable personal difficulty for the first plaintiff. The second plaintiff fully supported the first plaintiff and wished to assist him to confirm his ownership of the house and bring to an end the awkward residential arrangement between the first plaintiff and the defendant. The proceedings were instituted to enable the first plaintiff to recover possession from the defendant and for the plaintiffs to establish that only the first plaintiff had any proprietary interest in the house.

65 Given my conclusion on the facts, it is unnecessary for me to consider the defendant's submissions with respect to quantification of her interest. I merely record that counsel for the defendant submitted at one stage that the interest might be purely a right of occupancy, but then contended for a proprietary interest proportionate to the expenditure on the extension. Excluding the first plaintiff's contribution to the cost of the extension, he submitted that the interest was in the proportion that the cost of the extension, $80,000, bore to the then value of the Haberfield house, $595,000 - that is, a percentage interest of 13.4%, now worth $127,310 given that the value of the Haberfield house has risen to $950,000.

66 However, I should deal with the submission by counsel for the defendant that the second plaintiff waived his right to share in the proprietary interest that had arisen out of the arrangements, by giving evidence to the effect that there should be no declaration that he had any interest in the property. In my opinion, his evidence did not amount to a waiver of a proprietary interest, but was merely evidence confirming the second plaintiff's other evidence that there was, in effect, no factual basis for him or his wife to claim any proprietary interest in the Haberfield house.

67 I shall direct the plaintiffs to bring in short minutes to reflect these reasons for judgment, and hear any submissions that the parties may wish to make on the question of costs.

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Last Modified: 11/06/2001