Legal update: Manieri v Cirillo

1 Aug 2015


Following a failed assets for care arrangement with her son, an older woman is entitled to an equitable lien and an award of costs under a pro bono costs agreement. 

On 17 September 2014, the Supreme Court of Victoria Court of Appeal handed down a decision in relation to an assets for care arrangement, in which Mrs Cirillo sought to establish an equitable interest in property held in the name of her son, Mr Manieri, and his partner. The case provides an interesting analysis of equitable interests that may accrue in assets for care arrangements. It also supports the view that it is open to the court to make a costs order in favour of a party receiving pro bono assistance and subject to a conditional costs agreement.

Background

Mrs Cirillo (the respondent) sold her home, contributing $240,000 towards her son’s mortgage. Her son and his partner (the appellants) undertook to allow Mrs Cirillo to live with them indefinitely and care for her. When the money was exchanged, Mr Manieri took his mother to see his solicitor, who drafted an agreement as follows:

A. In consideration of the gift of $240,000 by the Donor to the Donees the Donees hereby agree to look after and take care of the Donor for the rest of her lifetime in a manner that is just and appropriate in all the circumstances.

B. The Donees agree to allow the Donor to reside in their home at [address] or any other principle place of residence they may own free of rental or any other charges.

The relationship between the respondent and the appellant’s broke down, making co-habitation impracticable. When the respondent asked for her money back, the appellant’s refused on the basis that it was a gift.

Mrs Cirillo brought proceedings claiming that she was entitled to a constructive trust over the appellant’s property or, in the alternative, to a right of repayment with an equitable charge or lien as security for repayment. Alternatively, she sought damages for repudiation of agreement.

At the first instance, Randall AsJ found that the written agreement did not comprise the entirety of the parties’ agreement. His Honour admitted evidence of a prior oral arrangement between the parties that the proceeds of sale would be applied to the mortgage, and ultimately found in favour of Mrs Cirillo.

On appeal, the appellants argued that the trial judge erred in admitting evidence of the prior oral arrangement because:

  1. It was apparent the parties intended the written instrument to be the sole repository of their agreement; and
  2. The terms of the oral arrangement contradicted, or were otherwise inconsistent with, the terms of the written agreement and should be excluded in accordance with the parole evidence rule.

In their joint judgment, Nettle AP and Hansen and Santamaria JJ found in favour of Mrs Cirillo, holding that her interest was best satisfied by an equitable lien or charge to secure repayment of her money with interest.

The November 2014 LIJ includes a useful summary of the judgment in relation to the Court of Appeal’s consideration of whether Mrs Cirillo had an equitable interest in the property.

Costs in pro bono litigation

At the first instance, a costs order was made in favour of Mrs Cirillo. The appellants argued that the judge erred because Mrs Cirillo was represented under a pro bono scheme and had no obligation to pay costs. They argued that an order for costs offended the indemnity principle, which requires that a party ordered to pay the other party’s costs is legally obliged to pay his or her solicitor only the costs they are legally obliged to pay their solicitor.

On appeal, their Honours found in favour of Mrs Cirillo. The fee agreement between Mrs Cirillo and her lawyers meant that her liability to pay legal costs was contingent on a costs order being made in her favour. Their Honours cited favourably the obiter comments of Santow JA in Wentworth v Rogers (2006) 66 NSWLR 474, who stated:

“The general law governing the indemnity principle with its emphasis on flexibility is, in my opinion, quite capable of accommodating conditional fee agreements of this kind. It should do so recognizing the importance of such agreements in promoting access to justice which may otherwise be unaffordable.”

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