Wallis v Rudek

[2020] NSWSC 162

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Wallis v Rudek [2020] NSWSC 162
Hearing dates:	17, 18, 20 February 2020
Date of orders:	26 February 2020
Decision date:	26 February 2020
Jurisdiction:	Equity
Before:	Parker J
Decision:	See [140]
Catchwords:	EQUITY – equitable interest in property – family arrangement – transferee pays off mortgage on property – equity in property exceeds amount owing – transferor permitted to remain in property – licence agreement not signed – relationship breakdown – Baumgartner v Baumgartner equity recognised – equitable compensation granted   EQUITY – general principles and maxims – they who seek equity must do equity – false claim of Commonwealth rental assistance – repayment of monies, interest and penalties as a condition of relief
Legislation Cited:	Conveyancing Act 1919 (NSW), ss 23C, 54A
Cases Cited:	Baumgartner v Baumgartner (1987) 164 CLR 137 Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447 Muschinski v Dodds (1985) 160 CLR 583 Nelson v Nelson (1995) 184 CLR 538
Category:	Principal judgment
Parties:	Yuri Wallis (First Plaintiff) Olga Wallis (Second Plaintiff) Suzanne Rudek (Defendant)
Representation:	Counsel: B Oliak/DE Thomas (First and Second Plaintiffs) J Bennett (Defendant)   Solicitors: P Dobrich & Co (First and Second Plaintiffs) Optic Lawyers (Defendant)
File Number(s):	2018/191080
Publication restriction:	Nil

Judgment – EX TEMPORE

Revised and reissued on 5 March 2020

1. These proceedings arise out of a family dispute concerning a house in which the parties are living at Pennant Hills in North Western Sydney. The plaintiffs, Yuri and Olga Wallis, are a married couple. The defendant, Suzanne Rudek, is their daughter.

2. The house was originally owned by Mr and Mrs Wallis. It was their family home (they have four other daughters as well as Mrs Rudek; by the time of the events which are the subject of these proceedings all of them had moved away from home and were living independently with their own families).

3. In 2012 Mr Wallis, who had worked as a builder, developed a heart condition and retired from work. He and Mrs Wallis had borrowed money from the ANZ Bank to fund improvements to the home and perhaps other ventures. They found themselves unable to meet their loan repayments.

4. The parties came up with a plan for Mrs Rudek to buy the house and to live there with her family alongside the Wallises. Pursuant to this plan, a written contract for the sale of land was written and executed between the Wallises, as vendors, and Mrs Rudek, as purchaser. Mrs Rudek paid off the outstanding amount to ANZ and the property was transferred to her. The transaction was completed in August 2013.

5. Following the completion of the transaction, Mrs Rudek moved into the house with her family which consisted of her husband, Vass Rudek, and their three children. The house is on three levels and consists of two self-contained living areas, each having separate access. Mrs Rudek and her family occupied the living area on the top two floors. The Wallises occupied the ground floor.

6. Conflict arose between the parties. There were serious altercations and an ongoing state of hostility between Mr Wallis and Mr Rudek, in particular. A similar state of affairs obtained between Mr Wallis and his grandson, Steve Rudek. I describe these conflicts in more detail below.

7. After this state of affairs had continued for some years (and the police had been called to the property more than once), Mrs Rudek gave her parents a formal notice asking them to leave. This was in February 2018.

8. The Wallises responded by placing a caveat on the property and bringing these proceedings. They remain in occupation of the ground floor of the house.

Issues for determination

9. The Wallises are very attached to the property. Their objective in this litigation is to ensure that they can continue to live there for the rest of their lives. Their primary contention is that Mrs Rudek promised them that they could do so, as part of the arrangement under which the property was transferred to her.

10. The Wallises put their case based on this alleged promise in two different ways. Their first contention is that the alleged promise amounted to a contractual agreement which can be specifically enforced.

11. The alleged agreement was oral so, on the face of it, it would be caught by the Statute of Frauds (Conveyancing Act1919 (NSW), ss 23C, 54A).

12. No such defence is pleaded on behalf of Mrs Rudek but in opening submissions counsel for Mrs Rudek relied on s 23C. In submissions in response, counsel for the Wallises invoked the doctrine of part performance. This gives rise to a potential issue as to whether there were acts of performance by the parties which were unequivocally referable to the existence of a contract of the type alleged.

13. The second way in which the Wallises put their case is that a proprietary estoppel arose from the alleged promise. It is not suggested that the Statute of Frauds would be an answer to this claim.

14. Counsel for Mrs Wallis acknowledged that even if an estoppel were established, the grant of relief would be discretionary. Counsel contended, however, that the Court should mould relief so as to give the Wallises a right to occupy the property for the rest of their lives.

15. The Wallises have an alternative claim to cover the possibility that the Court is not satisfied that a promise was made to them, as alleged, that they could stay at the house for the rest of their lives. The claim based on the total amount paid by Mrs Rudek to the Bank and to other creditors of the Wallises was approximately $840,000. The consideration shown on the contract and the transfer was $1,050,000 but the balance was never paid. Mrs Rudek contends that $1,050,000 was an over-value. She says that the figure was used only for the purpose of obtaining the necessary loan. She accepts, however, that the property was worth at least $950,000. On any view, therefore, the Wallises received less from the transaction than the property was worth.

16. In these circumstances, the Wallises characterise the case as an instance of a property acquired with a common intention (for the shared occupation of the house) which has broken down in circumstances where it would be inequitable for the property holder (Mrs Rudek) to retain the benefit of the whole of the property.

17. The Wallises seek the imposition of a constructive trust over the property to secure their contribution to it (which they characterise as the equity they had in the property at the time of the transaction in August 2013). The Wallises rely on the decisions of the High Court in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137.

18. The Wallises’ Statement of Claim also pleaded a case of unconscionable advantage allegedly taken of them by Mrs Rudek. This claim was based on the principles in Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447 but was abandoned at trial.

19. As well as defending the claim, Mrs Rudek has cross-claimed seeking possession of the property. The cross-claim also sought damages in the form of mesne profits, but no evidence was filed in accordance with the Court's directions to quantify this claim. I refused to permit counsel for Mrs Rudek to lead evidence on the question at the trial given the unexplained failure to comply with the Court's directions and the claim was not thereafter pursued.

Summary and analysis of evidence

Chronology of Key Facts

20. The Wallises acquired the property in about 1975 as vacant land. They built the house (originally with two storeys only) in 1985. I assume that the work, or most of it, was done by Mr Wallis himself.

21. As I have mentioned, Mr Wallis developed a heart condition and retired from building work in 2012.

22. The evidence does not indicate when the problems with the Bank first arose but it is clear that the Wallises were in difficulty by early 2013 at the latest. At that time Mrs Rudek took out a personal loan of $26,000 for the benefit of the Wallises. They arranged to pay the interest on it. The evidence also refers to the Wallises borrowing other sums from Mrs Rudek's uncle at around this time.

23. There is no evidence before me of the Wallises’ financial position before and after these loans were taken out. But it seems clear that the loans were insufficient to solve the Wallises’ financial problems.

24. ANZ commenced enforcement action against the Wallises. The precise form of the action is not described in the evidence but it is clear that the ANZ retained external solicitors Kemp Strang. Presumably, demand, at least, was made upon the Wallises for payment. It is unclear if the ANZ also commenced court proceedings.

25. The next event was a meeting which took place at the property between the Wallises, Mrs Rudek and Mr Rudek. This meeting forms a central part of the Wallises’ case in these proceedings. There is a dispute about what was said, which I deal with in more detail below, but it is clear that the parties discussed Mrs Rudek borrowing money to pay off ANZ and moving into the property with her family. The precise date of the meeting is not fixed in the evidence but it would appear to have been in June 2013.

26. Following the meeting, Mrs Rudek made an approach to the Commonwealth Bank of Australia (CBA) to borrow money to pay out the ANZ mortgage. Her mother also attended the meeting with the bank manager. There is a dispute about the degree of involvement of Mrs Wallis in the actual negotiations. But the upshot of the meeting was that a valuation needed to be obtained to see whether the property had sufficient value to support a loan in the amount which was required.

27. Following the meeting, Ms Nicole Webster, a conveyancer, was retained to act on the transaction. Her firm is known as Auswide Conveyancing. According to Mrs Rudek, the approach to Ms Webster was a joint one, in which both she and her mother participated. It seems from the correspondence that Ms Webster took most of her instructions from Mrs Rudek and may have seen her as the "main" client. However, Ms Webster also corresponded with and sought instructions from the Wallises, and her correspondence makes it clear that she considered that she was acting for both parties. She ultimately rendered a bill to each party for working on the transaction.

28. CBA duly obtained a valuation, which came in at $950,000. The valuation is in evidence and is dated 1 July 2013. On that day, or shortly afterwards, the bank manager rang Mrs Rudek and told her that this was not enough for the bank to lend the amount required (which seems to have been approximately $900,000).

29. In answer to her inquiry about whether finance could be obtained from another source, he suggested that she contact Mr Adrian Bryers, a mortgage broker working for RAMS.

30. Mr Bryers apparently told Mrs Rudek that a loan could be obtained from AMP, if a valuation could be obtained in the sum of $1,050,000 or more.

31. In order to pursue the application, it was also necessary to obtain a letter from a real estate agency, advising of the potential rental income on the property. For this purpose, Mrs Rudek, and her mother, visited an agent known as W Group in Pennant Hills. They explained the situation to the real estate agent, and he suggested that the Wallises contact an organisation known as "Debt Rescue". This was, apparently, a company which specialised in helping people with mortgage difficulties, to restructure, or refinance, their debts, so as to be able to retain their property.

32. This suggestion was taken up by the Wallises, and Debt Rescue seems to have become involved, at least to the extent of negotiating a payment moratorium with Kemp Strang. Initially, the Wallises were optimistic about being able to refinance, or restructure, their debt through Debt Rescue, but, eventually, this came to nothing.

33. On 10 July, Mrs Rudek wrote to Ms Webster, to update her on what had happened. Mrs Rudek reported that Debt Rescue had “put a stay” on the property until 22 July, but that "[t]hings didn’t go to plan" for her parents, and she would be buying the property. Ms Webster agreed to take up the conveyancing task again.

34. On the same day, a valuer visited the property for the purpose of valuing it for AMP. The valuer happened to be the same person who had conducted the valuation for CBA. According to Mrs Rudek, at Mr Bryers' suggestion, she approached the valuer on her parents' behalf, telling him about the circumstances, and explaining that a valuation of $1,050,000 was needed in order for the loan to go through, and for her parents to continue to be able to live at their house. Although it is not in evidence, correspondence from Mr Bryers to Ms Webster shows that a valuation of $1,050,000 was obtained.

35. Ms Webster drew up a standard form of contract for the sale of land and a transfer from the Wallises to Mrs Rudek. The contract price was shown as $1,050,000, and this is also recorded as the amount of consideration in the transfer. A meeting took place at Ms Webster's office which was attended by the Wallises and Mrs Rudek. Again, there is a dispute about exactly what was said, but it is clear that the transaction was discussed, and in particular there was a discussion about the arrangements for occupation after completion. The contracts and transfers were signed (the contract, apparently, in counterpart) but the papers were retained by Ms Webster.

36. Other correspondence shows that this meeting took place between 17 and 22 July.   Initially, it seems to have been planned to complete the transaction on 22 July. For reasons that are not explained in the evidence, this was delayed (at this point Debt Rescue appears to have temporarily resurfaced as an option).

37. Around a week later, on 29 July, Mrs Rudek paid a deposit of $105,000 (10 per cent of $1,050,000 shown in the contract) to representatives of ANZ. A signed contract and transfer were also shown to them, and this appears to have taken some of the urgency out of completion from ANZ’s point of view.

38. At some point after her meeting with the Wallises and Mrs Rudek, Ms Webster drew up a form of licence agreement. The agreement recited the contract of sale, and that the “parties have agreed to modify the contract by allowing the vendor to retain possession following completion on the terms and conditions herein contained".

39. Clause 1 provided:

The licensor grants the licensee a licence to occupy the part of the property on the bottom level of the residence at a weekly licence fee of $1 from the date of settlement until 16 August 2014 and following this time, indefinitely on a month by monthly basis

40. The use of the word "indefinitely" makes this clause somewhat clumsy, but it is clear enough that the intent behind the clause was that the Wallises were to be able to retain possession of the ground floor of the house for one year but that thereafter they would be liable to have their occupation terminated on one month's notice.

41. On 2 August, Mrs Wallis wrote to Mrs Rudek reporting on what she described as the “exchange” of the contract having taken place on 31 July 2013. It seems clear that no actual meeting between the parties to the contract, or physical handover of documents, took place. Instead, Ms Webster, acting for both parties, simply treated the contracts as having been formally exchanged. The contract in evidence is dated 31 July, and no doubt this date was inserted by Ms Webster to signify “exchange”.

42. On the same day, 2 August, Ms Webster wrote to the Wallises reporting on the “exchange” and the payment of the $105,000 deposit. The letter noted that if settlement had not occurred by 30 August 2013, then there was an "eviction notice" in place, which would require them to vacate the house. The letter continued:

We note that Suzanne is allowing you to remain in possession of the bottom half of the house following completion. Please ensure that the upstairs part of the house is left vacant by 16 August 2013 as agreed. Please find attached Licence Agreement for your signatures and return to me as soon as possible.

43. Although the letter stated that completion was to take place on 16 August, on 7 August Ms Webster wrote to the Wallises again, stating that settlement had been booked in for 8 August (the email to Mrs Rudek referred to below suggests this was a typographical error for 16 August). The letter went on to ask that the Wallises forward the signed licence agreement as soon as possible. The letter continued:

We note that should you remain in the property without the benefit of the licence agreement, then you will be doing so only due to the goodwill of your daughter. I understand you wished to remain in the property for as long as possible and recommend that you sign the agreement which would allow you to remain in the property for at least 12 months at a cost of $1 per week. Suzanne would not be able to request that you move prior to this time, provided you comply with the terms of the licence.

44. On the same day, Ms Webster sent an email to Mrs Rudek, advising her that settlement had been booked in for the following Friday, 16 August. Ms Webster undertook to prepare the necessary settlement adjustments on confirmation of the electricity meter reading and provision of an exact amount payable on the loan. The email continued:

Further, it is recommended not to allow anybody live in any property you own without an agreement for extended periods of time. As discussed, if your parents live in the property for 10 years or more without any agreement, they may claim an easement in equity to remain in the property as previously allowed.

However, should they not wish to allow [sic] to sign the Licence Agreement, then you will be able to request your parents vacate at any time.

45. On 15 August, the day before the settlement, Ms Webster again wrote to the Wallises, confirming the date and time at which the settlement was to take place, and setting out details of settlement adjustments for council rates, water rates and $52.29, being for rent at $1 per week for the next year. This was despite the fact that the licence agreement had not been signed. The letter referred to this, and stated:

We note that we haven’t received a signed Licence Agreement from you. Accordingly, we note that the purchaser can request that you vacate the property at any time.

46. On the same day, Ms Webster wrote to Mrs Rudek with financial details of the settlement. The letter noted that the total amount of $778,105.12 was being made available on settlement and provided details for cheques. These included $722,498.27 for the "vendor bank" (ANZ) and $7,114.10 for the "vendor solicitor" (Kemp Strang). It included a rates payment to the Hornsby Shire Council of approximately $2,700, and a water rates payment of approximately $170 and a cheque to Auswide Conveyancing of $2,207.36, which covered both Mrs Rudek's and the Wallises' fees. Excluding the fee for Mrs Rudek, the total amount paid to creditors of the Wallises was approximately $735,000. The remaining amount was approximately $43,300 for stamp duty. Thus, when added to the $105,000 deposit which had already been paid, the total amount received by the Wallises was approximately $840,000.

47. Ms Webster’s letter referred to the settlement adjustment sheet which had been prepared based on the contract price of $1,050,000. It stated:

We note that in accordance with the settlement adjustment sheet, you owe to the vendor an amount of $946,405.60. Accordingly, the vendor has allowed an amount of $212,907.84 to be allocated as rental fees for the term that you wish to allow them to stay in the underneath area of the property.

48. Although the letter spoke of an allowance being made for "rental fees", it is clear that the figure of $212,000 was merely a balancing item. No such amount was actually paid or brought to account by Mrs Rudek (noting that rent would ordinarily be taxable). The settlement proceeded on 16 August as planned.

48. About three weeks later, Ms Webster wrote again to the Wallises reporting on settlement. After having confirmed that no further amounts were payable, and that the loan from ANZ had been discharged in full, she said:

We note that you are now residing in the lower half of the property in agreement with the purchaser at a cost of $1 per week. We note that the first 12 months of this has already been paid. We recommend you enter into either a Licence Agreement or Residential Tenancy Agreement to ensure your option to remain in the premises as discussed. To date, we have not received any such agreements in this regard.

50. Although, on the face of it, this paragraph of the letter appeared to leave the question of a licence agreement open, the letter went on to enclose a final memorandum of costs and to indicate that the file was closed. The Wallises never did sign the licence agreement which Ms Webster prepared.

Witnesses

51. Both of the Wallises gave evidence in support of their case. Both of them were cross-examined and their credibility, or at least reliability as witnesses, was in issue.

52. Mr Wallis was born in March 1945 (I assume in Russia). He migrated to Australia with his parents as a five year old. As I have mentioned, he worked as a builder, but he also seemed to have had some investments in property at various times. He is now 74 years old. At the time of the events the subject of these proceedings, he was 68.

53. Mr Wallis gave evidence on a number of points which was demonstrably incorrect. One example is, at the beginning of his cross-examination, he was asked about whether he owned any other properties. He said he did not. Counsel immediately confronted him with a search of a property in Victoria, and Mr Wallis immediately had to recant, acknowledging that he does own a property there. The issue may not ultimately be of very great significance, but the course of events did not inspire confidence. Other points where I reject Mr Wallis’ evidence on specific points appear below.

54. In the evidence before me it appeared that, after the Rudeks moved into the house, Mrs Wallis claimed rental assistance from Centrelink. This benefit, as its name suggests, is only available by way of subsidy to people who are paying rent; and it seems quite clear that, on any view of the situation, the Wallises were not entitled to any such benefit.

55. I was told from the Bar Table that Mrs Wallis is now repaying the amounts which were paid. The point for present purposes is that, according to Mrs Rudek, it was Mr Wallis who asked her to sign the documents that she, as registered proprietor, was required to sign in order that the claim should be made. Mr Wallis was not questioned about this, but he did not deny what Mrs Rudek said.

56. Overall, I was not impressed with Mr Wallis' demeanour and his performance during cross-examination. Mrs Rudek, in her evidence, said that her father was fixated with the Pennant Hills property, and I am afraid, based on seeing him in the witness box, that this is probably true. He seemed to me to be completely focused on saying what he thought he needed to say to support his claim in these proceedings so that he can stay in the house as he wishes to. I have no real confidence in the reliability of his evidence.

57. Most of the negotiations which are relevant for the purpose of these proceedings seem to have taken place between Mr Wallis and Mrs Rudek. Mrs Wallis was involved, but I got the impression that she saw it as her responsibility to do her husband's bidding, without enquiring too deeply about the propriety or legitimacy or what he was asking for. This naturally causes me some disquiet about whether she maintained the same attitude in giving her evidence before me.

58. As it was, I found her evidence vague on matters of detail, and I was not satisfied that it was reliable. In fairness to Mrs Wallis, the events in question occurred now more than six years ago, and it would hardly be surprising if, not having the principal conduct of the negotiations, she had forgotten some of the details or got some of them the wrong way around. I do not think it would be safe to rely on her evidence on any disputed issue of fact.

59. Four witnesses gave evidence in the defence case. These were Mrs Rudek herself, her husband Vass Rudek, and two of her children, Steve and Nadia.

60. Mrs Rudek was cross-examined at length. Two matters were referred to in the evidence which might potentially affect her credit.

61. The first concerns her involvement in obtaining the valuation of $1,050,000. Counsel for the Wallises put to Mrs Rudek, in effect, that she was engaged in defrauding the lender (AMP). But in my view this goes too far.

62. It was clear from the evidence that Mrs Rudek did not herself believe that the property had increased in value by $100,000 over a period of several weeks, and that all she was really interested in was getting a valuation which would be sufficient to support the loan. She was indifferent as to the true value of the property, and perfectly happy for the Bank to lend more on the property than it was truly worth.

63. But Mrs Rudek is not a valuer, and the responsibility of the valuation ultimately lay with the valuer who propounded it. He is not before the Court, and even if the valuation was overstated, I do not see how Mrs Rudek can be held responsible.

64. The second matter to which I refer is Mrs Rudek's involvement in obtaining the Centrelink benefit. On her own account, she signed false papers at her father's request with a view to obtaining a benefit which she must have appreciated her parents were not entitled to.

65. It is easy to sympathise with the difficult position in which Mrs Rudek found herself. She was in effect being subjected to emotional blackmail concerning the loan. While I consider that these two incidents do Mrs Rudek no credit, I do not think they have any serious effect on the overall reliability of her evidence.

66. In final submissions, counsel for the Wallises attacked Mrs Rudek's credit generally. Counsel characterised her evidence as having been at best dissembling, and at worst as involving active concealment. Given what I have said about Mrs Rudek, it is only fair to record that I think this submission was entirely unjustified. I found Mrs Rudek's demeanour in the witness box was serious, but candid. She may not be correct in every detail of her evidence, but in general I thought her evidence reliable. In particular, I found her account of the difficulties in which she was placed by her parents' behaviour compelling and credible.

67. Mr Vass Rudek was also cross-examined. Again, I see no reason to question the honesty of his evidence. I thought he showed commendable restraint in being forced to relive incidents which have clearly been painful and humiliating for him. I have no difficulty whatsoever in accepting the broad thrust of his evidence.

68. The Rudek children, Steve and Nadia, were briefly cross-examined. Their credit was not challenged, and there is no reason not to accept their evidence, so far as it goes.

Alleged promise

69. Mr Wallis' case, as presented in his evidence, was that it was his daughter who approached him to take a transfer of the property, rather than the other way around. He identified two occasions on which, so he alleged, it had been promised that he and his wife would be allowed to stay in the property for the rest of their lives.

70. The first of those was the meeting at the property in June 2013. The second was at the meeting with the conveyancer, Ms Webster, which took place in July. On the latter occasion, according to Mr Wallis, it was agreed in front of Ms Webster that the Wallises were to be entitled to stay in the property until they died, and Ms Webster undertook to draw up a document accordingly. Mr Wallis' evidence was supported by Mrs Wallis.

71. Mrs Rudek presented a completely different account. She explained that, as she understood it, her father had had a chequered career in building and business generally. She had her own house which was mortgaged for about $100,000, and had no wish to increase her level of borrowing. She said that the approach came from her parents, and she and her husband only reluctantly agreed to it.

72. In her affidavit, she denied that at the meeting in June or at any other time, she ever indicated that her parents would be entitled to stay at the house until they died. She acknowledged that no specific time for their departure had been fixed, and characterised the arrangement as a loose "see how it goes" arrangement.

73. Under cross-examination, however, Mrs Rudek appeared to concede that at the first meeting her father did say that he wished to stay at the house, for the rest of his life, and that she agreed with this. But she insisted that, by the time the transaction came to be completed, this was no longer the case. She said that, once it was clear that Debt Rescue could not help, she made it clear to her father that he was buying the property on her terms, not his, and she would not agree to any such lifetime arrangement. For one thing, she said, she had no idea whether she would even be able to service such a large mortgage.

74. Mrs Rudek's affidavit account was supported by Mr Rudek. In cross-examination, he maintained that there had been no commitment, insofar as a lifetime occupancy was concerned, at the meeting in June 2013. He declined to make the concession apparently made by his wife in this regard.

75. In evaluating the conflict of evidence, I think there are four relevant factors. The first is the context for the transaction, and in particular, the previous loan of $26,000. Mrs Rudek gave evidence that this loan was only made after she was importuned by her mother to make the loan, and promised that it would be swiftly repaid.

76. On Mrs Rudek's account, this was accompanied by emotional blackmail, in which Mrs Wallis said that Mrs Rudek's uncle had provided a loan and therefore she should as well. Mrs Wallis did not deny this in cross-examination, and Mrs Rudek's version was not challenged when she came to be cross-examined. I see no reason not to accept it.

77. This conclusion on its own makes it unlikely that Mr Wallis was correct in his claim that it was Mrs Rudek who approached him to buy the property, rather than the other way around.

78. Secondly, the evidence given by Mrs Rudek about Mr Wallis' chequered career really amounted to saying that she did not trust him financially. Both she and Mr Rudek gave evidence that they specifically asked Mr Wallis whether there were any problems with the council arising out of the works which he had done, and were explicitly told that there were not. This evidence, if challenged at all, was only faintly challenged in cross-examination, and I accept it. It reinforces the conclusion that Mrs Rudek was wary of financial entanglements with her parents.

79. The third and most important factor is the contemporaneous written evidence. It is quite clear from Ms Webster's correspondence that she did not understand that the Wallises were to have a life interest. So much is also clear from the draft licence agreement which she prepared.

80. It is not easy to know what Ms Webster had in mind in preparing the licence agreement which was somewhat amateurish in form. Ms Webster also put herself in a difficult position by acting for both parties to the transaction. But none of this gives any reason to think that she misunderstood her instructions, let alone that she misunderstood them in the fundamental way required by Mr Wallis’ account of events.

81. Fourthly, there is the general credit of the witnesses involved. I have already explained why I consider the evidence given by the Wallises to be generally unreliable, and the evidence given by the Rudeks as being generally reliable.

82. It is not necessary to decide whether Mrs Rudek in fact agreed at the first meeting that the Wallises should be entitled to stay for life. This is because all of the considerations which I have mentioned support the thrust of the rest of Mrs Rudek's evidence; namely that by the time the contract was signed, the Wallises clearly understood that there was no commitment that they could stay at the property for the rest of their lives.

83. I do not doubt that this is what the Wallises wanted and hoped for. But I think it is quite clear from the evidence that, when they asked for this commitment, it was refused. I suspect that the real reason why they did not sign the licence agreement is because Mr Wallis knew very well that, if he did, he would be formally accepting something inconsistent with what he wanted. I regret to say that I think that that is probably the sort of man that he is. But I do not need to reach a final conclusion on this. It is sufficient to say that I am not satisfied that a promise was made to the Wallises of a lifetime interest as part of the transaction.

Conflict

84. It was not long after the Rudeks moved in to the Pennant Hills property in August 2015 that another property, described in the evidence as an investment property and elsewhere in the evidence as being owned by Mrs Wallis, was sold. This property had been the subject of discussion at the time of the $26,000 loan earlier in the year. Mrs Wallis had assured Mrs Rudek, according to Mrs Rudek's evidence, that the proceeds would be used to discharge the loans to Mrs Rudek's uncle and to her.

85. The evidence does not reveal whether Mrs Rudek's uncle was repaid, but she was not. Instead, at about the same time, and presumably with part of the proceeds, Mr Wallis bought himself a Mercedes Benz motor car. The Wallises continued (and, as I understand, continue) to make the monthly repayments. But according to Mrs Rudek, she resented the breach of the undertaking which had been explicitly given earlier in the year.

86. Problems also arose with the local council. It emerged that some years before the transfer, the council had issued notices to the Wallises as owners to undertake rectification works because of a failure to comply with the terms of the development approval. This issue was taken up by the council with Mrs Rudek as the new owners.

87. When asked about this by the Rudeks, Mr Wallis’ response was that he did not know, at the time of the August 2013 transaction, that there was an outstanding problem with council. The evidence before me does not allow me to make any assessment as to whether this is correct or not. But what is clear is that the Rudeks did not believe Mr Wallis, and this was a further source of resentment, in view of the express understanding on which they had gone into the transaction.

88. There were also difficulties in complying with the council's requirements. Mr Wallis, according to Mr Rudek, interfered with work that Mr Rudek was doing in order to comply with council's requirements. This involved the construction of pillars on balconies on the property.

89. According to Mr and Mrs Rudek, the council also required shutters to be installed for bushfire purposes, and Mr Wallis interfered with this also. It seems that Mr Wallis adopted a proprietorial attitude, considering that he and only he should be undertaking any works to "his" property.

90. There was evidence of a similar attitude with respect to work in the garden. Mr Wallis interfered with Mr Rudek trying to prune trees, and according to the Rudeks, also picked a fight with a neighbour over a dividing fence.

91. At the time the Wallises moved into the property the pool had been drained and was being used for the storage of items belonging largely, if not entirely, to the Wallises which were unkindly, but probably accurately, described as “junk”. According to the Rudeks, Mr Wallis refused to remove the items from the pool, and it remains in this state to this day.

92. The Rudeks also complained in their evidence that Mr Wallis would not give them access to the only clothes dryer in the house, which is on the ground floor, except on his own idiosyncratically imposed terms.

93. According to the Rudeks, Mr Wallis was also personally abusive, particularly to Mr  Rudek. He referred to him as "rude dick", a crude adaptation of his surname. Ms Nadia Rudek gave evidence of an occasion when Mr Wallis abused her father in front of her, in a belittling way.

94. On the Rudeks’ evidence, it was Mr Vass Rudek who bore the brunt of this behaviour; but Mr Steve Rudek gave evidence that his grandfather broke into an external shed which he used as a studio and destroyed one of his art works. When confronted about this, Mr Wallis abused his grandson in similarly offensive terms.

95. There were also occasions when, according to the Rudeks, Mr Wallis' behaviour led to the police being called to the property, whereupon Mr Wallis tried to get the police to take action against Mr Rudek. At one point, according to Mrs Rudek's evidence, Mr Wallis asked the police to take out an apprehended violence order against Mr Rudek, and when they refused, he commenced proceedings himself which were then dropped.

96. According to Mr Rudek, in late 2017 or early 2018, this came to a head. In a discussion with his mother-in-law, Mrs Wallis, she said that the Rudeks owed the Wallises $200,000. Mr Rudek said that they would pay this amount if only the Wallises would leave the house and go somewhere else.

97. According to the Rudeks' evidence, the obnoxious behaviour on the part of Mr Wallis continued, even after the proceedings began. There was an incident, in July 2018, when Mr Rudek was sprayed with a hose by Mr Wallis. Following the altercation, Mr Wallis was convicted of assault.

98. In his evidence, Mr Wallis denied some, but by no means all, of these allegations. But his version of events was not put to any of the Rudeks in cross-examination. In these circumstances, I am satisfied that the Rudeks' account of events is substantially correct.

99. In cross-examination and in final submissions, counsel for the Wallises sought to play down the significance of Mr Wallis' behaviour. Counsel characterised the events as involving no more than "name calling" and "squirting with a hose".

100. Counsel also established, in cross-examination, that Vass Rudek and Steve Rudek in particular, seek to avoid conflict with Mr Wallis by avoiding him wherever possible and as long as they are successful at doing that, an uneasy peace is maintained. Counsel submitted that, in these circumstances, there was no reason to think that the Wallises could not continue to live at the property.

101. In my view, the situation is all together more serious than that presented in counsel's submission. No self-respecting person should be required to put up with the sort of behaviour revealed by the evidence in this case.

102. It is not just a question of being called rude names on a few isolated occasions. Vass Rudek is required to share the home in which he lives with a person who, the evidence reveals, takes every opportunity to belittle and humiliate him, including in front of his own family. It is hardly surprising that Mr Rudek chooses, with commendable restraint, to avoid Mr Wallis. No doubt it would be even more convenient to Mr Wallis if Mr Rudek would just move out. But why should he have to?

103. I am satisfied that Mr Wallis' behaviour is wholly unreasonable, and represents a substantial interference with Mrs Rudek's and her family's enjoyment of their home. The anguish caused to Mrs Rudek from her father's behaviour was plain for all to see in the course of her evidence. It was an entirely understandable reaction. I reject the suggestion that Mr Wallis’ behaviour was somehow trivial or unimportant.

Specifically enforceable agreement

104. Having regard to my conclusions on the facts, the Wallises' claim that there is a contractually binding agreement capable of specific performance for them to stay in the property for the rest of their lives fails. It is unnecessary to go into the application of the Statute of Frauds and the doctrine of part performance.

Proprietary estoppel

105. Given my finding, that there was no promise that the Wallises were entitled to stay in the property for the rest of their lives, this claim fails. But I should make it clear that, even if I took a different view, I would not grant relief which would have the effect of securing the Wallises a right of continued occupation of the property.

105. In the course of the trial, counsel for the Wallises proffered an undertaking from them which they would agree to give to the Court, should the Court require it as a condition of granting equitable relief.

106. The undertaking was in the following terms:

1.   AND ACKNOWELDGE that the curtilage and rear yard and pool and trees are no longer our concern to maintain or upkeep and longer our concern, and will not interfere with you in your decision about these areas and that you will be responsible for the maintenance and upkeep and make the decisions about these areas;

2.   Remove from the pool the various items that have been placed inside within 4 weeks of your accepting our Undertaking;

3.   Assist in all ways with you making some modifications to the upstairs bathroom to include a laundry sink and plumbing connections for your washing machine and dryer, and note that one of our grandsons (and one of your sons) is a licenced plumber who can assist as well.

108. One of the striking things about the evidence in this case concerning Mr Wallis' behaviour is that there seems no shadow of a justification for his view that his entitlement to control the property extends beyond the ground floor living area and covers the garden, the swimming pool, and the external studio. Nothing in the evidence before me suggests that there was ever any agreement, even on the Wallises' own case, which would justify that view. Yet it is only at the end of the case that the Wallises agreed to do something which, insofar as I can see they have always been required to agree to. Even then the agreement is only conditional on the Court granting equitable relief.

109. At all events, I am not satisfied, given the past relationship between the parties, as disclosed by the evidence, that the Wallises can be trusted to change their ways. It seems to me that Mr Wallis must have a fixation about the property which causes him to behave in the obnoxious fashion revealed by the evidence. It seems he simply cannot help himself.

Common intention constructive trust

110. Counsel for the Wallises base their submissions on this claim, on the following statement of principle from Muschinski (at 620 per Deane J) which was approved in Baumgartner at 148:

“… the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.

111. Counsel for Mrs Rudek contended that this principle does not apply on the facts of the present case. The typical case of common intention constructive trust (of which Baumgartner and Muschinski were both examples) is of a pooling of financial assets which are then used to acquire the property in the name of one of the parties from a third party as a matrimonial home. Counsel pointed out that the facts of the present case are not the same.

112. I acknowledge the distinction drawn by counsel, but I do not think it makes a relevant difference. The fact is that the August 2013 transaction resulted in Mrs Rudek holding the title to the property, but on any view, she did not pay full value to acquire it. Instead, the financial effect of the transaction was that additional equity (whatever the amount, a question to which I will return) was contributed by the Wallises.

113. To that extent, I think there is a pooling of assets. There seems to me to be no reason in principle to confine the application of the Baumgartner doctrine to cases where the property is acquired from a third party, or cases where there is an actual pooling of financial resources or bank accounts. The doctrine ultimately rests on the inequity which arises if an asset which is acquired with joint contributions falls to the party who is the registered proprietor on the breakdown of the relationship between the parties. In my view, that element is present here.

114. On counsel's argument, Mrs Rudek was entitled on the day after settlement to exclude her parents from the property. In circumstances where there was no express agreement between the parties as to when their occupation would come to an end, I think the inequity of that position is manifest.

115. The question then arises as to what equitable relief would be available. Usually in a common intention constructive trust case, the Court will vest the property in trustees for sale who are directed to realise it, repay each party's contributions, and then divide the proceeds fifty-fifty between them.

116. But counsel for the Wallises did not suggest that the Court should take this step in the present case, and in my view it would not be proper to do so. Such an approach would clearly defeat the evident intention of the parties that Mrs Rudek was to own the property into the future. It would also be quite unreasonable to the Rudeks now that they have made the property their home, and given their much greater financial contribution to saving it from the bank.

117. One curiosity about this case is that, on the face of it, the Wallises would have a perfectly good contractual cause of action against Mrs Rudek. Under the written contract for sale, Mrs Rudek was obliged to pay the sum $1,050,000. She has not done so.

118. I appreciate that Mrs Rudek's evidence was that the sum in the contract was an over value. But I am not sure that it would be open to Mrs Rudek to rely on this, when she signed the contract with full knowledge of what it contained.

119. When I raised this question in final submissions, counsel for Mrs Rudek sought to reserve his position, and suggested that there might be some defence. But it is hard to see one. Presumably, Mrs Rudek would not wish to contend that the transaction should be set aside on the ground of misrepresentation or, perhaps, a sham. That would require her to return the property to her parents upon repayment of the amount that she paid off their mortgage. In a real sense, it seems to me, Mrs Rudek relied and continues to rely, on the contract which she signed.

120. On the face of it, therefore, the obvious solution in this case does not involve the application of any equitable doctrine at all. All that would need to happen would be for the Wallises to amend their Statement of Claim, so as to include a claim for the unpaid balance plus interest, and the Court could simply leave the Wallises to enforce their rights of law. But when I invited counsel for the Wallises to consider this, instructions were taken, and I was told that they did not wish to take that course.

121. Although I am mystified by those instructions, it is not for me to force on the parties an approach which neither of them wish to follow. I therefore propose to proceed by ordering Mrs Rudek to pay an amount of equitable compensation to her parents, to reflect the value of their contribution to the property.

122. This result may appear to be somewhat hard on Mrs Rudek. I have accepted her evidence that she never wished to be involved in the transaction in the first place. It is also difficult to escape the feeling that if Mrs Rudek had not become involved the Wallises may well have been drawn into further unproductive dispute, and possibly litigation, with ANZ, which might well have resulted in the rest of their equity being completely eroded.

123. But in a case like this, the Court is ultimately acting so as to prevent a windfall to Mrs Rudek. It is possible to assess the compensation so that it does not exceed the minimum amount necessary to avoid Mrs Rudek's unjust enrichment as a result of having paid her parents less for the property than it was in fact worth.

124. Counsel for the Wallises submitted that, if I came to this point, I should order judgment against Mrs Rudek in an amount calculated by reference to the contractual price of $1,050,000 and I should also award interest at court rates from August 2013 onwards. But as I have said, the Wallises have foresworn relief on a contractual cause of action.

125. There was evidence before me from a valuer called on behalf of Mrs Rudek who valued the property at $950,000. The valuer was cross-examined, but not in a way which led me to think that there was any doubt about the accuracy of the valuation. The valuer conceded that the figure might be more or less, but adopted a range of $900,000 to $1,000,000, and a midpoint of $950,000.

126. I emphasise that neither the CBA’s or the AMP’s valuation figures has been put in evidence before me as an expression of expert opinion. The actual AMP valuation for $1,050,000 is not in evidence before me at all.

127. Accordingly, the evidence before me is all one way, namely, that the property is worth $950,000. The proper measure of equitable compensation, in my opinion, is the difference between that amount, and the amount paid to discharge the liabilities of the Rudeks. The precise figure will need to be calculated.

128. I also do not propose to award interest at court rates. I think I can take judicial notice of the fact these rates are fixed at a level which is well above the bank bill swap rate, and therefore well above the rate that could be achieved by ordinary members of the public, such as the parties to this case, when they place money on deposit with a bank.

129. In this context, it must be remembered that Mrs Rudek had no capacity to borrow more than the $900,000 which she in fact borrowed, and which was substantially consumed by the payments to her parents and the stamp duty and costs associated with the purchase. In my view, it would be unreal to impose a liability for interest on her, on some sort of assumption that she has received a benefit from the transaction in the form of lower borrowings or greater interest earnings than she would otherwise have received.

130. In my view, the proper measure of interest in a case with a minimum relief has been granted to avoid unjust enrichment, will be to index the amount paid according to the consumer price index and enter judgment for the indexed amount.

131. Finally, I return to the Wallises’ claim for rental assistance from Centrelink. The fact that the Wallises have obtained public benefits to which they are not entitled does not prevent the grant of equitable relief entirely, but the Wallises should “do equity” by making restitution of those benefits. I will therefore make the grant of relief conditional, as in Nelson v Nelson (1995) 184 CLR 538.

132. Mrs Wallis has given an undertaking to repay the amount received from Centrelink by way of rental assistance, together with any interest and penalties associated with such payment. That undertaking is satisfactory in form. But I will provide in the final orders that the amount to be paid by Mrs Rudek will be paid into Court. When the Court is provided with evidence that the amount due to Centrelink has in fact been quantified, and, if not paid, will be paid out of the moneys held in Court, the balance will then be released to the Wallises.

Cross-claim

133. It is a consequence of my findings that Mrs Rudek is entitled to possession of the property, and I will make an order for possession in due course.

134. But having regard to the evidence about the conflicts between the parties and the behaviour of Mr Wallis in particular, I will, if asked, also grant specific injunctions requiring the Wallises to remove their property and to vacate the premises.

135. I will also, if sought, make orders requiring the Wallises not to harass Mrs Rudek, members of her family, or her guests, during the period when they are in occupation and before they vacate.

136. It should be clearly understood that these orders will be directly binding on the Wallises, and if they disobey them, they will be liable to punishment for contempt of court which may involve fines or even gaol.

Conclusions

137. I have concluded that:

(1)   the Wallises' claims of a specifically enforceable agreement fails on the facts;

(2)   so too does the claim based on proprietary estoppel;

(3)   but the Wallises are entitled, upon giving an undertaking to make restitution of rental assistance benefits they have received during their occupation of the property to Centrelink to relief based on the Baumgartner doctrine, which in the circumstances of this case will be an award of compensation representing the difference between the value of the property and the amounts paid to the benefit of the Wallises, indexed from August 2013 up to the date of judgment;

(4)   Mrs Rudek is entitled on her cross-claim to an order for possession, together with injunctions, to ensure the orderly vacation of the property and proper behaviour on the part of the Wallises in the meantime.

138. Before parting with the case, I wish to say something further about the role of Ms Webster, the conveyancer. On the evidence before the Court, Ms Webster put herself in an impossible position, by seeking to act for both parties to a transaction, whose interests were in conflict and, as the evidence in this case shows, where they had not reached agreement on an essential aspect of the deal. Her attempts to square the circle by having the parties enter into a licence agreement pointed up the problem but did not solve it.

139. On the face of it, Ms Webster appears fortunate not to have been sued by one or other of the parties to the transaction, or even both. But the fact is that she has not been sued, and her explanation for what happened is not before the Court. In the circumstances, I say no more than that the case is yet another example of the perils which face a conveyancer (or solicitor) who acts for both parties in a conveyancing transaction.

140. The orders of the Court are:

1.    I adjourn the proceedings to 4pm on 5 March 2020 for final orders and costs.

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Amendments

06 March 2020 - amend typographical error in a case name.

31 March 2020 - amend minor typographical errors

17 April 2020 - [43] change "exchange" to "completed"

Decision last updated: 17 April 2020