New South Wales Supreme Court CITATION : Ronald Smith v Cecilene Smith (Marlin) [2005] NSWSC 27 HEARING DATE(S) : Written submissions JUDGMENT DATE : 7 February 2005 JURISDICTION : EQUITY JUDGMENT OF : Brownie AJ DECISION : 1. Order that the defendant cause the property known as 50 Castlereagh Street Riverstone, being the land comprised in Folio Register 1/445812 to be sold by public auction, on a date not earlier than four months and not later than six months after today's date.; 2. Order that the plaintiff give vacant possession of that property to the defendant, on or before the day before the date fixed for that auction sale.; 3. Direct the parties to confer as to the date of the said auction sale, and direct the defendant to notify the plaintiff in writing of the date and the place of the said sale, not less than two months before the date of the said auction sale.; 4. Order that, out of the net proceeds of sale of the said property there be paid to the plaintiff by way of equitable compensation two thirds of the net proceeds. For this purpose, the net proceeds shall be the gross sum received upon sale, less only the reasonable fees and expenses of the defendant's solicitor, estate agent and auctioneer, and any reasonable advertising expenses.; 5. Otherwise, action and cross action dismissed. CATCHWORDS : No question of principle. APPLICANT Ronald Douglas Smith PARTIES : DEFENDANT Cecilene Smith (Marlin) FILE NUMBER(S) : SC 3589/2002 PLAINTIFF Mr ARR Vincent of Counsel COUNSEL : DEFENDANT Ms MA Gilmour PLAINTIFF Michael Siderowitz & Co SOLICITORS : DEFENDANT McKerns LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BROWNIE AJ Monday 7 February 2005 3589/2002 RONALD DOUGLAS SMITH v CECILENE SMITH (MARLIN) JUDGMENT 1 On 30 June 2004 I held that the plaintiff succeeded in respect of his claim based upon a proprietary estoppel, and that it was not appropriate that a constructive trust be imposed upon the property known as 50 Castlereagh Street Riverstone. I suggested that the parties might agree upon the relief to be granted, and it seems that the parties then embarked upon lengthy but ultimately unsuccessful settlement negotiations. Thereafter, written submissions were delivered, the last of them on 21 December 2004. 2 The plaintiff now submits that he is entitled to equitable compensation, secured by way of equitable charge or lien over the property. He referred to the evidence of a valuer that the property was worth $38,000 in May 1982, and $290,000 as at 3 July 2002, and submitted that there should be an award of equitable compensation in the sum of $252,000, as if he had bought the property on the former date and sold it on the latter date. In addition, he claimed $14,062, being ten percent of the aggregate sum paid by him to the defendant by way of periodic payments between May 1982 and July 2003. 3 The defendant's submissions reargued various findings made earlier, but not persuasively.,and I consider that I ought now to put those submissions aside. She did not contend for any particular figure to be awarded, but raised a number of matters going generally to the proposition that little or no compensation should be awarded. Some of these matters do not pay heed to the proposition that the measure of any compensation to be awarded is to be judged by reference to the need to cure the detriment suffered by the plaintiff, by reason of his having relied upon the representation of the defendant. However, the defendant went on to submit that the compensation to be awarded should be expressed as a percentage of the value of the property, with the suggestion that the plaintiff might then procure a loan and buy the interest of the defendant in the land, thereby, it was suggested, lessening the burden of the stamp duty to be expended; and the defendant further submitted that there should be conditions imposed concerning the sale of the property and the division of the proceeds of sale if the plaintiff did not purchase the defendant's interest in the property, and as to the continuation of the payment by the plaintiff to the defendant of "rent" in the meantime. In reply, the plaintiff opposed all this. 4 As I said on 30 June 2004, I consider that the detriment to the plaintiff to be remedied by the grant of relief now is that the plaintiff lost the opportunity to acquire a property, as home for himself and his wife and children. A practical difficulty to be confronted is the assessment of the value of that lost opportunity, given what the evidence establishes. The plaintiff was unemployed from November 1982 to 1989, and from 1993 until trial, and these very significant periods of unemployment point to a real risk that, if he had purchased the property in 1982, financing that acquisition by a mortgage debt, he would have had difficulty in meeting his obligations under the mortgage, and to the risk that he would have lost the home. 5 On the other hand, throughout the period from 1982 to trial, he met his obligations to pay what the defendant called rent, in a timely manner; he had a property in Tasmania, and his interest in the property at Killarney Vale, each of which might have been sold, if necessary, to meet a financial need; he or his wife might have worked, if necessary to do so to save their home; and he received significant sums of money in relation to his worker's compensation rights that might, if his financial circumstances had been more pressing, have been used to pay off or to reduce his mortgage debt. Whilst his relatively recent employment history is unattractive, in his earlier years, he appears to have been hard working. 6 There is no evidence going directly to the detail of what other property the plaintiff might have acquired, when, at what price, what he could or would have done by way of finding a traditional deposit, if one had been necessary, and how his obligations under the hypothetical mortgage compared to the payments he made to the plaintiff, but I consider that it would probably have been a property broadly comparable to that known at 50 Castlereagh Street Riverstone, and that I am entitled to know that many people like the plaintiff acquire homes, financed by mortgage debts, and that they manage to pay off the mortgage debts eventually, although sometimes after defaulting, and even defaulting serially. 7 I consider that the amount sought by the plaintiff should be discounted for contingencies, in particularly contingencies relating to his continued employment, and his continued capacity to meet his obligations under the hypothetical mortgage. If he had acquired a property, accompanied by a mortgage debt, in 1982, that mortgage debt might have been extinguished by now, but in all the circumstances I think that the award of compensation to be made should be assessed by reference to two thirds of the present value of the property at 50 Castlereagh Street Riverstone. The evidence about the value of that property ceases as at 3 July 2002. Presumably it might be worth more today. The financial circumstances of the parties point to the need to make some order which will prevent the funds of this family of being dissipated in further litigation. Something needs to be done to bring the litigation to an end now. 8 I therefore make the following orders. 1. Order that the defendant cause the property known as 50 Castlereagh Street Riverstone, being the land comprised in Folio Register 1/445812 to be sold by public auction, on a date not earlier than four months and not later than six months after today's date. 2. Order that the plaintiff give vacant possession of that property to the defendant, on or before the day before the date fixed for that auction sale. 3. Direct the parties to confer as to the date of the said auction sale, and direct the defendant to notify the plaintiff in writing of the date and the place of the said sale, not less than two months before the date of the said auction sale. 4. Order that, out of the net proceeds of sale of the said property there be paid to the plaintiff by way of equitable compensation two thirds of the net proceeds. For this purpose, the net proceeds shall be the gross sum received upon sale, less only the reasonable fees and expenses of the defendant's solicitor, estate agent and auctioneer, and any reasonable advertising expenses. 5. Otherwise, action and cross action dismissed. 6. Order that the defendant pay the plaintiff's costs of the proceedings. 7. Liberty to either party to apply upon seven days notice. 9 I record my view that the property is to be sold, without reserve, unless the parties otherwise agree: the litigation should be brought to an end. I record also my view that both parties should be at liberty to bid at the auction sale, provided they make it plain to all those attending that they are doing so. I proceed on the assumption that the caveat will continue in effect until settlement of the sale of the property, and withdrawn upon settlement. I make no order for the payment by the plaintiff to the defendant of any further amount in respect of the occupation of the property, pending settlement of the sale, intending that the plaintiff have no further obligation to make any further payment. 10 Notwithstanding all that has happened, I commend to the parties the wisdom of trying to reach agreement on any question that remains outstanding. To fail to reach agreement is to expend the money in costs, probably for no good reason. The suggestion made by the defendant that the plaintiff buy her interest in the property, which the parties might now regard as being one third of its value, may well be one that is the best practical solution at this stage. If the parties agree upon such a course, then they may take it that I will vary the orders made above. 11 I consider that the plaintiff has succeeded in the litigation generally, and is entitled to be paid his costs, but that it is not appropriate to make any order securing the payment of the costs out of the proceeds of the sale of the property. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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