ARAS and ANOR v SCHMUTZ and ANOR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY and POWELL JJA, and BROWNIE AJA 15 May 1997, 9 December 1997 [1997] NSWCA 25 EQUITY TRUSTS — EXPRESS TRUST — CONSTRUCTIVE TRUST — ESTOPPEL — CORRECTNESS OF INFERENCES DRAWN FROM PRIMARY FINDINGS OF FACT The parties were members of a family who lived in a house in Mosman (the Prince Street house) registered in the name of Vytautas Aras, the father of the family. The respondents had been asked by the father (one of the appellants) to live in a separate part of the house, extended and made self-contained for them, on the basis of various promises then made to them, on the faith of which they expended money and otherwise acted to their detriment as also did the father's first wife, Onas. After Onas died, the father married again, and after some time family relations broke down. The father persuaded the respondents to give up possession of their part of the house by promising to pay them $100,000 out of the proceeds of its sale. The house was sold and the proceeds used to buy a home for the appellants (the father and the second wife) in Balgowlah Heights (the Scales Parade house). The father refused to pay anything to the respondents. Bryson J at first instance found that the part of the Prince Street house occupied by the respondents had been held upon an express trust for them and the other part on an express trust for the father during his life and after his death for the respondents; he ordered the appellants to pay to the respondents equitable compensation of $100,000 and interest, and declared that the appellants held the Scales Parade house upon trust for the appellants during the life of Vytautas Aras, and after his death, for the respondents in remainder. In the alternative, constructive trusts to the same effect should be imposed. On appeal: The appellants submitted that the trial judge's primary findings of fact were insufficient to found the inferences which he drew from them. Held: Priestley JA: With the exception of the inference that there had been, well prior to the sale of the Prince Street house, a common intention between the parties that the respondents were to be from that earlier time, entitled to the whole Prince Street property after the death of Vytas and Onas Aras, or that the facts were such that a constructive trust should be imposed to that effect, the primary facts as Bryson J found them were sufficient to support the inferences which he drew. Powell JA (contra): The basis upon which Bryson J founded his judgment at first instance does not accord with the case which the respondents sought to make out in their statement of claim and for that reason the proceedings ought to have been dismissed. In any event, the evidence did not support the inferences which Bryson J appears to have drawn. Brownie AJA (also contra, but to a different effect): There was ample evidence to support the findings of fact and inferences made by Bryson J and his Honour's findings and orders should not be interfered with; however, since his view was a minority one, and since he agreed that the respondents were at least entitled to the relief proposed by Priestley JA, he agreed with the orders Priestley JA proposed. Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582 2 UNREPORTED JUDGMENTS Coulton v Holcombe (1986) 162 CLR 1 Green v Green (1989) 17 NSWLR 343 Legione v Hately (1983) 152 CLR 406 Muschinski v Dodds (1985) 160 CLR 583 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 Priestley JA Introductory Five people were principally concerned in the events giving rise to this appeal which involves a dispute about entitlement to property and the proceeds of sale of property. As the trial judge, Bryson J, made detailed factual findings in his reasons and as I will be setting out venous passages from those reasons, it will be convenient to refer to the five persons throughout, without any disrespect, in the same way as the trial judge did. They were Vytas Aras and his first wife Ona Aras, their only child Ruth Schmutz and her husband Riccardo Schmutz, and Vytas Aras's second wife Galina Aras, whom he married in 1990 about two years after the death of his first wife. Ruth and Riccardo Schmutz were the plaintiffs before Bryson J and are the respondents in this court. Vytas and Galina Aras were the defendants before Bryson J and are the appellants here. There was no dispute in the appeal about the primary facts of the case as found by Bryson J. I will begin with a narrative of those facts, put together partly by summary of Bryson J's account, and partly by direct quotation from it. Facts found by trial judge Ruth and Riccardo Schmutz married in Europe in 1980 and later in that year came to live in Australia. When they arrived they went to live in the home of Ruth's parents at Prince Street, Mosman. (I will call this the Prince Street house or property.) Riccardo Schmutz was intending to enrol as an architecture student at the University of Sydney. At the time Ona Aras was expecting to receive a sum of money from the estate of an uncle. The following is Bryson J's account of what then happened: "At some time probably within a few weeks or months of their arrival, Ona Aras showed Ruth Schmutz a letter from American lawyers who handled the estate referring to approximately $US68,000 being paid to her. The letter itself cannot be found and its exact date is not established. There was a discussion about what could be done with the money and Ona Aras said 'I want to help you and Riccardo get started. I want to make your life easier. I don't want your life to be a struggle like your father's and my life has been.' Ruth Schmutz and her mother then discussed the possibility of buying a house, using some of the money to come from the estate as a deposit, and of the plaintiffs' borrowing the balance. Ruth Schmutz and her mother looked at some houses in Mosman which they regarded as too expensive and at some houses in Balgowlah which were considered to be more affordable. After a number of houses had been inspected a house at Balgowlah was identified which the plaintiffs and Ona Aras liked and was within the price range regarded as affordable. Then there was discussion among all four. Ruth Schmutz said ""We have found a house that we can afford to buy for ourselves.' Vytas Aras said 'I don't want you (referring to Ona Aras) to put the money into another house. I want to build another storey on this house for Ruta and Riccardo to live in for as long as they like. This house will eventually be Ruta's house as she is URJ ARAS and ANOR v SCHMUTZ and ANOR (Priestley JA) 3 our only child." In the course of discussion about this he also said to Ona Aras 'If you give them the money I will divorce you.' In the discussion Ruth Schmutz said 'I don't think it's a good idea to put all the money into one property' and Vytas Aras said "Let Riccardo do the design and we will see how much it will cost'. Vytas Aras... moved out of the matrimonial bedroom and used the third bedroom in the house for a few weeks, and peace was only restored when the project of using the money as a deposit for a house for the plaintiffs to buy was no longer being considered and all concerned were prepared to spend the money on an extension." Bryson J described the arrangement as in many respects a good and suitable one and generous to the plaintiffs although it did involve them in some inconveniences and burdens. The building of the extensions started in 1982. All of the money that came to Ona Aras from her uncle's estate (at the trial the amount was spoken of as $60,000 but it was probably more) went towards paying for the extensions, which cost in all something in the order of $150,000. Bryson J described the extensions as transforming the house into two large dwellings comprised as to one by the lower storey and as to the other by the upper storey. The plaintiffs moved into the upper storey in May 1983 although all the building work was not then completed. Bryson J recorded the following in his reasons: "Explaining under cross-examination why such a big extension was made Vytas Aras said that he did it because he liked his daughter and he wanted his daughter to stay with him and his wife and to bring up their children if they had any in that family environment. He wanted them with their children to live with him and his wife as long as they wanted; he confirmed that he told Ruth Schmutz that on many occasions." Bryson J accepted evidence from the plaintiffs that they helped to do some of the building work and that design work by Riccardo Schmutz was well considered and was of some use. Also at this point in his reasons Bryson J said that Vytas Aras had claimed that Riccardo Schmutz's work had not been wanted by him and had been of no assistance. The trial judge said this evidence was extravagant and foolish and that he regarded the plaintiffs as much more reliable in their evidence than Vytas Aras. Bryson J continued: "About October 1982 Vytas Aras told Ruth Schmutz that he was going to get a loan for the work; she said We will pay money towards the loan' and he said "You can put the money towards other things because I can do it.' Considerable sums were borrowed for the extension; the borrowers were Vytas and Ona Aras, who gave mortgages in various financing arrangements and incurred personal liability as well as mortgaging their house. In 1982 there was a borrowing secured by a mortgage from CBFC Ltd; in 1983 from National Commercial Banking Corporation of Australia Ltd and in 1984 from private mortgagees. All these were discharged by December 1987. The plaintiffs did not join in as borrowers, although they were willing to do so, as they told both Vytas and Ona Aras. The plaintiffs made offers to Vytas Aras to contribute to repayment of the loan; these offers were made on a number of occasions, and he always declined them. Ruth Schmutz told her mother 'You needn't worry (about the loan) because Riccardo and I will take on responsibility for the loan if something happens to either of you. We are here to help.' Riccardo Schmutz proposed that the plaintiffs 4 UNREPORTED JUDGMENTS pay something towards loan repayments and Vytas Aras declined this offer. Fairly late in the financing of the extensions the plaintiffs gave a guarantee by deed dated 31 August 1987 to a private borrowing by Vytas Aras and Ona Aras of $20,000. They were not ever called on to make any payment under this guarantee." The plaintiffs paid $4,060 for carpeting the upper storey and spent $3,300 on completing the upstairs kitchen, in April 1985. In 1989 they paid $1,200 for installing doors upstairs. Bryson J described these payments along with some others as being significant sums which went directly to improving the structure. Vytas Aras was in constant work as a taxi driver. Ona Aras worked until her death. Returning to the judge's narrative, at this point he said: "Ona Aras told Diana Bernhardt (sic) that after the lives of her husband and herself the whole house would be for the plaintiffs. She also told her that she was only working to pay the debts for Ruth Schmutz. Ona Aras made statements to similar effect to several friends and associates. Vytas Aras explained his opposition to Ona Aras' providing her inheritance to the plaintiffs for a house by saying that he believed that it would be cheaper to build an extension onto the Prince Street property in which the plaintiffs could live. This explanation like other evidence given by him confirms that the purpose of the venture of extending the house was to provide a home for the plaintiffs. Both Vytas Aras and Ona Aras made and concurred in statements to the effect that the plaintiffs could live in the house for as long as they wished. No other purpose can be seen for extending the house in the way it was extended than to provide a home in which all four, and the plaintiffs' later family, could live together for an indefinite period, and no other purpose was suggested. The extension, with the availability of internal access and the absence of a laundry and completed kitchen upstairs is very unlikely to have been undertaken to create an investment. It is significant however that realisation of Vytas Aras' wish to build an extension because it would be cheaper involved the benefit of the inheritance passing into an asset of which he was a joint owner, and not into any asset over which the plaintiffs had title. Comparison of which venture is cheaper could only be undertaken on the assumption that the interests of all family members were to be taken together. For the remainder of Ona Aras' life the two households ran fairly smoothly in the same building and relationships were good on the whole. Ruth Schmutz had her parents' assurances that the property would eventually be hers, and the plaintiffs had participated in arrangements extending over some years to build and improve the upstairs extension for the express purpose of their living in it The statements to the effect that the house would eventually be Ruth Schmutz's conveyed the clear meaning that in the meantime the upper storey was to be their home indefinitely and certainly for the remainder of the lives of her parents. For some years Ruth Schmutz continued to work and her husband did not have any reliable source of income. At most times he was a student but at times he earned some money. Their lives were formed around reliance on these arrangements for housing themselves and their family, and they did not for some years pursue or even look for opportunities to establish a separate household or to embark on the task of acquiring a dwelling and paying for it. The arrangement was advantageous to them in significant ways, but they also incurred significant burdens and detriments and made contributions to the arrangements for an concerned to be housed As well as their practical contributions to the design work URJ ARAS and ANOR v SCHMUTZ and ANOR (Priestley JA) 5 and construction, they incurred expenses, and these were not nominal sums; indeed in view of their circumstances the sums which they incurred were quite significant. While them were marked advantages to them in having a dwelling for which they had not paid and for which they did not incur rent, and in Vytas Aras' meeting some significant expenses, and in shares arrangements for the kitchen and preparation of meals, these took place in a context of family relationships in which their presence and continuing occupation of the upper storey was desired by her parents and was advantageous to the parents in familial, social and human terms. The arrangement enabled Riccardo Schmutz to pursue his studies for some years, complete them and qualify as an architect, and also ensured that he would do so and that he would not pursue any other opportunity which his talents might present, and that he would not earn significant income early in life or be thereby enabled to make savings and acquisitions." A little later: "The plaintiffs were not asked to pay rent; there was no arrangement about rent and none to the effect that rent was postponed or would be paid at some future time." A little later again: "Tf Vytas Aras and his then wife had not repeatedly told the plaintiffs that the extension was being built for them to live in and eventually to own, but had told them that they could only live in the extension for a few years, the plaintiffs would have taken a completely different course, saved money and acquired their own house. Ruth Schmutz articulated this in her evidence (t23), and it is highly probable of hard working and energetic young people contemplating family responsibilities, as they were." The plaintiffs' first child was born in June 1986 and Ona Aras died suddenly on 10 September 1988. After her mother's death Ruth Schmutz did her father's shopping and cooked his meals. He was happy with the way she looked after the home and cooked for him. Bryson J's narrative moved on to a time some months after the mother's death when Vytas Aras proposed a change: "He said I've been thinking. Why don't we sell the house because half belongs to you. That's what your mother would have wanted.' He went on to outline what he had in mind. She asked him to leave the proposal for a year or so and see what happened, saying that there was no need to sell. As she did not take up this proposal it went no further. Vytas Aras began to work on renovation of the lower storey again and completed it, stripping wood work varnishing timber and repainting walls and ceilings. He got friends and contractors to assist him. Riccardo Schmutz used the second bedroom downstairs as his office, for which he paid rent, for a time after Ona Aras died." This state of affairs changed when Vytas Aras married Galina Aras and brought her to live in the lower storey in the latter part of 1990. "... Small differences arose over a number of matters which were not inherently important Vytas Aras had separate electricity meters installed, bringing the sharing arrangement to an end. The internal access door to the downstairs area was locked from the inside and the lock on the front door was changed, so that the plaintiffs could no longer gain access through the front door of the house; they had separate access. Ruth Schmutz was required to pay to use the washing machine, and later she was prevented from using the downstairs laundry. The arrangement for Riccardo Schmutz to use an area downstairs was brought to an end. 6 UNREPORTED JUDGMENTS By about a year after the defendants' marriage relationships had markedly deteriorated. Galina Aras told Ruth Schmutz I am going to ask your father to sell the house because I don't like living downstairs and there is too much friction and too many arguments. It will be better for all of us if we are living separately. Maybe then we will get on better.' Ruth Schmutz said 'It seems to be the only alternative.' This does seem to have been right. Soon after this Vytas Aras told Ruth Schmutz 'If we are going to sell the house you needn't worry. I'll look after you. I'll give you $50,000 as a deposit on a house.' She said 'That's not enough. We would have to borrow too much. No bank will lend us that amount of money.' He said something to the effect that the banks would lend them enough money to buy a house and $50,000 is all I will give you.' Not long afterwards Galina Aras told Ruth Schmutz 'Don't worry, I am working on your father to give you $100,000 and if he doesn't give you that amount I will sell my townhouse and give you the money. That will make your father give you the money. My townhouse is valued at $350,000.' By August 1991 the plaintiffs had three children, and the need for housing if they had to leave Prince Street had become a very serious concern. In a later conversation when Ruth Schmutz spoke to Vytas Aras about giving her money out of the sale of the house he said 'I will give you $100,000 or more depending on the sale of the house and what I buy.' There were further conversations, and she was given further assurances that she would be looked after. Vytas Aras became the sole registered proprietor of the Prince Street house by survivorship. He placed the property on the market for sale in 1991, and the plaintiffs began looking for houses;" In the course of the house hunt Vytas Aras told his daughter "$100,000 is all lam going to give you". The plaintiffs were unable to find a suitable house to buy and eventually, in May 1992, became tenants of residential premises in which they were still living at the time of the hearing before Bryson J, at a rental of $330 per week. Bryson J found that when they gave up possession "they had been given a series of assurances that they would receive provision out of the proceeds of sale. Their moving out of the Prince Street house was certainly not an abdication or recognition that they had no rights; quite to the contrary, they acted on continued assurances that they would receive provision." The sale of the Prince Street property was settled on 19 June 1992 for $620,000, with vacant possession. On the same day Vytas and Galina Aras took title as joint tenants to a house in which they were still living at the time of the hearing before Bryson J, at Scales Crescent, Balgowlah Heights (which I will call the Scales Crescent house or property). The purchase price was $450,000. This price was provided by Vytas Aras from the proceeds of sale of the Prince Street house. Galina Aras made no contribution to the purchase price. Bryson J held, in the absence of any evidence to the contrary, that Vytas Aras must have intended that she should become the beneficial owner of her joint interest. Vytas Aras had told his daughter Ruth that he would pay her the $100,000 on 22 June 1992. However, when she spoke to him on that day he said: "T've changed my mind. You'Il just have to get a mortgage like everyone else. All those years of not paying rent, you should have saved up and got a house yourself. It's your fault that Prince Street was sold." In the argument that followed this announcement, Vytas Aras told his daughter that if she divorced Riccardo he would give her the money. Vytas Aras maintained his latest attitude and Ruth Schmutz left, to return later that day with URJ ARAS and ANOR v SCHMUTZ and ANOR (Priestley JA) 7 her husband when, the judge found, "a conversation took place in which Vytas Aras made very frank statements showing his full awareness of how wrong his position was". A fight developed at the end of this conversation when Riccardo Schmutz revealed he had tape recorded it. The tape was not available at the trial but Riccardo Schmutz had made notes within a short while after the conversation which were not disputed at the trial. Bryson J said: "Tn the conversation Vytas Aras confirmed that he had told Ruth Schmutz that he would give her $100,000 if she divorced Riccardo Schmutz, he confirmed that he had said at the beginning to those concerned with building the extension that the plaintiffs could live there for as long as they wanted without having to pay rent, that after Galina Aras moved in, both of them assured the plaintiffs that nothing would change and all would live there, that there had been promises to give the plaintiffs money, first $50,000 then $100,000, then a refusal. Vytas Aras said 'That is right, I've changed my mind and was only going to give you the money if you bought the house'." Bryson J did not accept that Vytas Aras had attached a condition to the promised payment to the effect that it would be a deposit on a house. Bryson J found that the late introduction of the condition was in truth an indication of Vytas Aras' fraudulence and intention to evade any payment at all. Bryson J's final paragraph in his narration of the facts was as follows: "All in all the events show and I find that Vytas Aras was perfectly conscious that for many years, 12 years, he had been a party to an arrangement with the plaintiffs which they had relied on and had shaped their lives around. He had given assurances that they would receive money so that they could buy a house out of the proceeds of sale. He had winkled them out of the Prince Street house at a time when he was continuing these assurances and giving no indication that they would not be met or that the new conditions would be imposed. Immediately after the time had arrived to fulfil all the expectations he had created he began to impose new requirements, or nominally to do so although his true position was that he would not pay any money at all. He accompanied this with overbearing behaviour and with the statement that he would provide benefits if the plaintiffs were divorced, which was an altogether ridiculous suggestion. The plaintiffs had been married for 12 years and had three small children; the suggestion could only have been made out of mischief." The inferences drawn by Bryson J on which his judgment depended In two paragraphs in his reasons Bryson J stated his inferences and conclusions from the facts he had found. The shortest way of reaching the point of stating my own opinions on the case is by first setting out these two paragraphs. I agree with the greater part of the inferences and findings in these paragraphs, with the significant exception which at this stage I foreshadow by bold italics. The paragraphs say: "The facts as I have found them should in my view be understood to show that in the period from the plaintiffs" arrival in Australia to the commencement of the work of extensions, the plaintiffs, Vytas Aras and Ona Aras formed and expressed common intentions to the effect that the extensions would be carried out, that each would make contributions of various kinds, in particular that Ona Aras would contribute the money which she received from her late uncle's estate to the extension project instead of giving it to the plaintiffs for the plaintiffs to buy a house, that Vytas and Ona Aras would contribute by raising other moneys necessary to carry out the extensions, and that the plaintiffs would make 8 UNREPORTED JUDGMENTS contributions according to their ability. There was a common intention, which the parties expressed to each other on numerous occasions, and which an of them held and understood, that the property so extended would be occupied as their home by all concerned for the rest of the lives of Vytas Aras and Ona Aras, and that thereafter the plaintiffs would be the owner of the property. The parties did not use and are unlikely even to have known formal language which would unmistakably express the intention to create enforceable equitable interests, but in my opinion the meaning and effect of what they expressed and intended was that there should be property rights, that all concerned should be entitled to live in the Prince Street house when it was extended, in particular that the plaintiffs should be entitled to live in the upper storey and that Vytas Aras and Ona Aras should be entitled to live in the lower storey floor for the rest of their lives, and that the passage of ownership to the plaintiffs after their lifetimes would be a matter of right. In a matter of such seriousness as the housing of all concerned, involving such large commitments of resources, time and attention, the only reasonable and correct interpretation of what they intended is, in my view, that the plaintiffs should be the owners of the upper storey and also should be the owners of the whole property subject to life interests of Vytas Aras and Ona Aras." Bryson J's conclusions On the basis of the foregoing findings, Bryson J went on to explain that notwithstanding the informal way in which the parties had made their arrangements and expressed their intentions, they were intending to create enforceable rights; it could not be said that the plaintiffs were relying on a gift to be made to them in the future. He was also of the view that the plaintiffs should not be regarded as volunteers in the arrangements, because they had given consideration themselves by their contributions to the arrangement which were of benefit to Vytas Aras and Ona Aras and also because Ona Aras had provided what his Honour termed "meritorious consideration", a concept which he explained and discussed. Bryson J further held that although the trust which had arisen from the intentions and arrangements of the parties was not perfectly constituted because of the lack of writing, it had, long before 1992, "become enforceable having regard to equities arising out of the conduct of the parties, and in particular of the plaintiffs, in reliance on it". Bryson J further held that if he had not found an actual trust had been created he would have upheld the plaintiffs' alternative claim for a constructive trust remedy of the kind described by Deane J in Muschinski v Dodds (1985) 160 CLR 583. On either basis Bryson J went on to say that when Vytas Aras sold the Prince Street house he had been in the position of a trustee of it for himself and the plaintiffs as co-owners as tenants in common in two equal shares (half to Vytas Aras and half to the plaintiffs) subject, until sale, to the entitlement of Vytas Aras as co-owner to occupy the lower floor and of the plaintiffs as co-owners to occupy the upper floor; the co-ownership interests were to last for his lifetime and the plaintiffs were the beneficial owners in remainder. Because these interests were defeated by the sale of the property and because the proceeds of the sale could be traced into the Scales Parade house, and further because he did not think it practical to give the plaintiffs any equitable remedy for their right of occupation during Vytas Aras's life other than compensation, he concluded that equitable compensation was the only remedy for their loss of occupation, to be assessed at URJ ARAS and ANOR v SCHMUTZ and ANOR (Priestley JA) 9 the sum of $100,000 and charged upon the Scales Parade house; they were also entitled to a declaration that they had a remainder interest in the Scales Parade house expectant on Vytas Aras's death. Cross Claim Heard together with the plaintiffs' claim was a cross claim by Vytas and Galina Aras for moneys lent to the plaintiffs. Bryson J found an amount was recoverable on the cross claim (by Vytas Aras alone), namely $6,438. Orders made by Bryson J After calculating interest to which the plaintiffs were entitled on the $100,000 compensation and calculating interest on the $6,438 awarded pursuant to the cross claim, Bryson J made the following orders and declaration. 1. That Vytas Aras pay to the plaintiffs the sum of $100,000 together with interest of $46,871. 2. That the plaintiffs pay Vytas Aras $6,438 together with interest $3,017. 3. A declaration that Vytas and Galina Aras hold the Scales Parade property upon the trusts: (i) upon trust for Vytas and Galina Aras during the lifetime of Vytas Aras and (ii) upon trust for the plaintiffs in remainder after the lifetime of the said Vytas Aras. 4. That Vytas and Galina Aras pay the plaintiffs' costs of the proceedings upon the plaintiffs' claim. 5. That there be no order as to the costs of the cross claim. The appeal No question was raised in this court concerning Bryson J's orders on the cross claim of Vytas and Galina Aras. The argument was concerned entirely with the orders made by Bryson J in favour of the plaintiffs. The appellants' argument in the appeal The appellants' principal proposition was short and straightforward. It accepted Bryson J's primary findings of fact but disputed the inferences he drew from them. It was submitted that the primary findings were quite insufficient to found a conclusion that Vytas Aras at any stage intended or could have been understood by the plaintiffs to have intended that the arrangements he and his wife were making with his daughter and her husband were that they should become the owners of the upper storey of the Mosman house, and, after the deaths of himself and his then wife, the owners of the whole house. I agree with counsel for the appellants to this extent that the decision of the case depends upon the inferences to be drawn from the primary facts found by Bryson J. Before going on to indicate my opinion on this central part of the case, I should mention some discussion that took place in the course of the appeal relevant to the legal basis of any remedy to which the plaintiffs may be entitled. The plaintiffs' statement of claim consisted to a large extent of statements of fact, generally along the lines of the findings of primary fact later made by Bryson J. It was plain from the statement of claim that the plaintiffs would seek relief, based upon legal conclusions to be drawn from the facts pleaded, in the nature of either express trust or constructive trust or estoppel. Bryson J based his judgment on findings of express trust and in the alternative on findings justifying a constructive trust remedy. He did not need to deal with estoppel. 10 UNREPORTED JUDGMENTS The paragraphs in the statement of claim which if found proved would have justified findings of estoppel dealt with the situation both before (paral8, paral9, para25 and para26) and after (para27 and para28) the plaintiffs moved out of the Prince Street house. Different estoppels could have arisen at these different stages of the developing events between the parties. In the course of argument in the appeal, the court asked counsel for the appellants whether, in view of the way the case had been conducted at first instance, it was open to this court to take principles of estoppel into account in considering the appeal. My understanding of counsel's answer is that it would not be unfair for the court, if it felt the factual findings might support estoppel, to take the principles of estoppel into consideration. Counsel said, in part, "It would seem right to say that the matters pleaded by the plaintiffs are sufficient to entitle the court to revisit the matter on that footing" (His full answer appears at lines 41 to 51 on p18 of the transcript of the argument in this court - although the transcript refers to a case Holkin v Holkin, I understood counsel at the time to be referring to Coulton v Holcombe (1986) 162 CLR 1.) I should also mention here that in written submissions filed for the appellants prior to the oral hearing it was said that no case of estoppel in any of its various forms was pleaded or argued in the court below (paral2). However this seems to me to be contradicted by the paragraphs in the statement of claim to which I have already referred and I accept counsel's reply in the oral argument as accurately describing the situation. When the question of estoppel was raised in the oral argument counsel referred to paral2 of the written submissions, but not for that part of them which denied any case of estoppel had been sought to be made, but to rely on the reference in the paragraph to Legione v Hately (1983) 152 CLR 406 about the need for statements relied on as representations founding estoppels to be clear or, as counsel put it in his oral submission, "To get an estoppel off the ground it has to be unequivocal". (See the transcript of argument, p20, lines 13 and 14, (where Legione appears as Luciano).) The written and oral submissions for the appellants supported their principal proposition by examining the evidence which founded the trial judge's primary findings of fact and considering the likelihood that it should yield the inferences drawn by the trial judge, in the light of the surrounding circumstances of the parties and the probabilities concerning their intentions, particularly the intentions of Vytas Aras. In order to consider the appellant's submissions I have looked at the trial judge's primary findings of fact, by which counsel for the appellants acknowledged he was bound, and also in some instances where it seemed a finding might more properly be described as an inference than a primary finding, at the evidence relevant to that inference or finding. Having done this, I am fortified not only in the view that Bryson J's findings of fact were sound, but also that with the significant exception I earlier foreshadowed, the inferences he drew from them are also well founded. I refer here to the two paragraphs from his reasons set out above at p11 and p12. It seems to me that the objective conclusion to be drawn from the parties' actions and communications to one another is that there was the common intention found by Bryson J that, putting it in very basic terms, the plaintiffs should become the owners of the upper storey of the Prince Street house. Where I differ from Bryson J is that I cannot see that there was evidence before him justifying the inference that, at the same time as the common intention concerning the upper storey took effect, there was a similar common URJ ARAS and ANOR v SCHMUTZ and ANOR (Priestley JA) 11 intention that as from that same date the plaintiffs were to be entitled to the whole Prince Street house after the death of Vytas and Ona Aras. It seems to me, to put the situation at the lowest from the point of view of the appellants, that everything that was said and done was as consistent with a statement of intention that the survivor of Ruta Schmutz's parents was proposing to leave that survivor's interest in the lower storey of the property to the daughter by will as it was with the inference drawn by Bryson J. Furthermore, I do not think the statements about the daughter eventually getting the house were clear enough to warrant being regarded as promissory statements of intention; that is, I do not think both parents ever said (using non legal language) words to the effect: "As from now you can be sure that the whole house will be yours after we are dead". Instead I think the only kind of inference justified by the facts found by Bryson J is a much looser and vaguer one to the effect "In the ordinary course of events you our daughter will be inheriting our property". Such a statement seems to me to leave it open to the maker to depart from what the normal course would be if the maker were to choose to do so. The foregoing position seems to me to be made particularly clear by evidence referred to in the paragraph in Bryson J's reasons (already quoted earlier) where he said: "Ona Aras told Diana Bernhardt (sic) that after the lives of her husband and herself the whole house would be for the plaintiffs. She also told her that she was only working to pay the debts for Ruth Schmutz. Ona Aras made statements to similar effect to several friends and associates." The witnesses here referred to were women friends of Ona Aras and Ruth Schmutz whose surnames, in the order in which their evidence appears in the appeal papers were, Meiliunas, Bernard, Rowland and Harman. On the point on which I have reached a different conclusion from Bryson J, the evidence of these witnesses seems to me to fit in much more closely with the view I have taken than with his. Mrs Meiliunas, who was not cross-examined, was, from the point of view now being considered, quite equivocal, this no doubt being the reason she was not cross-examined. The witnesses Bernard and Rowland who were cross-examined, were equally equivocal. The last of them, Mrs Harman, who was cross-examined, said this in para4 and paraS of her affidavit: "4. At the wedding reception following the Plaintiffs' marriage on 14 February 1981 I recall having a conversation with the late Mrs Ona Aras. During the conversation words to the following effect were said: Me: 'You must be very proud of Ruth'. Ona Aras: 'Ruth has been a very good daughter to Vytas and me and we want to provide her with whatever opportunities exist that will make her life easier. She is our only child and Vytas and I think it would be a very good idea to extend the house upstairs to incorporate a separate and self contained living area for them'. Mr: 'I thought Ruth and Riccardo were going to save upon for their own home'. Ona Aras: 'It is my wish and that of my husband that they remain with us because we have a large house anyway which Ruth is going to inherit one day and this way they will not have to worry about unnecessary expenses and money wasted on such things as rent while Riccardo is studying Architecture at University'. 12 UNREPORTED JUDGMENTS 5. At the baptism of the Plaintiffs' first child in 1987 I recall speaking to the late Mrs Aras in the kitchen of the home at Prince Street. During our conversation Mrs Aras said to me words to the following effect: 'I am overjoyed at having a grandchild. Vytas and I are pleased that we have been able to help Ruth and Riccardo establish themselves. I am so pleased that Ruth and her family are living with us. It is what Vytas and I want, being able to help her and to pass on a good family home in such a pleasant and safe environment'." The effect of this evidence was not in any way disturbed in the cross-examination. It seems to me to count very heavily against the possibility of drawing the inference concerning the remainder interest in the house which the trial judge drew. Similarly, the whole of the evidence accepted by Bryson J concerning this point (at the level of primary fact finding) seems to me to be as consistent with the non promissory statement I mentioned above as with the promissory inference drawn by Bryson J. On this aspect of the matter, the statements relied on by Bryson J might well be relevant to proceedings of the kind brought under the Family Provision Act, but are not sufficient, in my opinion, to found the relief ordered by Bryson J. Conclusions In the light of the opinions I have formed, I am prepared to agree with the reasons of Bryson J for his order 1 concerning the equitable compensation of $100,000 but not with his declaration in O03. It seems to me that Ol may be supported both on Bryson J's express and constructive trust approaches and also on the basis of estoppel. This estoppel would be the one I referred to earlier as being that which had come into existence before the plaintiffs moved out of the Prince Street property. In my opinion Vytas Aras had so conducted himself and had made such representations to the plaintiffs that they were entitled to rely on that conduct and those representations and did rely on them in believing that they were the owners of the upper storey with the result that Vytas Aras was estopped from denying in proceedings between him and the plaintiffs that they were the owners of the upper storey. This reliance led to their acting to their detriment. The authorities which in my view justify the use of estoppel doctrine in the way I do here and also later in these reasons are collected or dealt with in Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466, at 472 and 476, Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582 at 604-612 and in Equity, Fiduciaries and Trusts (1993) ed Donovan W M Waters, at 281-291 and 293-5. I would then also agree with Bryson J's assessment of equitable compensation at the figure of $100,000. There is a further ground for arriving at the same conclusion. This ground is an alternative one and need only arise for consideration if all the bases upon which I have agreed with Bryson J's conclusions concerning equitable compensation should be found to be wrong. This alternative ground looks to the latter state of affairs earlier mentioned, that which came about when the plaintiffs agreed to move out of the Prince Street house. At that time, even if I am wrong in what I have earlier indicated as my opinion of the situation between the parties prior to that time, the plaintiffs at least had very arguable claims in respect of their occupation of the upper storey. At their highest, the claims were for the remedies eventually found in their favour by Bryson J. At a lesser level their claims were for rights such as in my opinion should be found to have been established. At a lesser level again, they had a very URJ ARAS and ANOR v SCHMUTZ and ANOR (Powell JA) 13 arguable case that they had a licence to occupy the upper storey which either could not be validly terminated in the way Vytas Aras was claiming to be entitled to do or had not been so terminated. At the time, it was essential to Vytas Aras that the plaintiffs should leave the house so he could complete its sale with vacant possession and move into his new house. In these circumstances, to persuade the plaintiffs to move out, he represented to them that he would pay them $100,000 from the proceeds of sale of the Prince Street house as soon as those proceeds became available. On the faith of this representation the plaintiffs gave up occupation of the upper storey at a time when they need not have done and at a time when, had they refused to go, Vytas Aras could only have recovered possession from them by legal proceedings which in their nature would take up considerable time and which, on any view, he was by no means certain to win. It may be that this view of the situation supports a conclusion that a contract was actually made between the father and the daughter on behalf of Vytas and Galina Aras on the one side and the plaintiffs on the other. However, that was not argued in the appeal and it is unnecessary for me to pursue it. To my mind however, the same considerations clearly support the finding of an estoppel precluding Vytas Aras from denying that he was obliged to pay $100,000 from the proceeds of sale of the Prince Street property to the plaintiffs. On this basis I would reach the same conclusions as before. I would therefore dismiss the appeal against Bryson J's O1, but uphold the appeal against the declaration contained in O3, and would substitute for that declaration a declaration that the defendants hold the land in Folio Identifier 45/5840 being house property at Scales Parade, Balgowlah Heights charged with immediate payment to the plaintiffs of the sums referred to in O1 and any further interest accrued since 7 August 1996 to the date of payment. The making of such orders would dispose of the matters argued in this court. Costs then need to be considered. In my view the partial success of the appellants by no means entices them to all the costs of either the trial or the appeal. I propose that the order in respect of the trial costs should be that the defendants pay two thirds of the plaintiff's costs of the proceedings upon the plaintiffs' claim and that on the appeal the appellants should pay two thirds of the plaintiffs' costs of the appeal. In regard to the cross claim, my opinion is that Bryson J's O2 and O5 should stand and there should be no order concerning any costs that may have been incurred in respect of the appeal proceedings. Powell JA I have read, in draft, the Judgment which has been prepared by Brownie AJA, but I regret that Iam unable to share his Honour's conclusion that the appeal should be dismissed with costs. The principal reason for my being unable to agree with his Honour's conclusion is that the basis upon which Bryson J founded his Judgment at first instance does not accord with the case which the Respondents, in their Statement of Claim, sought to make out. Reduced to its most simple form, the primary case which the Respondents, at first instance, sought to establish was that, by reason of an agreement made between Mr Aras and his first wife on the one hand and the Respondents on the other, Mr Aras and his first wife, for valuable consideration provided by the Respondents, promised that they would hold the Prince Street property upon trust as to a one-half share as tenants in common, during the lives of Mr Aras and his first wife or the survivor of them, for Mr Aras and his first wife as joint tenants, 14 UNREPORTED JUDGMENTS thereafter and during the life of the survivor of Mr Aras and his first wife, for the survivor, and after the death of the survivor for the Respondents, and as to the other half-share as tenants in common, for the Respondents, each of Mr Aras and his first wife and the Respondents during the lives of Mr Aras and his first wife to be entitled to reside in the property. Building upon that case the Respondents then sought to assert that as, so it was alleged, Mr Aras had disposed of the Prince Street property in breach of trust, Mr Aras was liable to account to them for "their share of the proceeds of the sale of the Prince Street property" and that, in addition, Mr Aras and his second wife ought to be held to hold the Scales Road property upon trust for themselves and the Respondents resemble the terms of the trust being similar to those subject to which, so it was alleged, Mr Aras and his first wife had held the Prince Street property. But even if, notwithstanding the form of the Statement of Claim, it was otherwise open to Bryson J to entertain a claim that the agreement by Mr Aras and his first wife to hold the property upon trust was otherwise than had been pleaded, it was, in my view, not open to Bryson J to hold that that agreement would have been enforceable at the suit of the Respondents, since they neither gave consideration for the promise alleged to have been made by Mr Aras and his first wife, nor were to be regarded as parties to any consideration which it might be held had been given to Mr Aras and his first wife for that promise. Although, as what Brownie AJA has written indicates, Bryson J did not consider it necessary to determine, in a final way, the alternative case, or the alternative cases, which the Respondents by their Statement of Claim, sought to raise against Mr Aras and his first wife, or, alternatively, against Mr Aras and his second wife, it seems to me that such findings of fact as Bryson J made would not have justified him in treating Mr Aras and his first wife as holding the Prince Street property upon a constructive trust, or in treating Mr Aras and his second wife as holding the Scales Road property upon a constructive trust, of the type which he indicated that he would otherwise have been disposed to treat them respectively. In the light of what I have written above, it is desirable that I should set out what appear to me to have been the basic elements of the Respondents' Statement of Claim. They were as follows: 6. The First Defendant and the late Ona Aras became the registered proprietors as joint tenants of the property known as 54 Prince Street, Mosman, New South Wales by Transfer numbered J743141 registered 26 August 1964 ('the Prince Street property'). 10. On 31 December 1978 Leo Rodgers died while in Australia. 11. Proceeds from the Estate of the said deceased Leo Rodgers were thereafter distributed to the now deceased the said Ona Aras ('the inheritance'). 12. In about May 1980 the said Ona Aras promised the Plaintiffs to gift to them her inheritance from the Estate of the said Leo Rodgers ('the gift'). 13. On several occasions thereafter discussions took place between the Plaintiffs and Ona Aras and the First Defendant with respect to the gift. 14. Following their return to Australia, the Plaintiffs resided at.'he Prince Street property together with the late Ona Aras and the First Defendant. 15. In or about 1981 the Plaintiffs, Ona Aras and the First Defendant agreed ('the agreement') that in consideration of the inheritance gifted to the Plaintiffs not being made over to them, the Prince Street property would be extended and renovated in order that the Plaintiffs could continue to reside in the extended and renovated Prince Street property URJ ARAS and ANOR v SCHMUTZ and ANOR (Powell JA) 15 16. It was a term of the agreement that the Plaintiffs could remain in occupation following the extensions and renovations indefinitely. 17. It was a further term of the agreement that following the extensions and renovations being carried out one half of the Prince Street property belonged to the Plaintiffs. 18. Further or alternatively, in or about 1981 Ona Aras and/or the First Defendant made representations to the Plaintiffs or either of them to the effect of the matters pleaded in paral5, paral6 and paral7 above. 19. Prior to and throughout the time of these representations being made the Plaintiffs looked at property at Balgowlah to purchase in part using the inheritance gifted to reside in such property. 20. In reliance upon the agreement further or alternatively upon the said representations, the Plaintiffs did not proceed to purchase an alternative property to reside in and attended to assist in the planning, organising and matters incidental to the construction of the said extensions and renovations to the Prince Street property. 21. The extensions and renovations commenced in about 1982 and were substantially completed about one year later. 22. The Plaintiffs took possession of the upper part of the Prince Street property after the extensions and renovations had been completed on or about 6 May 1983. 23. The Plaintiffs borrowed about $10,000.00 and purchased carpet for the upstairs extension and otherwise used those funds for expenses. 24. At about the time of the birth of their first child, the Plaintiffs paid about $4,000.00 towards the completion of the upstairs kitchen. 25. In and about the time the Defendants intermarried, in order to induce the Plaintiffs to maintain the then status quo, the Defendants made representations and statements to the Plaintiffs or either of them to the effect that the agreement or otherwise the arrangement then existing between the parties would remain unaltered. 26. In reliance upon the representations and statements pleaded in para25, the Plaintiff 's did not take any step to better protect their interests in the Prince Street property or otherwise protect their interests. 27. Prior to the said sale of the Prince Street property, each of the Defendants in order to induce the Plaintiffs to be co-operative about that sale, made representations and statements to the Plaintiffs or either of them. 28. In reliance upon the representations and statements pleaded in para27, the Plaintiffs co-operated with the Defendants regarding the sale of the Prince Street property and vacated the property and did not take any step to better protect their interests in that property or otherwise to protect their interests. 29. Further or alternatively, the representations, statements and conduct of the parties pleaded above constituted a variation of the agreement pleaded in paral5. 30. In breach of the said agreement further by making the said representations and statements in bad faith and against good conscience further or alternatively fraudulently well knowing that they were untrue, the defendants or either of them obtained the proceeds of the sale of the Prince Street property to the exclusion of the Plaintiffs. 31. Notwithstanding demand having been made upon the Defendants, they have refused to acknowledge the claims of the Plaintiffs. 32. In the premises, the Plaintiffs or either of them claim against the Defendants or either of them: 16 UNREPORTED JUDGMENTS The Plaintiff claims (sic):- A. A declaration that the First Defendant held the Prince Street property on trust for the Plaintiffs and himself in such shares as determined by the Court; B. A declaration that the Plaintiffs are entitled to their share of the proceeds of the sale of the Prince Street property; C. An order that an account be taken of the proceeds of the sale of the Prince Street property and that the Defendants pay to the Plaintiffs the balance thereof; D. A declaration that the Defendants hold the Scales Road property on trust for the Plaintiffs and themselves in such shares as determined by the Court; " As will be apparent, the case which the Respondents in their Statement of Claim sought to establish involved two differing approaches, they being: 1. that, by reason of the agreement for consideration which they asserted, Mr Aras and his first wife were to be treated as holding the Prince Street property upon trust for themselves and the Respondents; and 2. alternatively, that, having made the various representations set out in the Statement of Claim, and having permitted the Respondents to act in the manner set out in the Statement of Claim, Mr Aras and his first wife, and, later, Mr Aras and his second wife, had been guilty of unconscionable conduct, which conduct called for the imposition upon them in the case of Mr Aras and his first wife of a constructive trust of the Prince Street property, and in the case of Mr Aras and his second wife, of the Scales Road property. So far the primary case which the Respondents sought to advance is concerned, the following matters should be noted: 1. in May 1980 - that is, at the time when the Respondents returned to Australia - Mr Aras and his first wife were registered as the proprietors of the Prince Street property for an estate in fee simple unencumbered; 2. so far as the evidence permits one to judge, the principal asset in the Estate of Leo Rodgers - to which estate Mr Aras' first wife appears to have been entitled - was a one-half share in the estate of one Hypatia Sabanas, who appears to have been the niece of Leo Rodgers - the Executor of the Will of Leo Rodgers appears to have been one A Gordon Nicholson Junior, who was also the Administrator of the estate of Hypatia Sabanas; 3. although it is not entirely clear that this was so, it would seem that, at some time prior to 31 March 1980, the Estate of Hypatia Sabanas was substantially distributed, sums of US$68,218.11 being paid to Mr Nicholson in his capacity as Executor of the Will of Leo Rodgers and to one Algis Sabanas, those being the persons entitled in intestacy to the Estate of Hypatia Sabanas. Despite this distribution, a sum of US$9,585.00 was, pursuant to an order of the Superior Court of California, County of Contra Costa made on 21 January 1980, retained by Mr Nicholson's attorneys, Messrs Foley McIntosh & Foley in their trust account as a reserve to meet any contingencies for additional taxes or liabilities and to pay what were described as "closing expenses"; 4. although the evidence does not clearly demonstrate that this was so, subsequent events would make it probable that, at some time prior to February 1981, Mr Nicholson had made a partial distribution of the Estate of Leo Rodgers to Mr Aras' first wife; 5. despite the assertion in the Respondents' Statement of Claim that "In about May 1980 (Mr Aras' first wife) promised (the Respondents) to gift to them her inheritance from the Estate of... Leo Rodgers" the evidence which was tendered on behalf of the Respondents in this respect did not support that assertion - on the URJ ARAS and ANOR v SCHMUTZ and ANOR (Powell JA) 17 contrary, the evidence - which was accepted by Bryson J - rose no higher than the following assertion by Mr Aras' daughter: "When Riccardo and I arrived back in Australia on 23 May 1980 we were met at the airport by my parents. On the way home my late mother said words to the effect: 'T have inherited money from Dedé Leo' (Dedé is Lithuanian for Uncle. This was a reference to Leo Rodgers from the USA) my late mother continued: 'I don't know how much I am going to receive, but I want to give you the money to help you and Riccardo settle in Australia.' My father said, or words to the effect: "Maybe we can build on top of the house with Riccardo doing the design. It would be good experience for him.' Riccardo and I didn't say anything but decided to see how things worked out." 6. despite the assertion in the Statement of Claim that "In or about 1981 (the Respondents, Mr Aras and his first wife) agreed that in consideration of the inheritance gifted to (the Respondents) not being made over to them, the Prince Street property would be extended and renovated in order that (the Respondents) could continue to reside in the extended and renovated Prince Street property" and that "It was a term of the agreement that (the Respondents) could remain in occupation following the extensions and renovations indefinitely" and that "It was a further term of the agreement that following the extensions and renovations being carried out one half of the Prince Street property belonged to (the Respondents)" the evidence which was tendered on behalf of the Respondents - which evidence appears to have been accepted by Bryson J - fell far short of establishing the making of any such agreement. That evidence was as follows: "One day my late mother showed me a letter she had received from the American lawyers handling Uncle Leo 's estate. The letter made reference to an amount of approximately US$68,000.00 being paid to my later mother... I do not know what became of it. I recall that the date of the letter was proximate to the day my late mother showed it to me. My late mother appeared to me to be very happy and said to me: "Look what I have received. It's just like winning the lottery.' We talked about what we could do with the money. My late mother said: 'I want to help you and Riccardo get started. I want to make your life easier. I don't want your life to be a struggle like your father's and my life has been.' 13. We then discussed buying a house and using some of the money as a deposit with Riccardo and me borrowing the balance. My mother and I went looking at houses in the Mosman area near where we lived including two houses in Prince Street. These properties were too expensive. We then went looking at houses in Balgowlah because this was an area that was more affordable. I was the only one working, out of Riccardo and me, as Riccardo was studying full time at University. When we found houses that we liked Riccardo inspected them with my late mother and me. 14. We found a house in Balgowlah that we all liked that was in our price range. Shortly afterwards Riccardo, my late mother and I spoke to my father and words to this effect were used. Me: 'We have found a house that we can afford to buy for ourselves." Father: 'I don't want you (referring to my late mother) to put the money into another house. I want to build another storey on this house for Ruta and Riccardo to live in for as long as they like. This house will eventually be Ruta's house as she is our only child." 18 UNREPORTED JUDGMENTS My father also said to my late mother:- 'If you given them the money I will divorce you. I said:- 'I don 't think it's a good idea to put all the money into one property.' My father said: "Let Riccardo do the design and we will see how much it will cost.' 15. Following this conversation my father moved out of the bedroom he shared with my late mother and moved into the third bedroom for a few weeks." Although the letter which is there referred to was not identified, it appears as if it may have been a letter written on 21 January 1980 by Messrs. Foley McIntosh & Foley to Mr Aras' first wife reporting upon the making by the Superior Court of California, County of Contra Costa, of the Order to which I have earlier referred (see AB p38-p45, p49). If this be so, then it is likely that the first conversation referred to occurred shortly after the Respondents returned to Australia and that the second conversation referred to occurred not long thereafter and before the end of 1980; 7. on 20 February 1981 there was deposited to the credit of an account conducted by Mr Aras' first wife with the organisation which was later to become Advance Bank Australia Ltd ("the Advance Bank"), a sum of A$59,839.02, which sum, so it seems to be accepted, represented a distribution from the Estate of Leo Rodgers; as the result of that sum being deposited to the credit of that account, the account stood in credit in the sum of $60,236.56. 8. Although it would seem that work on the extensions and renovations did not commence until some time after April 1982, when the plans were approved by the Council of the then Municipality of Mosman, between 20 February 1981 and 30 April 1982, withdrawals from the account had reduced the credit balance to $20,142.76, substantially the whole of that balance being withdrawn between that date and the end of August 1992. It seems to be accepted that the whole, or substantially the whole, of those moneys which had been withdrawn were applied toward the cost of the extensions and alterations to the Prince Street property; 9. although the total cost of the extensions and renovations is not entirely clear, Bryson J proceeded upon the basis that the cost was in the order of $150,000.00 at the least. To the extent to which that cost exceeded the moneys withdrawn from the account with the Advance Bank and such additional sums as Mr Aras and his first wife may have been able to contribute from their own resources, that cost appears to have been raised by borrowings secured upon the Prince Street property, in 1982 in favour of CBFC Ltd, then by mortgage in 1983 to National Commercial Banking Corporation of Australia Ltd (as it was then known) and then, in 1984, to private lenders, the amount secured by that mortgage being $81,000.00. All mortgages appear to have been discharged by December 1987; 9. in November or December 1982, while the extensions and renovations were still being carried out, Messrs Foley McIntosh & Foley forwarded to Mr Aras' first wife US$4,792.50 representing one half of the moneys which had originally been retained in the Estate of Hypatia Sabanas as a reserve fund to meet contingencies, which fund, so it would seem, had then but recently been distributed to the two beneficiaries in that estate - that sum does not appear to have been credited to the account with the Advance Bank and the materials which are before the Court do not permit one to know what was done with it upon its receipt; ' URJ ARAS and ANOR v SCHMUTZ and ANOR (Powell JA) 19 10. although, on the hearing before Bryson J, the Respondents claimed to have made payments to Mr Aras and his first wife in respect of building work in sums totalling some $32,000.00, his Honour did not accept that claim, although he accepted that, at about the time when the Respondents moved to the upstairs portion of the Prince Street property - which seems to have been about May 1983 - they paid some $4,060.00 or thereabouts for carpeting, that in April 1985 they had the upstairs kitchen completed at their own expense at a cost of about $3,300.00 and that in 1989 they paid some $1,200.00 for the installation of by-fold doors upstairs - it is of some interest to note that, of the sums totalling $33,000.00 or thereabouts claimed by the Respondents to have been paid by them to Mr Aras and his first wife, some $12,000.00 or thereabouts represented payments described by Mr Aras' son-in-law as "rent". In the light of the manner in which, in the Statement of Claim, the Respondents pleaded the primary case which they set out to make, and in the light of the various matters which I have recorded above, it seems to me, with respect to Bryson J and to Brownie AJA, that that case failed for want of proof and that, to that extent, the proceedings ought to have been dismissed. But let it be assumed that, those matters notwithstanding, it was, at least in theory, open to Bryson J so to do, the question which arises is whether the evidence which was tendered by the Respondents established that an express trust of the Prince Street property had been brought into being. Before turning to consider that question, it is I think desirable, that I should set out what I regard as some simple, but nonetheless fundamental, principles. They are as follows: 1. it is of the essence of an express trust that it should be the creature of an expressed intention; 2. in order that an express trust may be created by a private person, the following conditions must be fulfilled: (a) the trust must be either - (i) completely constituted; or (ii) supported by valuable consideration; (b) the intention to create a trust must be sufficiently expressed; (c) the trust must be properly evidenced; 3. if a trust has been completely constituted, it will be enforced by a court of Equity at the instance of any cestui que trust, whether consideration was given for it or not; but an incompletely constituted trust will not be enforced in the absence of consideration. It is thus essential to the creation of a binding trust in favour of volunteers that it should be completely constituted; 4. an owner of property who wishes to make it the subject of a completely constituted trust must adopt one of the following courses: (a) he must transfer it to a trustee; or (b) he must declare himself a trustee of it; or (c) where the property is held by some other person on behalf of the party creating the trust, he must direct such person to hold the same as trustee for a third party; 5. property may be transferred to a trustee: (a) by assurance inter vivos; or (b) by will; 6. if a person in whom a legal or equitable interest in property is vested declares that he holds it as trustee for a cestui que trust, then, subject to that declaration being evidenced in such manner as the law may require, a binding 20 UNREPORTED JUDGMENTS trust is created although no consideration passes from the cestui que trust. Although formal language is not necessary, the intending settlor must have, and must sufficiently manifest, an intention to divest himself of the beneficial interest in the subject property and to constitute himself a trustee of it for the cestui que trust; where the subject matter of the trust is land, or any interest therein, the declaration of trust "must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will" (Conveyancing Act 1919 s23C); 8. although, in general an express trust of personalty may be created orally, where a person for whom personally is held in trust seeks to create a trust with respect to his beneficial interest by transferring it to a trustee, the transfer must be in writing and signed by him or by his agent "hereunto lawfully authorised in writing (Conveyancing Act 1919 s23C). Since the coming into effect of the Imperial Acts Application Act 1969, which repealed the Statute of Frauds in so far as it was in force in New South Wales, the former requirement (Statute of Frauds s4) that an agreement to create a trust with respect to personally, if made upon a marriage consideration, must be evidenced by writing signed by the person who has so agreed or some other person "hereunto by him lawfully authorised, no longer applies in New South Wales; 9. a cestui que trust may direct his trustee to hold the trust property in trust for a third party. Such a direction is a "disposition" within the meaning of s23C(1)(c) of the Conveyancing Act 1919 and must therefore be in writing. Where assented to, and acted on, by the trustee, the direction creates a binding trust in favour of the third party; 10. in order that an express trust may be created where the essentials for a complete constitution of the trust are not present, it is necessary that there should be an agreement for valuable consideration to create the trust; 11. an agreement to create a trust is not a trust but a contract. However, if the agreement is based upon valuable consideration and is otherwise enforceable, and a party to the consideration requires performance of it, then, by virtue of the maxim that Equity considers as done that what ought to be done, the person who received the consideration and who agreed to constitute the trust will be treated as a trustee. However, such an agreement will not be enforceable at the suit of a volunteer, for there is no Equity to perfect an imperfect gift and equity will not construe an imperfect gift as a declaration of trust; 12. where the consideration for the agreement to create a trust is an agreement to marry, the intending husband and wife are regarded as being within the marriage consideration, as are the issue of the marriage, and are treated as though consideration moved from them and they may thus enforce the agreement; however, other relatives of the parties - as for example, ex-nuptial children, the children by a prior marriage of a widow about to remarry, and next of kin - are not treated as being within the marriage consideration. The case of Ellis v Nimmo! upon which Bryson J - erroneously, in my view - relied, and upon which Brownie AJA appears to rely to support the proposition: "\.. If the (Respondents) were not otherwise entitled to enforce the arrangement for the creation of trust interests for their benefit, they would be entitled to rely on the consideration furnished by (Mr Aras 'first wife) as meritorious consideration" 1. (1835) Lloyd & Goold 333 URJ ARAS and ANOR v SCHMUTZ and ANOR (Powell JA) 21 is, in my view, merely an example of such a case. 13. where a party to the consideration sues to enforce an incompletely constituted trust, the Court will enforce it as a whole, for the benefit of all the beneficiaries, including volunteers; 14. provided that the elements of complete constitution, or consideration, are present and that the intention to create a trust is properly evidenced, any form of expression of that intention will be sufficient. But whatever form the expression may take, the settlor or party agreeing to create the trust must express with reasonable certainty- (a) an intention to create a trust; (b) an intention to bind a definite interest in property by the trust; and (c) an intention to benefit definite persons by such interest to a definite extent. For all the above statements of principle, see Jordan: Chapters on Equity in New South Wales2; Jacobs Law of Trusts in Australia3. The question thus is: what consequences flow from the application of the principles which I have just stated to the facts of the present case. It is clear, in my view - and Bryson J did not hold otherwise - that the evidence which was tendered on the hearing was incapable of supporting a finding that any trust of the Prince Street property had been completely constituted. This being so, Bryson J's ultimate finding that Mr Aras and his first wife held the Prince Street property upon trust for themselves and the Respondents, which finding was the foundation upon which his Honour was able to base the orders which he ultimately made, can be sustained only if it be held that there was an enforceable agreement made between, on the one hand, Mr Aras and his first wife, and on the other, the Respondents, which agreement required Mr Aras and his first wife to create a trust pursuant to which Mr Aras and his first wife held the Prince Street property upon trust for themselves and the Respondents, consideration for Mr Aras and his first wife agreeing so to do having been provided by the Respondents, or the Respondents being regarded as a party to the consideration which is said to have been given, to Mr Aras and his first wife for such promise. The process of reasoning adopted by Bryson J in reaching his conclusion that Mr Aras and his first wife - who died in September 1988 - held the Prince Street property upon trust for themselves and the Respondents is to be found in the following passage in his Judgment (AB 33-334):- "Facts relating to the establishment of a trust Allegations in support of the trust were put in broad ways and in several forms. The facts as I have found them should in my view be understood to show that in the period from the plaintiffs' arrival in Australia to the commencement of the work of extensions, the plaintiffs, Vytas Aras and Ona Aras formed and expressed common intentions to the effect that the extensions would be carried out, that each would make contributions of various kinds, in particular that Ona Aras would contribute the money which she received from her late uncle's estate to the extension project instead of giving it to the plaintiffs for the plaintiffs to buy a house, that Vytas Aras and Ona Aras would contribute by raising other moneys necessary to carry out the extensions, and that the plaintiffs would make 2. 6 Ed (1947); ed Stephen Chapter IIT; 3. 5 Ed (1986) ed Meagher and Gummow Chapters 5, 6 and 7 22 UNREPORTED JUDGMENTS contributions according to their ability. There was a common intention, which the parties expressed to each other on numerous occasions, and which all of them held and understood, that the property so extended would be occupied as their home by all concerned for the rest of the lives of Vytas Aras and Ona Aras, and that thereafter the plaintiffs would be the owner of the property. The parties did not use and are unlikely even to have known formal language which would unmistakably express the intention to create enforceable equitable interests, but in my opinion the meaning and effect of what they expressed and intended was that there should be property rights, that all concerned should be entitled to live in the Prince Street house when it was extended, in particular that the plaintiffs should be entitled to live in the upper storey and that Vytas Aras and Ona Aras should be entitled to live in the lower storey floor for the rest of their lives, and that the passage of ownership to the plaintiffs after their lifetimes would be a matter of right. In a matter of such seriousness as the housing of all concerned, involving such large commitments of resources, time and attention, the only reasonable and correct interpretation of what they intended is, in my view, that the plaintiffs should be the owners of the upper storey and also should be the owners of the whole property subject to the life interests of Vytas Aras and Ona Aras. The lack of precision and formal expression, and of written expression of this arrangement is unfortunate, but it is not remarkable in an arrangement among close family members, and it does not impede the court's perceiving the substance of what was intended in such an important matter. The plaintiffs would not have committed themselves to such a far-reaching arrangement over a number of years, and Vytas Aras and Ona Aras would not have expected them to do so unless the intention and expectation of all four that the arrangements would be carried out was so firm and clear that they must be interpreted as arrangements about enforceable rights. It would as a matter of fact be an error to suppose that people would act in these ways for so long and in such a serious matter on the basis that the plaintiffs hoped that a gift would be made to them in the future, or that Vytas Aras and Ona Aras had an intention to go on conferring benefits on the plaintiffs but regarded themselves as free to stop doing so if their intentions ever changed. The arrangement and the benefits conferred under it on the plaintiffs should not be regarded as a voluntary arrangement or one without valuable consideration or, in terminology appropriate for benefits conferred on children by parents, without meritorious consideration. Because Ruth Schmutz is her daughter the plaintiffs are entitled to point to value contributed by Ona Aras in the same way as they would be able to point to value contributed by themselves. Although courts have frequently concluded that agreements and arrangements among family members are not intended to be binding and hence do not give rise to contractual or other legal obligations, the key to the question whether they give rise to contractual obligations is the intention of the parties. (The traditional approach of courts is expressed in Balfour v Balfour [1919] 2 KB 571 at 478-9, noted in the judgment of Sheller JA in Cudgegong Soaring Pty Ltd v Haras, (sic) unreported, I May 1996 at p10.) When arrangements are made among family members, the nature of the arrangements, the value of the property affected by them or the extent and nature of the participation required and the period over which it is required may indicate an intention to create obligations. This is true whether the arrangement is susceptible of being analysed as a contract under the Common Law or whether its true meaning is that there was an intention to create URJ ARAS and ANOR v SCHMUTZ and ANOR (Powell JA) 23 a trust, which could well occur in an arrangement which could not be analysed as a contract. In particular a person who in contract law could not be salt to have given consideration may, for the purposes of trust law, not be a volunteer but be entitled to rely on meritorious consideration, although the consideration was actually furnished by a parent. In the present case the trust was not completely constituted in that it was not created or evidenced in writing under s23C of the Conveyancing Act 1919. The plaintiffs are not under the disability of being volunteers for the purpose of trust law in that they themselves participated in the arrangement in which they were to ma/'e and made contributions which, although not all capable of being measured in money, were real and were of benefit to Vytas Aras and Ona Aras. However they are in my opinion also entitled to point to the contributions by Ona Aras and particularly to the $60,000 from her inheritance as meritorious consideration. I do not know of any Australian authority which deals in a full way with the concept of meritorious consideration. The subject is noted briefly and obliquely in the judgment of Dixon J in Birmingham v Renfrew (1937) 57 CLR 666 at 687, and in Schofield v Jones, 31 March 1995 unreported, I considered that dictum and the authorities which underlie it. The clearest expression known to me is in an Irish case, Ellis v Nimmo (1835) Lloyd & Goold 333, a decision of Sugden LC who said of the enforcement of a settlement made by a parent to make provision for his child, where the parent and not the child gave value, at 349 "The consideration is such as would enable the court to remedy even a defective settlement, where there is no contract. I think it a fortiori sufficient to sustain an actual contract, and I shall therefore decree a specific performance of the agreement.' In my opinion, if the plaintiffs were not otherwise entitled to enforce the arrangement for the creation of trust interests for their benefit, they would be entitled to rely on the consideration furnished by Ona Aras as meritorious consideration within this principle. Although the trust was not perfectly constituted because of the lack of writing, but in my opinion it has by 1992, and indeed long before, become enforceable having regard to equities arising out of the conduct of the parties, and in particular of the plaintiffs, in reliance on it." In his Judgement, Brownie AJA has written, in relation to this passage: "T do not see any proper basis upon which the court can interfere with any of these findings of fact. In particular, I do not think it could be correct to focus upon the words used in one or two conversations at the commencement of the discussions, put aside all that happened afterwards, and then say that the words used in the initial conversations do not support the drawing of the inference that a trust was created." a view which, with respect, I am unable to share, if only because, in my view, the evidence which was tendered on the hearing before Bryson J was incapable of justifying the inferences which his Honour appears to have drawn. But let it be assumed that I am in error in the view which I have just expressed, it is my view that what his Honour appears to have inferred were the facts do not establish that there was ever a concluded agreement on the part of Mr Aras and his first wife to create a trust, still less that any such agreement which was, prior to the death of Mr Aras' first wife, enforceable at the suit of the Respondents. Although, in a case such as this was said to be, it was essential for the Respondents, if they were to succeed in establishing the existence of a trust, to establish that they had been parties to an agreement with Mr Aras and his first wife, which agreement was one for consideration, either given by themselves, or 24 UNREPORTED JUDGMENTS to which they could be regarded as parties, and which agreement was enforceable by them, it is quite impossible to determine from Bryson J's reasons when it was - save that it was prior to 1992 - that the agreement which his Honour inferred bad been made had in fact been made, what were the teens of that agreement - save that "there should be property rights", whatever that may mean - when such rights as the Respondents were to receive should accrue to them, what consideration was to be given by the Respondents and when, if at all, that consideration was in fact provided by the Respondents. These, in my view, are not mere carping criticisms for, as I have earlier recorded, although no formal language is necessary for the creation or the expression of an intention to create an express trust, it is, as I have also recorded, essential that an intending settlor or a person agreeing to create a trust, should express with reasonable certainty: 1. an intention to create a trust; 2. an intention to bind a definite interest in property by the trust; and 3. an intention to benefit definite persons by such interests and to a definite extent. Despite this being so, that part of Bryson J's Judgment which I have set out above, in my view, does not permit a finding that these requirements were satisfied in the present case. Further, the questions as to the time at which the alleged agreement is said to have been made, and what is said to have been the consideration to be provided by the Respondents for the alleged agreement on the part of Mr Aras and his first wife, are significant in another respect, for, unless one knows when it is that the agreement relied upon is said to have been made, and what is said to have been the consideration given, or to be given) by the Respondents, it is quite impossible to know whether the promises and conduct to which Bryson J has referred were given prior to, or pursuant to, the agreement and whether or not the promises given by Mr Aras and his first wife were in law enforceable at the suit of the Respondents. Nor are the difficulties to which I have just referred eased by Bryson J's reference to "meritorious consideration". Thus: 1. even if, contrary to the view which I have recorded above, "meritorious consideration" is not limited to a marriage consideration, I am quite unable to see how the fact that Mr Arras' first wife applied her own money, or permitted it to be applied, to the extension and renovation of a property which she jointly owned with Mr Aras could constitute consideration for any promise given by Mr Aras and herself to create a trust; 2. even if such actions on her part could constitute consideration for such a promise, the agreement would need to have been made by no later than 20 August 1982 when the last of those moneys were expended; 3. if a "meritorious consideration" must be a marriage consideration, then the payment, or application, of those moneys could not in law constitute a marriage consideration since the Respondents bad married in January 1980, that is over 4 months before they arrived in Australia and over a year prior to the receipt of Mr Aras' first wife of the sum of $59,832.02 to which I have earlier referred. Finally, the fact that it is not possible to discern from Bryson J's reasons when it was, as his Honour would have had it, the agreement was made and what consideration was to be given by the Respondents makes it impossible to know URJ ARAS and ANOR v SCHMUTZ and ANOR (Powell JA) 25 whether or not those - unspecified - actions on the part of the Respondents which his Honour appears to have treated as consideration for the agreement were but "past consideration". The question then is, whether the secondary case which the Respondents had sought to make out, that is, that Mr Aras and his first wife, or, after the death of his first wife, Mr Aras, in denying that the Respondents had any beneficial interest in the Prince Street property, had been guilty of unconscionable conduct and whether, even if they, or he, had been, the remedy which was appropriate to remedy that unconscionable conduct was, as Bryson J indicated that if necessary he would have been prepared to adopt, the imposition of a constructive trust. Bryson J's reasoning in this respect was as follows: "Constructive Trust An alternative claim was put for a constructive trust remedy of the kind described by Mr Justice Deane in Muschinski. v Dodds (1985) 160 CLR 583, where the collapse of some venture in the nature of a partnership or other common venture leaves one party with the legal ownership of property without there being any agreement dealing with that eventuality. In such a case the claimant has no equitable interest in the property and a constructive trust over the property is imposed by the court as a remedy with the object of preventing an unjust advantage flowing from contributions to the venture. Claims of this kind frequently come before the Equity Division in situations arising out of contributions by relatives to extensions of dwellings; the best known example being Morris v Morris [19827 I NSWLR 61. If I had not found that a trust had been created, I would have awarded a remedy of that kind, and I would have paid regard not only to the contributions made by the plaintiffs in terms of economic value, but also to contribution made by Ona Aras, and to non-economic contributions of various kinds made by the plaintiffs. In the period up to the death of Ona Aras, the situation had characteristics which from time to time give rise to constructive trust claims where persons with a family relationship or other personal associations work together in a venture, typically not a well-defined venture and not a contractual one, in which each makes contributions of kinds which, not necessarily in an economic sense, are advantageous to others. The most commonly recurring instance is the "Granny Flat ' case in which an elderly relative pays for a construction of a flat or extension to a house owned by another family member, and the contemplation is that the elderly relative will use it for the rest of his life or as long as is practical for him to do so. For as long as such arrangements and ventures work well they give rise to no contractual rights and to no legal or equitable interests in property. The arrangements are often poorly defined so that, without resorting to fiction, an intention to create any recognisable and enforceable category of interest in property cannot be attributed to the parties. Where the continuance of the venture is defeated by circumstances, leaving one party more or less fortuitously in possession of advantages associated with title to the property used in it, the courts have from time to time found it appropriate to impose a constructive trust on the property or on the proceeds of it. In Muschinski v Dodds (1985) 160 CLR 583 Deane J in a passage which has been repeatedly acted on in the Equity Division, by myself and other judges, set out the principles under which equitable relief is granted where the substratum of a joint relationship or endeavour is removed without attributable blame and the benefit of money or other property contributed by one party passes to a party who 26 UNREPORTED JUDGMENTS was not specifically intended to have that benefit. This articulated and furnished additional authority for the view expressed and acted on in Morris v Morris. I see Baumgartner v Baumgartner (1987) 164 CLR 137 as an application of these principles; see p147 and p148. A constructive trust of this kind is imposed, in Deane J's expression in Muschinski v Dodds. where the venture comes to an end 'without attributable blame, ' but no great severity is in my opinion appropriate in applying the concept of attributable blame. In particular where family relationships break down and the continued association of closely related persons becomes intolerable and impractical, it is in my opinion not appropriate for courts to seek to attribute blame, as such breakdowns are a human phenomenon which sometimes occurs, cannot really be avoided, was objectively foreseeable but was not actually contemplated by the parties when they entered the venture, and does not alter the claims in conscience or redress the situation of imposing a constructive trust where reliance on what would otherwise be the party's legal or equitable rights is unconscionable. See the observations of Young J in Knox v Knox unreported 16 December 1994 at p9 and p10 and my own observations in Bennett v Horgan, unreported, 30 June 1994 at p 7 and following, particularly at pl0 to pl2. A significant aspect of the events and the approach which should be taken to the plaintiffs' claim is that $60,000 which at least in the early stages was the whole of the funds contemplated to be used in the extension, was contributed by Ona Aras with the intention of thereby conferring a benefit on the plaintiffs and, very dearly, not with the intention of enabling Vytas Aras to derive for himself the whole advantage of the extension. Her first object was to make all or substantially an she received from the estate available as a deposit for a house for the plaintiffs, and she gave up this project under the influence of Vytas Aras' wishes and overbearing conduct, in favour of another project which would benefit the plaintiffs in another way by providing them with housing, in the contemplation that eventually ownership of the property would pass to Ruth Schmutz. It would completely defeat her expectations if the improved house including the extension and the proceeds of its sale all went for the benefit of Vytas Aras and in no way went towards provision of housing for the plaintiffs. Clearly enough, Ona Aras did not make a gift of $60, 000 to the plaintiffs, and did not create any trust of that money. Equally clearly she did not part with the money for the benefit solely of Vytas Aras. In a field where reasoning by analogy is important, and recognising that in their nature analogies are imperfect, the analogy between the events which took place and an express creation by Ona Aras of a trust in favour of the plaintiffs of the value produced by the expenditure of her money is guise strong Another useful and strong analogy with the view taken in trust law relates to the imposition of a constructive trust over the Scales Parade property of which Galina Aras is a co-owner. Galina Aras like Vytas Aras knew full well the nature of the plaintiff 's claim, association with and interest in the Prince Street house, and knew full well of his assurances that provision would be made for them out of the proceeds of the house, and also the circumstances which gave rise to those assurances; and she had herself reinforced the assurances. In the circumstances there are no reasons, in my opinion, why her position with respect to any constructive trust over the proceeds of sale in so far as represented by the Scales Parade house should be any better than his. URJ ARAS and ANOR v SCHMUTZ and ANOR (Powell JA) 27 It cannot be said, using the words literally, that the venture came to an end 'without attributable blame '. There are very strong grounds of blame and they are attributable firmly to the defendants. Bearing in mind all the circumstances, particularly his own assurances and the circumstances in which he had obtained the benefit of money which is late wife wished to give the plaintiffs, Vytas Aras behaved with cold fraud and great deceit. He joined in arrangements which gave the plaintiffs the assurance that their housing was provided for, continued to join in them very many years, and he renewed and continued them when he wanted to sell the house, even carrying his assurances to naming specific sums of money. He got the benefit of their packing up and leaving the house, and then almost immediately after he had collected the proceeds and spent money on a new dwelling for himself he repudiated his own course of conduct and the assurances that he had held out to them, inventing what were supposedly new conditions when in truth not intending to carry out his assurances at all. In terms of ordinary community standards of behaviour and common honesty, his behaviour was very dishonest and dishonourable and calls loudly for the exercise of the court's powers to control unconscionable reliance on legal rights. " With the greatest respect to Bryson J, the decision of the High Court in Muschinski v Dodds to which Bryson J refers and upon which he relies, in the passage which I have set out above provides no model justifying the imposition of a constructive trust and still less a constructive trust of the type his Honour suggested. The effect of the High Court's Judgment in Muschinski v Dodds was that the parties were, in substance, left with their respective interests as legal tenants in common of the subject property but were subjected to an equitable accounting directed toward compensating for the disproportion between their contributions to the purchase and improvement to the subject property. Since the legal title to the Prince Street property was at all times in Mr Aras and his first wife and, after her death in Mr Aras alone, the application of such an approach to the present case would, at best, justify the making of some form of order directed toward compensating the Respondents for such improvements to the Prince Street property as they might be held to have made. Since, as Bryson J rightly held, Mr Aras' first wife did not give to the Respondents, and did not constitute herself a trustee for the Respondents of, the sum of $60,000.00 or thereabouts received from the Estate of Leo Rodgers, what I have earlier (see p12-p13 (above)) recorded, would indicate that any amount of compensation would not exceed $10,000.00. If the imposition of a constructive trust is to be justified in the present case, it can, in my view, only be as the result of the exercise of the Court's jurisdiction to deal with unconscionable conduct or fraud in equity. Put in its most broad and general way, that jurisdiction enables a court of equity, when faced with conduct which is unconscionable, or which is held to constitute fraud in equity, to provide a remedy - whether in a positive form as by the imposition of a constructive trust, or in a negative or defensive form, whether by way of a plea in bar of a dilatory plea - which remedy will be commensurate with, and adequate to protect the subject person against, the detriment to which that person would otherwise have been subjected by reason of the other's unconscionable conduct - a comparatively recent example of the imposition of a constructive trust may be found in the decision of this Court in Green v Green'. 4. (1989) 17 NSWLR 343 28 UNREPORTED JUDGMENTS With great respect to those who may be of a different view, I am unable to agree that in denying that the Respondents had any beneficial interest in the Prince Street property, Mr Aras was guilty of unconscionable conduct or fraud in equity. If, as Mr Aras' son-in-law claimed in the evidence which he gave at the trial before Bryson J, the Respondents paid to Mr Aras and his first wife, as "rent", some $12,000.00 or thereabouts (see pl13 (above)) - those payments being made during at least the period from and including 1985 to and including 1991 - the Respondents could hardly have been under the impression that they then had any beneficial interest in the Prince Street property. But even if the Respondents did not make any payments by way of "rent", the simple facts were that at all times prior to the death of Mr Aras' first wife, the legal and beneficial estate in the Prince Street property was in Mr Aras and his first wife and that thereafter the legal and beneficial estate were in Mr Aras; that with the exception of the sums totalling about $8,500.00 which the Respondents claimed to have spent on improvements, the whole of the cost of the extensions and renovations of the Prince Street property was paid by Mr Aras and his first wife; and that for the better part of 12 years the Respondents and, later the Respondents and their children, lived rent free in the Prince Street property although from time to time contributing small sums towards charges made for electricity, gas, water rates and the telephone. But whatever be the true position, it seems to me that in neither case can it be said that Mr Aras' insistence on his legal rights constituted fraud in equity or unconscionable conduct. If the Prince Street property was not the subject of an enforceable agreement to create a trust, and if Mr Aras' conduct did not justify him being subjected to a constructive trust of that property or the proceeds of sale of it, then the whole basis for the Declaration and Orders ultimately made by Bryson J fails. For these reasons, the Orders which I would propose are: 1. ORDER that the Appeal be upheld. 2. ORDER that the Declaration and O1 and O2 made by Bryson J on 8 August 1996 be set aside. 3. IN LIEU THEREOF ORDER that the proceedings brought by the Respondents against the Appellants be dismissed 4. ORDER that the Respondents pay the Appellants' costs of the Appeal and of the proceedings before Bryson J. Brownie AJA The first respondent, Rutu (or Ruth) Schmutz, is the daughter of the first Vytautas (or Vytas) Aras and his late wife, Ona Aras. The second respondent, Riccardo Schmutz, is the husband of Ruta Schmutz, and the second appellant, Galina Aras, is now the wife of Vytautas Aras. Ruta Schmutz was the only child of Vytautas and Ona Aras. She met Riccardo Schmutz in Europe, where they married, and in 1980 they came to Australia to live. Vytautas and Ona Aras jointly owned a house property in Prince Street Mosman, and they invited Ruta and Riccardo Schmutz to live there with them. To state matters briefly for the moment, the learned trial judge, Bryson J, found that these four people, Ruta and Riccardo Schmutz and Vytautas and Ona Aras, entered into an arrangement which they intended would create legally binding obligations, the effect of which was that Vytautas and Ona Aras held the Prince Street property upon an express trust benefiting Ruta and Riccardo Schmutz, and that although that trust was imperfectly constituted, for lack of writing, it was nevertheless enforceable, having regard to the equities that had arisen from the conduct of the parties. URJ ARAS and ANOR v SCHMUTZ and ANOR (Brownie AJA) 29 Some time after Ona Aras died, so that Vytautas Aras became the sole owner of the Prince Street property by survivorship, he remarried; and later still, he sold the Prince Street property, and expended most of the proceeds of sale buying, in the joint names of Vytautas and Galina Aras, another property, situated in Scales Parade Balgowlah. Bryson J ordered Vytautas Aras to pay to Ruta and Riccardo Schmutz $100,000 (and interest) by way of compensation, and declared that Vytautas and Galina Aras held the Scales Parade property upon trust for Ruta and Riccardo Schmutz, as to a half share during the lifetime of Vytautas Aras, and after his death in remainder. His Honour made an alternative finding that, if there was no express trust, he would impose a constructive trust, having the same practical effect. Vytautas and Galina Aras appeal from these findings. (There was also litigated a claim for money lent. The appeal from his Honour's findings as to this claim was abandoned.) The trial centred almost entirely upon factual disputes. Although there were other witnesses, the resolution of many areas factual disputation depended largely upon the trial judge having to decide whether to accept the evidence of Ruta and Riccardo Schmutz on the one hand, or that of Vytautas and Galina Aras on the other hand. His Honour reviewed the evidence in close detail and expressed a marked preference for the evidence of Ruta and Riccardo Schmutz over that of Vytautas and Galina Aras; and he gave detailed reasons for doing so. In part, his Honour relied upon objective matters, but in significant ways, he also relied upon his observations of the credibility of these witnesses. A number of cases in the High Court have established that in circumstances like these, no appellate court should set aside the findings of a trial judge unless it can be shown that the trial judge failed to use, or palpably misused his advantage as trial judge, or acted on evidence which was inconsistent with facts incontrovertibly established by the evidence, or which was glaringly improbable: Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479. The appellants accepted this, but submitted that some of his Honour's findings turned upon the proper inferences to be drawn from facts established by the evidence, and from his Honour's other findings: Warren v Coombes (1979) 142 CLR 531. In examining these submissions, I will need to say something about the facts; and I will start by summarising the facts as Bryson J found them. At about the time that Ruta and Riccardo Schmutz came to Australia to live, Ona Aras expected to receive a legacy from the estate of her uncle; and in 1981 she received about $60,000. Vytautas and Ona Aras invited Ruta and Riccardo Schmutz to live with them in the Prince Street property, and Ona Aras said that she wanted to give to Ruta Schmutz the money she was about to receive, to enable Ruta and Riccardo Schmutz to buy their own home, and settle in Australia. At about the same time, Vytas Aras first suggested that the Prince Street property be extended by adding a second floor, so that Ruta and Riccardo Schmutz could live in the upper floor. One aspect of this proposal was that Riccardo Schmutz could make a contribution to the carrying out of the extension work, in that he had drafting qualifications, and was an architectural student. Later, Ona Aras received the legacy; there were discussions about Ruta and Riccardo Schmutz buying their own house; and various properties were inspected. However, Vytautas Aras took the strong stance that the money Ona Aras had received should be spent on extending the Prince Street property. He threatened to divorce Ona Aras unless she agreed, and he moved out of the main 30 UNREPORTED JUDGMENTS bedroom for some weeks, until his wishes were met. Thereafter, over a protracted period, the ground floor of the Prince Street property was extended, and a second storey was added; and then Vytautas and Ona Aras lived downstairs, and Ruta and Riccardo Schmutz upstairs; and the four of them lived together harmoniously until the death of Ona Aras in 1988. Over a long period of time, there were repeated statements made by the parties to the general effect that since Ruta Schmutz was the only child of Vytautas and Ona Aras, the Prince Street property would one day be hers, and his Honour found that there was a common intention to enter into a legally binding arrangement. One cannot say on the evidence that this arrangement was made on any one particular occasion; rather, it represented the end product of many discussions, and the conduct of the parties over a prolonged period. His Honour made detailed findings as to the contributions made by each of Ruta and Riccardo Schmutz and Vytautas and Ona Aras towards the extensions to the Prince Street property, monetary and otherwise. In brief, he found that the total amount of money expended was about $150,000, or a little more; that Ruta and Riccardo Schmutz contributed about $12,000; that Ona Aras contributed her $60,000 legacy; that Vytautas Aras paid the balance; and each of the four made non-monetary contributions of varying kinds. It was some time after the marriage of Vytautas and Galina Aras that the relationship between the parties soured, after several acknowledgments of the arrangement I have outlined. Eventually, Ruta and Riccardo Schmutz agreed to move out of the Prince Street property, and they did so, moving into rented premises. By then, they had three young children. After they moved out, Vytautas Aras sold the Prince Street property, and bought the Scales Parade property. During the course of the events leading up to the purchase of the Scales Parade property, Vytautas and Galina Aras acknowledged an obligation to pay Ruta and Riccardo Schmutz $100,000 out of the sale price received in respect of the Prince Street property, but ultimately they refused to pay that or any other sum. His Honour found that this sum was an agreed amount, representing compensation for Ruta and Riccardo Schmutz losing their right to live in the Prince Street property, and there was no challenge to the quantum of this finding, as distinct from the finding that there was a trust, and that any compensation was payable. The appellants submitted that his Honour erred in finding that the conversations between the parties in 1980, found to have taken place, supported the conclusion that a trust then arose. However, his Honour did not make that finding. Rather, he based his judgment on the conduct of the parties over a protracted time, and upon many conversations. That is, the trust did not arise on some specific occasion in 1980, but over a time. His Honour said this: "The facts as I have found them should in my view be understood to show that in the period from the plaintiffs' arrival in Australia to the commencement of the work of extensions, the plaintiffs [that is, Ruta and Riccardo Schmutz], Vytautas Aras and Ona Aras formed and expressed common intentions to the effect that the extensions would be carried out, and that each would make contributions of various kinds, in particular that Ona Aras would contribute the money which she received from her late uncle's estate to the extension project instead of giving it to the plaintiffs to buy a house, that Vytautas Aras and Ona Aras would contribute by raising other moneys to carry out the extensions, and that the plaintiffs would make contributions according to their ability. There was a common intention, which the parties expressed to each other on numerous occasions, and which all 2of them understood that the property so extended would be occupied as their URJ ARAS and ANOR v SCHMUTZ and ANOR (Brownie AJA) 31 home by all concerned for the rest of the lives of Vytautas Aras and Ona Aras, and that thereafter the plaintiffs would be the owner of the property. The parties did not use and are unlikely even to have known formal language which would unmistakably express the intention to create enforceable equitable interests, but in my opinion the meaning and effect of what they expressed and intended was that there should be property rights, that all concerned should be entitled to live in the Prince Street house when it was extended, in particular that the plaintiffs should be entitled to live the upper storey and that Vytautas Aras and Ona Aras would be entitled to live in the lower storey for the rest of their lives, and that the passage of ownership to the plaintiffs after their lifetimes would be a matter of right. In a matter of such seriousness as the housing of all concerned, involving such large commitments of resources, time and attention, the only reasonable and correct interpretation of what they intended is, in my view, that the plaintiffs should be the owners of the upper storey and also should be the owners of the whole property subject to the life interests of Vytautas Aras and Ona Aras. The lack of precision and formal expression, and of written expression of this arrangement is unfortunate, but it is not remarkable in an arrangement among close family members, and it does not impede the court's perceiving the substance of what was intended in such an important matter. The plaintiffs would not have committed themselves to such a far-reaching arrangement over a number of years, and Vytautas Aras and Ona Aras would not have expected them to do so unless the intention and expectation of all four that the arrangements would be carried out was so firm and clear that they must be interpreted as arrangements about enforceable rights. It would as a matter of fact be an error to suppose that people would act in these ways for so long and in such a serious matter on the basis that the plaintiffs hoped that a gift would be made to them in the future, or that Vytautas Aras and Ona Aras had an intention to go on conferring benefits on the plaintiffs but regarded themselves as free to stop doing so if their intentions ever changed. The arrangements and the benefits conferred under it on the plaintiffs should not be regarded as a voluntary arrangement or one without valuable consideration or, in terminology appropriate for benefits conferred on children by parents, without meritorious consideration. Because Ruth Schmutz is her daughter the plaintiffs are entitled to point to value contributed by Ona Aras in the same way as they would be able to point to value contributed by themselves." I do not see any proper basis upon which the Court can interfere with any of these findings of fact. In particular, I do not think it could be correct to focus upon the words used in one or two conversations at the commencement of the discussions, put aside all that happened afterwards, and then say that the words used in the initial conversations do not support the drawing of the inference that a trust was created. The appellants also submitted that Ruta Schmutz did not have any right, recognised at law or in equity, to her mother's inheritance of $60,000; and they submitted that no estoppel could ever arise from any reliance by Ruta and Riccardo Schmutz upon anything said about this. However, his Honour did not find an estoppel. Instead, when dealing with the claims pleaded, he did make a series of findings of representations, and reliance, and used that material as part of the matrix of facts from which he found an express trust. There were separate submissions made, that Ruta and Riccardo Schmutz suffered no detriment flowing from their reliance on any representations. His Honour found that there was a detriment; and whilst there is room for different 32 UNREPORTED JUDGMENTS views as to the measure of that detriment, and how, if a remedy was to be given based upon an estoppel, that detriment might be measured, the question is of no practical consequence in relation to the question whether there was an express trust. Having found the facts, his Honour continued: "Although courts have frequently concluded that agreements and arrangements among family members are not intended to be binding and hence do not give rise to contractual or other loyal obligations, the key to the question whether they give rise to contractual obligations is the intention of the parties... When arrangements are made among family members, the nature of the arrangements, the value of the property affected by them or the extent and nature of the participation which is required may indicate an intention to create obligations. This is true whether the arrangement is susceptible of being analysed as a contract under the Common Law or whether its true meaning is that there was an intention to create a trust, which could well occur in an arrangement which could not be analysed as a contract. In particular a person who in contract law court not be said to have given consideration may, for the purposes of trust law, not be a volunteer but be entitled to rely on meritorious consideration although the consideration was actually furnished by a parent. In the present case the trust was not completely constituted in that it was not created or evidenced in writing under s23C of the Conveyancing Act 1919. The plaintiffs are not under the disability of being volunteers for the purpose of trust law in that they themselves participated in the arrangement in which they were to make and made contributions which, although not all capable of being measured in money, were real and were of benefit to Vytautas Aras and Ona Aras. However they are in my opinion also entitled to point to the contributions by Ona Aras and particularly to the $60,000 from her inheritance as meritorious consideration. I do not know of any Australian Authority which deals in a full way with the concept of meritorious consideration. The subject is notes briefly and obliquely in the judgment of Dixon J in Birmingham v Renfrew (1937) 57 CLR 666 at 687, and in Schofield v Jones, 31 March 1995, unreported, I considered that dictum and the authorities which underlie it. The clearest expression known to me is an Irish case, Ellis v Nimmo (1835) Lloyd & Goold 333, a decision of Sugden LC who said of the enforcement of a settlement made by a parent to make provision for a child, where the parent and not the child gave value, at 349 'The consideration is such as would enable the court to remedy even a defective settlement, where there is no contract. I think it afortiori sufficient to sustain an actual contract, and I therefore decree a specific performance of the agreement.' In my opinion, if the plaintiffs were not otherwise entitled to enforce the arrangement for the creation of trust interests for their benefit, they would be entitled to rely on the consideration furnished by Ona Aras as meritorious consideration within this principle. Although the trust was not perfectly constituted because of the Jack of writing,... in my opinion it had by 1992 [when the Prince Street property was sold], and indeed long before, become enforceable having regard to the equities arising out of the conduct of the parties, and in particular of the plaintiffs, in reliance on it. When he came to sell the Prince Street property Vytautas Aras must be treated as having been in the position of a trustee of this property for himself and the plaintiffs as co-owners, he having an entitlement as co-owner to occupy the lower floor as a dwelling and the plaintiffs having an entitlement as co-owners to URJ ARAS and ANOR v SCHMUTZ and ANOR (Brownie AJA) 33 occupy the upper floor of the dwelling. As there is no other basis on which to act, their co-ownership in respects other than entitlement to occupy parts of the building should be regarded as tenancy-in-common in two equal shares. The co-ownership interests were to last for his own lifetime, and the plaintiffs were the beneficial owners in remainder." His Honour went on to find that the respondents' interests were defeated by the sale of the Prince Street property, that it was not practical to give than any right to occupy the Scales Parade property, and to assess the amount of compensation by reference to the parties' agreement that the sum of $100,000 was appropriate. The appellants did not submit that what his Honour said about meritorious consideration was wrong; the authorities to which his Honour referred in Schofield v Jones appear to support that view of the law; and I will proceed on the assumption that it is correct. His Honour also found that Ona Aras intended to confer on the plaintiffs the benefit of the $60,000 which she contributed: it was not a gift of the money, nor did she create a trust of the money, but she intended by spending the money on the extensions, in accordance with the arrangement mentioned, to benefit the plaintiffs. Viewed in that way, the monetary contributions towards the extensions of the Prince Street property might now be seen differently: Ruta and Riccardo Schmutz and Ona Aras on their behalf contributed a total of about $72,000 out of about $150,000; ant of course, Vytautas and Ona Aras had owned the property before the extension work commenced, and all four of the parties made non-monetary contributions to the extensions. The appellants stressed that the respondents had had the use of the Prince Street property, rent free, for several years, but his Honour did not overlook that, and it does not seem to me to be truly significant. What the parties agreed upon in and just after 1980, on one view of the matter, constituted an act of great generosity by Vytautas and Ona Aras, but as his Honour noted, it gave than certain benefits, and it was part of a family arrangement, whereby amongst other things, they set out not only to provide their only child with a home, but also to ensure that she and her new husband would settle in Australia, that he would have the opportunity to obtain professional qualifications, and that the respondents would live with them. A family arrangement of this type cannot be measured just in terms of dollars and cents. No doubt, it was of greater benefit to the respondents than it was to Vytautas and Ona Aras, but Vytautas and Ona Aras were in a sense doing no more than make an arrangement that amounted to an advance to Ruta Schmutz, and to her new husband, against what they seem to have regarded as her ultimate inheritance. Perhaps it is to be categorised in terms of generosity, perhaps in terms of family obligation, perhaps as a mixture of the two. It seems clear that to some extent at least, it was a case of Vytautas Aras exerting his authority as head of the family. But, if, as his Honour found, the parties intended to enter into binding obligations, it does not master that strangers to them might think the arrangement lopsided in benefits. Further, given that Vytautas and Ona Aras were migrants from Lithuania, and that Riccardo Schmutz was born in Switzerland, I consider that an appellate court should be slow to interfere with a trial judge's finding of fact as to the intentions of the parties when it seems likely that those intentions might well have been influenced by cultural factors. 34 UNREPORTED JUDGMENTS I do not think that we ought now to subject the transaction to any particular scrutiny, based upon the circumstance that at times the focus of the arrangement seems to have been upon Ruta Schmutz, as the only child of Vytautas and Ona Aras, alone, and at other times upon Ruta and Riccardo Schmutz, together. There does not seem to have been any attention placed upon this matter at the trial - the dispute was far more fundamental than that - and it seems likely that Vytautas and Ona Aras saw advantages in cementing their daughter's marriage, and in having her and her new husband live with them. I consider that we ought not to interfere with his Honour's finding that there was an express trust, in the terms found. The arrangement was certainly an unusual one, but there was ample evidence, accepted by his Honour, to support the view that the parties did intend to enter into binding obligations, and the measurement of those obligations does not seem to me to be inappropriate, given the circumstances and the findings of fact. On this basis, I do not need to consider the alternative finding of a constructive trust, but I should say that I see no error in what his Honour said on this topic, given his findings of fact. Similarly, there is no need to inquire into questions of estoppel or whether there was a resulting trust. Since writing the above, I have had the advantage of reading drafts of the judgments of Priestley and Powell JJA. I respectfully disagree with Priestley JA on one factual matter only, namely whether the evidence justifies the inference that the parties had and expressed a common intention concerning the ownership of the Prince Street property after the death of the survivor of Vytautas and Ona Aras. As I read the evidence as a whole, it seems to me that Bryson J was justified in coming to the conclusion he reached. Thus, in cross-examination Ruta Schmutz said that she and her husband would not have stayed in the Prince Street property unless her parents had assured them that the house was theirs (Appeal Book 205). Later (at 214 - 215), when challenged that her father had never said that half the house belonged to her (or her and her husband together - the cross-examiner used the word "'you'"), she said: "He did say that"; and she believed it. A little later, challenged that there was no certainty as to what would happen after her parents died, she said that the extensions were made, and were so extensive, for the purpose of providing "us" with a home. It is no doubt a matter upon which different people might well reach different conclusions, both as to what was the agreement reached between these non-lawyers, three of whom did not have English as a mother tongue, and as to what legal consequences flow from that agreement, but given the nature of the dispute, and the evidence, I think that we should defer to the views of the trial judge. Whilst therefore I would dismiss the appeal since my view is a minority one, and since I agree that the respondents are entitled to at least the relief that flows from the judgment of Priestley JA, I agree with the orders he proposes. If the question of estoppel arises, then I agree with what Priestley JA says as to that. I respectfully disagree with Powell JA as to the pleading point. I do not think that it is any longer acceptable to find against a party on that ground when the evidence supports the claim: see Leotta v Public Transport Commission of New South Wales (1976) 50 ALJR 666 at 667; the more so here since the appellants did not complain about this aspect of the case. URJ ARAS and ANOR v SCHMUTZ and ANOR (Brownie AJA) 35 _ Appeal against O1 made by Bryson J dismissed. Appeal against the declaration contained in O3 made by Bryson J upheld. For the declaration in O3 made by Bryson J there should be substituted a declaration that the defendants hold the land in Folio Identifier 45/5840 being house property at Scales Parade, Balgowlah Heights charged with payment to the plaintiffs, to which they are immediately entitled, of the sums referred to in O1, and any further interest accrued since 7 August 1996 to the date of the payment. The defendants to pay two thirds of the plaintiffs' costs of the proceedings upon the plaintiffs' claim at first instance and the appellants to pay two thirds of the respondents' costs of the appeal. Counsel for the appellant: D E Grieve QC / D Coulton Counsel for the respondent: D Ronzani Solicitors for the appellant: Hancock Alldis Solicitors for the respondent: Garland Hawthorn Brahe