In 2003 Adele Wheatley and her brother Gregory Salmon guaranteed the repayment of a loan by Gregory’s company Marketing Masters Qld Pty Ltd from Westpac of $550,000.
In 2005 the company went in liquidation and the Westpac debt was not paid. Adele sold her home and paid the debt which was then $640,000. Although Adele could have sued her brother for contribution, she chose not to do this.
In 2006 Adele demanded that Gregory buy her a home to make up for the loss of the home she sold to pay the debt. Gregory refused.
In 2010 Gregory and his wife decided to buy an investment property and Gregory said to Adele that she could live in the home rent free until she got on her feet provided, she pays the utilities and expenses associated with the property. Adele believed that the property was for her to compensate her for the earlier loss.
In 2018 Gregory and his wife Danielle served on Adele a notice terminating the tenancy. Adele commenced proceedings claiming that Gregory and Danielle were estoppel from denying that the property was hers.
In this case, Wheatley v Salmon [2022] NSWSC 395, Judge Kunz held that Adele had not been encouraged to believe that she had an interest in the property. She rather hoped that would be the case. His Honour found that there was no doubt that the property was purchased as part of an investment portfolio.
His Honour set out what must be established to prove that there is an estoppel by encouragement, namely:
- a representation by the defendant to the plaintiff that the plaintiff has or will have a proprietary interest in property owned wholly or partly by the defendant (representation)
- the plaintiff forms an assumption that he or she has or will have a proprietary interest in that property (assumption)
- the conduct of the defendant in making the representation causes or materially contributes to the formation of that assumption by the plaintiff (reliance)
- the plaintiff acts in change of his or her position in reliance on that assumption (inducement)
- the plaintiff would suffer detriment if the defendant were permitted to depart from the assumption (detriment)
- it would be unjust or unconscionable for the defendant to depart from the assumption (unconscionability)
His Honour held that on the facts Adele failed to prove the necessary elements
Unfortunately for Adele an action against Gregory for contribution was statute barred.
