New South Wales Court of Appeal CITATION: DELAFORCE v SIMPSON-COOK [2010] NSWCA 84 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S): 12/03/2010 JUDGMENT DATE: 20 July 2010 JUDGMENT OF: Allsop P at 1; Giles JA at 5; Handley AJA at 6 (1) Appeal allowed in part; DECISION: (2) Order 3 in the Equity Division set aside; (3) In lieu thereof order that the plaintiff's claim under the Family Provision Act be dismissed; (4) Appeal otherwise dismissed with costs. CATCHWORDS: CONTRACT – to leave property by will – effect of – equity. - EQUITY – proprietary estoppel – reasonable reliance – detriment – loss of chance – unambiguous assurance to leave property by will – estoppel established. - ESTOPPEL – proprietary estoppel – reasonable reliance – detriment – loss of chance – unambiguous assurance to leave property by will – estoppel established. - WILL – contract to leave property by – effect of. LEGISLATION CITED: Family Provision Act 1982 Succession Act 2006 CATEGORY: Principal judgment Attorney General of Hong Kong v Humphreys Estate (Queen's Gardens) Ltd [1987] AC 114 Barnes v Alderton [2008] NSWSC 107 Barns v Barns [2003] HCA 9, 214 CLR 169 Baumgartner v Baumgartner [1987] HCA, 164 CLR 137 Birmingham v Renfrew [1937] HCA 52, 57 CLR 661 Cameron v Murdoch [1983] WAR 321 Chalmers v Pardoe [1963] 1 WLR 677 PC Cobbe v Yoeman's Row Management Ltd [2008] 1 WLR 1752 Commonwealth v Verwayen [1990] HCA 39, 170 CLR 394 Crabb v Arun DC [1976] Ch 179 CA Dable v Peisley [2009] NSWSC 772 Davis Contractors Ltd v Fareham UDC [1956] AC 696 Donis v Donis [2007] VSCA 89 Fifteenth Eestin Nominees Pty Ltd v Rosenberg [2009] VSCA 112 Flinn v Flinn [1999] 3 VR 712 CA Gillett v Holt [2001] Ch 210 CA Giumelli v Giumelli [1999] HCA 10, 196 CLR 101 Griffiths v Williams (1978) 248 EG 947 Grundt v Great Boulder Proprietary Gold Mines Ltd [1938] HCA 58, 59 CLR 641 Henderson v Miles (No 2) [2005] NSWSC 867 Henry v Henry [2010] 1 All ER 988 PC, CASES CITED: In re Basham [1986] 1 WLR 1498 Jennings v Rice [2003] 1 P & CR 100 CA Jervis v Wolferstan (1874) LR 18 Eq 18 Legione v Hateley [1983] HCA 11, 152 CLR 406 Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 Muschinski v Dodds [1985] HCA 78, 160 CLR 583 Pascoe v Turner [1979] 1 WLR 431 CA Plimmer v Mayor of Wellington (1884) 9 App Cas 699 Ramsden v Dyson (1866) LR 1 HL 129 Re Brookman's Trust (1869) LR 5 Ch Ap 182 Re Goodchild [1996] 1 WLR 694, 700 Re Marsland [1939] Ch 820 CA. Schaefer v Schuhmann [1972] AC 572 Sledmore v Dalby (1996) 72 P & CR 196 CA Sullivan v Sullivan [2006] NSWCA 312 Synge v Synge [1894] 1 QB 466 CA Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133 The Commonwealth v Verwayen [1990] HCA 39, 170 CLR 394 Thorner v Major [2009] 1 WLR 776 Vukic v Grbin [2006] NSWSC 41 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7, 164 CLR 387 Weeks v Hrubala [2008] NSWSC 162 Yaxley v Gotts [2000] Ch 162 CA PARTIES: William John Martin Delaforce - Appellant Susann Simpson-Cook - Respondent FILE NUMBER(S): CA 2009/298377 COUNSEL: R Harper SC and R Jefferis - Appellant P Hallen SC - Respondent SOLICITORS: Davis Legal - Appellant Websters Solicitors - Respondent LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 4407 of 2007 LOWER COURT JUDICIAL OFFICER: Bergin CJ in Eq LOWER COURT DATE OF DECISION: 11/05/2009 LOWER COURT MEDIUM NEUTRAL CITATION: [2009] NSWSC 357 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 09/298377 ALLSOP P GILES JA HANDLEY AJA Tuesday 20 July 2010 William John Martin Delaforce v Susan Simpson-Cook CATCHWORDS CONTRACT – to leave property by will – effect of – equity. EQUITY – proprietary estoppel – reasonable reliance – detriment – loss of chance – unambiguous assurance to leave property by will – estoppel established. ESTOPPEL – proprietary estoppel – reasonable reliance – detriment – loss of chance – unambiguous assurance to leave property by will – estoppel established. WILL – contract to leave property by – effect of. HEADNOTE Following the break-up of their marriage the deceased and his wife negotiated their property settlement which was then incorporated in consent orders made by the Family Court. The husband wished to retain a house property that the wife was anxious to acquire for personal reasons. They agreed that he could have the property but he would leave it to his wife in his will. This promise was noted in the consent orders but was not made the subject of a binding order. The husband's last will gave the property to another. The wife had accepted the promise, and had not sought to have it incorporated in the orders. The trial Judge found that the husband's promise had created a proprietary estoppel by encouragement and ordered his executor to transfer the property to the former wife. The executor appealed. Held : (1) The wife had relied on the promise and her reliance was reasonable; (2) She had changed her position by giving up the chance of having the Family Court incorporate the husband's promise in its enforceable orders; (3) Prima facie equity would enforce the wife's expectation based on an un-ambiguous promise; (4) There was no reason for the Court to do otherwise than enforce of the wife's reasonable expectation. ORDERS (1) Appeal allowed in part; (2) Order 3 in the Equity Division set aside; (3) In lieu thereof order that the plaintiff's claim under the Family Provision Act be dismissed; (4) Appeal otherwise dismissed with costs. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 09/298377 ALLSOP P GILES JA HANDLEY AJA Tuesday 20 July 2010 William John Martin Delaforce v Susan Simpson-Cook Judgment 1 ALLSOP P: I have had the privilege of reading in draft the reasons of Handley AJA. I agree with his Honour's reasons and with the orders proposed by him. I would only add the following comments. 2 As Handley AJA says, there is no occasion in the resolution of this controversy to deal with the position of the property and the relationship between the parties during the deceased's lifetime, in hypothetical circumstances. In that context, and given the argument in this case, there is also no occasion to consider the possible alternative or additional perspective of analysis through the prism of a remedial constructive trust (rather than, or in addition to, estoppel) as discussed by Lord Scott of Foscote in Thorner v Major [2009] UKHL 18; [2009] 1 WLR 776 at 781 [14] and 784-785 [20]. 3 I agree in particular with Handley AJA that the reasons of Gleeson CJ, McHugh, Gummow and Callinan JJ in Giumelli v Giumelli [1999] HCA 10; 196 CLR 101 appear to remove as a governing principle in the relief to be granted in equitable or proprietary estoppel cases the notion of enforcement or vindication only of the "minimum equity": see Giumelli at 123-125 [40]-[48]. That, of course, does not make irrelevant matters that can assuage the detriment brought about by the resiling from the representation or encouragement by the party concerned. It does mean, however, that relief in such cases is not to be measured by weighing detriment too minutely in order that it be converted into some equivalent of cash or kind, as if one were measuring the consideration for a commercial bargain. Equity will look at all the relevant circumstances that touch upon the conscionability (or not) of resiling from the encouragement or representation previously made, including the nature and character of the detriment, how it can be cured, its proportionality to the terms and character of the encouragement or representation and the conformity with good conscience of keeping a party to any relevant representation or promise made, even if not contractual in character. Equity has always had a place in keeping parties to representations or promises: see for example, Burrowes v Lock (1805) 10 Ves Jr 470; 32 ER 927; Horn v Cole 51 NH 287; 12 Am Rep 111 (1868); J N Pomeroy, A Treatise on Equity Jurisprudence Vol 3 (5th ed, 1941) at 179-188 [802]-[803]; R Meagher, J Heydon and M Leeming, Meagher, Gummow and Lehane's Equity: Doctrine and Remedies (4th ed, 2002) at 556-560 [17-065]-[17-070] and 567-568 [17-110]. 4 Proportionality of the claimed interest or remedy to the prejudice or detriment is undeniably a relevant consideration, and sometimes of considerable importance. It should not, however, be transformed into a necessary constitutive element of a cause of action to be pleaded or proved by the party seeking relief. To do so would elevate one consideration above others, and in particular above the importance of making good an expectation by encouragement or representation: Plimmer v Mayor of Wellington (1884) 9 App Cas 699 at 713-714; Riches v Hogben [1985] 2 Qd R 292; Giumelli at 113-114 [10] and 121-122 [35]. It would tend to equate the analysis to one requiring that the party encouraged receive no more than it can prove that it suffered in detriment. This would see the equity become one of compensation for proved equivalent detriment. The equity is a broader one based on the just and conscionable satisfaction in appropriate fashion of the equity arising from the expectation created in another by encouragement or representation. As Handley AJA says, the role of proportionality is better understood, in a doctrine dealing with the legitimacy or otherwise of resiling from an encouragement or representation that has created an expectation, as assisting in an assessment whether what is claimed or contemplated to be granted is disproportionate or unjust in all the circumstances. 5 The importance of keeping a party to a representation or encouragement previously made is all the stronger where, as here, the encouragement or representation has been relied upon by a party to abandon a course of conduct that could possibly have led to a different outcome. This can be described in the language of loss of a chance that is not fanciful or unrealistic, or in the language of proceeding thereafter on the basis of a new or changed convention or conventional basis. Such expression of the matter is not different to how Dixon J put the matter in Grundt v Great Boulder Proprietary Gold Mines Ltd [1937] HCA 58; 59 CLR 641 at 674-675. For instance, if, as here, in reliance upon a representation or encouragement, a court case is abandoned and the representation or encouragement is later sought to be resiled from, the party to whom the representation or encouragement was made and in whom the expectation was raised is left in the position not only of the loss of the entitlement to pursue his or her rights in the case in the past, but also is likely to be in the position of being unable to demonstrate what would, or even may, have happened in the case, it being an alternative, complex and now hypothetical body of human conduct. That the party encouraged cannot show that he or she would have been better off in the posited alternative reality is not fatal to the making out of the estoppel. Indeed, the inability to prove such things reveals a central aspect of the detriment: being left, now, in that position. Of course, if it is self-evident or can be clearly demonstrated that the case was fanciful or otherwise doomed to fail, there may be no real detriment; but that was not the case here. The respondent gave up her right to propound her case in the Family Court on the faith of the deceased's representation. It was not self-evident, or otherwise clearly demonstrated, that she could not have been successful in securing her rights to the subject property after the death of the deceased. 6 GILES JA: I agree with the judgment of Handley AJA and with the additional comments of Allsop P. 7 HANDLEY AJA: This is an appeal by the executor of the estate of the late Michael Fiertag (the deceased) from orders made by Bergin CJ in Eq on 11 May 2009: [2009] NSWSC 357. Her Honour declared that the plaintiff, the deceased's former wife, had established a proprietary estoppel which entitled her to the property at 5 Dowling Street Arncliffe (the subject property) and its net rents since the death of the deceased. She also made orders for equivalent relief under the Family Provision Act. The facts are relatively few and not in dispute. 8 The plaintiff and deceased commenced their relationship in October 1989, separated on 29 June 1990, resumed their relationship in August 1991, and married in March 1994. They separated for the last time in July 2001 and were divorced on 28 December 2002 when the plaintiff was 41 and the deceased 59. 9 The plaintiff purchased what became their home in March 1991. It was next door to the subject property. The plaintiff always wanted to acquire the subject property to protect the heritage status of both properties. She attempted to buy it privately in 1992 without success. 10 The subject property was put up for auction the following year and the plaintiff and the deceased discussed its acquisition. The plaintiff could only obtain the necessary finance by mortgaging their home and she didn't want to do this. The deceased, who had recently inherited $340,000 from his mother, agreed to buy the subject property. 11 On 8 June 1993 the plaintiff, armed with the deceased's power of attorney, attended the auction and purchased the subject property for $259,500. The deceased borrowed $100,000 on mortgage and completed the purchase. The house was then renovated and let and surplus land was subdivided and sold for $55,000 (blue 20). The mortgage was discharged in 1998. 12 Some six months after their final separation the plaintiff and deceased decided that they would negotiate their property settlement themselves, without instructing lawyers. Their combined assets were then worth approximately $3,500,000 and their initial division included a payment of $100,000 by the deceased to make it an "even split". Later at the deceased's request this was reduced first to $70,000, then to $50,000. 13 The deceased planned to live in New Zealand, but wished to keep a foothold in the Sydney property market. Although the plaintiff was anxious to obtain the subject property she agreed that the deceased could retain it for his lifetime, if he left it to her in his will. 14 The parties instructed separate solicitors to document their agreement, but the plaintiff did not tell hers about their agreement for the subject property. The first draft declared that the deceased was the sole beneficial owner of the subject property, and required him to pay $50,000 to the plaintiff. 15 The deceased then told the plaintiff that he did not wish to pay the $50,000. The plaintiff agreed to forego this if the deceased spent the money on a granny flat on the subject property. 16 The plaintiff wrote to her solicitor on 24 May 2002 and her letter included the following: "Currently I am the main beneficiary in Michael's will. He has verbally undertaken to bequeath the [subject] property … to me, in spite of our divorce. I have not sought to include this in the property settlement as I have seen it as something which would not be possible to guarantee … nice if it happens, but I am not counting on it. With the discussion of the $50,000 we have talked about Michael using this money to build a granny flat on the [subject] property. This would be a win-win (assuming that Michael did leave the property to me) as he would have additional income from the granny flat, and I would inherit a more valuable asset. Is there any way to formally include these undertakings (the will and the granny flat) in the agreement, or should I continue to view it as 'a bird in the bush'." 17 The solicitor's reply 27 May included the following: "I think you're still getting a very good deal without the $50,000 payment so I would recommend that if that is a sticking point that you agree to foregoing it. A suggestion for dealing with the will and granny flat issues would be to include these intentions by way of Notation on the Consent Orders. Whilst they are not enforceable as such they indicate the basis on which agreement has been reached and they provide good evidence of expressed intentions in the event of later non-compliance." 18 The solicitor's suggestion was adopted and the Family Court made consent orders signed by the parties on 13 June 2002. The notation, at the end of the orders, provided: "1) The parties have entered into this agreement on the basis that the husband: a) will retain the wife as a beneficiary in his will and will bequeath the [subject] property … unencumbered to her; and b) will use his best endeavours to have a granny flat/combined garage erected on the said property … 2) pursuant to section 81 of the Family Law Act 1975 the husband and the wife intend that these Orders shall as far as practicable finally determine the financial relationship between them and avoid any further proceedings between them." 19 Although divorced the plaintiff and the deceased spoke on the telephone from time to time and on at least one occasion he told her that she was still a beneficiary under his will. The deceased had made a will on 15 October 1998 appointing the plaintiff his executrix, and bequeathing his residuary estate to her if she survived him for 30 days. It did not contain a specific devise of the subject property in her favour. 20 The deceased died from mesothelioma on 22 June 2007, having made a new will on 31 March that year. This revoked prior wills, and after some legacies, gave his residue to a cousin in London. It did not devise the subject property to the plaintiff. 21 The proprietary estoppel upheld by the Judge was an estoppel by encouragement. Such an estoppel comes into existence when an owner of property has encouraged another to alter his or her position in the expectation of obtaining a proprietary interest and that other, in reliance on the expectation created or encouraged by the property owner, has changed his or her position to their detriment. If these matters are established equity may compel the owner to give effect to that expectation in whole or in part. The general principles governing this form of estoppel were not in dispute, here or below. 22 The promises relied on as the basis for the estoppel were the statements in cl 1(a) of the Notation. The critical issues at the trial, and on appeal, were the extent to which the plaintiff relied on these assurances, the reasonableness of any reliance, the nature and extent of her detriment, and the quantum of any relief which should be granted. At the trial Counsel for the plaintiff abandoned a claim to enforce the Notation as a contract. 23 The plaintiff's initial expectation, and the nature and extent of her reliance on the deceased's verbal promises are recorded in her letter of 24 May 2002 [15]. She believed that his promises could not be guaranteed and was not counting on their performance. She acknowledged in cross-examination that she could not rely on what he was saying because he could change his mind (Black 9). 24 She said that she had separated from the deceased "because I couldn't rely on the things that he said to me … I couldn't stay married to this man because he won't keep his word to me" (Black 11). He had reneged on the agreement for a cash payment under the property settlement. As he steadily reduced the cash he was prepared to pay under the settlement: "I started to realise if he's not prepared to meet that agreement, then what is the probability that he's going to leave me that house in his will … so that's when I sought [the solicitor's] advice. I was really embarrassed that I hadn't told her, but I just sought her advice about getting it included in the consent orders" (Black 11). 25 As at 24 May she was not relying on what the deceased "was saying" and "realised that I needed to have it in writing" (Black 11). Her belief changed when the deceased signed the consent orders (Black 13). She had received advice in the e-mail of 27 May from her solicitor about the legal effect of the Notation. She was told that it was not enforceable as such, but would protect her from anyone currently in the deceased's life. If he remarried his new wife and any children would have a claim on the property. She relied on that advice (Black 13). 26 She said that if the deceased had not been prepared to put the agreement about the subject property in writing "I would have sought orders from the Family Court (Blue 134); "I would have had to take it further" (Black 19). "[I]f I had to go to the Court to get that, then yes I would have" (Black 21). 27 The Judge said that she had "some reservations about the plaintiff's evidence about her letter to the solicitor of 24 May 2002 but made the following findings (para [40]): "… once the deceased was willing to have the assurances in relation to the Will and the improvements to the Property included in the Notation to the Consent Orders she relied upon them and was willing to forego the payment of $50,000 … The assurances that had previously been viewed by the plaintiff as unreliable, were, by the deceased's agreement to use the $50,000 on the property and include the assurances as a Notation in the Consent Orders, converted into assurances upon which the plaintiff relied." 28 The appellant attacked these findings but in so far as they were findings of primary fact they cannot be disturbed. The plaintiff's doubts about the reliability of the deceased's verbal promises are not inconsistent with reliance on written promises signed by him and incorporated in a Court document. 29 Mr Harper SC, who appeared with Mr Jefferis for the appellant, submitted that the plaintiff's evidence that she relied on her solicitor's advice showed that she did not rely on the deceased's promises but this cannot be accepted. The advice was about the legal effect of the deceased's promises and it not only justified the plaintiff's reliance on them, it also established that this was reasonable. 30 The solicitor's advice was sound. The deceased's will of 18 October 1998 gave the whole of his estate to the plaintiff if she survived him for 30 days. His promise in the Notation to "retain" the plaintiff as a beneficiary may have been a promise not to revoke the will but this was not the intention of the parties. It may have been a promise not to revoke the will in so far as it gave the subject property to the plaintiff, but in any event the second limb was a promise to leave it to her. 31 Although a will is revocable until death or loss of testamentary capacity, equity enforces a contract not to revoke a will, or to leave property by will, not by restraining or nullifying an inconsistent will, but by fastening a trust on the estate to give effect to the contract: Birmingham v Renfrew [1937] HCA 52, 57 CLR 661, 683. A contract to leave an identified property by will is specifically enforceable against volunteers who claim under a disposition by the promisor in his lifetime: Synge v Synge [1894] 1 QB 466 CA, 470-1, but is subject to the claims of creditors if the estate is insolvent: Schaefer v Schuhmann [1972] AC 572, 586, but compare (1972) 88 LQR at 321-2. 32 A contract not to revoke a will is subject to contingencies. Revocation by operation of law on remarriage is not a breach: Re Marsland [1939] Ch 820 CA. The promisee must survive the promisor to avoid lapse: Re Brookman's Trust (1869) LR 5 Ch Ap 182; and a contract for a share of residue is subject to the claims of creditors: Jervis v Wolferstan (1874) LR 18 Eq 18, 24; Schaefer v Schuhmann (above) at 586, but compare (1972) 88 LQR AT 321-2. 33 A contract to leave property by will is subject to lapse if the promisee pre-deceases the promisor, but will not be affected by his marriage. The contract will be defeated by a disposition in the promisor's lifetime to a purchaser for value without notice: Schaefer v Schuhmann (above) at 586. 34 A contract not to revoke a will, or to leave specific property by will could be defeated, if there were eligible dependants, by an order for provision under the Family Provision Act 1982: Barns v Barns [2003] HCA 9, 214 CLR 169, or the designation of the property as notional estate under ss 22(4)(f) and 23(b)(iii) of that Act (since 2008 under corresponding provisions in the Succession Act 2006). If the promisor marries, and his marriage ends in divorce, the Family Court could order a transfer of the subject property to the wife and defeat any contract by the husband to leave it to someone else in his will. 35 A proprietary estoppel by encouragement based on similar promises must be subject to the same contingencies. 36 The plaintiff knew that a will can be revoked at any time, and Mr Harper submitted that a promise about an existing or future will had to be understood in the same way. In some cases this could be the proper finding but testamentary promises are not always revocable. This is clear from the cases on testamentary contracts, and it is denied for estoppels by encouragement based on testamentary promises by Flinn v Flinn [1999] 3 VR 712, 736 per Brooking JA and by Gillett v Holt [2001] Ch 210 CA, 227-8 where Robert Walker LJ said: "… the inherent revocability of testamentary dispositions (even if well understood by the parties …) is irrelevant to a promise or assurance that 'all this will be yours' … Even when the promise or assurance is in terms linked to the making of a will … the circumstances may make clear that the assurance is more than a mere statement of present (revocable) intention and is tantamount to a promise." 37 The insertion of the Notation into the consent orders made it clear that the deceased's assurances were "more than a mere statement of present, (revocable), intention" and were "tantamount to a promise". 38 The promise in the second limb of cl 1(a) of the Notation was clear, it was signed by the deceased, and it was incorporated in a court document. It was made with the evident purpose of affecting the legal relationships between the parties, without any hint that it was revocable. The plaintiff was entitled to rely on that promise, and the Judge was entitled to find that she did and that her reliance was reasonable. 39 The plaintiff relied below on two detriments to support her claim to a proprietary estoppel, the giving up of the opportunity to have the Family Court determine her property rights on the merits, and her acquiescence in the loss of the $50,000. 40 Mr Harper relied on the Judge's finding that the plaintiff's detriment was her agreement to give up the $50,000. In his submission the appropriate relief would compensate her for this amount, appropriately indexed, and there was no justification for awarding her the subject property or anything more. 41 The relevant detriment is not the loss flowing from non-fulfilment of the promise or assurance: The Commonwealth v Verwayen [1990] HCA 39, 170 CLR 394, 415 per Mason CJ, 429 per Brennan J, 445 per Deane J. 42 The detriment that makes an estoppel enforceable is that which the party asserting the estoppel would suffer, as a result of his or her original change of position, if the assumption which induced it was repudiated by the party estopped. This was explained by Dixon J (the Dixon principle) in Grundt v Great Boulder Proprietary Gold Mines Ltd [1938] HCA 58, 59 CLR 641, 674-5(Grundt): "That other must have so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption. In stating this essential condition, particularly where the estoppel flows from representation, it is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment." 43 In Legione v Hateley [1983] HCA 11, 152 CLR 406, 437 Mason and Deane JJ said that the Dixon principle applies to a promissory estoppel. In Cameron v Murdoch [1983] WAR 321, 351-2 Brinsden J held that it also applied to an estoppel by encouragement, as did Robert Walker LJ in Gillett v Holt [2001] Ch 210 CA, 232-3. The joint judgment in Giumelli [1999] HCA 10, 196 CLR 101, 124 adopted this view. 44 The Dixon principle was treated as applicable to proprietary estoppel in Sullivan v Sullivan [2006] NSWCA 312; and Donis v Donis [2007] VSCA 89 at [54]. 45 The Judge made the following findings paras [46] – [47]: "Whether the plaintiff acted to her detriment in giving up her right to have the Family Court determine her property rights on the merits cannot be ascertained in the circumstances of and on the evidence in the case. It is just not possible to know whether the plaintiff would have achieved a better outcome than she did achieve by negotiating with the deceased. Although the plaintiff gave up the opportunity I am not satisfied that it can be characterised as conduct to her detriment … the plaintiff relied upon the deceased's assurances that he would bequeath the Property to her and acted to her detriment in agreeing to the $50,000 being used on improvements to the property." 46 In my judgment this focus was too narrow. The plaintiff and the deceased had agreed on an overall settlement which included a promise by the deceased to leave the subject property to her in his will. 47 The first draft prepared by the solicitors allocated the subject property to the deceased without any reference to his testamentary promise. The deceased's change of mind about the $50,000 prompted the plaintiff to ask for the Court's orders to include a record of this promise. The deceased then confirmed his promise and agreed to its incorporation as a notation in the consent orders. 48 The plaintiff changed her position when she signed the draft consent orders and allowed the Court to act on her consent. In doing so she not only gave up any claim to the $50,000, she also gave up the right to ask the Family Court to determine her entitlements. Her solicitor advised her that she was not likely to do better in Court. However this did not take into account the plaintiff's right to ask the Family Court to make an enforceable order giving her a legal right to the subject property after the death of the deceased. The plaintiff could have adopted the informal settlement and simply sought an order giving effect to the testamentary promise. 49 The plaintiff could not point to any further reliance or change of position after the consent orders were made. She relied on the deceased's promise that the Notation would be included in the consent orders and changed her position by accepting that promise and then the notation in the consent orders. The plaintiff would be disadvantaged by her changes of position if the deceased were permitted to repudiate that promise and leave the subject property to another. 50 In my judgment therefore the plaintiff's detriment was not limited to the loss of the $50,000, but included the loss of the chance of obtaining an enforceable order giving her a right to the subject property after the death of the deceased. There is therefore no basis for limiting the plaintiff's relief, as Mr Harper contended, to the sum of $50,000 appropriately indexed. 51 His submissions on the quantum of relief emphasised the disparity between the plaintiff's detriment on 13 June 2002 in giving up any claim to the $50,000 and the order on 11 May 2009 awarding her the subject property valued at $600,000. 52 This submission overlooked the capital gain since the deceased acquired the property for $259,000 in 1992. His cost base was later reduced by the net gain from the sale of the surplus land for $55,000. If the plaintiff acquired the subject property, she would inherit the reduced cost base of the deceased, and, if and when she sold it, 50% of the net capital gain since 1992 would be taxable in her hands at marginal rates. The evidence does not allow the capital gain, or the tax payable on it to be determined, but the true value of the subject property to the plaintiff is much less than its market value. 53 The trial Judge adopted the conclusion of Brereton J in Vukic v Grbin [2006] NSWSC 41 at [33] that in a proprietary estoppel case, as distinct from a windfall equity case, "the expectation basis of the equity favours the view that the prima facie entitlement is to satisfaction of the relevant expectation." She held that this was not a windfall equity case and that there were no special circumstances which required an award of something less than the plaintiff's expectation. The expression "windfall equity" in the present context was coined by Young CJ in Eq in Henderson v Miles (No 2) [2005] NSWSC 867 at [19] to describe that enforced in Muschinski v Dodds [1985] HCA 78, 160 CLR 583, 620 and Baumgartner v Baumgartner [1987] HCA, 164 CLR 137, 148. It is not relevant in this case. 54 In Sullivan v Sullivan [2006] NSWCA 312 I considered the principles which govern the grant of relief in an estoppel by encouragement case. What follows is based on paras [11]-[32] in that judgment. 55 A proprietary estoppel by encouragement may be established where the conduct of the party estopped did not define the expectation: Plimmer v Mayor of Wellington (1884) 9 App Cas 699, 713; Flinn v Flinn [1999] 3 VR 712 CA, 738-9, 742, 743; Gillett v Holt [2001] Ch 210 CA, 226 per Robert Walker LJ. "[T]he quality of the assurances which give rise to the claimant's expectations" is an important factor: Jennings v Rice [2003] 1 P & CR 100, 112, 114 per Robert Walker LJ repeating what he said in Gillett v Holt [2001] Ch 210, 225: "the quality of the relevant assurances may influence the issue of reliance [and] reliance and detriment are often intertwined", which was approved by the Privy Council in Henry v Henry [2010] 1 All ER 988 PC, 995, 1000. 56 Although there are statements in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7, 164 CLR 387 and Commonwealth v Verwayen [1990] HCA 39, 170 CLR 394 that relief in these cases must be limited to removing or reversing the detriment suffered by the party entitled to the estoppel, the joint judgment in Giumelli [1999] HCA 10, 196 CLR 101, 120, 125 established that there is no such restriction. The detrimental reliance that supports the estoppel need not constitute, in any sense, a consideration moving to the party bound. It is a unilateral element of the estoppel and not the price paid for it. 57 Relief depends very much on the facts and, as the Privy Council said in Plimmer (1884) 9 App Cas 699, 714: "… the court must look at the circumstances in each case to decide in what way the equity can be satisfied." 58 This statement has frequently been approved: Chalmers v Pardoe [1963] 1 WLR 677 PC, 682; Crabb v Arun DC [1976] Ch 179 CA, 188, 193; Giumelli (above) at 113, 125. The Court does not exercise an unfettered discretion but adopts a principled approach: Giumelli (above) at 123-4, 125; Gillett v Holt [2001] Ch 210 CA, 225 and Jennings v Rice [2003] 1 P & CR 100 CA, 112. 59 It has been said that the Court should frame the relief to enforce "the minimum equity to do justice to the plaintiff": Crabb v Arun DC [1976] Ch 179 CA, 198 per Scarman LJ. This principle has frequently been applied in England: Yaxley v Gotts [2000] Ch 162 CA, 175; Gillett v Holt [2001] Ch 210 CA, 235, 237; and Jennings v Rice [2003] 1 P & CR 100 CA, 110, 113; however, as Robert Walker LJ said there it "does not require the Court to be constitutionally parsimonious, but … recognise[s] that [it] must also do justice to the defendant". The minimum equity principle was applied in Verwayen [1990] HCA 7, 170 CLR 394 by Mason CJ at 441, and Brennan J at 429, 430, but since Giumelli is probably not the law in this country. It was only mentioned once, and then only in passing in the speeches in Thorner v Major [2009] 1 WLR 776. This was to the statement of issues in the Court of Appeal: ibid at 792. 60 Relief may be moulded to recognise practical considerations such as the need for a clean break: Pascoe v Turner [1979] 1 WLR 431 CA, 438-9; Giumelli (above) at 113-4, 125; Gillett v Holt [2001] Ch 210 CA, 237; Jennings v Rice [2003] 1 P & CR 100 CA, 115. The Court must also take into account the impact of its orders on third parties and any hardship or injustice they would suffer: Giumelli (above) at 113-4, 125; Flinn v Flinn [1999] 3 VR 712 CA, 749, 750. 61 Relief may be refused or reduced if the plaintiff's equity has been diminished by later events. In Sledmore v Dalby (1996) 72 P & CR 196 CA the Court held that the plaintiff's equity based on his improvements had been fully amortized over 18 years of rent free occupation. Subsequent events may also enlarge the plaintiff's equity as in Crabb v Arun DC [1976] Ch 179 CA where the defendant's repudiation of the expectation had landlocked the plaintiff's land for five years: ibid at 189, 199. 62 Relief may also be limited where the enforcement of the plaintiff's expectation would be out of all proportion to the detriment: Jennings v Rice [2003] 1 P & CR 100 CA, 104, 111, 115. This is particularly so where the expectation was not defined and the Court has a broader discretion: ibid at 114. A gardener had looked after an elderly widow and been promised that "he would be alright" and "this will all be yours one day". He was awarded £200,000, and the Court of Appeal rejected his claim to the house and contents worth £435,000. 63 The Court should, prima facie, enforce a reasonable expectation which the party bound created or encouraged: Meagher Gummow & Lehane "Equity Doctrine and Remedies" 4th ed 2002, pp 567-8. In Ramsden v Dyson (1866) LR 1 HL 129, 170 Lord Kingsdown said: "If a man … under an expectation created or encouraged by the landlord that he shall have a certain interest [acts to his detriment] upon the faith of such expectation … a Court of equity will compel the landlord to give effect to such … expectation" (Lord Kingsdown's principle). In Chalmers v Pardoe [1963] 1 WLR 677 PC, 681-2, the Privy Council said that if such an estoppel is established "a court of equity will prima facie require the owner … to fulfil his obligation". In Attorney General of Hong Kong v Humphreys Estate (Queen's Gardens) Ltd [1987] AC 114, 121 Lord Templeman said: "The authorities expound and illustrate the principle upon which a litigant who is led to believe that he will be granted an interest in land and who acts to his detriment in that belief is enabled to obtain that interest." 64 In Giumelli (above) the joint judgment at 123 quoted with approval this statement of Deane J in Verwayen [1990] HCA 39, 170 CLR at 443: "Prima facie, the operation of an estoppel by conduct is to preclude departure from the assumed state of affairs. It is only where relief framed on the basis of that assumed state of affairs would be inequitably harsh, that some lesser form of relief should be awarded." 65 The joint judgment continued: "The prima facie entitlement to which his Honour had referred would be qualified if that relief 'would exceed what could be justified by the requirements of conscientious conduct and would be unjust to the estopped party'." 66 See also Flinn v Flinn [1999] 3 VR 712 CA, 749. 67 In Sledmore v Dalby (1996) 72 P & CR 196 CA, 203 Roch LJ, delivering the principal judgment, approved the statement in Snell's Equity 29th ed p 576 derived from Griffiths v Williams (1978) 248 EG 947, 949 per Reginald Goff LJ, and In re Basham [1986] 1 WLR 1498, 1510 per Nugee QC: "The extent of the equity is to have made good, so far as may fairly be done between the parties, the expectations of A which O has encouraged." 68 Sledmore v Dalby was followed in Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475, 517-8. 69 In Jennings v Rice [2003] 1 P & CR 100 CA, 114 Robert Walker LJ said: "… there is a category of case in which the benefactor and the claimant have reached a mutual understanding which is in reasonably clear terms but does not amount to a contract. … In such a case the Court's natural response is to fulfil the claimant's expectations . But if a claimant's expectations are uncertain, or extravagant, or out of all proportion to the detriment which the claimant has suffered, the Court can and should recognise that the claimant's equity should be satisfied in another (and generally more limited) way" (emphasis supplied). 70 I was in the minority in Sullivan v Sullivan (above) but my summary of the principles was not challenged and was approved in Donis v Donis [2007] VSCA 89 at [19] footnote 12, [39], [40]; per Nettle JA; Fifteenth Eestin Nominees Pty Ltd v Rosenberg [2009] VSCA 112 at [269] footnote 239; Barnes v Alderton [2008] NSWSC 107 at [43] per Young CJ in Eq; Weeks v Hrubala [2008] NSWSC 162 at [40] per Young CJ in Eq, and in Dable v Peisley [2009] NSWSC 772 at [200] per Ward J. Special leave was refused in Donis v Donis [2007] HCA Trans 609. 71 The House of Lords has since considered estoppel by encouragement in Cobbe v Yoeman's Row Management Ltd [2008] 1 WLR 1752 (Cobbe), and Thorner v Major [2009] 1 WLR 776, as did the Privy Council in Henry v Henry [2010] 1 All ER 988. 72 In Cobbe, where the parties were in a commercial relationship, Lord Scott with whom Lord Hoffmann, Lord Brown and Lord Mance agreed, referred (at pp 1763-4) to Lord Kingsdown's principle (above [59]) and approved its reformulation by Oliver J in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133, 144: "… if A under an expectation created and encouraged by B that A shall have a certain interest in land, thereafter, on the faith of such expectation and with the knowledge of B and without objection by him, acts to his detriment in connection with such land, a court of equity will compel B to give effect to such expectation". 73 Lord Scott emphasised that there was no lack of certainty in the case before Oliver J. 74 In Thorner v Major [2009] 1 WLR 776 the parties were in a family relationship, and the claimant had worked on the deceased's farm without wages for many years . The House of Lords upheld an estoppel by encouragement based on promises by the deceased that he would leave the farm to the claimant on his death. Lord Scott referred at p 784 to cases where the promisee has been promised an immediate interest where the "representor is estopped from denying that the representee has the proprietary interest … promised." 75 Lord Walker, with whom Lord Hoffmann, Lord Rodger, and Lord Neuberger agreed, referred at p 796 to the approval of Lord Kingsdown's principle by Lord Scott in Cobbe's case [2008] 1 WLR 1752, 1763 noted above [66]. 76 In Henry the Privy Council upheld a proprietary estoppel by encouragement based on an informal promise to leave the promisor's share in a property to the promisee. Sir Jonathan Parker, who delivered the judgment of the Board, said at p 1002: "Proportionality lies at the heart of the doctrine of proprietary estoppel and permeates its every application." 77 The Board did not enforce the expectation but awarded a half share in the deceased's interest as "the minimum equity required to do justice to" the claimant, without otherwise explaining why the expectation was not enforced. In my opinion, and with respect there is no positive requirement for a plaintiff to prove that the relief sought is proportionate. The principle, a negative one, is that enforcement of the expectation must not be disproportionate. 78 Proportionality was not mentioned in the speeches in Thorner v Major (above). With respect the Board in Henry did not explain why statements not made expressly but by "implication and inference from indirect statements and conduct" and "in oblique and allusive terms" by the promisor in Thorner v Major (at 778, 779) established a proprietary estoppel for the interest promised, but similar statements in Henry established a proprietary estoppel for only half that promised. 79 Mr Harper relied on the vicissitudes of life which may have required the deceased to mortgage or sell the subject property despite his promise in the consent orders. However the Court was not referred to any decision where adverse vicissitudes affected the enforceability of an estoppel by encouragement or the quantum of relief. 80 The question was averted to but sidestepped in Thorner v Major. Lord Scott said at pp 783-4: "… inherent in every case in which a representation about inheritance prospects is the basis of a proprietary estoppel claim is that … the circumstances of the representor … may change ... If, for example, [the promisor] had become, before his death, in need of full time nursing care, so that he could not continue to live at [the farm] or continue as a farmer and needed to sell [the farm] or some part of it in order to fund the costs of necessary medical treatment and care, it seems to me questionable whether [the claimant's] equity … would have been held … to bar the realisation of [the farm], or some sufficient part of it, for those purposes … for my part, I doubt it. 81 Lord Walker at p 794 and Lord Neuberger at p 805 adopted the following passage from the unreported judgment of Hoffmann LJ in Walton v Walton (1994): "… equitable estoppel [by contrast with contract] … does not look forward into the future [it] looks backwards from the moment when the promise falls due to be performed and asks whether, in the circumstances which have actually happened, it would be unconscionable for the promise not to be kept." 82 Lord Walker added at p 796: "it is unprofitable, in view of the retrospective nature of the assessment which the doctrine of proprietary estoppel requires, to speculate on what might have been." 83 Lord Neuberger said at p 802: "… if [the promisor] had changed his mind before he died, the question as to what, if any, relief should have been accorded to [the claimant] would have been a matter for the Court, to be assessed by reference to all the facts." 84 He added that the promisor may have been able to change his mind "if this … could be justified by a change of circumstances." 85 The effect of life's vicissitudes on the deceased's promises is relevant here only when considering the reasonableness of the plaintiff's reliance, and the significance of her changes of position. 86 Hoffmann LJ, in another passage in Walton v Walton (above) quoted by Lord Walker at p 794, referred, without elaboration, to the "unspoken and ill-defined qualifications" on testamentary promises. These are inherent in a promise to be performed when the promisor has no further need for the property. 87 I see no reason for devaluing the plaintiff's reliance and detriment because of the possible effect of adverse vicissitudes on the deceased. In any event he had other assets of substantial value. It is unnecessary in this case, as it was in Thorner v Major, to determine the rights of the parties in hypothetical circumstances in the deceased's lifetime. Compare the position where parties have made mutual wills: Birmingham v Renfrew [1937] HCA 52, 57 CLR 661, 674, 689; Re Goodchild [1996] 1 WLR 694, 700. 88 The arrangement between these parties was for the deceased to have the use of the subject property in his lifetime but when he no longer had any need for it it was to pass to the plaintiff. In the events that happened performance of his assurance involved no opportunity cost other than a restriction on his testamentary freedom. 89 If and when the enforceability of such a promise does arise in the lifetime of a promisor faced, in compelling circumstances, with the need to resort to the capital value of the property, the doctrine of frustration of contracts may be thought relevant. In Davis Contractors Ltd v Fareham UDC [1956] AC 696, 729 Lord Radcliffe said: "… frustration occurs whenever the law recognizes that without fault of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni . It was not this that I promised to do." 90 Given the principles referred to [62]-[68], [71]-[74] can it be said that the Judge erred in enforcing the plaintiff's expectation? The deceased made a solemn written promise which was incorporated in a court order. That promise in relation to the subject property was clear and unambiguous. It defined the interest the plaintiff was to receive and when she was to receive it. In this case the "quality of the deceased's assurances" provides no basis for refusing to enforce the plaintiff's expectation. 91 Lord Kingsdown's principle and the cases in the Privy Council [63], the joint judgment in Giumelli, the cases referred to in [65]-[67] and the confirmation of Lord Kingsdown's principle in Cobbe and Thorner v Major [71]-[74] support the enforcement of the plaintiff's expectation. See also the valuable discussion in Robertson "The reliance basis of proprietary estoppel remedies" [2008] Conv 295. 92 Where the expectation is undefined or uncertain equity must fashion its relief from the circumstances [51], but where the expectation was defined with certainty by the party estopped that is where the Court must start. There is no other principled starting point. What are the circumstances here which call for something less? In my judgment there are none. Notwithstanding the statement in Henry v Henry [75] (above) there is no basis for applying the proportionality principle in this case. 93 The beneficiary under the deceased's will is a volunteer with no other claim, and in any event he will inherit property worth some $2 million. There are no countervailing equities, there is no hardship, and there are no practical difficulties. Subsequent events have not inflated the value of the expectation beyond that in contemplation when the deceased made his promise. The Judge has enforced the expectation in the very circumstances envisaged when the deceased created and encouraged it. In my judgment this part of the appeal fails. 94 Family Provision Act claim The Judge found that the plaintiff had established a case under the Act and ordered a transfer of the subject property. She held that there were factors which warranted the plaintiff, a divorced wife, making an application under the Act and that s 9 was satisfied. 95 The plaintiff had assets worth $4,057,000, with mortgage liabilities of $1,521,000 and thus a net worth of $2.5 million. However the balance between her income and expenditure was very tight. Nevertheless the Judge found that the plaintiff had been left "without adequate provision from the deceased's estate for her maintenance, education and advancement in life". 96 The plaintiff had a need for some $150,000 for urgent repairs to some of her properties. Although she was in full-time employment with Qantas her job security was uncertain. The Judge referred to the length of her relationship with the deceased, and her contributions in accommodation and income support during the relationship. The Judge also took into account the promises made by the deceased in the consent orders and the importance the plaintiff had always attached to the subject property. 97 The plaintiff's contributions to the deceased during the relationship and the marriage should have been, and in this case were, taken into account in the property settlement embodied in the consent orders of the Family Court. 98 The plaintiff would have liked more income, or a capital sum to ease her liquidity problems and cover the costs of the repairs but those needs were not addressed by a transfer of the subject property which the plaintiff would never sell. With net assets of $2.5 million she had no need for provision for her maintenance, education or advancement in life and if she did have such a need the order did not address it. In these circumstances the decease's promises and the plaintiff's long felt wish to secure the property could not create a need of the kind addressed by the Act or support an order under it. The executor's appeal against the order under the Family Provision Act must therefore be allowed. 99 The claim under the Act did not add to the evidence and the hearings at first instance and on appeal both finished within the day. There is therefore no basis for a special costs order. The following orders should be made: (1) Appeal allowed in part; (2) Order 3 in the Equity Division set aside; (3) In lieu thereof order that the plaintiff's claim under the Family Provision Act be dismissed; (4) Appeal otherwise dismissed with costs. ********** 22/07/2010 - correction in counsel's initials - Paragraph(s) counsels 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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