Irons v Irons - [2007] SADC 54

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
IRONS v IRONS & ANOR
[2007] SADC 54
Reasons for Decision of His Honour Judge Millsteed
14 May 2007
REAL PROPERTY
Application for an order for time for removal of a caveat be extended until further order - application opposed by defendants - where defendants' son owed plaintiff approximately $360,000 in child maintenance payments - where defendants purchased unit for plaintiff to live in - where plaintiff made capital improvements to the unit - where defendants entered into a contract for the sale of the property - where plaintiff lodged a caveat over the property claiming an estate or interest as beneficiary of a constructive trust or alternatively as a life tenant - discussion as to authorities applicable to the application - discussion as to authorities as to whether a constructive trust has been created.
Held: Though plaintiff has a prima facie caveatable interest, balance of convenience favours the refusal of the application. Application refused.
Real Property Act 1886 (SA) s191(e), referred to.
Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198; Australian Broadcasting Corporation v O’Neill (2006) 229 ALR 457; Union Finance Pty Ltd and Others v Rateki Pty Ltd and Anor (No 2) [2007] SASC 11; Jakudo Pty Ltd v SA Telecasters Ltd (No 2) [1997] 69 SASR 440; Mushinski v Dodds (1985) 160 CLR 583; Baumgartner v Baumgartner (1987) 164 CLR 137; Windt v Carabelas (2002) 224 LSJS 124; Giumelli v Giumelli (1999) 196 CLR 101; Inwards v Baker [1965] 1 All ER 446; Vinden v Vinden [1982] 1 NSWLR 618; Milton v Proctor (1988) 4 BPR 9654; In re Sharpe [1980] 1 WLR 219; Jenke and Anor v Chaplin Unreported Judgment (SCWA) No 2034 of 1994 delivered on 27 October 1994; Pearce v Pearce [1977] 1 NSWLR 170, discussed.

IRONS v IRONS & ANOR
[2007] SADC 54
Introduction

This is an application by the plaintiff pursuant to s 191 of the Real Property Act 1886 (RPA) for an order that the time for removal of a caveat over land situated at Unit 3, 22 Tennyson Street, Kurralta Park be extended until further order. The application is opposed by the defendants who are the registered proprietors of the property.
The affidavits
On 17 January 2007 affidavits from the plaintiff and her solicitor William Sowden DeGaris were filed in support of the application. A further affidavit from Mr DeGaris was filed on or about 2 February 2007. On 31 January 2007 affidavits from the first defendant Raymond Irons, Brett Donald Williams and Bronte Halkett were filed on behalf of the defendants. The last of those deponents disputed certain aspects of the plaintiff’s assertions.
On the hearing of the application, Mr O’Halloran, counsel for the defendants, properly conceded, in my view, that I must proceed on the basis that the factual assertions made by the plaintiff in her affidavit would be the findings of fact made by the Court at trial. However, he submitted that I should ignore the second affidavit of Mr DeGaris because it is based on inadmissible opinion and hearsay. It is unnecessary to canvass the contents of the impugned affidavit. Suffice it to say that I agree with Mr O’Halloran’s submission.
Accordingly, I will proceed on the basis of the plaintiff’s assertions, as set out in her affidavit, and ignore the second affidavit of Mr DeGaris. I will also take into account the affidavit material filed on behalf of the defendants to the extent that it does not conflict with the plaintiff’s assertions.
Background facts
The relevant facts can be briefly stated. The defendants are the parents of the plaintiff’s late husband Dean Irons. The plaintiff separated from Dean Irons in 1982 and divorced him in early 2002. He died in August 2002 in a plane crash. The marriage produced four children whose ages range from 27 to 33 years. It is not in dispute that the plaintiff and the defendants have enjoyed a good relationship over the years.
At the time of his death Dean Irons owed the plaintiff approximately $360,000 in child maintenance payments. In about 1995 the plaintiff instituted, through the Child Support Agency, proceedings against Dean Irons for the recovery of the child maintenance payments owed to her. The action included a claim against Irons Engineering Pty Ltd (IEPL) in which Dean Irons held an interest. The company was owned and controlled by the defendants.
After the proceedings were instituted the first defendant asked the plaintiff to terminate the action, expressing concern that he would financially suffer if the action succeeded. He promised the plaintiff that he would look after her and her children if she discontinued the proceedings. On the basis of this promise the plaintiff dropped the action.
In about mid 2002, the first defendant told the plaintiff that, because his son Dean had never looked after her, he was going to buy a property for her and the children. The plaintiff believed that he was honouring the promise which he had made in 1995.
On 23 September 2002, the defendants purchased the unit at Kurralta Park in their names. However, at the time of purchase the first defendant told the plaintiff that the unit was for her sole occupation and for her children when she did not wish to live there any longer. The first defendant further informed the plaintiff that the defendants did not purchase the unit in her name because they did not want any future partner of the plaintiff to have an interest in the property.
Since then the plaintiff has lived in the unit. She has not been required to pay rent and the defendants have paid all the rates and taxes on the property. However, the plaintiff has spent approximately $15,000 to $20,000 of her own money improving the unit. The capital improvements have included the installation of floating wooden floors and a dishwasher, carpeting the hallway and lounge room, paving the backyard and re-landscaping the rear and front gardens. During the plaintiff’s occupation of the unit there have been a number of occasions when the first defendant has told friends and acquaintances, in the plaintiff’s presence, that the unit was purchased for her exclusive occupation, and in the names of the defendants to prevent any future partner of the plaintiff acquiring an interest in it.
On 28 December 2006, the defendants entered into a contract for the sale of the unit for the sum of $275,000. The date of settlement has since passed. I accept the defendants’ submission that they did not enter into the contract for the purpose of frustrating the plaintiff’s claim. Earlier in the year IEPL went into liquidation. Both the first defendant and his wife received no financial return from the administration of the company. In the result, it became necessary for the defendants, who have both retired, to sell the property at Kurralta Park to fund their living expenses. The defendants only other assets are their family home - a unit at West Lakes - two motor vehicles (value not disclosed) and $7,000 in a bank account.
The caveat
On 16 November 2006, about five weeks before the defendants entered into the contract of sale, the plaintiff (presumably because she discovered that the defendants intended to sell the unit) lodged a caveat over the defendants’ property at Kurralta Park claiming:
an estate or interest as beneficiary of a constructive trust entered into on or about the 23^rd of September 2002 in which the Caveatees are Trustees and the Caveator claims an interest in the land as a beneficiary presently entitled to the fee simple in the land or presently entitled to the exclusive use and occupation of the land as a life tenant pursuant to the terms of the constructive trust.
On 4 January 2007, the Registrar-General served upon the plaintiff a notice warning the removal of the caveat pursuant to s191 (e) and (f).
The proceedings
On 17 January 2007, the plaintiff filed a summons seeking an extension of time for the removal of the caveat. On 23 January 2007, I made an order extending the time for the removal of the caveat until 1 February 2007 to enable full argument to take place before me. Also I granted the plaintiff leave to file an Amended Summons.
By her Amended Summons, filed on 31 January 2007, the plaintiff seeks an order that the time for the removal of the caveat be extended until further order, and a declaration that the defendants hold the unit upon trust for the plaintiff and that the defendants be estopped from denying that the plaintiff is the beneficial owner of the unit.
On 1 February 2007, I heard both parties and made an order extending the time for the removal of the caveat until the delivery of this decision.
The Test
In Whallin v Bailbart Investments Pty Ltd[1] Cox J held that the test for determining whether an order should be made extending the time for removal of the caveat is the same as the test for the grant of an interlocutory injunction, that is whether there is a serious question to be tried and, if there is, whether the order should be made on the balance of convenience.
[1] (1987) 47 SASR 198 at 203
Recently, in Australian Broadcasting Corporation v O’Neill[2] the High Court by a majority (Gleeson CJ and Crennan J, Gummow and Hayne JJ) held that the relevant principles to be applied in determining applications for injunctive relief were those explained by the High Court in Beecham Group Ltd v Bristol Laboratories Pty Ltd.[3] In Beecham, Kitto, Taylor, Menzies and Owen JJ, said that the court when faced with such applications needed to consider the following issues:[4]
The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.
[2] Union Finance Pty Ltd & Ors v Rateki Pty Ltd & Anor (No 2) [2007] SASC 11 at [7] per Master Lunn; Australian Broadcasting Corporation v O’Neill (2006) 229 ALR 457 at 478-480 per Gummow and Hayne JJ; 466 per Gleeson CJ and Crennan J
[3] (1968) 118 CLR 618
[4] Ibid 622-3
In Union Finance Pty Ltd and Others v Rateki Pty Ltd and Anor (No 2)[5] Judge Lunn expressed the view that for extensions of time to remove caveats the “prima facie” rather than the “serious question to be tried” test is now to be used (together with balance of convenience). In my view, there is no significant difference between these expressions of the test provided they are applied in the manner explained by the majority in O‘Neill.
[5] [2007] SASC 11 at 466
Gleeson CJ and Crennan J after referring to Jakudo Pty Ltd v SA Telecasters Ltd (No 2)[6] said:[7]
As Doyle CJ said in the last-mentioned case, in all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff’s entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction. These are the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed. We agree with the explanation of these organising principles in the reasons of Gummow and Hayne JJ, and their reiteration that the doctrine of the court established in Beecham Group Ltd v Bristol Laboratories Pty Ltd should be followed. (my emphasis)
[6] (1997) 69 SASR 440
[7] (2006) 229 ALR 457 at [19] footnotes omitted
Gummow and Hayne JJ explained:[8]
[That] by using the phase “prima facie case”, their Honours [in Beecham] did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument.
[8] (2006) 229 ALR 457 at 473
They went on to say that the strength of the probability required depends on the nature of the rights the applicant asserts and the practical consequences likely to flow from the order sought.
Gummow and Hayne JJ later observed:[9]
When Beecham and American Cyanamid are read with an understanding of the issues for determination and an appreciation of the similarity in outcome, much of the assumed disparity in principle between them loses its force. There is then no objection to the use of the phrase “serious question” if it is understood as conveying the notion that the seriousness of the question, like the strength of the probability referred to in Beecham, depends upon the considerations emphasised in Beecham.
[9] (2006) 229 ALR 457 at 479
So with those qualifications in mind there can be no objection to the continued use of the phrase “serious question to be tried”.
Caveatable interests
Section 191 of the RPA allows a person “claiming to be interested at law or in equity … in any land” to lodge a caveat with the Registrar-General forbidding the registration of any dealing with that land.
Any existing interest at law or in equity, which is proprietary in nature, will support both lodgement and extension of a caveat.[10] However, a purely personal or contractual right is insufficient.[11] For example, a mere licence to use or occupy land creates no proprietary rights or interest in land and may be revoked by the licensor upon the giving of reasonable notice. Accordingly such a licence does not make any caveatable interest in land.[12]
[10] S Colbran and S Jackson (3rd ed 1996) at [5.1]; McMahon v McMahon [1979] VR 239, Re Pile’s Caveats [1981] Qd R 81
[11] Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605
[12] La Martina v Penney [1968] SASR 411
The interest claimed by the plaintiff
In the present case the plaintiff does not assert any legal right to a transfer of the property to her. Indeed, she could not claim such a right because there is no agreement evidenced in writing to that effect.[13] Rather the plaintiff asserts an equitable interest in the property the basis of which has been described in several ways.
[13] See s29 of the Law of Property Act 1936 (SA)
As earlier observed in the caveat the plaintiff claims, as the beneficiary of a constructive trust, an entitlement to the “fee simple in the land” and, in the alternative, a right to the “exclusive use and occupation of the land as a life tenant”. In the Amended Summons, however, the plaintiff does not claim an interest in the land as life tenant, but seeks a declaration that the defendants hold the whole of the land upon trust for her and that the defendants be estopped from denying that she is the beneficial owner of the land. In her affidavit of 16 January 2007 the plaintiff asserts that she intends to bring an action claiming that the defendants hold the property upon a constructive trust for her for life and thereafter for the benefit of her children.
On the hearing of the application Mr Riggall, counsel for the plaintiff, agreed that there has been a lack of consistency in the descriptions of the plaintiff’s claim. He put to me, as I understood his argument, that the plaintiff contends that she is entitled to the beneficial ownership of the property and, in the alternative, to an interest for her life, or for as long as she wishes to occupy the unit, and thereafter for her children and that a constructive trust should be imposed to recognise her interests.
As a matter of general principle the constructive trust is remedial in nature. It serves as a remedy which equity imposes regardless of actual or presumed agreement or intention to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.[14] The remedy is not to be imposed in accordance with what the Court thinks is just and fair.[15] Rather, the foundation for the imposition of the constructive trust is that a refusal to recognise the existence of an equitable interest amounts to unconscionable conduct. The trust is imposed as a remedy to circumvent that unconscionable conduct.[16] However, the use of the remedy depends on the person seeking relief establishing the existence of an equitable right.[17]
[14] Muschinski v Dodds (1985) 160 CLR 583, per Deane J at 614; Baumgartner v Baumgartner (1987) 164 CLR 137, per Mason CJ, Wilson and Deane JJ at 148-150
[15] Muschinski v Dodds (1985) 160 CLR 583, per Deane J at 616; Baumgartner v Baumgartner (1987) 164 CLR 137, per Mason CJ, Wilson and Deane JJ at 148
[16] Baumgartner v Baumgartner (1987) 164 CLR 137, per Mason CJ, Wilson and Deane JJ at 147-150
[17] See Windt v Carabelas (2002) 224 LSJS 124; Morton v Morton [1999] SASC 368
In the present case the constructive trust sought is founded on the first defendant’s promise that the plaintiff was entitled to sole occupation of the unit for life or for so long as she desired and thereafter for her children. On the basis of that promise the plaintiff has spent approximately $15,000 to $20,000 of her own money on capital improvements. The plaintiff contends that in those circumstances it would be unconscionable for the defendants to deny her beneficial ownership or a life interest in the property. The plaintiff maintains she has a prima facie case that it would be unconscionable for the defendants to assert their legal rights to the exclusion of these interests and that a constructive trust should be imposed to give effect to them.
Mr O’Halloran, counsel for the defendants, argued that the plaintiff has failed to establish the existence of an equitable interest in the property upon which a constructive trust could be founded. He submitted that the plaintiff may, at most, have a licence to occupy the unit for life, or for as long as she liked, and possibly an equitable estoppel that would entitle her to compensation in relation to the capital improvements made by her. He submitted that such an interest is less than a proprietary interest and cannot justify an extension of the caveat.
Prima facie case
Has the plaintiff established an equitable basis for the imposition of a constructive trust?
The courts have shown a willingness to impose constructive trusts requiring the legal owner of land to hold the land on trust for another in circumstances where that other person has made contributions to the acquisition, maintenance or renovation of property pursuant to a joint endeavour or relationship which has failed in circumstances where blame cannot be attributed to either party. The two leading cases are the High Court decisions in Mushinski v Dodds[18] and Baumgartner v Baumgartner.[19]
[18] (1985) 160 CLR 583
[19] (1987) 164 CLR 137
In Mushinski a man and a woman who were living in a de facto relationship purchased property with the intention of building a house and restoring a cottage on the property. The property was conveyed to them as tenants in common. The woman contributed about $25,000 and the man about $2,500 to the purchase and improvement of the property. The Court declared that the parties held their respective legal interests as tenants in common upon trust to repay each his or her respective contribution to the venture.

Deane J (with whom Mason J agreed) said:[20]
Once its predominately remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to apply the property for the benefit of another …
[20] (1985) 160 CLR 583 at 616-617
Deane J concluded that it was appropriate to impose a constructive trust in the circumstances of that case to give effect to the general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them.[21]
[21] Baumgartner v Baumgartner (1987) 164 CLR 137 at 147-148
In Baumgartner the parties to a defacto relationship pooled their incomes for living expenses. They lived in a unit owned by the male partner. They sold the unit and purchased a house which they placed in his name. The house was purchased with the aid of a mortgage which was also in his name. The male contributed approximately 55 per cent of his income and the female approximately 45 per cent of her income to the pooled funds which were used to meet their expenses including mortgage repayments. When they later separated the man claimed that the land was his sole property.
The High Court held that the case warranted the intervention of equity and the imposition of a constructive trust. Mason CJ, Wilson and Deane JJ considered that the parties had pooled their earnings for the purposes of their joint relationship and for their mutual security and benefit. Their Honours went on to say:[22]
The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant’s assertion, after the relationship had failed, that the … property … is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent.
[22] (1987) 164 CLR 137 at 149
The Court concluded that the constructive trust to be imposed should declare the beneficial interests of the parties in the proportions of 55 per cent to the male and 45 per cent to the female.
Since Baumgartner there have been a number of cases where courts have imposed constructive trusts in favour of members of a relationship who have made financial contributions or other forms of contributions (such as the pooling of labour) to the resources of a relationship.[23] However, what is common to these cases, and the High Court decisions in Mushinski and Baumgartner, is that the parties contributed financially or otherwise to a joint endeavour involving the acquisition, maintenance or renovation of property. The imposition of construction trusts in these cases were a remedial response to an application of the established equitable principle which restores to a party contributions which he or she has made to a joint endeavour.
[23] See discussion of authorities in Bryson v Bryant (1992) 29 NSWLR 188, per Kirby P at 202–203; Parij v Parij (1997) 72 SASR 153; Green v Green (1989) 17 NSWLR 343; Miller v Sutherland (1990) 14 Fam LR 416; Re Sabri (1996) 21 Fam LR 213; Lloyd v Tedesco (2002) 25 WAR 360
By contrast in Windt v Carabelas[24] the Full Court upheld the trial judge's decision that there was no basis for the imposition of a constructive trust where the evidence failed to establish that contributions made by the mistress of a land owner were in pursuance of a joint endeavour.
[24] (2002) 224 LSJS 124 Lander J at 133
In the present case the financial contributions the plaintiff made in the form of capital improvements to the property were not made in the context of, or for the purpose of, a joint endeavour. In the circumstances there is no basis for an application of the principles expressed in Mushinski and Baumgartner.
Is there any other equitable basis for imposing a constructive trust?
Mr O’Halloran submitted, and as far as I am aware he is correct, that apart from the joint endeavour cases, the only other cases in which the courts have constructed trusts to recognise beneficial ownership of property are those where a person has relied upon a representation as to the future acquisition of property and has suffered detriment as a result.
The leading case is Giumelli v Giumelli.[25] There a son worked on an orchard property belonging to his parents. The parents owned the property under a partnership agreement to which he and his brothers were later admitted. He was promised a portion of the property for working without wages. He was later told that he could build a residence on the property and the residence would be his. A residence was then constructed on the property which was partly paid for by him and the balance by the partnership. When he married he was promised a portion of the property upon which the residence had been built provided he stayed on the property. After his marriage ended in divorce he chose a wife of whom his parents disapproved. He was told that he would have to choose between his wife and the property. He then instituted proceedings against his parents claiming a beneficial interest in that portion of the property that had been promised to him.
[25] (1999) 196 CLR 101; see also Morton v Morton [1999] SASC 368
The High Court held that the son had acted to his detriment on the promise made to him and was therefore entitled to equitable relief. Prima facie that entitled him to an order for the creation of a conveyance of the promised portion of land to him under the terms of a constructive trust. However, the Court considered that such an order would cause unfairness to one of his brothers who also lived on the property with his family. It was also inappropriate by reason of a pending action relating to the family partnership. The Court considered that to avoid injustice to others and to avoid relief that went beyond what was required for conscientious conduct by the plaintiff’s parents, it was appropriate to grant relief in the form of monetary compensation rather than an acquisition of title to land.
The case of Giumelli, and others like it, are far removed from the present case. Here there was no promise of ownership but rather a promise of sole occupation for as long as the plaintiff desired. Furthermore, it is difficult to accept that the plaintiff would have believed that ownership of the unit had been given to her when she was not required to pay the rates and taxes on the land. In my view there is no basis in equity upon which it could be said that the plaintiff was entitled to the beneficial ownership of the property.
Is there any other basis upon which the plaintiff could claim a caveatable interest in the property?
In Giumelli, Gleeson CJ, McHugh, Gummow and Callinan JJ, in their joint judgment, observed that the relief in the form of a constructive trust was akin to orders for conveyance made in Dillwyn v Llewelyn[26] and Riches v Hogben.[27]
[26] (1862) 4 De GF J 517 at 523[45 ER 1285 at 1287]
[27] [1985] 2 Qd R 292 at 362
Their Honours added:
In these cases, the equity which founded the relief obtained was found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff. This is a well recognised variety of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant.
The variety of estoppel to which their Honours were referring was proprietary estoppel.[28] The application of this form of estoppel extends beyond cases like Giumelli.
[28] See discussion of Giumelli v Giumelli by A Bradbrook, S McCallum and A P Moore, Australian Real Property Law (3rd Ed 2002) at [5.46]
Dal Pont and Chalmers[29] provide the following explanation of the doctrine of proprietary estoppel:
Proprietary estoppel can operate to prevent an owner of an interest in property from asserting her or his rights against another party whom he or she has allowed or encouraged to deal with that interest, or act in relation to that property, as if the latter had rights to the said property. Traditionally, this form of estoppel was divided into two categories: where the representor encouraged expenditure on her or his property by some representation or benefit (“estoppel by encouragement”)[30], and where the representor acquiesced to the expenditure (which developed into “estoppel by acquiescence”)[31] The equity created by the expenditure in question could be a beneficial interest or it may be given effect by way of a charge or lien.
[29] G Dal Pont and D Chalmers, Equity and Trust in Australia (3rd Ed 2004)
[30] Citing Dillwyn v Llewelyn (ibid)
[31] Citing Ramsden v Dyson (1866) LR 1 HL 129
In my view, this form of estoppel could operate to prevent the defendants from asserting their rights against the plaintiff by reason of the fact that they had acquiesced to her expenditure on the property in circumstances where she had been led to believe by the first defendant that she had a right to occupy the property for as long as she desired. This is arguably sufficient to give rise to a proprietary interest even if the plaintiff’s occupation of the unit was under licence as the defendants contend.
This view accords with several authorities dealing with expenditure by an occupant of land in circumstances giving rise to proprietary estoppel.
In Inwards v Baker[32] the defendant was induced by his father to build a bungalow on his father’s land and had expended money for that purpose in the expectation of being allowed to remain there. Following the death of his father the trustees of his father’s estate sought to evict him on the basis that he merely had a licence to occupy the premises which they had revoked. The Court of Appeal held that he was entitled to remain in the bungalow.
[32] [1965] 1 All ER 446
Lord Denning (with whom the other members of the Court agreed) said:[33]
We have had the advantage of cases which were not cited … to the County Court judge, cases in the last century, notably Dillwyn v Llewelyn … and Plimmer v Wellington Corpn … This latter was a decision of the Privy Council which expressly affirmed and approved the statement of the law made by Lord Kingsdown in Ramsden v Dyson … It is quite plain from those authorities that, if the owner of land requests another, or indeed allows another, to expend money on the land under an expectation created or encouraged by the landlord that he will be able to remain there, that raises an equity in the licensee such as to entitle him to stay. He has a licence coupled with an equity … Counsel for the plaintiffs put the case of a purchaser. He suggested that the father could sell the land to a purchaser who would get the defendant out; but I think that any purchaser who took with notice would clearly be bound by the equity … It is an equity well recognised in law. It arises from the expenditure of money by a person in actual occupation of land when he is led to believe that, as a result of that expenditure, he will be allowed to remain there. It is for the court to say in what way the equity can be satisfied. I am quite clear in this case that it can be satisfied by holding that the defendant can remain there as long as he desires to use it as his home. (citations omitted)
[33] [1965] 1 All ER 446 at 448-449
See also Vinden v Vinden.[34]
[34] [1982] 1 NSWLR 618
But does the expenditure on improvements in land give rise to a proprietary interest?
In Milton v Proctor[35] the Court of Appeal (NSW) had occasion to consider whether the plaintiff had acted unconscionably in terminating a licence to occupy a cottage where the defendant had expended money on the land and cottage in the belief that he was entitled to occupy it for life. The trial judge’s decision that it would not be unconscionable for the plaintiff to obtain possession provided compensation was paid to the defendant was approved.
[35] (1988) 4 BPR 9654
The discussion by McHugh J of the principles governing licences to use or occupy land is germane to this case.
His Honour said:[36]
The licence agreement itself created no interest in land and could be revoked by the plaintiff: Cowell v Rosehill Racecourse Co Ltd … The possessory rights of a land owner cannot be renounced or altered by a mere contract. They continue to exist notwithstanding a contract made by the owner; for the contract operates only to impose obligations and does not prevent the exercise of rights arising from the property which the owner has in the land; Cowell v Rosehill Racecourse Co Ltd ... Hence the grant of a licence to go on land raises no equity against its subsequent revocation …Of course, if revocation of the licence constitutes a breach of contract the licensee may obtain damages for the breach … (citations omitted)
…
However, if the licensor requests or permits another to expend money on the licensor’s land under an expectation created or encouraged by the licensor that the licensee will be able to remain on the land, an equity is raised which entitles the licensee to stay: Inwards v Baker … Thus in Vinden v Vinden Needham J held that there was an irrevocable licence where the defendant undertook to meet the financial obligations of his father in return for the right to live in his father’s house: see also Morris v Morris …
However, expenditure on improvements on land by a licensee to the licensor’s knowledge does not by itself create any equity …
[36] (1988) 4 BPR 9654 at 9660
His Honour then considered what the position would be if the licensor conferred a right of entry upon his land and, although not actually inducing or encouraging the licensee’s expenditure, knows that it is being incurred. His Honour then cited with approval In re Sharpe[37] and the following passage from Browne –Wilkinson J:[38]
In a strict case of proprietary estoppel the plaintiff has expended his own money on the defendant’s property in an expectation encouraged by or known to the defendant that the plaintiff either owns the property or is to have some interest conferred on him. Recent authorities have extended this doctrine and, in my judgment, it is now established that, if the parties have proceeded on a common assumption that the plaintiff is to enjoy a right to reside in a particular property and in reliance on that assumption the plaintiff has expended money or otherwise acted to his detriment, the defendant will not be allowed to go back on that common assumption and the court will imply an irrevocable licence or trust which will give effect to that common assumption.
[37] [1980] 1 WLR 219
[38] [1980] 1 WLR 219 at 223
McHugh J concluded:[39]
Accordingly, I think that equity will prevent a licensor from revoking a licence during the period of the licence agreement if the licensee has expended money on land upon the common assumption that the licensee is to have the right to reside on that land.
The equity created constitutes an interest in the land: Plimmer v Mayor etc of Wellington, above; DHN Food Distributors Ltd v Tower Hamlets London Borough Council … In re Sharpe, above. The nature of the equity is measured by the extent to which equity will give the licensee protection against interference with the equity: cf Stern v Mc Arthur … (my emphasis)
[39] (1988) 4 BPR 9654 at 9661
The above passage supports the view that where a person has expended moneys in improving land proprietary estoppel may give rise to an interest in land, though something less than beneficial ownership. Such an interest would be sufficient to support a caveat. As earlier observed any interest in “equity … in any land” is sufficient: s191.
Indeed, in Jenke and Anor v Chaplin[40] the facts of which are not far removed from this case, White J (Supreme Court of Western Australia) held, on the basis of the principles expressed in Inwards v Baker, that the defendant had a caveatable interest where he had expended moneys in the construction of a granny flat on the plaintiffs property in the belief that he and his wife would be entitled to remain in occupation of the flat for life. It is to be observed that in Pearce v Pearce[41] Helsham CJ left open the possibility that the equitable interest of a woman occupying premises under an irrevocable licence was a sufficient basis for the lodgement of a caveat.
[40] Unreported Judgment (SCWA) No 2034 of 1994, delivered on 27 October 1994
[41] [1977] 1 NSWLR 170
Though the point may not be free of doubt, I am of the view that there is a prima facie case that the plaintiff has a caveatable interest. It would be unconscionable conduct on the part of the defendants to evict the plaintiff in circumstances where she had expended moneys on improvements to the unit on the basis of a belief induced by the first defendant’s representations that she had sole occupation of the unit for life. Even if she were not entitled to a share of the beneficial ownership of the property, and merely had a licence to occupy the premises for life, equity would prevent the defendants revoking the licence. The equity created constitutes an interest in the land.
For these reasons, I am satisfied that the plaintiff has a prima facie caveatable interest.
Balance of convenience
In deciding whether the balance of convenience favours the plaintiff the court must consider the risk of doing injustice to the parties in either granting or refusing the application.[42]
[42] National Bank Ltd v Zollo (No 3) (1995) 64 SASR 63 at 68
It is relevant to bear in mind that if the plaintiff were to succeed in an action against the defendants on the basis I have identified, it would be necessary for the court to consider a form of relief that gave sufficient recognition to the plaintiff’s equity. In my view, it is more likely than not that the court would consider an order for monetary compensation rather than an order that prevented the defendants from selling the property or regaining possession of it.[43] The market value of the property is approximately $260,000-$280,000 of which only a small proportion could be regarded as attributable to the capital improvements made by the defendant. Furthermore, it is necessary for the defendants to sell the property to raise money upon which to live. Apart from their home they have limited assets and very little money in the bank.
[43] See Giumelli v Giumelli (1999) 196 CLR 101 at 113; Milton v Proctor (1988) 4 BPR 9654
In these circumstances it cannot be said that the plaintiff has established that the balance of convenience favours her.
Orders
Application for an extension of time for the removal of the caveat refused.
I will hear the parties as to costs.