Henderson v Miles [2005] NSWSC 710

New South Wales Supreme Court

CITATION : Henderson v Miles [2005] NSWSC 710

HEARING DATE(S) : 27 and 28 June 2005

JUDGMENT DATE : 20 July 2005

JURISDICTION : Equity Division

JUDGMENT OF : Young CJ in Eq

DECISION : Plaintiff entitled to charge over defendants' property.

CATCHWORDS : CONTRACTS [17]- Domestic arrangement- Mother built dwelling on daughter and son-in-law's property- Mother permitted to occupy dwelling provided she did not vacate- Insufficient evidence to rebut presumption that arrangement was not a binding contract. EQUITY [33]- Charge over land- Dwelling built by mother on daughter and son-in-law's land- Breakdown in relations- Whether unconscionable for defendants to retain benefit of dwelling- Mother entitled to minimum equity necessary to remedy unconscionable retention of windfall by defendants.

Balfour v Balfour [1919] 2 KB 571 Baumgartner v Baumgartner (1987) 164 CLR 137 Muschinski v Dodds (1985) 160 CLR 583 CASES CITED : Nichols v Nichols (1986) 4 BPR 9240 Perpetual Trustees Executors & Agency Company of Tasmania Ltd v Walker (1953) 90 CLR 270 Schnell v Tyrrell (1834) 7 Sim 86; 58 ER 769

Annette Patricia Henderson (P) PARTIES : Paul Burnie Miles (D1) Monica Christine Mason (D2)

FILE NUMBER(S) : SC 2219/03

J C Pentelow (P) COUNSEL : M Gorrick (D)

Adams & Partners (P) SOLICITORS : Fishburn Watson O'Brien (D)

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

YOUNG CJ in EQ

Wednesday 20 July 2005

2219/03 – HENDERSON v MILES JUDGMENT 1 HIS HONOUR: These proceedings are brought by a mother against her daughter and son-in-law over a house the plaintiff/mother built on the defendants' land at Yarramundi. 2 There are various basic facts which are not in dispute. In 1985 the plaintiff had separated from her second husband and was unhappy with her bed-sit emergency accommodation at Penrith which had been provided to her by the Housing Commission or its successor. The plaintiff and the defendants agreed that the plaintiff could build a house on the defendants' land. The construction of the house was begun in October 1985 and the plaintiff moved into the house in June 1986. 3 At Christmas 1989 the plaintiff took a holiday in Tewantin, Queensland. She there met a man called "Jimmy". Later, Jimmy came to stay with the plaintiff at Yarramundi. 4 Some time in 1990, there was considerable evidence that it was July but I very much feel it must have been earlier, the plaintiff told the defendants that she was going to live with Jimmy in Queensland. She says that on 1 August 1990 she left Yarramundi and went with Jimmy to Queensland. 5 There is considerable dispute as to how the plaintiff left. She says that she and Jimmy had one vehicle between them and that she took very little furniture with her, mainly a bedside table and her "paraphernalia" as it would have been called in the 18th century. The defendants say that there were two vehicles and that the plaintiff took all her furniture leaving her house empty. 6 The plaintiff says that she and Jimmy stayed at various places along the way including a couple of weeks on the Gold Coast. She arrived in Tewantin sometime in August 1990. I have great doubts about this because it would seem that there was not sufficient time to make the leisurely trip and to write a letter, as she did, on 28 August 1990. However, it probably does not matter that much. 7 On 22 August 1990, the plaintiff wrote to her daughter, the second defendant, asking to come back to Yarramundi in February. She wrote again on 12 and 20 September 1990. 8 There is no doubt that the plaintiff did return to Yarramundi. She says it was in October 1990, the defendants say early March 1991. However, the plaintiff's bank records of withdrawals show that she withdrew monies from Richmond, Penrith and St Marys branches of the ANZ Bank in October 1990 and I believe that towards the end of their cross-examination the defendants accepted this. 9 The plaintiff actually met her present husband John Henderson many years ago. They renewed their acquaintance when the plaintiff was living at Yarramundi. He moved into her house in 1998 and they married on 8 July 2001. There is no doubt at all that the defendants were present at the marriage ceremony which took place at the Yarramundi property and that they consented to John Henderson sharing the house with the plaintiff. 10 The parties fell out in a big way in 2002. The argument appears to be over allegations that the plaintiff was dishonest and that she had removed money from envelopes in the letterbox and had even raided a money tin in the defendants' home. The plaintiff vehemently denies these allegations. However, whatever the truth of them, the defendants thereafter seem to have acted so as to cause the maximum inconvenience to the plaintiff. 11 Whilst these outlined facts are clear, the essential details are far from clear. Before dealing with the evidence, I should go to the pleadings and set out the issues that arise. 12 The plaintiff pleads that it was agreed by and between the plaintiff and the defendants that if the plaintiff paid for the erection of a self-contained cottage to be built on the defendants' land at Yarramundi, she could live there until she died when the ownership of the cottage would pass to the defendants. 13 The defendants say that the agreement or arrangement was that the plaintiff would be wholly responsible for the costs of the construction of the dwelling, that she would be the only occupant of the dwelling and that the plaintiff could live there for her life or until she vacated the dwelling. They say that the plaintiff vacated the dwelling in 1990, thus bringing the agreement to an end. 14 However, the defendants agree that in or about March 1991 there was a further agreement under which they would permit the plaintiff to return to live in the dwelling at Yarramundi, though they say only so long as the defendants wished that occupation to continue with the right of the defendants to give a month's notice to terminate the occupation if they so wished. 15 The plaintiff's reply to this allegation was that she did not vacate the dwelling nor did she cease to reside there and that there was never any further agreement that she occupy on the basis that she could be given a month's notice to quit. 16 The plaintiff sues for breach of contract, for damages for trespass and nuisance, and for a declaration that she is entitled to be granted an equitable charge over the Yarramundi land. The plaintiff's claim for breach of contract includes a claim for damages for causing a heart attack and other stress. 17 The case was begun before me on 27 June 2005, Miss J C Pentelow appearing for the plaintiff and Mr M Gorrick appearing for the defendants. 18 It was very surprising that there was such a paucity of evidence as to the original "agreement". The plaintiff does not actually give an account of the conversations of 1985 giving her permission to erect her cottage. The highest she goes is in her initial affidavit to say, "I recall on a number of occasions mentioning to the first and second defendants that I would pay for the construction of a cottage on the property and that if I passed away they could sell the cottage or give the value thereof to my grandchildren …". 19 In his evidence, Mr Miles said that he reluctantly agreed that his wife could give his mother-in-law permission to build a house on the defendants' land, but he himself did not take any part in the discussions. 20 Mrs Miles says in her first affidavit, "I telephoned my mother and I said words to the effect: 'You can build a dwelling on the property at your cost. If you pass on or move away to seek greener pastures the dwelling will become our property to do as we see fit' " to which the plaintiff replied "That's fine". The plaintiff's answer to that is merely that she did not have the telephone connected when she was living in Penrith, so her daughter could not have telephoned her (a matter which was not explored in cross-examination) and says that all that was discussed was that it was okay to build on the property and she would discuss the matter with her husband. 21 The second defendant adhered to her answers under cross-examination, and indeed was unaffected by that cross-examination. The plaintiff was not quite so strong, but most of the cross-examination was not directed at all to the key matter between the parties. 22 I wondered about this for quite a while and then the obvious answer occurred to me. I put the proposition to Mr Gorrick that he seemed to have acknowledged in his pleadings that there was a contract at law so that there was no room for finding a mere domestic arrangement. Mr Gorrick replied that para 4 of his amended cross claim said: "On or about 1985 the parties entered into an agreement or arrangement in relation to the erection of a dwelling upon the land by the cross defendant … and in relation to the cross defendant's occupation of the dwelling …". [The italics are mine]. He said that the pleading thus left open whether there was an actual enforceable contract or some looser arrangement. 23 I do not myself think that that construction would be apparent to a person who read the document or at least to someone who read it quickly, but there was no protest by Miss Pentelow in her reply. 24 I believe the obvious answer as to why there is so little detail about the conversation is that it is an arrangement that falls under the principle illustrated in Balfour v Balfour [1919] 2 KB 571. 25 It appears from what is written in the 7th Australian edition of Cheshire & Fitoot's Law of Contract (Butterworths, 1997) at [5.4] and following, one does not lightly come to this conclusion and one takes into account the gravity of the detriment to the promisee in the event of the promisor breaking his or her promise. However, the factors which show that it is the correct solution in this case are manifold. There was no documentation of any arrangement, apparently so little was said about the details that no-one has been able to give evidence of them. Each party had a vague understanding generally as to what was happening. Mr Miles was not involved in the negotiations even though he was a half-owner of the land, the house being built cost somewhere between $20,000 and $39,000, not a very great amount of money, and the parties at that stage had a relatively close relationship. 26 Because of this conclusion, it is not necessary for me to work out whether it was a term of the contract that the interest of the plaintiff would come to an end if she vacated or if she went to greener pastures. Indeed, the words "greener pastures" if I accept them, again are a pointer to an informal family arrangement rather than something that was of legal significance. 27 The evidence does, however, indicate that it was more likely than not that there was such a term in the arrangement. This appears clearly from the attitude of Mr Miles when the plaintiff was leaving for Queensland where he made it quite clear that if the plaintiff left she was not coming back and the plaintiff's lack of protest against this attitude. It is reinforced by the letters written by the plaintiff from Queensland pleading to come back, rather than, as she asserted in the witness box, knowing she had a right to come back and her furniture was there. 28 The plaintiff says that she was scared of her son-in-law, but I do not accept this as being a reason as to why she adopted the attitude that she did. First, people who have legal rights in a substantial piece of property such as a house usually defend it even against people they are not happy to front face to face, and in any event, Mrs Henderson had an advocate in her daughter who always had been able to persuade her husband to agree to the plaintiff's demands. 29 I also do not need to spend much time on the question whether the plaintiff did vacate the premises or not. I am inclined to the view that she did take her furniture with her and leave the property empty. The bulk of the evidence seems to favour this view including the evidence of Mr Millichamp. The fact that a two ton truck had to be sent to Tewantin to pick up the plaintiff's goods reinforces this and the fact that the plaintiff needed a part of a removal van to bring goods back from Mr Millichamp's home on the far north coast again agrees with this scenario. 30 The question of a person having a right to reside or occupy until they vacated or went to greener pastures has troubled the courts on many occasions, especially in the older cases under wills. Given the way in which I have considered the facts fall out, it is not necessary to delve into these. A right of residence is not lost by even a substantial absence from the premises but most cases involve absence because of work commitments or health problems (see eg Schnell v Tyrrell (1834) 7 Sim 86; 58 ER 769). A lot depends on the exact terms of a will, but very often courts find that attempts to limit rights of residence by a gift over on the beneficiary ceasing to reside or occupy are void for uncertainty; see eg Perpetual Trustees Executors & Agency Company of Tasmania Ltd v Walker (1953) 90 CLR 270. 31 If the plaintiff's rights were defeasible on her ceasing to occupy, in my view one judges the ceasing to occupy at the time when there is physical vacation. I do not accept the plaintiff's evidence that she only intended to stay away for six months. All the material suggests that she was feeling madly in love with Jimmy and she intended to move to Queensland with him and start a new life with him and that it was only when she arrived in Queensland and saw the misrepresentations that Jimmy had made and found out what he was really like, that she changed her mind. This is reinforced by my finding that she took her goods and furniture with her. Thus, if it were relevant, I would have found that she had ceased to reside or gone to greener pastures, whatever the term may have been. 32 However, even if it had been relevant, it ceased to be relevant when, to use a neutral term, the plaintiff was taken back. There is no doubt at all that she was taken back. The defendants say that that was on the condition that she vacate on one month's notice. I do not accept this. There was only one piece of evidence of this alleged term and that was a statement made by the second defendant which I have set out earlier that she put the proposition to her mother which her mother accepted. The memory of the second defendant, as was shown inter alia by her uncertainty over the date when her mother returned, is defective. There is no corroborative evidence; there is nothing in any of the events afterwards which would reinforce the claim, and I am not satisfied that that was a condition of the mother returning. 33 Accordingly, we have the situation where the plaintiff has built her house, she has expended something between $20,000 and $39,000 (there is just not enough material to show the precise cost) and now the arrangement between the parties has come to an end. 34 Cases such as Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137, make it clear that if there is a premature collapse of a joint venture whether commercial or non-commercial, then it is ordinarily contrary to justice and good conscience for any one party to retain a windfall because of that collapse. In such a situation equity gives relief against the unconscionable conduct on the part of, in this case, the landowners who would otherwise retain the windfall. However, the Court only awards to the plaintiff the minimum equity that is just sufficient to atone for what would otherwise be unconscionable; see eg Nichols v Nichols (1986) 4 BPR 9240. 35 In the instant case, the arrangement was that the plaintiff could live in her house rent free until she died or until she permanently vacated. The evidence before me is that the increased value of the property, due to the house being on the land, is between $38,000 and $40,000. As I said to counsel at the hearing, I would take the mid-figure of $39,000 because it would be a waste of costs to refine the evidence any further. 36 The minimum equity in my view is for the plaintiff to have an equitable charge over the property for a proportion of that $39,000. I say a proportion because the plaintiff was only to have a life estate in the house with a defeasance condition if she permanently vacated. It would seem to me that one approaches the amount of the equitable charge by saying that the value of the life estate of a lady aged X years is Y percent and then one gives a charge for Y percent of $39,000 with a discount to take account of the fact that the plaintiff may permanently vacate before her death. Assuming that Y is no more than 75%, this would mean that the plaintiff's charge would be in the vicinity of $29,000. I mention this because, although the Court will be standing the matter over so that these reasons may be digested and relisted so the calculations can be done, the Court would not take kindly to a long debate over an interest which could not exceed $29,000 if that be the case. 37 It may be that my prima facie approach to the calculation is incorrect and that can be argued on the next occasion with the usual penalty as to costs if that rival contention is incorrect. 38 There are also claims for nuisance and trespass. However, as the plaintiff has had no interest at law in the land at any time, these can just be summarily dismissed. 39 The upshot is that I publish these reasons. I stand the matter over for mention on Thursday 28 July at 9.30 am, so that I can be informed as to what will be the next step in the proceedings. If that date is inconvenient to counsel, then provided my Associate is notified the week before, then a more suitable date can be arranged.