Supreme Court New South Wales

• Medium Neutral Citation: Petronijevic v Milojkovic [2014] NSWSC 1337
• Hearing dates: 12 September 2014
• Decision date: 12 September 2014
• Jurisdiction: Equity Division
• Before: White J

Decision

Refer to para [29] of judgment

• Catchwords: CONTRACT - whether the parties' discussions amounted to a contract for the transfer of real property to the plaintiff - whether intention to create legal relations in family context - effect of s 54A Conveyancing Act 1919 (NSW); TRUSTS - constructive trusts - whether defendant promised plaintiff ownership of a Property if the plaintiff renovated the Property at her cost - whether plaintiff renovated Property at her cost - whether plaintiff entitled to a declaration of trust; ESTOPPEL - whether plaintiff encouraged to make renovations at her cost on reliance of a promise by defendant that the Property would be transferred to the plaintiff - detriment principles - whether plaintiff's change of position operates as a detriment - whether detriment of the plaintiff is proportionate to the value of the property - whether equitable compensation is an adequate remedy
• Legislation Cited: Conveyancing Act 1919 (NSW); Supreme Court Act 1970; Civil Procedure Act 2005
• Cases Cited: Darmanin v Cowan [2010] NSWSC 1118; Morgan v Worthington (1878) 38 LT 443; Horton v Jones (1935) 53 CLR 475; Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483; Sledmore v Dalby (1996) EWCA Civ 1305; (1996)72 P & CR 196 CA; Jennings v Rice [2003] EWCA Civ 159; [2003] 1 P & CR 100 CA; Estephan v Estephan [2012] NSWSC 52; Sidhu v Van Dyke [2014] HCA 19, (2014) 308 ALR 232; Morris v Morris [1982] 1 NSWLR 61
• Category: Principal judgment
• Parties: Slavica Petronijevic (Plaintiff); Milun Milojkovic (Defendant)
• Representation: Counsel: S Stojanovic, solicitor (Plaintiff); Solicitors: Stojanovic Solicitors (Plaintiff)
• File Number(s): 2013/145847

Judgment

1 HIS HONOUR: The plaintiff moves for final relief on her statement of claim. The defendant was personally served in Sydney on 10 May 2013 but has not entered an appearance. The defendant is a resident of Serbia.

2 The plaintiff and defendant are daughter and father. The plaintiff's claim is that in about 1988 she, her husband and their two sons lived with her parents in a property owned by the defendant and his wife (the plaintiff's mother) in Cabramatta. In about 1989 the plaintiff's parents moved to Serbia. Thereafter, the plaintiff's parents lived in Serbia, but made trips to Australia every year or so. When they visited they stayed in the Cabramatta property. The plaintiff and her family lived in the property from at least 1988 until 2011.

3 In 1997 the plaintiff had a conversation with her father in which she told him that she and her husband wanted to buy a unit. Her father said:

"Why buy a unit, put the money in the house. We need a bigger house. We can renovate the house. You can live in the house and the house will be yours as I want to live in Serbia, but will come back from time to time.

...

If you put your money in for the renovations, and take care of the house, the house will be yours when I die."

4 The plaintiff agreed to that. She said:

"Alright, I agree. I have $40,000 which I will put towards the renovations as long as you leave me the house."

5 In late 1997, after this conversation, renovations commenced to the Cabramatta property. The defendant was a bricklayer. The plaintiff assisted him in the building work. The plaintiff pleads that the defendant borrowed money to use in the renovation, but the majority of the labouring work was done by the plaintiff and, I infer, the defendant. The brickwork was completed by about March 1998, and the defendant then returned to Serbia.

6 The plaintiff paid out all of the money she had saved (which was approximately $40,000) towards the cost of tradesmen and materials used in the renovations. As a result of the renovations, the house was substantially improved and expanded.

7 The plaintiff and her family continued to live in the property. They did not pay rent. The plaintiff deposes that after her father returned to Serbia, she and her husband obtained work delivering a local newspaper and received, between them, about $100- $115 per week. She deposes that she deposited money into her father's account to ensure there were sufficient moneys in her father's account to cover the loan repayments. She cannot recall how much money came from her own account, and there is no evidence about that. It appears, however, that the only income of the plaintiff and her husband was the amount of between $100-$115 per week, plus any pension moneys to which they might have been entitled.

8 The plaintiff pleads that in about 2000 the defendant returned to Australia for a visit and informed her he proposed to make a will which would provide for the plaintiff to receive $40,000 from his estate, and then to receive only a half share in the Cabramatta property and a half share in the rest of his estate, which included a house in Serbia. The plaintiff pleads that the defendant represented that the other half share would be provided to her sister. The defendant returned to Serbia in November 2000 and did not return until a visit in June 2008.

9 The plaintiff's mother died in February 2011. The plaintiff went to Serbia for her mother's funeral. Whilst there, the defendant made a demand for rent for the Cabramatta property.

10 The defendant returned to Australia in August 2011 and at that time demanded that the plaintiff and her husband vacate the property, which they did on 6 September 2011. She lodged a caveat in which she claimed an equitable interest in the Cabramatta property, as beneficiary of a constructive trust. The caveat stated that the asserted equitable interest arose from the fact that the plaintiff provided funds in 1997 in the amount of about $40,000 for improvements on the land, and that since 1989 to date the caveator had paid statutory outgoings for the land.

11 After the plaintiff's mother died, the defendant became registered as the sole proprietor of the property as the surviving joint tenant. On 16 January 2013 the defendant served on the plaintiff a notice of proposed lapsing of a caveat. The caveat subsequently lapsed. The defendant sold the Cabramatta property for $648,000.

12 On or about 29 April 2013 the defendant, by his solicitor, advised the plaintiff that he did not propose to pay the plaintiff any money from the sale of the house. On 10 May 2013 the plaintiff obtained ex parte injunctive relief, restraining the disposition of the proceeds of sale. I understand, however, from what I have been told by the plaintiff's solicitor that subsequent inquiries, which have been extensive and time-consuming, have revealed that the proceeds of sale were remitted to the defendant in Serbia prior to the orders being made. An account in the defendant's name with a credit balance of approximately $27,000 has been located.

13 Unless any judgment the plaintiff obtains can be enforced against the defendant in Serbia, and unless the defendant has any other property in Australia, it is likely the plaintiff would not recover more than the $27,000, approximately, that has been located here.

14 The plaintiff pleads that, by reason of the facts I have summarised, the defendant held the proceeds of sale of the Cabramatta property on trust for her. She seeks a declaration to that effect, alternatively damages for breach of contract, or alternatively equitable compensation.

15 The plaintiff's solicitor fairly acknowledged that the claim in contract could not succeed. I think there are essentially two reasons for that. The first is that, on the plaintiff's own evidence, it does not appear objectively that the intention of the plaintiff and her father was to enter into binding legal relations by their conversation in 1997. There is a rebuttable presumption that such arrangements made in a family context are not intended to create legal relations (see Darmanin v Cowan [2010] NSWSC 1118 at [204] ff.). So far from being rebutted, that presumption is reinforced by the fact that, according to the plaintiff's evidence, the agreement was made between her and her father. Although the statement of claim pleads that her mother was a party to the agreement and pleads that the agreement was that the property would be left to the plaintiff after the death of the survivor of her parents, that was not the agreement to which she deposed. It is not likely that the parties could have contemplated a binding contract in relation to the property to which the plaintiff's mother was not a party.

16 The second reason why the plaintiff's claim is not enforceable as a contract is that there is no note or memorandum of the agreement relied upon signed by the defendant or other person lawfully authorised by the defendant. Section 54A of the Conveyancing Act 1919 (NSW) provides:

"54A Contracts for sale etc of land to be in writing

(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged."

17 The present claim, in so far as it is based on contract, is a claim for damages. On such a claim no question of part performance of the oral agreement would arise. It is true that a defendant who proposes to rely upon s 54A must plead the statute by way of defence. (See, for example, Broughton v Snook [1938] 1 Ch 505 at 511.) Reliance on the statute could not be taken by demurrer but needed to be pleaded (Morgan v Worthington (1878) 38 LT 443). But that principle has been established in cases in which the defendant is an active party. Clearly, in such a case, if a defendant is to rely upon the statute he needs to raise it by way of defence so that the plaintiff can meet the defence either by tendering a signed memorandum, if one is available, or in an appropriate case by adducing evidence of acts of part performance.

18 That is not this case. In this case there could be no answer to s 54A in so far as the claim is based on contract (Horton v Jones (1935) 53 CLR 475).

19 That is not an answer to the plaintiff's claim based on principles of equitable estoppel. It can be accepted, in the absence of defence, that the plaintiff was induced, by the representation made by her father, to act to her detriment on the assumption she would receive the Cabramatta property after her father's death, at least if he survived his wife. The acts of detrimental reliance on the defendant's representation are the expenditure of the plaintiff and her husband's savings of $40,000 on the renovations to the property, the payment of statutory outgoings, and the labouring work in which the plaintiff engaged with her father in late 1997 and early 1998.

20 The plaintiff's solicitor submitted that a further detriment the plaintiff suffered was forgoing the opportunity to enter the property market by using the savings of $40,000 as a deposit on a unit. The plaintiff's evidence does not establish that this was a realistic opportunity, or that the loss of the opportunity has caused any financial detriment when regard is had to the fact that the plaintiff and her husband had the benefit of rent-free accommodation from 1997 to 2011. As to the first, there is no evidence that the plaintiff and her husband had a sufficient income which would have supported a loan which would have been required for them to acquire a property with their savings.

21 Prima facie, in a case of estoppel by encouragement, the relief to which the plaintiff is entitled is relief which would make good the expectation the plaintiff was induced to adopt, by reason of which the plaintiff has suffered detriment. However, the first inquiry is always whether a remedy short of the imposition of a constructive trust in respect of the property the subject of the estoppel is appropriate.

22 There is also a question as to whether either a declaration of a constructive trust, or the provision of equitable compensation in an amount which would reflect the value of the expectation, is disproportionate to the detriment the plaintiff would suffer if the defendant is permitted to depart from the assumption he has induced the plaintiff to make. In the present case, the question whether the value of the expectation is disproportionate to the detriment is critical. Relief may be refused entirely, or may be provided by way of payment of adequate compensation, if the remedy sought is disproportionate to the detriment.

23 There are cases in which it has been found that a plaintiff's equity has been reduced or relief has been refused by reason of subsequent events. In Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483, Handley AJA referred (at [61] and [62]) to the English decisions of Sledmore v Dalby (1996) EWCA Civ 1305; (1996)72 P & CR 196 CA, and Jennings v Rice [2003] EWCA Civ 159; [2003] 1 P & CR 100 CA, where relief was refused where enforcement of the plaintiff's expectation would be out of all proportion to the detriment. In the former case, a critical factor was the plaintiff's rent-free occupation of the subject property for a period of over 18 years.

24 Such considerations are not always decisive. For example, in Estephan v Estephan [2012] NSWSC 52 the plaintiff was successful in establishing a case of proprietary estoppel, based on his continuing to live on his parents' property in the belief he would become entitled to it. But in that case, unlike the present, the plaintiff remained on the property for some 25 years caring for his parents physically, emotionally and financially, funding the operation of his parents' household by the promise that the property would be his. It was in those circumstances that Bergin CJ in Eq concluded that enforcement of the expectation he would receive the property was not disproportionate to the detriment suffered.

25 In Sidhu v Van Dyke [2014] HCA 19, (2014) 308 ALR 232, the High Court (at [83], [84] and [85]) re-stated the relevant principles from Giumelli v Giumelli, and (at [84]) observed that, on the facts of that case, if the respondent had been induced to make a relatively small, readily quantifiable monetary outlay on the face of the appellant's assurances, it might not be unconscionable for the appellant to resile from his promises on condition that the respondent's outlay was reimbursed. That was not the case in Sidhu v Van Dyke.

26 But on the facts of this case, it appears to me that conscience of the defendant would be satisfied by his reimbursing the plaintiff for her monetary outlay of $40,000 in 1997 or 1998 with interest. Having regard to her rent-free accommodation of the property, and given the fact that she and her husband enjoyed the benefits of the improvements for over 13 years, I do not think her payment of statutory outgoings or her labouring work could justify any wider form of relief.

27 For these reasons, it is appropriate the plaintiff be awarded equitable compensation. The plaintiff's solicitor has calculated the appropriate interest at the rates prescribed for the purposes of s 94 of the Supreme Court Act 1970 and s 100 of the Civil Procedure Act 2005. Interest on the outlay of $40,000 from 1 March 1998 to 1 July 2014 totals $59,917.43.

28 I think it also appropriate that the equitable compensation to which the plaintiff is entitled be charged on any remaining identifiable proceeds of sale of the property (see Morris v Morris [1982] 1 NSWLR 61).

29 Subject to any submissions the plaintiff's solicitor may have as to the appropriate form of orders, the orders I propose are as follows:

1. Declare that the plaintiff is entitled to be paid equitable compensation by the defendant in the sum of $40,000 plus interest at the rates prescribed from time to time pursuant to s 94 of the Supreme Court Act and s 100 of the Civil Procedure Act, up to the date of judgment, and is entitled to an equitable charge over the proceeds of sale of the property at 33 Curtain Street, Cabramatta, folio identifier 66/14033 to secure the compensation payable.

2. Give judgment for the plaintiff against the defendant in the sum of $99,917.43, that judgment to take effect as from 12 September 2014.

3. Give liberty to the plaintiff to apply for any appropriate orders for enforcement of the charge the subject of the declaration in order 1.

4. Order that the defendant pay the plaintiff's costs.

[Orders accordingly.]

Decision last updated: 30 September 2014