Tsourounakis and Repatriation Commission
[2005] AATA 892
•15 September 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 892
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2004/966
VETERANS' APPEALS DIVISION )
Re EMMANOUIL TSOUROUNAKIS
and VASILIKI TSOUROUNAKISApplicants
And
REPATRIATION COMMISSION
Respondent
DECISION
Tribunal Senior Member P McDermott Date15 September 2005
PlaceBrisbane
Decision
Matter remitted for assessment by the Repatriation Commission with the direction that Mr Michael Tsourounakis has a beneficial interest in the property at 16 Ganges Street, West End, Brisbane to the extent of one half of the value of the property.
...................[Sgd]......................
P McDermott
Senior Member
CATCHWORDS
VETERANS’ ENTITLEMENTS – age service pension – value of assets – whether applicants had any beneficial ownership of real property – whether son of applicants had interest in real property - whether proprietary estoppel where son made substantial improvements to the property – relevance of bankruptcy of son
Bankruptcy Act ss 5(1), 58(1)(a), 116(1)(a)
Land Title Act 1994 (Qld)s181
Married Women’s Property Act 1882 (Eng)
Veterans’ Entitlements Act 1986 ss 5L, 36,36A(2), 36N, 48, 52C(1) 57B,Bagshaw v Scott [2002] FCAFC 362
Cobb v Cobb [1955] 1 WLR 731
Collector of Customs (NSW) v Brain Lawlor Automotive Pty Ltd (1979) 41 FLR 338
Commonwealth v Verwayen (1990) 170 CLR 394
Cummings v Claremont Petroleum NL (1996) 185 CLR 124
Dillwyn v Llewelyn (1862) 45 ER 1285
Dinyarrak Investments Pty Ltd v Amoco Australia Ltd (1982) 45 ALR 214
Fribance v Fribance [1957] 1 WLR 384.
Giumelli v Giumelli (1999) 196 CLR 101
Jackson v Crosby (1979) 21 SASR 280
Kidner v Department of Social Security (1993) 30 ALD 428
Macdonald v Macdonald [1957] 2 All ER 857
Motion v Moojen (1872) LR 14 Eq 202
Official Receiver v Schultz (1990) 170 CLR 306
Pitwinski v Corporate Trustees of the Diocese of Armidale [1977] 1 NSWLR 266
Pridmore v Magenta (1999) 161 ALR 458
Radanovic and Secretary, Department of Family and Community Services (2001) 61 ALD 530
Raffaele v Raffaele [1962] WAR 29
Ramsden v Dyson (1866) LR 1 E&IA 129Repatriation Commission v Tsourounakis [2004] FCAFC 332
Shaw v Applegate [1977] 1 WLR 970
The Union Joint Stock Mutual Banking Association v King (1858) 25 Beav 72 (53 ER 563)
Waltons Stores (Limited) v Maher (1988) 164 CLR 387
Willmot v Barber (1880) 15 Ch D 96REASONS FOR DECISION
15 September 2005 Senior Member P McDermott
Introduction
1. I have to decide whether Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis have any beneficial interest in a home in which they do not reside. The Repatriation Commission (‘the Commission’) contend that the home is an asset of Mr and Mrs Tsourounakis for the purpose of assessing the entitlement of Mr Tsourounakis to a age service pension under the Veterans’ Entitlements Act 1986 (Cth) (‘the Act’).
2. Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis are the applicants in these proceedings,
3. The home is located at 16 Ganges Street, West End, Brisbane (‘the Property’).
4. This application has previously been before this Tribunal. In those proceedings Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis claimed that they had given the Property to their son, Mr Michael Tsourounakis. At the conclusion of those proceedings it was decided that Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis had given the Property to their son.
5. The Federal Court of Australia set aside that decision of the Tribunal and remitted this application for reconsideration by the Tribunal according to law in accordance with the reasons of the Federal Court of Australia: Repatriation Commission v Tsourounakis [2004] FCAFC 332.
6. In these proceedings Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis claim that their son has the beneficial ownership of the Property.
7. The position of the parties in these proceedings is diametrically opposed. The Commission contend that Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis have the whole of the beneficial ownership of the Property. The Commission also contends that the Property is free of any encumbrance or claim. Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis claim that most, if not all, of the beneficial ownership of the home is in their son.
8. In the initial proceedings before the Tribunal the witnesses were Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis, Mr Michael Tsourounakis, Mrs Mary Tsourounakis (Michael’s wife) and Mr William Carter (Mary’s father). All gave evidence as to the circumstances in which Michael and his family became the occupants of the Property. In these proceedings Mr Michael Tsourounakis alone gave evidence. The parties agreed that I should consider the original evidence before the Tribunal.
Task of Tribunal on Rehearing
9. In coming to a decision in this application, I have kept in mind that I must consider if “a court of equity would treat Mr Michael Tsourounakis as the beneficial owner of the Property”: see Repatriation Commission v Tsourounakis [2004] FCAFC 332 at [51].
10. Whilst I am exercising an administrative function I appreciate that I am required to endeavour to examine this matter from the perspective of a court of equity.
11. The Commission has submitted that the Federal Court of Australia disposed of the appeal on the basis that the findings made by the Tribunal did not support its conclusion.
12. The Commission made the submission that: “The Full Court’s discussion of proprietary estoppel which followed was therefore obiter and in no way binds the Tribunal nor the respondent in terms of the arguments that can now be raised”: see Respondent’s Submissions in Reply, para. 8. This submission was also made before me at the rehearing of this application.
13. As a member of the Tribunal I am bound by an order of the Federal Court of Australia which has remitted this matter for reconsideration by the Tribunal according to law in accordance with the reasons of the Court. It is quite usual in cases where the Court makes an order remitting an application to the Tribunal for the Court to make observations to assist the Tribunal in determining an application. I accordingly do not accede to the submission of the Commission which, in effect, requires me to disregard the reasons of the Federal Court of Australia which I have found to be of assistance to me in deciding this application.
Background Facts
14. Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis migrated to Australia in the early 1960s. In about 1966, they bought the Property and then became the registered owners of the Property, as joint tenants, of an estate in fee simple. They are still the registered owners of the Property.
15. Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis remained in occupancy of the home until 1988 when they let it to tenants.
16. Mr Michael Tsourounakis had an interest in a business that manufactured sauce. In 1991 the business failed with substantial unpaid liabilities. Mr Michael Tsourounakis had given a guarantee in respect of certain business liabilities. His residence at The Gap, Brisbane was security for business loans. When the business failed, Mr Michael Tsourounakis was left to deal with the creditors in the absence of his partner. In order to meet his obligations, he sold his family home with the hope of avoiding bankruptcy.
17. In 1991, Mr Emmanouil Tsourounakis told his son, Mr Michael Tsourounakis, that he knew that Michael was having trouble finding somewhere to live, and that as the Property would one day be Michael’s anyway, he thought there was no reason not to give it to Michael. Mr Emmanouil Tsourounakis told Michael that it was intended that the home would be left to him in his will.
18. Mr Emmanouil Tsourounakis suggested that Michael move into the Property and that he consider it as his own to do with as he wished. Mr Emmanouil Tsourounakis said that the Property was very run down and would need a lot of repairs.
19. In a discussion between Mr Emmanouil Tsourounakis and Mr Michael Tsourounakis it was appreciated that the Property could not be transferred into Mr Michael Tsourounakis’ name. This is because his creditors would then simply take it to pay off his liabilities and his family would again be left without a place to live.
20. Mr Michael Tsourounakis said that the arrangement was that Mr and Mrs Tsourounakis would retain title to the Property until Michael had emerged from his financial difficulties and he was in a position to have the Property transferred to him.
21. Mr Emmanouil Tsourounakis referred to the arrangement as ‘helping the family out’. Mr Michael Tsourounakis confirmed that Mr Emmanouil Tsourounakis did not want any money for the home and that Michael should treat it as his own.
22. Mr Michael Tsourounakis and Mrs Mary Tsourounakis moved into the Property in 1991. They have remained in possession ever since, although there were times when they could not live there because of building works. In 1991 the Property was in a state of complete disrepair. There was evidence that it was in such a bad condition that Mary and Michael Tsourounakis had to begin immediately to make renovations.
23. Evidence was given of the improvements that Mary and Michael Tsourounakis made to the Property and the costs that were incurred. It was claimed that no arrangement was made to pay rent for occupation of the Property. However, from 1991, Mr Michael Tsourounakis has paid all rates and other outgoings in respect of the home.
24. In December 1994, Mr Michael Tsourounakis became bankrupt on filing his own debtor’s petition. The Property was not disclosed as an asset in the Statement of Affairs that was submitted to his trustee in bankruptcy.
25. Mr Michael Tsourounakis was discharged from bankruptcy in 1997. By that time, Mr Michael Tsourounakis and Mrs Mary Tsourounakis had occupied the Property for over six years. During that time they had borne all expenses and outgoings involved in maintaining the home although they paid no rent. However, even after Mr Michael Tsourounakis was discharged from bankruptcy no steps were taken to deal with the title to the home.
26. In 2000, Mr Michael Tsourounakis and Mrs Mary Tsourounakis wished to carry out further renovations and improvements to the Property. Mr Michael Tsourounakis approached the National Australia Bank with a view to borrowing $100,000 for that purpose. Whilst the bank was prepared to lend that sum, they required security over the Property. However, since the Property was registered in the names of the applicants, the bank required guarantees from the applicants and a mortgage of the home as security under their guarantees.
27. Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis were not prepared to give guarantees. The evidence was that they considered that the Property belonged to Mr Michael Tsourounakis and that his proposed renovations were no concern of theirs. They said that they had nothing to do with the home and they did not want to have to worry about acting as guarantors at their stage of life. However, there appears to have been no discussion concerning the earlier promise to transfer title in the Property to Mr Michael Tsourounakis.
28. Mr Michael Tsourounakis discussed the need to have improvements with Mr Carter, who suggested that he would obtain a loan. Mr Carter borrowed $100,000 from the CBA in or around July 2001 and borrowed a further $30,000 in or around December 2001.
29. The arrangement made between Mr Michael Tsourounakis and Mrs Mary Tsourounakis on the one hand, and Mr Carter on the other, was that while Mr Carter would borrow the money, Mr Michael Tsourounakis and Mrs Mary Tsourounakis would repay the loans together with the interest payable on the loans. Mr Michael Tsourounakis and Mrs Mary Tsourounakis have honoured this arrangement.
30. Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis have had no involvement in the arrangement with Mr Carter. Mr Emmanouil Tsourounakis at the hearing stated that he did not know about the arrangement with Mr Carter prior to the hearing. The applicants have not contributed to the considerable cost of the substantial renovations and improvements carried out on the home by Mr Michael Tsourounakis and Mrs Mary Tsourounakis. Nor has their permission been sought for any of the work.
31. The home is insured in the name of Mr Emmanouil Tsourounakis. Mr Michael Tsourounakis could not obtain insurance in his own name because the home is not registered in his name. However, contents insurance is in the name of Mr Michael Tsourounakis. Premiums for both kinds of insurance have been borne by Mr Michael Tsourounakis.
32. There is no doubt that Mr Michael Tsourounakis and Mrs Mary Tsourounakis have invested a huge amount of time, energy and money in the Property. Mr Michael Tsourounakis considers that it would be ‘incredible’ to suggest that he would have done so if he did not consider the Property to be his own. Mr Michael Tsourounakis said that in all respects he considers the home to be his own and has acted accordingly for 13 years.
33. Mr Michael Tsourounakis said that he would not have spent the time, energy and money that he did renovating and living in the Property if he did not consider it to be his own. Mrs Mary Tsourounakis also gave unchallenged evidence that she and Michael spent a large amount of time, energy and money in repairing and renovating the Property on the basis that the Property was theirs.
34. On 27 September 2001 Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis each made a will. Each person devised the whole of his or her estate to the other provided that the other person survived him or her for a period of 30 days. If not, various parts of the estate were to pass to their children. In particular, the Property was to be given to Mr Michael Tsourounakis absolutely.
entitlement to Age Service Pension
35. A person is entitled to an age service pension if the person is a veteran who has rendered qualifying service and has reached the retirement age: see s 36. There is no issue that Mr Emmanouil Tsourounakis satisfies both of those requirements having served in the Greek Army in Korea from 20 December 1953 to 9 August 1954. From the documentation it is evident that he was, in the words of senior counsel for the Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis, a “good soldier who did his duty”. Having examined the documentation, I find that Mr Michael Tsourounakis has rendered the necessary qualifying service and has reached the retirement age.
36. The entitlement of a veteran to a pension is dependent upon the veteran’s age service pension rate: see s 36A(2). A veteran’s age service pension rate is worked out in accordance with the Rate Calculator: see s 36N. In particular the rate of service pension for Mr Emmanouil Tsourounakis is to be worked out in accordance with Method Statement 1 which is set out as part of Module A. Step 7 of Method Statement 1 then requires the application of the assets test using Module F to work out the reduction for assets.
37. Module F describes how to work out the effect of a person’s assets on the person’s maximum payment rate. Module F provides for the treatment of the assets of members of a couple. The value of the assets of a member of a couple is 50 per cent of the value of the person’s assets and the value of the person’s partner’s assets.
38. For the purposes of the Act and in the absence of a contrary intention the term “asset” means property or money: see s 5L(1). The value of a particular asset of a person is, if the asset is owned by the person jointly or in common with another person, a reference to the value of the person’s interest in the asset: see s 5L(2).
39. A reference in the Act to the value of a charge or encumbrance on an asset of a person is, if the asset is owned by the person jointly or in common with another person, a reference to the value of that charge or encumbrance in so far as it relates to the person’s interest in the asset: see s 5L(3). Where there is a charge or encumbrance over particular assets of a person, the value of the assets, for the purposes of calculating the value of the person’s assets for the purposes of the Act, is to be reduced by the value of that charge or encumbrance: see s 52C(1).
40. There is no definition of the expressions ‘charge’ or ‘encumbrance’. The terms must therefore be given their normal English meaning in the context in which they are to be found. I am of the opinion that for the purposes of s 52C(1) of the Act there is no charge or encumbrance over the Property. The expression “charge or encumbrance” would not in my view extend to any unsecured liability: see Radanovic and Secretary, Department of Family and Community Services (2001) 61 ALD 530.
41. It can therefore be seen that in order to determine the rate of pension to which Mr Emmanouil Tsourounakis is entitled, if any, it is necessary to arrive at a value of his interest in any assets, including assets that he and his wife own jointly such as the Property.
Claim for Age Service Pension
42. On 18 March 1992, Mr Emmanouil Tsourounakis made a claim for a service pension. He completed the appropriate form, which required disclosure of particulars of assets owned by him. He made full disclosure of the fact that he owned real estate, apart from the home that he lived in, and, accordingly, completed a further form relating to real estate. In that form, he set out particulars of the Property and said that he and his wife each owned 50 per cent of it. The estimated value of the Property was shown as $65,000.
43. His application was initially refused. However, by a letter dated 6 May 1992, he was informed him that he had been granted a service pension. The letter set out details of his income and assets. Those details included particulars of the Property with a net market value of $65,000.
44. In November 1992, Mr Emmanouil Tsourounakis sought a review of his service pension. On 11 December 1992, the Commission asked him to provide an updated income and assets statement. He completed and returned the statement on 16 December 1992. Part D of the statement disclosed the Property as being 100 per cent owned by him and Mrs Vasiliki Tsourounakis and as having a current market value of $70,000. Part D contained a note saying:
“Our son lives & no rent is paid.”
45. Mr Emmanouil Tsourounakis continued to receive a service pension at varying rates until 2002 when he completed a form to verify his continuing eligibility for the service pension. On 22 August 2002 he submitted the appropriate form to the Commission which he had duly completed. One of the questions in the form enquired as to whether Mr Tsourounakis owned or partly owned any real estate other than the home in which he was living. That question was answered ‘yes’ and, accordingly, Part D of the form required completion. Mr Tsourounakis completed Part D with particulars of the Property, showing that it was owned 50/50 with Mrs Tsourounakis.
46. In Part D of the form which required annual expenses and outgoings to be listed, Mr Tsourounakis inserted the following:
“Nil
My son resides in this dwelling not letted, as assistance to his family.”
47. Mr Emmanouil Tsourounakis estimated the current market value of the Property as $150,000. The Commission obtained a valuation of the property at $570,000 as at 30 September 2002. On 7 October 2002, the Commission wrote to Mr Emmanouil Tsourounakis saying that his service pension had been reduced to nil with effect from 1 October 2002. Attached to the letter was an income and assets statement disclosing the Property as having a net market value of $570,000.
48. On 15 November 2002, Mr Michael Tsourounakis wrote to the Commission. His letter has been treated as a request for a review under s 57 of the Act which provides that a claimant who is dissatisfied with certain decisions of the Commission may request the Commission to review the decision. If the Commission reviews a decision, the Commission must affirm the decision or set it aside: see s 57B(1). If the Commission sets the decision aside it must substitute a new decision: see s 57B(2).
49. Mr Michael Tsourounakis in his letter of 15 November 2002 said as follows:
“The property at 16 Ganges Street, West End whilst in my parents names is in fact held in trust for myself. The background is as follows: In 1990 I was a director of a business that failed (largely due to the fraud of my fellow director). Pursuant to guarantees I had given the Bank and Finance Companies the house owned by my wife, Mary and myself in The Gap was sold. I battled on for some years attempting to repay the Finance Companies but was forced into Bankruptcy in 1994.
After the home at The Gap was sold I had to find somewhere to live. My parents owned a rental property in Ganges Street, which they offered to me as a home for my family. The property would then have been worth $70 000 – 80 000.
The Ganges Street property was originally our family home. At the time my family and I moved into it, it had been rented for many years and was very run down and dilapidated. I attach photos of the state of the property around that time. The property required complete restumping, roofing and some reflooring to ensure structural security and to ward off termite activity and leaking. A substantial amount of money and my time and that of my wife was spent in making the property livable and improving it over the years to accommodate my growing family. I attach a summary of the costs incurred in repairing and improving the property.
Owing to my bankruptcy the legal title to the property remained in my parents name and willed to me. What was meant to happen (when my Bankruptcy finished in 1997) was for title I the property to be transferred to my wife and I. It was overlooked.
My parents have always openly placed value on their stake in the property whilst acknowledging it as in trust to myself and taking into account the work and cost my wife and I put into improving the property. In Summary The valuation of the property per local real estate agent $550,000(copy attached)
Please note: My parents and my concern about this agent’s quote. Their prediction of a $500 000 –600 000 sale of a similarly featured house in our street resulted in a $491 000 sale over the weekend. (photos attached). Owing to my wife and I on account of work and costs incurred in repairing and improving the property $350,000 (not including appreciation to the property) Net Equity attributable to my parents $200,000.”
50. Attached to the letter was a summary of expenses amounting to the sum of $352,523 under the following heads:
Building improvements: $208,118
Restumping: $ 6,500
Re-roofing: $ 3,500
Rates: $ 19,268
Insurance: $ 4,637
Labour: $110,500
A valuation of the Property at $550,000 was also enclosed.
51. In his letter of 15 November 2002, Mr Michael Tsourounakis asserted that his parents still had a net equity in the Property of $200,000.
52. On 12 December 2002, Mr Michael Tsourounakis furnished further details of the expenses that were summarised in his earlier letter.
53. On 18 December 2002, a service pension review officer within the Commission was furnished with a minute giving advice regarding whether any reduction should be made to the value of the assets of Mr Emmanouil Tsourounakis for the purposes of calculating his entitlement to a service pension. The conclusion in the minute was as follows:
“Mr Michael Tsourounakis holds an equitable interest in the property, which allows a reduction in the held asset value of the property in his parent’s assessment. This reduction is itself reduced by the foregone rental income during the period of occupancy.
The determination of the son’s equitable interest will reasonably include all the amounts as described in your e-mail. Apart from general house maintenance, any contribution made by the son to the property’s value may be considered. This is because any in-kind contribution is regarded as valuable consideration, which must be fairly considered given that it acts to reduce the extent of foregone rental income.”
54. On 23 January 2003, the respondent wrote to Mr Michael Tsourounakis in order to provide an explanation of the method to be used to calculate the value of the Property for the purposes of assessment of Mr Tsourounakis’ entitlement to a service pension. The letter indicated that the value of the Property had been set at $540,000 and requested further details of the contribution made by Mr Michael Tsourounakis to its value.
55. Mr Michael Tsourounakis wrote to the Commission on 31 January 2003, enclosing copies of documents evidencing the expenses that had been incurred in the previous twelve years or so in renovating and improving the Property.
56. On 12 March 2003, a delegate of the Commission set aside the decision of 7 October 2002. In place of that decision, the reviewing delegate made a determination that the value of the Property is $540,000 and that the share of the applicants in the Property is 61.87 per cent or $334,109.42.
57. The amended assessment is calculated by subtracting from the total value of the property ($540,000) the son’s interest ($325,118) as well as foregone rent ($119,227.42).
58. I reiterate that the applicants have made full disclosure of relevant matters before the making of the amended assessment.
59. The applicants filed an application with the Tribunal for review of the decision of 7 October 2002 as set aside upon review on 12 March 2003.
60. On 18 March 2004, the Tribunal determined that the applicants had disposed of the Property in 1992 by giving it to Michael and that the Property has not constituted part of their assets from that time on and remitted the matter to the respondent for reassessment of the service pension. The Federal Court of Australia set aside the decision of the Tribunal and remitted this matter for reconsideration by the Tribunal.
The Appeal
61. On appeal to the Federal Court of Australia, the appellants submitted that Mr Michael Tsourounakis had acquired an interest in the Property by the operation of the doctrine of proprietary estoppel (see Dillwyn v Llewelyn (1862) 45 ER 1285 and Ramsden v Dyson (1866) LR 1 E&IA 129). The Court observed that the attraction of that doctrine would require the establishment of the matters in Dinyarrak Investments Pty Ltd v Amoco Australia Ltd (1982) 45 ALR 214.
62. Before the Federal Court of Australia the applicants submitted that it would be unconscionable to treat them as having any remaining beneficial interest in the Property. This is because Mr Michael Tsourounakis and Mrs Mary Tsourounakis have contributed time, effort and money in renovating and improving the Property and treating it as their family home in reliance upon the assurances given by the applicants that they should treat the Property as their own and that it would be given to Mr Michael Tsourounakis absolutely upon the death of the survivor of the applicants.
63. In these proceedings Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis have contended that it would be unconscionable for them to assert their legal ownership of the Property to dispossess Mr Michael Tsourounakis and his family and that they would be restrained by a court of equity from doing so.
64. Alternatively, the applicants say that, even if they should not be treated as bare trustees of the Property, a court of equity would intervene to restrain them from dispossessing Mr Michael Tsourounakis and his family and selling the property unless they provided appropriate compensation to him for the expenditure that he has made in improving the Property.
65. The Federal Court of Australia observed that there was material before the Tribunal that is capable of supporting a finding that Michael and Mary expended considerable time, energy and money in reliance upon the statements made by Mr Tsourounakis in 1992 that Michael could treat the Property as his own.
66. The Court ruled that the task of the Tribunal on reconsideration of the matter according to law would be to examine the extent to which a court of equity would require the applicants to compensate Michael as a term of being permitted to dispossess him and his family and to sell the Property. I must assess the appropriate diminution in the value of the interest of Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis .
67. The Federal Court of Australia ruled that it would be necessary for the Tribunal to enquire whether the assurances that were given by Mr Emmanouil Tsourounakis and the conduct of Mr and Mrs Emmanouil Tsourounakis since that time have given rise to an estoppel against their assertion of full beneficial ownership in the Property.
68. The Court ruled that at one end of the spectrum, a court of equity may impose a constructive trust, if that is the only way in which equity can be done as between Mr and Mrs Emmanouil Tsourounakis on the one hand and Mr Michael Tsourounakis on the other. The Court also observed that it is necessary to decide whether there is an appropriate equitable remedy that falls short of the imposition of a trust: see Giumelli v Giumelli (1999) 196 CLR 101.
Whether Equitable Interests Are Recognised Under The Act
69. A threshold issue that I have to consider is whether the Commission is required to consider equitable interests in property. The Commission submitted that the Act did not require an officer of the Commission to consider whether a court of equity would recognise an equitable interest in the Property.
70. The Commission submitted: “The respondent is not required, nor authorised by the VE Act to consider whether a court of equity would carve out an equitable interest of a third party in the asset. Nor should the respondent be required to make such a determination given its role in assessing pensions and its limited access to information. The nature of the respondent’s function and powers in determining pension entitlements is purely administrative and not judicial. The legislature cannot have intended that a junior public servant, responsible for assessing pensions, is nevertheless obliged to make the types of decisions such as is facing the tribunal in this case.”: see Respondent’s Written Submissions, paras. 21 and 22. The Commission did not submit any authority in support of this submission. I do not accept this submission of the Commission.
71. The word “asset” in the Act is defined to include “property” of an applicant: see s 5L.
72. In my opinion in determining the value of a person’s interest in a jointly owned asset (see s 5L(2)) it is necessary to consider the actual beneficial interest of the person in the asset.
73. I have found support for that view in the decision of Drummond J in Kidner v Department of Social Security (1993) 30 ALD 428 AAR 545 where the Court was construing the assets test under comparable social security legislation. Drummond J adopted the approach that the term “asset” bears its ordinary English meaning. His Honour remarked (at 549): “In ordinary parlance, a person’s assets would not be regarded as including property of which that person was the bare legal owner when the beneficial ownership was vested in another”. I respectfully consider that I should adopt a similar approach in construing the Act.
74. I also make the observation that the reasons of the Federal Court of Australia require me to have regard to any equitable interest that Mr Michael Tsourounakis may have in the Property that is still registered in the name of Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis.
Whether Equity would Intervene
75. The Commission has submitted that in this case equity would not intervene as this is not a case where there is any unconscionable conduct.
76. The Commission submitted: “Equity will only intervenes where it is necessary to prevent unconscionable conduct. … There is no hint of unconscionable conduct in this case. In fact the opposite is the case as is evident from the evidence of Michael during the cross-examination”: see Respondent’s Written Submissions, paras. 26 and 27.
77. The basis of the submission that equity would not intervene is that Mr Michael Tsourounakis will obtain legal ownership of the property after both of his parents have passed away.
78. I do not accept this submission of the Commission. This is because the reasons of the Federal Court of Australia include the following passage:
“The Commission contended that there has been no attempt by Mr and Mrs Tsourounakis to resile from the assurances that they gave in 1991 and thereafter and that, accordingly, Michael has no cause of action that would result in his being recognised as having any equitable claim or interest in respect of the Property. That contention is somewhat facile. The question is not whether Mr and Mrs Tsourounakis are threatening to act in an unconscionable manner. The question is whether, if they did, Michael would be entitled in equity to restrain them from doing so”.
79. Having regard to that passage it is quite clear that I must consider this application as if Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis “are threatening to act in an unconscionable manner”. That is the basis upon which I must proceed to decide this application.
80. I might also mention that one may readily envisage a situation in which a third party may be appointed to administer the estate of Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis if they became bankrupt or incapable of managing their affairs. In such a case equity would also certainly intervene.
81. I consider that the fact that Mr Michael Tsourounakis is nominated in both wills as a beneficiary would not, in an appropriate case, prevent the intervention of equity. It might be mentioned that generally speaking a will “speaks from death” and a will may be amended prior to the death of a testator or testatrix. There are exceptions to that principle which have no application to this matter.
Bankruptcy Of Mr Michael Tsourounakis
82. In December 1994 Mr Michael Tsourounakis became bankrupt. He was discharged from bankruptcy in 1997.
83. In proceeding to consider this application “according to law” I consider that I have to consider the effect of bankruptcy upon any rights of Mr Michael Tsourounakis as if he was a party to a suit in equity against the applicants.
84. Mr Michael Tsourounakis did not disclose any interest in the Property as an asset in the Statement of Affairs that he completed when he became bankrupt.
85. The Statement of Affairs of Mr Michael Tsourounakis was placed in evidence. Page 5 of the Statement of Affairs form deals with “Assets/Property”. On that page is the following statement:-
“List details of all assets in which you have an interest not disclosed on pages 3 & 4”.
86. Against the section of the Statement of Affairs form relating to “Real estate freehold” is the statement of a “NIL” Market Value (Appeal Book, page 192).
87. On page 9 of the Statement of Affairs form he disclosed his current residential address as 16 Ganges Street, West End, Brisbane (which is the postal address of the Property) and in answer to Question 12(b) which asks “Do you own or are you purchasing the above property”, he answered “No”.
88. The Statement of Affairs was signed by Mr Michael Tsourounakis on 23 December 1994 when he made the following declaration: ‘I hereby declare that the particulars set out in this statement are true and correct”.
89. In a signed statement Mr Michael Tsourounakis explained why he failed to disclose the property in his Statement of Affairs: see exhibit 4, para. 15. He stated:
“When I opted for bankruptcy I didn’t declare the house as an asset. If I had done so then the house could have still been taken off me and any improvements that I had made would have been for nothing. I would have gone back to square one and I would have had nowhere for my family to live”.
90. In the initial proceedings before the Tribunal Mr Michael Tsourounakis was closely questioned about the fact that he did not disclose the property in his Statement of Affairs.
“With respect, I would like you to address the question more closely. What I was putting to you: did you understand back in 1994 when you said that you owned no property, that you didn’t have a house of your own, that perhaps the ---? The title hadn’t passed to me.
That is right?---It was my house.
Well your statement says that: “That my father said to me that one day the house was going to be mine”. You were told that it was going to be left to you in a will? --- In the context of the will.
Yes?--- You are at your lowest point, son. The house is always going to be yours. It is always willed to you. It is yours now; I am happy I can offer it to you. Do with it what you like. That is the context.
And my question is this: when he said to you do with it what you like, it was in the context that one day when he passed away it would be yours, but you didn’t see fit to disclose it in your bankruptcy because it wasn’t yours?--- Say that one again.
There is a difference, is there not ----? Title had not passed, correct.
Just listen to this carefully. There’s a difference, is there not, between a family arrangement where you are given free use of a property because one day it’s going to be yours- that’s one scenario. And there’s another scenario, where you are being given full, complete ownership of the property. What do you understand the situation to be? --- I understand ownership.
Well, why is it that you didn’t disclose it in your bankruptcy? – Because I just lost one house. I wasn’t going to repay my family by losing another one in the time they were trying to support me and I don’t know what the – I don’t know what’s so hard to understand there.
So you were prepared to defraud your creditors back in 1994? I’m not saying I defrauded my creditors. I wasn’t going to repay my family’s support by losing another property.
That is right?--- It was my house.
That is right. It was going to be your house when your father passed away is what you were told? – No. It was my house”
Nature of Rights Of The Son In The Property At The Time Of Bankruptcy
91. Mr Michael Tsourounakis was not registered as an owner of the Property. As he was unregistered he did not have a legal interest in the Property at the time that he became bankrupt: see Land Title Act 1994 (Qld), s 181. I also make the comment that the Full Court of the Federal Court of Australia in Bagshaw v Scott [2002] FCAFC 362 emphasised at [10] that under Torrens title an ownership interest in land is vested in equity until the registration of that interest. If Mr Michael Tsourounakis had any interest at all at the time of his bankruptcy it would have to be an equitable interest.
Whether Equitable Rights In The Property Vest In The Trustee In Bankruptcy
92. If Mr Michael Tsourounakis had an equitable interest in the property in December 1994 when he was made bankrupt that interest would vest in his trustee in bankruptcy.
93. Under s 116 (1)(a) of the Bankruptcy Act 1966:
“all property that belonged to, or was vested in a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolved on him or her, after the commencement of the bankruptcy and before his or her discharge” is property that is divisible amongst the creditors of the bankrupt”.
94. So that such property is “divisible amongst the creditors of the bankrupt” that property is vested in the official trustee or other trustee in bankruptcy pursuant to s 58 of the Bankruptcy Act.
95. The High Court of Australia in Official Receiver v Schultz (1990) 170 CLR 306 emphasised that in s 5(1) of the Bankruptcy Act such property is “the property of the bankrupt”. The High Court also made reference to the definition of “property” in s 5(1) which states:
“‘property’ means real or personal property of every description …., and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property”.
96. This definition of “property” includes any “interest” in real property. In Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 132 Brennan CJ, Gaudron and McHugh JJ remarked that the term “property” is “broadly defined” by s 5(1) of the Act.
97. The term “property” in the Bankruptcy Act would include any equitable interest that a bankrupt has in property. In Pridmore v Magenta (1999) 161 ALR 458, RD Nicholson J remarked (at 468): “In relation to s 58(1)(a) ‘the property of the bankrupt’ as defined in para. 116(1)(a) would include any choses in action which the applicant would have to enforce equitable rights. Such rights, being property being divisible among the creditors of the bankrupt, would vest in the Official Trustee”.
98. If Mr Michael Tsourounakis had an equitable interest in the property in December 1994 when he was made bankrupt, that interest should have been disclosed in his Statement of Affairs. However, the failure to disclose that interest would not prevent the vesting of any equitable interest in his trustee in bankruptcy by operation of law when he became bankrupt.
99. It would also be the case that any after-acquired equitable interest of Mr Michael Tsourounakis would also vest in the trustee in bankruptcy: see Pridmore v Magenta (1999) 161 ALR 458 at 469 [63] per RD Nicholson J.
Did The Son Have An Equitable Interest In The Property At The Time Of The Bankruptcy?
100. I must now consider whether at the time of bankruptcy Mr Michael Tsourounakis did in fact have an equitable interest in the Property. I find that he did not have any equitable interest in the Property both before and during the time that he was bankrupt.
101. There are serious obstacles to him asserting the existence of an equitable interest in a court of equity where such an interest subsisted before and during the time that he was bankrupt.
102. I find that the 1992 arrangement was designed to ensure that Mr Michael Tsourounakis and his family had a secure place to live.
103. One thing is clear. Mr Emmanouil Tsourounakis had worked hard all of his life. He said in evidence: “I work 20 years for that house”. It is quite inconceivable in my view that Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis had any intention of giving Mr Michael Tsourounakis any interest in the Property that could have been taken by the creditors.
104. This is apparent from the following passage when Mr Emmanouil Tsourounakis, in cross-examination, was asked about the Property.
“MISS FORD: What you are saying is if you had given it to him then, he would have lost it in his bankruptcy. Is that what you mean? --Yes.
THE INTERPRETER: He would have lost it ,yes.
THE WITNESS: Lost another house.
MISS FORD: So you didn’t give it to him, the house?—I work 20 years for that house”.
105. I find that Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis did not intend that Mr Michael Tsourounakis have an interest in the Property at the time when he and his family occupied it in 1992.
106. My findings are in conformity with the reasons of the Full Court of the Federal Court of Australia which observed: “It would have been quite inconsistent with the desire of Michael and his parents, that the Property not be available to Michael’s creditors, that he be given a proprietary interest of any sort in the Property in 1992”: see Repatriation Commission v Tsourounakis [2004] FCAFC 332 at [41].
107. The Full Court of the Federal Court of Australia also remarked, at [40]:
“Every piece of objective evidence is inconsistent with a conclusion that, in 1992, Mr and Mrs Tsourounakis intended to divest themselves, at that time, of a proprietary interest in the Property.”
108. There is also no evidence that the applicants intended to give him “a proprietary interest of any sort in the Property” while the possibility of the Property being made available to creditors was present. It is, for this reason, that I find that Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis did not intend that their son have any interest in the Property whilst he remained an undischarged bankrupt.
109. It would not be fair to Mr Michael Tsourounakis if I were to notionally allow Mr Michael Tsourounakis the existence of an equitable interest during his bankruptcy as that disclosure would necessarily involve a finding that he had not made disclosure of his assets as required by the Bankruptcy Act.
110. It would also not be fair to his creditors if I were in these proceedings to notionally allow Mr Michael Tsourounakis the existence of an equitable interest that he denied to his creditors at the time of his bankruptcy.
111. Prior to the bankruptcy of Mr Michael Tsourounakis, considerable funds were expended on the Property. I am concerned that the expenditure of considerable funds continued during his bankruptcy. For example, on 27 May 1995 a fireplace for $1089.00 was purchased. On 19 June 1996 $1500.00 was spent on sanding the kitchen floors. On 19 February 1996 kitchen goods of $2799.00 were purchased. On 8 May 1996 building work of $5988.00 was expended on the kitchen. On 9 May 1996 joinery work of $6400.00 was expended. On the evidence of Mr Michael Tsourounakis these funds were his funds: exhibit 4, para. 26 (“I would not have spent that amount of time and money renovating and living in a property if I did not consider it my own house”). If these funds were indeed the funds of Mr Michael Tsourounakis then there was no evidence before the Tribunal that the funds were expended with the consent of the trustee in bankruptcy or the creditors.
112. Another reason why it would not be possible for me to notionally allow Mr Michael Tsourounakis the existence of an equitable interest at the time of his bankruptcy is that I am unaware of the extent of his creditors.
113. When he completed his Statement of Affairs he did not disclose all of his creditors. He did not disclose “personal family loans”: see appeal papers, p. 194. I am also unaware of any administrative expenses that may burden his bankrupt estate.
Whether Equitable Rights Which Vest In The Trustee In Bankruptcy Are Exercisable By A Bankrupt
114. I have found that Mr Michael Tsourounakis did not have an equitable interest in the Property at the time when he was bankrupt. However, even if he did have such an equitable interest I must state why I consider that he could not now in a court of equity assert any such interest.
115. Despite exercising administrative functions I have endeavoured to examine this matter from the perspective of a court of equity.
116. From an historical perspective the Court of Chancery would not interfere with bankruptcy administration: see Motion v Moojen (1872) LR 14 Eq 202 at 207-208. This is particularly so where the trustee in bankruptcy, in which any equitable interest would vest at the time of the bankruptcy, is not a party to any proceedings.
117. I have come to the conclusion that Mr Michael Tsourounakis certainly could not whilst he was bankrupt take any proceedings in a court having equitable jurisdiction to assert an equitable interest in property which has vested in his bankruptcy.
118. The leading Chancery case is Motion v Moojen (1872) LR 14 Eq 202. In that case an uncertificated bankrupt filed a bill in Chancery against his former partners in respect of the sale of partnership property. A demurrer to the suit was allowed by Sir James Bacon, V-C. The Vice-Chancellor remarked at 209:
“As a consequence of the bankruptcy, all the rights and interests which the bankrupt had at the time of his bankruptcy have become vested in other persons. The creditors had the rights who have all the rights the bankrupt ever had”.
119. In Cummings v Claremont Petroleum NL (1996) 185 CLR 124 Brennan CJ, Gaudron and McHugh JJ at 135 explained that in Motion v Moojen:
“the case related to a right to bring proceedings in equity which, if successful, would enhance the property which had formerly belonged to the bankrupt but which was then vested in the trustee”.
The High Court obviously considered that the case of Motion v Moojen still has relevance under the Bankruptcy Act.
Whether Equitable Rights Which Vest In The Trustee In Bankruptcy Are Exercisable By A Discharged Bankrupt
120. In 1997 Mr Michael Tsourounakis obtained a discharge of his bankruptcy. It now is necessary for me to consider whether he can now exercise any rights which vested in his trustee in bankruptcy after his discharge from bankruptcy.
121. There are a number of cases which have emphasised that the property of the bankrupt remains vested in the trustee in bankruptcy after the discharge of the bankrupt.
122. In Pitwinski v Corporate Trustees of the Diocese of Armidale [1977] 1 NSWLR 266 a discharged bankrupt was held to be precluded from taking action in respect of property which was still vested in the trustee in bankruptcy.
123. A more recent case is a decision of the Full Court of the Federal Court of Australia which binds me. In Bagshaw v Scott [2002] FCAFC 362, the Full Court emphasised that the discharge of a person from bankruptcy did not affect the position that his property was still vested in the trustee in bankruptcy.
124. Having regard to these authorities I have concluded that Mr Michael Tsourounakis having obtained a discharge of his bankruptcy cannot now exercise any equitable rights which may have vested in his trustee in bankruptcy.
On What Basis Does The Son Have Any Interest In The Property?
125. The case for Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis was conducted on the basis that they had alienated their property to Mr Michael Tsourounakis. This is despite the fact that the relevant documentation that they have provided to the Commission over the years had not made any disclosure of that fact.
126. I also make the comment that at no time have the applicants stated in such documentation that they were not the owners of the Property. In fact the first suggestion that they were not the beneficial owners was on 15 November 2002 when Mr Michael Tsourounakis wrote to the Commission after the veteran’s pension payable to Mr Emmanouil Tsourounakis had ceased.
127. There is much force in the submission of the Commission that this matter is a dispute between the Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis and the Commission and that this is not a suit between Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis and their son. However, as the Full Court appreciated that in determining this application I must assume that there is a suit between Mr Michael Tsourounakis on the one hand, and Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis on the other hand.
128. In examining this matter it is important to appreciate that there are two distinct phases in the work that was undertaken on the Property. These two distinct phases are outlined in the statement of Mrs Mary Anne Tsourounakis of 15 March 2004.
129. Mrs Mary Anne Tsourounakis stated that Phase 1 was “Repairs to the place to make it liveable”. Phase 2 was “At a subsequent time the renovations”: see appeal book, p. 177.
130. The Phase 2 renovations that were commenced in 2001 were financed with the assistance of her father and mother in 2001. The cost of those renovations substantially escalated in December 2001.
131. When the Phase 2 renovations were commenced Mr Michael Tsourounakis was long discharged from his bankruptcy. In my view it is the construction of those renovations which is the basis upon which a court of equity would recognise Mr Michael Tsourounakis as having an equitable interest in the Property.
Family Arrangement
132. The Commission has submitted that the arrangement being a family arrangement was one which was not subject to equitable obligations. The senior counsel for Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis has quite rightly pointed out that many of the authorities which recognise an equitable obligation were in fact family arrangements. I consider that there is much force in his submission.
133. I mention that in a recent text which examines fundamental equitable principles the discussion of proprietary estoppel commences with a discussion of a family arrangement. The factual example in that discussion is that of the owner of a family farm who has encouraged his eldest son to work on the farm with the understanding that the business will be left to him: see S Worthington, Equity (Oxford University Press, 2003), p. 226.
134. Whilst the promise in Giumelli v Giumelli (1996) 196 CLR 101 was made to somebody who was not facing bankruptcy the promise made by Mr Tsourounakis in 1992 was not quite of the same character. It was in my opinion not the basis of an interest that could be claimed by a trustee in bankruptcy.
135. The Full Court in observing that “the evidence leaves something to be desired in terms of a suit in equity” may have had regard to the evidence of Mr Emmanouil Tsourounakis. However, he is elderly and not in good health and that may explain his evidence. On one hand he stated that the Property was no longer his, whilst on the other he acknowledged that he still asserted an interest in the Property which he has disposed of in his will. In his evidence he stated that prior to the hearing he was unaware of the financing arrangements concerning the Phase 2 renovations. He did, however, recall in cross-examination that Mr Michael Tsourounakis talked to him in 2000 about renovating the house to build bedrooms for the boys downstairs.
136. In these circumstances I have no doubt that Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis would be aware that Mr Michael Tsourounakis would expend considerable funds in those renovations.
137. I believe for reasons that follow that this would be a case where a court of equity would require the applicants to compensate Mr Michael Tsourounakis if they sold the Property.
Whether A Court Of Equity Would Restrain The Applicants From Selling The Property
138. I have given some consideration to the submission of the applicants that a court of equity would enjoin the applicants from selling their property. The Full Court recognised that one of the relevant issues is whether the applicants were free to sell the Property and dispossess their son. The Full Court remarked: “The question is whether, if they did, Michael would be entitled in equity to restrain them from doing so.”
139. The promise that was made in 1992 was made at a time when Mr Michael Tsourounakis had difficulties with his creditors. I do not consider that it was a promise which was intended to give him a property interest in the Property.
140. I do not consider that the promise made in 1992 would preclude the applicants from selling the Property if they had to. For example if one of the applicants required expensive medical treatment or of the applicants desired to purchase a retirement residence there would be no basis in my opinion for Mr Michael Tsourounakis being able to restrain the sale of the Property. I also do not consider that it was a promise which would allow him to reside there forever.
141. This was an arrangement for ‘helping the family out’. It was not a situation where Mr Michael Tsourounakis had acted to his detriment by selling his residence on the strength of a representation by Mr Emmanouil Tsourounakis or Mrs Vasiliki Tsourounakis.
142. I consider that the evidence does not support a finding that a court of equity would restrain the applicants from selling their property. There was no evidence before the Tribunal that the applicants encouraged the construction of the Phase 2 renovations. Mr Michael Tsourounakis in evidence stated that “the renovations were not any concern of theirs [i.e. the applicants]”: (see exhibit 4).
On What Basis Would A Court Of Equity Intervene?
143. This case is not the type of case in which proprietary estoppel is usually held to exist. The usual case is where a plaintiff has made a mistake as to his or her legal rights. In such a case Fry J in Willmot v Barber (1880) 15 Ch D 96 at 105-06 set out five tests to establish the existence of an equitable estoppel. In Waltons Stores (Limited) v Maher (1988) 164 CLR 387 Brennan J set out 6 elements to ascertain the existence of an equitable estoppel. However, this case does not fit into these formulations mainly because there is no mistake as to legal rights of a person. This is also not a case where Mr Emmanouil Tsourounakis and Mrs Vasiliki Tsourounakis requested the construction of the Phase 2 renovations.
144. I consider that this case is one which would be decided by a court of equity on equitable notions of unconscionability. In Shaw v Applegate [1977] 1 WLR 970 at 978 Buckley LJ thought that it was not necessary in an appropriate case to satisfy all of the 5 tests laid down by Fry J in Willmot v Barber (1880) 15 Ch D 96. Rather Buckley LJ thought that the “real test” “must be whether upon the facts of the particular case the situation has become such that it would be dishonest or unconscionable for the plaintiff or the person seeking to have the right sought to be enforced, to continue to seek to enforce it”.
145. In this particular case it would in my opinion be most unconscionable for the applicants to asset their legal title over the Property without compensating Mr Michael Tsourounakis for the Phase 2 renovations.
146. In Beaton v McDivitt (1985) 13 NSWLR 162, McHugh JA remarked, at 182,: “The jurisprudential basis of cases such as Dillwyn v Llewelyn, in my opinion, is that Equity will not allow a person to insist upon his strict legal rights when it is unconscionable to do so”.
147. The acquiescence of the applicants in standing by whilst Mr Michael Tsourounakis caused the Phase 2 renovations to be constructed is the basis of an equitable cause of action which rests on proprietary estoppel: see Dinyarrak Investments Pty Ltdv Amoco Australia Ltd (1982) 45 ALR 214 at 222 per Fisher J.
What Compensation Would The Son Be Entitled To If The Applicants Sold The Property
148. In cases of proprietary estoppel there are a variety of remedies which a court of equity may grant. I consider that a court of equity would not rigidly apply any particular kind of remedy. “The court has a wide discretion as to how to satisfy the equity”: see RE Megarry & W Wade, The Law of Real Property (6th ed., 2000), 13-028. This is reflective of the fact that a court of equity is exercising a discretionary jurisdiction.
149. A court of equity would “determine what is the fair order to make between the parties for the protection of the claimant: see Griffiths v Williams (1978) 248 EG 947 at 949 per Goff LJ.
150. I am of the opinion that in this case a court of equity would require the plaintiffs to pay compensation as a condition of being permitted to assert their legal rights over the Property. This possibility was adverted to by the Federal Court of Australia. The reasons for judgment of the Full Court include this passage:
“The court may require that a sum of money be paid to compensate a claimant as a consequence of the departure from the assumption”.
151. In circumstances such as this the amount of compensation that is payable is the minimum equity required to do justice in the circumstances to Mr Michael Tsourounakis: Waltons Stores (Limited) v Maher (1988) 164 CLR 387 at 404 per Mason J and Wilson J. Any award of compensation must do justice to the parties.
152. It In calculating the amount of compensation there are a number of choices of remedy which are available to a court of equity
153. One possible remedy which is available to a court of equity is to impose a lien which reflects the expenditure of Mr Michael Tsourounakis and his family: see The Union Joint Stock Mutual Banking Association v King (1858) 25 Beav 72 (53 ER 563). If this approach were adopted it is my opinion that the amount of compensation would reflect the cost of the Phase 2 renovations, any interest payments, the actual physical labour of Mr Michael Tsourounakis as well as rates and insurance costs.
154. If I were attempting to calculate compensation on that basis I make some comments on some elements make up the quantum of compensation. The actual building costs of the Phase 2 renovations is in the region of $160,000: see appeal book, pages 109-111. The interest costs of the loan to finance the Phase 2 renovations to date would exceed $20,000. The costs of rates and insurances since the Phase 2 renovations commenced could be quantified. There is no estimate of the labour of Mr Michael Tsourounakis on the Phase 2 renovations. No diary which discloses the contribution of Mr Michael Tsourounakis was tendered in available. I have kept in mind that any assessment of labour must be reasonable: see report AVO, 26 February 2003: appeal book, pp. 147-149.
155. I do not favour the imposition of a lien as a just order. This would in my opinion be inadequate for reflecting the value of any emotional investment by Mr Michael Tsourounakis. The photographs tendered to the Tribunal bear testimony to the importance of the home to the Tsourounakis family. How can one properly place a value on that emotional investment? Imposing a lien would also not in my view adequately reflect the increased value of the home caused by the Phase 2 renovations. It is also difficult to assess the continuing obligations of Mr Michael Tsourounakis to repay Mr Carter. Interest costs will change and there may be circumstances when Mr Michael Tsourounakis is unable to make the required periodic payments.
156. Another possible remedy is shown in the case of Raffaele v Raffaele [1962] WAR 29 where the Court made an award of damages of the market value of the house exclusive of the land. That case concerned the building of a new house in circumstances where the house was built under a contract which was enforceable under the doctrine of past performance. There is, however, no such contract present in this case.
157. I have taken the view that in the hypothetical family dispute such as this, a court of equity would not be disposed to make a precise equity accounting.
158. I consider that in this case a court of equity would more likely apply the maxim “equity is equality”. “It has long been a principle of equity that in the absence of sufficient reasons for any division, those who are entitled to property should have the certainty and fairness of equal division; for ‘equity did delight in equality’”: Snell’s Principles of Equity (31st ed., 2005), p. 102-103.
159. It is apparent from the decision of Roxburgh J in Macdonald v Macdonald [1957] 2 All ER 857 that the application of the maxim “equity is equality” does not depend upon any statutory basis but is the application of a general equitable principle. In Macdonald v Macdonald Roxburgh J, at 692, referred to the statement of principle of Sir Raymond Evershed MR in Rimmer v Rimmer [1952] 2 All ER 863 at 867: “Where the court is satisfied that both the parties have a substantial beneficial interest and it is not fairly possible or right to assume some more precise calculation of their shares, I think that equality almost necessarily follows”. I think that this is certainly a case which warrants the application of the maxim “equity is equality” as Mr Michael Tsourounakis has, in my view, “a substantial beneficial interest” in the Property.
160. The maxim “equity is equality” was applied in Macdonald v Macdonald [1957] 2 All ER 857 where members of a family had agreed to buy, furnish and equip a house together. The maxim has been applied in family disputes under the Married Women’s Property Act 1882: see, eg, Cobb v Cobb [1955] 1 WLR 731; Fribance v Fribance [1957] 1 WLR 384.
161. An Australian case in which the maxim “equity is equality” was applied is Jackson v Crosby (1979) 21 SASR 280 where there was an arrangement between a man and a woman that in expectation of eventual marriage the man built a house on land owned by the woman. In that case the trial judge could have ruled that the man was entitled to a lien of £12000 for the cost of his work, but decided that the applicant should be awarded equitable damages of £19000 which was half of the value of the property. The Court of Appeal, by majority, decided that the applicant should be awarded £19000 being half of the value of the property. I observe that in that case there was no concluded contract between the parties.
162. Having regard to all of the circumstances I have come to the conclusion that a court of equity would make a declaration that Mr Michael Tsourounakis has a beneficial interest in the Property to the extent of one half of the value of the Property.
163. In view of the considerable expenditure of Mr Michael Tsourounakis, I believe that the fair application of the maxim “equity is equality” would give him a half interest with the applicants together being regarded as one entity who would have the remaining half beneficial interest. I appreciate that this is a different basis than that applied in the case of Macdonald v Macdonald where all parties shared equally.
164. There is also another aspect to this matter. I do not consider that it is fair for the Commission to resile from the recognition of the existence of an equitable interest of the son. Mr Emmanouil Tsourounakis is an elderly veteran who is not in good health. This in my opinion does not accord with what Smithers J referred to as “standards of good government”: see Collector of Customs (NSW) v Brain Lawlor Automotive Pty Ltd (1979) 41 FLR 338. For the Commission to now resile from the recognition of an equitable interest may have prejudiced the applicants who could have taken other steps if the respondent’s present attitude was earlier made clear.
165. I mention that the assessment of rent that has been forgone for the purposes of s 48 of the Act was not challenged. This must be considered in any assessment together with the new valuation of Mr Walsh.
Decision
166. Matter remitted for assessment by the Repatriation Commission with the direction that Mr Michael Tsourounakis has a beneficial interest in the property at 16 Ganges Street, West End, Brisbane to the extent of one half of the value of the property.
I certify that the 166 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member P McDermott
Signed: Jeff Mills
Legal Research OfficerDate/s of Hearing 23 May 2005
Date of Decision 15 September 2005
Counsel for the Applicant Mr J Logan SC
Solicitor for the Applicant Gilshenan and Luton
Counsel for the Respondent Ms E Ford
Solicitor for the Respondent Legal Services Group, Department of Veterans' Affairs
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