Attwood Marshall Lawyers Commercial Litigation Partner Charles Lethbridge looks at how courts treat claims by people who were promised a property but were never registered on title, and why informal arrangements about property ownership so often end up in dispute.
Interests in family farms and homes are frequently promised on the basis of a conversation or a hand shake. A parent tells a son he will inherit the farm if he stays and works it. One friend tells another that he will own half the property if he pays for renovations and council rates over many years a. Years later, the person who made the promise dies, sells or changes their mind, and the person who relied on it discovers their name was never put on the title.
Disputes of this kind regularly reach the courts, and they are not limited to farming families. Many of these disputes are between family members, friends or business partners relating to commercial or residential property. Australian popstar Vanessa Amorosi’s recent court case against her mother over the ownership of two properties, heard in the Supreme Court of Victoria, centred on an informal “kitchen agreement” said to date back to 2001.
We examined that dispute here: Singer Vanessa Amorosi’s family property dispute highlights risks of casual agreements.
Our commercial litigation team acts for aggrieved plaintiffs in similar matters, including rural clients, seeking orders for constructive trusts or resulting trusts over land on the basis of promissory or proprietary estoppel claims.
Why registered ownership does not always settle a property ownership claim
Registered title is strong evidence of ownership, and in most disputes it decides the matter. However, courts exercising their equitable jurisdiction can make orders for ownership in favour of person not registered on title if it would be unconscionable not to do so.
Dealings in land generally need to be in writing, but the courts can intervene where a person was, as an example, encouraged to act on a promise and suffers loss when it is withdrawn – for example after decades of work on the property, or payment of outgoings associated with the property costs, or contributions towards a deposit to purchase the property and contributions towards mortgage payments.
Such claims are usually made via a cause of action for promissory or proprietary estoppel, with the remedy sought being an order by a court in favour of the claimant for a constructive trust over the land and orders for the transfer of the property, or part of the property to a claimant.
Estoppel essentially stops a person from going back on a promise, or on an assumption they encouraged, where it would be unfair to allow them to do so. A claimant generally needs to show that:
- the landowner made a promise or assurance, or encouraged an assumption, that the claimant would have an interest in the property,
- the claimant relied on it, for example by working the land, contributing money or giving up other opportunities,
- the claimant suffered a detriment because of that reliance, and
- it would be unconscionable for the landowner, or their estate, to depart from the promise.
The High Court’s decisions in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Giumelli v Giumelli (1999) 196 CLR 101, the latter a family farming dispute, remain leading authorities.
The court can also award something other than exactly what was promised, because its aim is to prevent the unconscionable outcome. Depending on the evidence, this can mean a monetary payment, a lesser interest in the land or a different parcel. For example, in Giumelli, the High Court substituted a monetary award for a transfer of the land.
The result in any case depends on its facts, including the extent of the reliance by aggrieved parties and the effect on other people with an interest in the property.
A hypothetical example: how a dispute can unfold
Consider a hypothetical family farming dispute. A woman says that, many years ago, her parents told her the family property would one day be hers. She understood this to mean she would inherit it.
Over the following years, she lived on the property with her own family and kept working in the family farming business, often for little or no pay, while helping to maintain the land. Later conversations about improving the property reinforced her belief that it was hers to look forward to.
Family relationships then deteriorate. She is told that she and her family may have to leave, and that the property might need to be sold. Concerned that a sale would defeat her promised ownership, she seeks legal advice and asks the court to protect her claimed interest while the dispute is decided.
In this scenario, the parents could respond in several ways. They might say that what they told her was not a binding promise but a statement of present intention that could change at any time, and that any future gift would depend on the assets they held when the time came. They might dispute that she relied on those statements or suffered a detriment, pointing out that she and her family lived on the property without paying rent, rates or insurance.
Each of these arguments goes to an element of the claim.
The court would weigh the evidence of what was said, what she did in response and what she gave up, which is why records and witnesses carry so much weight.
Another, example we see regularly is where a friend or family member is promised by the owner of the property that they will give them half of the property if they pay the mortgage repayments and water and rates for 10 years. Such payments are made, however the owner has a change of heart after 10 years and reneges on the promise. We have acted for many aggrieved claimants in this situation and achieved success for them both via negotiated mediations and via the trial in the court.
How does a property ownership claim proceed?
- Advice and early attempts to resolve dispute by negotiation,
- Protecting the claimed interest by lodging a caveat over the property,
- Pleading case in court and preparation of evidence, and
- Negotiation and mediation or court trial.
Time limits can apply to equitable claims, and delay can make a case harder to prove as memories fade and records are lost. However as is the case with many equitable claims, there are no time limits such that claims can be made in relation to promises going back decades.
Where the person who made the promise has died, the claim is made against their estate and can overlap with disputes over the Will. Our estate litigation team works alongside commercial litigation in these matters.
The importance of written agreements
The Amorosi dispute and the claims we see in our practice share a common feature, which is that the terms of the arrangement were never properly recorded. Where the evidence is limited to recollections of conversations held years earlier, each person is likely to remember the agreement differently, and the court is left to decide whose account to accept.
The result is often a lengthy and costly legal battle between people who once trusted each other.
Claimants who are promised to receive property should seek advice on how to record that promise. Depending on the circumstances, this might be done through a property transfer, a contract, or provisions in a Will, and the person promising the benefit should obtain independent advice too. Our lawyers can assist.
People relying on a promise should ask for it in writing where possible and keep records of what they contribute.
The same principle applies when buying property with friends or family, where a formal co-ownership agreement can prevent disputes later.
We discuss this in our blog “Should you buy property with a friend or a relative?”
Attwood Marshall Lawyers – helping you resolve your dispute
If you believe you were promised an interest in land, or you are a landowner facing a claim, early advice helps you understand where you stand and which steps need to be taken first.
Property disputes can be complex and cost you a lot of time and money and stress if you do not resolve them effectively. Attwood Marshall Lawyers will help you understand your rights and the most appropriate course of action to take for your unique circumstances.
To book an appointment with our expert lawyers, please get in touch with our Commercial Litigation Department Manager, Georgia Trapp, on (07) 5506 8257, email gtrapp@attwoodmarshall.com.au, or free call 1800 621 071.
