Macfarlan JA, Leeming JA, White JA, Hallen J, MacFarlan JA
Catchwords
[1937] HCA 29
Cope v Keene (1968) 118 CLR 1
[1968] HCA 53
Corin v Patton (1990) 169 CLR 540
Source
Original judgment source is linked above.
Catchwords
[1937] HCA 29
Cope v Keene (1968) 118 CLR 1[1968] HCA 53
Corin v Patton (1990) 169 CLR 540
Judgment (6 paragraphs)
[1]
Background Facts
Durcan and her then husband, Bayram, purchased the property in February 1980. Durcan has lived in the property from the time that purchase was completed in about March 1980. Bayram conducted a travel agency business. The primary judge found that in 1990 Durcan and Bayram appeared to have given a guarantee secured by a mortgage to the ANZ Bank in relation to the debts of the travel agency. By 1994 the travel agency business had failed. In September and October 1994 both Bayram and Durcan became bankrupt on their own petition. The ANZ Bank agreed to accept payment of $110,000 to discharge its mortgage over the Property and settle court proceedings commenced by ANZ in May 1994. Ertunc and Erdinc raised the money and purchased the Property so that their mother would have a house in which to live. Durcan and Bayram separated in January 1995 and were divorced in 1997. Bayram died in late 2012.
Seda married Erdinc in December 2004. He worked with the NSW Police Force until he retired in late September 2011 after having sustained an injury in June 2009. He had attained the rank of Detective Sergeant. His older brother Ertunc qualified as a lawyer in 1996 and practised as a barrister from 2004.
The primary judge noted that by the time of the hearing it was not disputed that Ertunc and Erdinc held the legal and beneficial title to the Property after its purchase in 1994 until the events of late 2011 (at [53]). They borrowed most of the money that was needed to purchase the property and discharged the loan themselves. The primary judge recorded (at [60]) that both Ertunc and Erdinc borrowed additional funds for uses unconnected with the Property using it as security. Durcan had uninterrupted sole possession of the Property. She paid most of the outgoings and made some improvements. She had unfettered occupation and control of the property (at [63]).
Isin v Ozen [2017] NSWCA 316 | Case summary | Zoe
On 16 August 2004 Ertunc and Erdinc granted a mortgage to St. George Bank Limited. By November 2011 the St. George Bank remained as the registered mortgagee. The mortgage debt had been reduced by 16 December 2011 to $1,872.91 (at [68]).
It was common ground that in late 2011 Durcan asked Ertunc and Erdinc to transfer the title to the Property into her name. The genesis of that request was that a close friend of Durcan had told her that if something happened between any of her children and his spouse she could be left without a home as the Property was not in her name. Durcan told Ertunc and Erdinc that she did not want to take that risk (at [72]).
On 3 November 2011 Ertunc sent an email to Mr Candan Koyuncu, a solicitor of the firm MCK Lawyers, in which he said:
"My brother and I want to transfer our jointly owned property to our mother. The debts have all been paid off (I think I owe about $1500 - but this can be paid as part of the conveyance). We do not want to get any payment for the house as it is a gift to mum, but we understand that the Government will charge us stamp duty regardless.
Can you advise what your costs will be, and how much stamp duty we might expect to pay? I can provide some details to you now:
Vendors: Ertunc & Erdinc Ozen
Purchaser: Durcan Isin
Address: [xx] Jean St Seven Hills
Please let me know what you need me to do, and of course send me a costs agreement."
Mr Koyuncu replied that the firm did conveyancing, that Buse (employed solicitor, Ms Buse Komuksu) enjoyed doing the work and he would supervise it. He said it would be a simple matter of preparing a transfer and discharging the mortgage and said that Ertunc would not be charged. Ertunc replied:
"Please charge me as I would be paying if I went elsewhere."
On 14 November 2011 Mr Koyuncu of MCK Lawyers wrote to Ertunc to confirm his instructions. The heading of his letter records the relevant matter as:
"ERTUNC YASAR OZEN & ERDINC OZEN transfer of ownership to DURCAN ISIN
Premise: [xx] Jean Street, SEVEN HILLS NSW 2147 (also known as [xxx/yyyyy])"
At this point at least, MCK Lawyers were acting for Ertunc and Erdinc on Ertunc's instructions.
Ertunc replied on 18 November 2011. He said that:
"2. I am keen to proceed with the transfer of the house to my mother. I would like your firm to handle the conveyance.
a. The house is a gift, there will be no money exchanged, but I understand that the Govt will still want a stamp duty slice, please advise how much
b. It is in my name, and my brother's - I owe about $1500- on it, and can clear that before the transfer if that's easier
c. Both Din (my brother) and I have lived in that house for extended periods of time, I can give you precise dates if needed
…
e. Please send me a costs agreement etc and let's get underway"
Later that day Ertunc sent a further email to Mr Koyuncu asking:
"Will mum have to have SD paid before the transfer occurs? I expect she will take out a loan to cover the cost, so she needs to know whether to do this before we move on the conveyance".
Ms Komuksu replied saying:
"The stamp duty on the transfer must be paid at settlement. A settlement date has not been determined, however generally banks take 4-6 weeks to process a discharge of mortgage. So, once the bank is ready and the valuation is conducted we will be ready to proceed with settlement."
In his letter of 14 November 2011 Mr Koyuncu had enclosed a transfer document (the "2011 Transfer"). He said:
"We enclose here under the transfer document. We request that the vendors sign the document in the presence of a witness, where marked and return the document to our office for filing."
In his email of 18 November 2011, Ertunc said that he would have the document signed over the weekend.
Erdinc and Ertunc executed the 2011 Transfer as transferors and their signatures were duly witnessed. Durcan was the transferee. The form of transfer stated that:
"The transferor acknowledges receipt of the consideration of $1 and as regards the abovementioned land transfers to the transferee an estate in fee simple."
The 2011 Transfer was not signed by Durcan. It was sent to Ms Komusku. She signed the transfer as solicitor for Durcan.
Seda does not challenge Ms Komuksu's authority to sign the 2011 Transfer as solicitor for the transferee, although there is no evidence that MCK Lawyers were retained to act as solicitor for Durcan otherwise than through the instructions given by Ertunc. The primary judge found, and it is not disputed, that MCK Lawyers acted as solicitors for Durcan. At [87], he found that:
"In late November 2011, Ertunc provided the original Transfer, signed by him and by Erdinc, to the firm of solicitors acting for Durcan, to enable its registration."
But that is not to say that MCK Lawyers were not also acting for Ertunc and Erdinc.
At this time it was anticipated that Durcan would borrow the stamp duty required to be paid to enable the 2011 Transfer to be registered. She applied to Westpac Banking Corporation for a loan of between $20,000-$25,000. The primary judge recorded that Ertunc explained that this amount was sought in order to cover the possibility that the value of the Property would be more than what was thought ($400,000) thereby increasing the amount of the stamp duty and to ensure that any associated legal costs could be met (at [91]). Durcan refused to borrow the money to pay stamp duty from her sons.
The loan was refused. Durcan refused offers of assistance from Ertunc saying she did not wish to be a further burden on her sons (at [92]). A further attempt by Ertunc to arrange a loan through a bank that he would guarantee was also unsuccessful.
Ertunc deposed that in late February 2012 he spoke with Mr Koyuncu and asked him to look at other options to protect Durcan's "interest" in the Property. In April 2012 Mr Ozenc Koyuncu (Candan's partner at MCK Lawyers) informed Ertunc that Ertunc and Erdinc could grant their mother a life estate in the Property without having to pay stamp duty. Mr Ozenc Koyuncu drafted a deed granting Durcan a life estate. At some time between 19 April and 9 May 2012 Mr Ozenc Koyuncu advised Ertunc that he had spoken with the Land Titles Office and the Office of State Revenue. The Office of State Revenue had advised that no stamp duty was applicable on a transfer creating a life estate. The Land Titles Office advised that a life estate could be created by completing a transfer form (Form 01T) and stating that the estate transferred was a life estate.
Mr Ozenc Koyuncu further advised that the mortgage to St. George Bank would need to be discharged. In January 2012, Mr Candan Koyuncu had advised Ertunc that the amount then required to discharge the St. George Bank mortgage was $1,872.91 plus certain fees payable on settlement, including a discharge fee.
[2]
Deed Granting Life Estate
On 12 May 2012 Mr Ozenc Koyuncu, at Ertunc's request, visited Durcan and explained the draft deed that he had prepared that granted her a life estate in the Property. She signed the document entitled "Deed Granting Life Estate" (the "Deed") and her signature was witnessed by Mr Koyuncu. Although called a deed, it was executed as an agreement. Nothing turns on this. The Deed was executed by Erdinc and Ertunc on 20 June 2012. Erdinc and Ertunc were described as the "Grantor" and Durcan was called the "Grantee". The Deed contained the following recitals and relevant provisions:
"INTRODUCTION
A. The Grantors are the registered proprietors of the property located at [xx] Jean Street Seven Hills NSW 2147 being lot [yyy] in deposited plan [zzzzz] ('The Premises')
B. The Grantors wish to grant to the Grantee a life estate of the premises for the term of the Grantee's life.
IT IS AGREED
1. INTERPRETATION
1.1 In this Agreement, unless otherwise indicated by the context:
…
(b) headings are for convenience only and do not affect interpretation of this Agreement;
…
(g) a reference to a party to a document includes that party's legal personal representatives, successors and permitted assigns;
...
2. CONVEYANCE
2.1 In consideration of the sum of $1 paid to the Grantors by the Grantee (the receipt of which sum the Grantors hereby acknowledge) the Grantors hereby convey to the Grantee the premises to hold the same unto and to the use of the Grantee during the remainder of the life of the Grantee.
3. RESPONSIBILITIES OF THE GRANTEE
3.1 The Grantee must take out and maintain in place an insurance policy covering the premises for damage, loss or destruction during the term of the life tenancy.
3.2 The Grantee must pay for Council and Water rates during the term of the life tenancy.
3.3 The Grantee must maintain the premises during the term of the life tenancy. This includes keeping the premises in good condition and working order.
4. TERMINATION
4.1 The life estate granted to the Grantee will terminate upon the death of the Grantee.
4.2 The estate in the remainder will revert to the Grantors upon the death of the Grantee.
…
10. WHOLE AGREEMENT
In relation to the subject matter of this Agreement:
(a) this Agreement is the whole agreement between the parties; and
(b) this Agreement supersedes all oral and written communications by or on behalf of any of the parties.
…
13. NO MERGER
Nothing in this Agreement, merges, extinguishes, postpones, lessens or otherwise prejudicially affects any right, power or remedy that a party may have against another party or any other person at any time."
On 18 May 2012 Ms Komuksu advised Ertunc that the St. George Bank was ready to discharge the mortgage on the Property. She provided Ertunc with the payout figure and asked him to transfer $2,298.50 into MCK Lawyers' trust account in readiness for the discharge of mortgage and "filing of the life estate".
Ertunc provided those funds on 29 May 2012. MCK Lawyers' trust ledger records the receipt in the matter described as "Re: Ertunc Ozen gift to mother". At this stage Ertunc and Erdinc had not signed the Deed nor the new transfer form to be lodged with Land and Property Information.
On 18 June 2012 Ms Komuksu attended a settlement with the St. George Bank. She paid $1,928.29 to the bank, received the certificate of title to the property and, as the primary judge found, presumably, a discharge of mortgage. Ms Komuksu handed the certificate of title to Mr Ozenc Koyuncu.
On or about 20 June 2012 Ertunc and Erdinc each signed the transfer in registrable form "transferring" a life estate to Durcan (the "2012 Transfer") and they signed the Deed. At some point, which is not established in the evidence, Mr Ozenc Koyuncu signed the transfer as solicitor for the transferee.
On the afternoon of 20 June 2012 Erdinc sent a text message to Ertunc saying:
"This is a question that I didn't want to ask in front of Seda. Can Mum take out a loan against the house?"
Ertunc replied:
"No, like I said this is not an asset for her. It is simply a right not to be kicked out."
The primary judge found (at [129]) that on 3 July 2012 the registered mortgage in favour of the St. George Bank was discharged, following which the Bank released the certificate of title to Durcan's solicitors. However, as his Honour had earlier found, those events took place on 18 June 2012. The primary judge found that on 3 July 2012 the solicitors caused the certificate of title to the Property to be lodged at the Land Titles Office in order to register the discharge of mortgage and the transfer creating the life tenancy. A new certificate of title recording Durcan as the holder of a life estate and Erdinc and Ertunc as holders of the estate in remainder as tenants-in-common in equal shares and showing no registered mortgage was issued on 3 July 2012.
Presumably the certificate of title was returned to MCK Lawyers, but the current whereabouts of the certificate of title is unknown.
Erdinc died on 5 March 2013.
On 27 June 2013 MCK Lawyers wrote to solicitors retained by Seda advising that they acted for Ertunc and Durcan and asserting that the Property was held on trust for Durcan by Ertunc and Erdinc. On 19 December 2013, Durcan and Ertunc brought proceedings to establish that claim. The primary judge noted that they put their claim in three ways as follows (at [144]):
"(a) firstly, pursuant to the principles set out in Corin v Patton by (amongst other things) providing Durcan with an executed Transfer in registrable form in November 2011 and authorising the release of the Certificate of Title of the Property to her solicitors in July 2012, Ertunc and Erdinc gave the legal title to the Property to Durcan, such that equity would enforce the gift;
(b) secondly, in the alternative to sub-paragraph (a) above, that Seda is estopped, by reason of an estoppel by convention, from denying that Ertunc and Erdinc held the legal title to the Property on trust for Durcan; and
(c) thirdly, in the alternative to both paragraphs (a) and (b) above, that Seda is estopped, by reason of an estoppel by representation and/or a promissory estoppel, from denying that Ertunc and Erdinc held the legal title to the Property on trust for Durcan."
The primary judge dismissed all three bases upon which the plaintiffs put forward their claim. His Honour's rejection of the second and third bases is not the subject of the appeal.
[3]
The Primary Judge's Reasoning
The primary judge held that to effect a gift in equity the donor must do everything that, according to the nature of the property, is necessary to be done in order to transfer the property and render the gift binding on the donor. In the case of a gift of land held under the Torrens system, this means that the donor must execute and deliver the requisite form of transfer that can be registered (at [158], [160]), and give the donee control of the certificate of title to permit registration of the transfer (quoting Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555; [1937] HCA 29 at 602-603 (per Dixon J) and Corin v Patton (1990) 169 CLR 540; [1990] HCA 12 at 560-561 (per Mason CJ and McHugh J) and 583 (per Deane J)). His Honour held that in November 2011 Ertunc and Erdinc had not done all that was required to be done by them to transfer the legal title of the Property to Durcan. Although they had signed a transfer of the estate in fee simple to Durcan (being the 2011 Transfer), the mortgage debt remained unpaid and the certificate of title remained with the registered mortgagee (at [168]). They had not equipped Durcan or her solicitors with the means of securing registration of the signed transfer (at [169]). Ertunc and Erdinc did not ever intend to hold the Property on trust for Durcan (at [172]-[173]). It was their intention that Durcan would not acquire the Property until the stamp duty had been paid and a transfer registered (at [175]). Neither of those things occurred. They continued to treat the Property as their own, including by entering into the Deed in 2012 (at [174], [177]). In entering into the Deed it was Ertunc's and Erdinc's intention only to confer a life estate on Durcan. Although the mortgage debt was paid off and the certificate of title was provided to the solicitors, this was done not for the purpose of registering the 2011 Transfer, but to enable registration of the 2012 transfer conferring a life estate on Durcan (at [182]). The primary judge found that there was no evidence that Durcan's solicitors were requested to retain the 2011 Transfer in order to enable it to be registered after the discharge of mortgage was registered and once stamp duty had been paid, and there was no evidence that the solicitors were ever given instructions to lodge the 2011 Transfer for registration (at [183]). There was insufficient evidence to establish any agreement that when Durcan had the necessary funds to pay the stamp duty she could register the 2011 Transfer (at [184]).
The primary judge found (at [184]):
"Indeed, the terms of the Deed suggest that she could not do so since title to the Property was to revert to the grantors, namely Ertunc and Erdinc, upon the death of Durcan."
The appellants contend that this finding was wrong.
The primary judge found (at [191]):
"This does not mean, however, that at a later time, Ertunc and Erdinc could not have transferred the remainder interest to Durcan if they had chosen to. Had the occasion arisen, there would have been no impediment to Ertunc and Erdinc consenting to Durcan lodging a Transfer of the fee simple from them to her together with the Certificate of Title. However, that would have required their further instructions."
[4]
Appellants' Contentions
In their written submissions, Durcan and Ertunc submitted that:
"55. The grantor remains free to deal with the estate in fee simple in reversion as he or she sees fit and in such manner as he or she sees fit. The two estates remain separate until either the life tenant dies (at which time the life estate comes to an end and the right to possession reverts to the grantor or his or her heirs) or the estates merge. (Butt, Land Law (6th Ed, Law Book Co, Sydney 2010) [10.34] - [10.35]; Heydon, Leeming and Turner, Meagher, Gummow & Lehane's Equity Doctrines & Remedies (5th Ed, Lexis Nexis Butterworths, Sydney 2015) [41-010].)
56. Hence the grant of the Life Estate is not inconsistent with a gift, effective in equity, of the fee simple. The estates are different. There is no inconsistency between the Life Estate and the gift of the reversionary interest in, or of, the fee simple (as the case may be once stamp duty could be paid).
…
60. As with old system land, the registered proprietors of a life estate and the corresponding reversionary or remainder estate in fee simple are free to deal with their respective separate and distinct interests as they see fit and may hold those interests subject to any number of personal rights arising from those dealings. There is no conceptual difficulty with the proposition that Durcan could at the same time be the holder of a registered life estate in the Property and have an equitable claim on Ertunc and Erdinc in respect of the reversionary estate in fee simple in the Property that was registered in their names. In short, neither the Life Estate nor the Deed was inconsistent with an intention on the part of Ertunc or Erdinc to make a gift of the reversion to Durcan. That removes the foundation of his Honour's reasoning in J[177]ff."
Durcan and Ertunc submitted that as at 18 June 2012 in equity the gift of the fee simple was complete because all that was required for Durcan to perfect a transfer of the legal title of the fee simple was her registering the 2011 Transfer, once she was able to pay the stamp duty. They argued that the Deed and the 2012 Transfer carved out a life estate from the fee simple, but from 18 June 2012 (when the certificate of title was obtained) the fee simple was held beneficially for Durcan until she was in a position to register the transfer of the fee simple. The appellants argued that the primary judge was wrong in concluding that the Deed precluded a transfer of the reversionary estate in fee simple to Durcan.
They also argued that the text messages of 20 June 2012 were between donors, and were not a communication to the donee. For that reason, they submitted that it was not open to the primary judge to "take the text messages out of context" because they were only relevant to showing their intention during the period of the life estate, which was not inconsistent (so it was submitted) with their "objective intention" to make a gift of the fee simple.
[5]
Consideration
For Durcan to establish that she is beneficially entitled to the whole of the fee simple estate she must establish that Ertunc and Erdinc made a gift of that estate to her that was effective in equity before Erdinc's death. To do that Durcan was required to establish that Ertunc and Erdinc intended to make a gift to her of an estate in fee simple and that they had done all that was necessary on their part to complete that gift (Corin v Patton per Mason CJ and McHugh J at 558-559, per Deane J at 582).
It was common ground before the primary judge and on appeal that if, after execution of the Deed and the execution of the transfer in registrable form of a life estate to Durcan, Ertunc and Erdinc still intended to transfer an estate in fee simple to Durcan, and if the solicitors holding the certificate of title could have provided it to Durcan without any further consent from Ertunc and Erdinc, Durcan could have acquired an estate in fee simple by paying the stamp duty on the transfer and lodging the 2011 Transfer of the estate in fee simple for registration. This question was not the subject of argument. It may have been assumed that, if necessary, Durcan could have executed an instrument surrendering her life estate in order to become registered as proprietor of an estate in fee simple.
If the appeal turned on this question I would not be content to proceed on the basis that this assumption was correct without further argument. Under s 36(6)(b)(iii) of the Real Property Act 1900 (NSW) a dealing is deemed not to be in registrable form unless the dealing is in the "approved form". What forms are approved is a matter not reasonably open to question and is capable of verification by reference to the website maintained by Land and Property Information (now NSW Land Registry Services). Hence judicial notice can be taken of what forms are approved pursuant to s 144(1)(b) of the Evidence Act 1995 (NSW). It may be that the required approved form for Durcan to have become registered as proprietor of an estate in fee simple (having already been registered as proprietor of a life estate) would be a duly executed transfer by Ertunc and Erdinc to her of their estate in remainder. That would enable her to become registered as proprietor of an estate in fee simple as a result of the merger of her life estate and the estate in remainder. No such transfer was signed.
For the reasons which follow it is not necessary to pursue this question. Even on the assumption that Durcan as the registered proprietor of a life estate could have become the registered proprietor of the estate in fee simple either by lodging for registration the 2011 Transfer with the certificate of title, or by lodging for registration that transfer and some form of surrender of the life estate accompanied by the certificate of title, it does not follow that Erdinc and Ertunc's intention as at November 2011 to make a gift of an estate in fee simple was brought to fruition by completion of the gift. It is only upon completion of the gift that it is beyond the donor's power to recall it (Corin v Patton at 556 per Mason CJ and McHugh J).
Even if Ertunc and Erdinc at all times intended that Durcan should be beneficially entitled to an estate in fee simple and not merely a life estate, and even if Durcan could have used the 2011 Transfer to become registered as proprietor of an estate in fee simple, the gift was not complete because the solicitors did not have authority to use the certificate of title to register the 2011 Transfer without further approval from Ertunc and Erdinc.
Ertunc acted for himself and his brother in giving the initial instructions to MCK Lawyers that they wanted to transfer the property to Durcan (see [13] above). MCK Lawyers' letter of 14 November 2011 records their clients as being Ertunc and Erdinc. When MCK Lawyers obtained the certificate of title upon discharge of the St. George Bank's mortgage ([31] above) they held the certificate of title for Ertunc and Erdinc. They had authority to produce the certificate of title in order to allow the registration of the transfer of a life estate to Durcan. The primary judge correctly observed (at [182]) that the solicitors did not obtain the certificate of title for the purpose of registering the 2011 Transfer, but to enable registration of the 2012 Transfer granting a life estate to Durcan. The primary judge also observed, again correctly, that there was no evidence that the solicitors were ever instructed to lodge the executed 2011 Transfer for registration (at [183]).
It may be assumed that MCK Lawyers received the new certificate of title recording Durcan as the holder of a life estate and Erdinc and Ertunc as holders of the estate in remainder. The necessary inference is that the solicitors held the certificate of title for Ertunc and Erdinc (in respect of their estate in remainder) and for Durcan (for her life estate). Without instructions from Ertunc and Erdinc the solicitors could not have used the certificate of title in order to register the 2011 Transfer.
It is clear from the text messages exchanged on 20 June 2012 (set out at [33] above) that at that time Ertunc did not believe that Durcan was beneficially entitled to an estate in fee simple and Erdinc was unaware, but was seeking guidance from his legally trained brother as to what were Durcan's rights in respect of the Property. I do not accept the appellants' argument that the text messages only showed Erdinc's and Ertunc's intentions during the period of the life estate (see at [44]). If they believed and intended that notwithstanding the grant of the life estate, they could be expected to have acted in accordance with her wishes if she wanted to take a loan against the house. Ertunc's text message is explicit in stating his then understanding and intention.
This is inconsistent with their having given any authority at that time to MCK Lawyers to use the certificate of title to register the 2011 Transfer.
For this reason alone the intended gift of the fee simple absolute was not completed (Corin v Patton at 560-561 per Mason CJ and McHugh J, 567 per Brennan J, 581 and 583 per Deane J)
The primary judge did not err in concluding that in 2011 Ertunc and Erdinc intended that Durcan would not acquire the Property until the stamp duty had been paid and the 2011 Transfer registered. The primary judge was correct in concluding that at the time they signed the 2011 Transfer Ertunc and Erdinc did not intend "then and there" to part with the Property (Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 28-29; [1963] HCA 21 (per Windeyer J); Cope v Keene (1968) 118 CLR 1 at 6; [1968] HCA 53 (per Kitto J); Corin v Patton at 554 (per Mason CJ and McHugh J)).
Further, to the extent it is relevant, property in the transfer form did not pass to Durcan (Brunker v Perpetual Trustee Co Ltd at 605 per Dixon J; Cope v Keene at 6 per Kitto J).
In any event, it is common ground that the gift was not completed in 2011 because the certificate of title was still held by the mortgagee and Ertunc and Erdinc had not done what was necessary on their part to provide the certificate of title to Durcan.
Circumstances changed, and Ertunc's and Erdinc's intentions changed, before the certificate of title was obtained. The primary judge was correct in concluding that by entering into the Deed, Ertunc and Erdinc dealt with the Property on the basis that it was both legally and beneficially owned by them and that they agreed to convey a life estate in the Property to Durcan. Whilst it is conceptually possible for Durcan to be the holder of a registered life estate in the Property and at the same time be the beneficial owner of the remainder interest, that is not what the Deed provided for.
Execution of the Deed by Ertunc and Erdinc following its execution by Durcan may have conferred an equitable life estate on Durcan by reason of the consideration she provided for the Deed in agreeing (by clause 3, set out at [28] above) to take out and maintain an insurance policy covering the Property for damage, loss or destruction and by agreeing to pay council and water rates during the term of her life tenancy and agreeing to maintain the premises in good condition and working order. These promises, particularly the promise in cl 3.1 to take out an insurance policy, extended beyond the obligations that would in any event be imposed by law on the holder of a life estate.
If Durcan were a volunteer, execution of the Deed would not have been effective to create an equitable life estate because at that point Ertunc and Erdinc had not done all that was necessary on their part to transfer a life estate to Durcan.
On the other hand, as the obligations assumed by Durcan under the Deed provided valuable consideration for the grant of a life estate, she became entitled to an equitable life estate once Ertunc and Erdinc executed the Deed and delivered it to her or someone on her behalf.
On any view, by agreeing to grant a life estate to Durcan, Ertunc and Erdinc exercised their powers as legal and beneficial owners of the fee simple, by agreeing to grant a lesser estate (viz. the life estate) to Durcan.
The Deed does not declare that the reversionary interest was or was to be held beneficially by Durcan. Any such declaration of trust would have attracted stamp duty (Duties Act 1997 (NSW) s 9). The primary judge was right in saying that in entering into the Deed Ertunc and Erdinc dealt with the Property as beneficial owners by granting Durcan a life estate. That is so whether or not Durcan acquired an equitable life estate by giving consideration for the grant, prior to her obtaining a legal interest as holder of the life estate on registration of the transfer.
Clause 10 of the Deed (set out at [28] above) provided that the Agreement contained in the Deed was the whole agreement between the parties. Although cl 13 provided that nothing in the Agreement affected any right that a party might have against another party at any time, that does not affect the inference to be drawn from the Deed that Ertunc and Erdinc did not then intend to grant Durcan any greater interest than a life estate. It is common ground that at the time of execution of the Deed, there was no completed gift in equity of the absolute fee simple estate. It follows that by the time at which the appellants contend that the gift was completed, viz. on receipt by MCK Lawyers of the certificate of title (18 June 2012), there was no evidence that Ertunc and Erdinc then intended to make a gift of the fee simple. To the contrary, the text messages of 20 June 2012 between Ertunc and Erdinc show that that was no longer their intention.
In summary, there was no completed gift in equity of the absolute fee simple estate for two reasons. First, Durcan, or the solicitors acting for her, did not have authority to use the certificate of title to register the 2011 Transfer (assuming it was sufficient) without receiving further authority from Ertunc and Erdinc. Secondly, Ertunc and Erdinc never intended to make a gift of the fee simple estate to Durcan "then and there", and by the time the certificate of title was obtained their intention was only to give Durcan a life estate.
For these reasons, which substantially coincide with the reasons of the primary judge, the primary judge was correct in the conclusion to which he came. The appeal should be dismissed with costs.
[6]
Endnote
At general law Erdinc and Ertunc have an estate in reversion, as distinct from an estate in remainder. That is because, as owners of the estate in fee simple absolute, they granted Durcan a life estate which entitled her to a present right to possession. (Brendan Edgeworth, Butt's Land Law, (7th ed 2017, Thomson Reuters) at [3.270], [3.280]). In these reasons I refer to Erdinc's and Ertunc's estate as an estate in remainder to reflect the nomenclature in the certificate of title.
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Decision last updated: 12 December 2017