Wife has interest in mother-in-law’s property

Wife has interest in mother-in-law’s property

Tadgell & Hahn & Ors [2016] FCCA 328 (18 February 2016)

The following is annotated. For full case: http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCCA/2016/328.html?stem=0&synonyms=0&query=riethmuller

See also Daily Mail Article: http://www.dailymail.co.uk/news/article-3568679/Matriarch-90-wealthy-Melbourne-family-forced-sell-seaside-mansion-buy-son-s-ex-wife.html

152. I am satisfied that Mrs Hahn did make the representations relied upon by the Wife. Whilst the particularised representations are modest in isolation, I accept that they fit with the arrangements that were in place among the family members at the time.
153. I am satisfied that the Wife relied upon the representations. She was focused upon obtaining a family home, as is a common goal for parents with children to rear. That there had been so much financial difficulty for her and the Husband in the past made this objective (of obtaining a family home) all the more important for the long term security of her and her children. The Wife’s clear focus on this goal was apparent to the Husband and it suited him for her to rely upon the representations and proceed on the assumption that the home was theirs. However, it is not the Husband’s conduct that is central, but that of Mrs Hahn. This leads to two important considerations: first, were Mrs Hahn’s representations made in such a way as to make reliance by the Wife upon them reasonable; and secondly, did the Husband act as the Wife’s agent in his dealings with the mother [Mrs Hahn] in a way that showed a different context to the representations or that they were not being relied upon by the Wife.
154. With respect to the first issue, context is important. The house had been a holiday home for many years. The Husband and Wife obtained exclusive possession which continued for many years. Representations of the type made by Mrs Hahn, are capable of categorisation as pleasantries to put the Wife at ease, if the Husband and Wife were there only on a licence or tenancy. In my view the terms of the representations, and the context of them go beyond politeness of mere pleasantries. As time went by, and renovations were done, it would have been apparent to all that the Wife was treating the home as that of the Husband and Wife.
155. I am satisfied that Mrs Hahn would have been well aware, that the Wife was acting in reliance upon the representations.
156. It is argued that the Husband was the Wife’s agent with respect to dealings with Mrs Hahn. The Husband dealt with his mother with respect to the property making payments to her and for the land tax. Whilst I accept that the Husband conducted himself in such a way as to eschew any particular interest I am satisfied that he and Mrs Hahn would have both known that the Wife thought otherwise and that the latter representations of Mrs Hahn confirmed the Wife’s beliefs.
157. That the Wife relied upon Mrs Hahn’s representation is absolutely clear. In the evidence the Wife’s lack of knowledge and understanding of legal structures was apparent. She never had a sophisticated view of how the property holdings were structured. She understood that it was better the property not be in the couple’s name to protect it from creditors. Her experience was of past loss of real property due to the Husband’s financial mismanagement. That she didn’t have a sophisticated view was not through her being disinterested. I am satisfied she genuinely believed that her interests were being protected by the arrangements in place.
158. The question of detriment is a key issue. It is put that the Husband and Wife had never been able to amass assets in the past and that any real property they bought was not retained. It was argued that this showed they would never have come to own a home in any event.
159. The parties sent their children to private schools, a significant expense, that they may not have been able to afford had they had a mortgage. However, they also spent significant sums on renovations of the house.
160. Detriment is not limited to an actuarial or financial analysis. Nor is it possible to put a price on life choices over 20 years. They are, as the Victorian Supreme Court of Appeal said inDonis v Donis [2007] VSCA 89 ‘life-changing decisions with irreversible consequences of a profoundly personal nature’ at [34]. The Wife’s loss by reliance on the representation included the opportunity to live in her choice of suburb in Melbourne, rather than on the (omitted). Whilst she adopted and made a positive life on the (omitted) and there is nothing intrinsically better about city suburbs, she lost her preference. On its own it would be difficult to see this as sufficient detriment to found an estoppel, at least with respect to these two areas (perhaps living on an outback station would lead to a different result).
161. More significantly, she did not pursue purchasing a home, relying upon Property G instead. Whilst there is little doubt that the Husband’s financial earning capacity could have funded the purchase of a home, whether his spending could have been managed to succeed in paying off a mortgage is open to serious question. However it was a real possibility, which was dear to the Wife’s heart. I accept she was very strongly motivated to own a home. By relying upon the representation she gave up the pursuit of owning another home. Life has moved on and she has effectively lost that opportunity. This is a loss of a chance that is significant. I am satisfied that this is a significant detriment that she has suffered.
162. The renovations were a detriment in a financial sense as she and the husband paid for them. They also paid money toward Mrs Hahn to improve her lifestyle.
163. There is no doubt that the property brought the benefit of greater disposable income. I am not persuaded this led to any lavish lifestyle for the Wife – more realistically it allowed for the private education of the children, the grandchildren of Mrs Hahn. Mrs Hahn could not help but have been aware of this.
164. Looking at the case as a whole, I am satisfied that it would be unconscionable for Mrs Hahn not to honour the representations she made to the Wife. This leads to a finding that the Wife should receive a half share of the Property G property as nothing less would satisfy the representations that were relied upon. Such an outcome is not out of proportion in this case.
165. Turning to the Husband’s interests the case is more difficult. I accept his claim that he never wanted to own the property. Whilst in the abstract this sounds odd, in context it makes perfect sense. He has always been a poor money manager. He was near to bankruptcy years ago and has ultimately been sequestrated. His family has always provided for him. Why would he have ever wanted property in these circumstances? The gift of usage was far more valuable to him than ownership as ownership could be taken by creditors. His capacity to manage, if not manipulate, his mother made ownership unnecessary. Unlike many cases, the property was never his nor did he contribute substantially to its purchase. I am not persuaded that he relied upon representations of his mother, nor altered his position as a result of them. I am not persuaded that he has or ought to receive an interest in Property G.
166. Counsel for Mrs Hahn strongly pressed an argument that Mrs Hahn through the effects of the land titles legislation and the transfer of the property to her from her own mother held indefeasible title. This misconceives the nature of the equity, which operates directly against Mrs Hahn to ensure that she does not act unconscionably. The remedy is a proprietary one sounding in an interest in the land to which she has title, but the action is a personal one. As a result I am not persuaded that these arguments provide any basis for denying the applicant her remedy in this case. It is only if the title is transferred to another that questions as to the limit of the proprietary remedy would arise. The equitable obligation is owed by Mrs Hahn personally with respect to land in which she held initially in equity and later by way of legal title. The personal remedy may be sought against her and the remedy fashioned in the light of the current circumstances. As the applicant’s interest flows from the personal rights against Mrs Hahn, good against the world (save for small class) the result is that Mrs Hahn is able to honour her representations and the appropriate remedy a declaration that she holds the property in her name on trust for her and the wife in equal shares.
167. As a result of the Husband having no property, any claim by the Wife pursuant to s.79 of the Family Law Act 1975 fails. The Trustee eschewed any claim against the Wife. The Husband made no claim against the Wife.
168. In the circumstances I find that the Wife should receive a half interest in Property G. As the parties are agreed as to its value and it is appropriate Mrs Hahn be permitted to retain the property if she is able to as a result of her ongoing strong emotional attachment to it. I will therefore fashion the remedy to provide for payment to the Wife of $1,162,500. If it is not paid within 90 days the property should be sold and the Wife and Mrs Hahn receive equal shares of the proceeds.

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