New South Wales Supreme Court CITATION : Maryska v Mason [2007] NSWSC 1222 HEARING DATE(S) : 24 October 2007 JUDGMENT DATE : 24 October 2007 JURISDICTION : Equity Division JUDGMENT OF : Palmer J EX TEMPORE JUDGMENT DATE : 24 October 2007 DECISION : Judgment for Defendant. CATCHWORDS : ESTOPPEL – Whether representation made that Plaintiff would have tenancy for life – whether sufficient detrimental reliance. - RESIDENTIAL TENANCY – Whether the Supreme Court should make order for vacant possession when Tenancy Tribunal has exclusive jurisdiction. LEGISLATION CITED : Residential Tenancies Act 1987 (NSW) – s.71 - Grundt v Great Boulder Proprietary Gold Mines (1937) 59 CLR 641 CASES CITED : - Morris v Morris [1982] 1 NSWLR 61 - Ramsden v Dyson & Thornton (1866) LR 1 HL 129 - Sullivan v Sullivan [2006] NSWCA 312 PARTIES : Robyne Carlyle Maryska – Plaintiff/Cross Defendant Scot Gregory Mason – Defendant/Cross Claimant FILE NUMBER(S) : SC 1665/07 COUNSEL : R.D. Wilson – Plaintiff/Cross Defendant R.E. Lee – Defendant/Cross Claimant SOLICITORS : John Simpson & Co – Plaintiff/Cross Defendant N/A – Defendant/Cross Claimant 1665/07 Maryska v Mason JUDGMENT – Ex tempore 24 October, 2007 1 The Plaintiff, Mrs Maryska, is the former mother-in-law of the Defendant, Mr Mason. Mrs Maryska's daughter, Kilie, was married to Mr Mason from 1996 to 2001. On 6 March 1997, Mrs Maryska's daughter (whom I will call Kilie for ease of identification but without intending any disrespect) purchased a house at Hoxton Park, New South Wales, for $155,000. Mrs Maryska says that in the course of a discussion between herself, Mr Mason and Kilie shortly before purchase of the house, Kilie offered to rent the house to her and assured her that it would be her house as long as she liked, and that she was buying the house as an investment for Kilie's children when Mrs Maryska no longer needed it. 2 After the purchase was completed, Mrs Maryska moved into the house and paid rent of $150 per week. She was happy to do this because she had previously been paying rent of $165 a week, as she had explained to Kilie and Mr Mason. 3 Between 1998 and 2000 Mrs Maryska spent about $8,300 on improvements to the house. The improvements consisted of concreting the patio, which cost about $5,000, the erection of a timber pergola and of a small garden shed, the purchase of some wooden venetian blinds for the interior, and a ceiling fan and downlights. Mrs Maryska said she spent this money in the belief that she would be able to live in the house for as long as she wished. 4 In June 2000, Mrs Maryska's son moved into the house and, at Mrs Maryska's suggestion, at least on her evidence, she paid an increased rent of $185 a week. 5 Kilie and Mr Mason were divorced in August 2001. Pursuant to a property settlement approved by the Family Court, Kilie transferred the house to Mr Mason. It is now subject to a mortgage. Mrs Maryska continued in occupation of the house and paid rent to Mr Mason. In August 2004, Mr Mason told Mrs Maryska that because of his financial difficulties he needed to sell the house. He has since endeavoured to obtain vacant possession but Mrs Maryska has refused to give vacant possession. 6 Mrs Maryska now claims a declaration that Mr Mason holds the house upon a constructive trust for her for her life, and an order permanently restraining Mr Mason from dealing with the house in any manner inconsistent with her interest. 7 Mrs Maryska says that in reliance on the representation made by Kilie in 1997 in the presence of Mr Mason that the house would be hers for as long as she liked, she has acted to her detriment in renting the house for $150 per week and in spending about $6,300 on the improvements referred to. Further, Mrs Maryska says that in November 2001, Mr Mason represented to her that she would be able to live in the house as long as she wished but if the house became too much for her, a unit could be purchased as a substitute residence. She says that, in reliance on that representation, she continued to live in the house and to pay rent to Mr Mason, and spent about $2,000 on the purchase of venetian blinds. By reason of her detrimental reliance on the alleged representations of Kilie and Mr Mason, Mrs Maryska says that Mr Mason is now estopped from denying that she has a life interest in the house. 8 Mr Mason denies that he made the representation in November 2001 in the terms alleged. He denies that Kilie made the representation in the terms alleged in his presence and with his consent in 1997. By his Cross Claim he seeks an order that Mrs Maryska give vacant possession of the house and remove a caveat which she has lodged against the title. 9 Mrs Maryska, Kilie and Mr Mason have given evidence. I do not think that the resolution of this case depends upon whether I accept a version of what was said in 1997 and 2001 given by Mrs Maryska and Kilie on the one hand or by Mr Mason on the other. On the evidence given by Mrs Maryska and Kilie as to the basis upon which Mrs Maryska expended money in relation to the house, I do not think that her case can succeed. 10 It is probable that at the time that the parties inspected the house there were some statements made by Kilie that Mrs Maryska could live in the house as long as she liked. This is the sort of statement a daughter might naturally make to her mother concerning accommodation to be provided by the daughter. However, there is no doubt that in 1997 Kilie, and Mr Mason for that matter, regarded the house as an investment because there was, by all accounts, agreement as to what rent Mrs Maryska would pay. 11 The context of the discussions indicated clearly that a condition of Mrs Maryska's occupation of the house was her continuing to pay rent. I should add that I am not satisfied that Mr Mason participated in any assurance given by Kilie to Mrs Maryska that she could live in the house as long as she liked. I accept Mr Mason's evidence that he regarded the house as an investment for the family, not as a means of providing subsidised accommodation for Mrs Maryska. 12 In any event, Mrs Maryska's claim cannot succeed because she cannot establish a detrimental reliance on the representations which she alleges were made which is sufficient to support the estoppel which she asserts. The elements of an estoppel by encouragement, such as is relied upon in the present case, have been stated by Lord Kingsdown in Ramsden v Dyson & Thornton (1866) LR 1 HL 129, at 170 thus: "If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation." 13 A plaintiff's reliance on an expectation or promise of an interest in land must be detrimental and it must be sufficiently substantial to make it unconscionable in the eye of equity for the representor to depart from it: see Grundt v Great Boulder Proprietary Gold Mines (1937) 59 CLR 641, at 674-675 per Dixon J. Further, equitable relief may be limited or may even be refused outright where enforcement of a plaintiff's expectation would be out of proportion to the detriment: see, for example, Jennings v Rice [2003] 1 P & CR 100 (Court of Appeal), and Sullivan v Sullivan [2006] NSWCA 312, [26] per Handley JA. 14 I cannot accept that the payment by Mrs Maryska of rent for the house was a relevant detriment to found the estoppel asserted. Mrs Maryska does not say that she agreed to forego some other benefit or advantage in terms of her accommodation in order to take up the occupation of the house. Indeed, her evidence is to the opposite effect. She says that when the arrangement between the parties was discussed during an inspection of the house in 1997, she said: "I have been paying $165 per week. If I could do it for $150 I would be happy" . 15 The rental arrangement which Mrs Maryska entered on the strength of what was said at this discussion was beneficial, not detrimental, at the time, and it has not, and could not, become detrimental if there were found to be a change of position on the part of Mr Mason as to the duration of her tenancy. That is so because Mrs Maryska has had the benefit of occupation of a house, which she says is very pleasant, at a rental which was better than the rental which she was previously paying. Indeed, as Mr Wilson conceded in his final submissions, for some time now Mrs Maryska has been occupying that house at a rental which appears to be below current market rental for the property. I note that Mrs Maryska has not asserted that it was ever represented to her that the rent she would have to pay for the house would be below market rental. 16 I am unable to accept Mrs Maryska's assertion that she spent money on improving the house in reliance upon an expectation that she would have any estate or interest in the house other than as a tenant under a tenancy determinable on reasonable notice. 17 In cross examination Mrs Maryska said that before spending money on the concreting and other improvements in the nature of fixtures she had discussions with Kilie and Mr Mason in which she sought reassurance that if she spent the money she would be able to stay in the house for life. I am unable to accept that evidence. It was denied by Mr Mason. Further, it was vague and hesitantly given. She said that the principal conversation in this regard occurred after the major work had already been carried out. 18 In any event, I find far more probable the account of these discussions given by Kilie in cross examination. She said that her mother had told her and Mr Mason what she wanted to do to the house by way of improvement and that it would increase the value of the house. Her mother had said words to the effect, "If anything happens to me and the house has to be sold, I expect to be repaid this money" . This is the substance of all that was said. That repayment of the cost of improvements was all that Mrs Maryska ever expected if the house was sold is confirmed by the evidence of Mrs Maryska herself. She said that when Mr Mason told her in 2004 that he needed to sell the house, she said that he should repay her the money she had spent on improvements. When he said that he could not remember having agreed to do so, she refused to leave. She said in cross examination that if Mr Mason had agreed to repay the $8,300 she had spent on improvements she would have vacated the house immediately. 19 This evidence indicates strongly that Mrs Maryska never had an expectation that she would have some right of permanent residence in the house and that she expended money on the basis of that expectation. I find that Mrs Maryska understood at all times that she was a tenant and that Kilie, and later Mr Mason, had a right to sell the house. All that Mrs Maryska ever expected was that if the house were sold she would be repaid the moneys which she had spent on improvements. 20 Mr R.D. Wilson of Counsel, who appears for Mrs Maryska, relied strongly on the decision of the Court of Appeal in Sullivan v Sullivan (supra). However, the facts of that case are very different from those in the present case. There, the plaintiff had given up the right to live in Housing Commission accommodation on subsidised rent in reliance upon a promise by the Defendant that she could live in accommodation provided by him for as long as she liked. The evidence showed that if he were permitted to depart from that representation, the plaintiff would probably have to wait another seven years before she could obtain Housing Commission accommodation again. That was held to be a sufficiently substantial detrimental reliance to fund an estoppel. For the reasons which I have given, I do not think that this case bears any factual resemblance to Sullivan v Sullivan . 21 Mrs Maryska has not relied on an expectation of a life tenancy in the house in paying rent or in spending $6,300 on such improvements as are fixtures rather than removable items. In any event, I would have found that the relief sought founded upon an expenditure of $6,300 is out of all proportion to the imposition of a constructive trust for life tenancy on a property now worth more than some $300,000. 22 Mr Wilson suggests that alternative relief could be granted. He says that the Court should restrain the Defendant from interfering with Mrs Maryska's quiet possession for a certain time. When I asked what time, Mr Wilson had some difficulty in formulating any definite term other than to say that it should be a sufficient term to enable Mrs Maryska to find suitable alternative accommodation. Shortly afterwards, upon instructions, Mr Wilson said that as Mrs Maryska had been living in the house for some ten years, she should be left in possession for another ten years. 23 If I had found Mrs Maryska entitled to any equitable relief, I would have refused such an order. The evidence is that Mr Mason is paying some $8,300 per month under a mortgage secured over the house. There is no evidence which supports any basis for affording Mrs Maryska any equitable rights to possession for ten years or any other specific term. 24 Mr Wilson submits that I could have granted an equitable lien or charge over the property to secure at least repayment of the money expended by Mrs Maryska on improvements. He relies in that regard on decisions such as Morris v Morris [1982] 1 NSWLR 61. In that case, the plaintiff had expended money on improvements to a property owned jointly by his son and daughter-in-law in order to provide himself with accommodation indefinitely as part of his son's family. Subsequently, the relationship between the parties broke down and the plaintiff was compelled to leave the house. His Honour held that there was no room for finding or inferring the existence at any material time of an actual intention on the part of the plaintiff or the defendants that a trust of the property or a share in the property was to be created in favour of the plaintiff. He therefore concluded that there was no legitimate basis for concluding that the arrangements gave rise to an express or implied trust. However, his Honour went on to say: "The plaintiff spent money on the defendants' property in the expectation, induced or encouraged by the defendants that he would be able to live there indefinitely as a member of their family. This expectation has been defeated by the occurrence of events which were not in contemplation when the money was spent and as a result of which any subsisting right of residence by the plaintiff in the property is now of no practical consequence. In my opinion, on the facts of this case, it would be unconscionable and inequitable that the defendants should now retain the benefit of the expenditure by the plaintiff of his money on their property free of any obligation of recoupment to him. Consequently an equity arises in favour of the plaintiff and the court must determine how in all the circumstances justice requires that that equity be satisfied. What a plaintiff in such a case as this should in justice receive will not necessarily correspond with what, when the relevant expenditure was made, he expected to receive." 25 The distinction between Morris v Morris and the present case is that in Morris his Honour concluded that the plaintiff had spent money on the defendants' property in an expectation which had been induced or encouraged by the defendants that he was able to live there indefinitely. I have found in the present case that the money spent by Mrs Maryska in improvements was not induced or encouraged by an expectation that she would be able to live in the property indefinitely. By reason of this factual distinction, I do not think that relief in the form granted in Morris v Morris could have been granted in the present case. 26 For those reasons, there must be judgment for the Defendant on the Plaintiff's Statement of Claim. I now deal with the Cross Claim. 27 Mr Wilson submits that I cannot make an order for vacant possession of the property as sought in the Cross Claim by reason of the provisions of s.71 of the Residential Tenancies Act 1987 (NSW). That section provides: " Prohibition on certain recovery proceedings in courts No proceedings in the Supreme Court, the District Court or a Local Court to obtain recovery of possession of residential premises subject to a residential tenancy agreement shall be commenced by a landlord against a tenant or former tenant of the landlord." 28 A residential tenancy agreement is defined in the Act as follows: "… any agreement under which a person grants to another person for value a right of occupation of residential premises for the purpose of use as a residence: (a) whether or not the right is a right of exclusive occupation; (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing or partly oral and partly in writing …" 29 The right of occupation of the house which Mrs Maryska has enjoyed for the last ten years is a right of occupation pursuant to an oral residential tenancy agreement, as defined. The Court has found, for the reasons which I have given above, that Mrs Maryska's occupation of the house is pursuant, not to any equitable estate or interest, but pursuant only to a tenancy determinable according to law. 30 Section 71 of the Residential Tenancies Act makes it clear that proceedings could not have been commenced in this Court to recover vacant possession of the house from Mrs Maryska. The position, therefore, is that this Court should not make an order for possession of the property pursuant to a Cross Claim improperly commenced in this Court. If vacant possession of the property is sought, it must be sought in the tribunal which administers the Residential Tenancies Act . However, this judgment will establish that, as between the Plaintiff and the Defendant, there is no estate or interest other than a tenancy in the terms to which I have referred. 31 Accordingly, I will not make an order for the giving up of vacant possession of the property as sought in the Cross Claim. If there is further resistance to the giving of vacant possession, the Defendant will have to seek an order from the Tenancy Tribunal. 32 However, there is no reason that the Court cannot make an order that Mrs Maryska remove the caveat which she has placed on the title by which she sought to preserve the alleged equitable interest. I will therefore make an order in terms of paragraph 3 in the Cross Claim. The Cross Claim is otherwise dismissed. 33 The orders of the Court are: a) judgment for the Defendant on the Plaintiff's Statement of Claim; b) order in terms of paragraph 3 of the Cross Claim; c) the Cross Claim is otherwise dismissed; d) the Plaintiff is to pay the Defendant's costs of the proceedings; e) exhibits may be returned. – oOo – DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.