The Facts
Parents unable to meet loan repayments on family home
A husband and wife acquired a property in 1975.
The husband, a builder, built the family home on the property. He and his wife raised their five daughters there.
Subsequently, the husband and wife borrowed money to fund improvements to the family home.
In 2012 the husband developed a heart condition and retired from work. As a consequence, he and his wife could no longer meet their loan repayments, and the bank commenced enforcement action.
Adult daughter buys family home and pays off loan
The husband and wife came up with a plan with their daughter, for the daughter to buy the family home, enabling her parents to repay the bank.
The daughter and her parents entered into a contract for sale of land for a price of $1,050,000. The property had been valued by one bank valuation at $950,000 and another at $1,050,000.
Despite the contract for sale of land, the daughter only ever paid the parents’ outstanding mortgage debt of $840,000, not the full purchase price.
Parents continue to reside in family home after daughter moves in
After purchasing the family home, the daughter and her family moved in and lived on the top two floors. The parents moved to the ground floor.
The two living areas were self-contained and had separate access.
There was nothing in writing specifying how long this arrangement was to continue.
Relations become hostile and daughter asks parents to move out
Over time relations between the parents and their daughter’s family became hostile. The police were called to the house more than once.
The daughter gave her parents a formal legal notice asking them to vacate.
Parents commence proceedings to remain in family home for life
The parents responded by placing a caveat on the title to the house and commencing proceedings against their daughter in the NSW Supreme Court.
The parents sought an order that they could remain in occupation of part of the family home for the rest of their lives.
The daughter cross-claimed, seeking possession of the property and eviction of her parents.
Expert commentary on the court's decision
Supreme Court rules in favour of daughter
In Wallis v Rudek [2020] NSWSC 162, the NSW Supreme Court ruled in favour of the daughter, Mrs Rudek. The court found that she had not promised her parents, Mr and Mrs Wallis, that they could live in the house for the rest of their lives.
As a result, the court ordered that Mrs Rudek was entitled to possession of the home and that Mr and Mrs Wallis must vacate the property by 2 April 2020.
Mr and Mrs Wallis were also ordered to pay their daughter’s legal costs, which were significant.
Evidence before court supports factual finding that no promise was made
The court’s conclusion that no promise was made was a factual finding based on the evidence.
Ultimately the court accepted Mr and Mrs Rudek’s evidence over that of Mr and Mrs Wallis.
The court stated that it had reservations about Mr Wallis’s credibility and also found that Mrs Rudek’s account was more consistent with the circumstances.
Of particular significance was the contemporaneous written evidence of the conveyancer. The draft licence agreement that she prepared clearly showed that she did not understand there to be a life interest contemplated.
Court chooses not to exercise its discretion in favour of parents
Given the court’s finding that no promise was made, it was not necessary for the court to consider whether any such promise gave rise to a proprietary estoppel.
However, the court did note that had it been necessary to do so, it would not have exercised its discretion to grant relief to the Wallises.
Given the past relationship between the Wallises and their daughter, the court was not satisfied that the Wallises could be trusted to change their ways if allowed to live in the house for life.
Court grants parents compensation for underpayment of purchase price
Mr and Mrs Wallis also asked the court to order that they be financially compensated. This was on the basis that the transaction with their daughter resulted in her holding the title to the property, without paying the full value to acquire it.
The Wallises argued that the home was acquired by their daughter with a common intention (the shared occupation of the home) which had broken down. It would be inequitable for their daughter to retain the benefit of the whole of the home.
The Wallises said that there was a constructive trust over the home. This trust secured their contribution to the home, namely the equity that they had in the home immediately before it was purchased by Mrs Rudek.
The court agreed with this argument and awarded the Wallises equitable compensation.
The compensation was calculated as the difference between the value of the home and the amount actually paid by Mrs Rudek. The bank valuation was taken to be $950,000. $840,000 was actually paid by Mrs Rudek. Therefore, the compensation to be paid was $110,000, indexed for inflation.
The court suggested that Mr and Mrs Wallis could instead have sued Mrs Rudek under the contract for sale of land for the unpaid purchase price, namely $210,000.00 plus interest. They refused to do so. The court confessed to being mystified.
Court highlights poor judgement of conveyancer
The court noted that the conveyancer had put herself in an impossible position by seeking to act for both parties. The parties’ interests were clearly in conflict and they had not reached agreement on a pivotal element of the deal.
The daughter and parents should have had separate legal representation.
Always get independent legal advice and make agreements in writing
This case highlights the importance of always ensuring agreements are made in writing and signed by all parties, even if those agreements are with family members.
In addition, always obtain truly independent legal advice before entering into agreements involving your valuable assets, even if those agreements are with family members.
Parents apply for stay of order to vacate due to Covid-19
Mr and Mrs Wallis have lodged an appeal of the Supreme Court’s decision and continue to seek an order that they can live in the home for life.
In the meantime, they were required by the initial judgement to vacate the premises by 2 April 2020.
Rather than organise themselves for this eventuality, they applied to the Supreme Court for a stay of the order to vacate (Wallis v Rudek (No 3) [2020] NSWSC 338).
The Wallises, who are elderly and suffering from various health conditions, argued that they had to continue living in the home in order to self-isolate and protect themselves from Covid-19.
They also argued that irrespective of Covid-19, they should be able to stay in the house while they await the hearing of the appeal.
The court rejected the Wallises’ application for a stay. The court also ordered them to pay their daughter’s legal costs.
The court’s reasons included that there was alternative accommodation available.
Also, the Wallises were taking risks in relation to Covid-19 in going shopping, to church and to court. These risks were no different to the risks taken by searching for alternative accommodation.
In addition, the Wallises had taken no steps to comply with the court order to vacate the premises, despite having had ample time to do so.
Neither were they prepared to pay any compensation to Mrs Rudek should they continue occupying the property while the appeal is pending.
The court also had concerns that the parents’ behaviour towards Mrs Rudek and her family continued to be hostile and unacceptable.
Court is expensive, risky and public
There are several things we can learn from this case. One is that Covid-19 alone will not excuse you from having to comply with court orders.
A second point worth making is that contested court proceedings are expensive and involve some element of risk. There is no guarantee you will win.
It is also important to bear in mind that contested court proceedings in the Supreme Court will lead to personal matters being available for the public to view in all their detail.
Parents make second application for stay of order to vacate
On 2 April 2020, the day the Wallises were supposed to vacate the premises, they made a further application to the Court of Appeal for a stay of the order to vacate (Wallis v Rudek [2020] NSWCA 61).
This time, the Wallises offered an undertaking to the court that in the event they were unsuccessful on appeal against the original ruling, they would pay Mrs Rudek an amount for lodging. The amount would be $300 per week for the number of weeks they remained in possession of the property beyond 2 April.
The Wallises also undertook that until the appeal was determined, they would not remove the $124,287.75 that Mrs Rudek had paid into the court as compensation ordered in the original ruling.
Unlike the first court they asked, this court granted the Wallises’ application for a stay. The court’s reasons included the giving of the undertakings and the fact that there was a court order requiring the Wallises not to harass, intimidate, stalk or assault Mrs Rudek or her family.
It remains to be seen who will win the appeal. This will determine whether the Wallises gain a right to live in Mrs Rudek’s house for life, or whether she succeeds in having them evicted.