Tadgell and Hahn and Ors

FEDERAL CIRCUIT COURT OF AUSTRALIA

TADGELL & HAHN & ORS

[2016] FCCA 328

Catchwords:
FAMILY LAW – Equity – Promissory Estoppel – representation of Mother-in-Law to wife – change of life arrangements over twenty years in reliance on representations – no matters of principle.

Legislation:

Family Law Act 1975 (Cth), s.79

Effem Foods Pty Ltd (t/as Uncle Ben's of Australia) v Lake Cumbeline Pty Ltd [1999] HCA 15;
Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446
Sidhu v Van Dyke [2014] HCA 19
Stern v McArthur [1988] HCA 51
Donis v Donis[2007] VSCA 89

Applicant:

MS TADGELL

First Respondent:

MR HAHN

Second Respondent:

MRS HAHN

Third Respondent:

THE OFFICIAL TRUSTEE IN THE BANKRUPT ESTATE OF MR HAHN

File Number:

MLC 7358 of 2009

Judgment of:

Judge Riethmuller

Hearing date:

25 - 29 August 2014 & 1- 4 September 2014

Date of Last Submission:

1 September 2015

Delivered at:

Melbourne

Delivered on:

18 February 2016

REPRESENTATION

Counsel for the Applicant:

Mr Mawson QC and Mr Moisidis

Solicitors for the Applicant:

Meier Denison Guymer

Counsel for the First Respondent:

In person

Counsel for the Second Respondent:

Mr Forbes

Solicitors for the Second Respondent:

Seoud Solicitors

Counsel for the Third Respondent:

Ms Wheeler

Solicitors for the Third Respondent:

Aitken Partners

DECLARATIONS

That the Second Respondent holds the property known as ‘Property G’ contained in the three titles (being: Lot 1 on the Tile plan Subdivision No.(omitted) as described in Certificate of Title Volume (omitted) Folio (omitted); Lot 1 on the Tile Plan Subdivision No.(omitted) as described in Certificate of Title Volume (omitted) Folio (omitted); and Lot (omitted) on the Tile Plan Subdivision No.(omitted) as described in Certificate of Title Volume (omitted) Folio (omitted)) on trust for herself and the Applicant in equal shares.

ORDERS

That, unless otherwise agreed in writing:
(a)The applicant’s interests in ‘Property G’ be discharged upon the payment to her of $1,162,500.00 within 90 days;
(b)That in the event the second respondent is unable or unwilling to comply with order 1(a) herein, the property be transferred to the applicant and the second respondent (or a nominee of the second respondent) as trustees for sale to sell the property and apply the proceeds of sale:
(i)first to the costs and expenses of sale; and
(ii)Secondly, to be divided equally between the applicant and the second respondent.
That all applications be otherwise dismissed.
That the parties have liberty to apply with respect to consequential procedural and machinery orders as may be required.

IT IS NOTED that publication of this judgment under the pseudonym Tadgell & Hahn & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 7358 of 2009

MS TADGELL

Applicant

And

MR HAHN

First Respondent

MRS HAHN

Second Respondent

THE OFFICIAL TRUSTEE IN THE BANKRUPT ESTATE OF MR HAHN

Third Respondent

REASONS FOR JUDGMENT

On the (omitted) of Melbourne is a large and beautiful property known affectionately by the parties and their families as ‘Property G’. Property G is on high ground, although close to the ocean. It has beautiful natural gardens and a modest house.
Property G was purchased by Mrs Hahn’s (the Second Respondent’s) parents in 1956 as a holiday retreat. In the past the family also had the rights to a boat shed nearby on the water. It is the location of many fond memories for Mrs Hahn who enjoyed holidays there with her parents. The property remains dear to Mrs Hahn as a result of these memories and her love of its gardens.
In 1978, Mrs Hahn’s father died, and the property was transferred to her mother. In 1987, on her mother’s death, the property vested in Mrs Hahn. Mrs Hahn is now over 90 years of age, and remains strongly attached to the property.
Mrs Hahn has three children, two sons and a daughter. Her eldest son, the First Respondent (the Husband in these proceedings), was born in 1949 and is now 65 years of age. In 1978, he met the Applicant Wife and they married a year later. The Wife, who was born in 1954, is now 60 years of age. The Husband and Wife have children, all of whom are now adults: Ms K born in 1979, Mr M born in 1981 and [D] born in 1984. After 28 years of marriage the Husband and Wife separated in September 2007, and later divorced in October 2009.
In 1985, the Husband and Wife started living at Property G, when it was owned by the Husband’s grandmother. In 1987, the Husband’s grandmother passed away, leaving the property to Mrs Hahn in her will.
After they separated in September or November of 2007, the Husband moved out, and the Wife remained living at Property G. In 2009, the Wife left Property G, and the Husband returned. He continues to reside there.
The Wife has no assets of significance. The Husband was declared bankrupt in May 2014. The Third Respondent is the Husband’s Trustee in Bankruptcy (‘the Trustee’).
Mrs Hahn remains the registered owner of Property G. Property G is now valued at $2.325m. The Wife claims a one half beneficial share on the basis of a claim sounding in promissory estoppel: based on a promise alleged against the Second Respondent to transfer the property to her and her Husband. The Husband makes no claim against Property G, and supports the position of his mother Mrs Hahn that she is the legal and beneficial owner. The Trustee claims an entitlement to any interest of the Husband on the basis that it vested with the Trustee upon the Husband’s bankruptcy. If the Husband or the Trustee holds an interest in Property G, property settlement orders are sought by the Wife pursuant to Part VIII of the Family Law Act 1975.

The Claims as articulated by the parties

Orders were made requiring the Wife and Trustee to plead their cases in equity against Mrs Hahn and for Mrs Hahn to plead her defence, in order to clearly define the issues between the parties with respect to claims other than for a property settlement between the Husband and Wife pursuant to Part VIII of the Family Law Act.
The Wife and Trustee both filed and served pleadings defining their cases.

The Wife’s Case

The Wife pleaded her case on three bases: contract, constructive trust, and estoppel.
The contract claim is based upon allegations that Mrs Hahn made an oral agreement to transfer the property to the parties ‘if they lived in the property’. This claim fails on the pleadings for two reasons. First, there is no consideration by the Husband or Wife. Secondly, it is a contract that is not evidenced in writing (and is without any note or memorandum) and therefore not enforceable as a result of the Statute of Frauds (see the Instruments Act 1958 (Vic)).
The constructive trust claim and estoppel claim both rely upon five representations alleged to have been made by Mrs Hahn, which the Wife pleads in para.10 of the Amended Statement of Claim as having occurred between 1986 and 2010:
[Mrs Hahn] said to [the Wife] words to the effect of:
a. Well dear, it’s yours, don’t let them come, I wouldn’t, I saw what they did and I was shocked.
b. I’m sorry for what I have done but you know you have Property G.
c. You know you stay there forever, its yours.
[Mrs Hahn] said to [the Husband] and [the Wife]:
a. I am leaving the back house to [the Husband’s sister] and the front one to [the Husband’s brother], and Property G is yours.
b. That’s nice dear, it is yours and you can do what you like to it.
The constructive trust claim is pleaded on the basis that the statements of Mrs Hahn induced the Wife to contribute financially to the conservation and improvement of Property G, and to make non-financial contributions in arranging the improvements and ‘maintenance of the household while the children were young.’ It is a claim for relief by way of the imposition of a trust. Notably, the pleading with respect to the constructive trust claim does not allege that the Husband was induced to make any contributions.
The Wife’s estoppel case is based upon the equitable principles recently discussed by the High Court in Sidhu v Van Dyke [2014] HCA 19 and in Donis v Donis [2007] VSCA 89; [2007] HCA Trans 609. In this regard the Wife must establish that representations were made, that she relied upon them, and that as a result she has altered her position to her detriment.
The Wife pleads that in reliance upon the representations set out above, she remained living on the property, and that jointly with the Husband, made financial and non-financial contributions. Later (at para.19) she pleads that both her and the husband relied upon the representations and conduct of Mrs Hahn and ‘lived in and treated the property as if absolutely entitled’ to it.
The only conduct of the Husband, pleaded by the Wife as having been carried out based on reliance upon the representations, is that of living in the property and treating it as his own. It is difficult to see that the Wife’s pleadings show any detriment that would found an estoppel as between the Husband and Mrs Hahn. Given that the Husband was not present for the most significant representations (and as the evidence revealed, also had numerous other meetings with his mother where the Wife was not present), it is unsurprising that the pleadings by the Wife do not seek to put the allegations of reliance by the Husband any higher.
The Wife’s case, to the extent it relies upon the Husband having an interest in Property G, is, from the Wife’s perspective largely moot as a result of the bankruptcy of the Husband. Any equitable interest he may have would vest in the Trustee, and she does not appear to have any basis for pursuing a s.79 adjustment where 50% of the only property, on her case, vested in her in circumstances where the property was provided to the parties without payment by the Husband’s mother.

The Trustee’s Case

The Trustee’s pleading was remarkably brief (more akin to an endorsement on a writ than a pleading) and far from satisfactory. After setting out the identities of the parties, the Husband’s bankruptcy, and the subject matter of the proceedings, the pleading simply alleged (after amendment during the trial) that:
9. The Third Respondent adopts the Statement of Claim of the Applicant and says that ~~should this Honourable Court find that~~ the Second Respondent holds her interest in the Property ~~(or alternatively an entitlement to compensation) was held~~ on trust for the Applicant and the First Respondent, alternatively the Applicant and ~~then the interest of the First Respondent in the Property (or compensation) is now held on trust for~~ the Third Respondent.
During final addresses I asked counsel for the Trustee whether her client’s claim was ‘still as pleaded’ and she confirmed that it was.
It appeared on the pleadings, that the Trustee was not pursuing any active case, simply hoping that the Wife would obtain orders that declared that the property is held by Mrs Hahn on trust for the Husband and Wife, and then claiming that any interest of the Husband vested in the Trustee. The Wife is not entitled to pursue orders against third parties simply for the benefit of the Husband or the Trustee in Bankruptcy. The Wife’s Counsel clearly identified that it was not open to the Wife to bring a proceeding on behalf of the Husband, even with respect to the lodging of a caveat (at transcript, p.68). The wife’s case under s.79 no longer pursues the property of which the Husband may be the equal owner so there is no benefit to the wife in pursuing a claim that the husband has an interest in Property G.
The pleading of the Trustee must therefore be read as relying upon the facts and circumstances pleaded by the Wife as the facts and circumstances relied upon by the Trustee in pursuing its claims as the successor in title to the Husband’s interests. The difficulty with this course is that the pleading of the Wife only articulates two representations alleged to be made to the Husband, and the only conduct said to be based upon the representations was living in and treating the property as that of the Husband and Wife. Simply living in the property in reliance upon the two representations said to have been made by the Second Respondent could not be sufficient detriment, without more, to found an estoppel in a case such as this.
The difficulties faced by the Trustee are even greater than the apparent difficulty of the Trustee’s case on the pleadings: the evidence demonstrated that there were numerous meetings between the Husband and his mother at which the Wife was not present, highlighting the obvious reality that the representations, and the extent to which the Husband could rely upon them in the given circumstances, must be quite a different case to that of the Wife.
Despite the inadequacy of the Trustee’s pleadings in failing to make clear allegations of detriment on the part of the Husband, it appears that the improvements made to the property by the Husband and Wife, as identified in the Wife’s pleadings, must have been part of the basis for the Trustee’s claim and that to treat them as such would not take Mrs Hahn by surprise, given the way that the case was conducted.
In the Outline of Argument of the Trustee, the ‘Summary of Argument’ section simply says:
1. The Third Respondent says that if the above property is owned in equity by the Wife and the Husband prior to the bankruptcy of the Husband then, the question for the court is what the Wife’s interest was in that property and any interest of the Husband becomes the property of the trustee to the extent of the debts as set out above in order to pay the liabilities of the Bankrupt.

The Husband and Mrs Hahn

The husband and Mrs Hahn make no claims for relief, simply seeking that the wife’s case be dismissed.

Restitution

None of the parties put forward a claim for restitution (in pleadings or in argument) based upon the value of the permanent improvements to the land (see, for example, Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446 and Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 at 509). There was no evidence led as to what effect, if any, the improvements had on the value of the land. As a result, I do not consider any claim in restitution.

The evidence

The valuation evidence was unchallenged. Property G was valued at $2.35m at the time of trial.
The Wife gave evidence and called her daughter, Ms K to also give evidence. The Husband gave evidence in his case. Mrs Hahn gave evidence and called her second son, Mr M to give evidence. The Trustee also swore an affidavit, but was not required for cross-examination. The Trustee called no witnesses. The hearing took many days as a result of the combination of extensive cross-examination, and illness of Mrs Hahn.
The parties also relied upon considerable documentary evidence which was compiled into Court Books (‘CB’).

Approach to the Evidence

Counsel for Mrs Hahn relied upon the decision of the High Court in Effem Foods Pty Ltd (t/as Uncle Ben's of Australia) v Lake Cumbeline Pty Ltd [1999] HCA 15; (1999) ALR 599 where general approval was given to the approach of the trial judge (Tamberlin J) where it was said:
[15] … Tamberlin J expressed his views on the credit of each of the main witnesses. He introduced this part of his judgment with the following preliminary comment:
Credit in this matter assumes a significant role because almost all of the representations alleged are specifically and categorically denied. There are four principal witnesses whose credit is squarely in issue, and I propose to comment on each of them in turn.
I should add that my final conclusion is that having regard to the seven to eight year period that has elapsed between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time.
[16] Tamberlin J then went on, assigning detailed reasons, to express his views on the reliability of the four witnesses concerned. In each case those views were based in part upon observations made, and impressions formed, concerning the demeanour of the witnesses, but they also turned in part upon reasoning as to the plausibility of certain parts of the evidence of the witnesses, considered in the light of what Tamberlin J had referred to as ‘the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence.’ This was an orthodox and sensible approach to the matter.
In this case I don’t approach the matter on the basis of identifying if a witness was exceptional, but rather bear in mind the real difficulties that witnesses generally have in giving evidence of events that took place many years in the past, and the importance of appropriate assessments of contemporaneous documents and events.

The Wife’s Evidence

The Wife said that when they first moved into the house the expectation from the Husband’s grandmother was that they would maintain the home and the gardens (transcript, pp.33-34). She said that this expectation came to an end when they were told, “The house is yours. You do with it as you please.” When pressed, she said that there was an ongoing ‘emotional expectation’ but that it was their property to do with as they pleased (transcript, p.35). She agreed that they continued to meet what she described as the emotional expectation, although claimed that Mrs Hahn was not, in her view, very interested towards the end of her time there.
Importantly, the Wife was firm when she stated that she regarded herself and the Husband as being the beneficial owners of Property G “definitely by 1991” (transcript, p.36).
She also said that her husband paid outgoings associated with the property and land tax assessed on it as it was registered in Mrs Hahn’s name. She said that the payment of land tax by her and her husband was a source of contention but that her husband told her it was the best way to arrange things. She said that at one stage she asked whether or not the spare block could be put in their names to reduce the land tax, and denied that she had suggested that they buy the spare block that formed around half of the land at Property G. The Wife was quite firm that the representations reflected the whole of the Property G properties. She maintained that the spare block was “part of the package. It was part of the deal” (transcript, p.45).
The Wife clearly understood that the land tax was payable as a result of the property being registered in Mrs Hahn’s name. She said that it was an ongoing issue and that her husband’s comment was to the effect that it was safer to do it this way.
When taxed about the proposition that the land tax was a pointless expense if her and her husband were the true owners, she said that her husband was strongly against having the property in his name. The Wife was not privy to discussions between him and his mother about financial matters and relied upon him to tell her the outcome of such matters. When asked whether she had ever taken the issue up with Mrs Hahn she said:
No, because Mrs Hahn and her three children discussed any matters to – with the family without me, I relied upon what my husband would tell me as an outcome of their matters (transcript, p.46).

On many occasions during her evidence the Wife failed to directly answer questions that were put to her, instead giving long-winded explanations about surrounding circumstances. For example, when it was put to her that they fell into default under the mortgage on a property at Property B and failed to complete the contract for the purchase of a property at Property G, which arguably indicated that the costs of their lifestyle and investments from 1986 to 2009 exceeded what they could afford, she simply explained that she was married to Mr Hahn and that these were his decisions. She went on to say that she was not well-educated in these types of matters.
She said the conversations alleged in para.5 of her Amended Statement of Claim, occurred between the Husband and his mother and that she was not present for those conversations. She went on, in referring to para.5 of the Amended Statement of Claim, to say:
Well, that wasn’t when we had agreed to stay there permanently. The – all – basically we – we stayed there to get the work done to start off with. We stayed longer and we were told it was going to be left, but – (transcript, p.53)
she went on to say –
Whereby it was said to him that Property G would be left to him and/or you and him? – It was to be left to us. We were a family, and it was the back house in Property T was to Mrs Hahn. The front one - in the same conversation, the front one was going to Mr M, and Property G to us, was the conversation, and that was always understood. It wasn't just about us.
It was always, during your marriage, understood that the properties in Property T – ? – Yes.
– owned by my client would be left to Mr Hahn and Mrs Hahn – I beg your pardon – ? – No, Mr M.
– to Mr M and Mrs Hahn? –Yes.
And that Property G would be left to you and Mr Hahn? – Back in 1986 that was what it was.
…
I'm only asking you about after 1986? – After 1986, we were told that was the case. It was to be left to us. We were told the division of what was going to happen to the properties (transcript, p.54).
It is clear that The Wife understood from Mrs Hahn that she intended to leave her properties to her three children, Property G to the Husband, and the Property T property to the other two children. However, the crucial questions are whether this amounted to more than expression of testament intent, and if so whether this understanding was a reasonable result of representations of Mrs Hahn.
Not surprisingly, The Wife sees this case in more global terms of obtaining a “fair settlement” with respect to her marriage rather than the discrete disputes between her and Mrs Hahn, and then the issues around the matrimonial property, for example, saying:
Is what you want now for the property to be left to you? – What I want now is to have a settlement on my marriage – a fair settlement on my marriage, and the property that we lived in as a family, which Mr Hahn still resides in with his partner, is matrimonial property. It has been since 1991, and we have improved it and maintained, but improved it most likely – a property which – but unfortunately I remarried, and they don't – they don't particularly like it (transcript, p.55).
When squarely asked whether or not it was the case that anyone was getting anything before Mrs Hahn died, she said:
Well, this is why she said this to us, because she was – she had changed – we could stay there (transcript, p.57).
When asked to clarify she said:
Well, the transfers were going to occur at her death, but we were to have the house beforehand (transcript, p.57).
When they first moved to Property G, the Husband and Wife owned a property at Property S, but did not actually sell that property until 1987. The parties rented it out in the meantime. The Wife did not think the repayments exceeded the rent at that time, but agreed that their financial situation was quite tight at the time that they moved to Property G.
She said that she would have liked to have purchased an investment property, but attributed their inability to do so to their meeting the outgoings on Property G, together with her Husband’s spendthrift behaviour with respect to clothes. However, she admitted that the properties they did attempt to acquire at Property B and Property M were for the purpose of residences, not investments (transcript, pp.59-60).
At the time that the contract for the purchase of the Property B property was signed the Wife did not believe that Property G was theirs, but said that at the time that Property M property was purchased “We knew that we would [be] left it in the will” (transcript, p.60).
She agreed that the Husband would take money to his mother on a monthly basis, although was adamant that it was not rent. She said that from 1991 Property G was theirs to live in, renovate and improve as they saw fit as long as they “paid all the money for it” and continued to live there (transcript, p.61): I take this to mean the outgoings including land tax. She was of the view that the arrangement was “insurance because of Mr Hahn’s past financial dealings” (transcript, p.61). The amount paid to his mother on a monthly basis was $650 back in 1991. The Wife denied that the husband told her that he was seeing his mother to give her rent, but was certainly aware of the payments.
When asked to explain why she understood that money was being given to her mother-in-law at this time (given that the evidence was that the parties were at least in financial straits, having had the banks sell one property and forfeiting a deposit on another), the following exchange took place:
He was giving her the money, I think, to enhance her lifestyle, for her outgoings and costs. She had a - quite a high level living of money, and because we were in the house. We were in the house, and it was ours, and it was going to be ours, but she told us, “It's your house. You do as you please. It's yours.” And because of my husband's financial - previous financial affairs, it was like a insurance policy, to us for to - staying in her name, and that's how - that's why it was arranged for that reason. My husband's - around that time had gone into a par ten, I think it's called. I didn't know. I only found out during this case what had happened around that time. I was confused myself. I didn't know what was happening, when I came home and found someone mowing my block of land behind the house, and I asked them, “What are you doing?” He said, “It's going for auction tomorrow,” and I rang up the agent who said it was a mortgagee's auction, and Mr Hahn had - was involved in different companies. They called him Mr Ten Per Cent. So it was an insurance policy that we - it was our house, and we were told, “It's your house," quite definitely on many occasions, and the money was paid to Mrs Hahn because we had the house - it was our house - so that she wouldn't miss out on her lifestyle (transcript, p.65).
She explained the fact that they did not seek to mortgage Property G as security for the other transactions on the basis that:
Well, we would never have done that, because Property G was safe. It was safe from anything my husband could do financially to lose it. It was like a - a wonderful insurance policy for our future (transcript, p.65).
Further cross-examination traversed the negotiations between the parties and where, prior to the trial, the Wife had asked for “the spare block” to be transferred to her as some form of settlement. It seems to me that these negotiations were genuine attempts to resolve the matter and do not tell of an underlying position against either party, and are of little or no assistance to me in determining the outcome of this case.
The terms of the caveat were somewhat confused, including a claim that Mrs Hahn would “hold the property at trust for herself and the caveator” as that did not match the claims in the case very well. The solicitor who drew the caveat was not called to say what instructions he was actually given, although it appears that it may have been a casting of the case in terms of holding the Wife’s interest on trust for her, and holding the other half share on some form of trust to ultimately dispose of it to the Husband after her death, or to place it on trust for her husband. Having seen the level of the Wife’s understanding of property I am not assisted by how the solicitor attempted to categorise the claim in the caveat.
During that exchange, the Wife said of the arrangement that, “It was to protect us financially. It was a protection to save Mr Hahn from himself, her son”, saying:
It had been in her name, and then she was like a – almost like a trustee for us, so that we couldn’t lose it, unless my husband went bankrupt (transcript, p.72).
Interestingly, in the negotiations after separation, the Wife spoke to Mrs Hahn but did not articulate what she sought by way of settlement of the matrimonial dispute, advising Mrs Hahn that her husband knew what she wanted and that she should speak with the applicant’s husband (Mrs Hahn’s son).
I note that there is a third title for a small piece of land associated with Property G, which has never been considered by the parties to be a separate block, given its size. The lack of reference to it, when discussions refer to the house block or the spare block, add nothing to the facts in this case as clearly it was considered part of the property.
When asked about a reference in her affidavit to the loss of opportunity to “purchase our own home” she responded by saying, “We could have bought another home”, later correcting it to “our own home” (transcript, p.81). This highlights a significant alteration of position in this case, having regard to the length of time they were living in the house.
She also outlines at one point when Mrs Hahn convinced or counselled a relative, not to leave a large estate to the Husband, that Mrs Hahn had said that she was sorry for having done that and told the Wife that “you know you have Property G”.
As with many cases of this type, where brief representations made so long ago are at issue, it is appropriate to be mindful of the circumstances under which people were labouring at the relevant times. For example, when discussing the time that various events happened The Wife said:
I was working extremely hard. I was having a lot of depression. My husband had, once again, lost money and signed guarantors, which I had no idea about, hadn’t informed me, and my life was maybe doing (employment omitted). It – my life was a blur and keeping house and trying to stand by my husband. So when I say I can’t – a particular year, I don’t know (transcript, p.86).
The Wife did not believe she was suffering from clinical depression and certainly did not obtain treatment for depression.
The Wife said that she believed it would have been cheaper for them to rent a house than to pay the outgoings on Property G, although she pointed out that there would not have been as much land and such a rental property would not have been as close to the beach. However, her estimates of the outgoings of $15,000 a year certainly did not stand up to scrutiny as was shown through the cross-examination. As her evidence developed, it became clear that she believed that there was an expectation the property would be left to them in the Second Respondent’s will until 1991 and that after that they became the owners.
The defining event, on the Wife’s evidence, was that Mrs Hahn told them that “the property was ours”. She said she had told her husband that she did not want to spend money on the house if it was not something that they owned, and that he had told her he had met with his mother and that they could stay there and do the renovations because now it was theirs, they could treat it as theirs of course, the Husband’s representations are hearsay to the extent they are said to be evidence of a conversation with Mrs Hahn. She saw this as fair as the property at Property T had two homes on it, which were in much better condition than the home at Property G, and therefore if one of each of the Property T homes was available to the siblings of the Husband and Property G to them, it was a proportional distribution of the mother’s estate when she died.
After the marriage break-up Mrs Hahn did not seek to exclude the Wife from the home, allowing her to stay there until she chose to move out, and on the evidence of the Wife saying, “You stay there. You know it’s yours.” When queried about this, the response was not so clear. At p.99 of the transcript, the following exchange occurred:
Mr Forbes: If you owned the house in 2007, there was no need for Mrs Hahn to say to you, “You know you stay there,” was there?
The Wife: She was - she was - she actually at first said, “You must forgive him, dear,” and then she said, “But you do know you stay there, don’t you?” She - she - she was being a female speaking to another female, “Stay strong. Stay there.” You know, “You take over the house. You’ve got your daughter and child there.” That’s how women speak.
The money that was being given to Mrs Hahn was described by the Wife as being “to enhance her lifestyle” rather than describing it as rent (see transcript, p.102). She did not imagine that they would continue to make those payments to Mrs Hahn had they moved out of the property (see transcript, p.104).
Despite the claims that she did not want to move to Property M nor live in the property, she said that when it was suggested that the house might be knocked down she felt that she “rather like[d] the cosiness of the house and [she] had it looking quite pretty” (transcript, p.104). She denied that she shared plans for renovations or improvements with her mother-in-law on the basis that her mother-in-law continued to be the owner, saying that she did not formally seek approval; although she did seek her mother-in-law’s approval for everything she did (she understood this to be on an emotional level rather than on a legal level). She described a situation where:
I suppose it’s also because we basically got our inheritance early. We had the – the inheritance was given to us, basically, early, but not in title, because of my husband’s shenanigans. It was – as Mr Hahn himself said, “It’s safer this way. I can’t lose it.” And ... (transcript, p.109).
Later in her evidence she expressed the view that:
I really – you know, I had got used to living down at Property M …
and that:
… And I had moved – I had had to move so many times previously because of Mr Hahn’s businesses, changing law firms and moving from country towns and things, and I was starting up a business and I would have to have literally close it down to move with my husband (transcript, pp.109-110).
She also expressed the view that they would have had to pay stamp duty if it was gifted, which was a further expense. She was aware that they had lost two properties and that to place their names on the title was a risk, although pointed out that in her view:
… it’s not my fault we lost two properties, but it’s the situation that he did – he did the legalities of our life. He always did, from the beginning until the time I left (transcript, p.111).
The private school fees the Husband and Wife paid were certainly not modest. The parties chose to send the children to a school that had fees around $10,000 per annum, rather than a much less expensive (omitted) private school. However, they were paying off the school fees from time to time and were not always able to pay them on time, the Wife acknowledging that:
… We were very lucky. We didn’t have a mortgage at all (transcript, p.120).
She acknowledged that had they had to move or buy another property, they would not have sent the children to a private school, or perhaps would have sent them to the (omitted) private school that had lower fees. It became clear that the claim in her affidavit that she had applied all of her earnings to renovations, improvements and repairs to Property G was not correct as much of her earnings were also applied to the household and caring for the children.
She agreed that the move to Property G enabled them to ensure that the Property S property was retained for an extra couple of years (in the name of a company), and that this did ultimately lead to them making a profit of at least $30,000 when they sold this property. However, the Wife later said that she could not give a clear answer about that because her husband managed it. She was strongly of the view that the money was locked into a law firm and she was not aware of how high the mortgages were.
With respect to the possibility of using Property G as security to avoid other financial difficulties, the following exchange took place:
Counsel: You didn’t raise with anyone the possibility that Property G could be mortgaged or sold to avoid a forced sale of the Property B property. Did you?
The Wife: Property G was safe as it was. There would be no question of putting – of even considering anything like that but I wouldn’t – I wouldn’t. The thing is I found out basically the day before the auction. So close to the auction that it was just too late to even think about and I went into shock. I was very upset. I was told nothing (transcript, p.134).
Later, The Wife said that she believed that they were the beneficial owners after 1991 and that it would be left to them in Mrs Hahn’s will (see transcript, p.138).
The clause of Mrs Hahn’s will provided for the property to be left to the husband, and if he died before her, that the Wife get a life estate followed by the remainder to the children. I asked whether it was fair to say that this provision of the Will was in accordance with her understanding of the arrangement. The Wife never directly answered that question. However, it is clear that she had a very limited understanding of the way in which wills operate.
It is clear that The Wife never personally paid any of the outgoings with respect to Property G, and that all of those transactions were between the husband and Mrs Hahn.
Whilst The Wife was cross-examined at some length about her financial statement and the binding financial agreement she entered into with her current spouse, the documents were largely at a level of technicality, that, in the context of this particular witness, the criticisms made are of little assistance, save for one. The binding financial agreement signed by the Wife and her solicitor includes a certification that a solicitor, Mr S, of Melbourne, had been independently instructed by her and given her advice with respect to the binding financial agreement. However, she stated that she had never paid him to do any legal work for her and had never met him. Counsel explored whether or not she could have obtained advice from him over the telephone but she maintained that she had never spoken to him nor obtained advice from him. It is difficult to draw much from this in the absence of Mr S as a witness.
I found the Wife to be a generally honest witness. It became clear that she has a fairly limited understanding of the issues involved in this case, land transactions and business transactions generally. Her skills clearly lie in her capacity as a homemaker and (occupation omitted).
She was obviously focused upon establishing a home for the family as a primary goal. I am satisfied that she genuinely believed that Property G was her and the Husband’s and that the arrangements between them and Mrs Hahn were more in the nature of technical structures to protect the property from the Husband’s profligate behaviours. Her beliefs were founded upon a number of factors, including the family meeting, the exclusive use of the home and representations by Mrs Hahn and the husband. I am also satisfied that in reliance on these representations she agreed to live at Property G, kept the gardens, carried out renovations, and ceased pursuing the purchase of an alternative family home.

Ms K’s evidence

Ms K is one of the children of the Husband and Wife. She was a well presented young woman who gave clear evidence in what appeared to be a thoughtful manner. It was obviously difficult for her to be cross-examined by her father, although he approached the task with considerable sensitivity of tone and demeanour (even if many of the questions were of little real relevance). During the course of her evidence Ms K made an inappropriate sotto voce comment heard by all in court, and later apologised. This no doubt added to the difficulties for Ms K in giving her evidence.

The matters about which her evidence was central were the conduct of the family at the time of the alleged initial representations with respect to the use of Property G. Ms K was careful to make clear that she was only a child at the time and did not have a perfect recollection of what was said or done. However, she was quite clear that her parents had been looking for houses for some time after they moved to Property G, and that after a family meeting the house hunting stopped and Property G became their home. Her evidence was:
Ma’am, how did you come to understand it was owned by your parents? I think when I was a child, there was a change. And then when I first moved into the house, we were looking at properties every weekend. And it happened after that first conversation - well, with my uncle - there was a change. We stopped doing that, and they started renovating the house and making improvements to the property. And there was a shift within my father, my mother, my grandmother, my uncles as to who the property actually belonged to now and who had ownership of it. And it was never really brought up again in terms of within the family, in terms of whose property it was and who had - that’s - yeah. (transcript p. 208)
Ms K’s demeanour in the witness box was impressive. The obvious care she took to ensure that her evidence of events so long ago, was seen in the context of her being a child at the time to allow it to be appropriately weighed, was also a hallmark of her evidence which appeared honest and genuine. I accept the evidence of Ms K as being honest and genuine.
I have carefully considered the fact that she was a child at the time, the amount of time that has passed, and the difficulties these things cause when people are asked to recollect events. I am mindful that a witness can be honest but mistaken. I also note that her evidence was not with respect to specific conversations (save with her father), but the conduct of the family generally at that time. I accept that her evidence with respect to the change in family attitudes to the property is reliable and should be accepted.
With respect to her understanding of any representations, it appears that she was not privy to the actual conversations, and has had to rely upon what others have told her. In this regard, whilst I accept her evidence as genuine and honest, I am not persuaded that (to the extent that it is admissible) it is sufficiently reliable to place weight upon the evidence of conversations and rely only on her description of the change in conduct as referred to above.

The Husband’s Evidence

The husband’s evidence-in-chief was contained in three affidavits: sworn 6 December 2010, 8 July 2011 and 18 August 2014.
In his first affidavit he sets out that his grandmother had lived in the house until 1983 and then it was vacant until 1985 when his grandmother allowed him to move into the house with his family for a modest rent, on the understanding that he would maintain the garden. In 1987 his grandmother passed away and he understood the house was bequeathed to his mother. However, the arrangement remained the same save that he paid his mother the rent and outgoings and maintained the house and garden. He said in his first affidavit (para 10) that his mother had said that she did not wish to spend any money to fix up the house and that if he wished to make the house more comfortable, it would have to be at his own expense. He says then in 1993 he and the wife decided to make some improvements, which included painting, carpet, some carpentry work, wardrobes, windows, lights and blinds, costing around $10,500, which he paid for. He also says that in 1995 he arranged for the exterior to be painted at a cost of around $2000 and that in 2001 the main bedroom was renovated for a cost of $5500. In 2003 they spent $1200 with an earthmoving contractor to resurface the driveway. In 2007 they did further works on the main bedroom costing around $8000.
The husband says that they continued to occupy the property and that he continued to pay rent to his mother until they separated in November 2007, after which he moved into his mother’s house at Property T. At para. 16 of his first affidavit he sets out that in 2007, after separation, the wife arranged for a pathway to the car port to be concreted at a cost of $500 and for the lounge room to be recarpeted at a cost of $2000, which was “charged to” the husband.
From his first affidavit onwards the husband has denied that the parties have any equitable interest in the property.
In his second affidavit the husband is responding to the wife’s affidavit of 28 June where he does not admit the house was in as poor a condition as described by wife, but adds (at para 12) that a new kitchen was installed at a cost of $15,000 and paid for by his grandmother before she passed away.
In 1988 he purchased a block of land at Property M for $112,000 on which the parties intended to build a house in which to live. The land was purchased in the name of the wife as sole proprietor and was used as security for his overdraft from his (business omitted). This land was sold by the bank in 1991. In 1989 the parties had purchased a house in the wife’s name in Property M for $270,000, placing a deposit of $27,000 pursuant to the contract. They were unable to settle and forfeited their $27,000. Importantly, the husband says (at para 13) that:
In the circumstances, the applicant was content to live in the Property M house because we could not afford to live elsewhere.
The parties educated their children at private schools on the (omitted), and ultimately all three children attended (omitted) College, a not inexpensive private school.
The Husband says that initially the use of the property was not to be permanent and it continued to also be a family holiday home, however friction between his family and his brother and sister resulted in this shared use ending. The Husband says:
‘with the advent of the economic recession and the loss of our deposit on the Property M house, it was then not possible for us to buy a house of our own.’
The Husband was quite clear that his mother was prepared to allow them to continue to use the Property M property on the same basis as it had been used, which enabled them to send the children to private schools. He says that it was his understanding that his mother intended to divide her estate on death equally between her three children and that she would leave the house block to him if he wished to live at Property M, simply that he could inherit the house block as part of his inheritance.
The Husband maintains that he continues to pay off a loan from the Second Respondent and rent on the property as well as the outgoings, although that he paid the land tax prior to 2006 on the understanding that his payments for land tax would be deducted from his loan. He said that the property was uninsured and that he was paying the rates until 2010 when he fell behind.
The Husband said that he was not aware of the discussions relating to Ms D proposing to change her will until after her death, nor any conversation between the wife and his mother following the difficulties with his brother’s family staying at the property for a holiday.
The husband attempted to enter into a Part X arrangement under the Bankruptcy Act with his creditors in 1991, which was rejected by the creditors as a whole, however he says that he entered into personal payment arrangements with various (clients omitted) that he owed money to as a (occupation omitted) and that the (omitted) bank sold the land at Property M in 1992 leaving a residual liability of $25,000.00 which he paid off over time.
In his most recent affidavit in para. 11 he says that he does not recall paying rent to his grandmother and cannot now remember the agreement about paying rent, although believed he reimbursed his grandmother for council rates. He said at para. 12 of his third affidavit that he paid his mother occasional rent between 1987 and 1991, around $200 per month, by way of cash at her house at Property T. He also says that in the period leading up to 2012 one of his daughters and her partner lived in the house before buying their own home and during this period repaired kitchen cupboards, replaced bench top surfaces and painted the kitchen and the interior of the house and that he paid for a new stove and oven to be installed as well as the repainting of the exterior of the house. The husband says that he did this not because he owned the house, but because he considered he had an obligation to keep the house in good order whilst he lived there.
The rental arrangement he alleges was clearly flexible as he says he ceased paying rent for a period in 1991 as a result of his financial difficulties. He says he commenced paying rent again in around 1998 at the insistence of his mother, which he believes was in part driven by concerns of his sister. The husband is clear that the wife was aware that he was paying rent and that he would regularly tell her, “I have to go to mum’s to pay rent” (para. 17).
At para. 19 he refers to the 2003 will of his mother and a conversation with the wife where she asked if they “could have some certainty” when his mother passed away to obtain Property G. He says that he told the wife that his mother had made a will that would leave Property G to him but that she may want to sell the spare block, and they discussed trying to be in a position to buy the spare block, and that at the time his wife thought they could put a bed and breakfast residence on the blocks.
He says that the first he heard that the wife claimed an interest in the property was when the court proceedings were commenced and he read the documents.
At para. 31 he says that the Property M property was located by the wife and that at the time his mother wanted them to move out of Property G. He says that the parties lived apart in 1991, describing the situation as follows:
32. As to paragraph 58 I say that Ms Tadgell and I lived apart during 1991. As Ms Tadgell says she was not happy about our financial situation which she blamed on me. When we resumed cohabitation she told me that she intended to keep her finances entirely separate to mine in the future. She had established her own business and her income was to be her own. I agreed to take responsibility for our living costs at Property M including rent payable to my mother, pay all bills, pay school fees and provide housekeeping to her on a weekly basis which I did. Ms Tadgell also wanted me to fix up the house so that it was more comfortable to live in. I agreed to do this and thereafter kept my financial affairs separate to hers. As my financial position deteriorated my mother allowed us to continue to live at Property G. As we had the use of the house Ms Tadgell did not see why my brother should be able to stay there at all. She accused my brother of leaving the house untidy after a holiday. She spoke to my mother about this. At the time I did not believe that Ms Tadgell’s complaints about my brother had merit but my brother did not stay there again.
It was clear that at least on a credit card application form on 2 May 2000 the husband represented to the credit card financier under the heading “Landlord or Mortgage” the answer “own home (private arrangement)”. In cross-examination, he said that the writing actually said “owner’s home”, and said that it did not represent that he owned his own home. I simply do not accept that the representation was for the purpose of conveying, at least informally, anything less than the proposition that the Husband owned a home which improved his asset position. However, I do not find that this was his honest view, rather a convenient way to comfort the financier with making a clearly false statement.
In the husband’s financial statement he did not identify the loan that he says is owing to his mother, but gave an explanation that it had been taken up in the books of his (business omitted), as run by the company rather than as a personal loan. He explained that this was with the intention to give her security over the book debts of the business, but maintained that he had not been released from the debt even though he had not set it out in his statement of financial circumstances. He does not set out in his affidavit material the transactions that lead it to being taken up as a company debt.
Similarly he did not list in his financial statement any interest that he had in a (omitted) venture in (country omitted). However, at one stage in litigation in the County Court with respect to a security for costs application he set out that an associated company had a potential $1.5 million interest based upon the valuation of another party. He maintained in cross-examination that he did not believe the valuation of the other party and that the interest was, in fact, worthless, but did not set out that information in the County Court affidavit. It seems, at least on the evidence before me, that the interest was worth practically nothing, however his preparedness to provide what is at best a misleading affidavit in the County Court tells strongly against his credit.
It also transpires that the Husband became involved in the (religion omitted) and the (omitted) Church in early 2000. He set up a charitable trust with one of his companies as the trustee. The financial statements indicated that in 2006 and 2007 the Husband made distributions to the church of $39,740 and $44,131 respectively. The husband explained this on the basis that he was tithing, but tithing from his gross income not his net income. Similarly, in 2008, there was $27,232 to one church and $2550 to another. In 2009 the total was $33,991.
During the course of the trial, I asked him about how he came to tithe in such a way and he said:
When – when my daughter, who you met today, when she was three she drowned and I pulled her out of the water. Ms Tadgell was there, and she appeared to be dead, and I said a prayer to the unknown God, “You give me back my daughter; I will give you the rest of my life”…(transcript p. 248)
It seems clear that he had not disclosed to either his wife or his mother that he was giving money to the church. No doubt to undermine any suggestion the tithing may have of the Husband living a devout (religion omitted) life, it was then put to him that his marriage broke down because he had another relationship, and he agreed that he had an affair, and as he put it, ‘My wife is blameless’. When asked whether he felt he could make such generous gifts on the basis that he had the security of Property G, he said that ‘I was happy to rent. I don’t want to own any property.’(transcript p. 250)
Later in his evidence he said that he had given the Wife a copy of the relevant part of his mother’s will that gave her a life estate, which satisfied her, although this does not appear anywhere in his affidavit material. That version of the will provides for the property to pass to the children after the wife’s life estate.
With respect to the difference in financial position that might have come to pass had they not remained in the property, the following exchange took place:
Were you untroubled by the fact that you weren’t getting any ownership interest because you understood from your mother you were going to inherit it anyway?   My mother said to me, “Do you still want to continue living there?” I mean, she – at one stage in 2000, she rang me and said, “Look, I will sell the spare block and give you $100,000, and you can move out.” It never came to much, but, yes, my mother wanted us to move out, and it would have been in our interest to move out, but we liked living there.
So your mother wanted you to move out, financially it would have been in your interests to move out?   Would have been.
And it seems your wife wanted to have a place of her own?   She deserved that, I agree.
And she wanted that all the time?   I think she – yes, I think she wanted me to buy an investment property. You know, she wanted me to – and look, I did. The (business omitted) was going quite well for – in the early 2000s, and I put aside money to buy – well, if the spare block was going to be sold, I wanted to be in a position to buy that, and eventually inherit the main house. But I think my perception of property values – I’ve never paid any interest to property values, so I was relying upon the rate notice as to what the property was worth, which was about 1.3 million. In fact, it used to concern me whenever I saw the rate value going up, because it meant my mother would be liable to pay more land tax. And so I was very surprised when I saw that the property was worth so much money – I had no – absolutely no idea.
With respect to the limited assurances that the husband said his mother gave, he said in answer to a question asked to clarify this:
So did you understand that from the nature of the person your mother is, that if she said, “You can stay there,” that meant you could stay there for the rest of your life, if need be? No, no, not the rest of my life because my brother and my sister were – were not in favour of us being there. But knowing my mother, until we got back on our feet, until, you know, the kids are at school – the kids have gone through their education, that was sort of the – the period that I was thinking that we could probably stay there and recover. I could get back on my feet financially and – and then decide what – what we’re going to do.
The husband’s evidence was most unsatisfactory about the issue of when his present debts arose, either before or after separation. It appears that he has not just been an appalling financial manager all of his life, but profligate. On the limited material available, it is more likely that the debts which are the foundation of the bankruptcy proceedings arose following separation. It also appears clear that they are likely the result of mismanagement and extravagant tithing and expenses by the husband.
Handwritten notes on the land tax assessments indicate that he was expected by his mother to pay the land tax, at least from around 2004. The husband agreed with this and said that he took on the land tax liability, as his mother wasn’t able to pay it from her own resources. I note, however, that the will takes up the land tax as a deduction from the debt that the husband owes his mother when his mother passes away and the estate is wound up. However, this arrangement was only made in 2007 in the will.
The husband maintained he was not aware of any representations made by his mother about Ms D’s estate, and maintained that the wife made no comments to him about representations being made to her that they would receive Property G.
Tellingly, the following exchange with the husband took place at the trial:
And if that option of Property G was not available to you through those years, your wife’s pressure to purchase a home is likely to have become overwhelming for you, isn’t it? It would have. Yes. I think it would have. Yes. If my mother hadn’t have made the property available to me at a very low rate rent and basically subsidised our living, we would have moved out and had to find something else.
And it’s likely, is it, that in those circumstances, even if you had to tighten your belts, your wife’s pressure on you would have been such that you would have bought some modest property to have as a family home? No doubt.
The history of land transactions of the Husband and Wife shows a long term failure to sustain the purchase of any real property. He acknowledged that the Wife always wanted them to have their own home, even after moving into Property G (as a result of his financial difficulties), and that had she not thought that Property G was to be theirs the pressure to attempt to buy their own home would have been irresistible.
Against this it is apparent that for him, his grandmother, and now his mother, making Property G available for his and his family’s use has been a significant benefit to him, and relieved him of the obligation to provide a stable home for his family. That the property is not in his name on the title also relieved him of responsibility for managing his affairs to ensure its preservation.

He stated in evidence that he is not interested in owning property, and never expected to own Property G. Whilst this seemed a bizarre response in the abstract, in the context of his life and evidence it is not inconsistent with the way he has conducted himself. It appears clear that he has been profligate in his expenditure through his life. The availability of Property G for his and his family’s use has meant that he has never had to address his behaviours and take financial responsibility for providing his family with a home.
The Husband was an unusual witness. He has (occupation omitted) all of his life. Remarkably, despite apparent professional successes, he has been overwhelmingly unsuccessful financially. In the witness box he presented as a quite complex albeit rather flawed character.
Ultimately I have difficulty accepting the truth of much of his evidence. There are certainly sound reasons why he would never have wanted the property in his name, nor to hold a proprietary interest in the property. With respect to the Husband I am at least satisfied that as between him and his mother he was not proceeding on the basis of reliance upon representations that the Property was or would be his, nor that he would necessarily receive Property G when his mother passes away. Similarly, I find no evidence that he altered his position to his detriment in reliance upon any form of representation. Rather the representations were to his advantage as they satisfied the wife’s need to own a home and allowed him to avoid responsibility for providing a home.

Mrs. Hahn's Evidence

Mrs Hahn commenced her evidence by emphatically denying the claims that she had given Property G to the applicant and her husband, and emphatically denied the allegations as to the words spoken in the statement of claim. Not only did she make emphatic denials, but explained:
How could she stay there forever? I have other children. It was a holiday house. It was not meant to be a house where people took up a position to live there. It was to be used as a holiday house. I had my own home. I went to Property G when I wanted a holiday. That was the whole idea of having Property G. My father gave me that property with the idea because he said to me, I remember this date what he said to me, “Here we are standing here. Now, what do you think of this? Every Christmas we have a terrible time getting a place for us all to stay. Now, I think I’ve found it. What do you think?” And, of course, we walked around and we loved it, and it was the intention of Property G to be a holiday house for the whole of the family. Now, that is the situation of Property G. Ms Tadgell stayed there for a while, much to our shivering, I must say. I didn’t want her staying there. Why should I? That’s the end of our holidays there. We only have one little – it’s a type of bungalow. I always intended to make it much better, but we didn’t, and also I had a beautiful boat shed down below which they completely ignored. ... I have never, never said I would part with Property G or any part of Property G. It’s completely a make-up.
When giving evidence Mrs Hahn was quite feisty in the witness box, for example, making comments to Queens’s Counsel cross-examining her such as:
I think it’s rather sad of you to face an older girl with a whole lot of figures, you know –
It became apparent that any “rent” that had been paid with respect to Property G was not disclosed by Mrs Hahn in her tax returns, and that on a number of documents concerning payment of rates or land tax, there are endorsements to indicate that the husband had paid, or it was paid on his behalf, indicating that he would repay it to her. It seems that land tax assessments were being undertaken on the basis that Mrs Hahn was living in the larger of the two units at Property T when she was actually living in the smaller of those units. At one point she exclaimed:
Forgive me for asking you this, but really, what has this got to do with the matter of Property G? The matter for Property G is I would never sell Property G. I would never promise it to anybody. That is why I’m sitting in the stand to try to tell his [Honour] here that I, under any circumstances would I ever sell a portion of Property G.
She was strongly of the view that it would be impossible for her to give Property G away as it was so much a part of her life. She maintains (page 342) that “her job” was to hang on to Property G for her three children. This does not appear entirely consistent with her various Wills, which for of the much time had provided for Property G to go to the husband and to follow his family line, and not her other two children.
Interestingly, Mrs Hahn took the view that the only reason that the applicant was included in her Will was that she was Mr Hahn’s wife and that:
If the marriage broke up, surely she’s not then entitled to it.
She said she would never consider giving the applicant half of Property G, and that ‘[The Husband] would have to do that’. (transcript p.345)
She confirmed that when she inherited the property from her mother there was a change in the arrangements but that she intended to allow Mr Hahn to continue to live in the property. She was quite adamant she would never have given away the property and that the representations alleged by the applicant do not even sound like the things that she would say.
It is clear that she had considerable difficulty remembering things in the past due to her advanced years, although her capacity to understand and interpret present questions and documents was well above the average level of understanding of many litigants that appear in the court. I accept that her memory loss with respect to the past is genuine and not to be taken in any sense as her avoiding answering questions.
Mrs Hahn is now over 90 years of age. Sadly, she has lost much of her medium to long term memory, a fact about which she is acutely aware. The result was that she was simply unable to give evidence of actual memories of key facts and circumstances, rather just say what she believed she would have done or not done. However, there is no question in my mind that she retains a very sharp intellect: she clearly understood documents and transactions, and was quite incisive and forthright in her evidence. Aside from the significant difficulty of her fading memory which I find to be entirely genuine, I found her to be an impressive and engaging witness.
Mrs Hahn was an impression witness, but has engaged in some questionable minimization (if not avoidance) in her tax and land tax arrangements. She also impressed me as a strong matriarchal figure in the family, and a considerable character. However, her cross-examination by Senior Counsel for the wife highlighted that her memory difficulties made her evidence less reliable than the impression one may glean from her demeanour and presentation in the witness box.
Mrs Hahn is particularly emotionally attached to Property G and has many fond memories of family times at the property and much fondness for the gardens. Whilst she protested that she would rather die than sell Property G, this appeared to be hyperbole, in a form not uncommon for someone of such advanced years.
Mrs Hahn was steadfast in her view that she never gave Property G to the Husband or Wife, and does not accept that she ever made any representations to that effect. Her position, in substance, is that she made the property available to the Husband and Wife to allow them the benefit of a home for themselves and their children at a time when they were in financial difficulty, and allowed them to remain there until they chose to leave. She is of the view that the Husband and wife were paying rent (albeit at a low rate), the land tax on the property and the upkeep and outgoings. The form of the arrangement is not within the usual forms of a residential tenancy, however such an observation assists little as it was, on everyone’s case, an informal family arrangement.

Mrs Hahn's Wills

Over the years Mrs Hahn made a number of wills. This evidence is important, as the first three wills in evidence were made prior to any dispute arising between the parties. One will was made with the assistance of the Husband, and in those circumstances can be expected to reasonably represent the joint understanding of the Husband and Mrs Hahn with respect to the promises alleged.

The First Will

Mrs Hahn’s will of 22 March 1991 was placed in evidence. The relevant part provided for her estate to be divided into thirds, with one third to each of her other children. The final third was to be held on trust to be applied to the benefit of the Husband at the discretion of the trustee, with the balance remaining vesting in the Husband’s children.
This will appears to contemplate the potential that the Husband’s creditors may attach his share. Importantly, it does not reflect any representation that may have been made to the wife.

The Second Will

On 18 July 2003 Mrs Hahn changed her will to provide for Property G to be bequeathed to the Husband, should he survive her by 28 days. In the event that the Husband did not survive Mrs Hahn, the property was to be held upon trust for the benefit of the Wife, for her life (she being responsible for rates, taxes upkeep and insurance) and thereafter to be held upon trust for the children of the Husband and Wife upon the children attaining 21 years. Mrs Hahn bequeathed her Property T property to the Husband’s two siblings.
One difficulty with this will is the interpretation of the clause providing for the bequest of Property G. The term Property G is defined as all of the land comprised in the three titles, which are listed and followed by the phrase “(‘the residence’)”, although only the last of the three titles listed has the house upon it. The balance of the clauses speak only of ‘the residence’.
Mrs Hahn also provided for her residual estate to be distributed in equal shares with an adjustment clause. The adjustment clause required an accounting for the different values of the real estate that had been bequeathed, and any loans to her sons that had not yet been repaid. This clause effectively equalized the total of the bequests to each of her children, if the residual estate was large enough compared to the value of the real estate. On the evidence the only residual estate that she had that could have enabled this clause to function effectively was the balance of the Property G property (contained on the two titles that did not contain the house). However, the phrase ‘the residence’ was not used in the equalization clause, but rather ‘Property G’.
This will was very poorly drafted in this respect, and was likely to have left the whole of Property G to the Husband, without sufficient residual estate to allow for the equalization that was clearly contemplated. However, it is certainly apparent from reading the will that Mrs Hahn intended the children of the Husband and Wife to share equally in the final result but ensure the Wife received a life interest if the Husband died before the Wife.

The Third Will

The third will was made on 11 April 2007 around 5 months before the Husband and Wife separated. This will is in substantially the same terms as the previous will, however with the drafting difficulties addressed. In this will, only the house block falls within the definition of ‘Property G’. The intent that the Husband receive only the house block is quite clear as later in the will he is granted a right of first refusal to purchase the two adjoining blocks. This ensures that the equalization clause is likely to be effective due to the value of the various parcels of land.
The life interest of the Wife is repeated, in the same terms (although subject to the different interpretations that may have been placed upon the term ‘the residence’ in the earlier will).
A further change was made in this will with respect to the accounting for any loans made to the Husband that remained outstanding, providing for any land tax that the Husband had paid on Property G to be reimbursed to him.

The Fourth Will

On 15 February 2011, around 4 months after the Wife issued proceedings against the Husband, Mrs Hahn changed her will again. In this quite simple will, aside from specific bequests of a small number of specific chattels, Mrs Hahn leaves all of her estate on trust for the benefit of each of her three children in equal shares.

The Fifth Will

On 5 June 2014, soon after the Husband’s bankruptcy, Mrs Hahn changed her will to provide for her estate to be held upon trust for the benefit of each of her three children in equal shares. However, the Husband’s share is to be held upon trust for his life with the remainder to his children, subject to the discretion of the trustee to pay capital to him to preserve the standard of living that he enjoys at the date of Mrs Hahn’s death.
This will was clearly made with the bankruptcy of the Husband in mind.

Inferences that may be drawn from the Wills

It appears clear that Mrs Hahn did not alter her will to reflect any representations that may have been made to the Wife until at least 1999, many years after the initial representations. Her son, the Husband, was a (occupation omitted) and in regular contact with her. It would have been easy to alter her will (which she has done many times).
From 1999 until 2011 (some four years after separation, and over a year after proceedings were commenced by the Wife against the Husband) Mrs Hahn’s wills ensured that the Wife received a life estate in at least the house block at Property G. The fact that the will provided for a life estate in favour of the Wife, even after separation, is consistent with a commitment to the Wife in at least those terms. This is consistent with a representation that the wife could have a life estate in the house block (if not all of Property G), at least whilst in occupation of the property.
The bequest (in one form or another) from 1999 to the present, effectively preserved to the Husband at least the house block at Property G, just as the bequests preserved the Property T property to the Husband’s two siblings. This form of bequest is entirely consistent with the usage of the properties at the time, and the equal distribution of the estate between the siblings. However, it is not necessarily inconsistent with the wife’s case as many a parent would treat a bequest to their adult child (when in a marriage) as in substance a bequest to the couple and in this case the life estate (with the remainder to the grandchildren) was provided to the Wife.
The more recent changes appear consistent with firstly ending the life interest of the Wife, following her leaving the property, and most recently not making a bequest to the Husband that would be likely to fall into the hands of his creditors.
Importantly, none of the earlier forms of the Will established a structure that would have kept Property G from the Husband’s creditors. This is not entirely consistent with what the Wife has said as to the reason that the property was not earlier transferred to them, in that the property would not be accessible by creditors whilst Mrs Hahn survived, but the whole of the property would be subject to attachment by creditors if she died.
The change to the wills account for land tax that the Husband had paid in the past is consistent with him being a tenant and not responsible for land tax, although is also consistent with avarice: creating an artifice to offset against his loan owing to his mother.
Ultimately, it appears that the wills provide support for the proposition that Mrs Hahn intended the Wife to have security of use of the home, at least until she left the property. Of course, a will is not like a contract or other joint document, in that the Wife was not party nor witness, nor it seems, privy to the contents of the wills at the relevant times. Thus it is entirely possible that a will may be inconsistent with representations intended to be relied upon, albeit that such a course would be dishonourable. Oral representation of testamentary intention are often numerous, and litigation with respect to such expressions is avoided by the requirements of the Succession Acts that wills be in writing and witnessed by two adults, which is a factor I take into account.
Ultimately I prefer the evidence of the Wife and Ms K to that of the Husband, Mrs Hahn, and Mr M where they differ.

Mr M's Evidence

Mr M is the Husband’s younger brother. He has been assisting Mrs Hahn to manage her financial affairs for some years and holds a power of attorney from her. He is a (occupation omitted).
Mr M’s evidence differed from Mrs Hahn’s evidence. He recognized the need to make arrangements for aged care for Mrs Hahn given her advanced years and particular needs. He expressed the view that the family was likely to have to realize at least part of the Property G property to fund aged care for Mrs Hahn, contrary to her strong preference that the property never be sold.
I found that Mr M presented as a genuine and forthright witness deeply concerned about the welfare of his mother. The tone of much of the cross-examinations was most strident, and the wording of some questions almost mocking, for example questions such as:
So you’re a (occupation omitted). You’ve never heard of a thing called a reverse mortgage. You haven’t heard that, have you?
and putting that parts of his affidavit were
Just an absolute nonsense and a fabrication that you created in order to criticise [the Wife];
and responding to an answer that family plans had involved his siblings, mother and grandmother with the retort
Well, your grandmother’s dead. Come on?
Despite this form of cross-examination Mr M presented well as a witness. If anything, the ultimate effect of the cross-examinations was to allow the witness to demonstrate his demeanour in difficult circumstances, leading me to form a quite favourable impression of him. However, most of his evidence goes to his interactions with family members. The benefits the Husband and Wife were receiving from Mrs Hahn were obviously a source of concern for Mr M, primarily because of concern about Mrs Hahn’s security in the future. I don’t find that his evidence is such as to lead me to doubt the Wife’s evidence as to the representations by Mrs Hahn and her reliance upon them. Clearly there was family tension and he expressed his concerns about his mother’s property, but at the relevant time it was a matter between Mrs Hahn and the Husband and the Wife regardless of Mr M’s views. Whilst I find him a genuine witness, with respect to the events at the commencement of the Husband and Wife’s occupation of the home, I ultimately prefer the evidence of the Wife and Ms K.

Failure to call Mrs Hahn's Daughter

Counsel for the Trustee made complaint that Mrs Hahn had not called her daughter to give evidence. Mrs Hahn’s daughter was present at court for most of the trial, and readily available to be called if counsel for the Trustee wanted to call her. There was nothing in the evidence which would lead me to draw an inference that she was not called as she would not help the case of Mrs Hahn. In any event her ready availability to give evidence meant that the Trustee could have called her if the Trustee so wished. This was an unhelpful submission from the Trustee’s counsel. I draw no inference from the fact that no party called Mrs Hahn’s daughter in the context of this case.

Findings

*1
I am satisfied that Mrs Hahn did make the representations relied upon by the Wife. Whilst the particularised representations are modest in isolation, I accept that they fit with the arrangements that were in place among the family members at the time.
I am satisfied that the Wife relied upon the representations. She was focused upon obtaining a family home, as is a common goal for parents with children to rear. That there had been so much financial difficulty for her and the Husband in the past made this objective (of obtaining a family home) all the more important for the long term security of her and her children. The Wife’s clear focus on this goal was apparent to the Husband and it suited him for her to rely upon the representations and proceed on the assumption that the home was theirs. However, it is not the Husband’s conduct that is central, but that of Mrs Hahn. This leads to two important considerations: first, were Mrs Hahn’s representations made in such a way as to make reliance by the Wife upon them reasonable; and secondly, did the Husband act as the Wife’s agent in his dealings with the mother [Mrs Hahn] in a way that showed a different context to the representations or that they were not being relied upon by the Wife.

With respect to the first issue, context is important. The house had been a holiday home for many years. The Husband and Wife obtained exclusive possession which continued for many years. Representations of the type made by Mrs Hahn, are capable of categorisation as pleasantries to put the Wife at ease, if the Husband and Wife were there only on a licence or tenancy. In my view the terms of the representations, and the context of them go beyond politeness of mere pleasantries. As time went by, and renovations were done, it would have been apparent to all that the Wife was treating the home as that of the Husband and Wife.
I am satisfied that Mrs Hahn would have been well aware, that the Wife was acting in reliance upon the representations.
It is argued that the Husband was the Wife’s agent with respect to dealings with Mrs Hahn. The Husband dealt with his mother with respect to the property making payments to her and for the land tax. Whilst I accept that the Husband conducted himself in such a way as to eschew any particular interest I am satisfied that he and Mrs Hahn would have both known that the Wife thought otherwise and that the latter representations of Mrs Hahn confirmed the Wife’s beliefs.
That the Wife relied upon Mrs Hahn's representation is absolutely clear. In the evidence the Wife’s lack of knowledge and understanding of legal structures was apparent. She never had a sophisticated view of how the property holdings were structured. She understood that it was better the property not be in the couple’s name to protect it from creditors. Her experience was of past loss of real property due to the Husband’s financial mismanagement. That she didn’t have a sophisticated view was not through her being disinterested. I am satisfied she genuinely believed that her interests were being protected by the arrangements in place.
The question of detriment is a key issue. It is put that the Husband and Wife had never been able to amass assets in the past and that any real property they bought was not retained. It was argued that this showed they would never have come to own a home in any event.
The parties sent their children to private schools, a significant expense, that they may not have been able to afford had they had a mortgage. However, they also spent significant sums on renovations of the house.
Detriment is not limited to an actuarial or financial analysis. Nor is it possible to put a price on life choices over 20 years. They are, as the Victorian Supreme Court of Appeal said in Donis v Donis[2007] VSCA 89 ‘life-changing decisions with irreversible consequences of a profoundly personal nature’ at [34]. The Wife’s loss by reliance on the representation included the opportunity to live in her choice of suburb in Melbourne, rather than on the (omitted). Whilst she adopted and made a positive life on the (omitted) and there is nothing intrinsically better about city suburbs, she lost her preference. On its own it would be difficult to see this as sufficient detriment to found an estoppel, at least with respect to these two areas (perhaps living on an outback station would lead to a different result).
More significantly, she did not pursue purchasing a home, relying upon Property G instead. Whilst there is little doubt that the Husband’s financial earning capacity could have funded the purchase of a home, whether his spending could have been managed to succeed in paying off a mortgage is open to serious question. However it was a real possibility, which was dear to the Wife’s heart. I accept she was very strongly motivated to own a home. By relying upon the representation she gave up the pursuit of owning another home. Life has moved on and she has effectively lost that opportunity. This is a loss of a chance that is significant. I am satisfied that this is a significant detriment that she has suffered.
The renovations were a detriment in a financial sense as she and the husband paid for them. They also paid money toward Mrs Hahn to improve her lifestyle.
There is no doubt that the property brought the benefit of greater disposable income. I am not persuaded this led to any lavish lifestyle for the Wife – more realistically it allowed for the private education of the children, the grandchildren of Mrs Hahn. Mrs Hahn could not help but have been aware of this.
Looking at the case as a whole, I am satisfied that it would be unconscionable for Mrs Hahn not to honour the representations she made to the Wife. This leads to a finding that the Wife should receive a half share of the Property G property as nothing less would satisfy the representations that were relied upon. Such an outcome is not out of proportion in this case.
Turning to the Husband’s interests the case is more difficult. I accept his claim that he never wanted to own the property. Whilst in the abstract this sounds odd, in context it makes perfect sense. He has always been a poor money manager. He was near to bankruptcy years ago and has ultimately been sequestrated. His family has always provided for him. Why would he have ever wanted property in these circumstances? The gift of usage was far more valuable to him than ownership as ownership could be taken by creditors. His capacity to manage, if not manipulate, his mother made ownership unnecessary. Unlike many cases, the property was never his nor did he contribute substantially to its purchase. I am not persuaded that he relied upon representations of his mother, nor altered his position as a result of them. I am not persuaded that he has or ought to receive an interest in Property G.
Counsel for Mrs Hahn strongly pressed an argument that Mrs Hahn through the effects of the land titles legislation and the transfer of the property to her from her own mother held indefeasible title. This misconceives the nature of the equity, which operates directly against Mrs Hahn to ensure that she does not act unconscionably. The remedy is a proprietary one sounding in an interest in the land to which she has title, but the action is a personal one. As a result I am not persuaded that these arguments provide any basis for denying the applicant her remedy in this case. It is only if the title is transferred to another that questions as to the limit of the proprietary remedy would arise. The equitable obligation is owed by Mrs Hahn personally with respect to land in which she held initially in equity and later by way of legal title. The personal remedy may be sought against her and the remedy fashioned in the light of the current circumstances. As the applicant’s interest flows from the personal rights against Mrs Hahn, good against the world (save for small class) the result is that Mrs Hahn is able to honour her representations and the appropriate remedy a declaration that she holds the property in her name on trust for her and the wife in equal shares.
As a result of the Husband having no property, any claim by the Wife pursuant to s.79 of the Family Law Act 1975 fails. The Trustee eschewed any claim against the Wife. The Husband made no claim against the Wife.
In the circumstances I find that the Wife should receive a half interest in Property G. As the parties are agreed as to its value and it is appropriate Mrs Hahn be permitted to retain the property if she is able to as a result of her ongoing strong emotional attachment to it. I will therefore fashion the remedy to provide for payment to the Wife of $1,162,500. If it is not paid within 90 days the property should be sold and the Wife and Mrs Hahn receive equal shares of the proceeds.
Otherwise I dismiss the applications.

I certify that the preceding one hundred and sixty nine (169) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller

Date: 18 February 2016

[2016] FCCA 328

18 February 2016

Key Legal Topics

Areas of Law

Civil Procedure

Property Law

Legal Concepts

Costs

Remedies

Procedural Fairness