New South Wales Supreme Court CITATION : Palinkas v Palinkas [2009] NSWSC 92 HEARING DATE(S) : 19 & 20 February 2009 JUDGMENT DATE : 27 February 2009 JURISDICTION : Equity JUDGMENT OF : Austin J DECISION : Declaration that the plaintiffs are entitled to recoupment of $210,000 plus interest reflecting their contribution to the defendant's property; order imposing equitable charge to secure that entitlement CATCHWORDS : EQUITY - plaintiffs'contribution to improvement of defendant's property pursuant to joint relationship or endeavour, the substratum of which is later removed without attributable blame - whether it would be unconscionable for defendant to retain plaintiffs' contribution - appropriate remedies to give effect to plaintiffs' equity - effect of subsequent agreement between the parties LEGISLATION CITED : Supreme Court Act 1970 (NSW), s 68 CATEGORY : Principal judgment Allina Pty Ltd v Federal Commissioner of Taxation (1991) 28 FCR 203 Atwood v Maude (1868) LR 3 Ch App Baumgartner v Baumgartner (1987) 164 CLR 137 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Congreve v Inland Revenue Commissioners [1947] 1 All ER 168 Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1163 CASES CITED : Hirst v Tolson (1850) 2 Mac & G 134 [42 ER 52] Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Jones v Padavatton [1969] 2 All ER 616 Legione v Hateley (1983) 152 CLR 406 Lyon v Tweddell (1881) 17 ChD 529 Morris v Morris [1982] 1 NSWLR 61 Muschinski v Dodds (1985) 160 CLR 583 SJP Formwork (NSW) Pty Ltd v WorkCover Authority of New South Wales [1999] NSWSC 941 Rudi Palinkas (First Plaintiff) PARTIES : Gizela Palinkas (Second Plaintiff) Rudolf Charles Palinkas (Defendant FILE NUMBER(S) : SC 2555/08 COUNSEL : S K Hill (Plaintiffs) F F F Salama (Defendant) SOLICITORS : Watson McNamara & Watt (Plaintiffs) Bell & Johnson Solicitors (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J FRIDAY 27 FEBRUARY 2009 2555/08 RUDI PALINKAS & ANOR V RUDOLF CHARLES PALINKAS JUDGMENT 1 HIS HONOUR: By their Further Amended Statement of Claim the plaintiffs sought a declaration that an agreement they have made with the defendant is valid and enforceable, and the following substantive relief: · an order for specific performance of the agreement; · an order that the defendant's property at Boggabri known as "Uplands" be charged with specified amounts of money; · any necessary accounts or inquiries; damages or equitable compensation. 2 At the hearing, counsel for the plaintiffs informed the court that her clients no longer seek specific performance, but they seek to assert a charge over the Uplands property and/or to recover compensation. Background facts 3 The plaintiffs, Mr and Mrs Palinkas, were born in Yugoslavia and migrated to Australia with their two sons, the defendant Rudi Palinkas and his brother Steven, in about 1970. Mr Palinkas Snr is about 75 years of age and Mrs Palinkas is about 74. The defendant is aged 53. 4 This case is about the legal effect of some arrangements which might broadly be called "living together arrangements" made between the parties, and an eventual agreement between them. A matter that needs to be borne in mind in assessing the effect of the arrangements and the agreement is the deterioration in the plaintiffs' health during the 1990s and subsequently, and consequently their need for care and attention. Dr John Shepherd, a general medical practitioner, deposed to their medical history. It is not necessary to set this evidence out in detail, but it should be noted that from about 1996 Mrs Palinkas had great difficulty with both her knees, leading to numerous medical consultations and eventually, in 2008, replacement surgery on both knees. Additionally she had degenerative lumbar spine disease and residual nerve root impairment to her left leg, and various other problems during the period from 2001 to 2008 including cataracts, glaucoma, obesity, hypertension, sciatica, chronic obstructive airways disease, diabetes and (from 2005) depression. Mr Palinkas developed trigeminal neuralgia affecting the right side of his head in 1995 and underwent surgery for decompression of his right trigeminal nerve in 1997. Dr Shepherd noted that according to Mr Palinkas, the surgery resulted in impairment to his memory, speech and thinking ability. In his affidavit Mr Palinkas said that after the surgery he had become slow in his thinking. He also developed back problems in 1998 for which he had surgery in 1999, and in 2001 he developed angina. In 2006-8 he had various medical problems including cataracts requiring surgery, diabetes, acute bronchitis and deteriorating hearing. Dr Shepherd noted that when he was reviewed by another doctor in October 2008, Mr Palinkas was unable to describe the medication he was taking. This is consistent with a degree of confusion that I observed when he gave oral evidence. 5 Another preliminary matter is to be noted. Before the events which have given rise to the present case, the parties entered into some "living together" arrangements of a broadly similar kind, which ended badly though not in litigation. In about 1986 the defendant purchased a 505 acre property known as Ghinni-Ghi, located near Kyogle in New South Wales. He purchased the property with his own money and with the assistance of vendor finance. At about the same time, the plaintiffs purchased an adjoining 550 acre property known as "Logan's Bridge". There were no dwellings on Logan's Bridge but there were two dwellings on Ghinni-Ghi. The defendant did not immediately move to Ghinni-Ghi but the plaintiffs moved into the larger of the two dwellings there and did some repairs to the smaller dwelling, the cost of which was shared by the parties. When the smaller dwelling had been repaired the plaintiffs moved into it and the defendant and his wife and their three children moved into the larger dwelling. Thereafter the defendant assisted the plaintiffs in various farm-related activities at Logan's Bridge. 6 Unfortunately the parties had some vehement disagreements and their relationship deteriorated over the following years. It is unnecessary to go into the details, except to note the depth of the bad feeling between the parties when their arrangements broke down. That history needs to be borne in mind in assessing the evidence regarding the "living together" arrangements that have led to the present proceedings. The plaintiffs at Logan's Bridge 7 In about 1992 the plaintiffs decided to build a house at Logan's Bridge, and when the house was completed they moved there and out of the second dwelling at Ghinni-Ghi. At the time when they moved, their relationship with the defendant was quite hostile. There was an argument about the physical condition in which they left the dwelling they had occupied at Ghinni-Ghi, and an incident alleged to have involved violence. 8 During the couple of years after the plaintiffs moved to Logan's Bridge, the defendant remained at Ghinni-Ghi and had virtually no contact with them. He sold Ghinni-Ghi in 1994 and purchased the property known as Uplands, located near Boggabri in north western New South Wales, where he moved with his wife and (by then) four children. There were three cottages at Uplands, two of which were habitable, and the defendant and his family moved into the larger of those two. He separated from his wife in 1998 but three of the children remained with him at Uplands. In the period from his move to Uplands and early 2001 he continued to have no contact with the plaintiffs. 9 However, the plaintiffs had a great deal to do with their other son, Steven. About a year after they moved to Logan's Bridge, Steven was divorced from his wife and he came to live with them. He worked on the farm at Logan's Bridge with them for about eight years. The evidence about the terms of their arrangement for living together is thin but Mrs Palinkas said that on 2 December 2006 [presumably she intended 2000] she and her husband transferred Logan's Bridge to Steven "on the basis that he would continue to work on the farm, and look after us as we aged". 10 It appears that the plaintiffs' relationship with Steven deteriorated and had become hostile by 2001. The defendant said he had regular contact with his brother Steven after he moved into Uplands, while Steven was living with the plaintiffs. During this time Steven indicated to him that he had fallen out with the plaintiffs and there was a significant issue between him and them. The depth of bad feeling is indicated by the defendant's evidence that Steven told him the plaintiffs had accused him of trying to poison them and had also accused him of planting a listening device in the house at Logan's Bridge. I make no finding as to the truth of that claim. The deterioration in the relationship between Steven and the plaintiffs is confirmed by their evidence. 11 In about February 2001 the plaintiffs and the defendant met, possibly at instigation of the defendant's new partner, and there was a reconciliation. Over the ensuing months the plaintiffs visited the defendant at Uplands on about three occasions. 12 Evidently some time in 2001 Steven decided to sell Logan's Bridge, titled which was then in his name. Both plaintiffs said in oral evidence that they strongly objected to the sale. Nevertheless Steven sold the property in about August 2001 for $580,000. An additional sum of money of around $200,000 was obtained from the sale of cattle and machinery at an auction held on 15 September 2001. 13 The plaintiffs claimed that they were entitled to a share of the proceeds of sale and after much argument, they apparently instigated legal proceedings. The proceedings were settled upon terms including payment by Steven to the plaintiffs of $270,000 in three instalments, the first being an instalment of about $190,000. Of course, once Steven had decided to sell the property it became necessary for the plaintiffs to find alternative accommodation. Arrangement for the defendant to buy a property for the plaintiffs 14 The parties agree that they made an arrangement at some time before settlement of Steven's sale of Logan's Bridge for purchase of a property for the plaintiffs ("the first arrangement"), but they differ as to what was said and what the arrangement was. 15 The defendant said that during one of their visits to him at Uplands, the plaintiffs expressed the view they would prefer to live in north western New South Wales rather than on the north coast. Later they indicated to the defendant, according to his evidence, that they had legal proceedings on foot in relation to Steven and the property at Logan's Bridge, and that they thought they would receive by way of settlement of those proceedings an amount somewhere between $300,000 and $330,000. They discussed whether the defendant could find a property to purchase for that amount containing both a dwelling house where they could live and land where the defendant would have free rein to farm or graze cattle. 16 The plaintiffs' proposal, according to the defendant, was that if additional funds were needed to acquire a property, beyond what they would receive from settlement of the proceedings against Steven, the defendant would personally borrow those funds and (he said) the property would be held entirely in the defendant's name. According to the defendant, the plaintiffs indicated that all they wanted was to be able to have ongoing occupation of any dwelling located on the property to be acquired. The defendant said that on the basis of this proposal he went to his bank and obtained conditional approval to borrow $350,000. 17 Subsequently the defendant looked for a suitable property. He said he agreed with the plaintiffs that he would attend an auction for a quite large property located near Gunnedah in New South Wales. The auction took place in September 2001 and although the defendant was the highest bidder the sale did not proceed because the price did not meet the reserve. Then subsequently the defendant negotiated in relation to another substantial property near Boggabri but following negotiations, the purchase did not proceed because someone else made a higher offer. 18 The plaintiffs' evidence was that they wanted to get the pension (presumably the old age pension) and they believed that a land holding would not prevent them from doing so provided they owned no more than 5 acres, and so the plaintiffs wanted to buy a property of that size. Mr Palinkas said that he and his wife wanted to use the money they would receive from the settlement with Steven to buy a 5 acre property. The implication seems to be that they would pay for the property without any assistance from the defendant and that they would take title to it. Mr Palinkas said the defendant agreed to help them find such a property and he proposed to them that they jointly purchase a large parcel of land out of which he would give them a portion of 5 acres and a house, but nothing came of this idea. Mr Palinkas claimed he found out that there was a suitable 1000 acre property at Boggabri but the defendant did not tell him about it. 19 It is difficult for the court to decide which of these competing versions to accept, in the absence of any clear corroborating evidence. However, I have reached the conclusion that I should prefer the defendant's evidence as to the contents of the first arrangement, for two reasons. First, the defendant's evidence is somewhat more specific than the plaintiffs', because he identified the location of two properties he investigated on behalf of his parents and gave some information about the auction of one of them; and he added to this information during cross-examination. On the other hand, the affidavit evidence of both plaintiffs is very vague on this matter and they did not improve their case in the witness box. In cross-examination Mr Palinkas gave contradictory evidence about whether he or his wife told the defendant at any stage that he would receive a benefit by way of inheritance, and Mrs Palinkas was very uncertain about the particulars of any of the arrangements that were made. In terms of witness demeanour, it seemed to me that in cross-examination the defendant was genuinely trying to recall how the first arrangement came about and what its contents were, whereas both of the plaintiffs gave the impression that they approached cross-examination as protagonists who were concerned to give the answers that would advance their case. 20 My conclusion, therefore, is that at some time before the settlement of the sale of Logan's Bridge, and therefore before the plaintiffs received any money from Steven, they made an arrangement with the defendant containing the following elements: · he would assist them to buy a property comprising a dwelling and grazing and farming land (not limited to 5 acres); · they would contribute the money they would receive from the settlement with Steven, originally expected to be $300,000-$330,000 but later reduced to $270,000; · if the purchase price was (as was likely, in view of the size of the properties seriously considered) more than $330,000 or $270,000, the property would be acquired in the name of the defendant and he would borrow the balance of the purchase money; · the defendant would allow the plaintiffs to have "ongoing occupation" of any dwelling on the property to be acquired, implying in my view that the plaintiffs' right of occupation would be for their joint lives and the life of the survivor of them; · the defendant would have free rein to use the remainder of the property for farming and grazing. No evidence was given of any arrangement that would operate should the plaintiffs wish to leave the property once it had been acquired for them. Arrangement to occupy the second cottage at Uplands 21 The first arrangement was not implemented because the plaintiffs, and the defendant on their behalf, were unable to find a suitable property before settlement of the sale of Logan's Bridge. It appears from the evidence of both parties that, at a time when they were still seeking to implement the first arrangement, they reached another arrangement for the purpose of providing the immediate accommodation that the plaintiffs would need upon settlement of the sale of Logan's Bridge. Under the new arrangement ("the second arrangement") the plaintiffs moved into the second cottage at Uplands and paid substantial sums of money to the defendant. Mr Palinkas gave uncontested evidence that the plaintiffs moved into Uplands on 2 October 2001. But in their evidence the parties gave different versions of the arrangement and about the amounts the plaintiffs paid to the defendant. 22 According to the defendant, the plaintiffs approached him and raised the question whether they could reside in the second cottage at Uplands. As I have mentioned, over a decade earlier they had resided in the second cottage on the defendant's property at Ghinni-Ghi. He said in his affidavit that the plaintiffs indicated to him that it appeared they would receive less than expected from the settlement with Steven and that the likely settlement amount was now $270,000, and he continued: "The plaintiffs indicated to me that once they received that settlement they would give to me an amount of $240,000 and that that would be, in effect, my inheritance. The plaintiffs indicated to me that they would be agreeable to giving me the money providing they could continue to live on Uplands in the second cottage located there." 23 Later in his affidavit, the defendant said that at the time the plaintiffs moved to Uplands, there was no talk of them paying rent, but they indicated that from time to time they might try to do certain works to improve the cottage. The defendant said that at some time after his parents had moved to Uplands, his father told him that the plaintiffs were not going to look for a property to purchase for themselves, as they would be better off staying at Uplands where they could help around the farm from time to time and be close to their son and grandchildren. 24 The defendant also said that on a number of occasions he told the plaintiffs he was happy for them to give him his inheritance at that stage, but they would have to understand that if he used the money around the property he would not be able to pay it back. He said that both plaintiffs told him: "This is yours. This is your inheritance." 25 The plaintiffs denied that they told the defendant they would pay him money as his "inheritance". Their evidence was that they decided to move into the cottage on a temporary basis, until they could find a suitable 5 acre property. I have made a finding of fact that the first arrangement was for the acquisition of a property not limited to 5 acres, but I accept the plaintiffs' evidence that when they initially moved into Uplands they, and the defendant, contemplated that the arrangement would be temporary. 26 Mrs Palinkas said the cottage was very messy and rundown and had no air-conditioning or hot water system. Mr Palinkas said that when he and his wife moved into the cottage at Uplands it still needed a lot of work to make it suitable for them to live in, and there was an unbearable smell coming from the feedlot in the adjacent paddock. He said he told the defendant the house was not fit to live in and that the plaintiffs wanted their own 5 acres. Comparing that evidence with the defendant's evidence, my opinion is that Mr and Mrs Palinkas probably did complain about the condition of the cottage although the evidence to the court seems to have exaggerated its bad qualities. 27 Mr Palinkas said that when no suitable property was found for them, the defendant told Mrs Palinkas to unpack everything and stay in the cottage, and proposed that they should give their money to him because he was "broke" and if they did so, they would solve his problems and they could live peacefully in the cottage. Mr Palinkas said the defendant promised to renovate the cottage and pay all the bills, including electricity, rates and insurance. He claimed that the defendant promised to buy Mrs Palinkas a car and pay for petrol and take her to the doctors in town when needed. He said the defendant told them that all they would have to pay for would be their food and if the pension was not enough for doctors' bills he would make sure the bills were taken care of. He said he and his wife agreed to these arrangements, but Mrs Palinkas told her son that their agreement would have to be written down. 28 The court must endeavour to ascertain the terms of the second arrangement having regard to this partly conflicting evidence. It seems to me that the following matters are established by the evidence as a whole: · the first arrangement, under which it was proposed that a property be acquired for the plaintiffs, was abandoned and replaced by the second arrangement (the accounts of why the arrangement was abandoned differ, but the parties agree that at some point after the plaintiffs moved in, the idea of buying another property did not proceed); · the defendant would permit the plaintiffs to live in the second cottage at Uplands; · implied in that permission, having regard to the history of the relationship and in particular the terms of the first arrangement, was that the plaintiffs would be entitled to reside in the second cottage for their joint lives and for the life of the survivor of them; · the cottage would be repaired and renovated (though there are disputes as to just what needed to be done); · the defendant would pay outgoings in respect of the second cottage including rates, insurance and electricity; · the plaintiffs would pay the defendant, to fund the renovations and otherwise for his own use, the settlement proceeds received from Steven (or, perhaps, only the first instalment of $190,000); · the plaintiffs probably did say something to the effect that their payment to the defendant was his "inheritance" (whether or not they used that word, or the Hungarian equivalent of it), just as they had conferred a similar benefit on Steven by transferring Logan's Bridge to him, but in my view any such statement would have been intended by them, and understood by the defendant, to be provisional or conditional upon their right of occupation of the second cottage at Uplands. 29 There is no evidence, prior to the circumstances leading to the agreement of 2 February 2002, that the parties agreed upon or even discussed what would happen if Uplands were sold or the plaintiffs wanted to move out and acquire another residence. I do not accept that it was part of the "living together" arrangement that the defendant promised to buy a car for Mrs Palinkas or to pay doctors' bills or all other expenses except food. In fact no car was purchased although it appears that the defendant made some contribution for maintenance and running costs of Mr Palinkas' existing car for a short while after they moved in. 30 It appears from a joint bank statement annexed to Mr Palinkas' affidavit that the plaintiffs withdrew $190,000 on 18 October 2001. Mr Palinkas said he paid that amount to his son. Expenditure on repairs, stock and equipment 31 There was some conflicting evidence about the state of repair of the second cottage in the amounts paid by the plaintiffs for its renovation and repair, and paid by them for the maintenance and improvement of the farm during the period from October 2001 to February 2002. The parties agree that the cottage was in need of some repairs prior to and after occupation. Mr Palinkas said that when the defendant invited him and his wife to move to Uplands he told them he would do some renovations to the cottage, putting in new carpet, painting the cottage and making it "decent living", but he said he did not have any money and so he asked them for some money to do the work. The defendant acknowledged that repairs were necessary to the cottage but his evidence was to the effect that in their affidavits and oral evidence the plaintiffs exaggerated the poor state of repair of the cottage. 32 Fortunately it is not necessary for me to resolve the inconsistencies in evidence about these matters, having regard to my construction of their written agreement of February 2002, considered later in this judgment. I shall simply record the main elements of the party's evidence on these matters; as follows: (a) Mr Palinkas said he offered $10,000 and his son replied that that would be "plenty". He said that on the day he arrived at Uplands, 2 October 2001, he gave the defendant $10,000 to fix the cottage up. (b) The defendant gave evidence that he engaged a local carpenter to get the house in order for the plaintiffs. The carpenter, Kim Carslake, rendered an invoice dated 28 August 2001 which is in evidence, for a total amount of $550 for some 32 hours' work in the period from 14 to 21 August. The defendant said he also purchased paint and had the cottage repainted and re-carpeted and also spent money having the septic system repaired. He did not state the total amount of this expenditure but there is an invoice in evidence dated 13 September 2001 from Viaduct Carpet Court to supply and lay carpet for $2090. (c) The defendant said that while the plaintiffs lived in the cottage at Uplands he paid all of the rates and insurance with respect to the property and was able to supply them with produce from the farm, including meat. He said he also paid for their heating oil ($550 each time the tank was filled) and electricity. As far as I can tell from the plaintiffs' evidence, they do not deny that the defendant paid the rates and electricity and made some contribution to the cost of heating oil. The plaintiffs assisted around the farm though there was no suggestion they would be paid any remuneration for doing so. (d) The parties agree that in about October 2001 an additional truck and a rock picker were acquired for Uplands and that these were to be paid for by the plaintiffs as a gift to their son. The defendant claimed that in about February 2002 he received a telephone call from Elders indicating that neither the rock picker nor the truck had actually been paid for by the plaintiffs. He said that he paid for them out of the $190,000 he had received from his parents. The evidence includes an invoice for a rock picker from Elders dated 11 August 2001 for $8,000 and an invoice for a second-hand truck from RA Slater Wholesale dated 16 August 2001 for $9,807.27, apparently paid by Elders and then re-invoiced for a total amount including GST of $10,788. (e) Mr Palinkas said that before he moved into Uplands the defendant called him asking for help with some farming and property expenses. He said his son told him he needed to get some hardwood timber for his tank, which he could not afford, on the basis that he would sort the money out with the plaintiffs when they arrived. Mr Palinkas said that on 19 September 2001 he paid for timber in the sum of $878.40 and he also paid $1200 for freight to bring the timber to Uplands. (f) Mr Palinkas said that after he gave the defendant $190,000 he started spending it on renovating his house and paying off an agent for a large mob of cattle for about $60,000. Deterioration of the relationship between the parties 33 According to Mr Palinkas, for the first month after they moved in to Uplands the defendant paid for petrol and some repairs to the plaintiffs' car, though he did not provide them with a new car. But afterwards he said he could not afford to pay for the petrol and they would have to do so for themselves. Additionally, according to Mr Palinkas, he and his wife were pressing the defendant to do the work that needed to be done on the cottage, but the defendant said he would renovate his own house first. Mr Palinkas said that after waiting for about four weeks, he arranged his own contractors to repair the cottage because the living conditions were so poor. He said his son told him that if Mr Palinkas was going to hire tradesmen he would have to pay for them. Mr Palinkas claimed that his son told him that he sold the rock picker for a profit of about $6,000. 34 The implication of this evidence is that the defendant began to resile from the arrangement he had agreed to, shortly after making it. It seems to me more likely, in view of the evidence as a whole, that the terms of the arrangement were not specific as to the precise work to be done and that the disagreements arose between the parties were as to whether particular repairs and renovations demanded by the plaintiffs were or were not necessary to be carried out in order to make the dwelling reasonably comfortable. 35 Mr Palinkas gave evidence that during the five years the plaintiffs lived in the cottage they paid for all repairs that were done to the cottage, using the money that they received from the later instalments of the settlement with Steven. He said the repairs included a new kitchen, kitchen floor, hot water system, appliances, and bathroom. He also maintained that the plaintiffs paid all expenses associated with living in the cottage including rates, insurance, water and electricity bills. He said that from time to time the defendant asked him for money as a loan and he provided money. 36 Annexure B to the affidavit of is a schedule of all the money he claimed to have paid towards cottage repairs and as cash payments made at the defendant's request. He also supplied some cheque butts for payments. At the hearing counsel for the parties handed up a revised list headed "Agreed Facts and Facts in Dispute: Payments by Plaintiffs to Defendant" which became Ex P2. That document lists dates and payments together with comments by the plaintiffs and the defendant. In some cases the defendant's comment is "agreed" while in other cases the comment is "disputed" followed by a brief reason for the dispute. 37 As with the evidence given about expenditure at about the time when the plaintiffs moved in to Uplands, in my opinion it is unnecessary to make findings about payments any of the other payments detailed in Annexure B or Ex P2 up to 20 February 2002, the date upon which the parties entered into their written agreement. The agreement of 2 February 2002 38 Mr Palinkas said that in about early February 2002 the plaintiffs and the defendant went to see Mr Michel, a solicitor, for advice regarding the plaintiffs' dispute with Steven about Logan's Bridge. He said that during their meeting he told Mr Michel about the plaintiffs' agreement with the defendant and Mr Michel advised that the agreement be put into writing. The evidence includes a file note made by Mr Michel, evidently during a discussion with at least the plaintiffs. There is a heading "Contribs by Mum and Dad" under which there are three items (the $10,000 paid on to October, the $190,000, and a figure of $40,000 said to be paid on 16 November 2001) adding up to $240,000, under which the figure of $210,000 is written and described as "agreed repayment figure". 39 The parties executed an agreement by deed ("the agreement") on 20 February 2002. Although some evidence was given suggesting that Mr and Mrs Palinkas did not understand the agreement (at any rate, in the witness box) and that the defendant was under some pressure to sign it, there is no application to set the agreement aside or to declare it to be invalid on a non est factum basis or otherwise. The only submission by either party seeking to impugn its validity was the defendant's submission that the agreement did not exhibit an intention to create rights and obligations. 40 I shall consider the terms of the agreement on whether exhibit an intention to create a legal relationship later in these reasons for judgment. The breakdown of the relationship between the parties and the plaintiffs' departure from Uplands 41 From about 2002 the financial position of Uplands deteriorated. The defendant sought to attribute this, in part, to an unsuccessful feedlot business that his father persuaded him to go into in about 2002, even though it appeared that Uplands might become subject to drought conditions. He said that the Uplands overdraft went from zero to about $250,000 and it was necessary to sell breeding stock, after 50 head of cattle were lost to starvation. 42 Mr Palinkas said that his son did not live up to the terms of the agreement because he continued to ask for money to pay for cottage repairs and expenses. The plaintiffs' payments to the defendant after 20 February 2002 are set out in Annexure B to his first affidavit and Ex P2. I shall return to them. Mr Palinkas also gave some evidence generally to the effect that his son kept him at arm's length, rarely allowing him to come to his house and refusing to give any information about the property. Mr Palinkas said he helped his son on the property over the period from 2001 to 2006 by mustering cattle and droving with his grandson, without payment, and that Mrs Palinkas provided food for them while they were droving without reimbursement from the defendant. 43 I accept that the plaintiffs continued to make payments from time to time to the defendant after February 2001, and that they helped around the farm and that Mr Palinkas went droving with his grandson without payment, but I do not accept their evidence to the extent that it implies that their son resiled or acted in consistently with the second arrangement or the agreement. I accept the evidence of both sides to the extent that over the period from the signing of the agreement in February 2002 until the departure of the plaintiffs in August 2006, there were many disagreements about repairs to the property, other financial matters, and the relationship between the defendant's sons and the plaintiff, contributing to the erosion of the relationship between the plaintiffs and the defendant. 44 There was an incident in about February 2006 when the defendant was away from the farm for a period of days. It appears that there was an altercation between his eldest son and the plaintiffs after the son and his friends engaged in some noisy activity on the farm (there was inconsistent evidence about what they did, the plaintiffs claiming that they were firing guns and the defendant saying they were riding motorbikes, but I need not resolve that issue). Subsequently the plaintiffs insisted that their grandson's friends should be required to leave Uplands, a demand that the defendant rejected. The evidence suggests that the defendant may not have done enough to supervise his children and their friends on that occasion, and also that the plaintiffs may have overreacted to teenage behaviour. According to the defendant, the relationship between himself and his children and the plaintiffs deteriorated very quickly after that incident. That seems to have been so. 45 Shortly after that incident the plaintiffs began to visit a deceased cousin's widow on a regular basis. The widow lived at Moree, about 140 km from Uplands. Later Mrs Palinkas told the defendant that she and his father wanted to relocate to Moree and to assist the widow financially by purchasing a duplex unit from her. The defendant said he told the plaintiffs he was not in a position to assist them financially for that purpose. Shortly afterwards the plaintiffs told him they wished to invoke the provisions of the agreement that the parties had signed. He said he told them that if they wanted to reside somewhere other than at Uplands then he would be happy to rent suitable premises for them at Boggabri or Moree. 46 The plaintiffs left Uplands in August 2006 and moved to a rented property in Moree. Mr Palinkas said he negotiated for the purchase of that property and then consulted solicitors. On 1 September 2006 the plaintiffs' solicitors sent the defendant a letter requiring him to purchase a home in Moree for the plaintiffs to live in. On 23 November 2006 the defendant's solicitors responded, saying that the defendant was prepared to arrange a rental dwelling and contending that this would fulfil his obligations under the agreement between the parties. Apparently the plaintiffs did not receive that letter at the time because their solicitors were no longer acting for them. There was further correspondence between solicitors on behalf of the parties in 2008, which I need not set out in detail. 47 The plaintiffs moved out of their rental property and purchased land in Moree, upon which they have erected what was called into evidence a colourbond shed, which they use as their dwelling. Mr Palinkas said the dwelling is a single room, which gets very hot in summer, but it is all they can afford even with a loan from a bank. He said that he and his wife are relying on their pension to pay off the loan. Mr Palinkas said there are several suitable properties in Moree that could be purchased for around $210,000 and gave evidence in the form of a letter from an estate agent. The rights and obligations of the parties 48 The plaintiffs contend that they have equitable and legal rights entitling them to the relief that they seek. It is appropriate to assess the plaintiffs' submissions by considering whether the second arrangement and the circumstances of their occupation of Cottage No 2 at Uplands gave them an equitable right with respect to their financial contribution to the property, and then to consider whether that right was extinguished by the agreement of February 2002 and if it was, whether the plaintiffs have contractual rights entitling them to relief. The plaintiffs' equitable right 49 In Muschinski v Dodds (1985) 160 CLR 583 at 619-620, Deane J (with whom Mason J agreed) described the equitable rules entitling a fixed term partner and a contractual joint venturer to proportionate repayment of capital contributions, and observed that they were instances of a more general principle of equity, that could be readily related to the equitable notions which find expression in the common law count for money had and received, and then he continued: "Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct: cf Story, Commentaries on Equity Jurisprudence , 12th ed. (1877: Perry ed.), vol 2, par 1316; Legione v Hateley (1983) 152 CLR, at p 444. The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns LC, speaking for the Court of Appeal in Chancery, in Atwood v Maude (1868) LR 3 Ch App, at p 375: where 'the case is one in which, using the words of Lord Cottonham in Hirst v Tolson (1850) 2 Mac & G 134 [42 ER 52], payment has been made by anticipation of something afterwards to be enjoyed [and] where … circumstances arise so that future enjoyment is denied'. Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specifically provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit the other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf Atwood v Maude (1868) LR 3 Ch App, at pp 374-375, and per Jessel MR, Lyon v Tweddell (1881) 17 ChD 529, at p 531." 50 The principle enunciated by Deane J was applied by Mason CJ, Wilson and Deane JJ in Baumgartner v Baumgartner (1987) 164 CLR 137 at 148. 51 In the present case there was a joint relationship or endeavour between the plaintiffs and the defendant arising by virtue of the second arrangement. That relationship or endeavour was the arrangement by which the plaintiffs would provide their settlement money (or the first $190,000 of it plus other contributions exceeding $210,000 in all) to the defendant for use in improving and running the farm including the cottage where they would live, and they would have a right of occupation for the rest of their lives. The substratum of that joint relationship or endeavour has been removed because the parties have fallen out and the plaintiffs no longer reside in the cottage. 52 The parties clearly have strong views as to whether there has been attributable blame for the breakdown of their relationship, but this is not the case where, on the evidence, there is clear wrongdoing on one side while the other is manifestly faultless. Rather it is a case of a relationship gradually turning sour through incremental events where thoughtless conduct appears to have been matched by undue sensitivity. For example, to take the event which according to the evidence of both parties was a crucial point in the breakdown of the relationship, arguably there was some blame to be attached to the defendant for leaving his teenage son and her son's friends alone on the farm where they had access to motorcycles and might be expected to use them to the distress of the plaintiffs; but on the other hand arguably the plaintiffs overreacted to the perhaps predictable wild conduct of unsupervised teenage boys. Considering the evidence as a whole, I would not conclude that there is "attributable blame" on either side for the purpose of applying the equitable principles espoused by Deane J. 53 This is a case, therefore, where the benefit of the money contributed by one party (the plaintiffs) on the basis and for the purposes of the relationship or endeavour (the working of the farm upon which they were to live in harmony) would otherwise be enjoyed by the other party (the defendant), in circumstances in which it was not specifically intended or specifically provided that the other party should do so. Therefore the principle is attracted and equity will not permit the defendant to assert or retain the benefit of the money contributed by the plaintiff to the extent that would be unconscionable for him to do so. 54 The equity relates to the plaintiffs' contribution to the property. To give effect to the equity, it is necessary to quantify that contribution. Were it not for the agreement of February 2002, findings would have to be made as to each item alleged by the plaintiffs to have been a contribution to the property, including items disputed by the defendant. But as I shall explain, the written agreement contains an acknowledgement by the parties that they would quantify the plaintiffs' contributions up to February 2002 at the sum of $210,000, and therefore the plaintiffs' equity (assuming it to have continued after the agreement) relates to a contribution of that amount, plus any subsequent payments properly characterised as contributions to the property within the equitable principle. 55 Importantly, the application of the equitable principle gives rise to a broader range of remedies. The equitable principle says that the defendant will not be permitted to retain the benefit of the payment he has received because it would be unconscionable for him to do so. Equity is able to design a remedy that gives effect to that proposition. 56 In Morris v Morris [1982] 1 NSWLR 61 the plaintiff paid $28,000 towards an extension to the home jointly owned by the defendants, his son and daughter-in-law, under an arrangement that would provide him with accommodation indefinitely as part of his son's family. Later his son's marriage failed, the son departed from the home, the father's relationship with his daughter-in-law broke down and the father also departed from the home. McLelland J held that there was no basis for finding an express or implied trust of the property in favour of the father, but he continued (at 63-64): "However, in my view wider equitable principles operate in the present case. 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 that 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 defendant 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 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." 57 His Honour noted the flexibility of the principle and he said (at 64): "The remedies to which the principle gives rise are imposed, as is a constructive trust, in order to satisfy the demands of justice and good conscience. Indeed in some circumstances the appropriate remedy may well be the imposition of a constructive trust. However, in the particular circumstances of the present case the plaintiff's equity would in my opinion be satisfied by his having an equitable charge over the … property in the sum of $28,000 together with interest thereon at the rate of 10 per cent per annum as from the date of commencement of these proceedings …." 58 Evidently what made a charge appropriate was that, as the father's relationship with his daughter-in-law had broken down, it would not be appropriate to give effect to the father's equity by any order that would perpetuate the domestic residential arrangement that he had elected to terminate. The equity was be satisfied by recoupment of the amount of the contribution, plus interest from the date of commencement of the proceedings, rather than by the imposition of a constructive trust that would allow the father a proportionate share of the value of the property from time to time. The father's entitlement to recoupment was protected by an equitable charge over the defendants' property. Presumably, in circumstances where the charge reflected an entitlement to recoupment of the contribution, there was no case for equitable relief by way of a damages or compensation order (as opposed to an order for repayment of the amount of the contribution plus interest), although his Honour did not expressly address relief of this kind. 59 In my view the same remedy is appropriate here, for the same reasons. The plaintiffs obtained an equity by virtue of the second arrangement and the events that subsequently happened. The relationship between the plaintiffs and their son has broken down and so the court should not give effect to that equity by seeking to perpetuate the residential arrangement in Cottage No 2 from which the plaintiffs have departed. Here the equity is better satisfied by the imposition of an equitable charge over the Uplands property reflecting an entitlement to be repaid the contribution, with interest from the date of commencement of the proceedings at an appropriate rate, rather than by the imposition of a constructive trust that would give the plaintiffs a proportionate beneficial interest in the property or an order for equitable compensation. The effect of the agreement of 20 February 2002 60 After the parties made the arrangement that was the foundation for their equity, they entered into a written agreement, which to a substantial extent defined their relevant rights and obligations. That leads to the question whether there is any room for the continued operation of the plaintiffs' equity in view of the parties' contract. 61 The judgment of Mason J in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97-98 is authority for the proposition that contractual rights may coexist with an equitable right arising out of the relationship which has a contractual element (in that case, equitable fiduciary rights). His Honour said: "That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided the foundation for the erection of a fiduciary relationship. In the such situations it is the contractual foundation which is all important because it is a contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction." 62 What Mason J says about a fiduciary relationship co-existing with but being accommodated to the terms of any contract between the parties may be applied mutatis mutandis to the co-existence of contractual rights with the equitable right that arises through the application of the principles I have identified in cases such as Muschinski v Dodds and Morris v Morris. To the extent that the contract has encompassed and replaced the pre-existing equitable right it is the contract that defines the rights and liabilities of the parties. But to the extent that the contract has nothing to say in the circumstances, the equitable right continues to exist. It is therefore necessary to analyse the terms of the agreement. 63 The agreement recites that the defendant is the registered owner of Uplands, subject to a qualification no longer relevant, and that the plaintiffs currently occupy the cottage on the property known as Cottage No 2 while the defendant occupies Cottage No 1. Two other recitals are important enough to be set out in full. 64 Recital B is as follows: "Rudi and Gazella who are the parents of Rudi Jnr have contributed various funds to assist Rudi Jnr both in relation to some machinery and to the property in various amounts over various periods and whilst the gross total of those funds are [sic] approximately $240,000, the parties have agreed that the net contribution apart from gifts and reimbursement of things paid for by Rudi Jnr is to be noted at $210,000." 65 Although counsel for the defendant seemed to adopt a different construction, in my view it is plain that Recital B records that the plaintiffs have contributed funds of approximately $240,000 in relation to some machinery and to the Uplands property, and that the parties have agreed to quantify the plaintiffs' net contribution at $210,000. The recital succinctly explains that the net contribution is calculated by deducting from the gross total money paid by the plaintiffs to the defendant by way of gift and money paid by them to the defendant but reimbursed by him. 66 Recital B is significant because it records the agreement of the parties that, whatever be the true state of accounts between them as at 20 February 2002, they would "note" the plaintiffs' contribution to the property and machinery at the sum of $210,000, and therefore (by implication) quantify the plaintiffs' entitlement by reference to that figure. Consequently it is unnecessary for the court to make findings as to what the plaintiffs' entitlement would have been in respect of all payments made prior to the execution of the deed, such as findings as to whether those payments were in each case loans or gifts or contributions pursuant to an arrangement creating a proprietary interest. 67 My construction of Recital B is consistent with the solicitor's file note, which describes the $210,000 as the "agreed payment figure". It is also consistent with the evidence of Mr Palinkas, who said that he "agreed to put the figure at $210,000" because he was "happy to treat the other amounts [as] a gift" and he "did not want to be petty about all the amounts" he had given his son. 68 The other recital that is to be set out in full is Recital D: "The parties wish to document their agreement in relation to the rights that Rudi and Gazella are to have in relation to both their occupation of the cottage and what should occur should the property be sold." 69 Recital D reflects the joint intention of the parties that the plaintiffs' rights in relation to occupation of the cottage, inter alia, would be "documented" by way of a contractual agreement. It exhibits an intention, in my view, that the contractual documentation of the parties rights and obligations would replace any existing equity. But this is so, self-evidently, only to the extent that the agreement purports to "document" the parties' position. To the extent that the agreement is silent, there is room for the continued operation of the equitable principle, by analogy with the reasoning of Mason J in Hospital Products. 70 Counsel for the defendants submitted, rather faintly, that the agreement did not exhibit an intention to create legal rights and obligations, relying on Jones v Padavatton [1969] 2 All ER 616. But in my opinion Recital D, coupled with the overall structure of the agreement as a duly executed deed and the contents of the operative part, make it plain beyond argument that both parties intended to make a legally binding and enforceable contract at the time when they executed the deed. Indeed, clause 7 records that the defendant "intends as far as possible that this agreement shall be binding upon his heirs, executors and assigns". This is not to say, of course, that every part of the agreement gives rise to legal rights and obligations: specifically, it may be that clause 4 is merely hortatory. 71 Recital D speaks about the plaintiffs' rights in relation to their occupation of the cottage and what should occur if the property were ever sold, but it does not refer to the plaintiffs' rights in the event that were to move out of Uplands. It seems to me, however, that this is merely an oversight in the recital and should not be taken as an indication of intention that the provision of the contract regarding the plaintiffs' rights should they move out was intended to be any less binding than the other operative parts of the agreement. 72 Clause 1 of the agreement stated that the plaintiffs were to have: "the right to occupy Cottage No 2 for as long as they wish, together with an area of approximately a 5 acre curtilege enclosed around the cottage together with unlimited rights of access." That basic right of occupation is equivalent to the right that the plaintiffs derived under the second arrangement, and in my view it is to the same effect. In other words clause 1 conferred a right of occupation during their joint lives and the life of the survivor should they or he or she wish to leave Cottage No 2. That is confirmed by clause 6, according to which if either Mr or Mrs Palinkas were to pass away the agreement would apply to the surviving parent. 73 Clause 2 obliged the defendant to make all necessary payments of rates, mortgage, insurance and other expenses associated with the property, including electricity accounts relating to Cottage No 2. There is no mention of other expenses such as petrol, but clause 4 obliged the defendant "to endeavour to provide both personal assistance and financial assistance necessary to help his parents to live a comfortable life in their advancing years". 74 Under the provisions summarised so far, it might be said that the arrangements in the agreement are substantially the same as under the second arrangement, though the contract replaced the equitable right. But clauses 3 and 5 go beyond anything discussed by the parties at an earlier stage. 75 Clause 3 applied in the event that the defendant decided to sell the property or the bank defected a sale under its power of sale. In either of those events the parties agreed that the defendant would provide, at the election of the plaintiffs, one of the following: (a) "upon settlement of the sale the sum of $210,000"; or (b) "by an alternative cottage to Rudi and Gazella's satisfaction in standard and location for occupation by them up to the value of $210,000"; or (c) "provide them with equivalent rights to occupy a cottage upon any other property that Rudi Junior may purchase up on similar terms and conditions to those set out in this agreement". 76 Clause 3 has not been triggered by the events that have happened. There has been no sale of Uplands. But the clause is important because it extends the plaintiffs' contractual rights to cover the circumstances that would arise upon sale, by creating a specifically enforceable obligation in their favour exercisable in respect of proceeds of sale of Uplands. 77 Clause 5 is of critical importance: "In the event that Rudi and Gazella decide that they would prefer to vacate the cottage occupied by them upon 'Uplands' and for example move to town to be closer to doctors and medical services, or decide that they need additional care that cannot be provided on the 'Uplands' property by Rudi Jnr, then Rudi Jnr is, at their request, to acquire a comfortable cottage, village home or suitable accommodation to a value to be agreed between the parties and Rudi and Gazella are to then be entitled to occupy that property for as long as they wish, Rudi Jnr being the owner of the property and being responsible for payment of Council rates and any necessary insurances in respect of that substitute property." 78 In fact the plaintiffs have decided that they would prefer to vacate the cottage at Uplands and move to Moree, and they have done so. Therefore clause 5 has been triggered. The defendant is therefore obliged under clause 5 to "acquire" a comfortable cottage etc "to a value to be agreed between the parties", and then to allow the plaintiffs to occupy that property for as long as they wish, and to pay rates and insurance. 79 Counsel for the defendant submitted that the obligation to "acquire" would be satisfied by his client obtaining rental accommodation for the plaintiffs, and he said his client was prepared to do so, though he could not afford to buy a property. Counsel relied on Allina Pty Ltd v Federal Commissioner of Taxation (1991) 28 FCR 203 at 209 (Lockhart, Burchett and Gummow JJ) and SJP Formwork (NSW) Pty Ltd v WorkCover Authority of New South Wales [1999] NSWSC 941 (Dunford J). The Allina case was about the meaning of the word "acquired" in tax legislation defining the taxpayer's cost base for capital gains tax purposes. The Full Federal Court held that the taxpayer "acquired" renounceable rights issue by a company to its shareholders including the taxpayer, and consequently its cost base for CGT purposes was the market value of the rights, even though there was no corresponding disposal of assets by anyone. In reaching this conclusion, the Court adopted a broad definition of the word "acquired", saying that according to its ordinary and natural meaning, the verb "to acquire" connotes to obtain, gain or get something. The court relied on definitions to that effect in the Oxford English Dictionary and the Macquarie Dictionary, and also on an observation by Cohen LJ in Congreve v Inland Revenue Commissioners [1947] 1 All ER 168 at 173, to the effect that the word "acquired" covers transactions of a purely passive nature and means little more than receiving. The Full Federal Court's reasoning was applied by Dunford J in the SJP Formwork case to support his view that in the construction of an insurance premium order gazetted under the Workers Compensation Act 1987 (NSW), the plaintiff employer had "acquired" its business from another person who was therefore its predecessor for the purpose of calculating a premium for workers compensation insurance. 80 I accept that the word "acquired" is capable of bearing a broad meaning extending to passive receipt, in an appropriate context. In clause 5, however, the context in which the word "acquire" appears makes it plain that a narrower concept was in contemplation. The defendant's obligation under the clause is to acquire accommodation for his parents to a value to be agreed. The concept of reaching agreement as to value does not sit naturally with the acquisition of rented accommodation. Further, under the clause the defendant is to be the owner of the property and is to be responsible for payment of Council rates and any necessary insurances in respect of the property. That language strongly points to the conclusion that what the parties contemplated was that the defendant would be obliged in the stated circumstances to purchase a property to be occupied by the plaintiffs. As a matter of construction, therefore, clause 5 obliges the defendant to purchase in his own name a comfortable cottage, village home or suitable accommodation to a value to be agreed between the parties, and to allow his parents to occupy that property for as long as they wish, he being responsible for rates and necessary insurances. 81 An obstacle to applying clause 5 in the events that have happened is that no value has been agreed between the parties, as contemplated by clause 5. Counsel for the plaintiffs submitted that either: · there is an implied term in clause 5 to the effect that in the absence of agreement as to value the value of the property to be applied was to be a fair and reasonable value having regard to the circumstances including the plaintiffs' needs and the amount of their contribution to Uplands; or · clause 5 has no application and so, as the contract does not govern the rights and obligations of the parties in the circumstances that have occurred, those rights and obligations are determined by equitable principles which have the effect that it would be unconscionable for the defendant to retain the plaintiffs contribution to the Uplands property and so a remedy should be granted to the plaintiffs to avoid that outcome. 82 In my view the plaintiffs have not made out the case for an implied term of the kind for which their counsel contends. I was taken during submissions to the well-known principles about implying a contractual term in a commercial contract, stated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, esp at 346-7. Although the agreement in the present case was not a commercial contract, it was not submitted that the court's approach to the implication of terms should be different in this case. The requirements enunciated by Mason J were recently conveniently summarised by Hammerschlag J in Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1163 at [69] as follows: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that it "goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract. 83 In the present case my view is that, leaving aside any debate about whether the other requirements are satisfied, requirements (2) and (3) are not. An obligation of a party to acquire a property for another party at a value that is fair and reasonable in the circumstances is different in character from an obligation of that party to acquire a property at a value to be agreed in the event that the other party leaves their existing accommodation. An obligation of the latter kind envisages that when the other party contemplates departure there will be a process of negotiation leading to an agreed value, which gives content to the first party's obligation at or about the time of the departure. The negotiated value might be more or less than fair value but, importantly, it will be a fixed figure by virtue of the negotiation that is part of a departure process. If departure occurs without any negotiation then an important component of the setting of value, as contemplated by the contract, has been omitted. In my view it is impermissible for the court to re-write the contract by inserting a fair value obligation operating at that point. Such a provision does not "go without saying" and it is not necessary to imply such a term to give the contract business efficacy. The position is simply that if the party in occupation leaves without agreeing a value for the new property to be acquired, the contract has nothing to say and the parties are left to their non-contractual rights and remedies (if any). 84 In written submissions counsel for the plaintiffs contended for other implied terms, namely that: (a) the defendant was required to negotiate in good faith; (b) any substitute residence to be acquired by the defendant was to be suitable accommodation for the plaintiffs; (c) the defendant was not to withhold his consent unreasonably to any request by the plaintiffs to acquire a substitute residence. 85 It seems to me that there were probably implied terms to the effect of these three propositions, but that this is of no consequence, because the evidence does not establish that the defendant failed to act in accordance with any such implied terms. There appears to be no issue about proposition (b). As to negotiating in good faith and not withholding consent unreasonably, there were some discussions between the parties directly and through their solicitors in August-November 2006. On 23 November 2006 Mr Michel, then acting for the defendants, responded to a letter from the plaintiffs' solicitor dated 29 August 2006. He correctly asserted that the agreement did not oblige his client to provide alternative housing all the sum of $210,000. As to clause 5, he said that his client did not have funds to purchase alternative accommodation at that stage but would be prepared to arrange to rent a cottage suitable to the plaintiffs, and he went on to say that the parties needed to have personal discussions to resolve matters amicably. There was no prompt response to that letter and there was a very long interval of time before the plaintiffs took up their case again, when their solicitor wrote to the defendant on 7 February 2008 under the mistaken belief that there had been no reply to the letter of 29 August 2006. The letter of 7 February 2008 threatened legal proceedings and so it can hardly be said that thereafter there was a failure by the defendants to negotiate in good faith or to withhold consent to a valuation unreasonably. Consequently if there are implied terms in accordance with propositions (a) and (c), the evidence does not show any breach of those terms. 86 Consequently the plaintiffs have not establish any breach of contract and therefore are not entitled to damages for breach of contract. Since clause 5 does not apply in the events that have happened, there would be no foundation for an order for specific performance of the agreement (relief not now sought), and consequently there is no foundation for an award of damages in substitution for specific performance under Lord Cairns' Act as reflected in the Supreme Court Act 1970 (NSW), s 68. Therefore it is unnecessary for the court to deal with the plaintiffs' evidence of loss of the and damage, relating to the payment of rent and interest on their loan. 87 Clause 5 does not apply in circumstances where the plaintiffs have simply vacated Cottage No 2 without reaching agreement with the defendants as to the value of the new accommodation that is to be acquired. This does not mean that they have no rights. As I have explained, the second arrangement which they made the defendants when they took up occupation of Cottage No 2 was the foundation for an equitable right of recoupment of their contribution, which arose when the substratum of their relationship and their joint endeavour disappeared without attributable blame in circumstances where it was unconscionable for the defendant to retain the contribution. The contract having no application to the events that have happened, the plaintiffs are able to rely on their equitable right. 88 The law report of Morris v Morris does not reveal the precise orders made by McLelland J. It seems to me that the best way to recognise and give effect to the plaintiffs' equitable right is to declare that in the events that have happened the plaintiff is entitled to recoupment of the amount of their contribution (which is to be specified) plus interest, and then to order that the property at Uplands be subject to an equitable charge to secure that entitlement. I want counsel for the plaintiffs to give some consideration to the terms of those orders, particularly as to the degree of specificity that will be needed for effective orders and the rate of interest to be charged. 89 The remaining issue is to quantify the amount of the plaintiffs' contribution, having regard to the partly conflicting evidence as to the payments that the plaintiffs have made to the defendant with respect to the property. I have held that all payments made prior to the agreement of 20 February 2002 are, in effect, rolled into the quantified sum of $210,000 and separate findings about them are unnecessary. According to Ex P2, there are 13 payments claimed to have been made after 20 February 2002, adding up to $18,793.49. But the evidence relating to those payments does not disclose that any of them was made as a contribution for the renovation of Cottage No 2 or otherwise for improvement of the Uplands property, being a payment of the kind that would attract the application of the equitable principle. Some of them were payments in the nature of maintenance and running repairs to the cottage, of a kind incurred in the course of residential occupation, and others were described by the plaintiffs as loans. The rights of a lender are contractual rights rather than equitable rights to recoup contributions. It seems to me that the plaintiffs' characterisation of these payments as loans excludes them from being treated as contributions for the purposes of the equitable principle. The consequence is that none of the payments made after 20 February 2002 increase the quantum of the plaintiffs' equitable entitlement, which remains at $210,000 plus interest. The present proceedings are not cast as proceedings for the recovery of loans. 90 The equitable remedies that I propose are discretionary and it is appropriate to consider any evidence going to such matters as hardship. There is some evidence here that the defendant will be unable to extinguish the charge by payment and there was mention in submissions that the presence of an equitable charge (and presumably any caveat lodged to reflect it) will inhibit any endeavours by the defendant to refinance his bank loan secured over Uplands. On the other hand, Ex P4 is a series of "Customer Statements of Position" over a period up to June 2008, from which it would appear that the defendant had during that period a substantial equity in the property. Since June 2008 there may well have been a decline in value of the property and a tightening of the availability of credit, consistently with overall economic circumstances, but there is no specific evidence of this. In the circumstances hardship has not been proven. If it had been, it would be necessary to weigh that hardship against evidence of the plaintiffs' circumstances and all other relevant matters including the circumstances that have given rise to the plaintiffs' equitable right. Conclusions 91 The plaintiffs are entitled to a declaratory order recognising, in the events that have happened, their equitable right to recoupment of their contribution to the improvement of the Uplands property and related machinery in the sum of $210,000 plus interest, and an order securing that entitlement by the imposition of an equitable charge over the Uplands property. As I have said, I want counsel for the plaintiffs to give some consideration to the terms of the orders including the rate of interest to be charged. Therefore I shall direct the plaintiffs, on or before Friday 6 March 2009, to serve on the defendant (with a copy to my associate) draft orders to give effect to these reasons for judgment, and I shall stand the proceedings over to 9:30 a.m. on Thursday 12 March 2009 for the purpose of my hearing submissions on the form of the orders and on the question of costs. ********** 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.