To save their house from being sold by the ANZ Bank, the parents transferred the title to their daughter who borrowed enough to repay the bank loan.
But the conveyancer who acted for both parties when the title was transferred failed to safeguard the parents’ continuing occupation rights and payment for their remaining equity in the house.
This failure resulted is a toxic legal dispute which has come before the Supreme Court on four separate occasions to date, with an appeal pending.
This is an account and analysis.
The facts
The parents, Mr & Mrs Wallis, built the house in Schofield Parade, Pennant Hills in 1985. It was their family home. Mr Wallis was a builder. In 2012 he developed a heart condition and retired from building work. He was in serious financial difficulties.
In early 2013, the daughter, Mrs Rudek, took out a personal loan for $26,000 and gave it to her parents to ease their financial difficulty. But that gave only temporary relief. In June, the ANZ Bank commenced enforcement action for their mortgage loan. Mrs Rudek agreed to raise $840,000 to pay out the ANZ Bank loan and other creditors in full.
The house was originally valued at $950,000 for loan purposes. Later, the valuer increased it to $1,050,000 to enable sufficient funds to be borrowed. This became the price in the Contract and Transfer. The title was transferred, the ANZ Bank loan and the other creditors were paid.
The house was divided into two separate units. On settlement, Mrs Rudek, her husband and two sons moved into the upper unit, on the top two levels, while Mr & Mrs Wallis moved into the lower unit, on the ground floor. Each unit had a separate entrance and was self-contained. Some furniture belonging to Mr & Mrs Wallis remained in the top unit.
The continuing occupation rights were documented in an ‘amateurish’ form by the conveyancer (who acted for all parties) in a licence agreement, in this way:
The licensor grants the licensee a licence to occupy the part of the property on the bottom level of the residence at a weekly licence fee of $1 from the date of settlement until 16 August 2014 and following this time, indefinitely on a month by monthly basis
The agreement was never signed. The licence fee was paid for one year.
The remaining equity in the property was left up in the air. In the settlement adjustment sheet the unpaid equity was referred to as ‘an amount of $212,907.84 to be allocated as rental fees’. No ‘allocation’ was made.
The Conflicts
After Mrs Rudek and her family moved into the property, various conflicts flared:
- The loan of $26,000 was not repaid when Mr & Mrs Wallis sold an investment property.
- The local council issued notices to comply requiring the construction of pillars on balconies and the installation of shutters for bushfire purposes, which Mr Wallis had never finished.
- The swimming pool had been drained and the pool area was being used by Mr Wallis to store a large quantity of “junk”.
- Mr Wallis was personally abusive, particularly to Mr Rudek calling him a “rude dick” (a crude adaption of his surname).
- The police had been called. They refused Mr Wallis’ request to take out an apprehended violence order.
- The conflicts came to a head in 2018, when Mrs Wallis said that the Rudeks owed the Wallis $200,000, which Mr Rudek said would be paid if the Wallises would leave the house and go somewhere else.
Justice Parker concluded: “I am satisfied that Mr Wallis’ behaviour [the abuse] is wholly unreasonable, and represents a substantial interference with Mrs Rudek’s and her family’s enjoyment of their home.”
The Law, the findings and the orders
The Wallises’ objective in commencing proceedings was to secure their continued residence in the property. Justice Parker stated:
The whole thrust of their case, at an evidentiary level, involved seeking to establish that a promise had been made to them which would allow them to remain in the property indefinitely.
The Court found that no promise had been made amounting to a contractual agreement which could be specifically enforced, and alternatively, no promissory estoppel was established.
Therefore, Mr & Mrs Wallis failed in their claim for lifetime occupation.
The Court was more accommodating in terms of the equity. The Court found a common intention constructive trust and applied the Baumgartner doctrine. Justice Parker stated:
The doctrine ultimately rests on the inequity which arises if an asset which is acquired with joint contributions falls to the party who is the registered proprietor on the breakdown of the relationship between the parties. … In a case like this, the Court [will] assess the [amount of] compensation … to avoid Mrs Rudek’s unjust enrichment as a result of having paid her parents less for the property than it was in fact worth.
Having decided the property was worth $950,000 at the time, the Court ordered the amount of $124,287.75 to be paid. The Court ordered the amount be paid into Court.
In reaching this conclusion, the Court considered that the usual remedy of appointing trustees for sale was not appropriate given the Rudeks had made a much greater financial contribution to saving the property from the bank, and their intention to own the property into the future.
The Court also raised with Mr & Mrs Wallis the alternative of claiming the unpaid balance price payable under the Contract and was ‘mystified’ as to why they chose not to pursue this contractual cause of action.
The Court ordered that:
- Mr & Mrs Wallis provide vacant possession of the ground floor unit;
- Mr Rudek make the chattels in the upper unit belonging to Mr & Mrs Wallis available for collection;
- Mr Wallis not ‘harass, intimidate, stalk or assault’ Mrs Rudek, her husband and children; and
- Mr & Mrs Wallis pay Mrs Rudek’s legal costs in the proceedings on an indemnity basis (based on a Calderbank offer). The amount claimed was $83,122.61.
The Applications for Stay
An application for stay of the orders to vacate the property and remove chattels pending appeal was heard by Justice Parker on 30 March 2020.
The application was refused subject to leave to make an application if there was evidence that the steps taken by the various Australian governments to respond to the COVID-19 emergency precludes the orders from being complied with.
Mr & Mrs Wallis chose to pursue their application for stay in the NSW Court of Appeal, where it was heard by Justice White on 6 April 2020.
The Court noted that “It is accepted that the Public Health (COVID-19 Restrictions of Gathering Movement) Order 2020 does not preclude the appellants from seeking alternative accommodation”.
The Court found that some of the appeal points may be arguable, and so if measures were taken to remove the opportunities for conflict pending the hearing of the appeal, a stay would be granted. The Court took into account the advanced age and poor health of the parents.
The application for stay was granted after undertakings were proffered which included: an occupation fee of $300 per week (if the appeal was not successful); the money paid into court be security for Mrs Rudek’s legal costs; the goods stored in the pool area or in the carport are to be removed within two to three weeks; and Mr & Mrs Wallis were to remain in their unit and not go into the garden or any other part of the property.
Conclusions
It is too early to draw firm conclusions because the appeal remains to be heard.
But what is clear is that the loose arrangements as to continuing occupation and accounting for the equity at the time the transaction took place were always likely to lead to conflict. Substantial blame must be placed on the conveyancer, who as Justice Parker said:
“put herself in an impossible position, by seeking to act for both parties to a transaction, whose interests were in conflict and [who] had not reached agreement on an essential aspect of the deal. Her attempts to square the circle by having the parties enter into a licence agreement pointed up the problem but did not solve it.”
The Court judgements are:
Wallis v Rudek [2020] NSWSC 162 (26 February 2020) (Parker J)
Wallis v Rudek (No 2) [2020] NSWSC 215 (5 March 2020) (Parker J)
Wallis v Rudek (No 3) [2020] NSWSC 338 (31 March 2020) (Parker J)
Wallis v Rudek [2020] NSWSCA 61 (6 April 2020) (White JA) Court of Appeal