[2016] NSWSC 1204
Anderson v Anderson (2017) 94 NSWLR 591
[2017] NSWCA 131
Ecosse Property Holdings Pty Limited v Gee Dee Nominees Pty Limited (2017) 91 ALJR 486
[2017] HCA 12
Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640
[2014] HCA 7
Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411
Nadinic v Drinkwater (2017) 94 NSWLR 518
Source
Original judgment source is linked above.
Catchwords
[2016] NSWSC 1204
Anderson v Anderson (2017) 94 NSWLR 591[2017] NSWCA 131
Ecosse Property Holdings Pty Limited v Gee Dee Nominees Pty Limited (2017) 91 ALJR 486[2017] HCA 12
Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640[2014] HCA 7
Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411
Nadinic v Drinkwater (2017) 94 NSWLR 518
Judgment (2 paragraphs)
[1]
Judgment - EX TEMPORE
By a Summons filed on 27 November 2017, the plaintiffs seek the appointment of trustees for sale pursuant to s 66G of the Conveyancing Act 1919 (NSW) in relation to a property in Henry Street, Waverley (or Queens Park, as that part of Waverley is now known).
The plaintiffs are Sebastiano Gentile, Renata Gentile and Daniela Gentile. The defendant is Patrizia Gentile. The first and second plaintiffs are the elderly parents of the third plaintiff and the defendant. The parties are each the registered proprietors of a one-quarter share in the property. Until about late December 2017 or early January 2018 the parties held the property as joint tenants. The severance of the joint tenancy was effected after each of the plaintiffs lodged a Transfer Severing Joint Tenancy form in November 2017.
The first return date of the Summons was 2 February 2018. On that day an order was made for the defendant to serve any affidavits and any Cross-Claim by 9 March 2018. That did not occur. On 22 March 2018 the defendant filed, without leave, a Cross-Claim or Cross-Summons. The document appears to have been accepted in the Court Registry as a Cross-Summons even though it includes a statement of facts and assertions relied upon by the defendant. For convenience, I will refer to the document as the "Cross-Summons".
Gentile v Gentile [2018] NSWSC 574 | Case summary | Zoe
By the Cross-Summons, the defendant sought an order to the effect that the net proceeds of any sale of the property be applied in a manner that accords with what the defendant maintains is the true construction of a Deed entered into by the parties in relation to the property on 11 October 1984. It is alleged that on the proper construction of the Deed, if the property is sold whilst all four parties are alive, the parents are entitled to receive out of the net proceeds of sale the present value of their right to live rent-free in the property until the last of them dies, and the third plaintiff and the defendant are entitled to each receive half of the remaining balance of the net proceeds of sale. It was also alleged in the Cross-Summons that on the true construction of the Deed, the property cannot be sold over the objection of any party.
The plaintiffs do not dispute that the Deed was entered into, and apparently do not dispute that it is binding upon them.
The matter came before the Court for directions on 23 March 2018 and then on 29 March 2018. On the latter occasion, the matter was set down for hearing today with an estimate of one hour. That occurred in circumstances where it appeared that the only issues raised by the Cross-Summons were questions of construction of the Deed and, if the defendant's contention concerning the proceeds of sale was correct, questions of valuation of the first and second plaintiffs' interest in the property. It was envisaged that any questions concerning the value of those interests could be deferred, thus allowing the trial of all other issues to proceed today and be determined first.
However, on 20 April 2018, the defendant served an Amended Cross-Claim upon the plaintiffs. Leave to file that document was sought by the defendant this morning. The proposed amendments raise allegations that the plaintiffs, in taking steps to sever the joint tenancy, made false statutory declarations concerning the address at which the defendant could be contacted. It is alleged that the declarations caused the Registrar-General to sever the joint tenancy, and that the defendant did not and does not consent to the severance. Relief is sought under s 138 of the Real Property Act 1900 (NSW) to order the Registrar-General to cancel the relevant dealings and amend the register so that the joint tenancy is restored. It therefore appears that the defendant seeks to invoke the fraud exception to indefeasibility in order to overcome the severance which is currently reflected in the register. A similar claim was advanced unsuccessfully in Anderson v Anderson (2016) 18 BPR 36,253; [2016] NSWSC 1204, a decision which was affirmed on appeal in Anderson v Anderson (2017) 94 NSWLR 591; [2017] NSWCA 131.
The defendant thus seeks to raise allegations which, by their very nature, are required to be pleaded specifically and with particularity (see Uniform Civil Procedure Rules 2005 ("UCPR") rr 14.14 and 15.3; Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 at [45]-[46]). Moreover, the seriousness of the allegations requires that the plaintiffs be given a proper opportunity to answer them (see Nadinic v Drinkwater (supra) at [48]).
Following a discussion between Bench and Bar table concerning the various procedural questions that arise from the pursuit of the new claims, it was ultimately agreed by counsel that it would be appropriate for leave to be granted for the filing of the Amended Cross-Claim, and for an order to be made under UCPR r 28.2 to the effect that certain issues on the Cross-Claim would be deferred so as to allow the hearing to proceed today. This position was reached after counsel for the defendant informed the Court that there was no opposition to the appointment of trustees for sale as sought by the plaintiffs, but that the defendant wished to argue that the proceeds of sale should be dealt with consistently with the construction of the deed advanced in paragraph 7 of the Amended Cross-Claim. Accordingly, an order was made that the question of construction arising under paragraph 7 of the Amended Cross-Claim be decided separately from and before all other questions that arise, or may arise, on the Amended Cross-Claim.
The Summons is supported by the affidavit of Daniela Gentile sworn on 21 November 2017, the affidavit of John Xenos sworn on 28 March 2018, and a form of consent to appointment as trustees for sale signed by Gavin Moss and Mohammed Najjar.
The evidence establishes, amongst other things, that the first and second plaintiffs, who are elderly (at least 83 and 80 respectively), suffer from a variety of conditions which makes continued living in the property impractical, or at least far from ideal. The evidence further shows that it appears the first and second plaintiffs wish to move to different accommodation. A sale of the property was suggested to the defendant more than 12 months ago, but no agreement about a sale has been reached until now. As I have said, that agreement is subject to the defendant's right to contend that the proceeds of sale be dealt with in a particular manner.
Three of the four co-owners want the property to be sold, and seek relief under s 66G. In those circumstances, the Court has a discretion whether or not to make an order under the section. The relevant principles are well-established. They are referred to, for example, by the Court of Appeal in Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411 at [36]-[42]. In that decision, the Court of Appeal referred (at [38]) to the decision of White J, as his Honour then was, in Tory v Tory [2007] NSWSC 1078 at [42] where his Honour noted that an order under s 66G is almost as of right unless on settled principles it would be inequitable to allow the application.
Having regard to the position enunciated by counsel for the defendant this morning, there is, of course, no reason why the Court should not exercise the discretion under s 66G to appoint trustees for sale.
The Court was assisted by written submissions from counsel as well as further oral submissions in Court today concerning the question of construction raised by paragraph 7 of the Amended Cross-Claim.
The defendant submits that the terms of the Deed, in particular clauses 1 to 3, reveal that the Deed was an exercise in estate planning by the family to give the parents security of occupation of the property during their lives until they both died "and then to devolve the realty to their two adult daughters by joint survivorship". The defendant submitted that it was predicted that the daughters would probably outlive their parents "but the longest surviving of the four parties would nonetheless inherit the entire real property by joint survivorship" which was integral to the estate planning mechanism. The defendant further submitted that the Deed did not contemplate that the parents would live anywhere else while they were still alive and did not contemplate that ill health might induce them to want to live somewhere else. It was noted that the deed contained no provision for early termination due to parental ill health or changes in preferences.
The defendant then submitted, as I understood it, that the Deed, properly construed, contained restrictions against any severance of the joint tenancy and any sale of the property over the objection of any party. However, in view of the position taken by the defendant today, it may be taken that it is not submitted that there are thus good reasons to exercise the discretion under s 66G against the appointment of trustees for sale.
The defendant does maintain that, upon the proper construction of the Deed, read as a whole, the Court should conclude that the net proceeds of any sale should be distributed on the basis that the first and second plaintiffs (the parents) are entitled only to the value of a right to live rent-free in the property until the last of them dies, with the balance of the net proceeds being shared by the third plaintiff and the defendant (the daughters). This contention rests primarily upon the terms of clause 3 of the Deed which, it is said, evinces an intention that the parents would only have rights in the nature of a life interest, with the daughters having the interest in remainder. It was submitted that, at least in equity, the parents had only a life interest.
In approaching this question of construction it is appropriate to apply the well-known principles as expressed by the High Court in cases such as Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; [2014] HCA 7 at [35], and Ecosse Property Holdings Pty Limited v Gee Dee Nominees Pty Limited (2017) 91 ALJR 486; [2017] HCA 12 at [16]. The language of the Deed thus needs to be considered in conjunction with the surrounding circumstances known to the parties, and the commercial purposes or objects to be secured by the agreement. As submitted by the defendant, and as appears to be common ground, the surrounding circumstances include that the four parties to the Deed are immediate family members, the first and second plaintiffs being the married parents of the third plaintiff and the defendant.
The terms of the Deed are as follows:
THIS DEED made this 11th day of October, One thousand nine hundred and eighty-four
BETWEEN
SEBASTIANO GENTILE of 57 Birrell Street, Bondi Junction, Musician (hereinafter referred to as "Sebastiano") of the first part
AND
RENATA GENTILE of the same address, Catering Assistant (hereinafter referred to as "Renata") of the second part
AND
PATRIZIA MARGHERITA PAOLA GENTILE of the same address, Travel Agent (hereinafter referred to as "Patrizia") of the third part
AND
DANIELA MARCELLA LIDIA GENTILE of the same address, Tourist Guide (hereinafter referred to as "Daniela") of the fourth part
WHEREAS
the parties hereto have this day entered into an agreement for the purchase of the property known as 27 Henry Street, Waverley
AND WHEREAS
they are purchasing that property as joint tenants
AND WHEREAS
the parties jointly and severally have agreed to purchase that property on the condition that they enter into the covenants hereinafter contained
NOW THIS DEED WITNESSETH : -
During the period that Sebastiano and Renata are surviving then the subject property cannot be sold or the interests of any of the parties hereto be charged or encumbered without the consent in writing of each of Sebastiano and Renata being firstly obtained in writing.
During that period that either Sebastiano or Renata survives the other of them then the subject property cannot be sold or the interests of any of the parties hereto be charged or encumbered without the consent in writing of the survivor of them being firstly obtained in writing.
After both of Sebastiano and Renata have died then Patrizia and Daniela may deal with the property in such manner as they shall from time to time agree. In the event, however, of them not being able to agree upon the sale or other dealing with their interest in the property then in that event Patrizia shall give written notice to Daniela of the consideration which she requires to receive for her nett interest in the property and Daniela shall have a period of one calendar month to enter into a Contract for the purchase of Patrizia's interest in the property for that consideration. In the event of her not doing so then Patrizia shall have a like option for a further period of one calendar month to enter into a Contract to purchase the nett interest of Daniela in the property subject to suitable adjustments being made in respect of those nett interests. It is hereby expressly agreed that this covenant may be enforced in a Court of Law.
Notwithstanding anything aforesaid in the event of either Sebastiano or Renata remarrying or commencing to live with another person in a de facto relationship then in that event the consent of that person who has remarried or who is living in a de facto relationship shall not be required if all of the other surviving parties to this Deed desire to sell the property or their respective interest in the property or charge or encumber their interest in the property.
To more effectively enforce the provisions of this Deed each of the parties hereto hereby irrevocably appoints the others or the surviving others of them the Attorney of that party to exercise in the name of that party all rights, powers and remedies of that party expressed or implied herein in respect of the subject property and to do all things required to be done by that party and to execute all documents and to take actions necessary to enforce the provisions hereof.
Each of the parties hereto expressly covenants with the others of them that neither they nor their executors, administrators or permitted assigns shall take any action in a Court of Law or otherwise other than as is contemplated by the terms of this Deed.
IN WITNESSETH WHEREOF the parties hereto have hereunto set their hands and seals on the day and year first hereinbefore referred to.
I turn then to the language of the Deed. It is recited that the parties had entered into an agreement to purchase the property, and that they were purchasing the property as joint tenants. Clause 1 provides that whilst both parents are alive, the property is not to be sold, or any charges or encumbrances created, unless both parents provide their written consent. Clause 2 provides that where one parent survives the other, the property is not to be sold, or any charges or encumbrances created, unless the surviving parent provides their written consent. Clause 3 concerns the situation after both parents have died. The language seemingly assumes that the two daughters will then own the property, but whether that is assumed to be as a result of survivorship or the operation of testamentary instruments is not clear on the face of the Deed. Clause 4 concerns the situation if either parent remarries or commences living with someone else in a de facto relationship. In those circumstances, the consent of a parent who has remarried or entered into a de facto relationship is not required for any sale or charge or encumbrance of the property that is desired by the other surviving parties to the Deed. Clause 5 is directed to facilitation of enforcement of the Deed. Clause 6 contains negative covenants given by each party not to take any action, including court action, other than is contemplated by the terms of the Deed.
I do not think that the Deed can be simply characterised as an exercise in estate planning whereby the property would devolve to the two daughters by survivorship. The Deed contains the terms the parties agreed upon at the time the property was purchased. It is true that the parties purchased the property as joint tenants, but the Deed does not in terms place any restrictions upon the rights of the joint tenants to sever the joint tenancy. Whilst the language of clause 3 seems to assume that after both parents have died, the two daughters will own the property, as I have mentioned it is not clear whether that is assumed to be the outcome of rights of survivorship or rights under testamentary instruments. It is not necessary to decide whether the Deed, on its true construction, precludes the parties (including the parents) from taking steps to sever the joint tenancy. For present purposes only, I am content to proceed on the assumption, favourable to the defendant's contention, that it does preclude such severance.
However, it seems to me to be of some importance that clauses 1 and 2 expressly contemplate that the property might be sold before both of the parents have died. The only express restriction upon such a sale is that the written consent of the parents or the surviving parent is first obtained. I note that the language of clause 4 might be said to support the view that the consent of all parties to the Deed is generally required for various dealings, including a sale of the property. A suggestion to that effect was made by counsel for the defendant. However, it seems to me that the clear words of clauses 1 and 2, read with clause 4, demonstrate an intention that only the consent of parents who are living and have not remarried or entered into a de facto relationship is required for a sale (or creation of a charge or encumbrance). As submitted by counsel for the plaintiffs, clauses 1, 2 and 4 are not inconsistent; they can work harmoniously together.
I accept that clauses 1 and 2 effectively provide that the property will be available to the parents to live in during their lives, if they wish to do so, but the clauses also permit a sale of the property with their consent, or the consent of the survivor of them, subject, of course, to clause 4 to the extent that it operates. The Deed contains no restrictions upon the parents in respect of any decision whether to give or withhold their consent. It is not to the point that the Deed contains no provision for early termination due to parental ill health or changes in preferences. If, as contemplated by clauses 1 and 2, a sale of the property occurs with the consent of the parents or the survivor of them, the underlying subject matter of the Deed falls away.
In light of the provisions of clauses 1 and 2, I do not accept that the Deed contains a restriction against any sale of the property over the objection of any party. Those clauses provide that whilst either of the parents is alive, only their consent, or the consent of the survivor of them, is required in order for a sale to occur, subject, again, to clause 4. I might add that it seems to me that a sale of the property at the behest of the plaintiffs is not an action that would be restrained in reliance upon clause 6 of the Deed. In my view, it is not an action that is not contemplated by the terms of the Deed. On the contrary, a sale of the property with the consent of the parents is expressly contemplated.
I turn then to the defendant's argument that if the property is sold whilst all four parties are alive, the first and second plaintiffs are entitled to receive jointly out of the net proceeds of sale the present value of their right to live in the property rent-free until the last of them dies, with the third plaintiff and the defendant being entitled to each receive half of the remaining balance of the net proceeds of sale.
As noted earlier, the language of clause 3 seemingly assumes that the two daughters will, perhaps by reason of the rule of survivorship, together own the entirety of the property once both of their parents have died. It may be accepted that when the Deed was entered into the parties expected that outcome might eventually come to pass. They may even be taken to have contemplated that as a likely outcome.
However, reading the language of the Deed as a whole, I do not think that it should be concluded that the parties intended that the parents would have only life interests (or rights of residence for life) in the property. The parties recited that they were purchasing the property as joint tenants. The Deed contains no language to the effect that any of the parties would hold an interest less than an interest in fee simple. Whilst it is expressly contemplated in clauses 1 and 2 that the property might be sold whilst one or both of the parents was alive, the Deed is silent as to how the proceeds of any sale would be distributed amongst the co-owners. If the parties had intended the parents to have only life interests, it is likely that provision would be made to cater for such in the event of a sale. The absence of provision in that respect is more readily explained if the intention was that the proceeds would be distributed in accordance with the respective shares held by the co-owners at the time of sale.
I am unable to accept that the Deed, in particular clause 3, evinces an intention that the parents would hold interests of a lesser nature than those to be held by the daughters. If anything, clauses 1 and 2 suggest that the parents were to have greater rights, or enhanced rights over and above those that would ordinarily be enjoyed by a co-owner. In my opinion, the defendant seeks to read too much into the Deed by virtue of clause 3. That clause operates only once both parents have died and to the extent that both daughters have ownership of the property.
Counsel for the defendant disclaimed any attempt to imply terms into the Deed. He submitted that the suggested terms are present in the expressed terms of the Deed when the whole of the Deed is considered. For the above reasons, I am unable to accept that argument.
In my opinion, the first and second plaintiffs are not merely the holders of life interests or rights of residency. The Deed does not provide for rights or interests of that character. Moreover, such rights or interests cannot, in accordance with the well-established principles for the implication of terms in written agreements, be implied from the terms of the Deed. Terms to that effect fail, at least, the test of necessity. I agree with the submissions made by counsel for the plaintiffs in this regard.
The Court therefore declines to make the declaration sought in the Amended Cross-Claim that rests upon the construction of the Deed advanced in paragraph 7 of the Amended Cross-Claim. The claim made in paragraph 7 of the Amended Cross-Claim and prayer for relief 1 will thus be dismissed.
The Court will further make an order in accordance with paragraph 1 of the Summons, save that the trustees to be appointed will be Gavin Moss, registered liquidator and official liquidator, and Mohammed Najjar, chartered accountant. The Court will also make orders 2, 3 and 4 as sought in the Summons.
[2]
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Decision last updated: 02 May 2018