KHOURY & ANOR v KHOURI

KHOURY & ANOR v KHOURI - [2006] NSWCA 184 - NSWCA 2006 case summary — Zoe

[53]

38 The Conveyancing (Amendment) Act 1930 (NSW), which inserted ss.23C, 23E, 54A and the definitions of "Assurance" and "Disposition" also repealed some (but not all) of the provisions of the Statute of Frauds: see the Schedule. Section 54A was amended in minor ways by Act 1970 No.52 Second Schedule (itself amended by Act 1972 No.41 Second Schedule): these amendments did not change its meaning. Section 23C(1)(a) relates to subjects earlier dealt with by s.3 of the Statute of Frauds, para.(b) relates to s.7, para.(c) relates to s.9; and s.23C(2) corresponds to a provision, to a similar effect but quite differently expressed, in s.8 of the Statute of Frauds. Section 54A relates to some words which formed a small part of s.4 of the Statute of Frauds; the rest of s.4, which made the same requirement for writing for various transactions not necessarily involving interests in land, continued in effect, and were repealed much later. The words of s.4 which antecede s.54A(1) were: … no action shall be brought … upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them; … unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized. The provisions inserted in the Conveyancing Act did not simply reproduce the earlier legislation; the language used was recast. Among the departures from the earlier language was the introduction of the words "or other disposition". Some words used are defined in the Conveyancing Act , so as to attract the defined meanings (unless the context or subject-matter otherwise indicates or requires - see s.7(1)). This affects "dispose", "convey", "disposition" and "assurance". It also affects "land", defined in s.7(1): Land includes tenements and hereditaments, corporeal and incorporeal, and every estate and interest therein whether vested or contingent, freehold or leasehold, and whether at law or in equity. There was no reference in the Statute of Frauds to the law relating to part performance: ss.23E(d) and 54A(2) do not represent earlier statute law. In my opinion ss.23C and 54A do more than simply re-enact and continue the previous statutory provisions, and they should be given effect upon the construction of their own language.

[59]

40 I deal first with submissions on the application of s.54A to the agreement. The Trial Judge refers (Judgment [46] and [49] Red 35-36) to the agreement in terms which are not the same as those in the finding in Judgment [26]. The Trial Judge refers at [46] to "a contract to declare a trust" and at [49] to "an agreement under which Peter promised to declare a trust in his favour." These expressions depart materially from the terms of the finding about the agreement at [26]: Peter's "promise to hold his one half share in the Johnston Road property for the benefit of (that is, on trust for) Bechara" took effect immediately. A promise in those terms, given for valuable consideration, has the immediate legal effect which would have been produced by a declaration of trust in lawyers' language. Judgment paras [46] and [49] do not contain findings of fact, which were very distinctly made in the earlier part of the judgment where findings of fact were appropriate, and those paragraphs express interpretations (in my respectful view misinterpretations) of facts which his Honour had earlier found. Subject to whatever difficulties ss.23C and 54A create, if Bechara sought equitable remedies controlling disposition of the half share, or requiring the half share to be transferred to Bechara, there would be no need for an intermediate stage in which Peter signed, or was compelled to sign a declaration of trust which was effectual under s.23C(1)(b). If Bechara sought to have the court compel Peter to execute a declaration of trust and not transfer the land to Bechara he would I suppose be entitled to that remedy, but the trust was fully constituted without any formal declaration. When the Trial Judge considered (at Judgment [46] to [50]) whether the Statute of Frauds applied he introduced a further stage which is not part of the findings of fact, in which Peter gave a contractual promise that he would declare a trust, which would be a different event at a later stage than the making of the agreement itself. Unless this stage is introduced, and making a declaration of trust is something which Peter promised to do in addition to his promise presently to hold his one half share for the benefit of Bechara, the Trial Judge's reasons cannot be understood.

[62]

[317] First, it is necessary to consider the effect of a declaration of trust and to determine whether it is a "disposition of land or any interest in land". The decision in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties is useful in this respect. Gibbs CJ said (at CLR 442; ATR 880; ATC 4131-32): The property comprised in the declaration of trust was the entire property in the land in question. Before the transfer was executed 29 Macquarie was the legal owner of the land; it had the whole right of property in the land, but had no separate equitable estate in it, for its equitable estate was absorbed in the legal estate … However, the property as to which the trust was declared - the property comprised in the declaration - was the whole right of property in the land, and not the bare legal estate, for it was not until the declaration of trust became operative that any separate equitable estate was created. [318] Aickin J said (at CLR 463; ATR 895; ATC 4145): It is a fundamental principle of both the common law and of equity that the holder of an estate in fee simple cannot be a trustee of that fee simple for himself for what he holds is a single estate, being the largest estate known to the law. [319] Mason J drew attention to the fact that stamp duties legislation proceeds on the "fiction" that a declaration of trust amounts to transfer of an interest in land. His Honour said (at CLR 457; ATR 891; ATC 4141): The statute proceeds upon the fiction or footing that the declarant imparts an equitable estate or interest to the beneficiary. Dixon CJ in Tooheys Ltd v Commissioner of Stamp Duties (NSW) observed: ' … that in applying the rates appropriate to a conveyance to a declaration of trust, you are required to treat the person declaring the trust as imparting property to the objects or purposes of the trust'. Mason J (and Dixon CJ), therefore, clearly thought that a declaration of trust amounted to something other than the imparting of an interest in the subject property.

[63]

[320] Brennan J said (at CLR 473-74; ATR 902; ATC 4151): Before the transfer it [the trustee] did not hold legal and equitable estates in the property: it held the legal estate alone. There was no equitable estate, for a person cannot be trustee for himself alone. [321] In Acorn v MCS Microcomputer Systems Pty Ltd (1984) 6 FCR 277; 4 IPR 214 Smithers J said (at 219), referring to an agreement to assign intellectual property for value (where such assignment had not yet taken place, and the operation of s 196(3) of the Copyright Act 1968 (Cth) (which requires an assignment of copyright to be in writing in order to be effective): It is normally the consequence of such a transaction that, value having been given, an equitable interest in the subject thereof arises in the party giving it: see Central Trust and Safe Deposit Co v Sinder [1916] AC 266 at 272; Fairweather v Fairweather (1944) 69 CLR 131 at 154. In such a case the equitable interest arises not by way of transfer but by activation in equity of the conscience of the receiver of the valuable consideration. A trust is created; there is not a transfer or assignment; there is no transmission of an equitable interest. The estate arising from a declaration a trust is appropriately spoken of as the estate created thereby; thus per Gibbs CJ in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 491; 12 ATR 874; 82 ATC 4125. It is appropriate also to speak of the fiction that by a declaration of trust the declarant 'imparts' to the beneficiary an equitable estate or interest upon which the Stamp Duties Act 1920 (NSW) operates; per Mason J in the last-mentioned case at 457. Where there is no transmission s 196(3) of the Copyright Act 1968 (Cth) is not involved. Similarly where there is an enforceable contract to transfer property the equitable interest arising in the proposed transferee is not the product of a transfer but an exercise in creation. [322] Smithers J therefore seems to have considered that in the case of both a declaration of trust and a trust arising consequent to an enforceable contract for value to transfer property the trust that is created involves no "transmission" of an interest, but exclusively a creation of an interest in the beneficiary. In my opinion this disqualifies a contract for the declaration of a trust from being a contract for the disposition of land to which s 54A would apply.

[69]

48 In ISPT Nominees Barrett J. at paras [317]-[322] shows the grounds for his Honour's opinion that a contract for the declaration of a trust is not a contract for the disposition of land to which s.54A would apply. Justice Barrett's treating this opinion as relevant and as a basis for decision in the present case is a product of his view that the contract as found is a contract by which Peter promised to declare a trust in Bechara's favour. As appears earlier, I am of the opinion that there is no such promise, and that, upon the contract as found, a trust arose upon the making of the agreement and passage of the consideration, without any declaration of trust being necessary or taking place. If it is necessary to consider whether and how the agreement as found falls within s.23C I am of the opinion that it falls within s.23C(1)(a) which operates to prevent an interest in land being created without writing, as well as to prevent an interest in land being disposed of except by writing. Whether or not a declaration of trust, or a transaction which the law construes as creating a trust is a disposition is something which it is not necessary to decide in order to discern that para (a) applies where a trust interest in land is created. In my opinion the passages in the judgments of Gibbs CJ and Aickin J. in DKLR Holding to which Barrett J. referred do not show or tend to show that a declaration of trust or other transaction which brought a trust into existence is not a disposition of an interest in land. Justice Mason observed to the effect that, when imposing a stamp duty, the legislation treated a declaration of trust as if it were a transfer of an interest in land, on which stamp duty is otherwise imposed. The interest in land which the creation of the trust conferred on the cestui que trust was not transferred or conveyed because it had no previous existence, but the legislature can subject that transaction to rates of duty appropriate to a conveyance if it chooses to do so, notwithstanding the property lawyer's clear understanding that it is not a conveyance at all, as appears from the passage of the judgment of Brennan J. cited in ISPT Nominees at para [320].

[88]

66 In 1992 Bishop Gibran Rimlawi was the Bishop of the Antiochan Orthodox Diocese of Australia and the leader of that church in Australia, and he continued to be until he died in January 1999. He was on terms of personal friendship with members of the Khoury family, and one of the brothers, Elias, was a priest of the Church and worked closely with the Bishop. The Bishop habitually provided financial assistance to members of the Church community whom he considered to be in need of it. In early 1992 (and it would seem before the agreement between Bechara and Peter) the Bishop gave Mr Bruce Rowan, a bank manager, a document in an envelope and instructed Mr Rowan not to open it "unless something happens to me". The document purports to be the Bishop's will dated 28 March 1992, although it is not executed according to required formalities. It includes a list of his assets. In this list para (k) is (Judgment [12] Red 22): k).- With Marina H. Khoury the sum of Twenty thousand dollars ($20,000-) to be paid at her convenience, and if needs be to be forfeited, as the Trustee Executor will determine. No Charges. Paragraph (k) appears to say, not completely clearly, that the Bishop had deposited $20,000 with Marina or lent it to her. Paragraph (l) is (Judgment [12] Red 22): l).- Half of the house on 93 Johnston, Bass Hill, where live the family of the priest Fr, Elais Khoury, the owner of the other half is Bechara Khoury. This house is still in the name of Marina and Peter her brother, but there is a certificate from her testifying that I paid her the price of half the property, and kept it in her name so we can save the exchange of Title. Marina and Bechara and Bruce Rowa [sic] know the truth of the matter. In this way the Bishop stated that on 28 March 1992 Bechara already owned half of the house and that the Bishop owned the other half; but did not state how these results came about, or how the Bishop knew them. The Trial Judge had regard to this document in the reasoning which led to acceptance of Bechara's evidence of the agreement.

[105]

77 The modern foundation of the doctrine is the decision of the House of Lords in Maddison v Alderson (1883) 8 App Cas 467. The speech of Lord Selborne LC has become a starting point for later consideration. His Lordship's speech includes these observations (at 474-476): The cases upon this subject (which are very numerous) have all, or nearly all, arisen under those words of the 4th section of the Statute of Frauds, which provide that "no action shall be brought to charge any person upon any contract or sale of lands, tenements, or hereditaments, or any interest in or concerning them, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized." … That equity has been stated by high authority to rest upon the principle of fraud: "Courts of Equity will not permit the statute to be made an instrument of fraud". By this it cannot be meant that equity will relieve against a public statute of general policy in cases admitted to fall within it; and I agree with an observation made by Lord Justice Cotton, in Britain v. Rossiter 11 Q.B.D. 130, that this summary way of stating the principle (however true it may be when properly understood) is not an adequate explanation, either of the precise grounds, or of the established limits, of the equitable doctrine of part performance. In a suit founded on such part performance, the defendant is really "charged" upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the statute) upon the contract itself. If such equities were excluded, injustice of a kind which the statute cannot be thought to have had in contemplation would follow. Let the case be supposed of a parol contract to sell land, completely performed on both sides, as to everything except conveyance ; the whole purchase-money paid ; the purchaser put into possession ; expenditure by him (say in costly buildings) upon the property ; leases granted by him to tenants. The contract is not a nullity ; there is nothing in the statute to estop any Court which may have to exercise jurisdiction in the matter from inquiring into and taking notice of the truth of the facts. All the acts done must be referred to the actual contract, which is the measure and test of their legal and equitable character and consequences. If, therefore, in such a case a conveyance were refused, and an action of ejectment brought by the vendor or his heir against the purchase, nothing could be done towards ascertaining and adjusting the equitable rights and liabilities of the parties, without taking the contract into account. The matter has advanced beyond the stage of contract ; and the equities which arise out of the stage which it has reached cannot be administered unless the contract is regarded. The choice is between undoing what has been done (which is not always possible, or, if possible, just) and completing what has been left undone. The line may not always be capable of being so clearly drawn as in the case which I have supposed ; but it is not arbitrary or unreasonable to hold that when the statute says that no action is to be brought to charge any person upon a contract concerning land, it has in view the simple case in which he is charged upon the contract only, and not that in which there are equities resulting from res gestae subsequent to and arising out of the contract. So long as the connection of those res gestae with the alleged contract does not depend upon mere parol testimony, but is reasonably to be inferred from the res gestae themselves, justice seems to require some such limitation of the scope of the statute, which might otherwise interpose an obstacle even to the rectification of material errors, however clearly proved, in an executed conveyance, founded upon an unsigned agreement. While extensively reviewing case law Lord Selborne said (at 478): The doctrine, however, so established has been confined by judges of the greatest authority within limits intended to prevent a recurrence of the mischief which the statute was passed to suppress. The present case, resting entirely upon the parol evidence of one of the parties to the transaction, after the death of the other, forcibly illustrates the wisdom of the rule, which requires some evidentia rei to connect the alleged part performance with the alleged agreement. There is not otherwise enough in the situation in which the parties are found to raise questions which may not be solved without recourse to equity. It is not enough that an act done should be a condition of, or good consideration for, a contract, unless it is, as between the parties, such a part execution as to change their relative positions as to the subject-matter of the contract. … it may be taken as now settled that part payment of purchase-money is not enough ; and judges of high authority have said the same even of payment in full: Clinan v. Cooke 1 Sch. & Lef. 40 ; Hughes v. Morris 2 D.M. & G. 356 ; Britain v. Rossiter 11 Q.B.D. 123. Some of the reasons which have been given for that conclusion are not satisfactory ; the best explanation of it seems to be, that the payment of money is an equivocal act, not (in itself), until the connection is established by parol testimony, indicative of a contract concerning land. I am not aware of any case in which the whole purchase-money has been paid without delivery of possession, nor is such a case at all likely to happen. All the authorities [show] that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged : Cooth v. Jackson 6 Ves. 38 ; Frame v. Dawson 14 Ves. 386 ; Morphett v. Jones 1 Sw. 181. "The acknowledged possession" (said Sir T. Plumer in Morphett v. Jones 1 Sw. 181) "of a stranger in the land of another is not explicable, except on the supposition of an agreement, and has therefore constantly been received as evidence of an antecedent contract, and as sufficient to authorize an inquiry into the terms, the Court regarding what has been done as a consequence of contract or tenure." "It is in general," said Sir James Wigram ( Dale v. Hamilton 5 Hare, 381) of the essence of such an act that the Court shall, by reason of the act itself, without knowing whether there was an agreement or not, find the parties unequivocally in a position different from that which, according to their legal rights, they would be in if there were no contract ….. But an act which though in truth done in pursuance of a contract, admits of explanation without supposing a contract, is not in general admitted to constitute an act of part performance taking the case out of the Statute of Frauds ; as for example, the payment of a sum of money alleged to be purchase-money. The fraud, in a moral point of view, may be as great in the one case as in the other, but in the latter cases the Court does not in general give relief": (see also Britain v. Rossiter 11 Q.B.D. at p.130, per Lord Justice Cotton.) The acts of part performance, exemplified in the long series of decided cases in which parol contracts concerning land have been enforced, have been (almost, if not quite, universally) relative to the possession, use, or tenure of the land. The law of equitable mortgage by deposit of title deeds depends upon the same principles.

[115]

87 In Steadman v Steadman [1976] AC 536 the House of Lords, in a case about a complicated agreement for settlement of maintenance and property disputes between husband and wife, treated a payment of £100 arrears of maintenance, which was required by a term of the agreement, as an act of part performance so as to enable specific enforcement of another term under which the wife was to surrender her interest in the matrimonial home for another payment of money which had not been made. Law Lords in the majority expressed dissatisfaction with the general rule that payment of money cannot constitute an act of part performance of a parol contract for disposition of an interest in land. Lord Reid said (at 541): Normally the consideration for the purchase of land is a sum of money and there are statements that a sum of money can never be treated as part performance. Such statements would be reasonable if the person pleading the statute tendered repayment of any part of the price which he had received and was able thus to make restitutio in integrum. That would remove any 'fraud' or any equity on which the purchaser could properly rely. But to make a general rule that payment of money can never be part performance would seem to me to defeat the whole purpose of the doctrine and I do not think that we are compelled by authority to do that. Lord Simon of Glaisdale said (at 565) that the reasons for the rule did not justify it "as framed so absolutely." Lord Salmon (at 570) was of the view that payments may be "acts from which the nature of the contract can be deduced", while saying "It is no doubt true that often it is impossible to deduce even the existence of any contract from payment … Nevertheless the circumstances surrounding a payment may be such that the payment becomes evidence not only of the existence of the contract under which it was made but also of the nature of that contract. What the payment proves in the light of its [surrounding] circumstances is not a matter of law but a matter of fact." Viscount Dilhorne said (at 555), that his Lordship found it difficult to say on what principle the conclusion excluding payments of money from part performance had been reached. Lord Morris of Borth-Y-Gest dissented. Later legislative changes in the United Kingdom seem to make it unlikely that the House of Lords will again consider such a question.

At a glance

Court

Decision date

Before

Source

Judgment (122 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (21)