Harris v Harris
[2021] VSCA 138
•20 May 2021
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S EAPCI 2020 0056
| RAYMOND JOHN HARRIS | Applicant |
| v | |
| GARY HARRIS | Respondent |
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| JUDGES: | BEACH, NIALL and KENNEDY JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 4 May 2021 |
| DATE OF JUDGMENT: | 20 May 2021 |
| MEDIUM NEUTRAL CITATION: | [2021] VSCA 138 |
| JUDGMENT APPEALED FROM: | [2020] VSC 256 (John Dixon J) |
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ESTOPPEL – Proprietary estoppel – Oral promises by landowner that son would receive family farm – Whether unconscionable to depart from promises – Where trial judge’s findings on expectation and detrimental reliance unchallenged – Prima facie entitlement to promised interest – Whether remedy went beyond what is required for conscientious conduct – Whether remedy ‘out of all proportion’ to detriment – Where detriment substantial but not precisely quantified – Where promisor made undertaking at trial to grant part of promised interest – Giumelli v Giumelli (1999) 196 CLR 101, Sidhu v Van Dyke (2014) 251 CLR 505, Donis v Donis (2007) 19 VR 577, Delaforce v Simpson-Cook (2010) 78 NSWLR 483 applied – Leave to appeal granted – Appeal dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr C E Shaw QC with Mr J D McKay | Simon Parsons & Co |
| For the Respondent | Mr D B Clough | MacPherson Kelley |
BEACH JA
NIALL JA
KENNEDY JA:
This application raises two related questions in the context of a claim of proprietary estoppel relating to oral promises made by the applicant to his son (the respondent). Essentially, both questions ask whether the applicant is bound in conscience to make good his son’s expectation that he would inherit the family farm (as the trial judge found),[1] or whether the grant of a lesser proprietary interest sufficed to satisfy the requirements of conscientious conduct.
[1][2020] VSC 256 (‘Reasons’).
For reasons expressed below, we have found no error in the approach of the trial judge with the result that, although leave will be given, the appeal will be dismissed.
Preliminary
The applicant, Raymond John Harris (‘John’), was the registered proprietor in fee simple of four parcels of land, being the land contained in certificates of title volume 8679 folio 903 (‘the Home Farm’), volume 9686 folio 190 (‘the Delios Farm’), volume 9686 folio 189 (‘the House Block’), and volume 8286 folio 326 (being a small triangle of land located between the three other parcels of land that was treated as part of the Delios Farm). These parcels are collectively referred to as ‘the Farm’.
John has carried on a business from the Farm for several decades. John resided at the Farm with his late wife Lynette Harris (‘Lynette’) until her death in 2010. John now resides at the Farm with his second wife, Robyn Harris, and continues to operate the farming business.
John’s younger son, Craig Harris (‘Craig’), instituted a proceeding in the trial division of this Court on 3 March 2017. Craig claimed, inter alia, a proprietary interest in the Farm on the basis of oral promises made by John and Lynette (allegedly giving rise to proprietary estoppel).
The respondent to this application, Gary Harris (‘Gary’), is John’s other son, and was subsequently joined as second plaintiff to the trial division proceeding. Gary also claimed a proprietary interest in the Farm for similar reasons.
On the first day of trial, John gave an open, unconditional, and irrevocable undertaking to the Court in the following terms (‘the undertaking’):
[John] undertakes to the Court to hold the land known as part of 105 Whitworths Road, Korumburra South, and being the land contained in Certificate of Title Volume 8679 Folio 903 [the ‘Home Farm’], on trust for himself for the duration of his life, and upon his death, for [Gary and Craig] as tenants in common in equal shares.
The trial was adjourned in the morning for a mediation that occurred that day. Craig and John reached a compromise, which was recorded in a deed of settlement. Gary continued with his claim.
In a separate hearing after the trial concluded, but before judgment, the deed of settlement was tendered into evidence. It included terms that John was bound by the undertaking; that John would pay Craig the sum of $100,000; and that John released Craig from any claims to an interest in certain land held by Craig. In return, Craig released John from any claims over the Farm, other than as recorded in the undertaking.
While Gary maintained his entitlement to the Farm, he conceded in the separate hearing that he did not wish to claim more than half of the Home Farm, so as to preserve Craig’s benefit under the undertaking and the deed of settlement (‘the concession’).
Gary’s case relied on a series of promises made by John, although it was the fourth promise (that he would solely inherit the whole of the Farm) which was the active promise that was the foundation of his claim.
The trial judge accepted that the four promises were made, and found that the claim based on proprietary estoppel was made out (albeit that his Honour concluded that the first promise could not have conveyed to a reasonable person that some form of legally binding promise was being made).[2] He made declarations that the parcels comprising the Farm were held on trust for John for life, and upon his death for Gary, save that the Home Farm was to be held for both Gary and Craig in equal shares after his death (consistent with the concession).
[2]See [32] below.
Proposed grounds of appeal
John raised four proposed grounds of appeal:
1.The learned trial judge erred in finding that it would have been unconscionable for the Applicant to refuse to perform the fourth promise found to have been made by him to the Respondent.
2.The learned trial judge should have found that it was not unconscionable for the Applicant to refuse to perform the fourth promise, as the Respondent failed to establish that the detrimental reliance found to have been sustained by him was not entirely ameliorated or offset by the undertaking given by the Applicant on the first day of trial and the other benefits conferred by the Applicant upon the Respondent during the course of the Respondent’s detrimental reliance.
3.Alternatively, the learned trial judge erred in imposing a constructive trust over all four titles comprising the Farm.
4.The learned trial judge should have found that such relief would be disproportionate, and exceed the extent of any remedy required to ameliorate the Respondent’s detrimental reliance and avoid unconscionable conduct.
In essence, proposed grounds 1 and 2 alleged that the undertaking and other benefits conferred were sufficient to ameliorate the detriment. Proposed grounds 3 and 4 contended that the relief given was ‘disproportionate’. However, as already identified, each of the proposed grounds were directed towards the same enquiry, namely, whether the trial judge was correct to make good Gary’s expectation (that he would inherit the Farm), or whether some lesser proprietary interest sufficed to satisfy the requirements of conscientious conduct.
Prior to any further analysis of the proposed grounds, a short chronology is necessary to understand the context in which the promises were made.
Chronology of promises[3]
[3]This chronology is derived from the Reasons and the ‘Agreed Summary – Court of Appeal’, 10 September 2020.
John and Lynette purchased the Home Farm in 1967. In 1971 Gary was around 10 years of age, and resided on the Home Farm. Both Gary and Craig worked on the Farm, assisting their parents. Gary did so both before and after school. During the period from 1971 to 1977, the trial judge found that statements were made by John to the effect that Gary and Craig were going to get the Farm ‘at the end of the day’, with the intention that they would be encouraged to work on the Farm (‘the first promise’).[4] The phrase ‘at the end of the day’ was understood to mean on the death of the survivor of John and Lynette.[5]
[4]Reasons [51], [203].
[5]Ibid [38].
In 1977 Gary obtained employment in the banking sector with the Commercial Banking Company (‘CBC’), at Korumburra, then Trafalgar. He continued to work significant hours on the Farm at this time for which he was not paid.
In May 1978 John and Lynette purchased the Delios Farm and the House Block, and the acquired acreage was incorporated into the farmland used for the family dairy business.
Upon leaving school in 1981, CBC transferred Gary to the Melbourne branch, and Gary lived in Prahran. During 1981, Gary resigned from CBC and returned to work on the Farm. The trial judge found that John asked Gary to return and help out on the Farm in 1981, stating that ‘you will both [Gary and Craig] get the Farm when we [John and Lynette] die’ (‘the second promise’).[6]
[6]Ibid [66], [204].
The trial judge found that one of Gary’s motivations in returning to Korumburra was the promise of the Farm.[7] However, he was also motivated by Lynette’s poor health, and the presence of his girlfriend, Kim (who became his wife in 1984).[8]
[7]Ibid [219](b).
[8]Ibid [72], [77], [219](b).
In 1982, John, Lynette, Gary and Craig were registered as proprietors of land adjacent to the Farm (‘Cochrane’s’) as tenants in common in equal shares. Gary and Kim then moved to Cochrane’s, and established a dairy farm. The circumstances of the acquisition were disputed, but the trial judge found that John and Lynette paid the deposit on the property and lent their names to the debt/mortgage obligations. John also supplied Gary with about 40 cows and permitted Gary to use an old red two wheel drive tractor.
Gary and Kim later returned the cows, acquired their own tractor, and fully assumed the financial obligations in 1984, at which time Cochrane’s was transferred to them absolutely. The trial judge found that John and Lynette’s contributions were ‘significant’, but ‘overstated by John in his evidence’.[9] The opportunity was made viable through Gary’s hard work and sacrifice.[10] Further, the acquisition was consistent with the expressed promises about Gary’s future ownership and use of the Farm.[11]
[9]Ibid [94].
[10]Ibid [93].
[11]Ibid [94].
In 1993, Gary and Kim purchased a farm in ‘Hallston’ on vendor terms for $1,020,000. Between 1993 and 1995, Gary and Kim subdivided Cochrane’s and sold off the land. Around this time Gary and John’s relationship broke down, and Gary performed no work for John from about 1993 for over a decade. Between 2001 and 2006, Gary also ceased farming altogether and worked as a real estate agent.
In 2000 John ceased to run a dairy and cropping farm and began to farm beef cattle. Soon after that he purchased three properties located near Ballarat (‘the Ballarat properties’).
However, from 2008 Gary assisted John again on the basis of further promises (‘the third promise’). Thus, the trial judge found that John asked Gary to work for no pay or reimbursement, on the repeated promise of ‘You’re going to get the farm at the end of the day. You boys will get the farm at the end of the day.’[12]
[12]Ibid [113], [205].
In the period from 2013 to 2016, following Lynette's death (in 2010), the nature of the promises made by John also changed. The trial judge found that John asked Gary to work without a wage, but now varied the promise such that Gary would solely inherit the Farm, and Craig would inherit John’s two remaining Ballarat properties,[13] subject to the two brothers coming to an ‘equitable accommodation’ based on the relative values of these properties so that each would receive the same value (‘the fourth promise’).[14]
[13]John had previously sold one of the Ballarat properties to Craig: Reasons [110] (footnote 2).
[14]Reasons [131], [206] (Craig was residing in Ballarat at this time).
From 2013 John commenced a relationship with Robyn (now Robyn Harris). At around this time, John and Gary discussed a proposal for Gary to lease the Farm (other than the House Block) at a ‘market rent’. This would allow Gary to increase the size of his herd, to manage up to 300 or 400 cows (rather than the 200 to 220 that Hallston could carry). The ‘project’ would require improving Hallston to support the increase in milking activity, as well as rendering the Farm fit for Gary’s purpose. In the result, Gary expended more than $330,000 on improvements to Hallston.
However, the project did not go ahead following a disagreement about the appropriate market rent. This meant that Gary returned to milking a herd of the same number as that which Hallston could carry before the improvements took place, while only using a third of the new expanded yard.
Key findings of trial judge
After providing a detailed narrative, the trial judge summarised the uncontroversial principles applying to claims of proprietary estoppel, as follows:[15]
[15]See also Sidhu v Van Dyke (2014) 251 CLR 505, 511 [2]; [2014] HCA 19 (‘Sidhu’).
173 To succeed, Gary must establish that:
(a)John engaged in conduct amounting to a representation or promise that Gary would acquire from him an interest in property belonging to John;
(b)Gary reasonably believed or expected that he presently has, or in the future will acquire, an interest in property belonging to John;
(c)John knew or intended that Gary held that belief or expectation and would act or abstain from acting in reliance on that belief;
(d)Gary reasonably acted to his detriment and changed his position in reliance on his expectation or belief; and
(e)the detriment is such that it would be unconscionable for John to assert his proprietary rights against Gary, in the context of Gary’s changed position, by not fulfilling Gary’s expectation.
John only challenged the findings relating to the last element. However, in order to assess this element it is important to record the trial judge’s unchallenged findings as to the other elements.
The findings as to the promises made have already been set out. There was no suggestion as to imprecision or ambiguity in the terms of the promises. More particularly, the trial judge was satisfied that there was no ambiguity about the land which was the subject of the promises. It was always the Farm, or whatever land comprised it.[16] There was also no exploration in the evidence of imprecision or ambiguity in relation to contingencies.[17]
[16]Reasons [76], [118], [214], [222].
[17]Ibid [223].
As to the first promise, the trial judge found that the informal, familial context of the promise could not have conveyed to a reasonable person that some form of legally binding ‘promise’ was being made.[18]
[18]Ibid [203].
As to the second promise, the trial judge found that the promise was in ‘sufficiently clear terms’ that Gary might have reasonably relied upon it. This finding was supported by the consistent repetition of the promise from when Gary was a school boy.[19]
[19]Ibid [204].
As to the third promise, the trial judge found that Gary was entitled to, and did, reasonably expect that he would inherit the Farm with his brother in circumstances where there was, again, ‘consistent repetition of the promise’.[20]
[20]Ibid [205].
As to the fourth promise, the trial judge found that Gary reasonably expected that his father would honour his promise, and that it was ‘unsurprising’ that he would develop a project to incorporate the Farm into his dairying business.[21]
[21]Ibid [152], [206].
The trial judge also found that John appreciated that Gary believed that John would retain, and not dispose of, the Farm and that Gary (or Gary and Craig) would inherit it, initially on the death of the survivor of them and then later, after Lynette died, when John died.[22]
[22]Ibid [212].
The trial judge summarised his findings on detrimental reliance as follows:
(a)Gary worked long hours during his childhood and teens, beyond the work that boys normally do on a farm. While working in Korumburra and Trafalgar (including while living away from home in Morwell), Gary continued to work significant hours on the Farm, for which he was never paid. Irrespective of whether this was conduct to Gary’s detriment, which I need not determine, his conduct was not induced by any act on John and Lynette’s part that was capable of affecting legal relations about the proprietary interests in the Farm.
(b)Gary gave up a highly promising career in banking. One of his motivations in returning to Korumburra, abandoning his career in banking, was the promise of the Farm and of paid work on the Farm. When he realised that John and Lynette did not intend to pay him, he purchased Cochrane’s. It doesn’t matter that he was also motivated by other interests, such as his mother’s health and his girlfriend’s presence, the promise of the Farm and of paid work on the Farm materially contributed to Gary acting to his detriment. I need not decide the issue of causal reliance, as I have not been persuaded that Gary acted to his detriment when he gave up his banking career.
(c)While operating Cochrane’s full time, Gary continued to work for John without pay. Most significant was about 200 hours every hay season from 1981 to 1993, cutting and raking hay, on Cochrane’s, the Farm and John’s property at Condoluci’s. He also spent about ten hours per week working on the Farm, helping with calving, sick cows and other farm work. I am satisfied that Gary acted to his detriment in this way, in reliance on the second promise.
(d)From 2008 to 2014, Gary continued to work for John, assisting in significant ways, carting cattle, working in John’s hay contracting business during the hay season, and working five to ten hours per week on the Farm. After Lynette died in 2010, Gary continued to work for John on the Farm and with his hay contracting business. I am satisfied that Gary acted to his detriment in this way, in reliance on the third promise.
(e)From 2013 to 2015, Gary ‘wasted’ more than $330,000 in connection with the 2013 lease agreement, scuppered by John, which Gary would not have undertaken but for the expectation of inheriting the Farm, and in circumstances where he would have preferred to slow down, rather than expand his operations. John’s contention was that the predominant motivation to expend money on the project between 2013 and 2015 was to take advantage of obtaining possession of the Farm in July 2015. It was, John’s counsel contended, a dispute about reneging on an agreement to lease, which was not an issue in the proceeding, rather than reneging on an inheritance promise. I am satisfied that Gary acted to his detriment in making the improvements and expenditure that I have described above, in reliance on the fourth promise. In particular, applying Gageler J’s approach to causation, on the basis of my analysis of the evidence that despite any other contributing factors, Gary would have adopted a different course and would not have made the improvements expanding substantially the capacity of his milking infrastructure at Hallston, had the relevant assumption that he would inherit the Farm not been induced by John’s fourth promise. The notion of a market value lease of the Farm giving Gary possession of the Farm from John’s retirement until his death was not in any way inconsistent with the promises.[23]
[23]Ibid [219] (citations omitted).
As to the second promise, the trial judge also found that Gary was induced to assist John when he could have devoted his efforts to his own farming interests.[24] There was no evidence of the weekly wage or the accrued benefits of employment that might have been foregone. Nor was there any specific identification of the forgone opportunities to pursue other profitable farming interests. Still the trial judge accepted the ‘general proposition advanced that working long hours on somebody else’s farm for no wage would ordinarily be considered detrimental to a person’s financial wellbeing.’[25]
[24]Ibid [106].
[25]Ibid [106].
As to the third promise, the trial judge was also satisfied that Gary worked long hours on the Farm and in the hay baling business that he otherwise could have devoted to working on his other farming interests, thus forgoing profits.[26]
[26]Ibid [125].
As to the fourth promise, the trial judge found that Gary relied on John’s promise in expending funds to develop Hallston as part of his project to incorporate the Farm into his dairy business.[27] He would never have contemplated the project, but for the fourth promise.[28] His detriment was the overcapitalisation of Hallston.[29] He otherwise had no reason to outlay $330,000 in improvements to the milking yards and attendant infrastructure.[30] Gary also made capital improvements to the Farm of a kind that would normally be the responsibility of a landlord under a lease, rather than a tenant.[31] Gary also carried out fencing and fencing repair work on the Farm.[32]
[27]Ibid [149].
[28]Ibid [152].
[29]Ibid [154].
[30]Ibid [154].
[31]Ibid [155].
[32]Ibid [157].
Turning then to the findings as to unconscionability and remedy, the trial judge found that possible vicissitudes could not affect the assessment of unconscionability or proportionality given that John adduced no evidence in respect of any relevant vicissitude.[33]
[33]Ibid [227].
In relation to the suggestion that the undertaking removed any stain on John’s conscience, the trial judge stated:
234In this context, I reject John’s submission based on the assertion that Gary ‘has done very well’ at Hallston and does not need the benefit of the promises that he have the Farm, which ought (save for the Home Farm) to revert back to John, whose need is now greater. That is not to the point. Relevantly, I am satisfied John has ‘done very well’, assisted considerably by Gary’s conduct in reliance on his promises.
235Gary was making lifestyle choices in reliance on the promise. I am not referring to his decision to give up a career in banking, for reasons previously discussed. John knew that Gary gave up his time and his labour to help him work the Farm, operate his hay baling business, and to a much lesser extent, his beef cattle business. Gary helped to keep the Farm viable, particularly through the final years of Lynette’s life and in the aftermath of her death. I am satisfied that once Lynette was no longer able to assist John on the Farm, he could not viably run dairy without assistance from Gary or Craig. Gary gave up not just his entitlement to be paid for his work, but the opportunity to devote all of his energy to creating opportunities and returns for his own family. Later, John was able to run beef cattle with less assistance from Gary. I am satisfied that the unpaid assistance John received from Gary helped him to expand his financial interests, including the purchase of other property, such as the Ballarat properties.
236The detriment to Gary flowing from reliance on the fourth promise was also not readily quantifiable in financial terms. It is not enough to add up Gary’s expenditure at, say $330,000, and determine that a half interest in the Home Farm when John dies relieves the detriment. Expenditure by Gary on his own property at Hallston is not likely to be completely wasted. The correct assessment is the extent to which the expenditure was wasted because of overcapitalisation of Hallston. In the absence of appropriate evidence, I cannot make any finding in this respect. There was no evidence of the expectant value of the Home Farm for Gary that would permit a comparative assessment. As I have stated above, the detriment to Gary was not limited to the overcapitalisation of Hallston. This was a project planned on the basis that Gary would have the Farm, not just the Home Farm. There were family elements evident from the invitation to Craig to join a partnership. The project that Gary devised and the expenditure was unusual. Without the Farm as part of the project, it became pointless. Gary would never have embarked on that project.
237 The detriment to Gary if he is now denied the Farm was accumulated over many years. I would not describe the detriment suffered by Gary as involving life-changing decisions with irreversible consequences of a profoundly personal nature, to borrow the language used by Nettle JA in Donis. However, the detriment to Gary is beyond the measure of money, and is such that the equity raised by John’s conduct can only be accounted for by substantial fulfilment of the assumption upon which all of Gary’s actions were based. Stepping back to take an expansive view, Gary’s conduct in reliance on John’s promises set the course of his life over decades in a way that cannot now be unscrambled. The course of Gary’s life since he returned to Korumburra and started farming Cochrane’s was substantially influenced by the expectation induced by John that he would receive, at least, a half share with Craig in the Farm. For Gary to receive no more than a half share in the Home Farm necessarily occasions him detriment of a kind and to an extent that calls for the intervention of equity.
238By the time of the fourth promise, that assumption, induced by John’s conduct and his acceptance of the benefit to him of Gary’s consequent conduct, was that on John’s death, Gary would solely inherit the Farm and Craig would inherit the Ballarat properties, subject to the two brothers coming to some equitable accommodation based on the relative values of those properties, so that they would each receive the same value. I have accepted that John reformulated the promise that he expressed to Gary as a promise to Gary alone…[34]
[34]Citations omitted.
His Honour then noted John and Craig’s settlement, and found that the consequence of Gary’s concession is that his interest in the Home Farm should be limited to a half share with Craig.[35]
[35]Reasons [242].
He therefore made the declarations as set out above.
Submissions
John
John emphasised that the scope of any relief was to be limited to that which was necessary to ameliorate the unconscionable outcome that would otherwise have arisen from his departure from the promises. The undertaking was ample to ameliorate the detrimental reliance and vindicate the promises having regard to other benefits conferred. Alternatively, the remedy imposed was wholly disproportionate to the detrimental reliance. The Court should have declined relief or imposed some lesser remedy.
In oral submissions, Senior Counsel also rejected Gary’s contention that House v The King[36] applied. He submitted that the questions of whether there was a proprietary estoppel; whether it was disproportionate to give effect to the promise; and what the appropriate remedy was; do not involve the exercise of a discretion subject to the judicial restraint outlined in that case.[37] However, he ultimately conceded that a range of remedies would be available if the promise cannot be enforced in the terms in which it was made. He also accepted that John needed to establish that the fulfilment of the promise was ‘clearly disproportionate’.
[36](1936) 55 CLR 499; [1936] HCA 40.
[37]John particularly cited Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541, 590 [148] where Edelman J stated that, although equitable remedies were traditionally discretionary, legal rules now govern a number of these remedies; [2018] HCA 30.
John also suggested that Gary had the onus of proving the value of the detrimental reliance. Further, in circumstances where John could not prove the value of the labour, or the extent of overcapitalisation, Gary also carried an evidentiary onus given that he was the only party capable of giving such evidence. It was only once that evidentiary onus was satisfied that John carried the ultimate onus as to disproportionality.
John’s principal contention was that there was a failure to consider the value of the detriment, and to then compare that value with the relief granted. This latter task was to be undertaken with reference to the valuation evidence (which was not referred to by the trial judge). The trial judge also erred in finding that the detriment could not be valued in money.
John emphasized that, on the basis of the valuation evidence, Gary stands to inherit $1,845,500.[38] However, when this was compared to the value of the detriment, the only detriment in relation to the fourth promise was the expenditure of $330,000 on improvements (with no evidence of pecuniary loss), and some fencing repairs.
[38]This figure represented the total of the standalone values of the Home Block ($850,000) and the Delios Farm ($458,000), plus half of the standalone value of the Home Farm ($1,075,000, half of which is $537,500).
Insofar as it was appropriate to look at the detriment generally, the detriment incurred was solely constituted by the overcapitalisation of Hallston and the work done for John on the Farm. These amounts could have been measured in money, though Gary did not put on evidence to enable the Court to do so. More specifically:
·there was no evidence of the weekly wage, the accrued benefits of foregone employment, or identification of foregone opportunities to pursue other farming interests;
·Gary also did not prove that he gave up a promising banking career in reliance on the promises; and
·there was no evidence that expenditure at Hallston resulted in any financial loss given that the trial judge was unable to value the extent to which the expenditure was wasted.
John highlighted that Gary had also received other substantial assistance in setting up Cochrane’s which then funded the acquisition of Hallston.
John submitted that the conclusions of the trial judge really rested on the ‘nebulous’ finding that Gary’s detriment was ‘beyond the measure of money’, and that the promises ‘set the course of his life over decades’. Criticisms were made of both these findings in circumstances where the trial judge also found that the case did not involve ‘life-changing decisions’ as found in Donis v Donis (‘Donis’).[39] More particularly, the finding that the detriment was ‘beyond the measure of money’ was said to be a fundamental error. John submitted that it was inconsistent with the findings that Gary did not give up his banking career in reliance on the promises; that his parents helped him buy a farm which he sold to buy his present farm; and that he spent 14 years estranged from his father and, for several years, chose to work as a real estate agent.
[39](2007) 19 VR 577; [2007] VSCA 89.
John also emphasised that the grant of a proprietary interest over the Farm, without accounting for the Equalisation Condition, meant that the trial judge had conferred a ‘windfall gain’ upon Gary because he acquired the Farm without having to account to Craig.
John submitted that the trial judge erred in concluding that something beyond the undertaking was necessary (which had a value of $537,500).[40] There was no justification for the extra $1,300,000 (approximately) in circumstances where the trial judge did not justify the figure by reference to the valuations, or value of the work performed.
Gary
[40]The value of the undertaking represents half of the standalone value of the Home Farm.
Gary submitted that judicial restraint should be exercised based on the principles in House v The King. He submitted that the decision was a discretionary one where error needed to be demonstrated. This was consistent with the approach in Donis.[41] It was also consistent with the judgment of Edelman J in Minister for Immigration and Border Protection v SZVFW.[42] Thus, although there are certain aspects of equity where rules may apply (such as unconscionability and specific performance), there are no ‘bright lines’ in relation to remedy and proportion.
[41](2007) 19 VR 577, 582 [17]; [2007] VSCA 89.
[42](2018) 264 CLR 541, 590 [148]; [2018] HCA 30.
Gary also submitted that the onus was on John to deal with any failures in the evidence regarding valuations, hourly rates, and the extent of overcapitalisation. He emphasized that, while the situation prior to the decision in Giumelli v Giumelli (‘Giumelli’)[43] was that relief should merely compensate, the current position was that an expectation should be fulfilled unless the promisor adduced evidence that the relief was disproportionate.[44] Consistent with this, it was for the promisor to prove disproportion.
[43](1998) 196 CLR 101; [1999] HCA 10.
[44]Citing, inter alia, Sidhu (2014) 251 CLR 505, 530 [85]; [2014] HCA 19.
Gary’s primary response to John’s case was that it wrongly compared the monetary value of the detriment against the value of the promise as a ‘calculus exercise’. However, the correct approach, in line with the more recent authorities, is to focus on John’s conscience which is referrable to the expectation that he created.
Detrimental reliance did not involve ‘quid pro quo’, and did not require correspondence between the expectation and the monetary value of the detriment.[45] Further, the concept of detriment did not need to consist of the expenditure of money or other quantifiable financial disadvantage so long as it was ‘something substantial’.[46]
[45]Citing, inter alia, Donis v Donis (2007) 19 VR 577, 583 [20]; [2007] VSCA 89 (‘Donis’).
[46]Citing Donis (2007) 19 VR 577, 583 [20]; [2007] VSCA 89.
In relation to the suggestion of benefits, Gary noted the findings of the trial judge that the alleged benefits received from John were overstated. The only real thing of value provided to ameliorate the detriment was the undertaking, but this was not a ‘benefit’ as it comprised no more than part of what John promised.
Further, even if it was relevant to engage in a calculus exercise and quantify the value of the relief, Gary contended that a quantification exercise did not demonstrate that the relief was ‘out of all proportion’. Thus the value of the undertaking ($537,500) was significantly under the value of the property to which Gary would be entitled purely by his reliance on the second and third promises (which would be half of the Farm, worth $1,300,000).[47] The difference between that figure and the remedy (which would take specific account of the fourth promise) was $545,500,[48] which was not ‘out of all proportion’ given the wasted expenditure of $330,000 at Hallston, and the other detriment suffered specifically in reliance on the fourth promise.
[47]This figure is based on a total figure of $2,600,000 being the standalone value of the House Block ($850,000) and the combined value of the Home Farm and the Delios Farm ($1,750,000).
[48]This figure represents the same valuation of the trial judge’s remedy advanced by John at [49] above ($1,845,500), minus the value of the property promised by the second and third promises ($1,300,000).
There was also more than just outgoings but lost opportunities, labour, and other benefits to John. Thus, counsel suggested that there were at least some 14,500 hours expended.[49] This could not be said to be disproportionate, even leaving aside the other detriment.
[49]This was said to amount to some $127 per hour taking into account the total (undisputed) value of the remedy at $1,845,000.
In any event, the trial judge correctly identified that the detriment went ‘beyond the measure of money’, and ‘set the course of [Gary’s] life over decades in a way that cannot now be unscrambled’. Gary gave up not just his entitlement to be paid for his work, but the opportunity to devote all of his energy to creating returns for his own family. In relation to Hallston, the trial judge also found that without the Farm as part of the project it became ‘pointless’, and rejected the argument that Gary had done ‘very well’ at Hallston.
Gary also submitted that the remedy was not disproportionate when consideration was given to the Equalisation Condition. Given that there is no evidence of the value of the Ballarat properties, there is no way for the Court to assess whether the value of the concession was equivalent to those properties. In any event, even if there is a windfall, it is not at John’s expense, but a matter between Gary and Craig.
Resolution
Legal principles
There is English authority which suggests that a court should award what has been described as the ‘minimum equity’ to do justice to the plaintiff.[50] This approach required substantial correspondence between the remedy and the detriment, and was also supported by certain statements made in Waltons Stores (Interstate) Ltd v Maher[51] and Commonwealth v Verwayen (‘Verwayen’) (particularly the observations of Mason CJ).[52]
[50]See, eg, Crabb v Arun District Council [1976] Ch 179, 198.
[51](1988) 164 CLR 387; [1988] HCA 7.
[52](1990) 170 CLR 394, 412; [1990] HCA 39.
However, in Giumelli a majority of the High Court (Gleeson CJ, McHugh, Gummow and Callinan JJ) rejected the suggestion that relief was limited to the reversal of the detriment.[53] Rather, the Court found that orders which gave effect to the generated assumption reflected the ‘prima facie entitlement’ of the plaintiff.[54] This was subject to any qualification necessary to avoid injustice to others, (particularly a third party who was living on the promised lot), and to avoid relief which went beyond what was required for conscientious conduct.[55]
[53](1999) 196 CLR 101, 120 [33]; [1999] HCA 10.
[54]Ibid 125 [50]. See also 123 [42], citing Deane J in Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39.
[55]Giumelli v Giumelli (1999) 196 CLR 101, 123–4 [42], 125 [50] (‘Giumelli’); [1999] HCA 10.
The emphasis on the making good of the expectation is also demonstrated in subsequent cases cited by the parties, including in Donis (the Victorian Court of Appeal); Delaforce v Simpson-Cook (‘Delaforce’) (the NSW Court of Appeal);[56] and the High Court decision of Sidhu v Van Dyke (‘Sidhu’).[57]
[56](2010) 78 NSWLR 483; [2010] NSWCA 84.
[57](2014) 251 CLR 505; [2014] HCA 19.
In Donis, Steven Donis and his parents made statements to his fiancé, Susie Donis, that certain property purchased by the parents belonged to the young couple. Despite Susie’s reluctance to live at the property (a farm on the outskirts of Melbourne), encouraged by the statements made, she married in 1997 and became pregnant soon after, giving up a teaching career. The couple also spent a considerable amount of money improving the property.
However, in January 2000, the couple separated and Susie was forced to vacate the property, which was subsequently sold. She thereafter claimed that the parents were bound to make good their promise that she would have a one-quarter share in the property, and was therefore entitled to one quarter of the proceeds of sale. The trial judge granted such relief.[58]
[58]The trial judge granted a remedy based on the mid-point between the value of the property on the date of separation and the value of the property at the date of sale.
In dismissing the appeal, Nettle JA, in the leading judgment, rejected the suggestion that equitable estoppel permitted a court to do only what was necessary to avoid the detriment. He considered that Giumelli showed that there was no such restriction with proprietary estoppel. He stated that in such cases:
19… Prima facie the estopped party can only fulfil his or her equitable obligation by making good the expectation which he or she has encouraged. The estopped party, having promised to confer a proprietary interest on the party entitled to the benefit of the estoppel, and the latter having acted upon the promise to his or her detriment, is bound in conscience to make good the expectation. It follows that the detrimental reliance that supports the estoppel need not constitute in any sense a consideration moving to the party bound. It is a unilateral element of the estoppel and not the price paid for it.
20The prima facie position will yield to individual circumstances. Principle and authority compel the view that where a plaintiff’s expectation or assumption is uncertain or extravagant or out of all proportion to the detriment which the plaintiff has suffered, the court should recognise that the claimant’s equity may be better satisfied in another and possibly more limited way. Thus, as was also said in Giumelli, before granting relief the court is required to consider all of the circumstances of the case, including the possible effects on third parties, and to avoid going beyond what is required for conscientious conduct or would do injustice to others. But that does not mean that the court is required to be ‘constitutionally parsimonious’ or that it is necessary for there to be substantial correspondence between expectation and the monetary value of the detriment suffered, or which but for the relief to be accorded would be suffered. The object of the exercise is to do equity and for that purpose ‘detriment’ is no narrow or technical concept. It need not consist of expenditure of money or other quantifiable financial disadvantage so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether departure from a promise would be unconscionable in all the circumstances.[59]
[59]Donis (2007) 19 VR 577, 582–3 [19]–[20] (citations omitted); [2007] VSCA 89.
His Honour found that there was nothing ‘vague or imprecise’ about the terms of the promises.[60] Nettle JA also contrasted the case with an illustration given by Deane J in Verwayen, that ‘an estopped party would not be held to a promise to transfer property worth $1m if the only detriment suffered by the party … were the outlay of a couple of hundred dollars in constructing a shed on the land’.[61] His Honour found that, whereas the detriment of a couple of hundred dollars on something as insignificant as a shed would be such a ‘small and impersonal degree of detriment’ as to be wholly compensable in cash, the detriment in Donis was ‘of a kind and extent that involves life-changing decisions with irreversible consequences of a profoundly personal nature’.[62] It was thereby ‘beyond the measure of money’, and such that the equity raised by the promisor’s conduct could only be accounted for by substantial fulfilment of the assumption generated.[63]
[60]Donis (2007) 19 VR 577, 588 [33]; [2007] VSCA 89.
[61]Ibid 588 [34].
[62]Ibid 588–9 [34].
[63]Ibid 589 [34].
Nettle JA also rejected a suggestion that the components of the detriment in that case were disproportionate to the relief sought having regard to calculations as to the quantification of the relevant amounts.[64] In so doing he noted that the law of proprietary estoppel was not a manifestation of the concept of unjust enrichment and further said:
The detrimental reliance which supports the estoppel is, therefore, not to be conceived of as consideration in any sense. It is not a case of quid pro quo and even less one which requires correspondence as between the financial value of whatever may move each way. It is only when adherence to the promise or assumption would cause injustice to others or go beyond what is required for conscientious conduct that the court should recognise that the promisee’s equity may be better satisfied in another and more limited way.[65]
[64]The appellants (Steven and his parents) calculated that Susie’s share of the pleaded detriment was unlikely to have exceeded $15,000 and that this amount ought be reduced to allow for rent-free accommodation which she enjoyed: Donis (2007) 19 VR 577, 592 [49]–[50]. Nettle JA found that this ‘broke down at a number of levels’: see 593–5 [53]–[59]; [2007] VSCA 89.
[65]Donis (2007) 19 VR 577, 594 [56]; [2007] VSCA 89.
The Court therefore upheld the trial judge’s conclusion that Susie was entitled to a sum representing her promised share of the property.
In Delaforce, the Court accepted that Giumelli appeared to remove the notion of enforcing only the ‘minimum equity’ in equitable or proprietary estoppel.[66]
[66]Delaforce (2010) 78 NSWLR 483, 485 [3] (Allsop P), 486 [6] (Giles JA), 493 [56] (Handley AJA); [2010] NSWCA 84.
Handley AJA’s judgment contains an extensive analysis of the relevant authorities. Like Nettle JA in Donis, he considered that the detrimental reliance need not constitute a consideration moving to the party bound.[67] He further concluded that there was no positive requirement for a plaintiff to prove that the relief sought is proportionate.[68] Rather, the principle was a negative one, that enforcement of the expectation must not be disproportionate.[69] He also considered that where the expectation was undefined or uncertain, equity would need to fashion relief from the circumstances. However, where the expectation was defined with certainty that is where the court must start.[70]
[67]Ibid 493 [56].
[68]Ibid 495 [77].
[69]Ibid.
[70]Ibid 497 [92].
Allsop P generally agreed with the reasons of Handley AJA. He considered that Giumelli did not mean that matters which could assuage the detriment were irrelevant. However, he described what it did mean as follows:
3… It does mean, however, that relief in such cases is not to be measured by weighing detriment too minutely in order that it be converted into some equivalent of cash or kind, as if one were measuring the consideration for a commercial bargain. Equity will look at all the relevant circumstances that touch upon the conscionability (or not) of resiling from the encouragement or representation previously made, including the nature and character of the detriment, how it can be cured, its proportionality to the terms and character of the encouragement or representation and the conformity with good conscience of keeping a party to any relevant representation or promise made, even if not contractual in character. Equity has always had a place in keeping parties to representations or promises.
4Proportionality of the claimed interest or remedy to the prejudice or detriment is undeniably a relevant consideration, and sometimes of considerable importance. It should not, however, be transformed into a necessary constitutive element of a cause of action to be pleaded or proved by the party seeking relief. To do so would elevate one consideration above others, and in particular above the importance of making good an expectation by encouragement or representation. It would tend to equate the analysis to one requiring that the party encouraged receive no more than it can prove that it suffered in detriment. This would see the equity become one of compensation for proved equivalent detriment. The equity is a broader one based on the just and conscionable satisfaction in appropriate fashion of the equity arising from the expectation created in another by encouragement or representation. As Handley AJA says, the role of proportionality is better understood, in a doctrine dealing with the legitimacy or otherwise of resiling from an encouragement or representation that has created an expectation, as assisting in an assessment whether what is claimed or contemplated to be granted is disproportionate or unjust in all the circumstances.[71]
[71]Citations omitted.
Sidhu concerned a woman who relied on promises from a sexual partner that the ‘Oaks Cottage’ would be put into her name. During eight and a half years at the property she carried out unpaid work, maintaining and improving that property (and other property), and gave up the opportunity to earn a full-time wage (though the amounts involved were not quantified). The promisor, inter alia, argued that the Court of Appeal had erred in ordering payment of equitable compensation measured by the value of the promises, submitting that any relief should be limited to what was necessary to compensate the respondent for the loss she suffered by relying on his promises.[72]
[72]Sidhu (2014) 251 CLR 505, 520 [46]; [2014] HCA 19.
The High Court reinforced the significance of the decision in Giumelli, which had held that the relief granted may include the performance of the promise and performance of the expectation generated by the promise.[73]
[73]Ibid 529 [82].
The Court observed that if the respondent had been induced to make a ‘relatively small, readily quantifiable monetary outlay’ on the faith of the promises, then it might not be unconscionable for the appellant to resile from his promises. However, that was not this case (which involved ‘life-changing decisions’ as in Donis).[74] Further:
85 … While it is true to say that ‘the court, as a court of conscience goes no further than is necessary to prevent unconscionable conduct’, where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise.[75]
[74]Ibid 529 [84].
[75]Citations omitted.
In summary, then, the authorities establish that in determining the proper remedy in a case of proprietary estoppel:
·the promisee is prima facie entitled to have the promisor held to the promise or expectation,[76] ie the relief which is necessary is ‘usually’ that which reflects the value of the promise;[77]
·the court will then consider all the circumstances to determine whether it is necessary to mould or modify the relief to avoid going beyond what is required for conscientious conduct, or to avoid injustice to others.[78] The equity may be satisfied in another more limited way where a plaintiff’s expectation or assumption is uncertain, or extravagant, or out of all proportion to the detriment suffered;[79]
·proportionality is a relevant consideration, but it should not be viewed as a ‘necessary constitutive element’ to be proved by the party seeking relief;[80]
·the character of the promise/expectation is also a relevant consideration, including whether it is vague or imprecise;[81]
·while the character of the detriment is a relevant consideration,[82] the exercise is not one of ‘weighing detriment too minutely in order that it be converted into some equivalent of cash or kind’,[83] nor does it require ‘substantial correspondence’ between the expectation and the monetary value of the detriment.[84] The detriment should also not be treated as ‘consideration’ for the proprietary interest;[85]
·the detriment need not consist of expenditure of money or other quantifiable financial disadvantage, so long as it is something substantial.[86]
Analysis
[76]Giumelli (1999) 196 CLR 101, 123 [42], 125 [50]; [1999] HCA 10; Donis (2007) 19 VR 577, 582 [19]; [2007] VSCA 89.
[77]Sidhu (2014) 251 CLR 505, 530 [85]; [2014] HCA 19.
[78]Giumelli (1999) 196 CLR 101, 123 [42], 125 [50]; [1999] HCA 10; Donis (2007) 19 VR 577, 588 [32], 594 [56]; [2007] VSCA 89.
[79]Donis (2007) 19 VR 577, 583 [20]; [2007] VSCA 89.
[80]Delaforce (2010) 78 NSWLR 483, 485–6 [4], 495 [77]; [2010] NSWCA 84.
[81]Delaforce (2010) 78 NSWLR 483, 485 [3], 497 [92]; [2010] NSWCA 84. See also Donis (2007) 19 VR 577, 583 [20], 588 [33]; [2007] VSCA 89.
[82]Delaforce (2010) 78 NSWLR 483, 485 [3]; [2010] NSWCA 84.
[83]Ibid.
[84]Donis (2007) 19 VR 577, 583 [20], 594 [56]; [2007] VSCA 89.
[85]Ibid 583 [19], 589 [36], 594 [56]; Delaforce (2010) 78 NSWLR 483, 493 [56]; [2010] NSWCA 84.
[86]Donis (2007) 19 VR 577, 583 [20]; [2007] VSCA 89.
On the basis of the trial judge’s unchallenged findings Gary is prima facie entitled to the Farm. The question that remains is whether it is necessary to modify the relief to avoid going beyond what is required for conscientious conduct, or to avoid injustice to others.
A difficulty with John’s approach is that it presumes that a ‘ledger’ approach is appropriate ie an approach where one quantifies and compares the value of the promises, and the value of the detriment. However, consistent with the principles above, such an approach does not assist him for a number of reasons.
First, John’s approach is tantamount to treating Gary’s detriment as ‘the consideration’ for the promised interest. Such an approach is misdirected as a matter of principle. The question is not whether Gary has earned the proprietary interest from an arm’s length perspective, but rather whether it is unconscionable for John to deny Gary the promised interest.
Secondly, the unchallenged findings were that Gary’s detriment involved a number of substantial components, taking into account the continuity of the course of John’s promises, and Gary’s reliance, throughout the whole of his lifetime. One cannot artificially isolate the fourth promise when it built upon Gary’s expectation generated from the previous promises.
Looking at the overall detriment, there was extensive unpaid labour, as well as the expenditure on improvements at Hallston (which would have never been undertaken but for the fourth promise). There was also other unquantified work, including fencing work. The trial judge further found that Gary could have otherwise devoted his efforts to his own farming interests. This is even leaving aside the trial judge’s finding that the detriment was ‘beyond the measure of money.’
Even allowing for a ‘ledger’ approach, the detriment in this case was not insignificant. Thus, insofar as it was quantified, it represented thousands of hours at the Farm, as well as $330,000 of expenditure at Hallston.
However, the detriment did not need to be measured minutely so that it was ‘converted into some equivalent of cash or kind’, nor did there need to be ‘substantial correspondence’ with the expectation. Rather, this is a case, like Sidhu, where although the detriment was not precisely quantified, it was clearly ‘substantial’. It is readily distinguishable from detriment of $200 on a shed, and it is not a ‘small and impersonal degree of detriment’ (as described in Donis). The lack of precise quantification does not prevent the Court from considering whether it is unconscionable for John to depart from his promises in this case.
The findings that Gary’s detriment was ‘beyond the measure of money’, and ’set the course of [Gary’s] life over decades in a way that cannot now be unscrambled’, fortify the substantial detriment involved. We find no error in those findings, given the repeated course of the promises over extensive years (notwithstanding the break), and the influence this had on ‘Gary’s lifestyle choices’ (even if the case is not exactly the same as Donis).
John’s approach would not satisfy the requirements of conscientious conduct. Such an approach would allow John to induce Gary into working without wages on the basis of a promised interest in the Farm, and then, decades later, revert back to a simple repayment of the value of the forgone wage. It could also provide an incentive for unconscionable conduct given that free labour can often be expected to produce a return of more than just the value of the labourer’s work to the labourer.
The alleged grant of ‘benefits’ does not alter our analysis. It is not John’s place, as a promisor, to unilaterally change the terms of his promises, and provide substitute benefits to those promised to Gary. In any event, the trial judge found that John’s contribution to Cochrane’s was overstated, and otherwise consistent with the express promises about the future ownership of the Farm. Any contribution to Gary’s business at Cochrane’s also cannot ameliorate the unconscionability of departure from the third and fourth promises, both of which post-dated any such contribution.
The Equalisation Condition also does not assist John. First, the property to which the fourth promise specifically attached was the entire interest in the Farm. Regardless of how the equalisation was to be achieved between the brothers,[87] the effect of the fourth promise was that Gary would ultimately become the sole owner of the Farm. Secondly, the Equalisation Condition only reflects the ultimate state of affairs between Gary and Craig. Any reduction in the interest moving from John to Gary would actually result in a windfall gain to John. Thirdly, although the impact on a third party may be a relevant consideration, Craig has willingly settled for a half interest in the Home Farm. This has already been taken into account by the remedy awarded by the trial judge, and there is no reason to further reduce the interest flowing from John to Gary. Finally, there is no evidence as to the value of the Ballarat properties in any event. We cannot be satisfied that the half-interest in the Home Farm, conceded by Gary, does not entirely satisfy the Equalisation Condition in such circumstances.
[87]There was evidence that John ‘wasn’t too concerned about’ how the split was to be achieved: see Reasons [115], [120].
The grant of the undertaking also does not alter the analysis. As a matter of principle, the undertaking is not the starting point. Rather, the proper analysis is to begin with the prima facie presumption that Gary is entitled to the Farm. It would only be if fulfilment of the second, third and fourth promises would each go beyond what would be required for conscientious conduct, that we might turn to consider the appropriateness of the grant already conferred by the undertaking. We are not satisfied that this is the case.
We accept that the character of the expectation and the detriment are relevant considerations. However, as recorded already, the trial judge found no ambiguity in the terms of the promises. The detriment was also substantial, even if it was not precisely quantifiable.
In all the circumstances then, the trial judge was correct to hold John to his promises. More particularly, we are not satisfied that the expectation was ‘out of all proportion’ to the detriment suffered. His Honour also fairly moulded the relief to give effect to the concession concerning Craig, and thereby ‘avoid injustice to others’. We are not satisfied that the equity should be satisfied in some other more limited way.
We are thereby not satisfied that the trial judge was in error such that the proposed grounds must fail.
Two final points can be added. First, there is some force in John’s submission that the question of whether it was disproportionate to give effect to the promises did not amount to the exercise of a discretion.[88] However, given that we have determined that there was no error by the trial judge, it is unnecessary to determine whether, and to what extent, the House v The King standard of judicial restraint would otherwise apply.
[88]See Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541, 562 [46] (Gageler J), 590 [148], 592 [151] (Edelman J); [2018] HCA 30.
Second, as to onus, as explained above, proportionality is not to be viewed as a ‘necessary constitutive element’. There is also no need for precise quantification of detriment in order to ascertain John’s unconscionability in departing from the promises. While there may be cases where a lack of evidence prevents any meaningful assessment of the detriment, this is not such a case in circumstances where John has not challenged the trial judge’s findings as to the nature of the detriment that Gary suffered.
Conclusion
There will be leave to appeal, but the appeal will be dismissed.
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