Introduction to property and commercial law [Second edition.] 9780455239217, 0455239215

Table of contents :
Title page
PUBLISHER’S NOTE
TABLE OF CONTENTS
TABLE OF CASES
TABLE OF STATUTES
PART 1: (A) THE CONCEPT AND FUNCTION OF “PROPERTY” AND (B) REAL PROPERTY – INTRODUCTION TO REAL PROPERTY
CHAPTER 1 Introduction to General Property Concepts
CHAPTER 2 Tenures, Estates and Native Title
CHAPTER 3 Legal and Equitable Interests in Land
CHAPTER 4 Old System Title Registration
CHAPTER 5 Torrens Title Land
CHAPTER 6 General Law and Torrens Title Mortgages
CHAPTER 7 Definition of Land - Fixtures
PART 2: PERSONAL PROPERTY – INTRODUCTION TO CHOSES IN POSSESSION
CHAPTER 8 Taxonomy of Personal Property
CHAPTER 9 Identifying Legal Interests in Choses in Possession:
Ownership and Possession
CHAPTER 10 Engaging in Dealings in Choses in Possession:
Transfer of Ownership
CHAPTER 11 Engaging in Dealings in Choses in Possession: Transfer of Possession by Bailment
PART 3: PERSONAL PROPERTY – INTRODUCTION TO CHOSES IN ACTION
CHAPTER 12 The Concept of a Chose in Action
CHAPTER 13 Exploring Equitable Choses in Action
PART 4: ASSIGNMENTAND DISPOSITION OF INTERESTS
CHAPTER 14 Legal Assignments of Choses in Action
CHAPTER 15 Equitable Assignments Generally
CHAPTER 16 Equitable Assignments of Legal Interests
CHAPTER 17 Assignment of Equitable Interests
CHAPTER 18 "Assignment" of Future Property
PART 5: (A) PRIORITY REGIMES AND (B) COMMERCIAL DEALINGS AS SECURITY INTERESTS OVER PROPERTY
CHAPTER 19 Priorities under the Sale of Goods act
CHAPTER 20 General Law Priority Rules: Contests Between
Legal and Equitable Interests
CHAPTER 21 General Law Priority Rules: Contests in Equity
CHAPTER 22 Traditional Forms of Security
CHAPTER 23
INDEX

Citation preview

INTRODUCTION TO PROPERTY AND COMMERCIAL LAW Second edition

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EUROPE Thomson Reuters London United Kingdom

INTRODUCTION TO PROPERTY AND COMMERCIAL LAW

compiled by

SCOTT GRATTAN BA LLB (Hons) (Macquarie), LLM (British Columbia), PhD (UNSW) Senior Lecturer University of Sydney

SHEELAGH MCCRACKEN MA (Camb), PhD (Sydney), Cert H.Ed (UNSW) Professor of Finance Law University of Sydney

SECOND EDITION

LAWBOOK CO. 2017

Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW First edition 2016 ISBN 9780 455 239217 © 2017 Thomson Reuters (Professional) Australia Limited This publication is copyright. Other than for the purposes of and subject to the conditions prescribed under the Copyright Act, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Inquiries should be addressed to the publishers. Commonwealth: All legislative material herein is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain reproduction and publication of Commonwealth legislation. In particular, s 182A of the Act enables a complete copy to be made by or on behalf of a particular person. For reproduction or publication beyond that permitted by the Act, permission should be sought in writing. Requests should be submitted online at www.ag.gov.au/cca, faxed to (02) 6250 5989 or mailed to Commonwealth Copyright Administration, Attorney-General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600. New South Wales: Copyright of NSW legislative material: Copyright continues to reside in the State of NSW. Victoria: All Acts and Statutory Rules © The State of Victoria, the Government Printer (2016). Disclaimer: This product or service contains an unofficial version of the Acts and Statutory Rules of the State of Victoria. The State of Victoria accepts no responsibility for the accuracy, completeness or currency of any legislation contained in this product or provided through this service. Queensland: Copyright of Queensland legislative material: © The State of Queensland (2016). South Australla: Copyright of SA legislative material: Copyright is owned by the Crown in right of the State of South Australia. Tasmania: Copyright of Tasmanian legislative material: Copyright is owned by the State of Tasmania. Editor: Nick Jewlachow Product Developer: Vickie Ma Publisher: Robert Wilson Printed by Ligare Pty Ltd, Riverwood, NSW

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PUBLISHER’S NOTE Text compilation This volume has been designed for use in conjunction with the unit of study outline and other material assigned for the unit. It has been prepared by drawing upon material from the following Thomson Reuters (Professional) Australia titles: • Chambers, An Introduction to Property Law in Australia (3rd ed, Lawbook Co, 2013); • Dal Pont, Equity and Trusts: Commentary and Materials (6th ed, Lawbook Co, 2015); • McCracken et al, Everett & McCracken’s Banking and Financial Institutions Law (8th ed, Lawbook Co, 2013); • Moore et al, Australian Property Law: Cases and Materials (5th ed, Lawbook Co, 2016); • Parkinson (ed), The Principles of Equity (2nd ed, Lawbook Co, 2003); • Pearson et al, Commercial Law: Commentary and Materials (3rd ed, Lawbook Co, 2010). Pagination, paragraphs, cross-references and footnotes The content of this book has been repaginated and reparagraphed to run consecutively. Where a reference is made to text not contained within this publication, the original reference remains, with an indication of its origin, eg (Moore). Footnoting in the text has been renumbered to run chronologically within each chapter. Acknowledgements The judgment in Public Trustee v Bussell (1993) 30 NSWLR 111 has been reproduced with the kind permission of the Council of Law Reporting for NSW. The UK cases published in this text have been reproduced exactly as in the original reports with the kind permission of the Incorporated Council of Law Reporting.

v

TABLE OF CONTENTS

Publisher’s note ................................................................................................................................. v Table of Cases .................................................................................................................................. ix Table of Statutes .......................................................................................................................... .. xxi

Part 1: (A) The Concept and Function of “Property” and (B) Real Property – Introduction to Real Property 1 Introduction to General Property Concepts ...................................................... .. 3 2 Tenures, Estates and Native Title ....................................................................... .. 37 3 Legal and Equitable Interests in Land .............................................................. .. 81 4 Old System Title Registration ............................................................................. 129 5 Torrens Title Land .............................................................................................. .. 131 6 General Law and Torrens Title Mortgages ..................................................... .. 143 7 Definition of Land – Fixtures .............................................................................. 149

Part 2: Personal Property – Introduction to Choses in Possession 8 Taxonomy of Personal Property ...................................................................... .. 167 9 Identifying Legal Interests in Choses in Possession: Ownership and Possession .............................................................. .. 199 10 Engaging in Dealings in Choses in Possession: Transfer of Ownership ..................................................................... .. 215 11 Engaging in Dealings in Choses in Possession: Transfer of Possession by Bailment ............................................... .. 299

Part 3: Personal Property – Introduction to Choses in Action 12 The Concept of a Chose in Action ................................................................. .. 331 13 Exploring Equitable Choses in Action ........................................................... .. 345

Part 4: Assignment and Disposition of Interests 14 Legal Assignments of Choses in Action ........................................................ .. 397 vii

Introduction to Property and Commercial Law

15 Equitable Assignments Generally .................................................................. .. 399 16 Equitable Assignments of Legal Interests .................................................... .. 449 17 Assignment of Equitable Interests ................................................................ .. 471 18 “Assignment” of Future Property ................................................................. .. 475

Part 5: (A) Priority Regimes and (B) Commercial Dealings as Security Interests Over Property 19 Priorities Under the Sale of Goods Act ......................................................... .. 483 20 General Law Priority Rules: Contests Between Legal and Equitable Interests ............................................................................................. .. 513 21 General Law Priority Rules: Contests in Equity ........................................... .. 525 22 Traditional Forms of Security ........................................................................... 557 23 Security Within the Scope of the Personal Property Securities Act 2009 (Cth) (PPSA) ..................................................................................... .. 575 Index ..................................................................... .. .................................................................. 629

viii

TABLE OF CASES [Where an extract from a case is reproduced the paragraph number at which the extract appears is in bold.] A ACT Revenue, Commissioner for v Perpetual Trustee Co (Canberra) Ltd (1994) 118 ACTR 1 ..... 13.40 AG(CQ) Pty Ltd v A&T Promotions Pty Ltd [2010] QCA 83 ....................................................... 21.15 Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58 .............................................. 21.05, 21.15, 21.20 Adamson v Hayes (1973) 130 CLR 276 ...................................................................... 15.115, 15.185 Agnew v Commissioner of Inland Revenue [2002] 1 NZLR 30 ....................................... 22.40, 22.55 Agnew and Bearsley v The Commissioner of Inland Revenue [2001] UKPC 28 ........................ 15.415 Agricultural Credit Corporation of Saskatchewan v Pettyjohn [1991] 90 Sask R 206 ........................... Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477 ................................................................ 15.375 Allen v Snyder [1977] 2 NSWLR 685 ........................................................................................... 3.35 Allgemeine Versicherungs-Gesellschaft Helvetia v Administrator of German Property [1931] 1 KB 672 ............................................................................................................................. 12.20 Anning v Anning (1907) 4 CLR 1049 ............................................................................. 15.60, 15.70 Arcabi Pty Ltd (recs & mgrs apptd) (in liq), Re; ex parte Theobald & Herbert (2014) 288 FLR 236 ..................................................................................................................................... 23.75 Archer-Shee v Garland [1931] AC 212 ...................................................................................... 13.15 Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143 .............. 12.30 Armory v Delamirie (1722) 1 Stra 505; 93 ER 664 ................................................................... 10.30 Askrigg Pty Ltd v Student Guild of the Curtin University of Technology (1989) 18 NSWLR 738 ........................................................................................................................... 22.75, 22.80 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 ................... 13.75 Atkins v Mercantile Credits Ltd (1985) 10 ACLR 153 ................................................................. 22.60 Attorney-General (Hong Kong) v Reid [1994] 1 AC 324 .............................................................. 3.35 Attorney-General (NT) v Chaffey (2007) 231 CLR 651 .............................................................. 1.135 Attorney-General for Hong Kong v Reid [1994] 1 NZLR 1 ......................................................... 13.95 Australian Elizabethan Theatre Trust, Re (1991) 30 FCR 491 ................................................... 13.130 Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) [2011] NSWSC 1306 ........................................................ 22.65 Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479; [1987] HCA 7 ...................... 1.115 Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480 ............. 23.25 Avco Financial Services Limited v White [1977] VR 56 ............................................................... 21.15 Avco Financial Services Ltd v Fishman [1993] 1 VR 90 .................................................... 21.15, 21.20 Azkanaad Pty Ltd v Galanos Bros Pty Ltd (No 2) [2008] NSWSC 476 .......................................... 3.70 Azkanaad Pty Ltd v Galanos Bros Pty Ltd [2008] NSWCA 185 ..................................................... 3.70

B B v B (2000) FLC 93-002 .......................................................................................................... 15.05 B v X [2011] 2 NZLR 405 .......................................................................................................... 13.30 B & B Budget Forklifts Pty Ltd v CBFC Ltd (2008) 216 FLR 274; [2008] NSWSC 271 ................. 22.70 B & B Budget Forklifts Pty Ltd v CBFC Ltd (2008) 216 FLR 294; [2008] NSWSC 271 ...... 22.40, 22.60 Babanaft International Co SA v Bassatne [1990] 1 Ch 13 .......................................................... 13.10 Bacaral Pty Ltd v Bodnar [2000] VSC 523 ............................................................................... 15.380 Backhouse v Judd [1925] SASR 16 ............................................................................................ 1.115 Bahr v Nicolay (No 2) (1988) 164 CLR 604 ............................................................................ 13.120 Bainbridge, Re; Ex parte Fletcher (1878) 8 Ch D 218 ................................................................ 12.25 Baird v Baird [1990] 2 AC 549 ................................................................................................ 15.250 Baker v Archer-Shee [1927] AC 844 .......................................................................................... 13.15 Baloglow v Konstanidis (2001) 11 BPR 20,721; [2001] NSWCA 451 ........................................... 3.70 Bandwill Pty Ltd v Spencer-Laitt [2000] WASC 210 ................................................................. 15.410 Bank of Credit and Commerce International SA (No 8), Re [1998] AC 214 .................................. 9.65 ix

Introduction to Property and Commercial Law

Bank of Montreal v Innovation Credit Union [2010] 3 SCR 3 .............................. 23.50, 23.55, 23.70 Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 .......................................... 22.60 Barclays Bank Ltd v Commissioners of Customs and Excise [1963] 1 Lloyd’s Rep 81 ................. 22.85 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 ............ 13.60, 13.105, 13.130, 23.45 Barclays Bank plc, In the matter of [2012] NSWSC 1095 .......................................................... 23.70 Barnes v Addy (1874) LR 9 Ch App 244 ...................................................................................... 3.35 Barnhart v Greenshields (1853) 9 Moo 18; 14 ER 204 .............................................................. 20.30 Bartlett Estates Pty Ltd, Re [1989] 2 Qd R 175 .................................................... 22.60, 22.65, 22.70 Bateman v Hunt [1904] 2 KB 530 ............................................................................................. 15.85 Baumgartner v Baumgartner (1987) 164 CLR 137 .................................................................... 21.30 Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd (2008) 66 ACSR 116 ...................................................................................................... 22.20, 22.35, 22.40 [1984] VR 947 ................................................................................................................... 7.10, 7.15 Benjamin v Leicher (1998) 45 NSWLR 389 ............................................................................... 15.55 Best v Best (1993) FLC 92-118 .................................................................................................. 15.05 Bevan Ashford (A Firm) v Geoff Yeandle (Contractors) Ltd (in liquidation) [1999] Ch 239 ....... 15.410 Bishop v Taylor (1968) 118 CLR 518; 42 ALJR 277 ...................................................................... 3.70 Blackett v Darcy (2005) 62 NSWLR 392 .................................................................................... 16.20 Bloch v Bloch (1981) 37 ALR 55 ................................................................................................. 3.15 Boardman v Phipps [1967] 2 AC 46 ............................................................................................ 3.35 Bogdanovic v Koteff (1988) 12 NSWLR 472 ............................................................................. 15.25 Booth v Federal Commissioner of Taxation (1987) 76 ALR 375 ............................................... 15.390 Booth, MacDonald and Co (Ltd) v Official Assignee of Hallmond (1913) 33 NZLR 110 ............. 13.70 Bowesco Pty Ltd v Zohar (2007) 61 ACSR 99 ............................................................................ 22.40 Brathwait v Skinner (1839) 5 M & W 313; 151 ER 133 ............................................................. 12.25 Breskvar v Wall (1971) 126 CLR 376 ................................................ 5.70, 5.85, 21.15, 21.20, 21.30 Brightlife Ltd, Re [1986] 3 All ER 673 ........................................................................................ 22.70 Brookfield v Davey Products (1996) 14 ACLC 303 .................................................................. 15.415 Brownsea v National Trustees Executors & Agency Co of Australasia Ltd [1959] VR 243; [1959] ALR 650 ...................................................................................................................... 3.70 Bruce v Tyley (1916) 21 CLR 277 ............................................................................................ 15.420 Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 ................................................. 15.65, 15.70 Brunswick Developments Pty Ltd v Shock Records Pty Ltd (1996) V ConvR 54-604 .................... 3.70 Bruton v London & Quadrant Housing Trust [2000] 1 AC 406 .................................................... 2.15 Butler v Fairclough (1917) 23 CLR 78 ....................................................................................... 21.15 Byrnes v Kendle (2011) 243 CLR 253 .................................................................................... 13.135

C Caisse Populaire Desjardins de L’Est de Drummond v Canada [2009] 2 SCR 94 ........................ 23.45 Camdex International Ltd v Bank of Zambia [1998] QB 22 ..................................................... 15.415 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386; 229 ALR 58 ................ 12.40 Cancer Care Institute of Australia Pty Ltd (admin apptd), Re (2013) 16 BPR 31,529; [2013] NSWSC 37 ............................................................................................................................ 7.45 Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 ........................................................................................................................ 18.10 Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525 ................................................ 19.45 Caratun v Caratun (1992) 96 DLR (4th) 404 ............................................................................... 1.15 Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240 ..................... 10.120 Carob Industries Pty Ltd (in liq) v Simto Pty Ltd (2000) 23 WAR 515; [2000] WASCA 362 ........ 14.05, 15.40 Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd [1985] 1 All ER 155 .......................... 13.25 Carson, in the matter of Hastie Group Ltd (No 3) [2012] FCA 719 ..................................................... Caunce v Caunce [1969] 1 WLR 286 ........................................................................................ 20.30 Chaka Holdings Pty Ltd v Sunsim Pty Ltd (1987) NSW ConvR 55-367 ........................................ 3.80 Chang v Registrar of Titles (1976) 137 CLR 177 ........................................................................ 15.50 Chapman Bros v Verco Bros & Co Ltd (1933) 49 CLR 306 ........................................................ 11.15 Chellaram v Chellaram [1985] Ch 409 ..................................................................................... 13.10 Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299 ......... 3.25, 3.35 x

Table of Cases

Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 ................. 15.50, 15.145 Child v Dynes [1985] 2 NZLR 554 ............................................................................................ 21.40 Chipperfield v Carter (1895) 72 LT 487 ...................................................................................... 3.70 Christie v Ovington (1875) 1 Ch D 279 .................................................................................... 13.50 Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 45 ALR 481 ............................................... 3.70 Ciaglia v Ciaglia [2010] NSWSC 341 .......................................................................................... 3.95 Cinema Plus Ltd (admins apptd) v Australia and New Zealand Banking Group Ltd (2000) 35 ACSR 1 ................................................................................................................................ 22.60 Circuit Systems Ltd (in liq.) v Zuken-Redac (UK) Ltd [1997] 1 WLR 721 .................................. 15.415 City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477; [1961] HCA 53 ...................................................................................................................... 1.95 Clark v Raymor (Brisbane) Pty Ltd [No 2] [1982] Qd R 790 ....................................................... 21.15 Clark Equipment of Canada Ltd v Bank of Montreal [1984] 4 WWR 519; 8 DLR (4) 424; 27 Man R (2d) 54 .............................................................................................................................. Clements v Ellis (1934) 51 CLR 217 ............................................................................................ 5.70 Clyne v New South Wales Bar Association (1960) 104 CLR 186 ............................................... 15.410 Cobb v Lane [1952] 1 All ER 1199 .............................................................................................. 3.80 Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107 ........................................... 11.05, 11.10, 22.75 Cole, a Bankrupt, Re [1964] 1 Ch 175 ...................................................................................... 10.05 Collyer v Isaacs (1881) 19 Ch D 342 ...................................................................................... 15.390 Colman v Golder [1957] VR 196 ................................................................................................. 3.70 Colonial Bank v Whinney (1885) 30 Ch D 261 ........................................................................... 8.10 Competitive Funerals Pty Ltd v Gurmit Singh Rai t/as Blacktown City Funerals [2005] NSWSC 1171 ......................................................................................................................... 3.70 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 ..... 15.105, 15.160, 15.180, 17.05 Connell v Bond Corp Pty Ltd (1992) 8 WAR 352 ....................................................................... 13.15 Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 ............................................................ 14.05 Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1984) 155 CLR 541 .......................... 13.85 Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 ................................... 3.35 Cooney v Burns (1922) 30 CLR 216; 28 ALR 181 ....................................................................... 3.40 Cooper v Stuart (1884) 14 AC 286 ............................................................................................. 2.30 Corin v Patton (1990) 169 CLR 540 ............................................. 15.70, 15.75, 15.80, 15.85, 16.10 Corin v Patton (1990) 92 ALR 1 ................................................................................................ 16.10 Cosslett (Contractors) Ltd, Re [1998] Ch D 495 ........................................................................ 22.40 Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90 ......................................................... 13.15 Costin v Costin (1994) NSW Conv R 55-715 ................................................................. 15.70, 15.80 (1997) NSW Conv R 55-811 ..................................................................................................... 15.70 Coulls v Bagot’s Executor & Trustee Co (1967) 119 CLR 460 .................................................. 15.105 Cranston v CBFC Ltd (unreported, SC(NSW), 11 June 1993) .................................................... 21.40 Crichton v Crichton (1930) 43 CLR 536 .................................................................... 15.210, 15.230 Cummings v Claremont Petroleum NL (1996) 185 CLR 124; [1996] HCA 19 .............................. 1.15

D DHN Food Distributors v London Borough of Tower Hamlets [1976] 3 All ER 462 ................... 15.140 DKLR Holding Co (No 2) Limited v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 .......................................................................................................... 3.25, 3.30, 3.35, 15.45 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 .................................................................................................................................... 15.205 Daniel Efrat Consulting Services Pty Ltd, Re (1999) 91 FCR 154 .............................................. 15.415 Danish Bacon Co Ltd Staff Pension Fund, Re [1971] 1 WLR 248 .............................................. 15.245 Davis v Heuber (1923) 31 CLR 583 ........................................................................................... 13.70 De Groot, Re (unreported, Qld SC, Muir J, 23 December 1999) ............................................. 15.380 Deeks v Strutt (1794) 5 TR 690; 101 ER 384 ............................................................................. 12.25 Denley’s Trust Deed, Re [1969] 1 Ch 373 ................................................................................. 13.25 Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd [1993] RPC 493 .................................................. 15.420 Dive v Maningham (1550) 1 Plowden 96; 75 ER 96 ................................................................. 1.120 Don King Productions Inc v Warren [1993] 3 WLR 276 ........................................................... 15.420 Don King Productions Inc v Warren [1998] 2 All ER 608 ............................................................ 15.15 Don King Productions Inc v Warren [1999] 3 WLR 276 ................................................ 15.05, 15.420 xi

Introduction to Property and Commercial Law

Donald v Suckling (1866) LR 1 QB 585 ......................................................................... 22.75, 22.90 Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409 ............ 21.20, 21.30, 21.35 Dougan v Ley (1946) 71 CLR 141 .......................................................................................... 15.375 Dublin City Distillery Ltd v Doherty [1914] AC 823 ................................................................... 22.80

E Earl of Lucan, Re (1890) 45 Ch D 615 .................................................................................... 15.110 Eastern Distributors Ltd v Goldring (Murphy, Third Party) [1957] 2 QB 600 ............................. 19.25 Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 .............................................. 21.40 Electrical Enterprises Retail Pty Ltd v Rodgers (1989) 15 NSWLR 473 ............................. 22.60, 22.65 Elitestone Ltd v Morris [1997] 1 WLR 687; [1997] 2 All ER 513; [1997] UKHL 15 ........................ 7.15 Ellingsen v Hallmark Ford Sales Ltd 2000 BCCA 458 .......................................................................... Ellis v Torrington [1920] 1 KB 399 .......................................................................................... 15.415 Endacott, Re [1960] Ch 232 ..................................................................................................... 13.25 Equus Corp Pty Ltd v Antonopoulos [2008] VSCA 179 ................................................................ 3.70 Equus Financial Services Limited v Glengallen Investments Pty Ltd (Appeal No 262 of 1993) .... 15.90 Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; 286 ALR 12 ..................................... 12.45, 16.40 Errington v Errington and Woods [1952] 1 KB 290 ..................................................................... 3.80 Euston Centre Properties Ltd v H&J Wilson Ltd (1982) 262 EG 1079 ........................................... 3.70 Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 ....................................................... 22.60, 22.70 Everett, Re; Executor Trustee and Agency Co of South Australia Ltd v Everett [1917] SALR 52 .... 10.10 Ewing v Orr Ewing (1883) 9 App Cas 34 .................................................................................. 13.10 Ewing’s case Ewing v Orr Ewing (1883) 9 App Cas 34 .............................................................. 13.10

F Facchini v Bryson [1952] 1 TLR 1386 .......................................................................................... 3.80 Fairbanx Corporation v Royal Bank of Canada (2010) 68 CBR (5) 102 ............................................... Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 ............................................. 3.35 Federal Airports v Makucha Developments Pty Ltd (1993) 115 ALR 679 ...................................... 3.80 Ferrishurst Ltd v Wallcite Ltd [1999] Ch 355 ............................................................................. 20.30 Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; [1999] HCA 20 .......... 6.10 Fire Nymph Products Ltd v Heating Centre Pty Ltd (1988) 14 NSWLR 460 .................... 22.65, 22.70 Fire Nymph Products Ltd v Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365 ......................... 22.70 Fiver Trading Pty Ltd v Spajak Pty Ltd [2005] NSWSC 532 .......................................................... 3.70 Foley v Hill (1848) 2 HLC 28; 9 ER 1002 ..................................................................................... 1.55 Foreman v Hazard [1984] 1 NZLR 586 ................................................................................... 13.125 Forge Group Power Pty Ltd (in liq) v General Electric International, Inc (2016) 305 FLR 101 .... 23.80 Forrest Trust, Re [1953] VLR 246 ............................................................................................... 22.25 Frazer v Walker [1967] 1 AC 569 ..................................................................... 5.15, 5.70, 5.75, 5.80

G Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236; 61 ALJR 415 ............................................................ 10.15, 10.20, 19.100, 19.105 Garcia v Lam (unreported, NSWCA, Sheller, Powell and Cole JJA, 2 July 1996) .......................... 15.80 Garcia v Lam (unreported, NSWSC, McLaughlin M, 20 February 1997) .................................. 15.395 Gartside v IRC [1968] AC 653 ................................................................................................... 13.25 General Motors Acceptance Corporation Australia v Southbank Traders Pty Ltd (2007) 234 ALR 608 ............................................................................................................................... 22.05 Gibbs v Messer [1891] AC 248 ................................................................................................... 5.75 Giffen, Re (1998) 1 SCR 91; 155 DLR (4) 332 .................................................................................... Gill v Gill (1921) 21 SR (NSW) 400 ........................................................................................... 13.25 Giumelli v Giumelli (1999) 196 CLR 101 .................................................................................. 21.30 Glegg v Blomley [1912] 3 KB 474 .......................................................................................... 15.410 Global Custodians Ltd v Mesh [1999] NSWCA 313 ................................................................. 15.315 Goldcorp Exchange Ltd, Re [1995] 1 AC 74 ............................................................................ 15.375 xii

Table of Cases

Goldcorp Exchange Ltd (In Receivership), Re [1994] 3 WLR 199; [1994] 2 All ER 806 ............ 10.130 Goldsbrough Mort & Co Ltd v Tolson (1909) 10 CLR 470 ........................................................ 12.20 Gosper v Sawyer (1985) 160 CLR 548 .................................................................................... 13.100 Governments Stock and Other Securities Investment Company Ltd v Manila Railway Co Ltd [1897] AC 8 1 ...................................................................................................................... 22.70 Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528 ....................................................... 23.55 Grainge v Wilberforce (1889) 5 TLR 436 ......................................................... 13.40, 15.145, 15.160 Gray v Official Trustee in Bankruptcy (1991) 29 FCR 166 .......................................................... 10.25 Gray v Royal Bank of Canada (1997) 143 DLR (4) 179 ....................................................................... Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWR 427 ................... 15.315 Grey v Australian Motorists and General Insurance Co Pty Ltd [1976] 1 NSWLR 669 ................. 14.10 Grey v Inland Revenue Commissioners [1958] Ch 690 ........................................................... 15.160 Grey v Inland Revenue Commissioners [1960] AC 1 ........................... 15.115, 15.175, 15.185, 17.15 Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98 ......................................................................... 22.20

H Hali Retail Stores Pty Ltd v Hafaz [2007] NSWSC 412 ................................................................. 3.70 Hamilton v Hunter (1982) 7 ACLR 295 ..................................................................................... 22.60 Hamilton-Snowball’s Conveyance, Re [1959] Ch 308 ............................................................... 15.50 Handevel Pty Ltd v Comptroller of Stamps (Vic) (1985) 157 CLR 177 ....................................... 22.05 Handevel Pty Ltd v Comptroller of Stamps (Vic) (1985) 62 ALR 204 .......................................... 22.20 Hardoon v Belilios [1901] AC 118 ............................................................................................. 13.40 Harrington-Smith on behalf of the Wongatha People v Western Australia (No 8) [2004] FCA 338 ........................................................................................................................................ 2.55 Harris v Anais Holdings Ltd [2002] 3 NZLR 511 ........................................................................ 21.40 Harrold v Plenty [1901] 2 Ch 314 ............................................................................................. 22.35 Harvey v Pratt [1965] 2 All ER 786 (CA); [1965] 1 WLR 1025 ...................................................... 3.70 Heberley (decd), Re [1971] NZLR 325 ...................................................................................... 13.30 Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 ..................... 21.10, 21.15, 21.20 Helby v Matthews [1895] AC 471 ............................................................................................ 10.65 Henry v Hammond [1913] 2 KB 515 ........................................................................................ 13.60 Hepples v Federal Commissioner of Taxation (1990) 22 FCR 1 .................................................. 15.05 Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 ........................................... 13.50 Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 ................................................. 11.30 Hobson v Gorringe [1897] 1 Ch 182 .......................................................................................... 7.40 Hodgson v Marks [1971] Ch 892 .............................................................................................. 20.30 (1872) LR 7 CP 328 .................................................................................................................... 7.15 Holroyd v Marshall (1862) 10 HLC 191 .......................................................... 15.50, 15.365, 15.380 Holroyd v Marshall (1862) 10 HLC 191; [1861-1973] All ER Rep 414 ...................................... 15.370 Holroyd v Marshall (1862) 10 HLC 191; 11 ER 999 ...................................................... 15.410, 22.55 Holt v Heatherfield Trust Ltd [1942] 2 KB 1 .............................................................................. 15.85 Horton v Jones (1935) 53 CLR 475 ........................................................................................... 13.15 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 ........................ 13.70 Hughes v Kingston Upon Hull City Council [1999] QB 1193 ................................................... 15.410 Hunt v Luck [1902] 1 Ch 428 ................................................................................................... 20.30

I I Trade Finance Inc v Bank of Montreal 2011 SCC 26 ................................................................ 22.05 IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 ................................................. 21.15, 21.20 ICM Agriculture Pty Ltd v Commonwealth (2009) 240 CLR 140 ............................................... 1.135 IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 .............................................. 20.30 ISPT Pty Ltd v Chief Commissioner of Stamp Duties (1997) 98 ATC 4.054; 38 ATR 128 ........... 15.145 Illingsworth v Houldsworth [1904] AC 355 .................................................................... 22.50, 22.55 Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] QB 580 .......... 3.70 Inglis v Clarence Holdings Ltd [1997] 1 NZLR 268 ...................................................................... 3.70 Inland Revenue, Commissioner of v Stiassny [2012] NZCA 93 .................................................. 23.10 Insearch Ltd v Kin Hing Pty Ltd [2004] ANZ ConvR 111; [2003] NSWSC 875 ............................. 3.70 xiii

Introduction to Property and Commercial Law

Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 ........ 8.05

J J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 .............. 21.15, 21.20 Maitland’s Equity (ed),(2nd revd ed .......................................................................................... 13.10 JS Brooksbank v EXFTX (in rec & in liq) [2009] NZCA 122 ................................................................. Jabbour v Sherwood [2003] FCA 529 ....................................................................................... 21.30 Jacobs v Platt Nominees Pty Ltd [1990] VR 146 .................................................. 20.30, 21.15, 21.20 Jared v Clements [1903] 1 Ch 428 ............................................................................................ 20.30 Jennings v Credit Corp Australia Pty Ltd as assignee from Citicorp Person to Person Financial Services Pty Ltd (2002) 48 NSWLR 709 ................................................................................ 15.90 Jigrose Pty Ltd, Re [1994] 1 Qd R 382 ........................................................................................ 9.70

K KH Enterprise (Cargo Owners) v Pioneer Container (Owners); The Pioneer Container [1994] 2 AC 324 ............................................................................................................................ 11.20 KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288 ............................... 15.95 Kaak v Bank of Montreal 2003 CanLII 38834 ..................................................................................... Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 .................................. 15.15 Kaufman v Michael (1892) 18 VLR 375 ....................................................................................... 3.70 Kayford Ltd (in liq), Re [1975] 1 WLR 279 ..................................................... 13.60, 13.130, 13.155 [1962] VR 429 ............................................................................................................................ 7.40 Keech v Sandford (1726) 2 Eq Cas Ab 741; 22 ER 629 ................................................................ 3.35 Kekewich v Manning (1851) 1 De GM & G 176 ..................................................................... 15.110 Kelly v Commissioner of Inland Revenue (1969) 1 ATR 380 ....................................................... 18.10 Kelrit Investments Pty Ltd v Transform Composites Holdings Pty Ltd [2004] ANZ ConvR 178; [2003] FCA 662 ............................................................................................................. 3.70 Kenneth Wright Distributors Pty Ltd (in liq), Re; W J Vines Pty Ltd v Hall [1973] VR 161 .......... 15.415 Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164 .................................. 15.95 King v Brown (1912) 14 CLR 17 ............................................................................................... 12.30 King v David Allen & Sons Billposting Ltd [1916] 2 AC 54 ........................................................ 1.125 King v Greig [1931] VLR 413 .................................................................................................. 15.375 King v Smail [1958] VR 273 ...................................................................................................... 15.25 Kingsnorth Trust Ltd v Tizard [1986] 1 WLR 783 ....................................................................... 20.30 Knapp v Knapp [1944] SASR 257 ...................................................................................... 9.05, 9.60 Konstas v Southern Cross Pumps and Irrigation Pty Ltd (unreported, Fed Ct, Tamberlin J, 3 July 1996) ............................................................................................................................ 15.15 Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25 ............................... 22.20 Kyriacou v Manakis [2006] NSWSC 804 ..................................................................................... 7.35

L Landall Holdings Ltd v Caratti [1979] WAR 97 .......................................................................... 22.60 Lapin v Abigail (1930) 44 CLR 166 ........................................................................................... 21.15 Laserbem Pty Ltd v Gainsville Investments Pty Ltd [2004] VSC 62 ............................................... 3.70 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 ........ 21.15, 21.25, 21.30 Legal Services Commissioner v Dempsey [2008] 2 Qd R 272 ...................................................... 3.25 [1902] AC 157; [1902] UKHL 1 .......................................................................................... 7.15, 7.25 Leigh’s Will Trusts, Re [1970] Ch 277 .......................................................................... 13.20, 13.170 Lewis v Bell (1985) 1 NSWLR 731 ............................................................................................... 3.80 Lift Capital Partners Pty Ltd v Merrill Lynch International (2009) 253 ALR 482 .......................... 22.20 Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23 ................ 3.70 Lind, Re [1915] 2 Ch 345 ....................................................................................................... 15.390 Linden Gardens Trust Ltd v Lenesta Sludge Disposal Ltd [1994] 1 AC 45 ................................ 15.420 Lion Nathan Brewing Investment Pty Ltd v Commissioner for ACT Revenue (1997) 79 FCLR 177 .................................................................................................................................... 15.165 Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 .................................... 13.15 xiv

Table of Cases

Lloyds Bank Plc v Rosset [1989] Ch 350 .................................................................................... 20.30 [1991] 1 AC 107 ....................................................................................................................... 20.30 Lockett v Norman-Wright [1925] Ch 56 ..................................................................................... 3.70 Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11.512 .................................................... 15.90 Long v Piper [2002] ANZ ConvR 43; (2002) NSW ConvR 56-000; [2001] NSWCA 342 ............... 3.70 Longtom Pty Ltd v Oberon Shire Council (1996) 7 BPR 14,799 ................................................ 21.40 Lonsdale Sand and Metal Pty Ltd v Commissioner of Taxation (1998) 81 FCR 419 ................... 15.85 Loxton v Moir (1914) 18 CLR 360 ................................................................................. 12.25, 12.30 Luckins (Receiver and Manager of Australian Trailways Pty Ltd) v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 ............................................................................. 22.60 Lyford v Commonwealth Bank of Australia (1995) 130 ALR 267 ................................................ 22.60 Lyne-Stephens and Scott-Miller’s Contract, Re [1920] 1 Ch 472 ............................................... 15.50 Lyons v Lyons [1967] VR 169 .................................................................................................... 22.25 Lysaght v Edwards (1876) 2 Ch D 499 .......................................................... 3.55, 3.60, 3.70, 15.50

M MBF Investments Pty Ltd v Nolan [2011] VSCA 114 .................................................................. 22.25 Mabo v Queensland (No 1) (1988) 166 CLR 186 ....................................................................... 2.30 Mabo v Queensland (No 2) (1992) 175 CLR 1; [1992] HCA 23 ............. 1.55, 2.20, 2.25, 2.30, 2.40 MacEwan Agricentre Inc v Beriault & McLennan (2002) 61 OR (3d) 63 .................................... 23.65 Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601 ....................................................... 13.25 Maddison v Alderson (1883) LR 8 App Cas 467; [1883] All ER Rep 742 ....................................... 3.70 Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 142 ALR 198 ........................... 15.410 Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 ....................................................................... 3.05 Marcroft Wagons Ltd v Smith [1951] 2 KB 496 ........................................................................... 3.80 Margart Pty Ltd (in liq), Re (1984) 9 ACLR 269 ......................................................................... 22.60 Marr v Admiralty Commissioners 1926 SC 842 ....................................................................... 15.405 Martin v Reid (1862) 11 CB (NS) 730; 142 ER 982 ................................................................... 22.80 Masters v Cameron (1954) 91 CLR 353; 28 ALJR 438 ................................................................. 3.70 Matthew Short & Associates Pty Ltd v Riviera Marine (International) Pty Ltd [2001] NSWCA 281 ..................................................................................................................................... 11.40 Maughan, Re (1885) 14 QBD 956 .............................................................................................. 3.70 May v Ceedive Pty Ltd [2006] NSWCA 369 ................................................................................ 7.15 Maye, In re [2008] 1 WLR 315 ............................................................................................... 13.175 McCaughey v Commissioner of Stamp Duties (1946) 46 SR (NSW) 192 ................................... 15.10 McEntire v Crossley Bros [1895] AC 457 ................................................................................... 10.70 McFadden v Public Trustee for Victoria [1981] 1 NSWLR 15 .................................................... 15.245 McGowan v Commissioner of Stamp Duties (Qld) [2001] QCA 236 ............................ 15.05, 15.420 McKinnon Wallace Holdings Pty Ltd v Commissioner of State Revenue [1999] 1 VR 397 ......... 15.140 McLeay v Inland Revenue Commissioner (1963) 9 AITR 265 ................................................... 15.355 McMahon v Ambrose [1987] VR 817 .......................................................................................... 3.70 McMahon’s (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185 ..................................................... 7.35 Melluish v BMI (No 3) Ltd [1995] 4 All ER 453 ............................................................................ 9.50 Merifield Cooksey Holdings Pty Ltd v Commissioner of State Taxation (WA) (1993) 93 ATC 4 .... 13.15 Meyerstein v Barber (1866) LR 2 CP 38 .................................................................................... 22.80 Meynert v Leafdale Pty Ltd [2005] WASC 102 ........................................................................... 15.10 Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 ................................................................ 1.55, 2.30 Millar v Taylor (1769) 98 ER 201 ................................................................................................. 8.05 Mills v Renwick (1901) 1 SR (NSW) (Eq) 173 ............................................................................ 20.30 Milroy v Lord (1862) 4 De GF & J 264 ............................................................ 15.60, 15.100, 15.210 Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185 ....................................................... 15.70, 16.05 Moffett v Dillon [1999] 2 VR 480 ................................................................................... 20.30, 21.15 Moore, Re; Ex parte Ibbetson (1878) 80 Ch D 519 ................................................................... 12.30 Morice v Bishop of Durham (1804) 9 Ves 399 ........................................................................... 13.25 Moss, Re (1977) 77 DLR (3d) 314 .......................................................................................... 15.220 Motor Auction Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 138 FLR 118 ....................... 15.80 Mountain Road (No 9) v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 .................... 15.85 Movitor Pty Ltd, Re (1996) 64 FCR 380 .................................................................................. 15.415 Muschinski v Dodds (1985) 160 CLR 583 ...................................................................... 13.10, 21.30 xv

Introduction to Property and Commercial Law

Myerson v Collard (1918) 25 CLR 154 ........................................................................................ 9.50

N NT Power Generation Pty Ltd v Trevor (2000) 18 ACLC 885 ................................................... 15.180 National Australia Bank Ltd v Dessau [1988] VR 521 ................................................................. 13.10 National Australia Bank Ltd v Finlay (1995) 13 ACLC 1 ............................................................. 22.70 National Mutual Life Nominees Ltd v National Capital Development Commission (1975) 37 FLR 404 ............................................................................................................................... 15.90 National Outdoor Advertising Ltd v Wavon Pty Ltd (1988) 4 BPR 9732 ....................................... 3.80 National Provincial Bank Ltd v Ainsworth [1965] AC 1175 ........................................................ 23.25 National Trustees Executors and Agency Co of Australasia Ltd v Federal Commissioner of Taxation (1954) 91 CLR 540 ................................................................................................ 23.25 National Westminster Bank plc v Spectrum Plus Ltd [2005] 2 AC 680; [2005] 4 All ER 209 ........ 22.40 National Westminster Bank plc v Spectrum Plus Ltd [2005] 2 AC 680; 4 All ER 209 ........ 22.50, 22.55 Nelson v Nelson (1995) 184 CLR 538 ..................................................................................... 13.100 Neville v Wilson [1997] Ch 144 .............................................................................................. 15.140 New Zealand Bloodstock Ltd v Waller [2006] 3 NZLR 629 ................................................................. Newtons of Wembley Ltd v Williams [1965] 1 QB 560 .............................................................. 19.95 Nokes v Doncaster Amalgamated Collieries Ltd [1940] 3 All ER 549 ........................................ 15.420 Nolan v Nolan [2003] VSC 121 ............................................................................................... 10.50 Nolan v Nolan [2004] VSCA 109 .............................................................................................. 10.53 Noonan v Martin (1987) 10 NSWLR 402 .................................................................................. 15.65 Norglen Ltd v Reeds Rains Prudential Ltd [1999] 2 AC 1 ......................................................... 15.410 Norglen Ltd (in liq.) v Reeds Rains Prudential Ltd [1996] 1 WLR 864 ...................................... 15.415 Norglen Ltd (in liq.) v Reeds Rains Prudential Ltd [1999] 2 AC 1 ............................................. 15.415 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 ........... 12.25, 15.35, 15.65, 15.105, 15.110, 15.325, 15.335, 15.345, 15.350, 16.30 North Shore City Council v Stiassny [2009] 1 NZLR 342 .................................................................... North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52; [1940] HCA 7 .................................................................................................................................... 7.25 North Western Shipping & Towage Co Pty Ltd v Commonwealth Bank of Australia (1993) 118 ALR 453 ........................................................................................................................ 22.70 Northern Counties Fire Insurance Co v Whipp (1884) 26 Ch D 482 ......................................... 20.10

O Oasis Merchandising Services Ltd, In re [1998] Ch 170 .......................................................... 15.415 Odessa, The [1916] 1 AC 145 ........................................................................................ 22.75, 22.90 Official Assignee v Wilson [2008] 3 NZLR 45 ........................................................................... 13.140 Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 .................................... 13.20, 13.180 Olsson v Dyson (1969) 120 CLR 365 ................................. 10.10, 12.30, 15.35, 15.65, 16.20, 16.35 Ottaway v Norman [1972] Ch 698 ........................................................................................... 13.25 Oughtred v Inland Revenue Commissioners [1960] AC 206 .......................... 15.115, 15.135, 15.145 Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) [2003] VSC 495 ................................................................................................................... 20.30

P PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 ................................................................... 12.30 PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 .......................................... 15.115, 17.10 Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] AC 867; [1965] 2 All ER 105 ........................................................................................................................... 19.75 Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 .......................................................... 15.380, 15.395 Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 .............................................................. 16.35 Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; 215 ALR 253; 79 ALJR 1121; [2005] HCA 28 .................................................................................................................... 22.75, 22.95 Pangallo Estate Pty Ltd v Killara 10 Pty Ltd [2007] NSWSC 1528 .............................................. 11.25 Paradise Motor Co Ltd, Re [1968] 1 WLR 1125 ....................................................................... 15.220 xvi

Table of Cases

Parker v British Airways Board [1982] 1 QB 1004 ............................................... 10.35, 10.40, 10.45 Parker & Parker v Ledsham [1988] WAR 32 ................................................................ 15.105, 15.180 Parker and Parker v Ledsham [1988] WAR 32 ............................................................. 15.165, 15.210 Parsons v McBain (2001) 109 FCR 120; 192 ALR 772 ............................................................... 21.30 Patmore v Upton (2004) 13 Tas R 95 ........................................................................................ 21.30 Pelenoy Pty Ltd v Donovan Oates Hannaford Mortgage Corp [2004] NSWSC 4 ....................... 21.40 Pemberton v Dimitrijevic [2001] NSWSC 54 ............................................................................... 3.70 Penn v Lord Baltimore (1750) 1 Ves Sen 444; 27 ER 1132 ......................................................... 13.10 Pennington v Waine [2002] 1 WLR 2075 .................................................................................. 16.35 Performing Right Society v London Theatre of Varieties [1924] AC 1 ......................................... 15.90 Permanent Houses (Holdings) Ltd, Re (1989) 5 BCC 151 .......................................................... 22.70 Perpetual Trustee Co Ltd v Commissioner of Stamp Duties (1961) 61 SR (NSW) 333 ................ 12.25 Perpetual Trustee Company Ltd v Smith (2010) 186 FCR 566; [2010] V ConvR 54-779 ........... 20.30, 21.15 Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85 ................................ 15.340, 15.400 Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 214 ALR 392 ..................................................... 22.35 Picwoods Pty Ltd v Panagopoulos (2005) NSW ConvR 56-120; [2004] NSWSC 978 ................... 3.70 Pilcher v Rawlins (1872) 7 Ch App 259 ......................................................................... 20.20, 20.25 Pitt Son & Badgery Ltd v Proulefco SA (1984) 153 CLR 644 ..................................................... 11.35 Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 ........................... 20.30, 21.15, 21.20 Polymer Systems (1999) Ltd v Montgomerie [2002] 3 NZLR 383 ............................................. 13.80 Powercell Pty Ltd v Cuzeno Pty Ltd (2004) 11 BPR 21,429; [2004] NSWCA 51 ........................... 3.70 Probert v Commissioner of State Taxation (1998) 72 SASR 48 ................................................ 15.220 Public Trustee v Bussell (1993) 30 NSWLR 111 ......................................................................... 10.55 Puntoreiro, Re (1991) 104 ALR 523 ........................................................................................ 15.395

Q Quarmby v Keating [2008] TASSC 71 ......................................................................................... 3.25

R R v Jackson (2005) 194 FLR 215 ............................................................................................... 22.60 R v McKay [1957] VR 560 ......................................................................................................... 1.135 R v Toohey; Ex Parte Meneling Station Pty Ltd (1982) 158 CLR 327 .............................. 15.05, 23.25 Rabobank New Zealand Ltd v McAnulty [2010] NZHC 1534 ............................................................. Rabobank New Zealand Ltd v McAnulty [2011] NZCA 212 ................................................................ Rasmussen v Rasmussen [1995] 1 VR 613 ................................................................................. 15.25 Ratto v Trifid Pty Ltd [1987] WAR 237; (1985) 56 LGRA 22; [1985] ANZ ConvR 202 ................... 3.70 Rayner v Preston (1881) 18 Ch D 1 .......................................................................................... 15.50 Redman v The Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 ..................... 15.95 Regent v Millett (1976) 133 CLR 679; 10 ALR 496 ...................................................................... 3.70 Registrar of Titles v Spencer (1909) 9 CLR 641; [1909] HCA 69 .................................................. 7.25 Reid v Smith (1905) 3 CLR 656; [1905] HCA 54 ......................................................................... 7.15 Reynolds Bros (Motors) Pty Ltd v Esanda Ltd (1983) 8 ACLR 422 .............................................. 22.65 Rice v Rice (1853) 2 Drew 73; 61 ER 646 .................................................................................. 21.15 Richard West & Partners (Inverness) Ltd v Dick [1969] 1 All ER 943 ........................................... 13.10 Riseda Nominees Pty Ltd v St Vincent’s Hospital (Melbourne) Ltd (unreported, SC Vic, Balmford J, 25 July 1996) .......................................................................................... 15.15, 15.35 Road Australia Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 327 .................... 2.15, 15.95 Roberts v Investwell Pty Ltd (in liq) (2012) 88 ACSR 689 .......................................................... 22.40 Robinson v Graves [1935] 1 KB 579 ......................................................................................... 10.68 Rodick v Gandell (1852) 1 De GM & G 763 ............................................................................. 18.10 Royal Bank of Canada v Radius Credit Union [2010] 3 SCR 38 .................................................. 23.65 Royal Brunei Airlines v Tan [1995] 3 WLR 64 ............................................................................... 3.35 Rural and Agricultural Management Ltd v West Merchant Bank Ltd (1995) 18 ACSR 793 ........ 13.105 Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793 ............................................................................. 21.30 xvii

Introduction to Property and Commercial Law

S Sabri, Re (1996) 137 FLR 165 ................................................................................................... 21.30 Sainsbury v IRC [1970] Ch 712 ................................................................................................. 13.25 Santley v Wilde [1899] 2 Ch 474 .............................................................................................. 22.20 Saulnier v Royal Bank of Canada [2008] 3 SCR 166 .................................................................. 23.25 Saunders v Vautier (1841) Cr & Ph 240; [1835-42] All ER Rep 58 ............................................ 15.165 Schokker v Commissioner of Taxation (No 2) [2000] 106 FCR 134 ......................................... 15.410 Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 ........ 13.25 Segard Masurel (NZ) Ltd v Nicol [2008] NZHC 109 .......................................................................... Shaw v Foster (1872) LR 5 HL 321 ............................................................................................ 15.50 Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 ............ 15.105, 15.325, 15.350, 18.05 Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 ............. 14.05, 15.40, 15.90 Simpson & Walton as Receivers of Service Foods Manawatu Ltd (in rec and in liq) v New Zealand Associated Refrigerated Food Distributors Ltd [2006] NZCA 349 ...................................... Singleton v Freehill Hollingdale & Page [2000] SASC 278 ....................................................... 15.410 Skybridge Holidays Inc, Re 1998 CanLII 5525 .................................................................................... Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 ............................................................... 16.25 Smith v Smith [1891] 3 Ch 550 ................................................................................................ 22.20 Somma v Hazelhurst [1978] 2 All ER 1011; [1978] 1 WLR 1014 .................................................. 3.80 Sorna Pty Ltd v Flint (1999) 21 WAR 563 ................................................................................ 15.130 Southern Wine Corp Pty Ltd (in liq) v Frankland River Olive Co Ltd (2005) 31 WAR 162 ........... 22.40 [1931] 2 Ch 183 ........................................................................................................................ 7.25 Stack v Brisbane City Council (No 2) (1996) 67 FCR 510 ............................................... 15.35, 15.90 Stamp Duties (Qld), Commissioner of v Jolliffe (1920) 28 CLR 178 ......................................... 13.140 Stamp Duties (Qld), Commissioner of v Livingston [1965] AC 694 ......... 13.15, 13.20, 13.25, 15.10, 15.45 Stephens Travel Service International Pty Ltd v Qantas Airways Ltd (1988) 13 NSWLR 331 ..... 13.130 Stern v McArthur (1988) 165 CLR 489 ..................................................................................... 15.95 Street v Mountford [1985] AC 809 ............................................................................................. 3.80 Strong v Bird (1874) LR 18 Eq 315 ................................................................................ 15.55, 16.20 Supply & Development, Minister for v Servicemen’s Co-operative Joinery Manufacturers Ltd (1951) 82 CLR 621 .............................................................................................................. 10.15 Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 ............................. 21.30 Swanville Investment Pty Ltd v Riana Pty Ltd [2003] WASCA 121 ................................................ 3.70 Swiss Bank Corp v Lloyds Bank Ltd [1980] 2 All ER 419 ............................................................. 22.40 Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 .................................................................... 22.40

T T Choithram International SA v Pagarani [2001] 2 All ER 492 ......................................... 15.55, 15.60 TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; [2010] HCA 49 ....... 7.25, 7.30 Tailby v Official Receiver (1888) 13 App Cas 523 ............................................ 15.50, 15.365, 15.380 Tamworth Industries Ltd v Attorney-General [1991] 3 NZLR 616 .............................................. 10.35 Taxation, Commissioner of v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 ................. 3.25 Taxation, Federal Commissioner of v Australia Guarantee Corp Ltd (1984) 54 ALR 209 ........... 15.355 Taxation, Federal Commissioner of v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499; [1979] HCA 67 ................................................................................................ 9.35 Taxation, Federal Commissioner of v Everett (1978) 38 ALR 625 ............................................. 15.335 Taxation, Federal Commissioner of v Everett (1980) 143 CLR 440 ...... 12.25, 15.95, 15.310, 15.315, 15.340, 18.10 Taylor v Deputy Federal Commissioner of Taxation (1969) 123 CLR 206 .................................. 15.65 Thai Trading Co (A Firm) v Taylor [1998] QB 781 ................................................................... 15.410 Theodore v Mistford Pty Ltd (2005) 221 CLR 612; [2005] HCA 45 .................................. 3.85, 22.35 Thomas v National Australia Bank Limited [2000] 2 Qd R 448 .................................................. 15.90 Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 ..................................................................................................................... 19.35 xviii

Table of Cases

Three Rivers District Council v Bank of England [1996] QB 292 ................................................ 15.90 Tobin v Ezekiel [2009] NSWSC 1313 ........................................................................................ 15.10 Tolhurst v Associated Portland Cement Manufacturers [1902] 2 KB 660 ................................. 15.420 Toohey v Gunther (1928) 41 CLR 181 ...................................................................................... 22.20 Torkington v Magee [1902] 2 KB 427 ....................................................................................... 12.30 Tottenham Hotspur Football & Athletic Co Ltd v Princegrove Publishers Ltd [1974] 1 WLR 113 ........................................................................................................................................ 3.70 Transphere Pty Ltd, Re (1986) 5 NSWLR 309 .............................................................................. 3.35 Trendtex Trading Corp v Credit Suisse [1982] AC 679 ............................................... 15.410, 15.415 Trepca Mines Ltd (No 2), Re [1962] Ch 511 ........................................................................... 15.410 Tricontinental Corp Ltd v Commissioner of Taxation [1988] 1 Qd R 474 ................................... 22.60 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 ....... 13.110, 13.115, 13.130 Tritton, Re; Ex parte Singleton (1889) 61 LT 301 ...................................................................... 12.25 Trust Agency Company v Markwell (1874) 4 QS Ct 50 ............................................................. 22.25 Tubantia, The [1924] P 78 ......................................................................................................... 9.30 Twinsectra Ltd v Yardley [2002] 2 AC 164 ............................................................................... 13.140

U UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457; (1996) 14 ACLC 1610 .................................................................................................................................. 15.415 Union Trustee Co of Australia Ltd v Federal Commissioner of Land Tax (1915) 20 CLR 526 ......... 9.50 Unisource Canada Inc v Laurentian Bank of Canada (1999) 47 OR (3d) 616 ...................................... United Bank of Kuwait Plc v Sahib [1997] Ch 107 ................................................................... 15.125 United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 ..................................... 22.60 United States of America & Republic of France v Dollfus Mieg et Cie SA & Bank of England [1952] AC 502 ....................................................................................................................... 9.05

V Valoutin Pty Ltd v Furst (1998) 154 ALR 119 ............................................................................. 15.25 Van Schaik Organic Soils & Bark Supplies Pty Ltd v Woakwine Industries Pty Ltd (2001) 215 LSJS 278; [2001] SASC 297 .................................................................................................... 3.70 Vandepitte v Preferred Accident Insurance Corporation of New York [1933] AC 70 .................. 13.110 Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 ........ 15.115, 15.195, 15.230, 15.255, 15.300, 17.15 Vandervell Trustees Ltd v White [1971] AC 912 ....................................................................... 15.255 Vandervell’s Trusts (No 2), Re; White v Vandervell Trustees Ltd [1974] Ch 269 ........... 15.255, 15.300 Vella v Wah Lai Investment (Aust) Pty Ltd [2004] NSWSC 748 .................................................... 3.70 Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10 ................................................................................................... 7.25, 7.30, 7.40 Vorster v Vorster’s Trustees (1910) EDL 132 ............................................................................... 10.05

W Wait, Re [1927] 1 Ch 606 ....................................................................................................... 15.375 Walker v Bradford Old Bank (1884) 12 QBD 511 ...................................................................... 15.85 Walker v Corboy (1990) 19 NSWLR 382 ....................................................................... 13.85, 13.90 Walker v Linom [1907] 2 Ch 104 ............................................................................................. 20.15 Walsh v Lonsdale (1882) LR 21 Ch D 9 ............................................................................. 3.65, 3.70 Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1995) 31 ATR 15 ........ 13.130 Walter & Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584 ................................................. 15.90 Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 ....................................................... 3.70 Warner Bros v Rollgreen [1976] QB 430 ........................................................................ 15.85, 15.90 Weddell v J A Pearce & Major [1988] Ch 26 .............................................................................. 15.90 Weir’s Settlement Trusts, Re [1971] Ch 145 .............................................................................. 13.25 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 .... 13.30, 13.40 xix

Introduction to Property and Commercial Law

Western Australia v Brown [2014] HCA 8 .................................................................................... 2.35 Western Australia v Commonwealth (1995) 128 ALR 1 ............................................................... 2.30 Western Australia v Ward (2000) 170 ALR 159 ............................................................................ 2.10 Western Australia v Ward (2002) 213 CLR 1; 191 ALR 1 .............................................................. 2.30 Westerton, Re [1919] 2 Ch 104 ................................................................................................ 15.85 Westgold Resources NL v St George Bank (1998) 29 ACSR 396; (1998) 17 ACLC 327 .............. 15.40, 15.340, 15.400 Westpac Banking Corporation v Market Services International Pty Ltd (unreported, SC Vic, Batt J, 1 October 1996) ........................................................................................................ 15.40 Wik Peoples v Queensland (1996) 187 CLR 1 ........................................................................... 1.135 Wilkes v Spooner [1911] 2 KB 473 ............................................................................................ 20.25 William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 .............. 15.90, 15.105, 15.120 William Felton & Co Pty Ltd, Re (1998) 145 FLR 211 .............................................................. 15.415 Williams v Commissioner of Inland Revenue [1965] NZLR 395 ............................................... 15.355 Williams and Glyn’s Bank Ltd v Boland [1981] AC 487 .............................................................. 20.30 Wilson v Commissioner of Probate Duties (Vic) (1978) 80 ATR 799 ........................................... 12.25 Wilson v Official Trustee in Bankruptcy (2000) 97 FCR 196 ....................................................... 15.90 Wily v Endeavour Health Care Services Pty Ltd [2003] NSWCA 321 .......................................... 22.20 Wily v St George Partnership Banking Ltd (1997) 150 ALR 329 ................................................. 22.60 (1997) 69 SASR 126; [1997] SASC 6287 ..................................................................................... 7.35 Woodroffes (Musical Instruments) Ltd, Re [1986] 1 Ch 366 ...................................................... 22.60 Wurridial v Commonwealth (2009) 237 CLR 309 ..................................................................... 1.135

Y Yanner v Eaton (1999) 201 CLR 351 ......................................................................................... 1.130 Yorkshire Woolcombers Association Ltd, Re [1903] 2 Ch 284 ......................................... 22.55, 22.60 Yorkshire Woolcombers Association Ltd, Re [1904] AC 355 ............................................ 22.65, 22.70 Young v Cockman (1943) 149 ALR 1006 .................................................................................. 10.05 Youssef v Victoria University of Technology [2005] VSC 223 ...................................................... 21.30

Z Zorbas and Zorbas, In the Marriage of (1990) FLC 92-160 ..................................................... 15.410

xx

TABLE OF STATUTES COMMONWEALTH

Native Title Act 1993: 2.40 s 14: 2.50 s 15: 2.50 s 223: 2.45

Bankruptcy Act 1966: 15.90 s 58: 1.15, 1.120 s 82: 15.385 s 116: 1.120 s 122: 13.160 s 153(1): 15.385

Patents Act 1990 s 13: 22.10 Personal Property Securities Act 2009: 6.05, 7.40, 13.70, 13.80, 19.05, 22.05, 22.10, 22.35, 22.55, 22.75, 23.05 s 3: 23.10, 23.25 s 6: 23.10 s 8: 22.05, 23.45 s 8(1): 23.05, 23.45 ss 8(1)(b) to (c): 23.40 s 8(1)(c): 22.05 s 8(1)(d): 23.45 s 8(1)(f)(x): 13.80 s 8(1)(h): 13.80, 23.45 s 8(1)(j): 7.40, 23.05, 23.25 s 8(2): 22.05, 23.45 s 8(3): 22.05, 23.05, 23.45 s 10: 22.05, 22.10, 23.05, 23.10, 23.15, 23.25, 23.30, 23.65 s 12: 19.95, 23.05, 23.10, 23.45 s 12(1): 23.20, 23.45 s 12(2): 22.05, 23.10, 23.20, 23.30, 23.40 s 12(2)(d): 13.80 s 12(2)(l): 23.45 ss 12(2) to (3): 23.35 s 12(3): 23.20, 23.40 s 12(5): 22.05, 23.05 s 12(6): 22.05, 23.05 ss 12 to 15: 23.15 s 13(1): 23.40 s 13(2)(a): 23.40 s 14(2): 23.40 ss 14(3) to (4): 23.40 s 15: 23.10 s 18: 23.65 s 19: 23.55, 23.60 s 19(1): 23.25, 23.60 s 19(2): 23.60 s 19(2)(a): 23.60 s 19(2)(b): 23.60 s 19(4): 23.60 s 19(5): 23.60 s 20: 23.55, 23.65 s 20(1)(a): 23.65 s 20(2): 23.65 s 21: 23.55, 23.70 s 21(1)(a): 23.55, 23.70 s 21(1)(b)(iii): 23.70 s 21(2): 23.70

Bankruptcy Regulations 1996 reg 6.03: 1.120 Commonwealth of Australia Constitution Act 1901 s 51(xxxi): 1.135 s 96: 1.135 s 122: 1.135 Competition and Consumer Act 2010: 22.20 Copyright Act 1968 s 196: 22.10 Corporations Act 2001: 22.05, 23.10, 23.25 s 9: 22.05 s 51: 22.05 s 51A: 22.05 s 130(2): 23.70 s 262: 13.80 s 588FA: 13.160 s 588FE: 13.160 s 588FL: 23.70 s 763A(1): 12.05 s 764A: 12.05 s 1070A: 22.10 s 1501B: 23.70 Ch 2K: 23.70 Corporations Law s 262: 13.80 Family Law Act 1975 s 68B: 1.50 Imported Food Control Act 1992 s 20(14): 9.50 Income Tax Assessment Act 1936 s 218: 15.90 Lands Acquisition Act 1989: 1.120 National Consumer Credit Act 2009 s 35: 6.05 National Credit Code ss 14 to 17: 6.05 s 72: 6.05 s 76: 6.05 s 88: 6.05 xxi

Introduction to Property and Commercial Law

Personal Property Securities Act 2009 — cont s 21(2)(b): 23.70 ss 21(2)(c)(i) to (v): 23.70 s 21(2)(c)(vi): 23.70 s 21(3): 23.55 s 24(1): 23.70 ss 25 to 29: 23.70 s 32(1)(a): 23.60 s 32(1)(b): 23.60 s 33(1): 23.70 ss 33(2) to (3): 23.70 s 34: 23.70 s 35: 23.70 s 36: 23.70 s 43: 23.70 s 52: 23.70, s 55: 23.70 s 57: 23.70 s 73: 22.05 s 100: 23.70 s 110: 22.05 s 123(4): 23.70 s 126(4): 23.70 s 150(1): 23.70 s 151: 23.55 s 153: 23.70 s 153(1): 23.25 s 164(1): 23.70 s 165: 23.70 s 165(a): 23.70 s 235(5): 23.10 s 254: 23.10 s 263: 23.65 s 267: 23.70 s 268: 23.70 s 273: 23.20 s 300: 23.70 s 306: 23.10 s 340(2): 23.70 s 343: 23.10 Ch 4: 22.05, 23.50 Pt 1.3, Div 3: 23.15 Pt 2.5: 23.60 Pt 5.4: 23.70 Pt 7.2: 23.10 Pt 7.3: 23.10

AUSTRALIAN CAPITAL TERRITORY

Personal Property Securities Bill 2009: 23.10, 23.70

Contracts Review Act 1980: 22.20

Civil Law (Property) Act 2006 s 201(3): 17.15 s 201 to 203: 3.15 s 204: 3.70 s 205: 14.10 Civil Law (Wrongs) Act 2002 s 168: 1.115 Duties Act 1999: 15.115 Heritage Act 2004: 1.115 Land Titles Act 1925 s 57: 3.10 s 58(1): 5.15 s 59: 5.55 s 60(2): 5.55 s 152: 5.65 s 159: 5.65 Lands Acquisition Act 1994: 1.120 Law of Property (Miscellaneous Provisions) Ordinance 1958 s 3: 15.35, 15.110, 15.310 Legal Profession Act 2006 s 222: 13.95 Real Property Act 1925 s 52: 15.25 s 57: 15.25 s 58: 15.25 Residential Tenancies Act 1997 Sch 1, s 67: 7.30 Sch 1, s 68: 7.30 Sch 1, s 68(4): 7.35 Sale of Goods Act 1954 s 21: 15.30, 15.370 s 55: 15.375

NEW SOUTH WALES Agricultural Tenancies Act 1990 s 10: 7.30, 7.35

Conveyancing Act 1919: 15.75 s 7: 15.155 s 7(1): 17.15 s 12: 12.05, 14.10, 15.35, 15.40, 15.85, 15.110, 15.120, 15.310, 15.315, 15.320, 15.325 s 19(1): 2.15 s 23B(1): 15.25 s 23C: 3.15, 15.25, 15.110, 15.115, 15.150, 15.155, 15.310 s 23C(1): 15.130, 15.255, 15.305

Personal Property Securities Regulations 2010: 23.05, 23.10 reg 1.5: 23.05 Sch 1: 23.25 Sch 1, cl 2.3: 23.15 Sch 1, Pt 2(2.1): 23.25 Racial Discrimination Act 1975: 2.30 Trade Marks Act 1995 s 21: 22.10 xxii

Table of Statutes

Conveyancing Act 1919 — cont s 23C(1)(a): 15.115, 15.120, 15.130, 15.150, 15.165, 15.170, 15.185, 15.220, 15.225, 15.235, 15.240, 15.305, 17.15 s 23C(1)(b): 15.150, 15.185, 17.15 s 23C(1)(c): 15.115, 15.120, 15.125, 15.130, 15.135, 15.155, 15.165, 15.170, 15.175, 15.180, 15.185, 15.195, 15.220, 15.225, 15.235, 15.240, 15.245, 15.250, 15.305, 15.315, 17.15 s 23C(2): 15.130, 15.140, 15.300 s 23D: 3.15 s 23E: 3.15 s 30: 15.75 s 46: 15.25 s 47(1): 2.15 s 47(2): 2.15 s 47(3): 2.15 s 53(1): 20.30 s 53(3): 20.30 s 54A: 3.70, 15.125, 15.150 s 93: 22.20 s 117: 15.15 s 164: 20.30 ss 184A to 184J: 4.05 s 188: 15.15 Pt 3, Div 3: 15.115 Duties Act 1997: 15.115 Factors (Mercantile Agents) Act 1923 s 3: 19.50 Heritage Act 1977: 1.115 Imperial Acts Application Act 1969 s 8: 3.20 Land Acquisition (Just Terms Compensation) Act 1991: 1.120 Legal Profession Act 2004 s 254: 13.95 Maintenance and Champerty Abolition Act 1993 s 3: 15.410 s 4: 15.410 Mining Act 1992 s 244: 7.30 s 245: 7.30 Personal Property Securities (Commonwealth Powers) Act 2009: 23.10 Real Property Act 1900: 15.75, 22.25 s 40(1): 15.25 s 41: 3.10, 15.25 s 42: 15.25 s 42(1): 5.15 s 43(1): 5.55 s 45(1): 5.65 s 45(2): 5.65 s 57(1): 22.05, 22.25

s 97: 15.75 s 118: 5.65 Residential Tenancies Act 2010 s 67: 7.30 s 67(1): 7.35 s 68: 7.30 Sale of Goods Act 1923 s 6(3): 19.95 s 21: 15.30, 15.370 s 22: 10.90, 10.105 s 23: 10.85, 10.90, 10.95, 10.100, 10.105, 10.110, 10.115 s 25A: 10.105 s 26(1): 19.10, 19.15, 19.20 s 27: 19.40, 19.95 s 28(1): 19.50, 19.55 s 28(2): 19.80, 19.85, 19.95 s 56: 15.375 s 60(2): 10.95 28(2) 28(2): 10.20

NORTHERN TERRITORY Heritage Act: 1.115 Land Title Act s 39: 5.25 s 184: 3.10 s 188(1): 5.25 s 188(2)(a): 5.55 s 188(2)(c): 5.65 s 188(3)(b): 5.65 Lands Acquisition Act: 1.120 Law of Property Act s 4: 17.15 s 6: 3.20 s 9 to 11: 3.15 s 10(1)(c): 17.15 s 22: 2.15 s 29: 2.15 s 56: 13.120 s 62: 3.70 s 182: 14.10 Legal Profession Act 2006 s 246: 13.95 Mineral Titles Act s 99: 7.30 Personal Injuries (Liabilities and Damages) Act s 9: 1.115 Residential Tenancies Act s 55: 7.30 Sale of Goods Act 1972 s 21: 15.30, 15.370 s 56: 15.375 xxiii

Introduction to Property and Commercial Law

Stamp Act 1978: 15.115

QUEENSLAND Acquisition of Land Act 1967: 1.120 Duties Act 2001: 15.115 Land Title Act 1994 s 37: 15.25 s 38: 5.15 s 59: 15.75 s 60: 15.25 s 62: 15.25 s 74: 22.05, 22.25 s 165: 15.25 s 181: 3.10 s 184(1): 5.15 s 184(2)(a): 5.55 s 184(2)(b): 5.65 s 184(3)(b): 5.65 Legal Profession Act 2007 s 248: 13.95 Mineral Resources Act 1989 ss 121 to 123: 7.30 ss 228 to 230: 7.30 ss 312 to 314: 7.30 Property Law Act 1974 s 5: 15.25, 15.110, 15.115, 15.155 s 6: 17.15 s 7: 3.20 s 9: 15.25, 15.110, 15.115 s 10(1): 15.25 s 11(c): 17.15 s 11 to 12: 3.15 s 22: 2.15 s 29: 2.15 ss 29(1) to (2): 2.15 s 55: 13.120 s 59: 3.70 s 155: 7.30, 7.35 s 199: 14.10, 15.35, 15.110, 15.310 s 200: 15.35, 15.110, 15.310 s 237(1): 20.30 s 237(6): 20.30 ss 241 to 249: 4.05 s 346: 20.30 Queensland Coast Islands Declaration Act 1985: 2.30 Queensland Heritage Act 1992: 1.115 Residential Tenancies and Rooming Accommodation Act 2008 ss 207 to 209: 7.30 Sale of Goods Act 1896 s 19: 15.30, 15.370 s 53: 15.375

Statute of Frauds Act 1972 s 5: 15.125, 15.150

SOUTH AUSTRALIA Civil Liability Act 1936 ss 19 to 22: 1.115 Heritage Places Act 1993: 1.115 Land Acquisition Act 1969: 1.120 Law of Property Act 1936 s 7: 17.15 s 15: 14.10, 15.35, 15.85, 15.110, 15.310 s 26: 3.70, 15.125, 15.150 s 28(1): 15.25 s 29: 15.25, 15.110, 15.115 s 29(1)(c): 17.15 s 29 to 31: 3.15 s 117: 20.30 Legal Practitioners Act 1981 s 31: 13.95 Mining Act 1971 s 86: 7.30 Property Act 1860 s 19: 15.35, 15.110, 15.310 Real Property Act 1886 s 67: 3.10, 15.25 s 69: 5.25, 5.30, 15.25 s 70: 5.25, 5.30 s 80: 15.25 s 86: 5.55 s 132: 22.05, 22.25 s 187: 5.55 s 207: 5.65 Registration of Deeds Act 1935: 4.05 Residential Tenancies Act 1995 s 70: 7.30 Sale of Goods Act 1895 s 16: 15.30, 15.370 s 51: 15.375 Stamp Duties Act 1923: 15.115

TASMANIA Conveyancing and Law of Property Act 1884 s 5: 20.30 s 35(1): 20.30 s 35(5): 20.30 s 35A: 20.30 s 36(1): 3.70 s 60(1): 15.25 s 60(2): 15.25, 15.110, 15.115 s 60(2)(c): 17.15 s 60(2) to (5): 3.15 xxiv

Table of Statutes

Conveyancing and Law of Property Act 1884 — cont s 61(2): 2.15 s 65: 2.15 s 86: 14.10, 15.35, 15.110, 15.310

Landlord and Tenant Act 1958 s 28: 7.30

Duties Act 2001: 15.115

Mineral Resources (Sustainable Development) Act 1990 s 114: 7.30

Legal Profession Act 2004 s 3.3.13: 13.95

Historic Cultural Heritage Act 1995: 1.115

Property Law Act 1958 s 18(1): 17.15 s 19A: 3.20 s 44(1): 20.30 s 44(6): 20.30 s 52(1): 15.25 s 53: 15.25, 15.110, 15.115 s 53(1)(c): 17.15 s 53 to 55: 3.15 s 54(2): 3.10 s 60(6): 2.15 s 134: 14.05, 15.35, 15.110, 15.310, 15.350 s 154A: 7.30, 7.35 s 199: 20.30 s 199(1)(b): 20.30 s 249: 2.15 Pt I: 4.05

Land Acquisition Act 1993: 1.120 Land Titles Act 1980 s 39: 15.25 s 40: 15.25 s 40(1): 5.35, 5.40 s 40(2): 5.35, 5.40 s 41(1): 5.55 s 41(2): 5.55 s 42: 5.65 s 49(1): 3.10 s 63: 15.75 s 73: 22.05, 22.25 s 149: 5.65 Landlord and Tenant Act 1935 s 26: 7.30 Legal Profession Act 2007 s 242: 13.95

Residential Tenancies Act 1997 s 64: 7.30

Mercantile Law Act 1935 s 6: 15.125, 15.150

Sale of Goods Act 1958 s 21: 15.30, 15.370 s 58: 15.375

Mineral Resources Development Act 1995 s 105: 7.30

Sale of Land Act 1962 s 32: 20.30

Registration of Deeds Act 1935: 4.05 Residential Tenancy Act 1997 s 54: 7.30

Transfer of Land Act 1958 s 40(1): 3.10, 15.25 s 41: 15.25 s 41(1): 5.10 s 42: 5.70, 15.25 s 42(1): 5.05 s 43: 5.45, 5.50, 5.70 s 44(2): 5.55, 5.60 s 74: 22.05, 22.25

Sale of Goods Act 1896 s 21: 15.30, 15.370 s 56: 15.375

VICTORIA Chattel Securities Act 1987 s 6: 7.40

Transfer of Land (Single Register) Act 1998: 4.05

Duties Act 2000: 15.115

Wrongs Act 1958 ss 14A to 14D: 1.115

Goods Act 1958 s 30: 19.50, 19.70, 19.80 s 31: 19.80

WESTERN AUSTRALIA

Heritage Act 1995: 1.115

Chattel Securities Act 1987 s 6: 7.40

Imperial Acts Application Act 1980 s 5: 3.20

Heritage of Western Australia Act 1990: 1.115

Instruments Act 1958 s 126: 3.70, 15.125, 15.150

Land Administration Act 1997: 1.120 Law Reform (Statute of Frauds) Act 1962: 3.70

Land Acquisition and Compensation Act 1986: 1.120

Legal Profession Act 2008 xxv

Introduction to Property and Commercial Law

Legal Profession Act 2008 — cont s 215: 13.95

Land Registration Act 2002 Sch 3, para 2: 20.30

Mining Act 1978 s 114: 7.30 s 119: 15.130

Law of Property (Miscellaneous Provisions) Act 1989 s 2(1): 15.125

Occupiers’ Liability Act 1985: 1.115

Sale of Goods Act 1893 s 18: 15.375

Property Law Act 1969 s 7: 17.15 s 11: 13.120 s 20: 14.10, 15.35, 15.110, 15.310 s 20(3): 16.35 s 23(1): 2.15 s 33(1): 15.25 s 34: 15.25, 15.110, 15.115 s 34(1)(c): 17.15 s 34(2): 15.130 s 34 to 36: 3.15 s 37: 2.15 ss 37(1) to (4): 2.15

Sale of Goods Act 1979 s 16: 15.375 Statute of Frauds 1677: 13.15 s 1-3: 15.115 s 4: 3.70 s 7-9: 15.115 Statute of Quia Emptores 1290: 2.05 Statute of Tenures 1660: 2.05 Statute of Uses: 3.20

Registration of Deeds Act 1856: 4.05

NEW ZEALAND

Residential Tenancies Act 1987 s 47: 7.30 s 47(2)(b): 7.35

Contracts (Privity) Act 1982 s 4: 13.120

Sale of Goods Act 1895 s 16: 15.30, 15.370 s 51: 15.375 Sale of Land Act 1970 s 22: 20.30 Stamp Act 1921: 15.115 Transfer of Land Act 1893 s 58: 3.10, 15.25 s 63: 15.25 s 68: 15.25 ss 68(1) to (4): 5.15 s 106: 22.05, 22.25 s 134: 5.55 s 199: 5.65 s 202: 5.65

GERMANY Civil Code (Bürgerliches Gestetzbuch) s 90: 8.05 s 903: 1.115

IMPERIAL AND UNITED KINGDOM Contracts (Rights of Third Parties) Act 1999: 13.120 Judicature Act 1873: 1.75, 12.25, 15.325 s 25(6): 12.05, 15.35 Land Registration Act 1925 s 70(1)(g): 20.30

Personal Property Securities Act 1999: 23.10 s 16: 23.15 s 36: 23.55 s 40: 23.55 Property Law Act 2007 s 48: 16.35 s 50: 14.10

ONTARIO Personal Property Security Act 1990: 23.10 s 11: 23.55

SASKATCHEWAN Personal Property Security Act 1993: 23.10 s 10: 23.55 s 12: 23.55

SINGAPORE Contracts (Rights of Third Parties) Act 2001: 13.120

UNITED STATES Uniform Commercial Code: 23.10 Art 9: 23.10, 23.15, 23.20

TREATIES AND CONVENTIONS International Convention on the Law Applicable to Trusts and on their Recognition Art 2: 13.40 xxvi

Chapter 1: Introduction to General Property Concepts .................... .. 3 Chapter 2: Tenures, Estates and Native Title ..................................... 37 Chapter 3: Legal and Equitable Interests in Land ........................... .. 81 Chapter 4: Old System Title Registration ......................................... 129 Chapter 5: Torrens Title Land ........................................................... 131 Chapter 6: General Law and Torrens Title Mortgages .................. .. 143 Chapter 7: Definition of Land – Fixtures .......................................... 149

PART1

PART 1: (A) THE CONCEPT AND FUNCTION OF “PROPERTY” AND (B) REAL PROPERTY – INTRODUCTION TO REAL PROPERTY

CHAPTER 1 Introduction to General Property Concepts [1.05]

INTRODUCTION TO WHAT IS PROPERTY ............................................................... 3

[1.10]

DEFINITIONS OF PROPERTY ..................................................................................... 4 [1.15] [1.20]

[1.25]

Assignable Rights .................................................................................... 4 Rights in Rem ........................................................................................... 5

THE ESSENTIAL CHARACTERISTICS OF PROPERTY RIGHTS ................................... 6 [1.30] [1.35] [1.40]

Enforceability ........................................................................................... 6 The Existence of Some Thing ................................................................. 7 Other Essential Characteristics? ............................................................. 7

[1.60]

INTRODUCTION TO TAXONOMY ......................................................................... 10

[1.65]

LAND AND GOODS ................................................................................................ 10

[1.70]

REAL AND PERSONAL .............................................................................................. 11

[1.75]

LEGAL AND EQUITABLE ........................................................................................... 12

[1.80]

TANGIBLE AND INTANGIBLE .................................................................................. 13

[1.85]

PROPERTY CREATING EVENTS ................................................................................ 13

[1.90]

INTRODUCTION TO OWNERSHIP ......................................................................... 14

[1.95]

OWNERSHIP AND POSSESSION ............................................................................. 15

[1.100]

BUNDLE OF RIGHTS ................................................................................................ 16

[1.105]

ALIENABILITY ............................................................................................................ 17

[1.110]

RESPONSIBILITIES OF OWNERSHIP ....................................................................... 18 [1.115] [1.120]

Duty to Prevent Harm .......................................................................... 18 Liability to Execution ............................................................................ 19 [1.125] [1.130]

King v David Allen & Sons Billposting Ltd .................................. 21 Yanner v Eaton ....................................................................... 30

Extracts from Chambers, An Introduction to Property in Australia, Ch 2.

INTRODUCTION TO WHAT IS PROPERTY [1.05] Property rights are rights to things. A basic understanding of them is best achieved in

two stages. The first, which is the subject of this chapter, is to identify the kinds of rights which the law regards as property rights. The second is to identify the kinds of things which can be subject to those rights. That is discussed in Chapter 3 (Chambers).

[1.05]

3

Part 1: (A) The Concept and Function of “Property” and (B) Real Property – Introduction to Real Property

DEFINITIONS OF PROPERTY [1.10] The word “property” means different things to different people and in different

contexts. It is commonly used to refer to the things that people own. For example, when we encounter a sign of “Private Property” on a gate, we assume that the property in question is the land on the other side. When we see “Property Left at Owner’s Risk” posted in a cloakroom, we understand property to mean the coats, hats, etc, that people may choose to leave there from time to time. This is a common and perfectly acceptable use of the word property, but it is a popular or layperson’s usage. When lawyers talk about property, they are usually referring to the rights which people have to things, rather than the things themselves. Lawyers divide legal rights into personal rights and property rights, but they do not always divide them in the same way. Whether a particular right counts as property depends on why it matters. Sometimes, what matters is whether a right can be assigned (that is, transferred) to another person. For that purpose, a right can be counted as property if it is assignable, but that produces a very wide definition of property because most rights are assignable. At other times, the essential issue is the enforcement of the right. In that context, a property right is a right to a thing which can be enforced generally against other members of society and not just against specific persons. This produces a much narrower definition of property since most rights are not enforceable generally against others. The fact that lawyers use different definitions of property for different purposes does not mean that the concept of property is vague or poorly defined. Legal definitions of property are precise and well understood in the contexts in which they are used. However, care must be taken to choose the correct definition and use it consistently. What is commonly regarded as the law of property (and studied as a separate subject in university law schools) is based on the narrow definition of property, set out below. That is what this book is about. However, it is important to be aware that a different and much wider definition of property is used for some purposes. Assignable Rights [1.15] At its widest, property means any right that can be transferred from one person to

another. For example, when someone dies, most of her or his rights form the estate which gets transferred to the executor and then distributed according to law (as discussed in Chapter 22 (Chambers)). The collection of rights available for distribution in this way is often called the property of the deceased, and can include such things as land, personal belongings, bank accounts, company shares, debts due to the deceased, and even legal claims which the deceased had a right to pursue. A similar process occurs when people are unable to meet their financial obligations and become bankrupt. The bankruptcy process is designed, in part, to prevent a stampede of creditors all rushing to get paid. Instead, the “property of the bankrupt” is transferred to the trustee in bankruptcy, who sells it and distributes the proceeds among the bankrupt’s creditors. 1 The “property of the bankrupt” includes most of the bankrupt’s transferable rights, and can even include a right to appeal from a judgment given against the bankrupt in a court of law. 2 For other purposes, we would not regard a right to appeal as a form of property, but it can count as property for the purposes of bankruptcy law. 1 2 4

Bankruptcy Act 1966 (Cth), s 58. Cummings v Claremont Petroleum NL (1996) 185 CLR 124; [1996] HCA 19. [1.10]

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These wide definitions of property are those based on the assignability of rights. When defined in this way, property includes everything that might be regarded as wealth or which an accountant might list as an asset on a balance sheet. Excluded are personal rights, which in this context are those rights which can be used only by the particular person who holds them. For example, the right to vote in a general election cannot be sold or given away. It is always regarded as a personal right, never property. The same is true of an academic or professional qualification, such as a university degree or licence to practise medicine. 3 If property was always defined this way, it would be a very large subject indeed. Since most contractual rights are assignable, it would swallow up most of the law of contract. Similar things could be said of the law of torts. However, for most purposes (including the study of law), the definition of property is based on the enforceability of rights and not their assignability. Rights in Rem [1.20] For most purposes, the distinction between personal rights and property rights is based

on their enforceability. It corresponds to the distinction between rights in personam and rights in rem (using the Latin words for person and thing). Rights in personam are so called because they are enforced against particular persons, without much regard to the things they might have. Rights in rem are rights people have concerning particular things, without much regard to the people against whom those rights might be enforced. Property law is primarily about rights in rem. An example may help. If I borrow $20 from you and promise to repay it, I owe you $20. You do not expect to get the same $20 note back. Instead, I have a personal obligation to pay which corresponds to your personal right to be paid $20. This is a right in personam which can be enforced against me, regardless of what has become of the $20 note I borrowed. If I give that note to a friend or spend it at a shop, you do not acquire any rights against my friend or the shopkeeper. You have no right to that note nor to any other $20 note I may have. In contrast, if I borrow your book and promise to return it, you continue to own the book. In addition to my promise, you have a right in rem which is enforceable against me because I have your book. The property right follows the book, and if I give your book to a friend, you can assert your right in rem against my friend, because he or she has your book. The distinction between rights in rem and rights in personam is important in the law. A right in rem depends upon the continued existence of the thing to which the right relates. For example, if your book is destroyed, your property right is gone. The destruction may give you a right in personam against the person who destroyed your book or against your insurance company, but it brings to an end your right in rem to the book. In contrast, a right in personam does not depend on the existence of any particular thing. Instead, it corresponds to some person’s obligation to fulfil that right. The value of the right in personam depends upon the ability of the person to perform the corresponding obligation. So, for example, if I owe you $20, you have a right in personam which appears to be worth $20. However, if it turns out that I owe money to almost everyone I know and am unable to pay my debts, the practical value of your right may be greatly reduced. Although your right to be paid does not depend on the existence of any particular thing, my lack of sufficient assets to meet my obligations can affect the value of your right. 3

Caratun v Caratun (1992) 96 DLR (4th) 404 (Ont CA). [1.20]

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Part 1: (A) The Concept and Function of “Property” and (B) Real Property – Introduction to Real Property

THE ESSENTIAL CHARACTERISTICS OF PROPERTY RIGHTS [1.25] Property rights come in a variety of shapes and sizes. For example, the right to use a

book borrowed from the library differs in many ways from a landlord’s right to a home which is rented out. Despite these differences, these and all other property rights share two common characteristics which distinguish them from personal rights. The first is that a property right always relates to, and depends upon the existence of, some particular thing. The second is that a property right can be enforced not just against specific persons, but against a wide range of persons. It will be helpful to look at the second characteristic first. Enforceability [1.30] All legal rights, whether personal or property, have correlating obligations. For

example, if I owe you $20, you have a right to be paid $20 and I have a corresponding obligation to pay that amount. Your personal right and my personal obligation are two sides of the same coin. They form a relationship between specific persons. In this example, the relationship is called debt, in which I am the debtor who owes money to you, the creditor. Property rights, like all legal rights, are also enforced against persons. However, unlike personal rights, there are no specific persons responsible for their fulfilment. Who, for example, owes the obligation which corresponds to your property right to this book? Although the book must exist for your property right to exist, it cannot fulfil that right for you. That right can only be enforced against other persons. The obligation which corresponds to your property right is owed by other members of society. They each have a duty not to interfere with your rights to your book. In an influential essay called “Fundamental Legal Conceptions as Applied to Judicial Reasoning”, 4 Wesley Hohfeld said that the difference between rights in rem and rights in personam is simply the number of rights involved. A personal right is either a unique right enforceable against “a single person” or one of a small group of similar rights enforceable against “a few definite persons”. In contrast, property rights consist of “a large class of fundamentally similar yet separate rights”, which correspond to the obligations of “a very large and indefinite class of people”. In other words, Hohfeld would view your property right to your book as a very large collection of rights against every member of society, each of whom is under an obligation to you not to interfere with your rights relating to your book. Hohfeld used an example to illustrate his point. Suppose I made a contract with Yvonne that she would keep off your land. What is the difference between my contractual, personal right against Yvonne and your property right against her? Both rights have the same content. Hohfeld would say that the only real difference is that I have only one right of that kind, whereas you have a large number of similar rights which are enforceable against an indefinite class of people (including Yvonne). A difficulty with Hohfeld’s portrayal of property rights, as equivalent to an indefinite number of personal rights, is that it devalues the role of the things which are subject to those rights. Also, it does not accord with the way property rights function in society. A property right does not normally involve a set of specific relationships between the person who holds it and everyone who is obligated to respect it. As members of society, we are all under the same general duty not to interfere with the persons and things of others. The identity of the persons 4 6

(1917) 26 Yale Law Journal 710 at 718. [1.25]

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involved is irrelevant until someone interferes with the property right of another. The Hohfeldian analysis of property, as an indefinite number of one-to-one relationships of rights and corresponding obligations, is unnecessary. Assume, for example, that I have an obligation not to trespass on land belonging to others and would breach that obligation if I walked across a lawn without the owner’s consent. As I walk along the street passing lawn after lawn, a Hohfeldian might say that I enter a legal relationship with the owners of each lawn that I pass. They have a right to keep me off their lawn which corresponds to my obligation to stay off. However, I do not know who or how many people live in the houses I pass nor whether they are home or away. It does not matter. The identity of the property owners is irrelevant because I know that (a) I have a general duty not to interfere with the things of others, (b) those are not my lawns, and (c) I do not have permission to tread on them. We have no legal relationship except as members of the same society bound to observe the laws of that society. The Existence of Some Thing [1.35] An essential characteristic of property rights is that they are enforceable generally

against other persons in society. However, this is not a sufficient definition of property. The law also protects people from personal injury by imposing a general duty on members of society not to injure others intentionally or negligently. These rights to personal integrity and freedom from bodily interference correspond to general duties not to touch others intentionally without their consent and to take reasonable care not to harm them. The law protects your body and your things in much the same manner. Someone who wrongly interferes with your arm is guilty of a tort and liable to compensate you for any loss you suffer. The same is true of someone who wrongly interferes with your book. If your right to non-interference with your body is not a property right, but a personal right, what distinguishes these two types of rights? It is clear, using the language of Hohfeld, that both rights are enforceable against an “indefinite class of people”. However, the right to be free from bodily interference is not a property right because our bodies are not “things”. Property rights must relate to things which are separate and apart from ourselves. As James Penner said, “‘Thing’ here is a term of art which restricts the application of property to those items in the world which are contingently related to us, and this contingency will change given the surrounding circumstances, including our personal, cultural or technological circumstances.” 5 Things which are intrinsically connected to us, such as our bodies and reputations, cannot be subject to property rights. Although they are valuable to us and protected by laws such as the rules against assault and defamation, they are not protected by property law. It is possible that the intrinsic connection to something might be severed and reduced to a contingent connection. For example, a lock of hair could be cut off and transformed from being a part of a person into a thing which a person owns. The same is true, perhaps, of a kidney. However, unless the intrinsic connection is broken, they cannot be subject to property rights. 6 Other Essential Characteristics? [1.40] So far, a property right has been identified as a right to a thing, which corresponds to a

general duty placed on other members of society not to interfere with that right. Although 5 6

“The “Bundle of Rights” Picture of Property” (1996) 43 UCLA Law Review 711 at 807. See MJ Radin, “Property and Personhood” (1982) 34 Stanford Law Review 957 at 966. [1.40]

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Part 1: (A) The Concept and Function of “Property” and (B) Real Property – Introduction to Real Property

basic, this definition identifies the two characteristics which separate all property rights from personal rights. Given the wide variety of property rights (discussed in Part III (Chambers)), it is unlikely that anything further can be added to this basic definition. There are several characteristics which the majority of property rights share, such as alienability, excludability, and value. However, as discussed below, not all property rights have these traits, while many personal rights do. Therefore, they are not useful as defining characteristics of property rights.

Alienability [1.45] First, it is sometimes said that property rights are alienable, meaning that they can be

sold or given away to others. Of course, this must be true when a wide definition of property based on assignability is used (as discussed at [1.15]). However, that definition of property includes both rights in rem and rights in personam. While most rights are alienable, many are not. Most non-assignable rights are rights in personam, but there are also a few non-assignable rights in rem. In other words, there is some property that cannot be sold or given away. For example, a non-assignable, residential lease is certainly a property right, even though the tenants are not free to transfer it to others. All property rights can be described as “alienable” if that term is understood to mean “disposable” rather than “transferable”. Since property rights must relate to some thing which is only contingently connected to the right holder, it must be possible for that person to alienate the thing in the sense of severing her or his connection to it. However, that connection can be severed without transferring the right to another. For example, the tenant with a non-assignable lease can surrender it and vacate the dwelling.

Excludability [1.50] The second characteristic often attributed to property rights is excludability, meaning

that the holder of a property right is able to exclude others from making use of the thing subject to that right. Most property rights do include this trait. For example, if you own or rent a home, you have the right to exclude others from it. If you borrow a book from the library, you have the right to exclude others from using the book. However, there are property rights which do not allow the right holder to exclude others from the thing subject to that right. For example, a right of way (discussed at [16.30]ff Chambers) is a property right to cross another person’s land. It meets the definition of a property right in that it relates to some thing (land) and is enforceable against other members of society (including the land owner), who are not permitted to interfere with its proper use. However, the holder of a right of way is not permitted to exclude others from the land subject to it. Just as all property rights do not entitle the right holder to exclude others from the thing, some personal rights do. Hohfeld’s example (discussed at [1.30]) gave me a personal right to exclude Yvonne from your land. Also, sometimes in the course of a domestic dispute, one spouse might be granted the right to exclude the other spouse from the family home, even though that other spouse is the sole or part owner of that home. 7

Value [1.55] Value is a third characteristic which most, but not all, property rights share. They

usually have some market value. Even second-hand clothing can fetch a few dollars in a 7 8

Family Law Act 1975 (Cth), s 68B. [1.45]

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charity shop. However, value is not a necessary characteristic of property. 8 Many things which are subject to property rights have only sentimental value (such as my child’s primary school artwork or an old theatre ticket from a memorable night out). There are other things which are completely valueless. For example, your property right to dirty motor oil drained from your car may create a liability for the cost of discarding it safely. On the other hand, there are many personal rights that have market value, such as a contractual right to be paid a sum of money. In modern Australian society, many of the things for which we pay money are not property rights, but services, such as the right to listen to live music, have our cars washed, or receive medical advice. Some personal rights are commonly regarded as property rights because of their value. The most familiar example is the bank account. Money in the bank may be a person’s most valuable asset, but that does not make it property. If you deposit a $100 note in the bank, your property right to that note passes to the bank and the balance in your account increases by $100. The bank does not keep that $100 note safe for you. It belongs to the bank and is used as the bank sees fit. 9 The deposit does not give you any property rights to any other notes or assets in the bank. Your “money in the bank” does not correspond to anything but the bank’s promise to pay you $100 (plus interest, less fees and taxes) on request. In other words, you have exchanged your property right to the $100 note for a personal right of similar value. You are the bank’s creditor and the bank is your debtor. A personal right against a bank is a valuable asset, not because it relates to any particular thing, but because the bank will almost certainly pay its debts. Most people would rather have money in the bank than large sums of cash, because the risk of a bank not paying is much smaller than the risk of cash being lost, stolen, or destroyed. In other words, a bank account is a desirable form of value precisely because it is not property and does not carry the usual risks of property ownership. It is important not to overstate the essential characteristics of property. This happened in Milirrpum v Nabalco Pty Ltd, 10 and led to the dismissal of the plaintiffs’ claim for native title. The plaintiffs claimed that the defendant’s mining activities were wrongly interfering with their property rights to use certain land to perform ritual ceremonies. The judge, Blackburn J, said, “I think property, in its many forms, generally implies the right to use or enjoy, the right to exclude others, and the right to alienate.” 11 Since the plaintiffs were not entitled to exclude others from the land and could not sell or give their rights to others, Blackburn J decided that they did not have property rights enforceable against other members of society. However, it is clear that the plaintiffs’ rights related to a thing (the land) with which they were contingently connected. Although individual members of the plaintiffs’ clan could not sell or give their rights to others, they had the power to sever their connection with the land by moving away. Also, the right to perform ritual ceremonies on the land, like a right of way, can be a property right so long as it corresponds to a general duty placed on other members of society not to interfere with the exercise of that right. The right to exclude others from the land was not required. The result in Milirrpum would probably be different if that case was decided 8 9 10 11

F Cohen, “Dialogue on Private Property” (1954) Rutgers Law Review 357 at 363-364. Foley v Hill (1848) 2 HLC 28; 9 ER 1002; at 36; 1005-1006. Milirrpum v Nabalco Pty Ltd(1971) 17 FLR 141. Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 at 272. [1.55]

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Part 1: (A) The Concept and Function of “Property” and (B) Real Property – Introduction to Real Property

today, now that native title has been recognised by the High Court of Australia in Mabo v Queensland (No 2) as discussed in Chapter 2. 12 Extracts from Chambers, An Introduction to Property in Australia, Ch 5.

INTRODUCTION TO TAXONOMY [1.60] Peter Birks said, “There is no department of human knowledge which can manage

without taxonomy and, equally important, a continuing taxonomic debate.” 13 This is especially true of the law of property. The subject is so large and complex that it can appear to be an overwhelming mass of disorganised details. Without a meaningful system of classification, it is difficult, if not impossible, to make sense of the detail and understand how property rules relate to each other and to other areas of law. There are a number of ways to organise the law of property. Distinctions can be drawn according to the nature of the things subject to property rights or according to the nature of the property rights to which things can be subject. These are the traditional methods of classifying property rights, but they suffer from two limitations: obsolescence and isolation. The first limitation is the product of a long history. Many of the categories into which property rights are divided were created centuries ago. Changes in law and society have rendered some of those categories obsolete and yet they persist as potential sources of confusion. Secondly, the traditional categories of property law tend to isolate it from other areas of law. Categories based on the nature of the thing or the nature of the right have no counterparts outside the law of property. Since personal rights do not depend on the existence of a thing and differ from property rights by nature, it is difficult to make meaningful comparisons between property and other laws. As an aid to solving this problem, this book makes use of a classification system based on the events which create property rights. This provides a useful basis for comparing property and personal rights and makes it easier to understand the law of property itself. This taxonomy is introduced at the end of this chapter and forms the basis of Part IV (Chambers) (Creation of Property Rights). This chapter is only an introduction to methods of classifying property rights. The taxonomy of property law will be explored in greater detail in the chapters which follow, where distinctions are drawn between various kinds of property rights to various kinds of things and between various ways in which property rights can be created. Taxonomy is an ongoing process which is essential for the successful study, practice, or application of the law, and it is an important feature of this book.

LAND AND GOODS [1.65] The most important division in the law of property may be that which is drawn

between land and other things. Most things other than land are referred to as goods (and less commonly as chattels). There are many things which are neither land nor goods, such as money, shares in a company, or copyright to a song. Goods are those things, other than land, which are tangible, such as a car, dog, or loaf of bread. The distinction between land and goods is a natural starting point. It is easy to understand why the law makes this distinction. 12 13 10

Mabo v Queensland (No 2) (1992) 175 CLR 1; [1992] HCA 23. “Equity in the Modern Law: An Exercise in Taxonomy” (1996) 26 UWA Law Review 1 at 6. [1.60]

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Generally speaking, land is both permanent and stationary. It remains relatively constant while the people who use it come and go. Most other things are transitory. Animals die, clothes wear out, and food gets eaten. Goods can be moved from one place to another. A parcel of land will always be subject to whatever laws apply to that location, while a car made in one State may become subject to the laws of several different States and Territories as it is moved from place to place. Roman law classified things as either movable (res mobiles) or immovable (res immobiles). 14 Countries with civil codes, like France, Germany, and Japan, adopted this classification. Countries like Australia, which adopted the British common law, use a different system under which property is either real or personal (sometimes called realty and personalty). This corresponds roughly with the civilian categories of immovable or movable and our popular notions of the distinction between land and goods. However, it is important to know that the categories of goods and land, personal and real, and movable and immovable do not correspond to one another with precision.

REAL AND PERSONAL [1.70] The distinctions between land and goods and between immovables and movables are

based on the nature of the thing. In contrast, the distinction between real and personal property is based on the nature of the right. It is derived from the forms of legal actions used in 13th and 14th century England. 15 Certain property rights to land were classified as real property because the holder of the right could bring a real action to recover the land from someone who was wrongly in possession of it. Other property rights were classified as personal property because there was no real action available to recover the thing itself. Instead, the holder of a personal property right had a personal action to be compensated for the loss caused by the person who wrongly interfered with that right. The categories of real and personal property continue to be used and are commonly associated with the categories of land and goods. This is because all real property rights are rights to land, while most personal property rights are not. However, the similarity is misleading because there are property rights to land which, strictly speaking, are not real property. A lease of land (discussed at [12.30]ff (Chambers)) was considered not to be real property because there was no real action which would allow a dispossessed tenant to recover the leased land itself. In the 15th century, another form of action, called ejectment, was developed to allow tenants to recover possession of leased land. Since ejectment was not a real action, leases of land were not reclassified as real property, but are sometimes found under the strange heading, chattels real. 16 Ironically, ejectment proved to be a more efficient remedy than the real actions and soon displaced them as the means of protecting real property rights. 17 The end of the real actions removed the original basis for the distinction between real and personal property. The right to recover the thing itself is no longer limited to real property. In addition to leases of land, the law allows the holders of property rights to goods which are difficult or impossible to replace (such as original paintings or made-to-order machine parts) 14 15 16 17

B Nicholas, An Introduction to Roman Law (Oxford, 1962) p 105. TC Williams, “The Terms Real and Personal in English Law” (1888) 4 Law Quarterly Review 394. AWB Simpson, A History of the Land Law (2nd ed, Oxford, 1986) pp 74-76. JH Baker, An Introduction to English Legal History (4th ed, London, 2002) pp 301-303. [1.70]

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Part 1: (A) The Concept and Function of “Property” and (B) Real Property – Introduction to Real Property

to recover those goods from others wrongly in possession of them. So, the categories of realty and personalty no longer indicate with accuracy whether a property right entitles the holder to recover the thing itself or merely receive compensation for its loss. The distinction between real and personal property should not be confused with the distinction between rights in rem and rights in personam. 18 Personal property rights are not personal rights. They are property rights because they relate to external things and are enforceable generally against other members of society. However, they are normally enforced by means of personal rights. For example, a thief who steals your car commits an actionable wrong (the tort of conversion, discussed at [7.20] (Chambers)) and is liable to compensate you for your loss. Your right to your car is a property right, while your right to be compensated is a personal right against the specific person who wrongly interfered with your property right.

LEGAL AND EQUITABLE [1.75] Property rights can also be divided into legal and equitable rights. Like real and

personal property, these categories are based on the nature of the right and were created by legal conditions that have since ceased to exist. Prior to 1875, the common law of England was administered by common law courts, such as the courts of King’s Bench and Common Pleas. Rights which could be enforced in those courts are called legal rights. A separate body of law, called equity, was administered by the Court of Chancery. Rights which could be enforced in Chancery, but not in the common law courts, are called equitable rights. A statute called the Judicature Act 1873 (UK) merged those courts into a single High Court of Justice, which continued to administer common law and equity as separate bodies of law. This process was copied in Australia. In each State and Territory, the courts of common law and equity have been merged into a single superior court empowered to administer both law and equity. 19 So, the separate categories of legal and equitable property rights continue to exist even though the court structure which created them does not. As FW Maitland said: 20 We have no longer any courts which are merely courts of equity. Thus we are driven to say that Equity now is that body of rules administered by our English courts of justice which, were it not for the operation of the Judicature Acts, would be administered only by those courts which would be known as Courts of Equity.

Although the body of law known as equity can be defined only historically, by reference to conditions which have ceased to exist, it continues to be a vital part of the law. The rules of equity were created to fill gaps in the common law and correct perceived injustices. Many of those rules were patterned after the common law and therefore most legal property rights have an equitable counterpart (and vice versa). For example, a lease of land can be either legal or equitable depending on whether that lease would have been recognised in a court of common law or only in a court of equity. The nature of equitable property rights will be discussed in more detail in Chapter 13 (Chambers). It is sufficient at this stage to note that there are still important practical differences between legal and equitable property rights. Two main differences are the manner 18 19 20 12

WN Hohfeld, “Fundamental Legal Conceptions as Applied to Judicial Reasoning” (1917) 26 Yale Law Journal 710 at 752-753. See K Mason, “Fusion: Fallacy, Future or Finished?” in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, 2005) p 41. Equity (Cambridge, 1909) p 1. [1.75]

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of their creation and their durability. First, as discussed in Part IV (Chambers) (Creation of Property Rights), most equitable property rights can be created with less formality than the comparable legal property rights. Secondly, as discussed in Part V (Chambers) (Priority of Property Rights), they tend to be less durable than legal property rights and are more easily extinguished by competing property rights to the same thing.

TANGIBLE AND INTANGIBLE [1.80] Property rights are sometimes classified according to whether they are tangible or

intangible. Other terms for these categories are corporeal and incorporeal. All property rights are intangible in the sense that they are rights enforceable against other persons, regardless of the nature of the thing to which those rights relate. The distinction depends on whether the property right entitles the holder to possession of the thing involved. Tangible (corporeal) property rights include the right to possession of some thing, while intangible (incorporeal) property rights do not. Possession is a legal concept which is discussed further in Part II (Chambers). A thing cannot be possessed unless it is something which can be controlled physically, like a book or parcel of land. Therefore, property rights to things which cannot be possessed (such as a copyright to a song or a share in a company) are necessarily intangible. However, the converse is not true. It is possible to have property rights to physical things which do not entitle the holder to possession of that thing. For example, a person can have a right of way to cross another’s land and not be entitled to possession of that land. A right of way (called an easement and discussed at [16.30]ff (Chambers)) is an example of an intangible (or incorporeal) property right to a physical thing. Personal property is often classified as tangible or intangible. A right to possession of goods is called a chose in possession (using the French word for thing) and a personal property right to an intangible thing is called a chose in action. The latter term is also used to refer to purely personal rights, such as a bank account or other rights to receive the payment of money. When used in that sense, the chose (thing) is the obligation to which the personal right corresponds. The terms, tangible, intangible, corporeal, and incorporeal, no longer have great significance in the law of property. However, the essential distinction between the right to possession and other property rights is important. As discussed in Part II (Chambers), possession is the cornerstone of much of the common law of property.

PROPERTY CREATING EVENTS [1.85] Another way to organise property rights is according to the events that create them.

Peter Birks has identified four main categories: “The rights which people bear, whether in personam or in rem, derive from the following events: wrongs, consent, unjust enrichment, and others.” 21 The origins of these categories can be found in Roman law. Most property rights are created by consent, such as a sale of goods, a bequest in a will, or a grant of a mortgage. Property rights can also be created by wrongdoing. For example, an employer may have a property right to a bribe received by an employee. There are property rights created by unjust enrichment, such as the right to recover land or goods transferred by 21

“Equity in the Modern Law: An Exercise in Taxonomy” (1996) 26 UWA Law Review 1 at 8. [1.85]

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mistake. The miscellany of other events includes the creation (and destruction) of property rights brought about by physical changes to things. These events and the distinctions between them are explored in Part IV (Chambers). This taxonomy of property rights is useful because it brings together and invites comparisons between different rights which tend to be studied and applied as discrete compartments of property law. For example, mortgages are often relegated to separate chapters near the end of property law textbooks (and law school subjects) and never related to, say, gifts of chattels. The same types of events create property rights regardless of whether those rights are real or personal, legal or equitable, and tangible or intangible. An important feature of this taxonomy is that it allows comparisons to be drawn between property and personal rights. The archaic language and taxonomy of property law has inhibited this in the past. Overcoming these obstacles will lead to greater consistency among various branches of law and make it easier for lawyers in one field to take advantage of progress in another. For example, recent developments in the law of unjust enrichment have been slow to reach the law of property. Conversely, property law has evolved to enable a fairer distribution of wealth between de facto spouses at the end of their relationships. A better understanding of the events which create legal rights in those relationships need not be limited to property law. A taxonomy based on the events which create legal rights (and obligations) is particularly helpful because these are, perhaps, the most important legal issues affecting our lives. We want to know, for example, whether the purchase of our new home is complete or whether we are at fault in a car accident. In other words, have events in our lives produced legal consequences? The legal profession spends much of its time seeking answers to questions such as these. It is important that the law be applied consistently. Lawyers and judges must sort through the seemingly infinite variety of human affairs in search of legally significant events. Without meaningful bases for comparison, questions regarding the existence of legal rights cannot be answered with certainty. This requires an accepted taxonomy of right creating events, so that people and their legal advisors can know whether rights found to exist in one case should be applied to another. A proper taxonomy can promote the certainty we need to plan our affairs and embark on litigation only when absolutely necessary. Extracts from Chambers, An Introduction to Property in Australia, Ch 10.

INTRODUCTION TO OWNERSHIP [1.90] Most of us have a basic understanding of the concept of ownership. We have at least

some idea of what it means to own a thing and would know how to respond to a visitor who asked, “Do you own this house?” In this chapter, the legal concept of ownership is explored in more detail. To begin, it is important to note that ownership is not the same as property. There are many property rights which are not ownership, such as an easement to cross someone’s land (see [16.30]ff (Chambers)). The person who borrows a library book does not own that book, nor does the tenant own the flat he or she rents. We need to identify what distinguishes ownership from other property rights.

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OWNERSHIP AND POSSESSION [1.95] The first task is to distinguish ownership from possession. Dictionaries provide little

assistance, since most define ownership by reference to possession. It is clear that a person can possess a thing without owning it. However, it is not easy to identify what makes someone an owner and not just a possessor. As discussed at [7.40]ff (Chambers), the law protects ownership and possession in precisely the same way. The remedies available to the owner are triggered by wrongful interference with her or his possession or right to possession, such as trespass, conversion, and detinue. When owners recover their things from others, it is not because they are owners, but because they have better rights to possession. Indeed, if an owner does not have a right to immediate possession, her or his interference with another’s possession is a tort. 22 This leads to the question whether the right is not defined by the remedy. If the law protects ownership by enforcing the owner’s possession or right to possession, how does ownership differ from the best possible right to possession? One feature of ownership, which distinguishes it from possession, is its potential for permanence. While ownership normally includes the right to possess a thing indefinitely, possession without ownership is a temporary right. For example, while you have a library book on loan, no-one is entitled to interfere with your possession. Still, it is clear that the library owns the book, because your right to possession is temporary and will revert to the library. This does not mean that ownership will last forever or even for long. You can own an ice cream cone on a hot summer day, even though it will be gone in minutes, one way or another. Owners are generally free to bring their ownership to an end by selling, giving, or destroying the thing owned. However, when we say that someone has possession, but not ownership, we mean that there is an owner with a greater right to possession which will revive when the possessor’s right comes to an end. It is this reversionary right which characterizes ownership. The owner’s right to possession in the future may be conditional upon the happening of certain events. Under a hire-purchase agreement, the hire-purchaser takes possession of the thing and becomes its owner when all the payments are made. This creates a bailment destined to become ownership if all goes well. Although the owner/bailor may never again have the right to possession, that ownership continues so long as the right to possession remains possible. People can own things even though their rights to possession are delayed for a very long time. For example, the owner of land might lease it for 100 years, in which case the tenant’s right to possession will last over a lifetime and the owner’s right to possession will not return until he or she is dead. Still, the owner has a reversionary right which will endure beyond the tenant’s right. It is a property right which can be enjoyed by another when the time comes. The difference between a sale or gift (which transfers ownership) and a lease or bailment (which transfers possession, but not ownership) is that the former disposes of all the owner’s rights to the thing, while the latter leaves the owner with some residual right. This is true even if the residual right might be destroyed by certain events (such as the sale at the end of a hire-purchase) or will not be enjoyed for more than a lifetime. 22

City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477; [1961] HCA 53. [1.95]

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Tony Honoré identified this “incident of residuarity” as a necessary element of ownership in an influential essay called “Ownership”. 23 To distinguish ownership from possession, it is necessary to look at the rights a person has to use a thing in the future. An examination of the property rights which can be exercised at present is insufficient. For example, if you owned a house and leased it to me for five years, it might appear to a bystander that I own the house. As discussed at [12.35]ff (Chambers), the lease would entitle me to possession of your house, which means that I would get to use and enjoy it and exclude you from it. My payment of rent would provide a clue about your rights, but would not set me apart from an owner who makes mortgage payments or distinguish you from the bank which receives them. It is your right to possession at the end of the lease which identifies you as the owner. Jeremy Waldron took a similar approach, but looking back in time instead of forward. He said that we cannot “tell who is and who is not an owner by concentrating on the rights, powers, and duties distributed around a society at a particular moment in time”. 24 However, unlike Honoré, who looks to the “incident of residuarity” to mark the owner of a thing, Waldron looks to the past to identify the person who decided how a particular thing would be used: 25 Ownership … expresses the abstract idea of an object being correlated with the name of some individual, in relation to a rule which says that society will uphold that individual’s decision as final when there is any dispute about how the object should be used.

Turning to the previous example, in which you leased your house to me for five years, Waldron would identify you as the owner because you are the person who decided that I should enjoy possession of the house at present. One difficulty with this approach is that it does not distinguish between a sale and a lease. Suppose you buy a house and I lease the house next door. We each take possession and yet you are the owner and I am not. If we ask, “Who decided on this use of these homes?”, we find that in your case it was the vendor (previous owner) and in mine it was the landlord (current owner). The real distinction is that your vendor disposed of all her or his rights to the land, while my landlord retained the right to possession in the future.

BUNDLE OF RIGHTS [1.100] In “Ownership”, Honoré set out to describe the concept of ownership shared by most

legal systems. He listed nine rights, one duty, and one liability as the elements which together constitute ownership. Six of those rights also belong to someone with a right to possession. These are the rights to possess the thing, to use it, to manage how it will be used, to the income from it, to security from interference with the right to the thing, and to transmit that right to successors of choice. The duty and liability would also attach to the person with the right to possession. These are the duty to prevent harm and the liability to execution (which are discussed further at [1.115] and [1.120]). Honoré sets out three rights of ownership which do not belong to a non-owner with a right to possession. The right to capital entitles the owner to destroy or alienate the thing itself. Although the right to possession is a property right which usually can be sold or given away, the destruction of the thing, without the consent of the person with a right to future 23 24 25 16

In AG Guest (ed), Oxford Essays in Jurisprudence (Oxford, 1961) p 113. The Right to Private Property (Oxford, 1986) p 56. The Right to Private Property (Oxford, 1986) p 47. [1.100]

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possession, would be an actionable wrong. The absence of term, meaning the potential to last indefinitely, and the incident of residuarity, discussed at [1.95], are also exclusive to ownership. This provides a useful description of ownership. It should not, however, be confused with a description of property. There are property rights, such as the restrictive covenant (discussed at [16.110]ff (Chambers)), which share very few of these characteristics. Perhaps more importantly, Honoré’s description of ownership should not be used as a definition of property. Focusing on the ways in which people can use their things (sometimes called a bundle of rights) detracts from the essential characteristics which separate property from personal rights. As James Penner said: 26 The bundle of rights perspective on property is entirely innocuous if regarded merely as an elaboration of the scope of action that ownership provides. In that vein, the right to property does comprise a bundle of rights – the right to use, consume, destroy, and transfer what one owns, and so forth. In the same way, the right to make contracts can be elaborated as the right to sell, the right to employ others, the right to take remunerative employment, the right to lend money at interest, and so on. There is nothing wrong with this. On the other hand, as any kind of analysis or substantial thesis about property, the bundle of rights can only be taken as meaning that property is a structural composite, ie, that its nature is that of an aggregate of fundamentally distinct norms. That is quite mistaken.

ALIENABILITY [1.105] Honoré said that the owner has the rights to sell the thing (the capital) and to let it for

value (the income). Penner has challenged this idea, arguing that ownership includes the rights to give the thing away and to share it with others, but not necessarily to do so for value. He sees the right to exchange property rights for value as part of our freedom of contract and not part of the law of property. Penner’s argument is significant for at least two reasons. First, it explains why we can own things we are not permitted to sell, such as human tissue or blood removed for donation. Secondly and more importantly, it identifies the separate interests protected by the law of property and the law of contract. Property protects our interests in using things, while contract protects our interests in dealing co-operatively with others. The rights to own things and make contracts go hand in hand in most societies. Many property rights are acquired through contract and many contracts concern the use of things. However, there is no necessary connection between property and contract. Each can exist independently of the other. If Penner is correct to conclude that the right to make contracts is not part of the law of property, is he also correct when he says that ownership includes the rights to share and give? It is clear that ownership is a property right to something contingently connected to the owner and therefore the owner must be able to alienate the thing by severing that connection. Does the owner’s right to alienate necessarily include the right to make a gift? We are social creatures. As John Donne wrote in 1623 in his famous Meditation XVII, “No man is an island.” Our enjoyment of life is enhanced when we share our experiences with others. Why else do we go with others to the cinema to sit quietly together in the dark? Since ownership is the greatest possible right to use and enjoy a thing, Penner argues that it must include the right to enjoy the thing socially, by giving to or sharing with others. 26

“The “Bundle of Rights” Picture of Property” (1996) 43 UCLA Law Review 711 at 741. [1.105]

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RESPONSIBILITIES OF OWNERSHIP [1.110] As discussed at [1.200] (Chambers), Honoré’s description of ownership includes the

duty to prevent harm and the liability to execution. The issue explored here is whether these are essential aspects of ownership, as Honoré suggests. Duty to Prevent Harm [1.115] There are two types of harm to consider: the duty not to harm others with the thing

owned and the duty not to harm the thing itself. First, it is uncontroversial that people must take care not to harm others with their things. The issue is whether this is a component of ownership or merely part of the general duty we all have not to interfere with other people or their things. If I throw a book and injure you, does it matter whether I own the book? As a book owner, do I have a duty to stop others from throwing it? In other words, does the benefit of ownership carry a burden which is distinct from the responsibilities we all bear as members of society? There are no easy answers. Even if a duty to prevent harm is part of the law of property, it is not clear whether it attaches to ownership or the right to possession. The essence of the wrong is allowing a thing to be used in a way which causes harm to another. The person with possession or the right to immediate possession of a thing has the power to control its use and, therefore, bears some responsibility for its misuse. The owner with a reversionary right to future possession does not necessarily have that power and is at least one step removed from the harm occasioned by the user. The law recognises this in some situations. For example, the liability for injuries caused by the dangerous condition of premises usually falls on the occupier of those premises, regardless of whether he or she is also the owner. 27 The second and perhaps more difficult question is whether the owner of a thing can have a duty not to harm the thing itself. It is clear that the possessor can be liable to the owner for damage to the thing (see, for example, the discussion of waste at [12.125] (Chambers)). However, the sole owner of a thing, to which no-one else has a property right, usually is free to destroy or damage it, provided this causes no harm to others. For example, you are free to throw your own wine glasses into your own fireplace, smash your own musical instruments on stage, or throw your own dinner in the bin. The law does not intervene, even though there are many people in the world who would love to have those things. There are situations in which the owner is not free to harm the thing owned. Usually, the owner of an animal is entitled to have it destroyed, so long as this is done humanely. However, the owner is not entitled to be cruel to the animal. As Napier J said in Backhouse v Judd: 28 There is nothing novel in the idea that property is a responsibility as well as a privilege. The law which confers and protects the right of property in any animal may well throw the burden of the responsibility for its care upon the owner as a public duty incidental to the ownership.

It is interesting that the German Civil Code includes the protection of animals in its statement of the “Powers of the Owner”: 29 27

28 29

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Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479; [1987] HCA 7; Civil Law (Wrongs) Act 2002 (ACT), s 168; Civil Liability Act 1936 (SA), ss 19 – 22; Wrongs Act 1958 (Vic), ss 14A – 14D; Occupiers’ Liability Act 1985 (WA). Also see the Personal Injuries (Liabilities and Damages) Act (NT), s 9. Backhouse v Judd [1925] SASR 16 at 21. German Civil Code (Bürgerliches Gestetzbuch), s 903. See M Raff, Private Property and Environmental Responsibility (The Hague, 2003) pp 191-196. [1.110]

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The owner of a thing may, to the extent that a statute or third-party rights do not conflict with this, deal with the thing at his discretion and exclude others from every influence. The owner of an animal must, when exercising his powers, take into account the special provisions for the protection of animals.

The owners of animals of endangered species might have even greater duties to protect them from harm. Similarly, the owners of land with particular cultural or biological significance might have a duty to preserve that land. For example, the owner of a building listed as a special heritage site is not permitted to demolish or change it without special permission. 30 Murray Raff has argued that the various duties to protect things from harm should include a general duty to preserve land from environmental harm. He said, “an environmental responsibility should be presumed positively, even in the absence of positive legal regulation, as an aspect of property itself and at the deepest jurisprudential level”. 31 Liability to Execution [1.120] For Honoré, ownership includes a liability to execution. This means that the rights of

the owner may be acquired by the government for the greater good and may be seized and sold to pay the owner’s debts. The possibility of compulsory acquisition by the government is a generally accepted limit on ownership. Most of us agree that an owner’s right to determine how her or his things are used must give way at times to society’s need to interfere with that use for purposes such as public transportation, utilities, parks, and other essential services. There are statutory mechanisms for regulating compulsory acquisition and determining the appropriate compensation for the rights expropriated. 32 When people are unable or unwilling to pay their debts, the generally accepted response is to force them to sell their property rights to raise money to pay those debts. If, for example, you obtain a judgment against me for the payment of money and I do not pay that sum, you are a judgment creditor and entitled to instruct the sheriff to seize and sell my things to pay the judgment. Similarly, if I am declared bankrupt (unable to pay my debts), my property rights are transferred to a person (called the trustee in bankruptcy or receiver) who sells those rights and distributes the proceeds among my creditors according to law. 33 It is not clear whether the liability to execution is an inherent limitation of ownership or merely part of everyone’s obligation to pay her or his debts. There are four arguments in favour of the latter view. First, not all rights of ownership are subject to execution. For example, many household items (including one television and one video recorder) are exempt from distribution among a bankrupt’s creditors. 34 Secondly, there is a wide variety of property rights, other than ownership, which are liable to execution. For example, possession of land or goods under a lease may have market value which can be realised to pay the 30

31

32

33 34

See Heritage Act 2004 (ACT); Heritage Act 1977 (NSW); Heritage Act (NT); Queensland Heritage Act 1992 (Qld); Heritage Places Act 1993 (SA); Historic Cultural Heritage Act 1995 (Tas); Heritage Act 1995 (Vic); Heritage of Western Australia Act 1990 (WA). “Environmental Obligations and the Western Liberal Property Concept” (1998) 22 Melbourne University Law Review 657 at 691. Also see M Raff, “Toward an Ecologically Sustainable Property Concept” in E Cooke (ed), Modern Studies in Property Law (Oxford, 2005) Vol 3, p 65. Lands Acquisition Act 1989 (Cth); Lands Acquisition Act 1994 (ACT); Land Acquisition (Just Terms Compensation) Act 1991 (NSW); Lands Acquisition Act (NT); Acquisition of Land Act 1967 (Qld); Land Acquisition Act 1969 (SA); Land Acquisition Act 1993 (Tas); Land Acquisition and Compensation Act 1986 (Vic); Land Administration Act 1997 (WA). Also see the movie, The Castle (1997). Bankruptcy Act 1966 (Cth), s 58. Bankruptcy Act 1966 (Cth), s 116; Bankruptcy Regulations 1996 (Cth), reg 6.03. [1.120]

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possessor’s debts. Thirdly, personal rights (such as a bank account or right to receive wages) can also be taken to pay a judgment debt. Finally, a society could choose to enforce judgment debts in other ways. For example, at one time in England, debts could be enforced by committing the debtor to prison. 35

35

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JH Baker, An Introduction to English Legal History (4th ed, London, 2002) pp 66-67; Dive v Maningham (1550) 1 Plowden 96; 75 ER 96. [1.120]

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King v David Allen & Sons Billposting Ltd [1.125] King v David Allen & Sons Billposting Ltd [1916] 2 AC 54

[1.125]

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King v David Allen & Sons Billposting Ltd cont.

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King v David Allen & Sons Billposting Ltd cont.

[1.125]

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King v David Allen & Sons Billposting Ltd cont.

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[1.125]

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King v David Allen & Sons Billposting Ltd cont.

[1.125]

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King v David Allen & Sons Billposting Ltd cont.

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King v David Allen & Sons Billposting Ltd cont.

[1.125]

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King v David Allen & Sons Billposting Ltd cont.

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King v David Allen & Sons Billposting Ltd cont.

[1.125]

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King v David Allen & Sons Billposting Ltd cont.

Extract from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 1.

Yanner v Eaton [1.130] Yanner v Eaton (1999) 201 CLR 351 High Court of Australia [An Aboriginal man used a traditional form of harpoon to catch two juvenile estuarine crocodiles in Queensland. He and some other members of his clan ate some of the crocodile meat and froze the rest. The man did not hold a licence, permit, certificate or other authority under the Fauna Conservation Act. He was charged with one count of taking fauna contrary to that Act. A magistrate found that the man’s clan had a connection with the land from which the crocodiles were taken which had existed before the common law of the colony of Queensland had come into being and which continued thereafter. The magistrate further held that it was a traditional custom of the clan to hunt juvenile crocodiles for food. He dismissed the charge on the basis that s 211 of the Native Title Act applied. The informant applied for review, contending that any native title right or interest to hunt crocodiles, which the man may have enjoyed, had been extinguished prior to the commencement of the Native Title Act by the enactment of s 7(1) of the Fauna Conservation Act.] GLEESON CJ, GAUDRON, KIRBY AND HAYNE JJ: The word “property” is often used to refer to something that belongs to another. But in the Fauna Act, as elsewhere in the law, “property” does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of “property” may be elusive. Usually it is treated as a “bundle of rights”. But even this may have its limits as an analytical tool or accurate description, and it may be, as Professor Gray (Gray K and Gray S F, “The Idea of Property in Land”, in Bright and Dewar (eds), Land 30

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Yanner v Eaton cont. Law: Themes and Perspectives (1998) 15, at p 16) has said, that “the ultimate fact about property is that it does not really exist: it is mere illusion”. Considering whether, or to what extent, there can be property in knowledge or information or property in human tissue may illustrate some of the difficulties in deciding what is meant by “property” in a subject matter. So too, identifying the apparent circularity of reasoning from the availability of specific performance in protection of property rights in a chattel to the conclusion that the rights protected are proprietary may illustrate some of the limits to the use of “property” as an analytical tool. No doubt the examples could be multiplied. Nevertheless, as Professor Gray also says, “An extensive frame of reference is created by the notion that ‘property’ consists primarily in control over access. Much of our false thinking about property stems from the residual perception that ‘property’ is itself a thing or resource rather than a legally endorsed concentration of power over things and resources.” “Property” is a term that can be, and is, applied to many different kinds of relationship with a subject matter. It is not “a monolithic notion of standard content and invariable intensity”. That is why, in the context of a testator’s will, “property” has been said to be “the most comprehensive of all the terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have”. Because “property” is a comprehensive term it can be used to describe all or any of very many different kinds of relationship between a person and a subject matter. To say that person A has property in item B invites the question what is the interest that A has in B? The statement that A has property in B will usually provoke further questions of classification. Is the interest real or personal? Is the item tangible or intangible? Is the interest legal or equitable? For present purposes, however, the important question is what interest in fauna was vested in the Crown when the Fauna Act provided that some fauna was “the property of the Crown and under the control of the Fauna Authority”? The respondent’s submission (which the Commonwealth supported) was that s 7(1) of the Fauna Act gave full beneficial, or absolute, ownership of the fauna to the Crown. In part this submission was founded on the dictum noted earlier, that “property” is “the most comprehensive of all the terms which can be used”. But the very fact that the word is so comprehensive presents the problem, not the answer to it. “Property” comprehends a wide variety of different forms of interests; its use in the Act does not, without more, signify what form of interest is created. There are several reasons to conclude that the “property” conferred on the Crown is not accurately described as “full beneficial, or absolute, ownership”. First, there is the difficulty in identifying what fauna is owned by the Crown. Is the Fauna Act to be read as purporting to deal with the ownership of all fauna that is located within the territorial boundaries of the State but only for so long as the fauna is within those boundaries, or does it deal with all fauna that has at any time been located within those boundaries? That is, does the Fauna Act purport to give the Crown ownership of migratory birds only as they pass through Queensland, or does it purport to give ownership to the Crown of every bird that has ever crossed the Queensland border? Secondly, assuming that the subject matter of the asserted ownership could be identified or some suitable criterion of identification could be determined, what exactly is meant by saying that the Crown has full beneficial, or absolute, ownership of a wild bird or animal? The respondent (and the Commonwealth) sought to equate the Crown’s property in fauna with an individual’s ownership of a domestic animal. That is, it was sought to attribute to the Crown what Pollock called “the entirety of the powers of use and disposal allowed by law”. At common law, wild animals were the subject of only the most limited property rights. At common law there could be no “absolute property”, but only “qualified property” in fire, light, air, water and wild animals. An action for trespass or conversion would lie against a person taking wild animals that had been tamed, or a person taking young wild animals born on the land and not yet old enough to [1.130]

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Yanner v Eaton cont. fly or run away, and a land owner had the exclusive right to hunt, take and kill wild animals on his own land. Otherwise no person had property in a wild animal. “Ownership” connotes a legal right to have and to dispose of possession and enjoyment of the subject matter. But the subject matter dealt with by the Fauna Act is, with very limited exceptions, intended by that Act always to remain outside the possession of, and beyond disposition by, humans. As Holmes J said in Missouri v Holland (1920) 252 US 416, 434: “Wild birds are not in the possession of anyone; and possession is the beginning of ownership.” Thirdly, there are several aspects of the Fauna Act which tend to suggest that the property in fauna conferred on the Crown may not easily be equated with the property an individual may have in a domestic animal. The property rights of the Crown would come and go according to the operation of the exception contained in s 7(1) of fauna taken or kept “otherwise than in contravention of this Act during an open season with respect to that fauna”. As open seasons were declared and fauna taken, what otherwise was the property of the Crown, ceased to be. Next there are the references in ss 71(2) and 83(3) to forfeiture of fauna to the Crown. Even accepting that s 84 says that these sections shall not prejudice or affect the rights of the Crown conferred by s 7, why were ss 71(2) and 83(3) necessary if the Crown owned the fauna? Then there are the provisions of s 7(2) that “[l]iability at law shall not attach to the Crown by reason only of the vesting of fauna in the Crown pursuant to this section”. The Crown’s property is property with no responsibility. None of these aspects of the Fauna Act concludes the question what is meant by “property of the Crown”, but each tends to suggest that it is an unusual kind of property and is less than full beneficial, or absolute, ownership. Fourthly, it is necessary to consider why property in some fauna is vested in the Crown. Provisions vesting property in fauna in the Crown were introduced into Queensland legislation at the same time as provisions imposing a royalty on the skins of animals or birds taken or killed in Queensland. A “royalty” is a fee exacted by someone having property in a resource from someone who exploits that resource. As was pointed out in Stanton v Federal Commissioner of Taxation (1955) 92 CLR 630 at 641: … the modern applications of the term [royalty] seem to fall under two heads, namely the payments which the grantees of monopolies such as patents and copyrights receive under licences and payments which the owner of the soil obtains in respect of the taking of some special thing forming part of it or attached to it which he suffers to be taken. That being so, the drafter of the early Queensland fauna legislation may well have seen it as desirable (if not positively essential) to provide for the vesting of some property in fauna in the Crown as a necessary step in creating a royalty system. Further, the statutory vesting of property in fauna in the Crown may also owe much to a perceived need to differentiate the levy imposed by the successive Queensland fauna statutes from an excise. For that reason it may well have been thought important to make the levy as similar as possible not only to traditional royalties recognised in Australia and imposed by a proprietor for taking minerals or timber from land, but also to some other rights (such as warren and piscary) which never made the journey from England to Australia. In light of all these considerations, the statutory vesting of “property” in the Crown by the successive Queensland fauna Acts can be seen to be nothing more than “a fiction expressive in legal shorthand of the importance to its people that a State have power to preserve and regulate the exploitation of an important resource”. So much was acknowledged in the second reading speech on the Bill which first vested property in fauna in the Crown. The Minister said: It [the fur industry] is an industry that really belongs to the people, and although the Bill, amongst other things, makes it quite clear that the native animals of the State belong to the people of the State, I do not think there is any doubt in the minds of any one regarding that question already. The native animals belong to the people in just the same way as the timber and the minerals belong to the people, and they cannot be sold without permission. 32

[1.130]

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Yanner v Eaton cont. Roscoe Pound (Pound, An Introduction to the Philosophy of Law (Revised ed, 1954, p 111) explained why wild animals and other things not the subject of private ownership are spoken of as being publicly owned. He said: We are also tending to limit the idea of discovery and occupation by making res nullius (for example, wild game) into res publicae and to justify a more stringent regulation of individual use of res communes (for example, of the use of running water for irrigation or for power) by declaring that they are the property of the state or are “owned by the state in trust for the people.” It should be said, however, that while in form our courts and legislatures seem thus to have reduced everything but the air and the high seas to ownership, in fact the so-called state ownership of res communes and res nullius is only a sort of guardianship for social purposes. It is imperium, not dominium. The state as a corporation does not own a river as it owns the furniture in the state house. It does not own wild game as it owns the cash in the vaults of the treasury. What is meant is that conservation of important social resources requires regulation of the use of res communes to eliminate friction and prevent waste, and requires limitation of the times when, places where, and persons by whom res nullius may be acquired in order to prevent their extermination. Our modern way of putting it is only an incident of the nineteenth-century dogma that everything must be owned. The “property” which the Fauna Act and its predecessors vested in the Crown was therefore no more than the aggregate of the various rights of control by the Executive that the legislation created. So far as now relevant those were rights to limit what fauna might be taken and how it might be taken, rights to possession of fauna that had been reduced to possession, and rights to receive royalty in respect of fauna that was taken (all coupled with, or supported by, a prohibition against taking or keeping fauna except in accordance with the Act 1975). Those rights are less than the rights of full beneficial, or absolute, ownership. Taken as a whole the effect of the Fauna Act was to establish a regime forbidding the taking or keeping of fauna except pursuant to licence granted by or under the Act. [The appeal was allowed.]

[1.135]

Notes

1. The judgment points out that property in wild animals is often linked to property in fire, light, air and water. With respect to water, legislation in all States and Territories has vested property in water in watercourses and often that in underground aquifers in the State or Territory. As with the fauna discussed in the above case, water may flow out of the State or Territory or evaporate. The significance of the vesting of property in water is, therefore, as with the fauna, to regulate access to the water so that users require government permission. Private rights to take surface and ground water have been granted by the State in the form of statutory licences that are separate from land ownership. These rights are transferable and, according to economic theory, will be acquired by the person who places greatest value upon them and is the most efficient user: McKenzie, “Water Rights in NSW: Properly Property?” (2009) 31 Sydney Law Review 443. A recent constitutional challenge to a variation of such a licence, as it related to subsurface water in a particular geographical location in New South Wales, will be discussed in Note 4 below. 2. Whilst the case discusses property in relation to resources other than land, the concept of government ownership as a means of control rather than the normal use and enjoyment conferred by private ownership has implications for the nature of the Crown’s interest in land. Traditionally the doctrine of tenure has been taken to mean that all land vests in the [1.135]

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Crown and private rights are lesser interests or estates flowing from grants by the Crown. However in Wik Peoples v Queensland (1996) 187 CLR 1, the High Court concluded that the residuary interest of the Crown after a grant for a limited period of time was different from a private reversion and not inconsistent with continuing native title. It is possible that in Australia the doctrine of tenure does not confer upon the Crown a normal ownership of land but more a form of control over the land. 3. It is rare for the courts to be discussing the meaning of property as opposed to an analysis of the incidents of a particular form of property or less commonly whether property rights exist in a particular situation. The reason for this rarity is that the meaning of so broad a concept as property is seldom the basis for the resolution of a dispute and its analysis tends to be the province of writers seeking to find common strands to a series of decisions. Disputes where the meaning of fundamental concepts are raised are likely to occur where the property issue is the basis of the existence of a general body of protection. For example, criminal laws protect persons with respect to interference with their “property” by others and constitutions protect citizens with respect to the taking of their “property” by governments (see Note 4). 4. Section 51(xxxi) of the Australian Constitution allows the acquisition of property for a purpose for which the Commonwealth has power to make laws, but only on the provision of just terms. This constitutional protection of property rights was recently considered in ICM Agriculture Pty Ltd v Commonwealth (2009) 240 CLR 140. In this case ICM had its rights to take water from the Lower Lachlan Groundwater System, pursuant to a bore licence, replaced with less generous rights (in terms of the volume of water allowed to be taken) under an aquifer access licence. Although the water in the system was vested in the State of New South Wales and the licences had been granted pursuant to New South Wales legislation, four of the seven judges of the High Court who considered the issue found that, if there had been an acquisition of ICM’s property by New South Wales, s 51(xxxi) would be engaged. This was because the compensation paid to ICM, which the Commonwealth conceded did not amount to just terms, was provided by the Commonwealth pursuant to s 96 of the Constitution. Nevertheless, the High Court (Heydon J dissenting) concluded that there had not been an acquisition of property. Although Hayne, Kiefel and Bell JJ (as well as Heydon J) concluded that ICM’s statutory bore licence was a form of property (French CJ, Gummow and Crennan JJ not deciding the issue), six of their Honours held there had been no acquisition of property by New South Wales through its cancellation. This was because New South Wales did not acquire an identifiable and measurable benefit through the cancellation of the licence, as its rights with respect to the subsurface water had not been enlarged. The subsurface water itself in the System was a natural resource in which there were no specific private property rights. The water was vested in the State of New South Wales for the purpose of controlling access to it as a public resource. The statutory licences giving access to take specific volumes of that water were inherently fragile and susceptible to change: the volume of water allowed to be taken could be reduced from time to time, and the licence cancelled altogether in certain circumstances: (at 180, 200 – 202). Although ICM’S property rights had been varied or extinguished, there had been no acquisition of property by New South Wales. Accordingly, the Commonwealth had no obligation to provide just terms to ICM. 5. ICM Agriculture Pty Ltd v Commonwealth demonstrates that a claim for s 51(xxxi) protection of a proprietary interest that has its source in statute may face difficulties over 34

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and above the difficulties faced by a claim for the protection of a proprietary interest that exists at common law or in equity. (Also see Attorney-General (NT) v Chaffey (2007) 231 CLR 651 at 664 on this point.) This is because statutory rights may be seen as inherently vulnerable to amendment, so that the Commonwealth (or other third party) does not receive a benefit that can be characterised as proprietary when the right is so varied. However, the situation may be different where the statutory right is analogous to a proprietary right that exists under the general law. An example of this is the High Court’s decision in Wurridial v Commonwealth (2009) 237 CLR 309. As a part of its Northern Territory National Emergency Response, the Commonwealth compulsory imposed leases and rights of access over land vested in fee simple in the Arnhem Aboriginal Land Trust. A majority of the High Court (Crennan J disagreeing on, and Heydon J not deciding, this point) found that the diminution of the Trust’s interest in the land, to the benefit of the Commonwealth, constituted an acquisition of property. Even though the Trust’s fee simple interest in the land was created and regulated by statute, it nevertheless approximated, just as a common law fee simple does, an exclusive right of ownership (at 361-362, 382-383, 421,466). The final result in Wurridial, however, was that there had not be a contravention of s 51(xxxi) because the Commonwealth had provided just terms for the acquisition. The case is also noteworthy as it confirms that s 51(xxxi) will apply to an acquisition of property effected by a law enacted pursuant to the “Territories power” (s 122) of the Constitution. 6. Introductory legal texts often use the example of the sign “trespassers prosecuted” as a blurring of the distinction between civil and criminal law. They point out that traditionally trespass to land was not of itself a criminal offence. However today criminal sanctions with respect to intentional unauthorised entries onto private land are increasing and the word “trespass”, although clearly from a civil law background as an actionable interference with property, is retained presumably because it conveys strongly the element of wrongfulness. The issues of the right to protect property by force and the imposition of criminal sanctions on those who interfere with property is discussed in R v McKay [1957] VR 560. 7. The existence of constitutional protections and criminal sanctions add to the significance of any property right. However, the existence of a property right depends ultimately on the existence of a legal remedy to protect or enforce that right. As property rights are defined in terms of relationships with persons generally (or enforceability against the whole world) the remedy should be one able to be brought against any other person. Tortious remedies satisfy this requirement and, consequently, the availability of an action in trespass protects both real and personal property.

[1.135]

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CHAPTER 2 Tenures, Estates and Native Title [2.05]

THE DOCTRINE OF TENURE ................................................................................... 37

[2.10]

THE DOCTRINE OF ESTATES ................................................................................... 37 [2.10] [2.20]

[2.25]

Western Australia v Ward ......................................................... 37 Mabo v Queensland (No 2) ..................................................... 43

RECOGNITION OF NATIVE TITLE ........................................................................... 48 [2.25] [2.35]

[2.40] [2.45] [2.50] [2.55]

Mabo v Queensland (No 2) ..................................................... 48 Western Australia v Brown ....................................................... 67

Statutory recognition and protection ................................................. Definition of native title ........................................................................ Validation of acts of the Commonwealth ........................................... Procedures for protecting native title .................................................

77 78 78 79

Extracts from Moore Australian Property Law: Cases and Materials, 5th ed, Ch 2.

THE DOCTRINE OF TENURE [2.05] After the Norman Conquest, William I as sovereign asserted the power to grant land

holdings to any person as he wished. When making grants, the King did not transfer absolute ownership but instead granted rights over the land subject to the grantee fulfilling particular duties and conditions, such as the rendering of services or payment of money. The person who held land directly of the King was the tenant-in-chief. The tenant-in-chief then granted part of the land to another, again in return for the performance of certain duties. The process could be repeated many times with respect to the same piece of land and thus complicated feudal ties were set up. This was called subinfeudination and gave rise to the notion of a feudal pyramid with the King at the top. As time went by the system became extremely complicated. Enforcement of services became a major problem. An attempt to simplify the system of tenure was made in 1290 in the Statute of Quia Emptores 1290 but it was not until 1660 that the Statute of Tenures 1660 abolished most of the incidents of tenure.

THE DOCTRINE OF ESTATES Western Australia v Ward [2.10] Western Australia v Ward (2000) 170 ALR 159 Federal Court of Australia [An extract of the High Court decision in this case and the reasons for decision relating to native title issues can be found at [7.70] (Moore). North J was in dissent in the full Federal Court. This part of his judgment is extracted here as it provides a clear summary of the history and development of doctrines of tenures and estates.] NORTH J: … [2.10]

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Western Australia v Ward cont. Change as a feature of the history of property law Nowhere has modification and change marked the history of property law more clearly than in relation to the doctrine of tenure. This doctrine was the first way in which the ownership of property was fragmented. It underpinned the feudal system, so that the land law reflected the social demands of the time. Through the process of subinfeudation, a hierarchy was set up in which everyone held land of a superior, with the King at the apex. Each person in the hierarchy owed services to the mesne lord above, and was also owed services by those below. Interests in land were therefore not granted outright to tenants, and it was implicit in the relationship of tenure that both the grantor and the tenant have interests in the land at the same time. In the fifteenth century Littleton classified the various tenures by reference to the nature of service which the grant of land required the tenant to render. Thus, for instance, a tenant holding by knight service was required to fight as a knight or supply knights for battle. A tenant who held by castle-gard was obliged to serve in defence of castles, and a tenant holding by grand sergeanty was required to render service of a personal nature, and so on. A major change in the tenurial system reflected the social changes then occurring. Originally the tenures formed the basis of social organisation and reflected the economic, military and spiritual cooperation between all segments of society. In due course the value of fixed services declined and an economy based on contract and the payment of wages grew up. The obligation to render services was replaced by the obligation to pay “rent”. The position today is described by Simpson in A History of the Land Law 2nd ed, 1986, p 1 as follows: Indeed, so unimportant have tenures become that nobody certainly knows what sorts of tenure can still exist, and in practice this matters not at all. As the incidents of land holding changed so did the ability to transfer those interests. In the earliest times the tenant’s interest in land was not heritable as of right. In due course the tenant was entitled to pass his interest to his heir without the consent of the grantor. By the time of the Statute of Quia Emptores 1290 (UK) it was recognised that the tenant had the right to alienate his interest. Each of these steps constituted a radical change which was accommodated within the system of tenure and which reflected the requirements of contemporary society. By demonstrating that several persons could hold proprietary interests in the one piece of land, the doctrine of tenure laid the groundwork for the division of land in ways other than pursuant to the tenurial relationship. Lawson and Rudden in The Law of Property 2nd ed, 1982 state at p 81, that “tenure, since it denied in principle the unity of ownership, created a mental atmosphere favourable to the division of ownership on other lines also”. In particular, with the evolution of the doctrine of estates, property interests came to be fragmented on the basis of time. Whereas the doctrine of tenure recognised that a number of persons could have a proprietary interest in the one piece of land at the same time, by relying upon duration, the doctrine of estates allowed for the creation of successive interests, present and future, in the same piece of land. In essence, the doctrine of estates reflected the idea that a person should be able to have an interest in land giving rise to a present right to possession, while at the same time other persons would also have interests in the same land giving them future rights to possession. Kevin Gray and Susan Francis Gray in The Idea of Property in Land (referred to above at [789]) at pp 28-29 discuss the temporal basis of the doctrine of estates in the following terms: It was left to the doctrine of estates to quantify the grades of abstract entitlement which might be enjoyed by any particular tenant (or landholder) within the tenurial framework. This doctrine spelt out a rich taxonomy of “estates” in the land, each estate representing an artificial proprietary construct interposed between the tenant and the physical object of his tenure. Each tenant owned (and still owns) not land but an estate in land. The precise nature 38

[2.10]

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Western Australia v Ward cont. of the estate was graded by its temporal duration and by the possible attachment of variegated conditions precedent or subsequent. Each common law estate – whether the fee simple, the fee tail, or the life estate – comprised a time-related segment of the bundle of rights and powers exercisable over land; and the doctrine of estates effectively provided diverse ways in which three-dimensional realty might be carved up in a fourth dimension of time. In Walsingham’s Case (1573) 2 Plowd 547 at 555; 75 ER 805 at 816-817 it was said: … the land itself is one thing, and the estate in the land is another thing, for an estate in the land is a time in the land, or land for a time, and there are diversities of estates, which are no more than diversities of time … Lawson and Rudden also discuss how notions of duration could be divided through the doctrine of estates. The authors state (p 88): In relation to land the solution long ago adopted by English law was to create an abstract entity called the estate in the land and to interpose it between the tenant and the land. Since the estate was an abstract entity imagined to serve certain purposes, it could be made to conform to a specification, and the essential parts of the specification were that the estate should represent the temporal aspect of the land – as it were a fourth dimension – that it should be divisible within that dimension in respect of time according to a coherent set of rules, but that the whole of that dimension, the estate, should be regarded as existing in the present moment so that slices of the estate representing rights to successive holdings of the land should be regarded as present estates co-existing at the same time. The change in the importance of the doctrine of estates is explained by Simpson at pp 1-2 as follows: The doctrine of estates too is still with us, though in a guise which would hardly be intelligible to a medieval lawyer. But although the fundamental nature of these two doctrines [the doctrine of tenure and the doctrine of estates] is avowed in the leading modern textbook on real property, estates no longer have the fascination that once they had, and tenure is little discussed. The emphasis of the modern law passes both doctrines by, and rightly so. If we go back into the history of the land law the emphasis changes. In the eighteenth and early nineteenth centuries the ablest property lawyers are concerned to work out the subtleties of the rules governing the limitation of estates, particularly in connection with the elaborate family settlements of the time; when we reach the fifteenth century Littleton’s treatise on the law of real property is traditionally called Tenures, and though he deals at length with the doctrine of estates it is the tenurial quality of the law which bulks largest in his analysis. Thus, it can be seen that while native title is not an estate recognised by the common law, there is nothing inconsistent within the common law in the concept of suspension of property rights. It reflects an idea which lies at the foundation of the doctrine of estates itself. Further, the changes accommodated through history in the elements of the doctrine of estates show the capacity of property law to change as required by contemporary circumstances. It should also be remembered that the original estates in property law were the freehold estates of fee simple, fee tail and life estate. Initially, leaseholds were not classified as estates. Leaseholds created contractual rights only and could be enforced by contractual remedies. Late in the fifteenth century the common law courts permitted leaseholders to recover the land itself in an action for ejectment. Once this remedy became available the common law could no longer deny leaseholders the status of estate holders. The incorporation of leaseholds into the doctrine of estates is yet another example of a change by which circumstances have seen structural alterations in the law of property. Indeed change has continued in this area. Last year the House of Lords decided in Bruton v London & Quadrant Housing Trust [1999] 3 WLR 150 that a leasehold does not always create an estate in land. Mr Bruton occupied a flat under an agreement with the Housing Trust. The flat was in a building owned by the London Borough of Lambeth. The Borough and the Trust entered into an agreement [2.10]

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Western Australia v Ward cont. designated a licence, in which it was agreed that the Borough did not grant an estate or other proprietary interest to the Trust. The question to be decided was whether the Trust and Mr Bruton were landlord and tenant for the purposes of the statutory repairing obligations. The House of Lords considered that the relationship was that of landlord and tenant. In response to the argument that there could be no lease between Mr Bruton and the Trust because the Borough did not grant any proprietary interest to the Trust, Lord Hoffman, with whom Lord Slynn of Hadley, Lord Jauncey of Tullichettle, Lord Hope of Craighead and Lord Hobhouse of Woodborough agreed, said at 156-157: First, the term “lease” or “tenancy” describes a relationship between two parties who are designated landlord and tenant. It is not concerned with the question of whether the agreement creates an estate or other proprietary interest which may be binding upon third parties. A lease may, and usually does, create a proprietary interest called a leasehold estate or, technically, a “term of years absolute”. This will depend upon whether the landlord had an interest out of which he could grant it. Nemo dat quod non habet. But it is the fact that the agreement is a lease which creates the proprietary interest. It is putting the cart before the horse to say that whether the agreement is a lease depends upon whether it creates a proprietary interest. No reference to the adaptability of the law to contemporary needs in relation to property dealing would be complete without reference to the growth of uses and trusts. The Courts of Chancery recognised a division between beneficial enjoyment and legal title – a division which the common law did not entertain … [Discussed further at [2.70]ff (Moore).] The system of law which saw the growth of a concurrent system to take account of the demands of conscience continues today and is sufficiently flexible to accommodate the notion of the suspension of rights and interests dependent upon the existence of native title. Radical change has, thus, been a part of the development of property law. Indeed, in modern times the international community has developed a legal regime governing the ownership and use of the moon. Whilst Art 11 of the Agreement Governing the Activities of States on the Moon and Other Celestial Bodies (New York 1979 ATS (1986) No 14) prevents any nation from claiming property in the moon, its surface or natural resources, Art 6 confers limited usufructuary rights for the purposes of scientific investigation. The various adaptations described in this section have accommodated changes more radical than those necessary to accommodate the concept of suspension of the rights and interests dependent upon the holding of native title for the duration of the existence of inconsistent rights and interests.

Notes&Questions

[2.15]

1.

In Road Australia Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 327, the Queensland Court of Appeal commented on the meaning of the word “estate”. The word “estate” has two meanings in law, one narrow and the other broad. The narrow meaning is: “[T]he fee simple of land and any of the various interests into which it could formerly be divided at law, whether for life, or for a term of years or otherwise.” And the broad meaning is: “[A]ny property whatever”: see Halsbury’s Laws of England, 4th ed, vol 39(2), para 2. Under the narrow meaning, the only interests caught are the fee simple – that is, full ownership – and divisions, by reference to time, of that concept. For example, under the narrow meaning a leasehold interest would be an estate but a charge on land would not be. Under the broad meaning, any proprietary interest in land would be treated as an estate. It will be noted that the exclusion of a mortgagee’s interest from the statutory definition of “land” suggests that the reference to “estate” in the definition was intended to convey the broader meaning.

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The narrow interpretation of the term “estate” conveys a more accurate description of the term and it is in this context that “estate” is used here. 2.

The fee simple is the most extensive estate in duration. It is only the doctrine of tenure which prevents the holder of such an estate from being the absolute owner. The fee simple endures indefinitely and its holder may dispose of the estate inter vivos or by testamentary disposition. The fee simple was not always such an enduring interest: for a description of its development see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.100]; Epstein, “Past and Future: The Temporal Dimension in the Law of Property” (1986) 64 Wash ULQ 667.

3.

The fee tail estate was used only rarely in Australia. The original aim of the fee tail estate was to keep the estate within a particular branch of a family and there was little interest in using the fee tail to effect such a result in Australia: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016). South Australia is the only jurisdiction in which the fee tail may still be created over general law land or Torrens system land. In the other jurisdictions, the fee tail can no longer be created and existing fees tail have either been automatically converted into fees simple or may be so converted by statutory provisions providing for the barring of the entail: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.125].

4.

The life estate may exist in two forms: it may be granted for the life of the grantee or for the life of a person other than the grantee, an estate pur autre vie. The latter form often arises not pursuant to a direct grant but as a result of the holder of a life interest conveying the estate to another person.

5.

The doctrine of waste is the means whereby the common law balanced the interests of persons with successive interests in land. Any act in respect of the land which affected its ongoing character was potentially regarded as waste. Thus, the holder of a future interest could restrain any harm to the land by the person currently entitled to possession. The doctrine is also relevant to the relationship of a tenant (particularly under a fixed-term lease) and a landlord and probably as between co-owners each at present entitled to possession of the land and of whom one may be acting in a way which is detrimental to the land. There are four types of waste: voluntary waste, permissive waste, ameliorating waste and equitable waste. Voluntary waste is constituted by an intentional act damaging the land or buildings; permissive waste occurs where deterioration to land is allowed (normally a failure to repair); ameliorating waste is an act in relation to the land which benefits the land; equitable waste is a more serious form of voluntary waste – the intentional causing of serious harm. It is difficult to perceive situations in which ameliorating waste will give rise to any legal dispute. Liability for waste depends upon the terms of the instrument creating the limited interest. An owner is liable for voluntary waste unless exempted by the terms of the instrument (described as being made unimpeachable for waste). Such an exemption does not extend to liability for equitable waste unless it is specifically stated to so extend. Liability for permissive waste only occurs where liability is imposed by the [2.15]

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instrument. Voluntary waste includes not only intentional damage to the land or building but some acts which constitute exploitation of the land. The opening of a mine and the cutting of timber are clearly established acts of voluntary waste. For further discussion of the doctrine of waste, see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.45]-[13.65]. See also Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.110]–[13.190] for a discussion of the various statutory rights and duties which cover the relationship of the life tenant and the remainderman. 6.

As is discussed in Chapter 14 (Moore), the lease was not originally considered an estate in land: rather it was considered a personal, contractual transaction and relationship between the landlord and tenant. During the 15th century, however, the tenant’s right to recover the land on dispossession was recognised and the estate less than freehold, the leasehold estate, was recognised. What is the defining difference between a freehold estate and a leasehold estate? During the 20th century and beyond, changing social and economic conditions led to an increased importance for the contractual aspects of the landlord-tenant relationship. Many contractual principles which were not formerly applied to the landlord-tenant relationship, have now been held to do so. Nevertheless, until recently, a tenancy was still always seen as giving rise to a proprietary interest, a leasehold estate in the land. However, the House of Lords in Bruton v London & Quadrant Housing Trust [2000] 1 AC 406 held that it is possible to have a lease which does not create a leasehold estate in the land but which is effective only in contract between the parties.

7.

In order to create each of the estates, it was necessary to use a particular form of words, “words of limitation”. However, in all jurisdictions except South Australia, statute has modified the position and it is now the case that a disposition without the correct words of limitation is effective to pass a fee simple estate unless there is a contrary intention. Legislation concerning fee simple: Conveyancing Act 1919 (NSW), s 47(1), (2), (3) after 1 July 1920; Property Law Act 1958 (Vic), s 60(6), from 3l January 1905 to 31 December 1918 – the words “to A in fee” and “to A in fee simple” in addition to the correct words of limitation “to A and his heirs” passed a fee simple estate. Section 60(1), after 31 December 1918 the fee simple passed without the use of correct words of limitation unless there was a contrary intention – “to A”, “to A forever”; Property Law Act 1974 (Qld), s 29(1) – (2) after 4 December 1952; Property Law Act 1969 (WA), s 37(1) – (4), after 1 August 1969; Conveyancing and Law of Property Act 1884 (Tas), s 61(2), after 18 September 1874; Law of Property Act (NT), s 29. Legislation concerning the fee tail: Conveyancing Act 1919 (NSW), s 19(1), after 1 July 1920; Property Law Act 1958 (Vic), s 249 – a limitation which would have created a fee tail, for example, “to A and the heirs of his body” created a fee simple estate from 1 January 1886; s 60(6) – a limitation which showed an intention to create a fee tail, for example, “to A in tail male” created a fee simple estate from 31 January 1905. Query a limitation “to A in fee tail”; Property Law Act 1974 (Qld), s 22 after 1 December 1975; Property Law Act 1969 (WA), s 23(1) after 1 August 1969; Conveyancing and Law of Property Act 1884 (Tas), s 65 after 1 January 1884; Law of Property Act (NT), s 22. In

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Queensland and Western Australia, it appears that where there is a clear intention to create a fee tail but words are used which would not have been sufficient to create a fee tail (for example, “to A in tail”) the common law remains applicable and a life estate by default would result. Neither of the relevant provisions (ss 22 and 29 in Queensland and s 23(1) and s 37 in Western Australia) appear to apply. See Note (1953) ALJ 648. The use of correct words of limitation has never been required in relation to Torrens land. (For a more detailed discussion see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.175] In relation to dispositions by will a more lenient approach has always been adopted, with the courts putting into effect the intention of the testator (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.185]. [2.195] and [2.205]). 8.

Inherent in the doctrine of estates is a recognition and acceptance of the concept of the creation of successive interests in land. In turn, this involves a clear recognition that future interests in land may exist. See above Note 5. Future interests are discussed in detail in Chapter 11 (Moore). Would it be possible for future interests in land to exist if there were no doctrine of estates? See New Zealand Law Commission, Tenure and Estates in Land (Preliminary paper No 20, June 1992) pp 6-7, 20-23.

9.

The Victorian Law Reform Commission has proposed that the ability to create successive legal interests in land be abolished, and that successive interests only be created in equity, as beneficial interests under a trust. See Victorian Law Reform Commission, Review of the Property Law Act 1958 Final Report (2010), pp 66-70, 73.

10.

Apart from the doctrine of estates other types of proprietary interests in land can exist (for example, the easement, the profit à prendre and the restrictive covenant). These rights do not involve tangible, possessory rights over the land but rather involve particular and specific rights with respect to the land.

Mabo v Queensland (No 2) [2.20] Mabo v Queensland (No 2) (1992) 175 CLR 1 High Court of Australia [The case involved the land rights of the Meriam people: see [2.25]. In its decision, the High Court considered the doctrine of tenure.] BRENNAN J: … A basic doctrine of the land law is the doctrine of tenure, to which Stephen CJ referred in Attorney-General (NSW) v Brown, and it is a doctrine which could not be overturned without fracturing the skeleton which gives our land law its shape and consistency. It is derived from feudal origins. The feudal basis of the proposition of absolute Crown ownership The land law of England is based on the doctrine of tenure. In English legal theory, every parcel of land in England is held either mediately or immediately of the King who is the Lord Paramount; the term “tenure” is used to signify the relationship between tenant and lord (Attorney-General of Ontario v Mercer (1883) LR 8 App Cas 767, 771-772), not the relationship between tenant and land. The characteristic of feudalism “is not tenere terram, but tenere terram de X” (Pollock and Maitland, The History of English Law (2nd ed, 1898, reprinted 1952), Vol 1, p 234n). It is implicit in the relationship of tenure that both lord and tenant have an interest in the land: “The King had ‘dominium directum’, the subject ‘dominium utile’” (Pollock and Maitland, p 773; Co Litt 16). Absent a “dominium directum” in the Crown, there would be no foundation for a tenure arising on the making of a grant of land. When [2.20]

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Mabo v Queensland (No 2) cont. the Crown acquired territory outside England which was to be subject to the common law, there was a natural assumption that the doctrine of tenure should be the basis of the land law. Perhaps the assumption did not have to be made. After all, as Holdsworth observed (Vol 2, p 199), the universal application of the doctrine of tenure is a purely English phenomenon. And Pollock and Maitland may be correct in saying (Vol 2, p 236; accord: Holdsworth, Vol 2 (1923) p 75, n 8) that the notion of universal tenure “perhaps was possible only in a conquered country”. In Scotland, the King was not Paramount Lord of all land: some allodial lands remained in the Orkney and Shetland Islands, though most land that had been held allodially became subject to feudal tenure: Bell, Lectures on Conveyancing (Edinburgh, 1867), Vol 1, Ch I, pp 531-532; Stair, The Institutions of the Law of Scotland (4th ed, 1826), pp 219, 222; Craigie, Scottish Law of Conveyancing (Edinburgh, 1899), pp 27-28; Lord Advocate v Balfour (1907) SC 1360, 1368-1369). However, the English view favoured a universal application of the doctrine of tenure (Pollock and Maitland, op cit, pp 232-233): Every acre of English soil and every proprietary right therein have been brought within the compass of a single formula, which may be expressed thus:- Z tenet terram illam de … domino Rege. The king himself holds land which is in every sense his own; no one else has any proprietary right in it; but if we leave out of account this royal demesne, then every acre of land is “held of” the king. The person whom we may call its owner, the person who has the right to use and abuse the land, to cultivate it or leave it uncultivated, to keep all others off it, holds the land of the king either immediately or mediately. It is arguable that universality of tenure is a rule depending on English history and that the rule is not reasonably applicable to the Australian colonies. The origin of the rule is to be found in a traditional belief that, at some time after the Norman Conquest, the King either owned beneficially and granted, or otherwise became the Paramount Lord of, all land in the Kingdom (Bacon’s Abridgement (6th ed, 1807), Vol V, “Prerogative”, B,1). According to Digby’s History of the Law of Real Property (1897, p 34) William I succeeded to all rights over land held by the Anglo-Saxon kings; he acquired by operation of law the land of those who had resisted his conquest and a vast quantity of land was deemed to have been forfeited or surrendered to William and regranted by him. He may have become the proprietor of all land in England so that no allodial land remained. Or it may be, as Blackstone asserts, that in England, as in France, the allodial estates were surrendered into the king’s hands and were granted back as feuds, the only difference being that in France the change “was effected gradually, by the consent of private persons; (the change) was done at once, all over England, by the common consent of the nation” (Commentaries, Bk II, Ch 4, pp 50–51). But, whatever the fact, it is the fiction of royal grants that underlies the English rule. Blackstone says that: it became a fundamental maxim, and necessary principle (though in reality a mere fiction) of our English tenures, “that the king is the universal lord and original proprietor of all the lands in his kingdom; and that no man doth or can possess any part of it, but what has, mediately or immediately, been derived ‘as a gift from him, to be held upon feodal services’.” For this being the real case in pure, original, proper feuds, other nations who adopted this system were obliged to act upon the same supposition, as a substruction and foundation of their new polity, though the fact was indeed far otherwise. It is not surprising that the fiction that land granted by the Crown had been beneficially owned by the Crown was translated to the colonies and that Crown grants should be seen as the foundation of the doctrine of tenure which is an essential principle of our land law. It is far too late in the day to contemplate an allodial or other system of land ownership. Land in Australia which has been granted by the Crown is held on a tenure of some kind and the titles acquired under the accepted land law cannot be disturbed. Accepting the doctrine of tenure, it was an essential postulate that the Crown have such a title to land as would invest the Sovereign with the character of Paramount Lord in respect of a tenure created by grant and would attract the incidents appropriate to the tenure, especially the Crown’s right to 44

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Mabo v Queensland (No 2) cont. escheat. (Wright, Introduction to the Law of Tenures (4th ed, 1792), p 5.) The Crown was invested with the character of Paramount Lord in the colonies by attributing to the Crown a title, adapted from feudal theory, that was called a radical, ultimate or final title: see, for example, Amodu Tijani v Secretary, Southern Nigeria (1921) 2 AC 399, 403, 404, 407; Nireaha Tamaki v Baker [1901] AC 561, 580; cf. Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR 353, 396-397. The Crown was treated as having the radical title to all the land in the territory over which the Crown acquired sovereignty. The radical title is a postulate of the doctrine of tenure and a concomitant of sovereignty. As a sovereign enjoys supreme legal authority in and over a territory, the sovereign has power to prescribe what parcels of land and what interests in those parcels should be enjoyed by others and what parcels of land should be kept as the sovereign’s beneficial demesne. By attributing to the Crown a radical title to all land within a territory over which the Crown has assumed sovereignty, the common law enabled the Crown, in exercise of its sovereign power, to grant an interest in land to be held of the Crown or to acquire land for the Crown’s demesne. The notion of radical title enabled the Crown to become Paramount Lord of all who hold a tenure granted by the Crown and to become absolute beneficial owner of unalienated land required for the Crown’s purposes. But it is not a corollary of the Crown’s acquisition of a radical title to land in an occupied territory that the Crown acquired absolute beneficial ownership of that land to the exclusion of the indigenous inhabitants. If the land were desert and uninhabited, truly a terra nullius, the Crown would take an absolute beneficial title (an allodial title) to the land for the reason given by Stephen CJ in Attorney-General (NSW) v Brown (1847) 1 Legge, 317-318: there would be no other proprietor. But if the land were occupied by the indigenous inhabitants and their rights and interests in the land are recognised by the common law, the radical title which is acquired with the acquisition of sovereignty cannot itself be taken to confer an absolute beneficial title to the occupied land. Nor is it necessary to the structure of our legal system to refuse recognition to the rights and interests in land of the indigenous inhabitants. The doctrine of tenure applies to every Crown grant of an interest in land, but not to rights and interests which do not owe their existence to a Crown grant. The English legal system accommodated the recognition of rights and interests derived from occupation of land in a territory over which sovereignty was acquired by conquest without the necessity of a Crown grant. After the conquest of Ireland, it was held in Case of Tanistry (1608) Davis 28 (80 ER 516); 4th Dublin (1762) English translation 78, 110-111 that the Crown was not in actual possession of the land by virtue of the conquest and that: a royal monarch (who) hath made a new conquest of a realm, although in fact he hath the lordship paramount of all the lands within such realm, so that these are all held of him, mediate vel immediate, and he hath also the possession of all the lands which he willeth actually to seise and retain in his own hands for his profit or pleasure, and may also by his grants distribute such portions as he pleaseth … yet … if such conqueror receiveth any of the natives or antient inhabitants into his protection and avoweth them for his subjects, and permitteth them to continue their possessions and to remain in his peace and allegiance, their heirs shall be adjudged in by good title without grant or confirmation of the conqueror, and shall enjoy their lands according to the rules of the law which the conqueror hath allowed or established, if they will submit themselves to it, and hold their lands according to the rules of it, and not otherwise. Similarly, after the conquest of Wales, in Witrong and Blany (1674) 3 Keb 401, 402 (84 ER 789, 789) and see McNeil, Common Law Aboriginal Title, p 174 it was held that the inhabitants who had been left in possession of land needed no new grant to support their possession under the common law and they held their interests of the King without a new conveyance. In these cases, the courts were speaking of converting the surviving interests into an estate of a kind familiar to the common law, but there is no reason why the common law should not recognise novel interests in land which, not [2.20]

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Mabo v Queensland (No 2) cont. depending on Crown grant, are different from common law tenures. In Amodu Tijani [1921] 2 AC, 403 Viscount Haldane, speaking for the Privy Council, referred to the variable nature of native title to land capable of recognition by the common law: There is a tendency, operating at times unconsciously, to render (native) title conceptually in terms which are appropriate only to systems which have grown up under English law. But this tendency has to be held in check closely. As a rule, in the various systems of native jurisprudence throughout the Empire, there is no such full division between property and possession as English lawyers are familiar with. A very usual form of native title is that of a usufructuary right, which is a mere qualification of or burden on the radical or final title of the Sovereign where that exists. In such cases the title of the Sovereign is a pure legal estate, to which beneficial rights may or may not be attached. But this estate is qualified by a right of beneficial user which may not assume definite forms analogous to estates, or may, where it has assumed these, have derived them from the intrusion of the mere analogy of English jurisprudence. And, in Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR, 397 Barwick CJ was able to say that the indigenous people of Papua New Guinea “were secure in their usufructuary title to land, [but] the land came from the inception of the colony into the dominion of Her Majesty. That is to say, the ultimate title subject to the usufructuary title was vested in the Crown. Alienation of that usufructuary title to the Crown completed the absolute fee simple in the Crown”. In Amodu Tijani, the Privy Council admitted the possibility of recognition not only of usufructuary rights but also of interests in land vested not in an individual or a number of identified individuals but in a community. Viscount Haldane observed [1921] 2 AC, 403-404: The title, such as it is, may not be that of the individual, as in this country it nearly always is in some form, but may be that of a community. Such a community may have the possessory title to the common enjoyment of a usufruct, with customs under which its individual members are admitted to enjoyment, and even to a right of transmitting the individual enjoyment as members by assignment inter vivos or by succession. To ascertain how far this latter development of right has progressed involves the study of the history of the particular community and its usages in each case. Abstract principles fashioned a priori are of but little assistance, and are as often as not misleading. Recognition of the radical title of the Crown is quite consistent with recognition of native title to land, for the radical title, without more, is merely a logical postulate required to support the doctrine of tenure (when the Crown has exercised its sovereign power to grant an interest in land) and to support the plenary title of the Crown (when the Crown has exercised its sovereign power to appropriate to itself ownership of parcels of land within the Crown’s territory). Unless the sovereign power is exercised in one or other of those ways, there is no reason why land within the Crown’s territory should not continue to be subject to native title. It is only the fallacy of equating sovereignty and beneficial ownership of land that gives rise to the notion that native title is extinguished by the acquisition of sovereignty. If it be necessary to categorise an interest in land as proprietary in order that it survive a change in sovereignty, the interest possessed by a community that is in exclusive possession of land falls into that category. Whether or not land is owned by individual members of a community, a community which asserts and asserts effectively that none but its members has any right to occupy or use the land has an interest in the land that must be proprietary in nature: there is no other proprietor. It would be wrong, in my opinion, to point to the inalienability of land by that community and, by importing definitions of “property” which require alienability under the municipal laws of our society (see, for example, National Provincial Bank Ltd v Ainsworth [1965] AC 1175, 1247-1248), to deny that the indigenous people owned their land. The ownership of land within a territory in the exclusive occupation of a people must be vested in that people: land is susceptible of ownership, and there are no other owners. 46

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Mabo v Queensland (No 2) cont. True it is that land in exclusive possession of an indigenous people is not, in any private law sense, alienable property for the laws and customs of an indigenous people do not generally contemplate the alienation of the people’s traditional land. But the common law has asserted that, if the Crown should acquire sovereignty over that land, the new sovereign may extinguish the indigenous people’s interest in the land and create proprietary rights in its place and it would be curious if, in place of interests that were classified as non-proprietary, proprietary rights could be created. Where a proprietary title capable of recognition by the common law is found to have been possessed by a community in occupation of a territory, there is no reason why that title should not be recognised as a burden on the Crown’s radical title when the Crown acquires sovereignty over that territory. The fact that individual members of the community, like the individual plaintiff Aborigines in Milirrpum (1971) 17 FLR, 272, enjoy only usufructuary rights that are not proprietary in nature is no impediment to the recognition of a proprietary community title. Indeed, it is not possible to admit traditional usufructuary rights without admitting a traditional proprietary community title. There may be difficulties of proof of boundaries or of membership of the community or of representatives of the community which was in exclusive possession, but those difficulties afford no reason for denying the existence of a proprietary community title capable of recognition by the common law. That being so, there is no impediment to the recognition of individual non-proprietary rights that are derived from the community’s laws and customs and are dependent on the community title. A fortiori, there can be no impediment to the recognition of individual proprietary rights. Once it is accepted that indigenous inhabitants in occupation of a territory when sovereignty is acquired by the Crown are capable of enjoying – whether in community, as a group or as individuals – proprietary interests in land, the rights and interests in the land which they had theretofore enjoyed under the customs of their community are seen to be a burden on the radical title which the Crown acquires. The notion that feudal principle dictates that the land in a settled colony be taken to be a royal demesne upon the Crown’s acquisition of sovereignty is mistaken. However, that was not the only basis advanced to establish the proposition of absolute Crown ownership and the alternative bases must next be considered. … DEANE and GAUDRON JJ: … The English common law principles relating to real property developed as the product of concepts shaped by the feudal system of medieval times. The basic tenet was that, consequent upon the Norman Conquest, the Crown was the owner of all land in the kingdom. A subject could hold land only as a tenant, directly or indirectly, of the Crown. By 1788, the combined effect of the Statute Quia Emptores 1290 and the Tenures Abolition Act 1660 had been largely to abolish the “pyramid of free tenants” (Gray, Elements of Land Law (1987), p 57) which had emerged under the feudal system of tenure and to confine the practical significance of the basic tenet that all land was owned by the Crown to matters such as escheat and foreshore rights. The “estate” which a subject held in land as tenant was itself property which was the subject of “ownership” both in law and in equity. The primary estate of a subject, the estate in fee simple, became, for almost all practical purposes, equivalent to full ownership of the land itself. Nonetheless, the underlying thesis of the English law of real property remained that the radical title to (or ultimate ownership of) all land was in the Crown and that the maximum interest which a subject could have in the land was ownership not of the land itself but of an estate in fee in it. The legal ownership of an estate in land was in the person or persons in whom the legal title to it was vested. Under the rules of equity, that legal estate could be held upon trust for some other person or persons or for some purpose. If the slate were clean, there would be something to be said for the view that the English system of land law was not, in 1788, appropriate for application to the circumstances of a British penal colony. (See, for example, Roberts-Wray, Commonwealth and Colonial Law (1966), p 626.) It has, however, long been accepted as incontrovertible that the provisions of the common law which became [2.20]

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Mabo v Queensland (No 2) cont. applicable upon the establishment by settlement of the Colony of New South Wales included that general system of land law. (See, for example, Delohery v Permanent Trustee of NSW (1904) 1 CLR 283, 299-300; Williams v Attorney-General for New South Wales (1913) 16 CLR 404.) It follows that, upon the establishment of the Colony, the radical title to all land vested in the Crown. Subject to some minor and presently irrelevant matters, the practical effect of the vesting of radical title in the Crown was merely to enable the English system of private ownership of estates held of the Crown to be observed in the Colony. In particular, the mere fact that the radical title to all the lands of the Colony was vested in the British Crown did not preclude the preservation and protection, by the domestic law of the new Colony, of any traditional native interests in land which had existed under native law or custom at the time the Colony was established. Whether, and to what extent, such pre-existing native claims to land survived annexation and were translated into or recognised as estates, rights or other interests must be determined by reference to that domestic law. …

Extracts from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 7.

RECOGNITION OF NATIVE TITLE Mabo v Queensland (No 2) [2.25] Mabo v Queensland (No 2) (1992) 175 CLR 1 High Court of Australia BRENNAN J: The basis of the theory of universal and absolute Crown ownership It is one thing for our contemporary law to accept that the laws of England, so far as applicable, became the laws of New South Wales and of the other Australian colonies. It is another thing for our contemporary law to accept that, when the common law of England became the common law of the several colonies, the theory which was advanced to support the introduction of the common law of England accords with our present knowledge and appreciation of the facts. When it was sought to apply Lord Watson’s assumption in Cooper v Stuart that the colony of New South Wales was “without settled inhabitants or settled law” to Aboriginal society in the Northern Territory, the assumption proved false. In Milirrpum v Nabalco Pty Ltd Blackburn J said (1971) 17 FLR 141 at 267: The evidence shows a subtle and elaborate system highly adapted to the country in which the people led their lives, which provided a stable order of society and was remarkably free from the vagaries of personal whim or influence. If ever a system could be called “a government of laws, and not of men”, it is that shown in the evidence before me. Faced with a contradiction between the authority of the Privy Council and the evidence, his Honour held that the class to which a colony belonged was a question of law, not of fact (ibid, at p 244; McNeil, Common Law Aboriginal Title (1989), p 292, fn 207; Lester, The Territorial Rights of the Inuit of the Canadian Northwest Territories: A Legal Argument (unpublished doctoral thesis (1981)), pp 100-107, 155-157: Whether or not the Australian aboriginals living in any part of New South Wales had in 1788 a system of law which was beyond the powers of the settlers at that time to perceive or comprehend, it is beyond the power of this Court to decide otherwise than that New South Wales came into the category of a settled or occupied colony. The facts as we know them today do not fit the “absence of law” or “barbarian” theory underpinning the colonial reception of the common law of England. That being so, there is no warrant for applying 48

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Mabo v Queensland (No 2) cont. in these times rules of the English common law which were the product of that theory. It would be a curious doctrine to propound today that, when the benefit of the common law was first extended to Her Majesty’s indigenous subjects in the Antipodes, its first fruits were to strip them of their right to occupy their ancestral lands. Yet the supposedly barbarian nature of indigenous people provided the common law of England with the justification for denying them their traditional rights and interests in land, as Lord Sumner speaking for the Privy Council said in In re Southern Rhodesia [1919] AC 211 at 233-234: The estimation of the rights of aboriginal tribes is always inherently difficult. Some tribes are so low in the scale of social organisation that their usages and conceptions of rights and duties are not to be reconciled with the institutions or the legal ideas of civilised society. Such a gulf cannot be bridged. It would be idle to impute to such people some shadow of the rights known to our law and then to transmute it into the substance of transferable rights of property as we know them. As the indigenous inhabitants of a settled colony were regarded as “low in the scale of social organisation”, they and their occupancy of colonial land were ignored in considering the title to land in a settled colony. Ignoring those rights and interests, the Crown’s sovereignty over a territory which had been acquired under the enlarged notion of terra nullius was equated with Crown ownership of the lands therein, because, as Stephen CJ said, there was “no other proprietor of such lands”. Thus, a Select Committee on Aborigines reported in 1837 to the House of Commons that the state of Australian Aborigines was “barbarous” and “so entirely destitute … of the rudest forms of civil polity, that their claims, whether as sovereigns or proprietors of the soil, have been utterly disregarded”. (Cited by Lindley, op cit, at p 41.) The theory that the indigenous inhabitants of a “settled” colony had no proprietary interest in the land thus depended on a discriminatory denigration of indigenous inhabitants, their social organisation and customs. As the basis of the theory is false in fact and unacceptable in our society, there is a choice of legal principle to be made in the present case. This Court can either apply the existing authorities and proceed to inquire whether the Meriam people are higher “in the scale of social organisation” than the Australian Aborigines whose claims were “utterly disregarded” by the existing authorities or the Court can overrule the existing authorities, discarding the distinction between inhabited colonies that were terra nullius and those which were not. The theory of terra nullius has been critically examined in recent times by the Inter/-national Court of Justice in its Advisory Opinion on Western Sahara (1975) ICJR, at p 39. There the majority judgment read: “Occupation” being legally an original means of peaceably acquiring sovereignty over territory otherwise than by cession or succession, it was a cardinal condition of a valid “occupation” that the territory should be terra nullius – a territory belonging to no-one – at the time of the act alleged to constitute the “occupation” (cf Legal Status of Eastern Greenland, PCIJ, Series A/B, No 53, pp 44 f and 63 f). In the view of the Court, therefore, a determination that Western Sahara was a “terra nullius” at the time of colonisation by Spain would be possible only if it were established that at that time the territory belonged to no-one in the sense that it was then open to acquisition through the legal process of “occupation”. Whatever differences of opinion there may have been among jurists, the State practice of the relevant period indicates that territories inhabited by tribes or peoples having a social and political organisation were not regarded as terrae nullius. It shows that in the case of such territories the acquisition of sovereignty was not generally considered as effected unilaterally through “occupation” of terra nullius by original title but through agreements concluded with local rulers. On occasion, it is true, the word “occupation” was used in a non-technical sense denoting simply acquisition of sovereignty; but that did not signify that the acquisition of sovereignty through such agreements with authorities of the country was regarded as an “occupation” of a “terra nullius” in the proper sense of these terms. On the contrary, such [2.25]

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Mabo v Queensland (No 2) cont. agreements with local rulers, whether or not considered as an actual “cession” of the territory, were regarded as derivative roots of title, and not original titles obtained by occupation of terrae nullius. If the international law notion that inhabited land may be classified as terra nullius no longer commands general support, the doctrines of the common law which depend on the notion that native peoples may be “so low in the scale of social organisation” that it is “idle to impute to such people some shadow of the rights known to our law” (In re Southern Rhodesia [1919] AC, at 233-234) can hardly be retained. If it were permissible in past centuries to keep the common law in step with international law, it is imperative in today’s world that the common law should neither be nor be seen to be frozen in an age of racial discrimination. The fiction by which the rights and interests of indigenous inhabitants in land were treated as non-existent was justified by a policy which has no place in the contemporary law of this country. The policy appears explicitly in the judgment of the Privy Council in In re Southern Rhodesia in rejecting an argument (ibid, at p 232) that the native people “were the owners of the unalienated lands long before either the Company or the Crown became concerned with them and from time immemorial … and that the unalienated lands belonged to them still”. Their Lordships replied (ibid, at 234): the maintenance of their rights was fatally inconsistent with white settlement of the country, and yet white settlement was the object of the whole forward movement, pioneered by the Company and controlled by the Crown, and that object was success-fully accomplished, with the result that the aboriginal system gave place to another prescribed by the Order in Council. Whatever the justification advanced in earlier days for refusing to recognise the rights and interests in land of the indigenous inhabitants of settled colonies, an unjust and discriminatory doctrine of that kind can no longer be accepted. The expectations of the international community accord in this respect with the contemporary values of the Australian people. The opening up of international remedies to individuals pursuant to Australia’s accession to the Optional Protocol to the International Covenant on Civil and Political Rights (see Communication 78/1980 in Selected Decisions of the Human Rights Committee under the Optional Protocol, vol 2, p 23) brings to bear on the common law the powerful influence of the Covenant and the international standards it imports. The common law does not necessarily conform with inter-national law, but international law is a legitimate and important influence on the development of the common law, especially when international law declares the existence of universal human rights. A common law doctrine founded on unjust discrimination in the enjoyment of civil and political rights demands reconsideration. It is contrary both to international standards and to the fundamental values of our common law to entrench a discriminatory rule which, because of the supposed position on the scale of social organisation of the indigenous inhabitants of a settled colony, denies them a right to occupy their traditional lands. It was such a rule which evoked from Deane J (Gerhardy v Brown (1985) 159 CLR 70 at 149) the criticism that: the common law of this land has still not reached the stage of retreat from injustice which the law of Illinois and Virginia had reached in 1823 when Marshall CJ, in Johnson v McIntosh ((1823) 8 Wheat, at p 574 (21 US, at 253)), accepted that, subject to the assertion of ultimate dominion (including the power to convey title by grant) by the State, the “original inhabitants” should be recognised as having “a legal as well as just claim” to retain the occupancy of their traditional lands. Once it is accepted that indigenous inhabitants in occupation of a territory when sovereignty is acquired by the Crown are capable of enjoying – whether in community, as a group or as individuals – proprietary interests in land, the rights and interests in the land which they had theretofore enjoyed under the customs of their community are seen to be a burden on the radical title which the Crown acquires. The notion that feudal principle dictates that the land in a settled colony be taken to be a 50

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Mabo v Queensland (No 2) cont. royal demesne upon the Crown’s acquisition of sovereignty is mistaken. However, that was not the only basis advanced to establish the proposition of absolute Crown ownership and the alternative bases must next be considered. If native title survives the Crown’s acquisition of sovereignty as, in my view, it does, it is unnecessary to examine the alternative arguments advanced to support the rights and interests of the Meriam people to their traditional land. One argument raised the presumption of a Crown grant arising from the Meriam people’s possession of the Murray Islands from a time before annexation; another was the existence of a title arising after annexation in accordance with a supposed local legal custom under the common law whereby the Meriam people were said to be entitled to possess the Murray Islands. There are substantial difficulties in the way of accepting either of these arguments, but it is unnecessary to pursue them. It is sufficient to state that, in my opinion, the common law of Australia rejects the notion that, when the Crown acquired sovereignty over territory which is now part of Australia it thereby acquired the absolute beneficial ownership of the land therein, and accepts that the antecedent rights and interests in land possessed by the indigenous inhabitants of the territory survived the change in sovereignty. Those antecedent rights and interests thus constitute a burden on the radical title of the Crown. It must be acknowledged that, to state the common law in this way involves the overruling of cases which have held the contrary. To maintain the authority of those cases would destroy the equality of all Australian citizens before the law. The common law of this country would perpetuate injustice if it were to continue to embrace the enlarged notion of terra nullius and to persist in characterising the indigenous inhabitants of the Australian colonies as people too low in the scale of social organisation to be acknowledged as possessing rights and interests in land. Moreover, to reject the theory that the Crown acquired absolute beneficial ownership of land is to bring the law into conformity with Australian history. The dispossession of the indigenous inhabitants of Australia was not worked by a transfer of beneficial ownership when sovereignty was acquired by the Crown, but by the recurrent exercise of a paramount power to exclude the indigenous inhabitants from their traditional lands as colonial settlement expanded and land was granted to the colonists. Dispossession is attributable not to a failure of native title to survive the acquisition of sovereignty, but to its subsequent extinction by a paramount power. Before examining the power to extinguish native title, it is necessary to say something about the nature and incidents of the native title which, surviving the Crown’s acquisition of sovereignty, burdens the Crown’s radical title. The nature and incidents of native title Native title has its origin in and is given its content by the traditional laws acknowledged by and the traditional customs observed by the indigenous inhabitants of a territory. The nature and incidents of native title must be ascertained as a matter of fact by reference to those laws and customs. The ascertainment may present a problem of considerable difficulty, as Moynihan J perceived in the present case. It is a problem that did not arise in the case of a settled colony so long as the fictions were maintained that customary rights could not be reconciled “with the institutions or the legal ideas of civilised society” (In re Southern Rhodesia [1919] AC, at 233), that there was no law before the arrival of the British colonists in a settled colony and that there was no sovereign law-maker in the territory of a settled colony before sovereignty was acquired by the Crown. These fictions denied the possibility of a native title recognised by our laws. But once it is acknowledged that an inhabited territory which became a settled colony was no more a legal desert than it was “desert uninhabited” in fact, it is necessary to ascertain by evidence the nature and incidents of native title. Though these are matters of fact, some general propositions about native title can be stated without reference to evidence. First, unless there are pre-existing laws of a territory over which the Crown acquires sovereignty which provide for the alienation of interests in land to strangers, the rights and interests which constitute a [2.25]

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Mabo v Queensland (No 2) cont. native title can be possessed only by the indigenous inhabitants and their descendants. Native title, though recognised by the common law, is not an institution of the common law and is not alienable by the common law. Its alienability is dependent on the laws from which it is derived. If alienation of a right or interest in land is a mere matter of the custom observed by the indigenous inhabitants, not provided for by law enforced by a sovereign power, there is no machinery which can enforce the rights of the alienee. The common law cannot enforce as a proprietary interest the rights of a putative alienee whose title is not created either under a law which was enforceable against the putative alienor at the time of the alienation and thereafter until the change of sovereignty or under the common law. And, subject to an important qualification, the only title dependent on custom which the common law will recognise is one which is consistent with the common law. Thus, in The Case of Tanistry, the Irish custom of tanistry was held to be void because it was founded in violence and because the vesting of title under the custom was uncertain ((1608) Davis [80 ER]; 4th ed Dublin (1762) English translation, at pp 94-99). The inconsistency that the court perceived between the custom of tanistry known to the Brehon law of Ireland and the common law precluded the recognition of the custom by the common law. At that stage in its development, the common law was too rigid to admit recognition of a native title based on other laws or customs, but that rigidity has been relaxed, at least since the decision of the Privy Council in Amodu Tijani. The general principle that the common law will recognise a customary title only if it be consistent with the common law is subject to an exception in favour of traditional native title. Of course, since European settlement of Australia, many clans or groups of indigenous people have been physically separated from their traditional land and have lost their connection with it. But that is not the universal position. It is clearly not the position of the Meriam people. Where a clan or group has continued to acknowledge the laws and (so far as practicable) to observe the customs based on the traditions of that clan or group, whereby their traditional connection with the land has been substantially maintained, the traditional community title of that clan or group can be said to remain in existence. The common law can, by reference to the traditional laws and customs of an indigenous people, identify and protect the native rights and interests to which they give rise. However, when the tide of history has washed away any real acknowledgment of traditional law and any real observance of traditional customs, the foundation of native title has disappeared. A native title which has ceased with the abandoning of laws and customs based on tradition cannot be revived for contemporary recognition. Australian law can protect the interests of members of an indigenous clan or group, whether communally or individually, only in conformity with the traditional laws and customs of the people to whom the clan or group belongs and only where members of the clan or group acknowledge those laws and observe those customs (so far as it is practicable to do so). Once traditional native title expires, the Crown’s radical title expands to a full beneficial title, for then there is no other proprietor than the Crown. It follows that a right or interest possessed as a native title cannot be acquired from an indigenous people by one who, not being a member of the indigenous people, does not acknowledge their laws and observe their customs; nor can such a right or interest be acquired by a clan, group or member of the indigenous people unless the acquisition is consistent with the laws and customs of that people. Such a right or interest can be acquired outside those laws and customs only by the Crown. (This result has been reached in other jurisdictions, though for different reasons: see Reg v Symonds (1847) NZPCC, at p 390; Johnson v McIntosh (1823) 8 Wheat, at 586 (21 US, at 259); St Catherine’s Milling and Lumber Co v The Queen (1887) 13 SCR 577, at 599.) Once the Crown acquires sovereignty and the common law becomes the law of the territory, the Crown’s sovereignty over all land in the territory carries the capacity to accept a surrender of native title. The native title may be surrendered on purchase or surrendered voluntarily, whereupon the Crown’s radical title is expanded to absolute ownership, a plenum dominium, for there is then no other owner (St Catherine’s Milling and Lumber Co 52

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Mabo v Queensland (No 2) cont. v The Queen (1888) 14 App Cas, at 55). If native title were surrendered to the Crown in expectation of a grant of a tenure to the indigenous title holders, there may be a fiduciary duty on the Crown to exercise its discretionary power to grant a tenure in land so as to satisfy the expectation (see Guerin v The Queen (1984) 13 DLR (4th) 321, at 334, 339, 342-343, 356-357, 360-361), but it is unnecessary to consider the existence or extent of such a fiduciary duty in this case. Here, the fact is that strangers were not allowed to settle on the Murray Islands and, even after annexation in 1879, strangers who were living on the Islands were deported. The Meriam people asserted an exclusive right to occupy the Murray Islands and, as a community, held a proprietary interest in the Islands. They have maintained their identity as a people and they observe customs which are traditionally based. There was a possible alienation of some kind of interest in two acres to the London Missionary Society prior to annexation but it is unnecessary to consider whether that land was alienated by Meriam law or whether the alienation was sanctioned by custom alone. As we shall see, native title to that land was lost to the Meriam people in any event on the grant of a lease by the Crown in 1882 or by its subsequent renewal. Secondly, native title, being recognised by the common law (though not as a common law tenure), may be protected by such legal or equitable remedies as are appropriate to the particular rights and interests established by the evidence, whether proprietary or personal and usufructuary in nature and whether possessed by a community, a group or an individual. The incidents of a particular native title relating to inheritance, the transmission or acquisition of rights and interests on death or marriage, the transfer of rights and interests in land and the grouping of persons to possess rights and interests in land are matters to be determined by the laws and customs of the indigenous inhabitants, provided those laws and customs are not so repugnant to natural justice, equity and good conscience that judicial sanctions under the new regime must be withheld (Idewu Inasa v Oshodi [1934] AC 99 at 105). Of course in time the laws and customs of any people will change and the rights and interests of the members of the people among themselves will change too. But so long as the people remain as an identifiable community, the members of whom are identified by one another as members of that community living under its laws and customs, the communal native title survives to be enjoyed by the members according to the rights and interests to which they are respectively entitled under the traditionally based laws and customs, as currently acknowledged and observed. Here, the Meriam people have maintained their own identity and their own customs. The Murray Islands clearly remain their home country. Their land disputes have been dealt with over the years by the Island Court in accordance with the customs of the Meriam people. Thirdly, where an indigenous people (including a clan or group), as a community, are in possession or are entitled to possession of land under a proprietary native title, their possession may be protected or their entitlement to possession may be enforced by a representative action brought on behalf of the people or by a sub-group or individual who sues to protect or enforce rights or interests which are dependent on the communal native title. Those rights and interests are, so to speak, carved out of the communal native title. A sub-group or individual asserting a native title dependent on a communal native title has a sufficient interest to sue to enforce or protect the communal title (Australian Conservation Foundation v The Commonwealth (1980) 146 CLR 493 at 530-531, 537-539, 547-548; Onus v Alcoa of Australia Ltd (1981) 149 CLR 27 at 35-36, 41-42, 46, 51, 62, 74-75). A communal native title enures for the benefit of the community as a whole and for the sub-groups and individuals within it who have particular rights and interests in the community’s lands. The recognition of the rights and interests of a sub-group or individual dependent on a communal native title is not precluded by an absence of a communal law to determine a point in contest between rival claimants. [2.25]

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Mabo v Queensland (No 2) cont. Whatever be the precision of Meriam laws and customs with respect to land, there is abundant evidence that land was traditionally occupied by individuals or family groups and that contemporary rights and interests are capable of being established with sufficient precision to attract declaratory or other relief. The extinguishing of native title Sovereignty carries the power to create and to extinguish private rights and interests in land within the Sovereign’s territory (Joint Tribal Council of the Passamaquoddy Tribe v Morton (1975) 528 Fed 2d 370, at 376 n 6). It follows that, on a change of sovereignty, rights and interests in land that may have been indefeasible under the old regime become liable to extinction by exercise of the new sovereign power. The sovereign power may or may not be exercised with solicitude for the welfare of indigenous inhabitants but, in the case of common law countries, the courts cannot review the merits, as distinct from the legality, of the exercise of sovereign power (United States v Santa Fe Pacific Railroad Company (1941) 314 US 339, at 347; Tee-Hit-Ton Indians v United States (1954) 348 US 272 at 281-285). However, under the constitutional law of this country, the legality (and hence the validity) of an exercise of a sovereign power depends on the authority vested in the organ of government purporting to exercise it: municipal constitutional law determines the scope of authority to exercise a sovereign power over matters governed by municipal law, including rights and interests in land. In Queensland, the Crown’s power to grant an interest in land is, by force of ss 30 and 40 of the Constitution Act 1867 (Q), an exclusively statutory power and the validity of a particular grant depends upon conformity with the relevant statute (Cudgen Rutile (No 2) Ltd v Chalk [1975] AC 520 at 533-534). When validly made, a grant of an interest in land binds the Crown and the Sovereign’s successors (Halsbury, op cit, 4th ed, vol 8, par 1047). The courts cannot refuse to give effect to a Crown grant “except perhaps in a proceeding by scire facias or otherwise, on the prosecution of the Crown itself” (Wi Parata v Bishop of Wellington (1877) 3 NZ (Jur) NS 72 at 77). Therefore an interest validly granted by the Crown, or a right or interest dependent on an interest validly granted by the Crown cannot be extinguished by the Crown without statutory authority. As the Crown is not competent to derogate from a grant once made (Stead v Carey (1845) 1 CB 496 at 523 [135 ER 634 at 645]), a statute which confers a power on the Crown will be presumed (so far as consistent with the purpose for which the power is conferred) to stop short of authorising any impairment of an interest in land granted by the Crown or dependent on a Crown grant. But, as native title is not granted by the Crown, there is no comparable presumption affecting the conferring of any executive power on the Crown the exercise of which is apt to extinguish native title. However, the exercise of a power to extinguish native title must reveal a clear and plain intention to do so, whether the action be taken by the Legislature or by the Executive. This requirement, which flows from the seriousness of the consequences to indigenous inhabitants of extinguishing their traditional rights and interests in land, has been repeatedly emphasised by courts dealing with the extinguishing of the native title of Indian bands in North America. It is unnecessary for our purposes to consider the several juristic foundations – proclamation, policy, treaty or occupation – on which native title has been rested in Canada and the United States but reference to the leading cases in each jurisdiction reveals that, whatever the juristic foundation assigned by those courts might be, native title is not extinguished unless there be a clear and plain intention to do so (Calder v Attorney-General of British Columbia (1973) SCR, at 404; (1973) 34 DLR (3d), at 210; Hamlet of Baker Lake v Minister of Indian Affairs (1979) 107 DLR (3d) 513, at 552; Reg v Sparrow (1990) 1 SCR 1075, at 1094; (1990) 70 DLR (4th) 385, at 401; United States v Santa Fe Pacific Railroad Co (1941) 314 US, at 353, 354; Lipan Apache Tribe v United States (1967) 180 Ct Cl 487, at 492). That approach has been followed in New Zealand (Te Weehi v Regional Fisheries Officer [1986] 1 NZLR 680, at pp 691-692). It is patently the right rule. 54

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Mabo v Queensland (No 2) cont. A clear and plain intention to extinguish native title is not revealed by a law which merely regulates the enjoyment of native title (Reg v Sparrow (1990) 1 SCR, at 1097; (1990) 70 DLR (4th), at 400) or which creates a regime of control that is consistent with the continued enjoyment of native title (United States v Santa Fe Pacific Railroad Co (1941) 314 US, at 353-354). A fortiori, a law which reserves or authorises the reservation of land from sale for the purpose of permitting indigenous inhabitants and their descendants to enjoy their native title works no extinguishment. [Brennan J then considered some of the actions which were argued to constitute extinguishment.] The power to reserve and dedicate land to a public purpose and the power to grant interests in land are conferred by statute on the Governor in Council of Queensland and an exercise of these powers is, subject to the Racial Discrimination Act, apt to extinguish native title. The Queensland Parliament retains, subject to the Constitution and to restrictions imposed by valid laws of the Commonwealth (Mabo v Queensland (1988) 166 CLR 186), a legislative power to extinguish native title. This being so, it is necessary to consider the effect which the granting of leases over parts of the Murray Islands has had on native title before the Racial Discrimination Act came into force. A Crown grant which vests in the grantee an interest in land which is inconsistent with the continued right to enjoy a native title in respect of the same land necessarily extinguishes the native title. The extinguishing of native title does not depend on the actual intention of the Governor in Council (who may not have adverted to the rights and interests of the indigenous inhabitants or their descendants), but on the effect which the grant has on the right to enjoy the native title. If a lease be granted, the lessee acquires possession and the Crown acquires the reversion expectant on the expiry of the term. The Crown’s title is thus expanded from the mere radical title and, on the expiry of the term, becomes a plenum dominium. Where the Crown grants land in trust or reserves and dedicates land for a public purpose, the question whether the Crown has revealed a clear and plain intention to extinguish native title will sometimes be a question of fact, sometimes a question of law and sometimes a mixed question of fact and law. Thus, if a reservation is made for a public purpose other than for the benefit of the indigenous inhabitants, a right to continued enjoyment of native title may be consistent with the specified purpose – at least for a time – and native title will not be extinguished. But if the land is used and occupied for the public purpose and the manner of occupation is inconsistent with the continued enjoyment of native title, native title will be extinguished. A reservation of land for future use as a school, a courthouse or a public office will not by itself extinguish native title: construction of the building, however, would be inconsistent with the continued enjoyment of native title which would thereby be extinguished. But where the Crown has not granted interests in land or reserved and dedicated land inconsistently with the right to continued enjoyment of native title by the indigenous inhabitants, native title survives and is legally enforceable. As the Governments of the Australian Colonies and, latterly, the Governments of the Commonwealth, States and Territories have alienated or appropriated to their own purposes most of the land in this country during the last 200 years, the Australian Aboriginal peoples have been substantially dispossessed of their traditional lands. They were dispossessed by the Crown’s exercise of its sovereign powers to grant land to whom it chose and to appropriate to itself the beneficial ownership of parcels of land for the Crown’s purposes. Aboriginal rights and interests were not stripped away by operation of the common law on first settlement by British colonists, but by the exercise of a sovereign authority over land exercised recurrently by Governments. To treat the dispossession of the Australian Aborigines as the working out of the Crown’s acquisition of ownership of all land on first settlement is contrary to history. Aborigines were dispossessed of their land parcel by parcel, to make way for expanding colonial settlement. Their dispossession underwrote the development of the nation. But, if this be the consequence in law of colonial settlement, is there any occasion now to overturn the cases which held the Crown to have become the absolute beneficial owner of land when British colonists first settled here? Does it make any difference whether native title failed to survive British colonisation or was [2.25]

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Mabo v Queensland (No 2) cont. subsequently extinguished by government action? In this case, the difference is critical: except for certain transactions next to be mentioned, nothing has been done to extinguish native title in the Murray Islands. There, the Crown has alienated only part of the land and has not acquired for itself the beneficial ownership of any substantial area. And there may be other areas of Australia where native title has not been extinguished and where an Aboriginal people, maintaining their identity and their customs, are entitled to enjoy their native title. Even if there be no such areas, it is appropriate to identify the events which resulted in the dispossession of the indigenous inhabitants of Australia, in order to dispel the misconception that it is the common law rather than the action of governments which made many of the indigenous people of this country trespassers on their own land. After this lengthy examination of the problem, it is desirable to state in summary form what I hold to be the common law of Australia with reference to land titles: 1

The Crown’s acquisition of sovereignty over the several parts of Australia cannot be challenged in an Australian municipal court.

2

On acquisition of sovereignty over a particular part of Australia, the Crown acquired a radical title to the land in that part.

3

Native title to land survived the Crown’s acquisition of sovereignty and radical title. The rights and privileges conferred by native title were unaffected by the Crown’s acquisition of radical title but the acquisition of sovereignty exposed native title to extinguishment by a valid exercise of sovereign power inconsistent with the continued right to enjoy native title.

4

Where the Crown has validly alienated land by granting an interest that is wholly or partially inconsistent with a continuing right to enjoy native title, native title is extinguished to the extent of the inconsistency. Thus native title has been extinguished by grants of estates of freehold or of leases but not necessarily by the grant of lesser interests (for example, authorities to prospect for minerals).

5

Where the Crown has validly and effectively appropriated land to itself and the appropriation is wholly or partially inconsistent with a continuing right to enjoy native title, native title is extinguished to the extent of the inconsistency. Thus native title has been extinguished to parcels of the waste lands of the Crown that have been validly appropriated for use (whether by dedication, setting aside, reservation or other valid means) and used for roads, railways, post offices and other permanent public works which preclude the continuing concurrent enjoyment of native title. Native title continues where the waste lands of the Crown have not been so appropriated or used or where the appropriation and use is consistent with the continuing concurrent enjoyment of native title over the land (eg, land set aside as a national park).

6

Native title to particular land (whether classified by the common law as proprietary, usufructuary or otherwise), its incidents and the persons entitled thereto are ascertained according to the laws and customs of the indigenous people who, by those laws and customs, have a connection with the land. It is immaterial that the laws and customs have undergone some change since the Crown acquired sovereignty provided the general nature of the connection between the indigenous people and the land remains. Membership of the indigenous people depends on biological descent from the indigenous people and on mutual recognition of a particular person’s membership by that person and by the elders or other persons enjoying traditional authority among those people.

7

Native title to an area of land which a clan or group is entitled to enjoy under the laws and customs of an indigenous people is extinguished if the clan or group, by ceasing to acknowledge those laws, and (so far as practicable) observe those customs, loses its connection with the land or on the death of the last of the members of the group or clan.

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Mabo v Queensland (No 2) cont. 8

Native title over any parcel of land can be surrendered to the Crown voluntarily by all those clans or groups who, by the traditional laws and customs of the indigenous people, have a relevant connection with the land but the rights and privileges conferred by native title are otherwise inalienable to persons who are not members of the indigenous people to whom alienation is permitted by the traditional laws and customs.

9

If native title to any parcel of the waste lands of the Crown is extinguished, the Crown becomes the absolute beneficial owner.

These propositions leave for resolution by the general law the question of the validity of any purported exercise by the Crown of the power to alienate or to appropriate to itself waste lands of the Crown. In Queensland, these powers are and at all material times have been exercisable by the Executive Government subject, in the case of the power of alienation, to the statutes of the State in force from time to time. The power of alienation and the power of appropriation vested in the Crown in right of a State are also subject to the valid laws of the Commonwealth, including the Racial Discrimination Act. Where a power has purportedly been exercised as a prerogative power, the validity of the exercise depends on the scope of the prerogative and the authority of the purported repository in the particular case. It remains to apply these principles to the Murray Islands and the Meriam people. The plaintiffs seek declarations that the Meriam people are entitled to the Murray Islands – “(a) as owners (b) as possessors (c) as occupiers, or (d) as persons entitled to use and enjoy the said islands”; that – “the Murray Islands are not and never have been ‘Crown Lands’ within the meaning of the Lands Act 1962 (Qld) (as amended) and prior Crown lands legislation” and that the State of Queensland is not entitled to extinguish the title of the Meriam people. As the Crown holds the radical title to the Murray Islands and as native title is not a title created by grant nor is it a common law tenure, it may be confusing to describe the title of the Meriam people as conferring “ownership”, a term which connotes an estate in fee simple or at least an estate of freehold. Nevertheless, it is right to say that their native title is effective as against the State of Queensland and as against the whole world unless the State, in valid exercise of its legislative or executive power, extinguishes the title. It is also right to say that the Murray Islands are not Crown land because the land has been either “reserved for or dedicated to public purposes” or is “subject to … lease”. However, that does not deny that the Governor in Council may, by appropriate exercise of his statutory powers, extinguish native title. The native title has already been extinguished over land which has been leased pursuant to powers conferred by the Land Act in force at the time of the granting or renewal of the lease. Accordingly, title to the land leased to the Trustees of the Australian Board of Missions has been extinguished and title to Dauar and Waier may have been extinguished. It may be that areas on Mer have been validly appropriated for use for administrative purposes the use of which is inconsistent with the continued enjoyment of the rights and interests of Meriam people in those areas pursuant to Meriam law or custom and, in that event, native title has been extinguished over those areas. None of these areas can be included in the declaration. I would therefore make a declaration in the following terms: Declare – 1

that the land in the Murray Islands is not Crown land within the meaning of that term in s 5 of the Land Act 1962-1988 (Q);

2

that the Meriam people are entitled as against the whole world to possession, occupation, use and enjoyment of the island of Mer except for that parcel of land leased to the Trustees of the Australian Board of Missions and those parcels of land (if any) which have been validly appropriated for use for administrative purposes the use of which is inconsistent with the continued enjoyment of the rights and privileges of Meriam people under native title; [2.25]

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Mabo v Queensland (No 2) cont. 3

that the title of the Meriam people is subject to the power of the Parliament of Queensland and the power of the Governor in Council of Queensland to extinguish that title by valid exercise of their respective powers, provided any exercise of those powers is not inconsistent with the laws of the Commonwealth.

DEANE and GAUDRON JJ: Ordinarily, common law native title is a communal native title and the rights under it are communal rights enjoyed by a tribe or other group. It is so with Aboriginal title in the Australian States and internal Territories. Since the title preserves entitlement to use or enjoyment under the traditional law or custom of the relevant territory or locality, the contents of the rights and the identity of those entitled to enjoy them must be ascertained by reference to that traditional law or custom. The traditional law or custom is not, however, frozen as at the moment of establishment of a Colony. Provided any changes do not diminish or extinguish the relationship between a particular tribe or other group and particular land, subsequent developments or variations do not extinguish the title in relation to that land. The rights of an Aboriginal tribe or clan entitled to the benefit of a common law native title are personal only. The enjoyment of the rights can be varied and dealt with under the traditional law or custom. The rights are not, however, assignable outside the overall native system. They can be voluntarily extinguished by surrender to the Crown. They can also be lost by the abandonment of the connection with the land or by the extinction of the relevant tribe or group. It is unnecessary, for the purposes of this case, to consider the question whether they will be lost by the abandonment of traditional customs and ways. Our present view is that, at least where the relevant tribe or group continues to occupy or use the land, they will not. The personal rights conferred by common law native title do not constitute an estate or interest in the land itself. They are extinguished by an unqualified grant of an inconsistent estate in the land by the Crown, such as a grant in fee or a lease conferring the right to exclusive possession. They can also be terminated by other inconsistent dealings with the land by the Crown, such as appropriation, dedication or reservation for an inconsistent public purpose or use, in circumstances giving rise to third party rights or assumed acquiescence. The personal rights of use and occupation conferred by common law native title are not, however, illusory. They are legal rights which are infringed if they are extinguished, against the wishes of the native title-holders, by inconsistent grant, dedication or reservation and which, subject only to their susceptibility to being wrongfully so extinguished, are binding on the Crown and a burden on its title. As has been seen, common law native title-holders in an eighteenth century British Colony were in an essentially helpless position if their rights under their native title were disregarded or wrongly extinguished by the Crown. Quite apart from the inherent unlikelihood of such title-holders being in a position to institute proceedings against the British Crown in a British court, the vulnerability of the rights under native title resulted in part from the fact that they were personal rights susceptible to extinguishment by inconsistent grant by the Crown and in part from the immunity of the Crown from court proceedings. The vulnerability persists to the extent that it flows from the nature of the rights as personal. On the other hand, as legislative reforms increasingly subjected the Crown or a nominal defendant on its behalf to the jurisdiction of the courts and to liability for compensatory damages for a wrong done to a subject, the ability of native title-holders to protect and vindicate the personal rights under common law native title significantly increased. If common law native title is wrongfully extinguished by the Crown, the effect of those legislative reforms is that compensatory damages can be recovered provided the proceedings for recovery are instituted within the period allowed by applicable limitations provisions. If the common law native title has not been extinguished, the fact that the rights under it are true legal rights means that they can be vindicated, protected and enforced by proceedings in the ordinary courts. 58

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Mabo v Queensland (No 2) cont. In a case where the Crown or a trustee appointed by the Crown wrongly denies the existence or the extent of an existing common law native title or threatens to infringe the rights thereunder (for example, by an inconsistent grant), the appropriate relief in proceedings brought by (or by a representative party or parties on behalf of) the native title-holders will ordinarily be declaratory only since it will be apparent that the Crown or the trustee, being bound by any declaration, will faithfully observe its terms. Further relief is, however, available where it is necessary to protect the rights of the title-holders. One example of such further relief is relief by way of injunction. (See, for example, Nireaha Tamaki v Baker [1901] AC 561, at 578.) Notwithstanding their personal nature and their special vulnerability to wrongful extinguishment by the Crown, the rights of occupation or use under common law native title can themselves constitute valuable property. Actual or threatened interference with their enjoyment can, in appropriate circumstances, attract the protection of equitable remedies. Indeed, the circumstances of a case may be such that, in a modern context, the appropriate form of relief is the imposition of a remedial constructive trust framed to reflect the incidents and limitations of the rights under the common law native title. The principle of the common law that pre-existing native rights are respected and protected will, in a case where the imposition of such a constructive trust is warranted, prevail over other equitable principles or rules to the extent that they would preclude the appropriate protection of the native title in the same way as that principle prevailed over legal rules which would otherwise have prevented the preservation of the title under the common law. In particular, rules relating to requirements of certainty and present entitlement or precluding remoteness of vesting may need to be adapted or excluded to the extent necessary to enable the protection of the rights under the native title. TOOHEY J: The plaintiffs seek a declaration that: the Defendant is under a fiduciary duty, or alternatively bound as a trustee, to the Meriam People, including the Plaintiffs, to recognise and protect their rights and interests in the Murray Islands. They argued that such a duty arises by reason of annexation, over which the Meriam people had no choice; the relative positions of power of the Meriam people and the Crown in right of Queensland with respect to their interests in the Islands; and the course of dealings by the Crown with the Meriam people and the Islands since annexation. However, while the plaintiffs claim the declaration just mentioned, the statement of claim does not seek any specific relief for a breach of fiduciary duty. (i) Existence of the obligation The factors giving rise to a fiduciary duty are nowhere exhaustively defined (Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 68, 96-97, 141-142; Finn, Fiduciary Obligations (1977), p 1). There are certain kinds of relationships which necessarily entail fiduciary obligations, for example, trustee and beneficiary, company director and shareholder, principal and agent. But a fiduciary obligation may arise in a variety of circumstances as a result of a particular relationship. The kinds of relationships which can give rise to a fiduciary obligation are not closed (Hospital Products Ltd ibid, at 68, 96, 102; Tufton v Sperni (1952) 2 TLR 516 at 522; English v Dedham Vale Properties Ltd [1978] 1 WLR 93 at 110; [1978] 1 All ER 382 at 398). In Hospital Products Ltd Mason J said ((1984) 156 CLR 41, at 96-97): The critical feature of (fiduciary) relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. [2.25]

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Mabo v Queensland (No 2) cont. Underlying such relationships is the scope for one party to exercise a discretion which is capable of affecting the legal position of the other. One party has a special opportunity to abuse the interests of the other. The discretion will be an incident of the first party’s office or position (Weinrib, “The Fiduciary Obligation”, (1975) 25 University of Toronto Law Journal 1, at pp 4-8); Guerin [1984] 2 SCR, at 384; (1984) 13 DLR (4th), at 340-341). The undertaking to act on behalf of, and the power detrimentally to affect, another may arise by way of an agreement between the parties, for example in the form of a contract, or from an outside source, for example a statute or a trust instrument. The powers and duties may be gratuitous and “may be officiously assumed without request” (Finn, op cit, 201; Guerin ibid, at 384; 341 of DLR). The defendant argued that there is no source for any obligation on the Crown to act in the interests of traditional titleholders and that, given the power of the Crown to destroy the title, there is no basis for a fiduciary obligation. This can be answered in two ways. First, the argument ignores the fact that it is, in part at least, precisely the power to affect the interests of a person adversely which gives rise to a duty to act in the interests of that person (Hospital Products Ltd (1984) 156 CLR 41, at 97; Weinrib (1975) 25 University of Toronto Law Journal 1, at 4-8); the very vulnerability gives rise to the need for the application of equitable principles. The second answer is that the argument is not supported by the legislative and executive history of Queensland in particular and of Australia in general. In the present case, a policy of “protection” by government emerges from the legislation, examples of which are quoted above, as well as by executive actions such as the creation of reserves, the removal of non-Islanders from the Islands in the 1880s and the appointment of a school teacher and an “adviser” in 1892. More general indications include the stated policy of protection underlying the condemnation of purported purchases of land by settlers from Aborigines as, for example, the John Batman incident referred to earlier. And even the general presumption that the British Crown will respect the rights of indigenous peoples occupying colonised territory, as discussed above, itself indicates that a government will take care when making decisions which are potentially detrimental to aboriginal rights. [The defendant raised further arguments against the imposition of a fiduciary duty and these were also rejected by Toohey J.] Be that as it may, if the Crown in right of Queensland has the power to alienate land the subject of the Meriam people’s traditional rights and interests and the result of that alienation is the loss of traditional title, and if the Meriam people’s power to deal with their title is restricted in so far as it is inalienable, except to the Crown, then this power and corresponding vulnerability give rise to a fiduciary obligation on the part of the Crown. The power to destroy or impair a people’s interests in this way is extraordinary and is sufficient to attract regulation by Equity to ensure that the position is not abused. The fiduciary relationship arises, therefore, out of the power of the Crown to extinguish traditional title by alienating the land or otherwise; it does not depend on an exercise of that power. Moreover if, contrary to the view I have expressed, the relationship between the Crown and the Meriam people with respect to traditional title alone were insufficient to give rise to a fiduciary obligation, both the course of dealings by the Queensland Government with respect to the Islands since annexation – for example the creation of reserves in 1882 and 1912 and the appointment of trustees in 1939 – and the exercise of control over or regulation of the Islanders themselves by welfare legislation – such as the Native Labourers’ Protection Act of 1884 (Q), The Torres Strait Islanders Act of 1939 (Q) under which an Island Court was established and a form of “local government” instituted, and the Community Services (Aborigines) Act 1984 (Q) – would certainly create such an obligation. (ii) Nature of the obligation To say that, where traditional title exists, it can be dealt with and effectively alienated or extinguished only by the Crown, but that it can be enjoyed only by traditional owners, may be tantamount to 60

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Mabo v Queensland (No 2) cont. saying that the legal interest in the traditional rights is in the Crown whereas the beneficial interest in the rights is in the indigenous owners. In that case the kind of fiduciary obligation imposed on the Crown is that of a constructive trustee. In any event, the Crown’s obligation as a fiduciary is in the nature of, and should be performed by reference to, that of a trustee. In Guerin Dickson J said (ibid, at 376; 334 of DLR), referring to the Crown’s duty towards the Musqueam Indians: This obligation does not amount to a trust in the private law sense. It is rather a fiduciary duty. If, however, the Crown breaches this fiduciary duty it will be liable to the Indians in the same way and to the same extent as if such a trust were in effect. Thus, the fiduciary obligation on the Crown, rooted in the extinguishability of traditional title, is in the nature of the obligation of a constructive trustee. The situation where a particular traditional title is dealt with by the Crown is distinguishable. This may occur where a parcel of land is alienated to a third party by the Crown with the consent of the traditional titleholders, as in Guerin. In such a case the Crown is clearly a trustee with respect to the particular traditional titleholders: see Guerin (1984) 2 SCR, per Wilson J at 355; (1984) 13 DLR (4th), at 361. (iii) Content of the obligation The content of a fiduciary obligation or constructive trust will be tailored by the circumstances of the specific relationship from which it arises. But, generally, to the extent that a person is a fiduciary he or she must act for the benefit of the beneficiaries (Hospital Products Ltd; Finn, op cit, 15). Moreover, this general mandate comprises more particular duties with respect to, first, the procedure by which a fiduciary makes a decision or exercises a discretion and secondly, the content of that decision. On the one hand, a fiduciary must not delegate a discretion and is under a duty to consider whether a discretion should be exercised. And on the other hand, a fiduciary is under a duty not to act for his or her own benefit or for the benefit of any third person (Finn, ibid, 15-16). The obligation on the Crown in the present case is to ensure that traditional title is not impaired or destroyed without the consent of or otherwise contrary to the interests of the titleholders. For example, the Crown could not degazette the Islands, thereby terminating the reserve, or simply alienate the Islands contrary to the interests of the Islanders; nor could it take these or any other decisions affecting the traditional title without taking account of that effect. If it did, it would be in breach of its duty and liable therefor … In the present case, extinguishment or impairment of traditional title would not be a source of the Crown’s obligation, but a breach of it. A fiduciary has an obligation not to put himself or herself in a position of conflict of interests. But there are numerous examples of the Crown exercising different powers in different capacities. A fiduciary obligation on the Crown does not limit the legislative power of the Queensland Parliament, but legislation will be a breach of that obligation if its effect is adverse to the interests of the titleholders, or if the process it establishes does not take account of those interests. [Mason CJ and McHugh J agreed with the reasons for judgment of Brennan J. Dawson J dissented. Mason CJ and McHugh J provided a summary of the findings of the court:] In the result, six members of the Court (Dawson J dissenting) are in agreement that the common law of this country recognises a form of native title which, in the cases where it has not been extinguished, reflects the entitlement of the indigenous inhabitants, in accordance with their laws or customs, to their traditional lands and that, subject to the effect of some particular Crown leases, the land entitlement of the Murray Islanders in accordance with their laws or customs is preserved, as native title, under the law of Queensland. The main difference between those members of the Court who constitute the majority is that, subject to the operation of the Racial Discrimination Act 1975 (Cth), neither of us nor Brennan J agrees with the conclusion to be drawn from the judgments of Deane, Toohey and Gaudron JJ that, at least in the absence of clear and unambiguous statutory provision to [2.25]

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Mabo v Queensland (No 2) cont. the contrary, extinguishment of native title by the Crown by inconsistent grant is wrongful and gives rise to a claim for compensatory damages. We note that the judgment of Dawson J supports the conclusion of Brennan J and ourselves on that aspect of the case since his Honour considers that native title, where it exists, is a form of permissive occupancy at the will of the Crown. We are authorised to say that the other members of the Court agree with what is said in the preceding paragraph about the outcome of the case.

Notes&Questions

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1.

The decision in Mabo v Queensland (No 2) (1992) 175 CLR 1 reversed what had been considered to be the legal position in Australia over a long period. The major decision prior to Mabo had been that of Blackburn J in the Northern Territory Supreme Court in Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141. In that case Aboriginal clans at Yirrkala on the Gove peninsula in the Northern Territory brought an action seeking to restrain the mining of bauxite on their traditional lands and challenged the validity of the mining leases granted over their lands by the Commonwealth government to Nabalco Pty Ltd. Blackburn J considered that he was bound by existing authority, in particular the decision of the Privy Council in Cooper v Stuart (1884) 14 AC 286, to the conclusion that Australia was a settled colony and that no previously existing legal rights survived the assertion of British sovereignty. That legal conclusion had in part been based in early decisions on a factual assertion that the indigenous peoples at the time of British settlement did not have in place any system of laws and in particular any laws relating to land ownership. Blackburn J rejected much of this factual basis although he characterised the relationship between the indigenous peoples and the land as something other than proprietary.

2.

As to the existence of a system of law Blackburn J stated: … The Solicitor-General contended that before any system can be recognised by our law as a system of law, there must be not only a definable community to which it applies, but also some recognised sovereignty giving the law a capacity to be enforced. This argument, or something like it, appeared at a number of points in the case for the defendants. I have already referred to the contention that there was no recognisable community to which the rights claimed related, so as to make reputation evidence admissible under the relevant rules of the law of evidence. Elsewhere it was put to me that the claims of the Rirratjingu and the Gumatj to areas of land could not be regarded as in the category of law at all, because there was no authority shown which was capable of enforcing them. Counsel used the analogy of international law, the nature of which as law has often been challenged on the ground that there is no authority capable of enforcing its rules. Implicit in much of the Solicitor-General’s argument on this aspect of the case was, I think, an Austinian definition of law as the command of a sovereign. At any rate, he contended, there must be the outward forms of machinery for enforcement before a rule can be described as a law. He did not deny the deep religious sanctions which underlay the customs and practices of the aboriginals; indeed, he stressed them, and contended that such sanctions as there were were religious and not otherwise. I do not find myself much impressed by this line of argument. The inadequacy of the Austinian analysis of the nature of law is well known. I do not believe that there is utility in attempting to provide a definition of law which will be valid for all purposes

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and answer all questions. If a definition of law must be produced, I prefer “a system of rules of conduct which is felt as obligatory upon the members of a definable group of people” to “the command of a sovereign”, but I do not think that the solution to this problem is to be found in postulating a meaning for the word “law”. I prefer a more pragmatic approach. I cannot complain of any lack of evidence, and I am very clearly of opinion, upon the evidence, that the social rules and customs of the plaintiffs cannot possibly be dismissed as lying on the other side of an unbridgeable gulf. The evidence shows a subtle and elaborate system highly adapted to the country in which the people led their lives, which provided a stable order of society and was remarkably free from the vagaries of personal whim or influence. If ever a system could be called “a government of laws, and not of men”, it is that shown in the evidence before me. But granted that comparison is categorically possible, does it, when made, lead to the conclusion that the plaintiffs’ system was a system of law from which conclusions can be drawn about particular rules of law? One argument much stressed by counsel for the defendants was that the system was not shown to apply to any definable community. The statement of claim uses the phrase: “Pursuant to the laws and customs of the aboriginal inhabitants of the Northern Territory, each clan holds certain communal lands” (par 4). Paragraph 23 similarly refers to “the aboriginal laws and customs of the Northern Territory”. This choice of words was perhaps not beyond criticism, but I do not read it as requiring the plaintiffs to establish a system of laws applicable to all aboriginals in the Northern Territory. What is now in question is the recognition of the plaintiffs’ system of law, and for that purpose the question is asked – To what definable community does the system apply? The statement of claim is capable of being understood, and in my opinion should reasonably be understood, as meaning that the system provided by the plaintiffs is, at least, a part of the totality of the laws and customs of aboriginals in the Northern Territory. After all, it is the plaintiffs’ case that the doctrine of communal native title is part of the law of the Northern Territory. What is shown by the evidence is, in my opinion, that the system of law was recognised as obligatory upon them by the members of a community which, in principle, is definable, in that it is the community of aboriginals which made ritual and economic use of the subject land. In my opinion it does not matter that the precise edges, as it were, of this community were left in a penumbra of partial obscurity. Upon the evidence, the community could possibly be described as the community of the people of those clans which now have members living in the neighbourhood of the Yirrkala Mission, with the qualification that there might now be some clans represented only at Elcho Island or Milingimbi. But the exact definition of the community is inessential. What matters, in my opinion, is the fact that the existence of a community was proved and that it was shown to be in principle definable. I hold that I must recognise the system revealed by the evidence as a system of law.

3.

As to the relationship between the indigenous persons and the land Blackburn J further stated: The next question is whether the proved relationship of the plaintiffs to their defined areas of land is a relationship which ought to be described as proprietary, either in a general sense or in any special sense which may be required by the Lands Acquisition Act. Mr Woodward’s contentions were these. First, he put it that the evidence showed that the aboriginals “think and speak of the land as being theirs, as belonging to them”. It seems to me that to ask what they “think” begs the question: the problem at present before the Court is to characterise what the aboriginal relationship is as manifested by what they say and do, to the land. What they “speak” is in the first place a matter of their own language. About this I had nothing which could strictly speaking be called evidence, except for the fact that much of what the aboriginals said in evidence, both in their own languages as interpreted and sometimes in English, was expressed in language which is consistent with ownership – the phrases “my country”, “our country”, “land [2.30]

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of the Rirratjingu”, “land belonging to Gumatj”, and phrases of that nature. For myself, I do not think that this language is of itself of very much weight. In the English language, the possessive pronouns, and the word “of”, are used with the widest variety of meanings, some of which do, and some of which do not, imply interests of a proprietary nature. For example, a great variety of relationships is indicated by the following phrases – “my house”, “my son”, “my father”, “my occupation”, “my club”, “my journey”, “my birthday”, “my incompetence in mathematics”. There was before the Court in this case only the slightest material upon which any opinion could be formed about the linguistic usages of the aboriginals. The lady who did most of the interpretation of such of the aboriginal evidence as was given in native languages, spoke and understood Gumatj but not Rirratjingu or any other language, and anything spoken to her or by her, not in English, was in Gumatj. At one stage she explained (and I accepted it without reservation) that a certain suffix was used in the Gumatj language to indicate property as distinct from loan or temporary possession. This suffix was being used by the witness in relation to the land. But upon such meagre material it would not be safe to base any generalisations, for there was no investigation of the matter in any depth – for example, what other implication has the same suffix and how are other English uses of possessive pronouns or the preposition “of” rendered into Gumatj? Moreover there could be no justification, without any evidence, for generalising about linguistic usages in the other languages from what the Court was told about Gumatj (which was not evidence). Mr Woodward’s proposition that the aboriginals “think and speak of the land as being theirs” may be properly paraphrased as “they think and speak of the land as being in a very close relationship to them” and in this form there would be no dispute about it. I think this problem has to be solved by considering the substance of proprietary interests rather than their outward indicia. I think that property, in its many forms, generally implies the right to use or enjoy, the right to exclude others, and the right to alienate. I do not say that all these rights must co-exist before there can be a proprietary interest, or deny that each of them may be subject to qualifications. By this standard I do not think that I can characterise the relationship of the clan to the land as proprietary. It makes little sense to say that the clan has the right to use or enjoy the land. Its members have a right, and so do members of other clans, to use and enjoy the land of their own clan and other land also. The greatest extent to which it is true that the clan as such has the right to use and enjoy the clan territory is that the clan may, in a sense in which other clans may not (save with permission or under special rules), perform ritual ceremonies on the land. That the clan has a duty to the land – to care for it – is another matter. This is not without parallels in our law, which sometimes imposes duties of such a kind of a proprietor. But this resemblance is not, or at any rate is only in a very slight degree, an indication of a proprietary interest. The clan’s right to exclude others is not apparent: indeed it is denied by the existence of the claims of the plaintiffs represented by Daymbalipu. Again, the greatest extent to which this right can be said to exist is in the realm of ritual. But it was never suggested that ritual rules ever excluded members of other clans completely from clan territory; the exclusion was only from sites. The right to alienate is expressly repudiated by the plaintiffs in their statement of claim. In my opinion, therefore, there is so little resemblance between property, as our law, or what I know of any other law, understands that term, and the claims of the plaintiffs for their clans, that I must hold that these claims are not in the nature of proprietary interests. … Upon the whole of this aspect of the matter, my conclusion is that the evidence shows a recognisable system of law which did not provide for any proprietary interest in the plaintiffs in any part of the subject land. 64

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4.

The decision of Blackburn J in Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 was widely criticised. See, for example, Reynolds, The Law of the Land (Penguin, Ringwood, 1987); Blumm and Malbon, “Aboriginal Title, the Common Law and Federalism: A Different Perspective” in Ellinghaus, Bradbrook and Duggan, The Emergence of Australian Law (1989); Hookey, “The Gove Land Rights Case: A Judicial Dispensation for the Taking of Aboriginal Lands in Australia?” (1972) 5 FLR 85; Hocking, “Does Aboriginal Law Now Run in Australia” (1979) 10 FLR 16; Bartlett R, “Aboriginal Land Claims at Common Law” (1983) UWALR 16.

5.

Once land rights of indigenous persons are held to exist, those rights are given protection in part by the Racial Discrimination Act 1975 (Cth); legislative provisions cannot apply to such interests differently to non indigenous land rights, for example in the form of compensation. In the Mabo dispute itself, the applicant had succeeded in having the Queensland Coast Islands Declaration Act 1985 (Qld) struck down (Mabo v Queensland (No 1) (1988) 166 CLR 186). The 1985 Act had purported to vest native land rights but not other land rights in the Crown in right of the State of Queensland. Unless the 1985 legislation was invalidated, the existence of native title could not arise as an issue. Similarly an attempt by Western Australia to restrict native title was invalidated in Western Australia v Commonwealth (1995) 128 ALR 1.

6.

The decision in Mabo has been the subject of intense and sometimes heated public debate. Recently judicial reservations have re-emerged. Callinan J in Western Australia v Ward (2002) 213 CLR 1; 191 ALR 1 stated: I add this. The first non-indigenous people who occupied this country brought with them their common and statutory law which had long included a doctrine of adverse possession and settled notions about the use and occupation of land. These were closely connected ideas: land was to be used and enjoyed, and those who possessed, used and enjoyed the land should own it, albeit at first, transiently. As Blackstone put it: For, by the law of nature and reason, he, who first began to use it acquired therein a kind of transient property, that lasted so long as he was using it, and no longer: or, to speak with greater precision, the right of possession continued for the same time only that the act of possession lasted. Those early non-indigenous settlers also brought with them a knowledge of agriculture and husbandry, and of domestic, commercial and official construction of a kind completely different from that of the indigenous peoples. To the undiscriminating, and perhaps insensitive and unimaginative eyes of the former it must have appeared that much of this large continent was not in fact being used or enjoyed, or certainly not so in a way that was familiar. After discussing the use and occupation of Crown lands by reference to the Old Testament, Blackstone says of this migration: Upon the same principle was founded the right of migration, or sending colonies to find out new habitations, when the mother-country was over-charged with inhabitants; which was practised as well by the Phoenicians and Greeks, as the Germans, Scythians, and other northern people. And, so long as it was confined to the stocking and cultivation of desert uninhabited countries, it kept strictly within the limits of the law of nature. But how far the seising on countries already peopled, and driving out or massacring the innocent and defenceless natives, merely because they differed from their invaders in language, in religion, in customs, government, or in colour; how far such a conduct was consonant to nature, to reason, or to Christianity, deserved well to be considered by those, who have rendered their names immortal by thus civilizing mankind. [2.30]

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Activities of this kind undoubtedly occurred in Australia. Some were utterly indefensible. It is possible to understand, again without condoning, that others of them might have occurred, in part because of different conceptions about land and how it might be possessed, used or owned. The different conceptions held by the new settlers, much the stronger of the peoples, were bound to prevail. This was inevitable when those who were more powerful had a well settled, longstanding body of property law in written texts, statutes and cases, and those whom they dispossessed depended for the assertions of their rights to occupy and use the land upon traditional oral customs and practices. Perhaps it was equally significant that the new settlers brought with them a transparent system of legal enforcement and courts to give effect to the resolution of disputes over property. To these new settlers, it might also have appeared, whether it was true or not, that the country was so sparsely populated that disputes did not arise between competing indigenous people over land. The problems for the indigenous people were compounded by the difficulty of finding any conceptual common ground between the common and statutory law of real property and Aboriginal law with respect to land. It seems likely that the first settlers would have regarded the two as incompatible, that whatever the Aboriginal peoples possessed by way of title to land was too foreign, fragile and elusive to withstand and survive the common law. Mabo [No 2] was a brave judicial attempt to redress the wrongs of dispossession. But its “recognition” of native title has involved the courts in categorising and charting the bounds of something that, being sui generis, really has no parallel in the common law. The Court has endeavoured to find a way of recognising, and to a degree protecting, that anomalous interest without unduly disturbing the law of Australian property. The results of this enterprise can hardly be described as satisfactory. The decisions of this Court and or lower courts have resulted in something that is not strictly property, as common lawyers would understand it, being regarded as a burden on the Crown’s radical title. Long settled understandings about land law relating to exclusive possession and leases have been questioned. Parliament has been compelled to intervene, repeatedly, to secure the validity of acts that were never before thought to be problematic. And we now have a body of law that is as complicated, shifting and abstruse that it continues to require the intervention of this Court to resolve even the most basic issues, such as the effect of freehold or leases on native title. Judging from the submissions to this Court and the native title legislation that we have had to consider, few people, if any, have been able to thread this labyrinth of Minos unscathed. To these drawbacks flowing from the recognition of native title may be added others: considerable uncertainty has been created; commercial activity and therefore national prosperity has been inhibited; much time and money have been expended on litigation; and, I fear, the expectations of the indigenous people have been raised and dashed. I do not disparage the importance to the Aboriginal people of their native title rights, including those that have symbolic significance. I fear, however, that in many cases because of the chasm between the common law and native title rights, the latter, when recognised, will amount to little more than symbols. It might have been better to redress the wrongs of dispossession by a true and unqualified settlement of lands or money than by an ultimately futile or unsatisfactory, in my respectful opinion, to attempt to fold native title rights into the common law. I remain bound by Mabo [No 2] and Wik to the extent that they are reflected in the Native Title Act. Until such time as parties wish to question their correctness, I must apply them. In the meantime, however, this Court should do what it can to provide indigenous people, governments, lawyers, academics and members of the general community with clear, logical and final rules for determinations of native title. It is for this reason that I have attempted to deal with all interests and, where possible, to avoid remitter to the Federal Court.

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Western Australia v Brown [2.35] Western Australia v Brown [2014] HCA 8 FRENCH CJ, HAYNE, KIEFEL, GAGELER AND KEANE JJ 1 In 1964, the State of Western Australia made an agreement with some joint venturers about the development and exploitation of iron ore deposits at Mount Goldsworthy. The agreement was approved by s 4(1) of the Iron Ore (Mount Goldsworthy) Agreement Act 1964 (WA) and it is convenient to refer to it as “the State Agreement”. The State Agreement obliged the State to grant, and the State did grant, to the joint venturers mineral leases for iron ore (in a form provided by the agreement). Two leases are relevant to this matter. Each was for a term which expired in 1986, with the right to renew from time to time for further periods each of 21 years. Each has been renewed and is still in force. 2 The parties to this litigation agree that, subject to the question of extinguishment, the Ngarla People hold native title to the land which is subject to the two mineral leases. The parties agree that the relevant native title rights and interests are non-exclusive rights (a) to access and camp on the land; (b) to take flora, fauna, fish, water and other traditional resources (excluding minerals) from the land; (c) to engage in ritual and ceremony on the land; and (d) to care for, maintain and protect from physical harm particular sites and areas of significance to the native title holders. 3 Did the grant of the mineral leases extinguish those native title rights and interests in relation to the land subject to the mineral leases? This Court’s decision in Western Australia v Ward 1 requires that the question be answered “No”. The rights granted under the mineral leases are not inconsistent with the claimed native title rights and interests. The State Agreement 4 The Mount Goldsworthy iron ore project was a very large development. The State Agreement made detailed provisions about the rights and obligations of the State and of the joint venturers. It is enough, for present purposes, to notice only the following provisions. 5 The State Agreement provided 2 that, “[a]s soon as conveniently may be” after the commencement date specified in the agreement, and after application by the joint venturers, the State would grant the joint venturers “a mineral lease … for iron ore” in the form provided in the schedule to the agreement and later grant 3 similar mineral leases over other areas. The form of mineral lease provided by the State Agreement was generally similar to the form of mineral lease then provided by the Mining Act 1904 (WA). 6 The State agreed 4 that, subject to the joint venturers performing their obligations under the State Agreement, the State and its authorities would not resume any property used for the purposes of the agreement. The State further agreed 5 not to rezone the land which was the subject of a mineral lease granted in accordance with the State Agreement. 7 The joint venturers agreed 6 that, within three years of the commencement date fixed by the State Agreement, they would do all that was necessary to enable them to mine iron ore from the land the subject of the initial mineral lease, to transport ore by rail to the joint venturers’ wharf and to commence shipment of ore from the wharf at an annual rate of not less than one million tons of ore. In 1 2

(2002) 213 CLR 1; [2002] HCA 28. Iron Ore (Mount Goldsworthy) Agreement Act 1964 (WA), Schedule, cl 8(2)(a).

3 4 5 6

Iron Ore (Mount Goldsworthy) Agreement Act 1964, Schedule, cl 11(6). Iron Ore (Mount Goldsworthy) Agreement Act 1964, Schedule, cl 8(5)(b). Iron Ore (Mount Goldsworthy) Agreement Act 1964, Schedule, cl 10(g). Iron Ore (Mount Goldsworthy) Agreement Act 1964, Schedule, cl 9(1). [2.35]

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Western Australia v Brown cont. particular, the joint venturers agreed 7 to construct a railway, to make roads, to construct a wharf, to lay out and develop townsites and to provide suitable housing, recreational and other facilities and services. Some of this was to be done on the land the subject of a mineral lease but some of it had to occur elsewhere. 8 The joint venturers agreed 8 that, “[t]hroughout the continuance” of the State Agreement, they would: allow the State and third parties to have access (with or without stock vehicles and rolling stock) over the mineral lease (by separate route road or railway) PROVIDED THAT such access over shall not unduly prejudice or interfere with the Joint Venturers’ operations [under the State Agreement]. 9 The State Agreement has been varied three times since it was first made. Nothing turns on those variations. There have been assignments of interests in the joint venture and in the mineral leases. Again, nothing turns on the detail of those changes and it is convenient to refer to the “joint venturers” without distinguishing between the differing compositions of the joint venture over the years. The mineral leases 10 The State has granted two mineral leases that are relevant to this litigation. The first (variously referred to as “ML 235”, “ML 235SA” or “AML 7000235”) was granted by instrument dated 17 February 1966. The second (referred to as “ML 249”, “ML 249SA” or “AML 7000249”) was granted by instrument dated 8 May 1974. Both mineral leases were granted before the enactment of the Racial Discrimination Act 1975 (Cth) and long before the enactment of the Native Title Act 1993 (Cth). 11 Argument in this Court proceeded on the basis that there is no relevant difference between the two mineral leases and that each was in the form provided for by the State Agreement. It is therefore convenient to refer only to the first of them (ML 235). 12 The recitals to the instrument recorded that, by the State Agreement, the State had agreed to grant the joint venturers “a mineral lease”, that the State Agreement had been ratified by the Iron Ore (Mount Goldsworthy) Agreement Act 1964 and that the Act had authorised the grant of a mineral lease or leases to the joint venturers. 13 The instrument provided that, “in consideration of the rents and royalties reserved by and of the provisions of the [State] Agreement”, the Crown “do[es] by these presents grant and demise” to the joint venturers as tenants in common in equal shares: ALL THAT piece or parcel of land [identified in the instrument] and all those mines, veins, seams, lodes and deposits of iron ore in on or under the said land (hereinafter called ’the said mine’) together with all rights, liberties, easements, advantages and [appurtenances] thereto belonging or appertaining to a lessee of a mineral lease under the MINING ACT, 1904 … or to which the JOINT VENTURERS are entitled under the [State] Agreement TO HOLD the said land and mine and all and singular the premises hereby demised for the full term of twenty one years … for the purposes but upon and subject to the terms, covenants and conditions set out in the [State] Agreement and to the Mining Act (as modified by the [State] Agreement) YIELDING and paying therefor the rent and royalties as set out in the [State] Agreement. 14 The instrument further provided that “this lease is subject to the observance and performance” by the joint venturers of certain covenants and conditions, including that the joint venturers “use the land bona fide exclusively for the purposes of the [State] Agreement”. 7 8 68

Iron Ore (Mount Goldsworthy) Agreement Act 1964, Schedule, cl 9(1)(c), (d), (e), (f)(ii). Iron Ore (Mount Goldsworthy) Agreement Act 1964, Schedule, cl 9(2)(g). [2.35]

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Western Australia v Brown cont. Subsequent activities 15 In accordance with their obligations under the State Agreement, the joint venturers developed the Mount Goldsworthy iron ore project. Construction of the townsite and mine operations on the land the subject of ML 235 began in 1965. A town of over 200 houses (and separate single men’s quarters) was built, together with roads, a shopping centre, a school, clubs and sporting facilities, a medical centre, a police station and other associated works. In 1977, the town reached a maximum population of 1400 people. 16 Together, the minesite infrastructure and the town covered about one third of the area of ML 235. (The parties agreed that there was no evidence that any significant construction was carried out on the remainder of the area of ML 235.) 17 Mining was conducted using open pit mining. Before mining began, the peak of Mount Goldsworthy was about 132 metres above sea level. When mining stopped, Mount Goldsworthy had been transformed into a pit about 135 metres below sea level. 18 The mine was closed in December 1982. The town was closed in 1992. The town has since been completely removed and the land on which it stood restored. The pit remains, but is now filled with water. Procedural history 19 Alexander Brown and others (on behalf of the Ngarla People) applied to the Federal Court of Australia for native title determinations in respect of land and waters in the Pilbara region of Western Australia. The claimed areas included the areas subject to the two mineral leases referred to at the start of these reasons. On 30 May 2007, the primary judge (Bennett J) made 9 a consent determination of native title with respect to part of the claimed areas other than the areas the subject of the mineral leases. 20 On 5 October 2007, the primary judge ordered the trial of some questions relating to the effect of the grant of the mineral leases. The order recorded that it was agreed that, subject to the answers given to the questions, “native title exists in the land [the subject of the mineral leases] in the manner recognised” in the consent determination which had been made on 30 May 2007. The questions included 10 the following: (1)

Did the grant of the [mineral] leases pursuant to the … State Agreement confer on the holders of those leases a right of exclusive possession such that any native title rights and interests were wholly extinguished?

(2)

If the grant of the [mineral] leases did not confer exclusive possession so as to extinguish any native title rights and interests, are the rights granted pursuant to the [mineral] leases and the … State Agreement inconsistent with any or all of the bundle of native title rights and interests recognised in [the consent determination of 30 May 2007]? If the answer is “yes”, which ones?

(3)

If the answer to (2) is “yes”, in relation to any and each of such native title rights which are inconsistent, are these rights wholly extinguished?

(4)

Was native title wholly extinguished to the area (or part of the area) of the [mineral] leases through the rights as exercised under the [mineral] leases and the … State Agreement?

(5)

If the answer to (4) is “yes”, in which areas has native title been wholly extinguished?

21 For the purposes of the trial of those separate questions, the parties submitted a statement and chronology of agreed relevant facts and a statement and chronology of further undisputed facts, the relevance of which was contested. 9 10

Brown (on behalf of the Ngarla People) v State of Western Australia [2007] FCA 1025. Brown (on behalf of the Ngarla People) v Western Australia (No 2) (2010) 268 ALR 149 at 153–154 [3]. [2.35]

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Western Australia v Brown cont. 22 On the trial of the separate questions, the primary judge held 11 that the mineral leases (ML 235 and ML 249) did not confer on the joint venturers a right of exclusive possession such that any native title rights and interests were wholly extinguished. The primary judge further held 12, however, that the rights granted pursuant to ML 235 and ML 249 and the State Agreement were inconsistent with the continued existence of any of the determined native title rights and interests “in the area where the mines, the town sites and associated infrastructure were constructed”. The rights which the joint venturers exercised with respect to this “developed” area were said 13 to be “analogous to rights of exclusive possession”. But the analogy was neither explored nor explained further. Her Honour subsequently made 14 a determination of native title reflecting the conclusions which have been described. 23 The holding of inconsistency, and consequent extinguishment of native title, on account of activities undertaken by the joint venturers on the land the subject of the mineral leases subsequent to the grant of those interests, followed from the decision of the Full Court of the Federal Court in De Rose v South Australia (No 2) 15. It will be necessary to say more about that decision but, in order to understand the subsequent procedural history of this matter, two points should be made about it now. The Full Court held 16 in De Rose (No 2) that the grant in a pastoral lease of the right to construct improvements on the land (such as a dwelling house or shed), when exercised, was inconsistent with native title rights to access and move about the land, hunt and gather on the land, camp on the land, engage in ceremonies and cultural activities on the land and maintain and protect places of significance. The Full Court further held 17 that construction of improvements by the holders of the pastoral lease on the land extinguished native title rights and interests in the land on which the improvements were constructed and in any adjacent land reasonably necessary for or incidental to the operation or enjoyment of the improvements. 24 In the present matter, the native title holders appealed to the Full Court of the Federal Court against the orders and determination made by the primary judge. They alleged, in effect, that her Honour should have held that their native title rights and interests were not extinguished to any extent by the grant of the mineral leases or by any subsequent activities on the leased land. 25 The State of Western Australia and the joint venturers each cross-appealed against the determination. Each alleged that the claimed native title rights and interests were wholly extinguished over the whole of the area of the mineral leases, either because those leases conferred on the holders a right of exclusive possession or because the rights granted by the leases and the State Agreement were inconsistent with all of the native title rights and interests. 26 On 5 November 2012, the Full Court (Mansfield, Greenwood and Barker JJ) published 18 reasons for judgment and made orders that the appeal by the native title holders “be upheld” and the cross-appeals by the State and the joint venturers be dismissed. 27 The Full Court divided in opinion, principally about what consequences followed from the joint venturers having exercised their rights under the mineral leases to build the mine, the town and 11

Brown (on behalf of the Ngarla People) v Western Australia (No 2) (2010) 268 ALR 149 at 205 [230].

12 13 14

(2010) 268 ALR 149 at 205 [231]. (2010) 268 ALR 149 at 200 [202]. Brown (on behalf of the Ngarla People) v State of Western Australia (No 3) [2010] FCA 859.

15 16 17 18

(2005) 145 FCR 290. (2005) 145 FCR 290 at 331–332 [149]. (2005) 145 FCR 290 at 333 [157], 335 [166]. Brown v Western Australia (2012) 208 FCR 505.

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Western Australia v Brown cont. associated facilities. Mansfield J concluded 19 that the orders and reasons of the primary judge were correct. Greenwood J held 20 that the native title rights and interests of the Ngarla People were not extinguished by the grant of the mineral leases but that the exercise of the rights granted by the leases would prevent the exercise of native title rights over any part of the leased land for so long as the joint venturers hold rights under the leases. Barker J also held 21 that the native title rights and interests were not extinguished but held 22 that, to the extent that native title rights and interests could not be exercised or enjoyed by reason of the incompatibility of activities conducted by the joint venturers, the exercise of the native title rights and interests “yielded” to the joint venturers’ exercised rights. 28 Subsequently, on 22 February 2013, the Full Court set aside 23 the determination of native title made by the primary judge and made a new determination in a form proposed by the native title holders. Because these reasons will show that subsequent use of the land the subject of the mineral leases is irrelevant to the issue of extinguishment, it is not necessary to explore the differences between the members of the Full Court or the particular resolution of those differences which was reflected in the substituted determination of native title. 29 It is sufficient to complete the description of the procedural history of the matter by noting that, by special leave, the State appeals to this Court against the orders of the Full Court. The State again advances the argument (advanced in the Full Court) that native title rights and interests were wholly extinguished over the whole of the area of the mineral leases, either because those leases conferred on the holders a right of exclusive possession or because the rights granted by the leases and the State Agreement were inconsistent with all of the native title rights and interests. In the alternative, the State submits that the native title rights and interests were extinguished “in respect of those lands … on which the [joint venturers] exercised their rights to develop and construct mines, a town and associated works”. 30 The joint venturers did not appeal against the orders made by the Full Court. They made submissions supporting the State in its appeal. The Attorney-General for the State of South Australia was granted leave to appear and make submissions as amicus curiae. Extinguishment 31 This is an appeal against a determination of native title made under the Native Title Act 1993. The Native Title Act 1993 therefore “lies at the core of this litigation” 24. As noted earlier in these reasons, both of the mineral leases (ML 235 and ML 249) were granted before the enactment of the Racial Discrimination Act 1975. No party submitted that the provisions of that Act are engaged in any relevant way. In both the Full Court of the Federal Court 25 and this Court, it was common ground that none of the provisions of the Native Title Act 1993 dealing with “past acts”, “intermediate period acts” or “previous exclusive possession acts” applied. That is, it was common ground, in both the Full Court and this Court, that the question of extinguishment which lies behind the determination sought under the Native Title Act 1993 was not governed by statute. 32 Did the grant of the mineral leases extinguish some or all of the claimed native title rights and interests? 19 20 21 22 23 24 25

(2012) 208 FCR 505 at 526 [94]. (2012) 208 FCR 505 at 586–587 [431]. (2012) 208 FCR 505 at 596 [479]. (2012) 208 FCR 505 at 597 [479]. Brown (on behalf of the Ngarla People) v State of Western Australia (No 2) [2013] FCAFC 18. Ward (2002) 213 CLR 1 at 60 [2]. See also Akiba v The Commonwealth (2013) 87 ALJR 916 at 930 [54]; 300 ALR 1 at 19; [2013] HCA 33. (2012) 208 FCR 505 at 511–513 [23]–[27]. [2.35]

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Western Australia v Brown cont. 33 To answer this question, it is necessary, as the plurality held 26 in Ward, to ask “whether the rights [granted] are inconsistent with the alleged native title rights and interests”. This question is 27 “an objective inquiry which requires identification of and comparison between the two sets of rights”. Each stage of this inquiry – identification of rights and comparison between rights – will be considered in turn. Identifying the rights 34 The identification of the relevant rights is an objective inquiry. This means that the legal nature and content of the rights must be ascertained 28. The nature and content of a right is not ascertained by reference to the way it has been, or will be, exercised. That is why the plurality in Ward said 29 that consideration of the way in which a right has been exercised is relevant only in so far as it assists the correct identification of the nature and content of the right. The claimed native title rights and interests 35 As was said 30 in Ward, “[q]uestions of extinguishment first require identification of the native title rights and interests that are alleged to exist”. As already noted, the nature and extent of those rights was agreed in this case. It was agreed that those rights were non-exclusive rights to access and camp on the land, to take flora, fauna, fish, water and other traditional resources (excluding minerals) from the land, to engage in ritual and ceremony on the land and to care for, maintain and protect from physical harm particular sites and areas of significance. 36 It is important to recognise that particular considerations apply to the identification of native title rights and interests. In examining the “intersection of traditional laws and customs with the common law” 31 (or, in this case, the intersection with rights derived from statute), it is important 32 to pay careful attention to the content of the traditional laws and customs. It is especially important not to confine 33 the understanding of rights and interests which have their origin in traditional laws and customs “to the common lawyer’s one-dimensional view of property as control over access”. Yet it is no less important to recognise that, as Fejo v Northern Territory made clear 34, a right of exclusive possession affords the holder the right to “use the land as he or she sees fit and [to] exclude any and everyone from access to the land” (emphasis added). The grant of a right to exclude any and everyone from access to the land for any reason or no reason is inconsistent with the continued existence not only of any right in any person other than the grantee to gain access to the land but also of any right which depends upon access to the land. Determining inconsistency 37 The determination of whether two or more rights are inconsistent is also an objective inquiry. The question of inconsistency of rights can always be decided at the time of the grant of the allegedly inconsistent rights. And it must be decided by reference to the nature and content of the rights as they stood at the time of the grant. At that time, were the rights as granted inconsistent with the relevant native title rights and interests? As these reasons will later demonstrate, to the extent to which the 26 27 28 29 30

(2002) 213 CLR 1 at 89 [78]. (2002) 213 CLR 1 at 89 [78]. cf Wik Peoples v Queensland (1996) 187 CLR 1 at 71–72 per Brennan CJ, 185 per Gummow J; [1996] HCA 40. (2002) 213 CLR 1 at 89 [78]. (2002) 213 CLR 1 at 208 [468]. See also at 91–95 [83]–[95]; Akiba (2013) 87 ALJR 916 at 930 [51]; 300 ALR 1 at 19.

31 32 33 34

Fejo v Northern Territory (1998) 195 CLR 96 at 128 [46]; [1998] HCA 58. Ward (2002) 213 CLR 1 at 92 [85]. Ward (2002) 213 CLR 1 at 95 [95]. (1998) 195 CLR 96 at 128 [47].

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Western Australia v Brown cont. decision in De Rose (No 2) countenances a notion of contingent extinguishment (contingent on the later performance of some act in exercise of the “potentially inconsistent” rights granted), it is wrong and should not be followed. In the present case, then, the question of inconsistency is to be determined at the time of the grant of the relevant mineral leases. What the joint venturers did or did not do in exercise of the rights granted under the mineral leases is important 35 only to the extent to which it directs attention to the nature and content of the rights which were granted. 38 There cannot be “degrees of inconsistency of rights”. “Two rights are inconsistent or they are not. If they are inconsistent, there will be extinguishment to the extent of the inconsistency; if they are not, there will not be extinguishment.” 36 As counsel for the native title holders put the point in argument in this Court, inconsistency is that state of affairs where “the existence of one right necessarily implies the non-existence of the other”. And one right necessarily implies the nonexistence of the other when there is logical antinomy between them: that is, when a statement asserting the existence of one right cannot, without logical contradiction, stand at the same time as a statement asserting the existence of the other right. 39 The joint venturers and South Australia sought to formulate a test for determining whether rights granted are inconsistent by analogy with s 109 of the Constitution. Reference was made to notions of “direct” and “indirect” inconsistency and to whether the existence or enjoyment of native title rights would alter, impair or detract from the enjoyment of a right conferred by statute. Yet, as was acknowledged in argument, the analogy is necessarily imperfect. An inconsistent State law is inoperative 37 only for so long as there is inconsistent federal law. A native title right, once extinguished, cannot be revived 38. More fundamentally, however, the analogy is apt to mislead, at least to the extent to which it directs attention to the enjoyment of rights rather than the necessary comparison between the legal nature and content of the right granted and the native title right asserted. The analogy should not be pursued. 40 It is convenient to turn to the task of identifying the rights which the State granted to the joint venturers pursuant to the Iron Ore (Mount Goldsworthy) Agreement Act 1964 and comparing those rights with the claimed native title rights and interests. Exclusive possession? 41 As noted earlier, the State (supported by the joint venturers) submitted that the mineral leases granted the joint venturers exclusive possession of the land the subject of the instruments. 42 Three points may be made about ML 235 which apply equally to ML 249. 43 First, like any mineral lease granted under the Mining Act 1904, ML 235 was described as a kind of lease: a “mineral lease”. The instrument used the term “demise”. It granted and demised identified land as well as mines, veins, seams, lodes and deposits of a mineral in, on or under that land. As with the mining leases considered in Ward, the rights and obligations of the joint venturers are not to be determined 39 by fastening upon the use of the words “lease” or “demise”, or by noticing that there was a demise of land as well as mines. As Toohey J said 40 in Wik Peoples v Queensland, “[a] closer 35

Ward (2002) 213 CLR 1 at 89 [78].

36 37 38 39

Ward (2002) 213 CLR 1 at 91 [82]. Butler v Attorney-General (Vict) (1961) 106 CLR 268; [1961] HCA 32. Fejo (1998) 195 CLR 96 at 131 [56]-[58]. Ward (2002) 213 CLR 1 at 158 [284]-[287]; Wik (1996) 187 CLR 1 at 117 per Toohey J. See also Wade v New South Wales Rutile Mining Co Pty Ltd (1969) 121 CLR 177 at 192-193 per Windeyer J; [1969] HCA 28; Goldsworthy Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199 at 212-219; [1973] HCA 7; O’Keefe v Malone [1903] AC 365 at 377. (1996) 187 CLR 1 at 117.

40

[2.35]

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Western Australia v Brown cont. examination is required”. It is necessary to identify the rights which are actually conferred upon the joint venturers. And that leads to the second point to be noticed. 44 The grant was expressed to be “for the purposes but upon and subject to the terms, covenants and conditions set out in the [State] Agreement”. The joint venturers were required to use the land “bona fide exclusively for the purposes of the [State] Agreement”. Read as a whole, in the context provided by the State Agreement, the instrument provided for a “mineral lease” of the kind understood by the common law and described in Newcrest Mining (WA) Ltd v The Commonwealth 41. That is, the instrument gave the joint venturers liberty to go into and under the land, during the currency of the mineral lease, and to get and take away the iron ore that they found there. 45 This being the nature of the right granted to the joint venturers, the third point to be made is that neither the instrument itself nor the State Agreement provided expressly that the joint venturers were not only to have possession of the land which was the subject of the mineral lease for the purposes which have been described but also to have the right to exclude any and everyone from that land for any reason or no reason at all. On the contrary, as already noted, the State Agreement provided expressly that the joint venturers must allow not only the State but also third parties to have access over the land the subject of the mineral lease, provided that the access did not “unduly prejudice or interfere with” the joint venturers’ operations. This express provision precludes construing the leases as impliedly providing a right of exclusive possession. 46 It follows that neither ML 235 nor ML 249 gave the joint venturers a right of the kind identified 42 in Fejo: the unqualified right to exclude any and everyone from access to the land, for any reason or no reason. The joint venturers could prevent anyone else from using the land for mining purposes and could use any part of the land for the extraction of iron ore or for any of the associated purposes described in the State Agreement (such as building a town, roads and railway). It may be accepted that the grant of these rights would be inconsistent with a native title right of the kind which was at issue in Ward: a native title right to control access to land (for any purpose or no purpose). But no right of that kind was in issue in this case. Neither instrument gave the joint venturers the right to exclusive possession of the land. 47 The first branch of the State’s argument must be rejected. Extinguishment by actual or potential conflicting use? 48 The alternative arguments advanced by the State depended, directly or indirectly, on the proposition that extinguishment could be demonstrated by showing that native title rights could clash with rights under the mineral leases in the sense that the rights could not be exercised simultaneously in the one place. That is, the State’s alternative arguments were founded in the observation that a native title holder could not hunt over land being excavated to recover iron ore or over land on which there stood one of the houses in the town. And because the mineral leases gave the joint venturers the right to mine anywhere on the land and the right to build many and very large improvements anywhere on the land, the State submitted that the rights granted by the leases were wholly inconsistent with the claimed native title rights and interests at the time of the grant of the mineral leases, or at least became so when the joint venturers exercised their rights. 49 It follows from what has already been said in these reasons that these arguments must be rejected. It is as well, however, to examine further the flawed premises upon which the arguments depend. 50 The State sought to support its broader proposition (that a right to mine or build anywhere on the land was wholly inconsistent with the claimed native title rights and interests) by reference to the 41 42 74

(1997) 190 CLR 513 at 616 per Gummow J; [1997] HCA 38, citing Gowan v Christie (1873) LR 2 Sc & Div 273 at 284 per Lord Cairns. (1998) 195 CLR 96 at 128 [47]. [2.35]

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Western Australia v Brown cont. reasons of Brennan CJ in Wik. Particular emphasis was given to his Honour’s statement 43 that “[t]he law … cannot recognise the co-existence in different hands of two rights that cannot both be exercised at the same time”. This statement must be understood in the context in which it appears. 51 In particular, it is important to notice that, in the very paragraph from which the statement relied on by the State was taken, Brennan CJ emphasised that extinguishment of native title does not depend upon the exercise of the allegedly inconsistent right: the inconsistency is, as his Honour said 44, “between the rights” and not “between the manner of their exercise” (emphasis added). That is, questions of extinguishment must be resolved 45 as a matter of law, not as a matter of fact. Hence, inconsistency arises 46 “at the moment when those [inconsistent] rights are conferred”. These propositions, though stated in a dissenting judgment, state principles which must now be taken to be firmly established. 52 In Wik, the Court divided on whether the pastoral leases in issue in that case gave the holders a right of exclusive possession (in the sense of a right to exclude any and everyone from the land for any reason or no reason). The majority concluded that the relevant pastoral leases did not give such a right to their holders and that it followed 47 that there was no necessary extinguishment of native title rights and interests. Brennan CJ, and other Justices who dissented, concluded that the pastoral leases did give the holders exclusive possession. 53 The statement by Brennan CJ, on which the State placed such emphasis, responded to the argument advanced on behalf of the Wik and Thayorre Peoples that only practical inconsistency between the exercise of competing rights can extinguish native title rights and interests. The observation which Brennan CJ made about simultaneous exercise of rights was made in answer to the argument that the manner of exercise of the competing rights was relevant to the question of extinguishment. As has already been seen, that argument was rejected. But the observation answered that argument because, even if the argument were correct, the rights that could not both be exercised at the same time were, on the one hand, rights such as a right to hunt and gather on the land and, on the other, the leaseholder’s right to exclude any and everyone from the land for any reason or no reason. 54 Two other submissions made by the State may be noted at this point, but put aside from consideration. It is not to the point to observe, as the State did, that other forms of land tenure might have been granted to the joint venturers. Nor is it to the point to observe, as the State did, that the State Agreement obliged the State not to resume or rezone the land which was the subject of the mineral leases and that the holder of an interest in fee simple in land will seldom have the benefit of such obligations. Even if it is right to say, as the State did, that in these respects the joint venturers had rights that were greater than those of the holder of a fee simple, the observation is irrelevant to the question of extinguishment. The joint venturers’ rights to insist upon performance of these obligations did not intersect in any way with the claimed native title rights and interests. 55 The decisions in both Wik and Ward established that the grant of rights to use land for particular purposes (whether pastoral, mining or other purposes), if not accompanied by the grant of a right to exclude any and everyone from the land for any reason or no reason, is not necessarily inconsistent with, and does not necessarily extinguish, native title rights such as rights to camp, hunt and gather, conduct ceremonies on land and care for land. As the State rightly pointed out, both Wik and Ward were decided before the native title rights claimed had been determined. But neither case could have 43

(1996) 187 CLR 1 at 87 (footnote omitted).

44

(1996) 187 CLR 1 at 87.

45

(1996) 187 CLR 1 at 87.

46

(1996) 187 CLR 1 at 87.

47

(1996) 187 CLR 1 at 132-133 per Toohey J (Gaudron, Gummow and Kirby JJ concurring). [2.35]

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Western Australia v Brown cont. been determined as it was if, as the State submitted, the grant of rights to perform acts or erect structures on land was necessarily inconsistent with the native title rights and interests claimed in this case. And contrary to the submissions made by the State, observing that the Mount Goldsworthy iron ore project was very large, requiring a large mine and extensive associated facilities, founds no tenable legal distinction between this case and the earlier decisions of this Court. 56 Rather, it is necessary to ask whether the existence of the rights granted to the joint venturers necessarily implied that the claimed native title rights and interests could no longer exist. 57 For the reasons which have been given, the mineral leases in issue in this case did not give the joint venturers a right of exclusive possession. In this respect, the mineral leases were no different from the pastoral leases considered in Wik, the mining leases considered in Ward or the Argyle mining lease also considered in Ward. The mineral leases did not give the joint venturers the right to exclude any and everyone from any and all parts of the land for any reason or no reason. The joint venturers were given more limited rights: to carry out mining and associated works anywhere on the land without interference by others. Those more limited rights were not, and are not, inconsistent with the coexistence of the claimed native title rights and interests over the land. (No party submitted that any distinction should be drawn between the several native title rights and interests that were claimed.) That the rights were not inconsistent can readily be demonstrated by considering the position which would have obtained on the day following the grant of the first of the mineral leases. On that day, the native title holders could have exercised all of the rights that now are claimed anywhere on the land without any breach of any right which had been granted to the joint venturers. That being so, there was not then, and is not now, any inconsistency between the rights granted to the joint venturers and the claimed native title rights and interests. 58 The State’s larger alternative submission (that the grant of rights to mine and build improvements anywhere on the land was wholly inconsistent with the claimed native title rights and interests) should be rejected. There remains for consideration the State’s narrower alternative submission that the claimed native title rights and interests were extinguished when the joint venturers exercised their rights to develop and construct mines, a town and associated works. It is convenient to refer to this submission as asserting extinguishment by development. Extinguishment by development? 59 The submission that there could be (and in this case was) extinguishment of native title by the exercise of rights granted by or under statute should be rejected. As has already been explained, the submission is directly contrary to the principles established and applied in both Wik and Ward and postulates a test for inconsistency which turns upon the manner of exercise of one of the allegedly competing rights rather than upon the right’s nature and content. As Brennan CJ said 48 in Wik, that would deny the law’s capacity to determine the priority of rights over or in respect of the same piece of land. No less importantly, as Brennan CJ also pointed out 49, “[t]o postulate extinguishment of native title as dependent on the exercise of the private right of the lessee (rather than on the creation or existence of the private right) would produce situations of uncertainty, perhaps of conflict” (emphasis added). 60 The decision of the Full Court of the Federal Court in De Rose (No 2) has already been mentioned. The decision proceeded from a misunderstanding of what was decided in Ward. It assumed, wrongly, that the principles applied in Ward permit the deferral of consideration of extinguishment until the manner of exercise of the allegedly inconsistent and extinguishing rights is known. So to proceed would be to return to and adopt the argument about practical inconsistency advanced but rejected in Wik. 48 49 76

(1996) 187 CLR 1 at 87. (1996) 187 CLR 1 at 87. [2.35]

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Western Australia v Brown cont. 61 De Rose (No 2) was not, and this is not, a case in which the “operation of a grant of rights [was] subjected to conditions precedent or subsequent” 50. That is, De Rose (No 2) was not, and this is not, a case in which the rights were 51 “incapable of identification in law without the performance of a further act or the taking of some further step beyond that otherwise said to constitute the grant”. To understand 52 the grant of a right as being subject to a “condition precedent” that consists in the granted right being exercised is to fall into confusion. 62 The decision in De Rose (No 2) assumed, again wrongly, that the permitted construction of an improvement on land held under a “lease” which did not give a right of exclusive possession necessarily affected the existence of native title rights and interests rather than the manner of their exercise. That is, the decision treated extinguishment as determined by the manner of exercise of the allegedly inconsistent right rather than, as it must be, by the nature and content of the two rights which are said to be inconsistent. 63 As the State rightly pointed out, the mineral leases gave the joint venturers the right to mine anywhere on the land and the right to build improvements anywhere on the land. But the mineral leases did not provide that the joint venturers must use the whole of the land for mining or associated works. Had the mineral leases provided that the whole of the land must be used in a way which would not permit any use of the land by native title holders, it may have been open to construe the mineral leases as providing for the joint venturers to exclude any and everyone from the whole of the land for any reason or no reason. But, as has been explained, that is not what these mineral leases provided. 64 In the end, then, the State’s narrower alternative argument reduces to the practical observation that two persons cannot occupy the one place. When the joint venturers built a house in the town, native title holders could not (for example) hunt and gather on the land which that house occupied. And the rights which the joint venturers had, and exercised, took and continue to take priority over the rights and interests of the native title holders for so long as the joint venturers enjoy and exercise those rights. Any competition between the exercise of the two rights must be resolved in favour of the rights granted by statute. But when the joint venturers cease to exercise their rights (or their rights come to an end) the native title rights and interests remain, unaffected. Conclusion and orders 65 For these reasons, the State’s appeal must be dismissed with costs. The joint venturers should bear their own costs. There being no cross-appeal against the determination made by the Full Court, that determination stands.

STATUTORY RECOGNITION AND PROTECTION OF NATIVE TITLE Statutory recognition and protection [2.40] Native title is now a creature of statute. The Native Title Act 1993 follows the

reasoning of the High Court in Mabo v Queensland (No 2) (1992) 175 CLR 1 but today it is the Act which confers the entitlement to native title. The Act also provides procedures to ascertain the existence of native title in any instance, the validation of Crown acts in relation to native title and the extinguishment of native title. In turn, this legislation is supplemented by 50 51 52

Ward (2002) 213 CLR 1 at 114 [150]. Ward (2002) 213 CLR 1 at 114–115 [150]. cf De Rose (No 2) (2005) 145 FCR 290 at 333 [156]. [2.40]

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legislation in the States and Territories; see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [6.340]–[6.385]. Definition of native title [2.45] The Native Title Act 1993 (Cth), s 223 defines native title as: (1) The expression native title or native title rights and interests means the communal, group or individual rights and interests of Aboriginal peoples or Torres Strait Islanders in relation to land or waters, where: (a) the rights and interests are possessed under the traditional laws acknowledged, and the traditional customs observed, by the Aboriginal peoples or Torres Strait Islanders; and (b) the Aboriginal peoples or Torres Strait Islanders, by those laws and customs, have a connection with the land or waters; and (c) the rights and interests are recognised by the common law of Australia. (2) Without limiting subsection (1), rights and interests in that subsection includes hunting, gathering, or fishing, rights and interests.

Validation of acts of the Commonwealth government [2.50] Validation of acts of the Commonwealth government is provided by ss 14 and 15 of the

Native Title Act 1993 (Cth) as follows: 14. Effect of validation of law (1) If a past act is an act attributable to the Commonwealth, the act is valid, and is taken always to have been valid. (2) To avoid any doubt, if a past act validated by subsection (1) is the making, amendment or repeal of legislation, subsection (1) does not validate: (a) the grant or issue of any lease, licence, permit or authority; or (b) the creation of any interest in relation to land or waters; under any legislation concerned, unless the grant, issue or creation is itself a past act attributable to the Commonwealth. 15. Effect of validation on native title (1) If a past act is an act attributable to the Commonwealth: (a) if it is a category A past act other than one to which subsection 229(4) (which deals with public works) applies–the act extinguishes the native title concerned; and (b) if it is a category A past act to which subsection 229(4) applies: (i) in any case–the act extinguishes the native title in relation to the land or waters on which the public work concerned (on completion of its construction or establishment) was or is situated; and (ii) if paragraph 229(4)(a) applies–the extinguishment is taken to have happened on 1 January 1994; and (c) if it is a category B past act that is wholly or partly inconsistent with the continued existence, enjoyment or exercise of the native title rights and interests concerned–the act extinguishes the native title to the extent of the inconsistency; and (d) if it is a category C past act or a category D past act–the non-extinguishment principle applies to the act. Note: This subsection does not apply to the act if section 23C or 23G applies to the act. (2) The extinguishment effected by this section does not by itself confer any right to eject or remove any Aboriginal persons who reside on or who exercise access over land or waters covered by a pastoral lease the grant, re-grant or extension of which is validated by section 14. 78

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Procedures for protecting native title [2.55] Although native title is defined by the laws and customs of the native peoples, those

interests have to be established within the Australian legal system and in particular according to the rules and procedures of Australian courts: Harrington-Smith on behalf of the Wongatha People v Western Australia (No 8) [2004] FCA 338.

[2.55]

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CHAPTER 3 Legal and Equitable Interests in Land [3.00]

FORMALITIES FOR THE TRANSFER OF LAND ........................................................ 81 [3.00]

Legal interests ........................................................................................ 81 [3.05]

[3.15] [3.20]

EQUITABLE INTERESTS – THE DEVELOPMENT OF THE TRUST ........................... 84 [3.25]

The trust ................................................................................................. 85 [3.30]

[3.40]

Manton v Parabolic Pty Ltd ...................................................... 81

Equitable interests ................................................................................. 83

DKLR Holdings Co (No 2) v Commissioner of Stamp Duties .................................................................................... 86

OVERCOMING A LACK OF FORMALITIES ............................................................. 90 [3.40] [3.55] [3.65] [3.85] [3.95]

Cooney v Burns ....................................................................... 90 Lysaght v Edwards ................................................................ 102 Walsh v Lonsdale .................................................................. 104 Theodore v Mistford Pty Ltd ................................................... 107 Ciaglia v Ciaglia .................................................................... 112

Extracts from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 9.

FORMALITIES FOR THE TRANSFER OF LAND Legal interests [3.00] From the 19th century the deed has been the primary method for the conveyance of

freehold estates in land outside the Torrens system. Australian legislation followed English legislation providing that freehold estates should lie in grant. Statutory provisions in New South Wales, Victoria, South Australia, Western Australia and Tasmania require that a deed is to be used to create or pass a legal interest in land: Conveyancing Act 1919 (NSW), ss 23B(1), 23D; Property Law Act 1958 (Vic), s 52(1); Law of Property Act 1936 (SA), s 28(1); Property Law Act 1969 (WA), s 33(1); Conveyancing and Law of Property Act 1884 (Tas), s 60(1).

Manton v Parabolic Pty Ltd [3.05] Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 New South Wales Supreme Court YOUNG J: It seems to be a feature of every legal system that there must be some particular ritual, act or instrument by which a person can notify the community that he most solemnly means what he is doing as being binding on him. In Biblical times, this solemnity was provided by the contracting parties slaughtering an animal, cutting its carcass in two, and together walking between the two halves, see Genesis Ch 15: 10-18. In Roman law there was the stipulatio. Sir Henry Maine in his Ancient Law (Everymans Library Edition at 184) says: That which the law arms with its sanctions is not a promise, but a promise accompanied with a solemn ceremonial. Not only are the formalities of equal importance with the promise itself, but they are, if anything, of greater importance; for that delicate analysis which mature [3.05]

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Manton v Parabolic Pty Ltd cont. jurisprudence applies to the conditions of mind under which a particular verbal assent is given appears, in ancient law, to be transferred to the words and gestures of accompanying performance. In early land law, the only effective method of conveying was by traditio or as it is usually put, by livery of seisin. It would seem, see Pollock and Maitland, 2nd ed at 82 and following, that originally the two parties to a conveyance attended on the land. The vendor removed his battle glove with which he had defended the land and vested the purchaser with it. It is, of course, from this ceremony that we get the words “vesting in possession” and the like. The vendor then took his knife and dug up a sod and lifted it up and handed it to the purchaser. This lifting up and handing over is the livery. The vendor then handed the purchaser the knife which was usually broken or twisted into a unique shape as a memorial of the transaction. The vendor then publicly quit the land and usually threw to the purchaser a wand or rod or festuca. No-one really knows exactly what the festuca was, but as Pollock and Maitland say (at 85) there is no doubt it had a great contractual efficacy. The parties then repaired to the Church where the knife was usually laid up on the altar. As time went on, a parchment memorial of what had happened was substituted for the knife or the festuca, though for a while, the knives were often incorporated in the wax of the seal that was placed on the deed. By 1600 the parchment which was called “the Charter” or “the Factum” or “the Deed” had entirely replaced the ancient symbols of livery. The word “factum” of course, came from the supine form of the Latin verb “to do” or “to act”, and the factum or deed was the memorial of the most solemn act that a person could do with respect to his land. In truth, whilst originally the parchment was mere evidence of the actual livery of seisin that had taken place on the site, in time it went through the stages of being conclusive evidence of that fact to the stage where the factum itself became the medium by which the conveyance was effected. Thus the substantial requirement of a deed is that it be intended by the party who does it to be the most solemn indication to the community that he really means to do what he is doing. That solemn indication is given by sealing a deed which witnesses to what has been done. Even today, these documents say: “In witness whereof I have hereunto affixed my hand and seal.” So then, a deed is the most solemn act that a person can perform with respect to a particular property or contract involved, and the form of that deed is as laid down by the law from time to time. With Old System land prior to the Conveyancing Act, the solemn act required for a conveyance had to be a feoffment with livery of seisin recorded in a deed, bargain and sale with lease and release or release pursuant to the Conveyancing and Law of Property Act 1898, or one of the other particular ways which the law allowed. The act had to include two sets of magic words, operative words (the necessity for which was removed by the Conveyancing Act 1919, s 46), and words of limitation. With Torrens System land, the solemn act required is different. It is the proper completion of the prescribed form and the registration of that dealing on the Register. With Crown Lands, yet another solemn form is prescribed, that is, the form that has been prescribed pursuant to the regulations under the Act. In each case, by completing the appropriate form and having it registered, the conveyor does the most solemn thing possible in order to divest himself of his estate, …

Notes&Questions

[3.10]

1.

82

Formalities are significant to provide evidence of the existence of a transaction and that the parties truly intended to be bound by the transaction. A formal document should ensure that all key terms are set out and particularly that the weaker party has some notice of the obligations being undertaken. Documents lessen the ability to perpetrate [3.10]

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fraud by allegations of a transaction that does not exist. Are there arguments for formalities beyond the need for evidence of the existence of the transaction? Do these arguments differ according to the subject matter involved? The common law had a very public process for the transfer of land by feoffment with livery of seisin which is described in the above case. Similarly continental legal systems have required execution of documents before a public notary. 2.

However various methods besides feoffment with livery of seisen were adopted as a means of conveying interests in land in a less public manner. These methods were the lease and release and the bargain and sale.

3.

There are exceptions to the rule requiring a deed to create or pass a legal estate in land. First, leases for a term not exceeding three years, taking effect in possession, may be created orally (see above, for example s 54(2) of the Victorian Act above). Secondly, various interests which are legal in nature may arise pursuant to possession or long use. (See [3.100]–[3.120] (Moore).)

4.

The requirement of a deed to create or pass a legal estate in land resulted in chains of title (or written records of ownership) being set up in respect of individual pieces of land. The chain of title comprised all documents affecting interests in the land, not just deeds. A further split or fragmentation in estates in land occurred between legal and equitable ownership. A document such as an express trust or a contract of sale affecting equitable title only, may form part of the chain of title. These chains of title comprising documents affecting estates in the land going back where possible to the original Crown grant, form the basis of the general law land conveyancing system. A purchaser who wishes to be satisfied that the vendor has the estate which is being purported to be sold, has to search each individual document in the chain of title to ensure that the “chain” from Crown grant to the vendor remains “unbroken”. The task was, and remains, a long and complicated one. Even where a thorough search was conducted, it was still not possible to declare with complete certainty that the vendor had a clear title. Statutory provisions to limit the searches required of a purchaser were introduced in all States except South Australia.

5.

The provisions concerning deeds were enacted before the Torrens system of land registration came into existence in Australia. A deed is not the method by which legal title is passed with respect to Torrens land: it is registration of the appropriate document which passes legal title: Real Property Act 1900 (NSW), s 41; Transfer of Land Act 1958 (Vic), s 40(1); Land Title Act 1994 (Qld), s 181; Real Property Act 1886 (SA), s 67; Transfer of Land Act 1893 (WA), s 58 Land Titles Act 1980 (Tas), s 49(1); Land Titles Act 1925 (ACT), s 57; Land Title Act (NT), s 184; Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.60]. Nevertheless, a registered document under the Torrens system is deemed to be a deed and so property principles that flow from the execution of a deed are equally applicable to a registered instrument under Torrens land.

Equitable interests [3.15] An express trust may take the form of a declaration of trust whereby the owner of the land declares himself or herself a trustee of the land for another person. Alternatively, the [3.15]

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owner of the land may transfer the title to a trustee to be held on trust for another person. The trust may relate to the whole of the interest in the land or to a lesser or more limited interest. Thus A, the fee simple owner, may declare himself a trustee for B of the whole interest or alternatively A may declare that she holds the estate on trust for B as to a life estate in B. A trust may be made over a legal or equitable interest in land. Although no specific or formal words are required, the language used must demonstrate an intention to create a trust. As Wilson J stated in Bloch v Bloch (1981) 37 ALR 55, 59 “[w]hilst it is true that no particular form is necessary for the creation of an express trust, the intention of the settlor to create a trust must be explicit. In every case it is a question of fact for the court to determine whether an intention to create a trust is sufficiently evinced.” There are statutory provisions in all jurisdictions setting out the formal requirements for the creation of trusts (and thus equitable interests) in relation to land and also for the disposal of equitable interests. The basic requirement is that of writing: Conveyancing Act 1919 (NSW), ss 23C, 23D; 23E; Property Law Act 1958 (Vic), ss 53 – 55; Property Law Act 1974 (Qld), ss 11 – 12; Law of Property Act 1936 (SA), ss 29 – 31; Property Law Act 1969 (WA), ss 34 – 36; Conveyancing and Law of Property Act 1884 (Tas), s 60(2) – (5); Civil Law (Property) Act 2006 (ACT), ss 201 – 203; Law of Property Act (NT), ss 9 – 11. The statutes commonly have three key paragraphs as in the following example: (1) With respect to the creation of interest in land by parol– (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;

(2)

(b)

a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;

(c)

a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will

This section shall not affect the creation or operation of resulting, implied or constructive trusts. Extracts from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 2.

EQUITABLE INTERESTS – THE DEVELOPMENT OF THE TRUST [3.20] The development of the equitable interest in land law began primarily as a result of the

many fetters the common law placed on the holders of freehold estates. The holder of a freehold estate was unable, for example, to dispose of an estate by will (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.290] for further detail). In order to avoid the fetters created by the common law, and in particular to gain free alienability of the interest in land, the freeholder began to employ the use. Typically, the freeholder conveyed the land to a trusted person who held the land not for his or her own use or benefit, but for the use of the grantor during the grantor’s lifetime and then for other members of the grantor’s family after the grantor’s death. The trusted person taking the legal estate was called the “feoffee to uses” and the person entitled to the use of the land was called the “cestui que use”. 84

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The problem was that the common law courts refused to view the cestui que use as having any interest in the land. From the beginning of the 15th century, the Chancellor on behalf of the King and in the exercise of the King’s residual judicial power, heard special petitions from persons with legitimate complaints who could find no appropriate cause of action in the defined forms of writ available in the common law courts. The Chancellor and the Chancery Council (later the Court of Chancery) gradually developed a set of rules in dealing with these petitions. These became the rules of equity. It was the Court of Chancery which began to enforce the use and provide protection for the cestui que use. (See generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.315].) In general, equity followed the common law in the types of interests in land which could be created. However, there was the capacity for equity to permit the creation of interests unattainable at common law, and equity did, and continues to, use this capacity. For example, equity recognises the restrictive covenant, an interest in land which can exist in equity only. (See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), Ch 18, Pts II and III.) One of the aims of the freeholder in employing the use was to avoid the payment of feudal dues. The King, being at the top of the feudal pyramid, lost a great deal from the reduction in payment of dues and so instigated the passing of the Statute of Uses in 1535. The aim of the statute was to abolish the use and to vest the legal estate in the cestui que use so that in a conveyance “to A and his heirs to the use of B and his heirs”, B took the legal estate and A took nothing. Upon the death of B, the legal estate holder, feudal dues would again be payable. Over the next 100 years, the equitable interest re-emerged. Eventually a grant “to A and his heirs to the use of B and his heirs to the use of C and his heirs” was recognised by the Court of Chancery as creating a legal interest in B (the Statute of Uses having executed the use) and an equitable interest in C. C’s equitable interest was equivalent to the equitable interest created by one single use before the Statute of Uses. The terminology altered and the words “to A and his heirs to the use of B and his heirs on trust for C and his heirs” became effective to create a legal estate in B and an equitable estate in C. Eventually, A’s name was removed and a grant “unto and to the use of B and his heirs on trust for C and his heirs” was equally effective to confer legal title on B and equitable title on C. B, the feoffee to uses, became the trustee and C, the cestui que use became the cestui que trust or “the beneficiary”. The Statute of Uses has been repealed in New South Wales (Imperial Acts Application Act 1969, s 8), Victoria (Imperial Acts Application Act 1980, s 5), Queensland (Property Law Act 1974, s 7) and the Northern Territory (Law of Property Act, s 6). In these jurisdictions the words “to A in fee simple on trust for B in fee simple” are effective to create a trust and legal and equitable title in A and B respectively (see also Property Law Act 1958 (Vic), s 19A). See further Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [10.145]. The trust [3.25] In the course of his judgment in DKLR Holdings Co (No 2) v Commissioner of Stamp

Duties [1980] 1 NSWLR 510, Hope JA discussed the origins and nature of the trust. The analysis of Hope JA is unaffected by the decision of the High Court in the case (see (1982) 149 CLR 431.) His comments have been referred to and approved a number of times, most authoritatively by Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at 606 and 612. See also, [3.25]

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for example, Quarmby v Keating [2008] TASSC 71 at [17], Legal Services Commissioner v Dempsey [2008] 2 Qd R 272 at [38] and Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299 at 309-310. The judgment of Hope JA is extracted here for its discussion on the nature of the trust. The case concerned complex issues of stamp duty and references to the facts and decision have been omitted where possible.

DKLR Holdings Co (No 2) v Commissioner of Stamp Duties [3.30] DKLR Holdings Co (No 2) v Commissioner of Stamp Duties [1980] 1 NSWLR 510 New South Wales Court of Appeal HOPE JA: … The starting point of a consideration of the questions which this part of the case raises seems to me to be the principles concerning the nature of legal and equitable estates. An unconditional legal estate in fee simple is the largest estate which a person may hold in land. Subject to qualifications arising under the general law, and to the manifold restrictions now imposed by or under statutes, the person seised of land for an estate in fee simple has full and direct rights to possession and use of the land and its profits, as well as full rights of disposition. An equitable estate in land, even where its owner is absolutely entitled and the trustee is a bare trustee, is significantly different. What is, perhaps, its essential character is to be traced to the origin of equitable estates in the enforcement by Chancellors of “uses” or “trusts” (a term originally synonymous with “uses”) in the confidence that he would perform which the owner had enfeoffed another person with land. When the Chancellor began to enforce the uses so confided, he intervened to enforce the duty which he considered the conscience of the feoffee bound him to satisfy; he did not intervene to enforce an obligation otherwise recognised at common law. “… at common law the use was nothing at all-not even a chose in action.”: Holdsworth, History of English Law, 3rd ed, Vol IV, 2nd ed, p 440. Moreover, as Maitland pointed out in his Lecture on Equity, 2nd ed, p. 31: “… the remedy is given not to the trustor but to the destinatory. In the earliest instances the trustor and the cestui que trust (or use) are the same person-still it is as destinatory, not as ‘author of the trust’ that he has the remedy. This marks it off from contract … This principle runs through our law of equity to the present day – the destinatory, beneficiary, cestui que trust has the remedy.” In due course, the obligation to carry the use into effect was enforced by the Chancellors against most, although not all, persons acquiring the legal ownership of the land: Holdsworth, op cit, pp 432, 433. When the modern trust developed, after the enactment of the Statute of Uses, it was similarly enforced and, indeed, the classes of persons against whom it could not be enforced became more limited. After some hesitation, a trust interest in respect of land came to be regarded, not merely as some kind of equitable chose in action, conferring rights enforceable against the trustee, but as an interest in property. The fact that equitable estates were not enforceable against everyone acquiring a legal title to the property did not prevent them from being so regarded; a legal owner of land could lose his estate in, or become unable to enforce his rights in respect of, land in a number of ways. Although there has long been a controversy whether trust interests are true rights in rem: cf Pettit, Equity and the Law of Trusts, 3rd ed, pp 48, 49, 50, there can be no doubt that the interest of the cestui que trust is an interest in property. As Rolle J said in R v Holland (1647) Style 20, 21; 82 ER 498, 499: “… a trust is not a thing in action, but may be an inheritance or a chatell (sic) as the case falls out.” These essential features of interests arising under private trusts are thus described in Jacobs’ Law of Trusts, 3rd ed, p 109: “… the trustee must be under a personal obligation to deal with the trust property for the benefit of beneficiaries, and this obligation must be annexed to the trust property. This is the equitable obligation proper. It arises from the very nature of a trust and from the origin of the trust in the separation of the common law and equitable jurisdictions in English legal history. The obligation attaches to the trustees in personam, but it is also annexed to the property so that the equitable interest resembles a right in rem. It is not sufficient that the trustee should be under a 86

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DKLR Holdings Co (No 2) v Commissioner of Stamp Duties cont. personal obligation to hold the property for the benefit of another, unless that obligation is annexed to the property. Conversely, it is not sufficient that an obligation should be annexed to property unless the trustee is under the personal obligation.” Several consequences follow. Firstly, an absolute owner in fee simple does not hold two estates, a legal estate and an equitable estate. He holds only the legal estate, with all the rights and incidents that attach to that estate. If he were to execute a declaration that he held the land in trust for himself absolutely, the declaration would be of no effect; it would give him no separate equitable rights; he would remain the legal owner with all the rights that a legal owner has. At least where co-extensive and commensurate legal and equitable interests are concerned, “… a man cannot be a trustee for himself.”: Goodright v Wells (1781) 2 Dougl 771, 778; 99 ER 491, 495 per Lord Mansfield. “You cannot have a legal estate in trust for yourself.”: Harmood v Oglander (1803) 8 Ves Jun 106, 127; 32 ER 293, 301 per Lord Eldon. Secondly, although the equitable estate is an interest in property, its essential character still bears the stamp which its origin placed upon it. Where the trustee is the owner of the legal fee simple, the right of the beneficiary, although annexed to the land, is a right to compel the legal owner to hold and use the rights which the law gives him in accordance with the obligations which equity has imposed upon him. The trustee, in such a case, has at law all the rights of the absolute owner in fee simple, but he is not free to use those rights for his own benefit in the way he could if no trust existed. Equitable obligations require him to use them in some particular way for the benefit of other persons. In illustrating his famous aphorism that equity had come not to destroy the law, but to fulfil it, Maitland, op cit, at 17, said of the relationship between legal and equitable estates in land: “Equity did not say that the cestui que trust was the owner of the land, it said that the trustee was the owner of the land, but added that he was bound to hold the land for the benefit of the cestui que trust. There was no conflict here.” This relationship can, perhaps, be usefully illustrated by reference to the possession, and the right to possession, of land which is held by a trustee subject to a private trust. As legal owner, and subject to any disposition of the right, such as would occur upon the granting of a lease, the trustee has at law the right to possession of the land and, unless somebody else is in possession, under him or adversely to him, he also has the legal possession of the land. He may maintain trespass against anyone who infringes that possession, and ejectment against any person who, without his consent, takes possession. At law a cestui que trust has no right to possession. He cannot sue the trustee at common law in ejectment: Roe d Reade v Reade (1799) 8 TR 118, 121, 122, 123; 101 ER 1298, 1300, 1301. If the trustee holds as a bare trustee for a beneficiary absolutely entitled, that beneficiary is, in equity, entitled to be put into possession if he so wishes, but he cannot sue the trustee in ejectment. His right can be enforced only by an order made in the exercise of the equitable jurisdiction of the court. If necessary, the court will, upon an appropriate indemnity being given, compel the trustee to allow the beneficiary to use his name to bring ejectment. When placed in possession by the trustee, at law the beneficiary is merely tenant at will of the trustee, the tenancy being determinable at law at any time on demand of possession by the trustee: Garrard v Tuck (1849) 8 CB 231, 250; 137 ER 498, 506; Melling v Leak (1855) 16 CB 652, 668, 669; 139 ER 915, 921, 922. As a corollary, the trustee might at law determine the beneficiary’s tenancy and recover the land from him in an action for ejectment, and the beneficiary would have no legal defence. He would, of course, have an equitable defence which he has long been able, by statute, to plead in the action at law. This position can be analysed in a similar way in respect of all the rights given to a trustee who holds property at law in trust absolutely for a beneficiary. In some cases the right vested in the trustee may be such that he cannot be compelled to allow the beneficiary to exercise it except (unless, because of the nature of the right, it is not permissible to do so) in his, the trustee’s, name. If this analysis be correct, although the beneficiary has an interest in the trust property, the content of that interest is essentially a right to compel the trustee to hold and use his legal rights in accordance with the terms of the trust. [3.30]

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DKLR Holdings Co (No 2) v Commissioner of Stamp Duties cont. Where the trustee holds absolutely for the beneficiary, the beneficiary has a right in equity to be put, so far as practicable and generally subject to appropriate indemnities being given, into a position where directly, or indirectly, or for all practical purposes, he enjoys or exercises the rights which the law has vested in the trustee …

[3.35]

Notes

1. The trust is an obligation imposed on a person who has the legal title to property. The obligation binds such a person (the trustee) to use or deal with the property for the benefit of another person (the beneficiary). As the above historical introduction and the extract from DKLR Holdings Co (No 2) v Commissioner of Stamp Duties [1980] 1 NSWLR 510 demonstrate, the obligation of the trustee is enforceable in equity. Thus if X the owner of property conveys the property to A, on trust for B, the obligation of A to hold the property for the benefit of B is recognised and enforced in equity. As Gray and Gray, Elements of Land Law (5th ed, OUP, London, 2009), p 76 commented, “[t]he core of every trust is the idea that the formal or titular interest in some asset (eg the legal estate in fee simple) is vested, in a nominal capacity in one or more persons as trustee. The strict duty of such persons is to deflect all beneficial enjoyment of the trust asset to [those who hold the equitable interests under the trust].” 2. In the absence of an obligation of the kind described above being imposed on the holder of a legal title, how is the title held? See Re Transphere Pty Ltd (1986) 5 NSWLR 309 at 311 and Allen v Snyder [1977] 2 NSWLR 685 at 701. In Re Transphere, McLelland J stated: It is important to recognise the true nature and incidents of legal and equitable estates in property subject to a trust. They are clearly and succinctly described in the judgment of Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510, 518-520. (His Honour’s analysis is not affected by the decision of the High Court in that case – see 149 CLR 431.) I would not wish to detract from the value of Hope JA’s exposition by trying to summarise it. But what is significant for present purposes is the imprecision of the notion that absolute ownership of property can properly be divided up into a legal estate and an equitable estate. An absolute owner holds only the legal estate, with all the rights and incidents that attach to that estate. Where a legal owner holds property on trust for another, he has at law all the rights of an absolute owner but the beneficiary has the right to compel him to hold and use those rights which the law gives him in accordance with the obligations which equity has imposed on him by virtue of the existence of the trust. Although this right of the beneficiary constitutes an equitable estate in the property, it is engrafted onto, not carved out of, the legal estate. Hope JA (at 519) illustrates the point by the following quotation from Maitland – Lectures on Equity 2nd ed (1949) at 17: Equity did not say that the cestui que trust was the owner of the land, it said that the trustee was the owner of the land, but added that he was bound to hold the land for the benefit of the cestui que trust. There was no conflict here.

See also Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299 where the comments of Hope JA on the nature of the trust were quoted with approval. 88

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3. Historically and in the modern day context, the trust has been used to serve a number of purposes and to facilitate a variety of transactions. (See Note 6.) In whatever context it arises, however, the setting up of a trust reflects a need to vest beneficial use and enjoyment of the property in one person and to vest administration and varying degrees of control in another person. In some trusts, the trustee may have little or no effective control and no administrative tasks to perform. In such a trust, the trustee holds no more than the “bare” legal title. In other trusts, the trustee may have wide powers and detailed administrative duties to perform with respect to the trust property (see Gray and Gray, Elements of Land Law (5th ed, OUP, London, 2009), pp 77-78). 4. Regardless of the type of trust, the trustee has a fiduciary duty to manage the trust property in as profitable a manner as possible and the trustee must not profit by reason of his or her position as a trustee. (See Keech v Sandford (1726) 2 Eq Cas Ab 741; 22 ER 629; Boardman v Phipps [1967] 2 AC 46 and Attorney-General (Hong Kong) v Reid [1994] 1 AC 324 in which the nature of the duty is discussed. See also Barnes v Addy (1874) LR 9 Ch App 244; Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; Royal Brunei Airlines v Tan [1995] 3 WLR 64 and Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.) 5. The discussion above suggests that a trust arises only where it has been expressly set up. In fact, over the years equity has implied a trust relationship into a number of fact situations. Thus the major dichotomy in the types of trust which can exist is between express and non-express trusts. Non-express trusts fall into two main categories – resulting and constructive trusts. The categories of resulting and constructive trusts are dealt with in detail in Chapter 10 (Moore). Glass JA in Allen v Snyder [1977] 2 NSWLR 685, 689 clearly summarised the categories of trust. Although this categorisation can be stated simply, the courts have often struggled both to use the terms in a consistent fashion and to demonstrate clear dividing lines: Any claim to a beneficial interest in real property by a person in whom the legal title is not vested must be based upon a trust. Trusts may be express, implied or constructive. An express trust of land is not enforceable unless it is evidenced in writing and signed by the party able to declare the trust: Conveyancing Act 1919, s 23C. By way of exception, an express trust may be proved by oral evidence where otherwise the statute would be made “an instrument of fraud”: Rochefoucauld v Boustead [1897] 1 Ch 196, 206. An implied trust (also called a resulting trust) arises where the legal owner has provided none or only part of the purchase price. A resulting trust is presumed in favour of the party providing the money. His beneficial interest is proportionate to his contribution. If, however, the legal owner is a wife, and the purchase price has been provided by her husband, there is a countervailing presumption of advancement viz that she takes the beneficial interest as a gift. Both presumptions, being rebuttable, will yield to evidence as to the actual intention of the parties. Constructive trusts arise where it would be a fraud for the legal owner to assert a beneficial interest. Unlike express and implied trusts, which reflect actual intentions, they are imposed, without regard to the intentions of the parties, in order to satisfy the demands of justice and good conscience: Snell, Principles of Equity, 27th ed, s 185; Jacobs, Law of Trusts in Australia, 4th ed, p 232. Constructive and implied (resulting) trusts may be enforced without evidence in writing: Conveyancing Act 1919, s 23C(2).

6. Historically, the subject matter of the trust was land. The trust is now used to achieve a variety of objectives and the subject matter of the trust may often not involve land. Some of the modern day uses of the trust are discussed in Moore, Grattan and Griggs, [3.35]

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Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.370]. For example, the funds held under pension and superannuation schemes and by unincorporated associations are often held in a trust. The discretionary trust has been used to minimise income tax and the unit trust has been used to enable smaller investors to participate in broadly based investment opportunities. Extracts from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 9.

OVERCOMING A LACK OF FORMALITIES Cooney v Burns [3.40] Cooney v Burns (1922) 30 CLR 216; 28 ALR 181 High Court of Australia (footnotes omitted) KNOX J: This was an action for specific performance of an agreement for the sale by the defendant to the plaintiff of “the ingoing, the piano and furniture as inspected by the plaintiff and the existing lease” of an hotel. The defendant was the lessee and licensee of the hotel in question. The contract was in writing signed by the plaintiff and by one J. F. Kelly therein described as agent for the defendant. The defendant set up by way of defence that Kelly was not authorized to make the contract on behalf of the defendant, and that the provisions of secs. 228 and 229 of the Instruments Act 1915 had not been complied with. The action was tried by Mann J. with a jury; and the questions put to them and their answers are as follows: – “(1) Did John Francis Kelly have authority to make on behalf of the defendant the contract mentioned in the statement of claim? – Yes. (2) Did the plaintiff go into occupation of the hotel and remain in occupation until 14th March in performance of the contract? – No. (3) Was the list” of the hotel furniture “(Ex. 1) taken in performance of the contract? – Yes. (4) Was the plaintiff instructed by the defendant as to the conduct of the hotel business? – Yes. (5) (a) Was the lease of the hotel handed to the plaintiff’s solicitors under instructions from the defendant for the purpose of having prepared an assignment of the lease and an application for a transfer of the licence? – Yes. (b) Did the plaintiff’s solicitors prepare an assignment of the lease and the notices of application for transfer of the licence? – Yes.” On these findings Mann J. gave judgment for the plaintiff for specific performance of the contract, holding (1) that acts of part performance which would be sufficient to enable a plaintiff to succeed on a parol contract would also be sufficient to enable him to succeed on a contract signed by an agent not authorized by writing signed by the defendant, and (2) that the findings of the jury established acts of part performance sufficient to take the case out of the operation of the statute. On the first point I need say no more than that I agree with the decision of the learned Judge for the reasons given by him. The second point gives rise to more difficulty. The rules to be applied in determining whether a given act or series of acts amounts to such part performance as obviates the necessity for a memorandum in writing are reasonably clear; the difficulty lies in applying these rules to a particular state of facts. A careful consideration of a great number of authorities, and especially of the speech of Lord Selborne L.C. in Maddison v. Alderson, leads me to the conclusion that these rules may be summarized thus: – (1) The acts relied on must be unequivocally and in their own nature referable to some such agreement as that alleged (Maddison v. Alderson). I think the meaning of this statement is most clearly expressed by Wigram V.C. in Dale v. Hamilton, where he says: “It is, in general, 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”. By the words “some such agreement as that alleged” I understand some agreement for the disposition of some estate or interest in the land in question. (2) The acts proved must be such as to render it a fraud in the defendant to 90

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Cooney v Burns cont. take advantage of the contract not being in writing (Fry on Specific Performance, 6th ed., sec. 580). It is, I think, involved in propositions 1 and 2 that the circumstances in which the acts relied on were done must be proved. (3) When acts fulfilling the conditions expressed above have been proved, evidence becomes admissible to prove a parol agreement (Frame v. Dawson). “The previous question as to the sufficiency of the part performance must be settled before the construction and operation of the unwritten contract can be legitimately approached” (Maddison v. Alderson, per Lord O’Hagan). (4) In order that the plaintiff may succeed he must establish by clear evidence the agreement alleged by him, and it must appear that the acts relied on as acts of part performance were done for the purpose and in the course of performing that agreement and with no other view or design than to perform it. (5) Another rule, but one not relevant to the question which arises in this case, is that the agreement sued on must be of such a nature that the Court would have jurisdiction to enforce it specifically if it had been in writing. From the application of these rules to the varied circumstances of a great number of cases certain qualifications of a negative character may be deduced. It is settled that payment of part of the purchase-money is not of itself and apart from other circumstances – e.g., delivery of possession – a sufficient act of part performance to take a case out of the statute (Fry on Specific Performance, sec. 613). The best explanation of this doctrine is said by Lord Selborne in Maddison v. Alderson to be that the payment of money is an equivocal act and not in itself, until the connection is established by parol testimony, indicative of a contract concerning land. And it is said that acts subsequent to the contract and even in pursuance of it, if not strictly in performance of the contract as between the parties to it but preparatory to such performance, cannot be taken as part performances (Fry on Specific Performance, sec. 625). The cases illustrating this statement are difficult to reconcile either with one another or with the general rules propounded by Lord Selborne, but most, if not all, of them may be explained by the suggestion that “acts of this sort may be, and for the most part are, the mere acts of the party doing them: the other party is not necessarily cognizant of them, and consequently he is not so bound by them as to render it fraudulent in him subsequently to refuse to carry the contract into effect” (Fry on Specific Performance, sec. 625). Turning to the relevant findings of the jury in this case, they may be stated thus: “The lease of the hotel was handed to the plaintiff’s solicitors under instructions from the defendant for the purpose of having prepared an assignment of the lease and an application for a transfer of the licence and the plaintiff’s solicitors prepared an assignment of the lease and the notices of application for transfer of licence.” The lease remained in possession of plaintiff’s solicitors, and was produced by them at the trial. I do not think the answers of the jury to questions 3 and 4 assist the plaintiff. The question then is whether the handing over of the lease, in the circumstances found by the jury, and the preparation of the assignment and notices resulting in the plaintiff expending money or incurring liability are such acts as would warrant the admission of evidence to prove that the agent was authorized verbally to make the agreement alleged. In my opinion the act of handing to plaintiff’s solicitors the original lease – an act done by the direction of the defendant, the lessee – is unequivocally and in its nature referable to some agreement between the plaintiff and the defendant relating to the land demised by the lease. The finding of the jury established that the lease was handed to the plaintiff’s solicitors on the instructions of the defendant. Leaving out of consideration the finding as to the purpose with which this act was done as possibly depending on evidence of conversations, the fact of the defendant causing his title-deed to be handed to solicitors acting for another person – a stranger – seems to me to be consistent only with the existence of some agreement between the defendant and that other person relating to the leasehold premises. It is, of course, possible that in some cases a title-deed may come into the possession of some person other than the owner in circumstances which would not necessarily imply an agreement for the disposition of any interest in the land by the owner to that person. For instance, [3.40]

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Cooney v Burns cont. the circumstances established by the evidence might show that the deed had been stolen or improperly obtained, or that it was handed to the owner’s solicitor or banker for safe custody, or that it was lent by the owner to some person to serve as a precedent. So in the case of possession of land it might appear that possession was obtained wrongfully or that the person in possession was a gratuitous licensee. But the finding of the jury negatives the existence of any such circumstances in this case. The inevitable inference to be drawn from the possession by one person of the title-deeds of another, in the absence of explanatory circumstances, appears to me to be that some agreement relating to the land covered by the deeds has been made between those persons. This may be illustrated by reference to cases of equitable mortgage. It is well settled that a verbal agreement to give a mortgage is valid, notwithstanding the Statute of Frauds, if the title-deeds are in the possession of the proposed mortgagee. According to Lord Selborne (Maddison v. Alderson) the law of equitable mortgage by deposit of title-deeds depends on the same principles as the doctrine of part performance regarded as an answer to the defence of the Statute of Frauds. The decisions in cases relating to equitable mortgage establish: (1) that a valid equitable mortgage cannot be created by a mere parol agreement to give a legal mortgage if the deeds remain in the possession of the proposed mortgagor; (2) that a valid equitable mortgage can be created by a mere parol agreement to give a legal mortgage if deeds have been handed over to the proposed mortgagee where his possession of the deeds cannot be otherwise explained (Russel v. Russel; James v. Rice). The importance of the possession of the title deeds in cases of agreement to give a security over land is therefore apparent. I think it follows from the decisions that, if the agreement alleged by the plaintiff in the present case had been an agreement to assign the lease by way of mortgage, proof of the fact that the original lease had been handed over by the defendant, or by his instructions, to the plaintiff’s solicitors for the purpose of preparing a legal mortgage, would have rendered admissible evidence of a verbal agreement to assign the lease by way of mortgage, if the circumstances were such as to render it a fraud in the defendant to take advantage of the fact that the contract was not in writing – e.g., if money had been advanced or the creditor had forborne to press for payment. Does the fact that the agreement alleged is an agreement to assign the lease absolutely and not merely by way of mortgage make any difference? I think not, provided the other circumstances exist. In either case the assignor is bound by the agreement to hand over the original lease to the assignee on the completion of the contract, and the obligation to do so is no less binding than the obligation in the case of an absolute assignment to deliver possession of the premises. The fact that in either case the delivery of the lease takes place before completion does not make that act any the less a performance of a duty imposed on the assignor by the agreement. If possession of the land be given to a purchaser before completion, it is, as I understand, conceded that the giving of possession is an act of part performance sufficient to take the case out of the statute. I see no difference in principle in this respect between giving possession of the land and handing over the title-deeds. Each is an act which the vendor is bound by the contract to perform upon, and not until, completion of the contract. Applying the language of Kay J. in McManus v. Cooke, I am of opinion that this act – the handing over to the plaintiff’s solicitors of the title-deeds by the defendant – could not have been done by the defendant in the circumstances of this case without some agreement with the plaintiff, and according to Morphett v. Jones the Court is bound to inquire what that agreement was. The next question is whether on the facts found by the jury it would be a fraud in the defendant to take advantage of the contract not being in writing. The jury found (1) that the lease was handed to the plaintiff’s solicitors under instructions from the defendant for the purpose of having prepared an assignment of the lease and an application for a transfer of the licence. It was the duty of the plaintiff as purchaser to prepare these documents, and their preparation must necessarily involve the plaintiff in expense, and the jury has found that the documents were in fact prepared. I agree with Mann J. in 92

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Cooney v Burns cont. thinking that these findings show an expenditure of money by the plaintiff in the carrying out of the agreement, and that they show that the expenditure was made (or the liability incurred) with the knowledge and consent, and indeed with the assistance, of the defendant. In my opinion the fact that this expenditure was made or liability incurred with the knowledge and consent and assistance of the defendant is sufficient to render it a fraud in him to take advantage of the contract not being in writing. I do not think the fact that the expenditure or liability was small in amount affects the position. The plain fact is that the defendant by his conduct induced the plaintiff to incur a liability on the footing that the contract for sale of the property to him was a valid contract, and I see no reason to doubt that the conduct of the defendant in attempting subsequently to dispute the validity of the contract was dishonest, and therefore fraudulent. The requirements of the 1st and 2nd rules stated above having been complied with, evidence of the verbal authority given to Kelly became admissible. On the evidence the jury found that Kelly had authority to make the contract sued on, and as that contract was in writing no difficulty existed as to the proof of its terms. I think it follows necessarily from the findings of the jury that the acts relied on as acts of part performance were done for the purpose and in the course of performing the agreement alleged and with no other view or design than to perform it. It is plain that by force of the contract it became the duty of the plaintiff to prepare and tender for execution by the defendant an assignment of the lease (Poole v. Hill), and failure to do so would amount to a breach of contract on his part. But it was argued that the preparation of a conveyance is not in itself such an act of part performance as will suffice to take a case out of the statute. The answer to this argument appears to me to be that it is not on that act alone the plaintiff relies, but on that act coupled with the conduct of the defendant in handing over the lease – for the very purpose of having the assignment prepared. The preparation of the assignment of itself proves nothing more than that the plaintiff acted in the manner in which the defendant invited him to act for the purpose of performing the contract. The important act is the delivery of the original lease. It is this act which furnishes the evidentia rei referred to by Lord Selborne in Maddison v. Alderson as requisite to connect the alleged part performance with the alleged agreement. And in the same speech Lord Selborne said: – “It” (the statute) “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 gestæ subsequent to and arising out of the contract. So long as the connection of those res gestæ with the alleged contract does not depend upon mere parol testimony, but is reasonably to be inferred from the res gestæ 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.” The res gestæ in this case are the delivery of the lease to the plaintiff’s solicitors and the preparation by them of the assignment. The parol evidence as to the purpose for which the lease was handed over is important mainly, if not solely, to negative any suggestion or inference that the lease might have been handed over with some other view or design than to perform the agreement. On the whole, I am of opinion that the facts found by the jury bring this case within the rules governing the application of the doctrine of part performance, and that there is no decision which makes it incumbent on me to hold that the plaintiff is not entitled to succeed. The decision in Edge v. Worthington appears to me to support the conclusion at which I have arrived. The plaintiff in that case alleged a verbal agreement to execute a legal mortgage and a subsequent delivery of the deeds to the solicitor for the purpose of enabling him to prepare a mortgage. This delivery was held a sufficient act of part performance to avoid the operation of the statute, and a declaration was made that the verbal agreement amounted to a valid agreement to execute a mortgage. It is true that the deposit of the deeds gave the creditor a lien on them, but it is clear that, apart from the verbal agreement to give a mortgage, the creditor would not have been entitled to obtain a decree for foreclosure—and that was [3.40]

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Cooney v Burns cont. the decree that was made. The fact that the deposit constituted a lien was not put forward by the Master of the Rolls as supporting the decree for foreclosure, nor could it do so. ISAACS J: Two questions of considerable importance have arisen in this appeal. The first is whether the equitable jurisdiction to order specific performance on the ground of part performance exists where sec. 229 of the Instruments Act 1915 applies, and the other is what constitutes the necessary part performance to attract that jurisdiction. The objection raised to the jurisdiction in this case is based on the argument that sec. 229 is a modern statute and must be left to its full operation, unqualified by any equitable jurisdiction on the ground of fraud. Passing by the fact that the whole Instruments Act is modern, one sufficient answer is that in reality sec. 229 is only an addendum to, or extension of, sec. 228, and creates an additional case of the same nature as one finds in the earlier section. Its opening words, “Notwithstanding anything in this Act contained”, are connective, and in a sense are also limiting. To accord with the objection the opening words should read “Notwithstanding anything in this Act contained or any doctrine of equity”. The Legislature must be taken to have been fully aware of the equitable jurisdiction then exercised as stated generally by Lord Westbury in McCormick v. Grogan, acted on by the House of Lords in French v. French (see per Lord Davey), a jurisdiction constantly applied to contracts for the sale of land, notwithstanding the principals or their agents had not signed the contract itself or a memorandum of it. The nature of the jurisdiction I have, in collaboration with my learned brother Rich, stated in McBride v. Sandland; and to that statement I refer. No reason can be assigned for attributing to the language of the section the intention of Parliament to exclude the jurisdiction where the principals had not written their authority to their agents to make the contract. The fraud is as great in the one case as in the other. I therefore reject the contention. With respect to the second question, I am equally unable to accept the invitation on the part of the respondent to give a wider scope to the jurisdiction than we already find established in the cases. The suggestion was that the modern tendency was to broaden the Court’s repression of fraud. That may be so in some classes of cases where the Court is not confronted with specific legislation. But here there has been distinct legislation, and, while it has left unimpaired the principle as it then stood, it would, in my opinion, be wholly improper, in face of the declared policy of Parliament, for any Court to enlarge the principle, because that would be really narrowing the intended operation of the enactment. Whatever circumstances, however varied or novel, fairly fall within the ambit of the equitable doctrine as we find it already established are, of course, subject to its influence; but beyond that we cannot legitimately go. The principle enunciated by Lord Westbury in the passage above referred to must be qualified by the consideration stated by Lord Selborne L.C. in Maddison v. Alderson. Indeed, as to this, Lord Cranworth L.C. in Nunn v. Fabian said: “I should yield to no Judge of a Court of equity in my desire to refrain from extending the cases in which the Court gets over the Statute of Frauds; but there being an established rule on this subject, a Judge ought not to depart from it.” This followed the view of Lord Redesdale in Lindsay v. Lynch. Lord Selborne in Maddison v. Alderson, eighty years after Lord Redesdale, also inculcates the propriety of observing limits. The concrete problem for us is whether in this case certain “acts” constitute, either severally or in conjunction, sufficient part performance of the contract so as to support a decree for specific performance. Those acts are: (1) the taking of the inventory; (2) the appellant’s handing his lease to the respondent’s solicitor; and (3) the respondent’s incurring expense relative to the preparation of the assignment and of the application for transfer of the licence. For the respondent it was argued that the performance of any obligation arising out of the contract, as, for instance, showing a good title, is “part performance” in the required sense of the term, if proved to be done with the assent of the other party and on the faith of the bargain being binding. It 94

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Cooney v Burns cont. was even argued that any act whatever, if prejudicial to the plaintiff, would equally suffice, if shown to be done with defendant’s assent on the faith of the agreement being obligatory. It is not, in my opinion, necessary to say more as to these broad contentions than that they confuse ratification with part performance and have no countenance from any of the cases, and, further, are opposed to the reasons and citations of the learned Lords in Maddison v. Alderson, as, for instance, per Lord Selborne, and are directly contrary to the statement of Bowen L.J. in Ex parte Broderick; In re Beetham. There may, of course, be cases where a party estops himself from asserting some fact, but that depends on ordinary rules of estoppel, and, if properly pleaded and proved, would be effectual. But that is quite outside the present subject, and no such question can arise here, for it appears by unchallenged evidence that the respondent expressly admitted at the trial the fact that no written instructions were given by the appellant to his agent. I do not think the problem a very difficult one, if we have regard to the landmarks of undoubted authority that we find erected along the road that has run for two centuries in this region of the law. I do not mean to say there have not been some deviations from the path. Various Judges, as, for instance, Lord Redesdale in Clinan v. Cooke, have recognized that there have been deviations, but no case brought under the notice of the Court has gone so far as we are invited to go in this case. No argument was addressed to us on the effect of conjunction, to show its significance in this case. The combination of several acts of true part performance might create the importance of the part performance relied on, which equity requires in such a case. But I am quite unable to see how the mere multiplicity of distinct acts, none of which separately answers the necessary description, can change the essential nature of any of them. And it is the essential nature of the acts referred to which we have to determine, no question being raised as to the sufficiency of their importance. We are then brought face to face with the broad question: What is meant by “part performance” of a contract for the sale and purchase of land? What are the limits of the equitable doctrine; or, in other words, what test should be applied to any given case in order to determine whether a suggested “act” is one of “part performance”? In McBride v. Sandland an attempt was made to formulate some of the elements that are required to raise the necessary equity. It was not necessary there to consider the one important point we have to deal with here, but some of the propositions there stated are essential steps. Two of them, Nos. 3 and 7, were examined, though questioned, and as to these, and particularly as to No. 7, I may at once say my opinion then expressed has been confirmed. But in that case it was not necessary, as it is here, to go on and ascertain what class of acts are understood in equity as “part performance” because possession of and improvements in the land were admitted. Here that question presents itself sharply. There is nothing occult about the term “part performance”. It means on its face partial, but not complete, performance of the contract between the vendor to sell and the purchaser to purchase the land. What is the “sale” and the “purchase” of the land? It is not the contract for the sale and purchase—though that is colloquially referred to as if it were. From the standpoint of law the sale and purchase of land does not occur until the property is transferred. “Sale” connotes transfer of ownership. The contract for sale does not transfer the ownership. Sometimes it is assumed that it does so in equity. So it does, provided the circumstances are such that a Court of equity would decree specific performance, but not otherwise (Central Trust and Safe Deposit Co. v. Snider — see also Plimmer v. Mayor of City of Wellington and per Jessel M.R. in Walsh v. Lonsdale). A suit for specific performance is essentially a suit for enforcing a stipulated obligation relating to property. The word “contract” itself primarily means a transaction which creates personal obligations; but it may, though less exactly, refer to transactions which create real rights (per Lord Buckmaster for the Privy Council in Maharaja Ranjit Singh v. Maharaj Bahadur Singh). If the personal obligations are such that according to the rules of equity operating on the conscience of the defendant it is right specifically to enforce the performance of the contract, then, and then only, does equity regard the [3.40]

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Cooney v Burns cont. purchaser as owner of the property. The question then is what is the test which equity applies to such a case as the present? It is not the same as in other cases where the law recognizes an enforceable contract but gives only a limited remedy. There the right is purely contractual and equity interposes, if at all, only with a remedy which law does not afford. In the present class of cases the right, if any, is not contractual, and at law none exists. Equity searches first for the right, and then, and then only, applies a remedy. And in searching for the right a special test is applied. It is not simply “fraud” (see per Wigram V.C. in Dale v. Hamilton, cited by Lord Selborne in Maddison v. Alderson). It is fraud of a special kind. It is fraud arising from “part performance” of the contract, or, in other words, part execution of the agreement. And the jurisdiction to compel performance of an agreement struck at by the statute does not arise unless the bargain in fact made, though devoid of an enforceability either at law or in equity, has been so acted upon by partly performing it that for the defendant to recede from it at that stage would be a fraud on the plaintiff. The essential nature of the acts constituting part performance may be gathered from cases of commanding authority. In Lester v. Foxcroft it is stated that, “in performance of the agreement, appellant entered into” the land; and that was Lord Redesdale’s view of it in Bond v. Hopkins. In Hawkins v. Holmes Lord Macclesfield speaks of “an execution of the contract by entering upon and improving the premises.” In Pembroke v. Thorpe Lord Hardwicke says: “As to the admeasurements, I do not look upon that as a performance of any part of the agreement;”” and he calls it “only a step towards the performance”. And then he adds, to show exactly what he means: “Here ought to have been a parting with the interest in some measure, otherwise the Court cannot decree a performance”. Therefore the Lord Chancellor refused a decree as to the contract of exchange. But as to the building agreement he granted a decree, because the defendant pulled down a house and took away the materials and used them, and that was part performance. In Whitbread v. Brockhurst Lord Thurlow says: “I do not recollect any case where an act merely introductory or ancillary to the agreement, though attended with expense, has been held a part performance.” To this Mr. Madocks replied: “I believe there is not any such case.” And at p. 417 the Lord Chancellor says: “I always thought the Court considered it as fraudulent in the party to make the contract, and to lead on the other party to lay out his money in the melioration of the estate, and then to withdraw from the performance of the contract.” In Cooke v. Tombs Macdonald C.B. says: “To take the case out of the statute, there must be a part execution of the substance of the agreement itself.” In Clinan v. Cooke Lord Redesdale says that entering into possession “in pursuance of an agreement” is part performance, and, unless complete performance followed, it would be a fraud on the man admitted into possession as exposing him to an action for trespass. In Kine v. Balfe Lord Manners L.C., referring to possession taken, and rent paid pursuant to the terms of the contract, asks: “Is not this then an act substantially in part performance of the contract?” In Nunn v. Fabian Lord Cranworth L.C. held (1) that the plaintiff’s alteration of his shop-front at a cost of more than £100 at the defendant’s request, was not part performance, the parol agreement being silent as to this, and (2) that payment of the new rent, the plaintiff continuing in possession, was part performance. In Caton v. Caton the same learned Lord says: “The right to relief … rests not merely on the contract, but on what has been done in pursuance of the contract.” What his Lordship means by that is shown on p. 148, where he adds: “When one of two contracting parties has been induced, or allowed by the other, to alter his position on the faith of the contract, as for instance by taking possession of land, and expending money in building or other like acts, there it would be a fraud,” &c. Finally on this point I cite a passage from Lord Selborne’s speech in Maddison v. Alderson:— “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.” It is convenient for brevity to quote a passage in note (1) to Hawkins v. Holmes, as follows: “Where one party has been permitted by the other to act upon a parol 96

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Cooney v Burns cont. agreement, it is considered as a species of fraud in the latter to insist upon the statute as a bar to a specific performance of the whole agreement”; and the cases are there cited. In Caton v. Caton Lord Cranworth says: “If I agree with A, by parol, without writing, that I will build a house on my land, and then will sell it to him at a stipulated price, and in pursuance of that agreement I build a house, this may afford me ground for compelling A to complete the purchase, but it certainly would afford no foundation for a claim by A to compel me to sell on the ground that I had partly performed the contract.” On the other hand, possession given to the purchaser on the faith of an agreement to sell may operate so as to make it a fraud on either party if the other repudiates (Wilson v. West Hartlepool Railway Co.). Other cases quoted in Maddison v. Alderson I need not further mention, but in that case itself is found an important passage in Lord Selborne’s judgment, as follows: “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.” These authorities show that the Court in order to found its jurisdiction inquires whether with the concurrence of the plaintiff, and on the basis that the agreement would be carried on to completion by legal conveyance, the defendant has gone so far, if purchaser, in directly or indirectly exercising, or, if vendor, in permitting the purchaser directly or indirectly to exercise, rights of ownership over the property which the sale, if formally effected, would connote, that it would be a fraud on the plaintiff unless the ownership were completely transferred by formal sale upon the terms in fact agreed to. Crystallizing that statement, for present purposes, there is always in part performance the actual transfer by enjoyment, directly or indirectly, of some right of ownership which the legal title would confer. Maitland on Equity, at p. 242, brings the position to very much the same point. In the early case of Butcher v. Stapely, referred to by Lord Selborne in Maddison v. Alderson, there are some suggestive words of the then Lord Chancellor quoted by Lord Selborne. Those words are: “that in as much as possession was delivered according to the agreement, he took the bargain to be executed.” Whether the suggestion that the equitable doctrine of part performance originated in the then well known, and up to a comparatively late date common, method of conveying land by parol and livery of seisin (see Challis, 3rd ed., p. 47) is correct or not, the words in question are consistent with that suggestion, and the suggestion is not improbable. And equally consistent is the way in which the principal authorities I have referred to have confined the operation of the doctrine, so as to create the test I have mentioned. How then do the “acts” proved in this case answer the test? (1) The taking of the inventory was not a part of the agreement, either expressly or impliedly. As a convenient or as a prudent act, nothing can be said against it; but it is weaker than the shopfront alteration in Nunn v. Fabian, above referred to. Besides, it had nothing to do with any right of ownership. It is clearly outside the pale of part performance. (2) The handing over of the lease:—Reading the finding, by its own words, it is not sufficient to show that the lease was handed over as the property henceforth of the purchaser. Read by the light of the uncontroverted testimony and the judgment under appeal, it is clear that the document was handed over merely for inspection, and for the limited purpose of preparing an assignment and transfer of licence and then to be handed back to the defendant. By the terms of the contract, there was no right to an assignment except upon payment of the full price—that is, £600 beyond the preliminary deposit of £50. The final instalment of £250 was not payable for some months after the lease was handed for inspection, and there is nothing in the assignment as prepared or anywhere else to show that the respondent was prepared or was proposing to pay earlier. Indeed, in the statement of claim he avers no willingness to pay £600, but only £350, the second instalment, which was to be contemporaneous with possession and transfer of licence, and not with transfer of lease. In short, the handing over of the lease for the purpose mentioned was no more than the ordinary production for inspection of title. That was what Lord Hardwicke, in Pembroke v. Thorpe, called “a step towards the performance”, and what Lord Thurlow called, in Whitbread v. Brockhurst, [3.40]

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Cooney v Burns cont. “an act merely ancillary to the agreement,” and though attended with expense is not part performance. Had the lease been handed over to be kept by the respondent permanently as owner, I am disposed to think it would have been a sufficient act of part performance. It would have been an act which a person parting with ownership by legal forms would do, and to which the new owner would be entitled. In In re Williams and Duchess of Newcastle’s Contract North J. said, “the owner of land is entitled to the custody of the title-deeds relating to it, and can maintain an action for them, even though the conveyance to him contains no express grant of the deeds.” In In re Duthy and Jesson’s Contract Romer J. marks the distinction to which I have adverted. He says: “The purchaser is not asking to have these deeds produced for the verification of or for information as to the title, but is calling upon the vendors to fulfil the ordinary obligation they are under of handing over on completion all title-deeds in their possession or power.” The analogy of equitable mortgages referred to by Lord Selborne is in point. The judgment of Cave J. in In re Beetham; Ex parte Broderick, is a clear statement on this point, and on appeal this decision was upheld. An early case on that subject contains a very useful passage. In Birch v. Ellames Macdonald C.B. says: “The deposit of title-deeds as security for a debt, is now settled to be evidence of an agreement to make a mortgage, and that agreement is to be carried into execution by the Court” &c The third “act” relied on as sufficient part performance was the incurring of legal expenses in respect of the assignment and transfer of the licence. The authorities quoted above are quite opposed to this being so considered. But Mann J. thought Child v. Comber supported it; and in the interests of good faith took that case as a foundation, having avowedly great doubt as to its power to sustain the burden. His Honor’s doubt was more than justified. In Child v. Comber the bill was in fact dismissed on the hearing. And the decision relied on was a confirmation of the order of the Master of the Rolls, who ordered the plea “to stand for an answer with liberty to except, and the benefit of it saved to the hearing”. In Mitford on Pleadings, 5th ed., p. 355, the rule is stated as follows: “If a plea be ordered to stand for an answer, it is allowed to be a sufficient answer to so much of the bill as it covers, unless by the order liberty is given to except.” In Sellon v. Lewen Lord Talbot L.C. relied on the distinction, and, because no express liberty to except was given, the plea was taken to be a sufficient answer. Child v. Comber, therefore, cannot be regarded as even a decision in favour of the respondent. In my opinion the appeal should be allowed. As the appellant was the defendant, and resisting on grounds the law permits, and openly placed his legal defence on the record, I see no reason for depriving him of the general costs of the action; but he should pay any costs exclusively caused by the issues on which he failed. As to the costs of the appeal, I think he is entitled to them. HIGGINS J: I see no reason to doubt that an act of part performance which would take a case out of the operation of sec. 228 of the Instruments Act 1915 of Victoria (sec. 4 of the Statute of Frauds) would be effective to take the case out of the operation of sec. 228 as qualified or supplemented by sec. 229. Sec. 228 provides that no action shall be brought unless a memorandum of the contract be signed by the party to be charged therewith or by some other person by him lawfully authorized; and sec. 229, following substantially the language of sec. 228, provides the further condition that no action shall be brought unless the other person be lawfully authorized “in writing signed by the party to be … charged.” The Courts of equity have for very many years treated sec. 4 of the Statute of Frauds, notwithstanding the absolute character of its negative words, as being subject to an exception in the case of a contract having been partly performed; and there is nothing in the nature of sec. 229—nothing in the nature of the requirement that any agent shall be not only authorized but authorized in writing signed &c—to warrant us in refusing to treat sec. 229 as being subject to the same exception. The exception which is to be implied to the rigid requirements of sec. 228 must, in my opinion, be implied with equal or more reason to the still more rigid requirements of sec. 229. 98

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Cooney v Burns cont. The second question is more difficult: Has the jury found in the special verdict a sufficient act of part performance? The Courts have wavered considerably in their application of the doctrine; and in their desire to do justice against a defaulting defendant they seem often to have treated acts as being sufficient part performance which ought not to be so treated. The cases on the subject cannot be all reconciled. Lord Selborne made an heroic effort in 1883, in the case of Maddison v. Alderson, to bring order to the chaos, to give system to the unsystematic; and perhaps for practical purposes, it would be well to treat that case as being, at all events primâ facie, a complete exposition of the law. Lord Selborne said:—“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.” According to this statement, it would appear that the act alleged to be an act of part performance of a contract for land cannot be so treated unless it affect the subject matter—the land—itself. In the present case the plaintiff has relied principally on the jury’s answers to questions 5 (a) and (b). According to these answers, the lease of the hotel was “handed to plaintiff’s solicitors under instructions from defendant for the purpose of having prepared an assignment of the lease and an application for a transfer of the licence; and the plaintiff’s solicitors prepared an assignment of the lease and the notices of application for transfer of the licence.” Personally, I should doubt whether these findings involve the proposition that the handing of the lease and the preparation of the assignment and notices took place under the instructions or with the cognizance of the plaintiff. The fault in the language of the question is not the fault of the learned Judge, for he followed the language of the pleading (reply, par. 2 (d)). But I shall assume that the plaintiff was privy to these acts, and that he became liable to pay his solicitors for their work: Do these acts constitute a sufficient part performance? Now, no case has been cited to us in which the handing over of title-deeds for the preparation of a conveyance and the preparation itself have been held to be a sufficient part performance. On the contrary, in Cooke v. Tombs it was held that the joint instructing of a solicitor to draw the conveyance, and his doing so, and the approval of both parties to the conveyance are no part performance, no “part execution of the substance of the agreement itself.” In the case of Hawkins v. Holmes a solicitor was employed by the consent of both parties to make a draft conveyance, and he made a draft which the defendant altered and delivered to the solicitor to engross; yet it was held to be no part performance. The same principle was affirmed in Whitbread v. Brockhurst, where in pursuance of the agreement certain timber was valued by an appraiser at considerable expense. The Lord Chancellor said: “I do not recollect any case where an act merely introductory or ancillary to the agreement, though attended with expense, has been held a part performance.” By the word “introductory” I understand introductory to the performance of the contract. An act introductory to the making of a contract would be an act done before there is an contract, before there are any rights created in pursuance of which the plaintiff acts. This is the only meaning consistent with the expressions of the Master of the Rolls in Phillips v. Edwards that “part performance … means, the parties on both sides acting as if the agreement had been carried into execution” The words “part performance of a contract” are clear in themselves; they do not mean part performance of an expected contract. As Lord Selborne puts it in Maddison v. Alderson, “in a suit founded on … 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.” But the drawing of a conveyance, as was pointed out in Cooke v. Tombs, is no “part execution of the substance of the agreement itself.” The substance of the agreement is the transfer of the possession and use of the land with the title thereto; and there has been no performance in part of that substance. Indeed, Lord Blackburn failed to discover any case of part performance established “in which there has not been a change in the possession of the land, or, in the case where the purchaser was a tenant already in possession, a change in the nature [3.40]

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Cooney v Burns cont. of his tenure”. In Whitchurch v. Bevis it was held that neither the delivery of the deeds nor the appointing of an appraiser was sufficient part performance; and see Redding v. Wilkes; Clerk v. Wright. In the case of O’Reilly v. Thompson the principal ground of decision was that though the plaintiff had procured the release of some claim of a third party, the procuring of the release was merely a condition annexed to the existence of any contract; but it is noteworthy that the delivery of the original lease by the vendor and the tender of the sublease drafted by the plaintiff were not treated as a part performance. As I infer the position, the acts of part performance must be such as would involve a fraud on the party performing unless the agreement be fully performed (Gunter v. Halsey; Clinan v. Cooke; Buckmaster v. Harrop). The doctrine in many respects closely resembles the doctrine of estoppel by representation; but in the estoppel by representation the party relying on estoppel is not confined to acts done in furtherance of a contract as he is in the case of part performance; and the representation must be of an existing fact, not a promise (Jorden v. Money). This doctrine is applied to such acts as the taking possession of the land, or the erecting of a limekiln, or the digging of foundations for a house, or the preparing of materials (Savage v. Carroll); but the doctrine is not treated as being applicable to acts done which are either preparatory or ancillary to performance, even though they involve some expense to the plaintiff. So far as the precedents are known to me, so far as I have traversed “the wilderness of single instances,” I should have no hesitation in saying that there is no ground for applying the principle of part performance to a contract for land where the only things done are (a) the handing over of the title to the plaintiff’s solicitor to prepare the conveyance and (b) his preparation thereof. The case of Child v. Comber, on which reliance was placed for the plaintiff below, is not, as my brother Isaacs pointed out, an authority for the plaintiff. The plea of the Statute of Frauds was merely ordered “to stand for an answer with liberty to except, and the benefit of it saved to the hearing,” until the answer should admit or deny the agreement; and the bill was in fact dismissed at the hearing. The Lord Chancellor, it is true, said that “the fees paid to the counsel, the drawing of the drafts, and engrossing them, and the plaintiff providing his purchase-money, are as much an execution of it” (the agreement) “on his part, as the laying out money on the buildings was in the other case”; but there is no decision that such acts, though in execution of the contract, are sufficient to prevent the application of the statute. The only matter that causes me to hesitate in the present case is the comparison with the doctrine of equitable mortgage by deposit of title-deeds. Even Selborne L.C., when saying that the acts of part performance treated as sufficient have related to the possession, use or tenure of the land, adds that “the law of equitable mortgage by deposit of title-deeds depends upon the same principles.” In Ex parte Broderick; In re Beetham, Cave and Wills JJ. say practically the same thing; and their decision (though not this dictum) was affirmed on appeal. But, though the same principles apply, it does not follow that the acts which would be sufficient part performance in the case of equitable deposit as security for money advanced would be sufficient in the case of purchase or lease of land. Where land is purchased or leased, the subject matter is land, its possession or use; where money is lent, the subject matter is a debt to be repaid. Something in the nature of change of possession or use or tenure of the land is involved in the one contract; it is not involved in the other. Moreover, in the case of equitable mortgage by deposit, a valid lien on the title-deeds, for value received, and until repayment, is created; in the case of sale or lease, the deeds are handed over to the purchaser for the mere temporary purpose of preparing the conveyance. At all events, in the present state of the authorities it would be impossible for me to hold that the acts found here constitute a sufficient part performance of the contract of sale to take this case out of the Statute of Frauds; and our proper course is to obey the statute unless the facts of the case bring it within the exception recognized by the Courts, leaving it to the Legislature to amend the law if and so far as it thinks fit. In my opinion, the appeal has to be allowed. 100

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Cooney v Burns cont. GAVAN DUFFY J: In this case two points were argued for the appellant: first, it was said that the respondent had not established any part performance of the contract, and, secondly, that part performance could not cure non-compliance with the provisions of sec. 229 of the Instruments Act 1915. I agree with the judgment of my brother Higgins on the first point, and it is therefore unnecessary to express any opinion on the second. STARKE J: this action was tried before a jury, which found that the lease of an hotel was handed over to the plaintiff’s solicitors under instructions from the defendant for the purpose of having prepared an assignment of the lease and an application for a transfer of the licence of the hotel, and that the solicitor accordingly prepared the assignment and notices of application for a transfer. Mann J. held that these facts constituted such part performance of the contract alleged in the statement of claim and found by the jury as was sufficient to take the contract out of the Statute of Frauds (Instruments Act 1915 (Vict.), sec. 228). The question to be decided by this Court is whether he was right in so holding. Numerous cases have been cited to us, but the principle which governs the present case is stated in the following propositions contained in the speech of Selborne L.C. in the House of Lords, in the well-known case of Maddison v. Alderson:—(1) “The acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged” in the case. (2) “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”. If the relative positions of the parties are changed as to the subject matter of the contract, then 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”. (3) “Acts relative to the possession, use, or tenure of the land” are the type of acts which establish a change in the relative positions of the parties as to the subject matter of the contract. The Lord Chancellor did not say that acts of this character were the only acts that could establish a change in the relative positions of the parties as to the subject matter of the contract, but he added that the decided cases were “almost, if not quite, universally” of the above type. The act found by the jury in this case is, I think, unequivocally and of its own nature referable to some such agreement as is alleged by the plaintiff, but it does not change the relative positions of the parties as to the subject matter of the contract, namely, the land. The delivery of the lease for the purpose of preparing an assignment did not alter the title in the land, it did not affect the possession or the right to possession of the land, and it did not affect the use of the land or touch or concern the land in any way whatever. A deposit of title-deeds by way of security affects the title to the land, and therefore alters the position of the parties as to the land itself. So, again, the laying out of money in improvements on the land changes the position of the parties in relation to the use of the land. On the contrary, any acts preparatory to the completion—not the formation—of the contract do not alter the position of the parties in relation to the land. Examples of this latter class of case may be found in Maddison v. Alderson, and, in my opinion, the present case falls within the same category. The finding that an inventory of furniture was taken in performance of the contract stands in no different position. The error in the judgment below resides partly in the view that once a claim for equitable relief of some kind is established by the plaintiff, then the Court will examine the whole circumstances existing between the parties and give complete relief, and partly in the assertion that the main act in question here may rightly be said to be one relative to the possession or to the use or tenure of the land. The first proposition is much too broadly stated; and the second is unconvincing, for it does not demonstrate the relation between the act and the possession, use or tenure of the land. Child v. Comber is, as my brothers Isaacs and Higgins have shown, no authority for the decision of Mann J. As to the other argument urged before us, that the doctrine of part performance has no application to cases involving sec. 229 of the Instruments Act 1915, I agree that Mann J. was right in rejecting it, [3.40]

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Cooney v Burns cont. and I concur in the opinions of my brothers Isaacs and Higgins on this point.

Lysaght v Edwards [3.55] Lysaght v Edwards (1876) 2 Ch D 499 Chancery Division JESSELL MR: It appears to me that the effect of a contract for sale has been settled for more than two centuries; certainly it was completely settled before the time of Lord Hardwicke, who speaks of the settled doctrine of the Court as to it. What is that doctrine? It is that the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase-money, a charge or lien on the estate for the security of that purchase-money, and a right to retain possession of the estate until the purchase-money is paid, in the absence of express contract as to the time of delivering possession. In other words, the position of the vendor is something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate, but is, in certain events, entitled to what the unpaid vendor is, viz, possession of the estate and a charge upon the estate for his purchase-money. Their positions are analogous in another way. The unpaid mortgagee has a right to foreclose, that is to say, he has the right to say to the mortgagor, “Either pay me within a limited time, or you lose your estate,” and in default of payment he becomes absolute owner of it. So, although there has been a valid contract of sale, the vendor has a similar right in a Court of Equity; he has a right to say to the purchaser, “Either pay me the purchase-money, or lose the estate.” Such a decree has sometimes been called a decree for cancellation of the contract; time is given by a decree of the Court of Equity, or now by a judgment of the High Court of Justice; and if the time expires without the money being paid, the contract is cancelled by the decree or judgment of the Court, and the vendor becomes again the owner of the estate. But that, as it appears to me, is a totally different thing from the contract being cancelled because there was some equitable ground for setting aside. If a valid contract is cancelled for non-payment of the purchase-money after the death of the vendor, the property will still in equity be treated as having been converted into personalty, because the contract was valid at death; while in the other case there will not be conversion, because there never was in equity a valid contract. Now, what is the meaning of the term “valid contract”? “Valid contract” means in every case a contract sufficient in form and in substance, so that there is no ground whatever for setting it aside as between the vendor and purchaser – a contract binding on both parties. As regards real estate, however, another element of validity is required. The vendor must be in a position to make a title according to the contract, and the contract will not be a valid contract unless he has either made out his title according to the contract or the purchaser has accepted the title, for however bad the title may be the purchaser has a right to accept it, and the moment he has accepted title, the contract is fully binding upon the vendor. Consequently, if the title is accepted in the lifetime of the vendor, and there is no reason for setting aside the contract, then, although the purchase-money is unpaid, the contract is valid and binding; and being a valid contract, it has this remarkable effect, that it converts the estate, so to say, in equity; it makes the purchase-money a part of the personal estate of the vendor, and it makes the land a part of the real estate of the vendee; and therefore all those cases on the doctrine of constructive conversion are founded simply on this, that a valid contract actually changes the ownership of the estate in equity. That being so, is the vendor less a trustee because he has the rights which I have mentioned? I do not see how it is possible to say so. If anything happens to the estate between the time of sale and the time of completion of the purchase it is at the risk of the purchaser. If it is a house that is sold, and the house is burnt down, the purchaser loses the house. He must insure it himself if he wants to provide against such an accident. If it is a garden, and a river 102

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Lysaght v Edwards cont. overflows its banks without any fault of the vendor, the garden will be ruined, but the loss will be the purchaser’s. In the same way there is a correlative liability on the part of the vendor in possession. He is not entitled to treat the estate as his own. If he wilfully damages or injures it, he is liable to the purchaser; and more than that, he is liable if he does not take reasonable care of it. So far he is treated in all respects as a trustee, subject of course to his right to being paid the purchase-money and his right to enforce his security against the estate. With those exceptions, and his right to rents till the day for completion, he appears to me to have no other rights. … I now come again to the will before me. First of all, there is a charge of “such part of my real estate as consists of my messuage, farm, and lands at Arlsey aforesaid, called the Bury Farm, in exoneration of my personal estate with the payment of my debts, and of the pecuniary legacies aforesaid;” and, subject to the trust hereinafter contained for sale of the same hereditaments, he directs the debts and legacies to be received under the statutory power; and then there is a general devise of all the real estate. The first question is, Is there a specific devise of Bury Farm? It is a question of some difficulty, but I think there is not. He had sold Bury Farm, he had not got Bury Farm at the time of his death; if he had not Bury Farm at the time of his death, beyond all question he could not charge it. The object of referring to Bury Farm is to charge it. It is stated to be part of his real estate, and it was at the date of his will really part of his real estate. When he says, “subject to the trust hereinafter contained,” he means subject to the trust affecting my real estate, so far that real estate includes Bury Farm, but if Bury Farm is dropped out of the charge of debits (as it was, because the will is to take effect from the time of his death), why am I to say that that which was a mere clause to shew that the general gift of his real estate was not to be done away with by the specific charge of Bury Farm – that is, that Bury Farm was still to be subject, as all his other real estate, to the trusts of his will – why am I to hold that such a clause is to prevent it dropping out of a gift of “my real estate”? I think the will must be read and interpreted by the Wills Act, and that the gift of “my real estate” is a gift of “the real estate which I shall be entitled to at the time of my death”. Then we have that followed by a devise to Mr Hubbard of “all real estate which at my death may be vested in me as trustee”. Therefore this testator actually contemplated that something might happen between the date of his will and his death, and even without the Wills Act you might well have read it as providing that “if by any reason that which is vested in me as absolute owner of my real estate shall become vested in me as a trustee, that shall go to somebody else.” That is perfectly consistent, and consequently if this estate was vested in him (as I hold it was) as trustee at the time of his death, it appears to me that it must pass to Hubbard as sole devisee.

[3.60]

Note

This case has assumed such significance that reference is commonly made to the Rule in Lysaght v Edwards (1876) 2 Ch D 499. The rule is connected with the principle that equity deems to be what ought to be. However, the interest of a purchaser under a contract of sale is asserted to arise at least when the contract becomes specifically enforceable. The standard procedure in relation to contracts for the sale of land is for a defined period (30 or 45 or 60 days) between execution of the contract and settlement (the exchange of title documents for payment). [3.60]

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Extracts from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 14.

Walsh v Lonsdale [3.65] Walsh v Lonsdale (1882) LR 21 Ch D 9 English Court of Appeal [In May 1879 the defendant agreed to lease to the plaintiff a mill for a term of seven years. The agreement stipulated that the plaintiff would operate at least 540 looms, the rent to be calculated according to the number of looms in operation. The agreement also allowed the defendant to demand in advance a whole year’s rent (plus arrears), if quarterly rent was not paid in advance. The defendant paid rent (to the lessor’s mortgagee), but not in advance. In March 1882 the defendant made demand for a year’s rent in advance and the balance of rent owing for that quarter, and then distrained for rent (and took possession). The plaintiff argued that as the agreement did not create a legal interest, the legal remedy of distress could not apply. He claimed damages, and sought an injunction and specic performance of the agreement.] JESSEL MR: The question is one of some nicety. There is an agreement for a lease under which possession has been given. Now since the Judicature Act the possession is held under the agreement. There are not two estates as there were formerly, one estate at common law by reason of the payment of the rent from year to year, and an estate in equity under the agreement. There is only one Court, and the equity rules prevail in it. The tenant holds under an agreement for a lease. He holds, therefore, under the same terms in equity as if a lease had been granted, it being a case in which both parties admit that relief is capable of being given by specic performance. That being so, he cannot complain of the exercise by the landlord of the same rights as the landlord would have had if a lease had been granted. On the other hand, he is protected in the same way as if a lease had been granted; he cannot be turned out by six months’ notice as a tenant from year to year. He has a right to say, “I have a lease in equity, and you can only re-enter if I have committed such a breach of covenant as would if a lease had been granted have entitled you to re-enter according to the terms of a proper proviso for re-entry.” That being so, it appears to me that being a lessee in equity he cannot complain of the exercise of the right of distress merely because the actual parchment has not been signed and sealed. Cotton and Lindley LJJ concurred.

Notes&Questions

[3.70]

1.

The above case establishes a principle so well known and applied that it is popularly referred to as “The Rule in Walsh v Lonsdale”. How exactly would you formulate this rule? On what principle of equity is it based? The rule in Walsh v Lonsdale (1882) LR 21 Ch D 9 did not apply to leases only. The principle seemed applicable to any situation where there was a specifically enforceable contract or agreement for grant of any type of interest in land. Importantly the rule applied to contracts for the sale of the fee simple in land: Lysaght v Edwards (1876) 2 Ch D 499. Provided the agreement for the grant of an interest in land constituted a binding and specifically enforceable contract equity would intervene, finding that the vendor held the property on a constructive trust for the purchaser. These matters are discussed in Chapter 9.

2.

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common law formalities but who wish to claim the protection afforded to tenants by the common law of leases, in particular the requirement for a period of notice to quit. However, the rule in Walsh v Lonsdale (1882) LR 21 Ch D 9 was never designed as a tenant’s charter and is capable of working in the landlord’s favour, as in this case. What other potential applications in the context of the law of leases can you think of for this rule? 3.

An agreement for lease, binding at equity under the rule in Walsh v Lonsdale (1882) LR 21 Ch D 9, will not come into existence unless the agreement constitutes a binding contract under normal common law principles (Insearch Ltd v Kin Hing Pty Ltd [2004] ANZ ConvR 111; [2003] NSWSC 875; Inglis v Clarence Holdings Ltd [1997] 1 NZLR 268; Euston Centre Properties Ltd v H&J Wilson Ltd (1982) 262 EG 1079 at 1081; Brownsea v National Trustees Executors & Agency Co of Australasia Ltd [1959] VR 243; [1959] ALR 650 at 244 (VR)). To constitute a binding contract, the parties must have reached final agreement on the essential terms of the lease. The essential terms have been held to be the property to be leased, the rent payable, the names of the parties, and the commencement date and maximum duration of the term (see, for example, Equus Corp Pty Ltd v Antonopoulos [2008] VSCA 179; Bishop v Taylor (1968) 118 CLR 518; 42 ALJR 277; Harvey v Pratt [1965] 2 All ER 786 (CA); [1965] 1 WLR 1025; Pemberton v Dimitrijevic [2001] NSWSC 54; Picwoods Pty Ltd v Panagopoulos (2005) NSW ConvR 56-120; [2004] NSWSC 978; Long v Piper [2002] ANZ ConvR 43; (2002) NSW ConvR 56-000; [2001] NSWCA 342). In addition, the court must be satisfied that the contract is intended to be final. If the document contemplates the execution of a future lease, before it will be held to be enforceable in equity as an agreement for a lease the court must be satisfied that the future lease will merely embody the terms already agreed upon. If the court believes that the parties intend to reopen negotiations on any aspect of the terms of the lease prior to signing a formal lease, the document will not be enforceable in equity as an agreement for a lease. The issue is one of construction for the court in each case on the facts. For example, an agreement for a lease containing the phrase “subject to contract” has been held to be unenforceable in that it indicates the parties’ intention to hold further negotiations on the content of the lease (Masters v Cameron (1954) 91 CLR 353; 28 ALJR 438). For other cases on this point, see eg Hali Retail Stores Pty Ltd v Hafaz [2007] NSWSC 412; Brunswick Developments Pty Ltd v Shock Records Pty Ltd (1996) V ConvR 54-604; Lockett v Norman-Wright [1925] Ch 56; Ratto v Trifid Pty Ltd [1987] WAR 237; (1985) 56 LGRA 22; [1985] ANZ ConvR 202; and Chipperfield v Carter (1895) 72 LT 487.

4.

In addition to a binding contract, the rule in Walsh v Lonsdale (1882) LR 21 Ch D 9 will not apply unless the terms of the agreement are embodied in a signed memorandum or note in writing or unless there is part performance of the agreement. The requirement for a memorandum or note in writing is contained in State legislation based on s 4 of the Statute of Frauds 1677 (Eng) (Conveyancing Act 1919 (NSW), s 54A; Instruments Act 1958 (Vic), s 126; Property Law Act 1974 (Qld), s 59; Law of Property Act 1936 (SA), s 26; Conveyancing and Law of Property Act 1884 (Tas), s 36(1); Civil Law (Property) Act 2006 (ACT), s 204; Law of Property Act (NT), s 62. In Western Australia, s 4 of the 1677 Act remains in effect, subject to the Law Reform (Statute of Frauds) Act 1962 (WA)). In relation to the part performance requirement, [3.70]

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the act relied upon must be unequivocally, and of its own nature, referable to some such agreement as that alleged (see, for example, Maddison v Alderson (1883) LR 8 App Cas 467 at 477; [1883] All ER Rep 742 (HL); Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 432; Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; McMahon v Ambrose [1987] VR 817; Regent v Millett (1976) 133 CLR 679; 10 ALR 496). This appears to represent the current Australian position. Note, however, that dicta by Lord Reid in Steadman v Steadman [1976] AC 536 at 541; [1974] 2 All ER 977; [1974] 3 WLR 56 (HL) suggest that in England the rule may be less stringent. His Lordship stated: I am aware that it has often been said that the acts relied on must necessarily or unequivocally indicate the existence of a contract. It may well be that we should consider whether any prudent reasonable man would have done those acts if there had not been a contract but many people are neither prudent nor reasonable and they might often spend money or prejudice their position not in reliance on a contract but in the optimistic expectation that a contract would follow. So if there were a rule that acts relied on as part performance must of their own nature unequivocally show that there was a contract, it would be only in the rarest use that all other possible explanations could be excluded. In my view, unless the law is to be divorced from reason and principle the rule must be that you take the whole circumstances, leaving aside evidence about the oral contract, to see whether it is proved that the acts relied on were done in reliance on a contract: that will be proved if it is shown to be more probable than not. Authorities which seem to require more than that appear to be based on an idea, never clearly defined, to the effect that the law of part performance is a rule of evidence rather than an application of an equitable principle.

For recent applications of this point of law, see Powercell Pty Ltd v Cuzeno Pty Ltd (2004) 11 BPR 21,429; [2004] NSWCA 51; Kelrit Investments Pty Ltd v Transform Composites Holdings Pty Ltd [2004] ANZ ConvR 178; [2003] FCA 662; Baloglow v Konstanidis (2001) 11 BPR 20,721; [2001] NSWCA 451; Competitive Funerals Pty Ltd v Gurmit Singh Rai t/as Blacktown City Funerals [2005] NSWSC 1171. 5.

In the context of leases, part performance may be constituted by the handing over of keys, the payment of a security deposit, the making of mortgage payments or the entry into possession and the payment of rent (Van Schaik Organic Soils & Bark Supplies Pty Ltd v Woakwine Industries Pty Ltd (2001) 215 LSJS 278; [2001] SASC 297; Laserbem Pty Ltd v Gainsville Investments Pty Ltd [2004] VSC 62; McMahon v Ambrose [1987] VR 817; Colman v Golder [1957] VR 196). In Kaufman v Michael (1892) 18 VLR 375, the alleged agreement for a lease contained a clause requiring the tenant to make certain alterations to the premises including wallpapering. The tenant carried out the alterations, but did not enter into possession or pay rent. The tenant later sought to escape from the agreement and argued that it was unenforceable in equity. What result?

6.

It is sometimes said that an agreement for a lease is as good as a lease (see, for example, Re Maughan (1885) 14 QBD 956 at 958). Do you agree? If not, why not?

7.

For recent applications of the rule in Walsh v Lonsdale, see Azkanaad Pty Ltd v Galanos Bros Pty Ltd (No 2) [2008] NSWSC 476; upheld in Azkanaad Pty Ltd v Galanos Bros Pty Ltd [2008] NSWCA 185; Fiver Trading Pty Ltd v Spajak Pty Ltd [2005] NSWSC 532; Vella v Wah Lai Investment (Aust) Pty Ltd [2004] NSWSC 748; Swanville Investment Pty Ltd v Riana Pty Ltd [2003] WASCA 121; Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] QB 580

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(CA); and Tottenham Hotspur Football & Athletic Co Ltd v Princegrove Publishers Ltd [1974] 1 WLR 113. Note that it was not applied in Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 45 ALR 481 (Fed Ct) on the basis that the rule has no application in relation to third parties. Extracts from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 8.

Theodore v Mistford Pty Ltd [3.85] Theodore v Mistford Pty Ltd (2005) 221 CLR 612; [2005] HCA 45 High Court of Australia GLEESON CJ, McHUGH, GUMMOW, CALLINAN AND HEYDON JJ. This appeal requires some consideration of the principles governing equitable mortgages by deposit of a duplicate certificate of title. The principles governing the creation of an equitable mortgage by deposit of title deeds were developed by the English courts of equity with respect to old system conveyancing. This appeal concerns their application in the Torrens system, in particular to the deposit of the duplicate certificate of title to land under the provisions of the Land Title Act 1994 (Q) (“the Act”). Section 75 of the Act states: (1) An equitable mortgage of a lot may be created by leaving a certificate of title with the mortgagee. (2) Subsection (1) does not affect the ways in which an equitable mortgage may be created. The statute law in Queensland thus stands in marked contrast to the present position in England established by the decision in United Bank of Kuwait plc v Sahib. In that case, the Court of Appeal held that the principles respecting the creation of an equitable security by deposit of title deeds were inconsistent with the requirements which had been introduced by the Law of Property (Miscellaneous Provisions) Act 1989 (UK). In Queensland, the predecessor of s 75 of the Act, s 30 of The Real Property Act 1877 (Q) had declared that: an equitable mortgage or lien upon land or any estate or interest in or security upon land under the provisions of this Act or any instrument affecting any such land may be created by deposit of the instrument of title and such deposit shall subject to the provisions hereinafter contained have the same effect on the estate interest or security sought to be charged as a deposit of title deeds would have had before the passing of this Act. Before the enactment of s 30, the Supreme Court of Queensland held in In re Wildash and Kenneth Hutchison, Ex parte Miskin that an equitable mortgage might be created by deposit of the duplicate certificate of title, although, as Lilley J put it, unless protected by caveat “its practical value as a security is very doubtful, and it is not to be commended as a mode of investment”. That warning notwithstanding, the subsequent legislation in Queensland and decisions in Victoria confirmed the adaptation of this species of equitable security to Australian conditions. It should be added that the Property Law Act 1974 (Q) (“the Property Law Act”) applies to land under the provisions of the Act. Section 5(1)(b) of the Property Law Act so provides. The Property Law Act contains various provisions whose origins may be traced to the Statute of Frauds 1677 (Eng). Two are presently significant. Section 11(1)(a) of the Property Law Act provides that subject to that statute, with respect to the creation of interests in land by parol: “no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent lawfully authorised in writing, or by will, or by operation of law”. Section 59 states:

[3.85]

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Theodore v Mistford Pty Ltd cont. No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised. It will be necessary to refer to s 11 and to s 59 later in these reasons. The primary judge found that on 12 July 1996 Mr Glen Theodore had advised Mr Peter Klar that he was ready to proceed with the purchase of the Air Monitoring Services business. He said that he had borrowed $30,000 from his mother and that he wanted to utilise $20,000 of that money for a deposit. Mr Klar told Mr Theodore that there would be a requirement by the respondents that the duplicate certificate of title to the Buderim land be deposited with his firm. Mr Theodore told him that, while the Buderim land was in the name of his mother, he was the beneficial owner. That was untrue. On 18 July 1996, Mr Theodore attended the offices of Allan Taylor & Associates, Mrs Theodore’s solicitors. He produced to them a handwritten authority evidently composed by him. It had been signed by Mrs Theodore and authorised her solicitors to release to Mr Glen Theodore the duplicate certificate of title to the Buderim land. On the same day, Mr Glen Theodore obtained possession of the duplicate certificate of title, deposited it with the respondents’ solicitors and obtained their letter of acknowledgment addressed to him. This stated that the certificate of title was “to be held in safe custody on your behalf as security on account of the purchase from M & V Vines of the business, Air Monitoring Services”. Up to the time of the settlement of the Sale Contract on 22 July 1996, neither the respondents nor their solicitors had any direct dealings with Mrs Theodore. Before the settlement, Mr Klar advised his clients that the holding of the certificate of title was insufficient security for payment of the balance of the purchase price without the support of an executed guarantee and mortgage. Notwithstanding that advice, the respondents, who wished urgently to settle, instructed Mr Klar to proceed. As a result, there was no insistence upon full compliance with the requirements of cl 4.3 of the Sale Contract. Those requirements had included provision on or before settlement not only of the duplicate certificate of title but also of a mortgage of the Buderim land in favour of the respondents. The primary judge commenced his consideration of the evidence given by Mrs Theodore as follows: Her evidence is in short compass. She said that she was aware in 1996 of the son’s interest in the business. She authorised the son to obtain the title deed from Mr Taylor. I find that this occurred on the 18th July 1996. This is the date of the hand written authority signed by her and is the same date that the title deed was delivered to Mr Klar by the son. [Mrs Theodore] strenuously denies any prior knowledge that her son was going to deliver the deed to Mr Klar, or any authority from her for him to deal with the deed in this way. This is the essential factual issue in the case. At the time of the trial, Mrs Theodore was aged 71 years. She had been a widow for 10 years. Her husband had been an Area Manager with the ANZ Bank and she said that her “whole life [had] been tied up with the ANZ Bank”. Her husband had told her never to give a guarantee and she was adamant in refusing to do so. Mr Glen Theodore was one of her four children. Mr Glen Theodore had been divorced in 1992 and, at the relevant time, was living at home with his mother. Mrs Theodore’s case was that she had agreed only to the delivery of the deed to the ANZ Bank at Maroochydore as security for a loan which Mr Glen Theodore proposed to obtain from that Bank. Mr Theodore had sought unsuccessfully to arrange finance from the ANZ Bank. On 18 July, he had attended the Maroochydore branch with Mrs Theodore but the Bank declined his application for an advance of $60,000. Mrs Theodore had already received advice from her accountant that a purchase of the respondents’ business at that price was not a viable proposition. 108

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Theodore v Mistford Pty Ltd cont. Mrs Theodore’s evidence was that she had decided not to assist her son at all in the matter but that she relented and lent him $30,000, of which $20,000 was for the initial payment under the Sale Contract and $10,000 for his purchase of a van. The primary judge introduced his conclusions respecting the credibility of Mrs Theodore by saying that she had impressed him as a highly intelligent, astute and alert witness. His Honour continued: She was not in the least overborne by cross-examination despite her obvious physical difficulties resulting from her distressing condition. I do not think she is a liar, however I regret to say that on the balance of probabilities, I do not accept her evidence that she did not know of her son’s plans to deal with the deed as he did on the 18th July 1996. I think it more probable than not that at the time of purchase of the business by the son, she did act with her heart and not her head; and that she has now convinced herself that she did not give him authority to deal with the deed, when in fact she did. … In my opinion, it is more probable than not that she was aware, after the failure to obtain finance, that the son was going to hand over the deed as security to enable him to complete the sale of the business. His Honour added that, although Mr Glen Theodore had not given evidence, he was satisfied that he was manipulative and probably dishonest. General Principles The respondents support the declaratory relief in their favour given by the Court of Appeal by reliance upon a basic proposition. This may be stated in the terms used by Maitland in the thirteenth of his “Lectures on Equity”. He said that the Court of Chancery had enabled people to create equitable mortgages without any writing at all and added: An equitable mortgage (enforceable by an order for foreclosure or for sale) can be made by a deposit of title deeds if they were deposited with intent that the land which they concern shall be security for the payment of a debt. In the present case, there were no direct dealings between the appellant and the respondents but, the respondents submit, this provides no fatal objection to their case. They say the findings of fact establish two sufficient planks for their case. First, Mrs Theodore had the necessary intention to deposit the duplicate certificate of title as security for her son’s indebtedness under the Sale Contract and, secondly, to effectuate that intention she conferred an actual authority on her son, in broad terms encompassing his subsequent dealing with the duplicate certificate of title to procure settlement of the Sale Contract. These submissions should be accepted and the appeal dismissed. We turn to explain why this is so. Several preliminary matters are to be noted. First, given the findings as to the intention of Mrs Theodore, this is not a case which tests the proposition in some of the leading English texts that from a relationship of debtor and creditor and the delivery of title deeds the court will presume an intention to create a security, a presumption to be rebutted only by proof that the deposit was made on other grounds. However, it may be noted that this proposition does have the formidable support of Lord Macnaghten. In delivering the reasons of the Privy Council in Bank of New South Wales v O’Connor Lord Macnaghten said: It is a well established rule of equity that a deposit of a document of title without either writing or word of mouth will create in equity a charge upon the property to which the document relates to the extent of the interest of the person who makes the deposit. In the absence of consent that charge can only be displaced by actual payment of the amount secured. Before the fusion of law and equity a Court of Equity would undoubtedly have restrained the legal owner of the property from recovering his title deeds at law so long as the charge continued, and now when law and equity are both administered by the same Court if there be any conflict the rules of equity must prevail. [3.85]

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Theodore v Mistford Pty Ltd cont. Secondly, the term “equitable mortgage” is not used in the texts and the authorities with any single denotation. The nature of the security created must turn upon the intention of the party dealing with the assets to be subjected to the security and the nature of those assets. So it is accepted that a mortgage of an equitable interest, being an equity of redemption, can only be by way of an equitable mortgage, although described as a second mortgage of the land in question. In respect of a legal interest, under the general law an agreement to give a legal mortgage is described as an equitable mortgage. Subject to compliance with any statutory formalities, it may be treated in equity as if a legal mortgage had been granted and therefore as carrying with it the remedies, including foreclosure, incident to a legal mortgage. Hence the statement that while in theory the equitable mortgagee may call for a legal mortgage, in the great majority of cases the mortgagee rests upon its equitable rights. Lord Eldon LC said of the Court of Chancery that “an equitable title to a mortgage is here as good as a legal title”. In this way, by looking at the intent rather than the form, equity is able to treat as done that which in good conscience ought to be done. However, in the present appeal, debate as to whether the factual findings were consistent with an agreement between the appellant and the respondents that she would execute a legal mortgage (ie, a memorandum of mortgage in registrable form) would have been misplaced. The trial judge found that authority had been given by Mrs Theodore for her son to furnish the duplicate certificate of title as the immediately effective security required by the respondents for their completion of the Sale Contract on 22 July 1996. Their case thus is not to be approached as one of an agreement, supported by deposit of the title deeds, to give a legal mortgage. It was a transaction of this nature which was discussed by Knox CJ in Cooney v Burns, to which reference was made in argument. Further, the respondents accept that, there being no such agreement and no personal covenant by the appellant, their remedy is limited to recoupment from the sale proceeds, with no judgment against the appellant upon a personal liability to pay moneys. The principles respecting part performance developed in cases where s 4 of the Statute of Frauds was pleaded in answer to a suit for specific performance of an oral land sale contract. These principles were treated, at least by analogy, as applying to the enforcement of agreements to create legal and equitable securities. The analogy was imperfect for at least two reasons. First, as Lord Eldon LC complained, the deposit of title deeds by itself was an equivocal act, being referable also, for example, to a pledge only of those chattels. Secondly, as Higgins J later explained in Cooney v Burns, the nature of the acts which suffice for part performance differ in the two situations. Given the nature of the respondents’ case which does not found upon an executory agreement by the appellant to provide security, the matter of part performance need not further be considered. The appellant correctly submitted that a consequence of the respondents’ fixing upon her intention to create a security immediately effective upon completion is that attention is required not to s 59 but to s 11(1)(a) of the Property Law Act. Section 59 is concerned with contracts, and s 11(1)(a) with dispositions. Here, there was no writing satisfying par (a) of s 11(1). The Issues on the Appeal The appellant did not select as a battleground for the appeal the general assertion that in the face of s 11(1)(a), the provision respecting dispositions rather than contracts, there was no scope for equity to effectuate an intention to create an equitable mortgage of the Buderim land. The ultimate question, rather, was whether in the circumstances as found at trial, the respondents having completed the Sale Contract on the faith of the provision of the duplicate certificate of title, the appellant had been entitled in equity to the return of that instrument (or, as it happened, to the full proceeds of sale) without satisfying the secured indebtedness. This approach to s 11 of the Property Law Act and other Statute of Frauds descendants is consistent with what was said by Hope J in Last v Rosenfeld. His Honour observed: “No sooner had the Statute of Frauds 110

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Theodore v Mistford Pty Ltd cont. been enacted in 1677 than the courts set about relieving persons of its effect in cases where it was thought that the legislation could not have been intended to apply. In general terms, it was said that the courts would not allow the Statute of Frauds to be made an instrument of fraud, and that it did not prevent the proof of the fraud. No doubt, as was said by Selborne LC in Maddison v Alderson in relation to one of the principles that was developed in this way, namely, the doctrine of part performance, 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 relevant doctrine. The general approach indicated by this summary statement did, however, spread into a number of fields where a statute requires writing”. Counsel for the appellant pointed to features of the evidence which might have supported findings other than those adverse to the appellant which were made at trial but, in the end, did not challenge that outcome. However, counsel submitted that several aspects of the law respecting this species of equitable mortgage dictated the conclusion that no such security had been created here. Counsel for the appellant emphasised the circumstance that the deposit of the duplicate certificate of title with Klar and Klar on 18 July 1996 (a Thursday) was made in advance of the completion of the Sale Contract on the following Monday, 22 July. At the time of that deposit the purchaser, Mobile Lab, had incurred no indebtedness to the respondents for the balance of the purchase moneys. The appellant thus relied upon authorities suggesting that the deposit must be to secure an advance made at that time, or in some circumstances made antecedently, and upon general propositions that equity does not order specific performance of a contract to make or take a loan of money, whether the loan is to be on security or not. The unpaid balance of the purchase price under the Sale Contract for this purpose is treated as if it were a loan at an interest rate of 8 per cent per annum. There is no occasion to consider the implications of these submissions. The distinction between 18 and 22 July is indecisive of any issue in favour of the appellant. There was but one business day between the receipt of the duplicate certificate of title by Klar and Klar on 18 July and settlement on 22 July. The respondents correctly submit that there was a change in the nature of the dominion over the duplicate certificate of title on 22 July. Before settlement the solicitors held it in safe custody on account of the appellant; thereafter, in effectuation of the appellant’s intention found at trial, the duplicate certificate of title was held as security for the balance of the purchase moneys. The presumption described above and said to arise from the delivery of title deeds may not readily accommodate what thereafter is alleged to be a third party security where the depositor is not the principal debtor. The present appeal concerns a third party security. But the respondents do not rely solely upon any such presumption in their favour. There thus is no occasion here to decide whether, as Templeman J considered in In re Wallis and Simmonds (Builders) Ltd, such a “general rule” or “general presumption” applies to a deposit of title deeds securing debt owing by a third party. Templeman J said in Wallis and Simmonds that in logic there could be no distinction between deposits to secure a first and third party indebtedness. The appellant criticised that statement. But, putting aside the question of a presumption, evidence of the dealings between the parties may lead to the conclusion that, as in this case, a third party security was provided. In Wallis and Simmonds itself there was detailed consideration of the evidence and Templeman J relied upon the presumption he favoured in order to resolve the issue of intention in favour of the giving of security. In the present case, no such reliance is necessary for the respondents to succeed. On the other hand, the close analysis by Bryson J of the evidence in Arnick Holdings Ltd v Australian Bank Ltd led him to conclude that the delivery of the title documents to the bank was for the limited purpose of an overall credit assessment of the account of the third party customer. Finally on this point, the terms of s 75 of the Act do not foreclose the possibility of the provision of third party security by deposit of title deeds. It was accepted in the nineteenth century that a surety might take security for its obligations to the principal creditor, by deposit with the surety of title deeds by the [3.85]

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Theodore v Mistford Pty Ltd cont. party for whose benefit the guarantee was given. There is nothing in the terms of s 75 to limit the nature of the obligations secured by an equitable mortgage by deposit of a certificate of title.

[3.90]

Notes and Questions

1. An equitable mortgage is one where the interest of the mortgagee is equitable. Such an interest occurs most commonly where the mortgagor’s interest is equitable or where the mortgage transaction lacks the formalities for the transfer of a legal interest. Why is a second mortgage of land under the general law always equitable? 2. A mortgage transaction will not only fail to confer a legal title upon the mortgagee but will be unenforceable unless it is evidenced in writing so as to satisfy the Statute of Frauds. The deposit of title deeds is significant as it is universally regarded as a sufficient act of part performance to render enforceable an otherwise purely oral transaction, see the discussion of the means to overcome the lack of formalities: see [7.50]–[7.60] (Moore). An equitable mortgage is one where the interest of the mortgagee is equitable. The deposit of title deeds is significant as it is universally regarded as a sufficient act of part performance to render enforceable an otherwise purely oral transaction, see [7.50]–[7.60] (Moore).

Ciaglia v Ciaglia [3.95] Ciaglia v Ciaglia [2010] NSWSC 341 WHITE J 1 The defendant is the registered proprietor of land in Goodchap Road, Chatswood (“the Chatswood property”). The principal question in these proceedings is whether she holds a one-half share of the land on trust for the plaintiff. Background 2 The defendant is the widow of the plaintiff’s brother, Pasquale Ciaglia, who died on 15 November 2002. From about 1970 to 1991 the plaintiff and Pasquale Ciaglia were the registered proprietors as joint tenants of the Chatswood property. The property was used as a boarding house. From about 1982 the boarding house business was operated by a company called Lajido Pty Ltd (“Lajido”) of which the two brothers were the sole directors and shareholders. From the late 1980s the plaintiff was engaged in family law proceedings with his then wife. He deposes that in early 1991 he came to an oral agreement with his brother, Pasquale, that he would transfer his half-share of the Chatswood property to Pasquale and Pasquale would raise a mortgage of around $195,000 on the property and lend that amount to him. He deposed that a conversation took place between them to the effect that he said to Pasquale “I’ll transfer the property to you as security on the loan … in case anything should happen to either of us” and Pasquale said “OK … Well if anything happens to me your half will always be yours, subject to you repaying the $195,000 with interest.” 3 Although counsel for the defendant submitted that the plaintiff’s evidence should not be accepted, there is no real dispute on the pleadings about the nature of the arrangement. The defendant admits that: 5(a) The Plaintiff and Pasquale Ciaglia made an oral agreement with regard to the Chatswood Property in or about 1991 (the Loan Agreement); 112

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Ciaglia v Ciaglia cont. (b) It was a term of the Loan Agreement that Pasquale Ciaglia would raise approximately $190,000 by way of mortgage over the Chatswood Property and would use those moneys to acquire the Plaintiff’s half share in the Chatswood Property; … 6(a) It was a term of the Loan Agreement that the Plaintiff would repay the principal of the loan and interest to Pasquale Ciaglia; and (b) The interest payable would be that which the National Australia Bank charged on the monies which Pasquale Ciaglia borrowed; … 10 … it was a term of the Agreement that upon payment by the Plaintiff to Pasquale Ciaglia of the outstanding loan monies, Pasquale Ciaglia would transfer back to the Plaintiff his half share in the Chatswood Property … 4 The defendant pleads that there was an understanding between the plaintiff and his brother that upon repayment by the plaintiff of the moneys owing on the loan Pasquale Ciaglia would transfer to the plaintiff a one-half interest in the property, but pleads that this understanding was: on the basis that two other properties would also be shared equally between the Defendant and Pasquale Ciaglia (and after their deaths by their respective children) being: (a) the block of apartments owned by the Plaintiff’s mother located at Crows Nest (“the Crows Nest property”); and (b) the house built by the Plaintiff in Italy (“the Italy Property”). 5 There was no evidence that the admitted agreement between the parties was subject to a term or understanding that it was conditional upon either the Crows Nest property or the Italy property being “shared equally” between the defendant and Pasquale Ciaglia, and after their deaths, their respective children. It is not clear what that allegation was intended to convey, given that the Crows Nest property was not owned by either the plaintiff or his brother. It was not suggested to the plaintiff in cross-examination that the agreement was subject to any such condition. The defendant did not give evidence. 6 On 16 April 1991 the plaintiff executed a memorandum of transfer in registrable form of his interest in the Chatswood property to his brother. The transfer stated that it was made in consideration of the payment of $195,000. Pasquale Ciaglia became the sole registered proprietor of the property. The transfer was made pursuant to the loan agreement. The plaintiff contends that by 1993 he had repaid the whole of the loan and interest. The date by which the loan was repaid is disputed by the defendant, but there is no dispute on the pleadings that the loan was repaid prior to Pasquale Ciaglia’s death in 2002. In para 15 of his statement of claim the plaintiff pleaded: 15. After the repayment by the Plaintiff of all monies outstanding in relation to the loan agreement, Pasquale Ciaglia failed or neglected to transfer to the Plaintiff a half share interest in the property. In response to this paragraph the defendant pleaded: As to paragraph 15 of the Statement of Claim, the Defendant admits that after repayment of all monies outstanding in relation to the Loan Agreement Pasquale Ciaglia did not transfer to the Plaintiff a half share interest in the Chatswood Property but says further that: (a) at no time did the Plaintiff request that Pasquale Ciaglia transfer to the Plaintiff a half share interest in the Chatswood Property; and

[3.95]

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Ciaglia v Ciaglia cont. (b) in or about 1999 or 2000 Pasquale Ciaglia offered to transfer the half share interest in the Chatswood Property to the Plaintiff and the Plaintiff refused this offer for the reason that matters with his former wife in the Family Court had not been resolved and he did not wish to have any property in his name. 7 The defendant pleads that the reason she refused to transfer the half share in the Chatswood property to the plaintiff was that the plaintiff refused to acknowledge the entitlement of the defendant’s children to a share in both the Crows Nest property and the Italy property. She did not aver that the reason she refused to transfer the half share in the Chatswood property to the plaintiff was that the loan had not been repaid. There was no evidence that any proposal was put to the plaintiff that the plaintiff acknowledge an entitlement of the defendant’s children to a share in the Crows Nest property or the Italy property or of his refusing to do so, and no such matter was put to the plaintiff in cross-examination. 8 In about January 2003, not long after Pasquale Ciaglia’s death, the plaintiff spoke to the defendant and said words to the effect that he wanted her to transfer his half of the property back into his name. She said “How do I know that the Chatswood property is half yours?”. He replied “You know very well that half of it is mine and I want you to transfer my one half back to me.” 9 Some time after 18 February 2003 the defendant handed the plaintiff a document and told him that “I’ve done this addendum so that it forms part of my Will. I’ve fixed everything up for you.” The document she gave to the plaintiff was signed by her and was described as an addendum to her last will and testament. It was directed to a Mr Ralph Selwyn, the family solicitor. The defendant wrote: I being of sound mind wish to state that two properties, they being […] Ridge Street Ettalong and […] Goodchap Road, Chatswood, are shared properties and half ownership is to revert back to my brother-in-law Umberto known as [Robert] Ciaglia … There are monies owed by myself and my late husband Pasquale Ciaglia to Robert, of which we are in the process of working out … 10 By this document the defendant acknowledged that the Chatswood property was a “shared property” with the plaintiff and that half ownership of that property was to revert back to him. Her acknowledgement that she and Pasquale Ciaglia owed money to the plaintiff is inconsistent with the plaintiff’s not having repaid the loan. 11 Probate of Pasquale Ciaglia’s estate was granted to the defendant on 28 May 2003. By a transmission application dated 16 December 2003 the defendant applied to be registered as proprietor of the estate or interest of the late Pasquale Ciaglia in the land as beneficiary of his will. She had notice of the plaintiff’s claim to be entitled to a half share of the property. The property was vested in her on her obtaining the grant of probate pursuant to s 44 of the Probate and Administration Act 1898. The vesting of the property in her as executor was subject to any trust or equity affecting the same (Probate and Administration Act, s 45). 12 The admitted contract is an agreement for a loan and the grant of a common law mortgage notwithstanding that the property in question is land held under the provisions of the Real Property Act 1900. In G and C Kreglinger v New Patagonian Meat and Cold Storage Co Ltd [1914] AC 25, Lord Parker of Waddington said (at 47): My Lords, a legal mortgage has generally taken the form of a conveyance with a proviso for reconveyance on the payment of money by a specified date. But a conveyance in this form is by no means necessarily a mortgage. In order to determine whether it is or is not a mortgage, equity has always looked to the real intention of the parties, to be gathered not only from the terms of the particular instrument but from all the circumstances of the transaction, and has always admitted parol evidence in cases where the real intention was in doubt. Only if according to the real intention of the parties the property was to be held as a pledge or 114

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Ciaglia v Ciaglia cont. security for the payment of money, and as such to be restored to the mortgagor when the money was paid, was the conveyance considered to be a mortgage. 13 A mortgage of Torrens title land can be effected by registering an instrument of transfer of the legal title from the mortgagor, and at the same time, entering into a separate agreement that confirms the intention that the transfer was by way of security only: Abigail v Lapin [1934] AC 491 at 501; Currey (Registrar of Titles) v The Federal Building Society (1929) 42 CLR 421. 14 On the defendant’s admission, the transfer by the plaintiff to his brother of his half interest in the property was not intended to be an absolute conveyance and the money paid on the transfer was not paid as the price for a transfer on sale but as a loan to be repaid and on terms that the property was to be restored to the plaintiff when the loan was repaid. The real intention of the parties was that the plaintiff’s half-interest in the land was to be held by Pasquale Ciaglia as security for the repayment of the advance with interest. In the case of a common law mortgage, where the mortgagee acquires the legal title to the property, upon the whole of the mortgage debt being repaid and the mortgagor becoming entitled to a reconveyance, the mortgagee holds the property on a constructive trust for the mortgagor (Venables v Foyle (1660) 1 Ch Cas 2; 22 ER 664; Richardson v Syms (1740) 1 Barn C 90; Cholmondeley v Clinton (1820) 2 Jac & W 1; 37 ER 527; RW Turner, The Equity of Redemption (1931) Cambridge University Press at 167; Pearce v Morris (1869) LR 8 Eq 217; Tyler, Young and Croft, Fisher & Lightwood’s Law of Mortgage, 2 nd Australian edition (2005) LexisNexis Butterworths at [32.54]). 15 Notwithstanding the defendant’s admission, Mr Stack of counsel, who appeared for the defendant submitted that the evidence of repayment adduced by the plaintiff, did not show that the loan had been repaid. He submitted that I should determine whether the loan had been repaid based on that evidence and should find that it had not, notwithstanding the defendant’s admission that it had been repaid. He referred to Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 at 520-522. 16 The plaintiff deposed that the loan repayments were made partly from lump sum repayments which he made from Italy to his mother’s account, and partly by payments from Lajido to Pasquale Ciaglia’s loan account with the National Australia Bank which he obtained for the purposes of the mortgage raised on the Chatswood property. The plaintiff said that the payments from Lajido represented his half share of net income of Lajido to which he was entitled. 17 The plaintiff paid $117,050.77 into his mother’s account between 23 April 1991 and 9 February 1993. Pasquale Ciaglia’s loan account with the National Australia Bank was credited with 28 payments of $3,327 from Lajido between May 1991 and September 1993 ($93,156) and six payments in lump sums ranging between $15,000 and $40,000 made between 26 April 1991 and 19 February 1993 totalling $144,000. The latter payments were made from Mrs Maria Ciaglia’s bank account. 18 In a number of cases the payments were prima facie made pursuant to a loan agreement between Mrs Maria Ciaglia and Pasquale. There is no evidence that any repayment by Pasquale to his mother was made or sought. 19 The result of these payments to Pasquale Ciaglia’s account with the National Australia Bank for the loan he took was that the account was in credit. That is, Pasquale Ciaglia’s loan from the National Australia Bank was repaid by August 1993. 20 Damberg v Damberg demonstrates that a court is not bound to act on the parties’ admissions. But a fundamental purpose of pleadings is to define the issues so as to confine the matters on which evidence need be led. In Damberg v Damberg Heydon JA observed (at [160]) that courts will act on admissions of or about matters of fact where there is no reason to doubt their correctness, but are reluctant to do so if there is such doubt. Where a matter of fact is admitted on the pleadings, it is not a reason to doubt the correctness of the admission that attenuated evidence is given on that matter, which, but for the admission, would be insufficient to prove the fact. Were it otherwise pleadings [3.95]

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Ciaglia v Ciaglia cont. would not only fail in their purpose, but could be the source of injustice. If a party who admits a fact is later able to say that the court should not act on the admission because the opposite party’s evidence about the fact does not amount to proof on the balance of probabilities, the efficacy of pleadings is much diminished. The opposite party would have to prepare his or her case as if no such admission were made. That is not the law. I do not doubt the correctness of the admission because of the insufficiency of the objective corroboration of the plaintiff’s evidence, considered without the admission, to prove the fact if it had been in issue. Other evidence might well have been called, for example from Mrs Maria Ciaglia, to explain the payments made through her account. As appears below, I consider that the indirect means of repayment were probably adopted due to the parties’ desire to conceal the true nature of the transaction from the plaintiff’s former wife. 21 During the hearing the defendant sought leave to withdraw the admission. I refused that application. There was no evidence that the admission was made by mistake. I had regard to the defendant’s admission in her document of 18 February 2003 (at [9] above) that she and her husband were indebted to the plaintiff, which I regard as inconsistent with the plaintiff’s not having repaid the admitted loan and interest. 22 Nothing turns on the question as to whether the loan was repaid in 1993 as deposed to by the plaintiff, or at some time before Pasquale’s death as admitted by the defendant. In the absence of other evidence as to how the loan was repaid, and having regard to the defendant’s admission, I accept that it was repaid by August 1993. 23 On the admissions of the defendant, she holds the land on a constructive trust for the plaintiff as to a one-half share subject to her defences of: a)

the Limitation Act 1969;

b)

laches;

c)

unclean hands;

d)

s 23C and s 54A of the Conveyancing Act 1919; and

e)

indefeasibility under s 42 of the Real Property Act.

24 The plaintiff did not contend that the property was beneficially owned by him and his brother as joint tenants so that he became entitled to his brother’s share on his brother’s death. The plaintiff claims to be entitled to a half-share of the land as tenant-in-common with the defendant. ... Sections 23C and 54A of the Conveyancing Act 50 Sections 23C, 23E(d) and 54A(1) and (2) provide: 23C Instruments required to be in writing (1) Subject to the provisions of this Act with respect to the creation of interests in land by parol: (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent thereunto lawfully authorised in writing, or by will, or by operation of law, (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will, (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person’s will, or by the person’s agent thereunto lawfully authorised in writing. 116

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Ciaglia v Ciaglia cont. (2) This section does not affect the creation or operation of resulting, implied, or constructive trusts. … 23E Savings in regard to secs 23B, 23C, 23D Nothing in section 23B, 23C, or 23D shall: … (d) affect the operation of the law relating to part performance. … 54A Contracts for sale etc of land to be in writing (1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged. (2) This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court. 51 There is a threshold question of which of s 23C and s 54A is potentially engaged, or whether both are engaged. In Baloglow v Konstantinidis & Ors [2001] NSWCA 451; (2001) 11 BPR 20,721 Giles JA, with whom Mason P agreed, held that s 54A applies at the stage of there being an executory agreement to dispose of an interest in land, whereas s 23C arises at the stage of performance of an agreement or where there is a creation or disposal of property without a prior agreement. His Honour said (at [162]): [Section 54A] arises at the stage of agreement to create or dispose of an interest in land. It has its own requirement of writing, less stringent than the requirement in s23C in that a note or memorandum of the agreement is sufficient and the signing agent need not be authorised in writing. [Section 23C] arises at the stage of performance of an agreement or where there is no prior agreement, and in keeping with the importance attached to property rights has a more stringent requirement of writing in that the creative or dispositive instrument itself must be in writing and the signing agent must be authorised in writing. S54A excepts the operation of the law relating to part performance, material to an executory agreement, s23C excepts the operation of the law relating to trusts, material to property rights. S23C is in a Part of the Conveyancing Act dealing with property and a Division of that Part dealing with assurances, and otherwise concentrates on property rights, see s23C(1)(b) dealing with declarations of trust and s23C(1)(c) dealing with disposition of subsisting equitable interests. There is no encouragement in its language to make it apply to executory agreements under which property rights are to be created or disposed of when the agreement is performed. It was held that s 23C does not apply where the only basis for asserting that property rights were created or disposed of was because equity would decree specific performance of an executory agreement. Giles JA also said that where the question was whether there had been an assurance of property because the agreement to dispose of property had been performed, s 23C, and not s 54A, was the relevant section. His Honour said (at [190]): … When property rights are involved, s23C applies at the time of assurance. It may be that property rights arise without an assurance, because the purchaser pays the purchase price and the vendor holds the property as bare trustee for the purchaser. In that situation there will be no requirement of writing because s23C(2) will have effect. 52 On this analysis, only s 23C would be engaged in the present case. 53 On the admitted facts, the plaintiff has performed his obligations under the agreement by granting the mortgage. For the reasons below, equity prevents the transferee from denying the true [3.95]

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Ciaglia v Ciaglia cont. character of an apparently absolute conveyance as a mortgage if it would be a fraud to insist on the absolute conveyance. The deceased became the registered proprietor of the plaintiff’s half interest in the land and advanced the loan to the plaintiff. The agreement is therefore executed; it does not require the execution of an instrument or the doing of an act to put the parties in the position contemplated by the agreement as mortgagee/mortgagor and lender/borrower. 54 The plaintiff has repaid the loan. Accordingly, all that remains is for equity to enforce the parties’ property rights under the conveyance by recognising a constructive trust in the plaintiff’s favour that arose upon the loan repayment (see cases cited at paragraph [14]). The application of s 23C(1)(a) to the enforcement of the constructive trust is excluded by s 23C(2) (see Baloglow v Konstantinidis at [158] and [162]). For this reason, s 23C(1)(a) does not preclude the court from recognising that the interest created in Pasquale Ciaglia was an interest as mortgagee only, preserving to the plaintiff an equity of redemption, and thus enforcing the defendant’s obligation to reconvey. 55 The issue in Baloglow v Konstantinidis was whether s 23C applied to an agreement which was wholly executory, where the only basis for contending that interests in property were created or disposed of was through the agreement being amenable to an order for specific performance. Only s 23C was relied on because there was a memorandum signed by the agent of the party to be charged, although the agent was not authorised in writing. The ratio of the decision is that s 23C does not apply in such circumstances. The reasoning that s 23C, and not s 54A, applied where the interest created or disposed of arose out of the performance of the agreement was said to be part of an harmonious relationship between the sections. But it was not essential for the decision. That part of the reasoning in Baloglow v Konstantinidis is difficult to reconcile with earlier cases concerning s 4 of the Statute of Frauds (the equivalent of s 54A) and in any event is inconsistent with the later Court of Appeal decision in Khoury v Khouri [2006] NSWCA 184; (2006) 66 NSWLR 241. 56 So far as earlier cases are concerned, in the seminal case of Maddison v Alderson (1883) 8 App Cas 467, the plaintiff had fully performed the agreement the jury found had been made that the deceased would leave the plaintiff a life interest in certain lands if she continued to serve him as housekeeper without wages. Yet the plaintiff failed under s 4 of the Statute of Frauds because there was no memorandum of the agreement signed by the deceased and the acts of performance were not unequivocally in their own nature referable to some such agreement as was alleged. Lord Selborne said (at 478-479) that: … 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; Hughes v Morris; Britain v Rossiter. 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 purchasemoney has been paid without delivery of possession, nor is such a case at all likely to happen. All the authorities shew 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; Frame v Dawson; Morphett v Jones. (citations omitted) 57 None of the authorities cited for the proposition that payment of the purchase price in full was not a sufficient act of part performance supported the proposition, but this reasoning is inconsistent with s 4 of the Statute of Frauds being inapplicable if payment were made in full so that the land was held on a constructive trust for the purchaser. 58 In Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6 (discussed below in the context of equity’s not permitting the statute to be used as an instrument of fraud) it was agreed that an apparently absolute conveyance should be no more than security for payment of a debt. The agreement was at least partly 118

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Ciaglia v Ciaglia cont. executed. The mortgagor’s claim to enforce the oral promise for redemption was upheld by Knight-Bruce LJ on the grounds of part performance. 59 In Khoury v Khouri the primary judge found that the parties made an oral agreement that B (Bechara) would pay $30,000 to P (Peter) and pay P’s instalments under a bank loan in exchange for P’s promise to hold his half share in certain land for the benefit of, that is, on trust for B (at [26]-[28]). The primary judge found that the agreement had been performed by a complex arrangement involving other parties. Later the primary judge described the agreement as one by which B promised to declare a trust in favour of A, but Bryson JA, who gave the leading judgment, rejected that description and said that on the primary findings there was a declaration of trust with immediate effect (at [40]). 60 Bryson JA (with whom Handley JA agreed) said (at [54] and [57]): [54] Upon the present facts, it is my opinion that both ss 54A and 23C(1)(a) operate to prevent enforcement of the agreement as found unless enforcement is available under the doctrine of part performance. … [57] … [counsel contended] that as Bechara performed his obligations under the agreement and paid the consideration Peter held his share in the property on a constructive trust for Bechara. It was then contended that if Peter held his share in the property as a constructive trustee for Bechara there was no room for the operation of s 23C(1) having regard to s 23C(2). I will not examine this argument further; it could well be right but would not overcome s 54A … 61 Thus it was held that s 54A applied to an agreement to declare immediately a trust of land, and that was so notwithstanding that the agreement had been performed and a constructive trust arose if the agreement was enforceable. The Court of Appeal held that payment of money could not be relied on as part performance to take the case outside s 54A and in any event the complex arrangements involving payments to third parties were not acts unequivocally referable to some such agreement as was alleged. It did not reverse the primary judge’s finding that the agreement had been performed. 62 This analysis is only consistent with s 54A applying not only to executory but also to executed agreements. It is the ratio of Khoury v Khouri. Accordingly, notwithstanding Baloglow v Konstantinidis, I conclude that s 54A is also potentially applicable. That is not to say that s 23C(1)(a) is not also engaged. The defendant pleads that s 23C(1)(a) precludes the plaintiff’s asserting that the transfer of the land to Pasquale was by way of mortgage and that he is entitled to redeem the mortgage. Once it is recognised that the transfer to Pasquale was not absolute but by way of mortgage, there is no difficulty in concluding that s 23C(1) does not apply because the plaintiff is seeking to enforce a constructive trust. Prima facie s 23C(1)(a) means that in the absence of writing the plaintiff cannot establish that the transfer was by way of mortgage and he has an equity of redemption. For the reasons below this would be to use s 23C(1)(a) as an instrument of fraud, which the defendant is not allowed to do. 63 The authorities also establish that independently of the doctrine of part performance, s 54A cannot be used as an instrument of fraud. Hence s 54A also does not preclude the recognition and enforcement of the plaintiff’s equity of redemption. I also consider that the plaintiff can rely on the doctrine of part performance. Fraud on the Statute 64 The plaintiff did not specifically plead that the defendant was not entitled to rely upon either s 23C or s 54A of the Conveyancing Act because to do so would be to use those sections as an instrument of fraud. However, he pleaded the facts which give rise to that contention and during the hearing it was plainly identified as an issue arising on the pleadings and the evidence. [3.95]

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Ciaglia v Ciaglia cont. 65 The following cases illustrate that equity will not permit a party to rely upon s 23C of the Conveyancing Act to resist proof that an apparently absolute conveyance was intended to be by way of security only and to deny a mortgagor’s right to redeem and obtain a retransfer of the mortgaged property. To do otherwise constitutes a fraud on the statute. If the issue arises under s 54A, as I think it does, the same wider principle applies that a party cannot use the Statute as an instrument of fraud to deny an agreement for the grant of a mortgage. 66 The leading analogous case is the decision of the Court of Appeal in Chancery (Knight-Bruce and Turner LJJ) in Lincoln v Wright. There, a mortgagee made it known that he proposed to exercise his power of sale and sell the mortgaged property for £220 unless a higher offer could be obtained. The mortgaged property consisted of land and buildings and a policy of insurance on the mortgagor’s life. The plaintiff (mortgagor) agreed with Wright that Wright would buy the mortgaged property from the mortgagee on the mortgagor’s behalf for £230 and have a lien on it for that sum, but that the mortgagor would pay five percent interest and the premiums on the policy. The mortgagor and Wright agreed that the mortgagor would continue to occupy the house and land and that rents of other buildings would be applied in reducing the principal. Wright duly purchased the mortgaged property. The mortgagor remained in possession of the house and land without paying rent. Wright received rents from other buildings. The mortgagor paid the premiums on the policy as they became due. The agreement between the mortgagor and Wright was oral. It was not evidenced by any note or memorandum. Knight-Bruce LJ held that the plaintiff’s continuing in possession of the property amounted to part performance of the oral agreement although his Lordship added that “though I have mentioned part performance alone as a ground for excluding the operation of the Statute of Frauds, I am not sure that its operation is not also otherwise excluded in this case” (at 8-9). Turner LJ said (at 9): Without reference to the question of part performance, on which I do not think it necessary to give any opinion, I think that the parol evidence is admissible and is decisive upon the case. The principle of the Court is, that the Statute of Frauds was not made to cover fraud. If the real agreement in this case was that as between the Plaintiff and Wright the transaction should be a mortgage transaction, it is in the eye of this Court a fraud to insist on the conveyance as being absolute, and parol evidence must be admissible to prove the fraud. Assuming the agreement proved, the principle of the old cases as to mortgages – to which I referred in the course of the argument – seems to me to be directly applicable. Here is an absolute conveyance, when it was agreed there should be a mortgage; and the conveyance is insisted upon in fraud of the agreement. 67 The “old cases as to mortgages” to which Turner LJ referred may have included England v Codrington (1758) 1 Eden 169; 28 ER 649. In that case the proviso for redemption was fraudulently omitted by the drawer of the conveyance which, on its face, was absolute. There was no note or memorandum signed by the mortgagee or his agent evidencing the true nature of the transaction, but the mortgagee by his answer admitted that the agreement was not for the sale of the estate but the estate was redeemable in certain circumstances (which the mortgagee contended had not occurred). The court recognised and enforced the true transaction (that the conveyance was by way of security) notwithstanding the absence of writing. 68 In Edge v Worthington (1786) 1 Cox 211; 29 ER 1133, Kenyon MR admitted parol evidence to prove the “actual agreement”, being an agreement for the grant of a mortgage, and made a decree for foreclosure. Thus it is stated in W Clark (ed), Fisher and Lightwood’s Law of Mortgage, 12th ed (2006) LexisNexis Butterworths at [1.12] that: The courts will, however, give effect to an intention to create a security, if proved, and will also take care that a borrower shall not suffer from the omission by fraud, mistake, or accident, of the usual requisites of a mortgage. An instrument which purports to be an absolute conveyance may, therefore, be construed as a mortgage where, according to the true intention of the parties, it was intended to be regarded as a mortgage. This will be done 120

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Ciaglia v Ciaglia cont. where there is parol evidence of the non-execution, erasure, or omission by mistake or fraud of an intended defeasance or proviso for redemption, or if a separate defeasance or agreement for a right of redemption has been made by the mortgagee or his duly authorised agent, either in writing or orally … (emphasis added) (See to the same effect Fisher and Lightwood’s Law of Mortgage 2nd Australian Edition at [1.20].) 69 Cases of the highest authority establish that oral evidence is admissible to establish the true nature of the transaction, and that if the true nature of the transaction is one of mortgage, the equity of redemption can be enforced (Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98; Barton v Bank of NSW (1890) LR 15 App Cas 379). The reason, I take it, that the Statute of Frauds does not stand in the way is that it would be to use the Statute as an instrument of fraud to deny enforcement of the true transaction. 70 The judgment of Turner LJ in Lincoln v Wright has frequently been applied to allow a transferor who purports to part with his or her property under an absolute conveyance to establish that the true intention of the parties was that the conveyance should not be absolute, but that the transferee had orally agreed to reconvey the property in certain events. In Haigh v Kaye (1872) LR 7 Ch App 469 the plaintiff conveyed his estate to the defendant by deed which was expressed to be an absolute conveyance for consideration of the purchase price. The defendant admitted that the purchase price had not been paid and it was found that on the defendant’s admissions that he acquired the property as trustee for the plaintiff. The trust so found appears to be an express, not a resulting or constructive, trust. It was held, applying the judgment of Turner LJ in Lincoln v Wright, that the Statute of Frauds could not be relied upon to deny the trust. 71 In Re Duke of Marlborough; Davis v Whitehead [1894] 2 Ch 133, the Duchess of Marlborough transferred her leasehold estate to the Duke by deed, expressed to be an absolute assignment made for natural love and affection, in order that the Duke could use the property as security for a loan to be raised by him on mortgage. The Duke and Duchess both intended that he would reconvey the property to her, and that she was beneficially entitled to the property subject to the mortgage. Stirling J, applying the judgment of Turner LJ in Lincoln v Wright and also Haigh v Kaye, held that the Duchess was entitled to the equity of redemption in the leasehold house and that she was entitled to a reconveyance of the leasehold estate subject to the mortgage. 72 In Rochefoucauld v Boustead [1897] 1 Ch 196 the plaintiff was the owner of lands subject to a mortgage. The mortgagees exercised their power of sale and the defendant purchased the land. The plaintiff successfully contended that the defendant purchased the land as trustee for her subject to a charge in the defendant’s favour in respect of sums advanced by him to purchase the estates and to work them. The Court of Appeal held (at 206) that: Consequently, notwithstanding the [Statute of Frauds], it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself. 73 The Court of Appeal cited Lincoln v Wright and Re Duke of Marlborough; Davis v Whitehead in support of that principle. 74 In Cadd v Cadd (1909) 9 CLR 171 at 187 Isaacs J said: The respondent’s evidence as to the trust is entirely oral, but that in itself presents no difficulty. The repudiation by any person of the terms upon which he has been entrusted with the legal title to property is a fraudulent use of another’s confidence and the Statute is not intended to cover fraud: In Re Duke of Marlborough; Davis v Whitehead; Rochefoucauld v Boustead. [3.95]

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Ciaglia v Ciaglia cont. 75 In Bannister v Bannister [1948] 2 All ER 133 the defendant sold her cottages to the plaintiff on terms which included an oral agreement for the grant of a life tenancy in one of the cottages. The Court of Appeal held that to permit the plaintiff to rely upon the absolute character of conveyance to defeat the oral reservation of a life tenancy would be to use the Statute of Frauds as an instrument of fraud. In Dalton v Christofis [1978] WAR 42, Smith J held that the Statute of Frauds could not be relied on to smother proof of an agreement to hold land on an express trust. 76 In Last v Rosenfeld [1972] 2 NSWLR 923, the parties were joint owners of property. The parties executed and completed a contract for the defendants to purchase the plaintiffs’ half-share of the property. There was a prior oral agreement that the defendants would resell that half-interest to the plaintiffs if the defendants did not live in the property themselves within one year. After the purchase contract was completed, the defendants did not live in the property within the year but then sought to deny the oral agreement. Hope J held that the principle that the Court would not allow the Statute of Frauds to be used as an instrument of fraud applied to s 54A of the Conveyancing Act and precluded the defendants’ reliance upon that section. In the course of a wide ranging review of authority, his Honour observed (at 927-928): No sooner had the Statute of Frauds been enacted in 1677 than the courts set about relieving persons of its effect in cases where it was thought that the legislation could not have been intended to apply. In general terms, it was said that the courts would not allow the Statute of Frauds to be made an instrument of fraud, and that it did not prevent the proof of the fraud. No doubt, as was said by Selborne L.C. in Maddison v Alderson in relation to one of the principles that was developed in this way, namely, the doctrine of part performance, 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 relevant doctrine. The general approach indicated by this summary statement did, however, spread into a number of fields where a statute requires writing, some of which it will be necessary to look at for the purposes of the present case. The fields in which this general approach was adopted include, as well as the doctrine of part performance, the rule that parol evidence is admissible to show that an absolute conveyance was in truth by way of security only, the principle that oral evidence can establish that a person has taken a transfer of property as trustee or agent for another, the doctrine whereby equity gave relief upon a breach by the survivor of two persons of a contract they had made to make mutual wills, and the principle whereby equity will compel beneficiaries who have agreed to accept their interests under the will upon communicated trusts to perform those trusts. … 77 His Honour also observed that mortgage cases were within this principle, that is, the Statute of Frauds cannot be used to prevent a person who has transferred his or her property, apparently by way of absolute conveyance, from establishing that the true transaction was by way of mortgage and that he or she was entitled to redeem, that is, to take a reconveyance upon repayment of the loan. His Honour said (at 931-932): Another class of case where what I have described as the general approach is adopted is that where land has been conveyed by what on its face is an absolute conveyance, but where the transaction was intended to be defeasible. The mortgage cases are included in this class. In the seventeenth century and for some time thereafter it would seem that a mortgage was commonly effected by an absolute conveyance to the mortgagee, who also executed a separate deed of defeasance. This deed would operate according to its terms at law, and if the condition which it contained as to repayment was not duly performed, the legal right of the mortgagor to recover the property would go. In equity, of course, the mortgagor would still be entitled to redeem until he was foreclosed or otherwise lost this right, but by virtue of an equitable right and not by virtue of any legal or contractual right. … … there are a great many decisions in which a court of equity has admitted oral evidence to establish that an apparently absolute conveyance was in truth a mortgage. In most of these cases it was not material to 122

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Ciaglia v Ciaglia cont. order the execution of a deed of defeasance or to rectify the absolute conveyance; the time for the exercise of the legal right to redeem was gone and the only question was whether the mortgagor had an equitable right to redeem. The maxim “Once a mortgage always a mortgage” was developed in relation to this situation, but it seems to me that this is really merely an expression of the general principle as to fraud in its application to mortgages. … The rule that oral evidence can be adduced to show that an apparently absolute transaction is in truth a mortgage is well established and has been affirmed by the Privy Council: Barton v Bank of New South Wales. 78 His Honour then dealt with Lincoln v Wright. 79 These observations, coupled with his Honour’s applying the wider principle that the Statute of Frauds cannot be used as an instrument of fraud in the context of s 54A, indicate that the principle applies to both s 23C and s 54A. This is consistent with Lincoln v Wright. The learned authors of Meagher, Gummow & Lehane’s Equity Doctrines & Remedies, 4 th ed LexisNexis Butterworths at [12-125] treat Lincoln v Wright as a case on s 7 of the Statute of Frauds, that is as a case on the predecessor to s 23C(1) requiring all declarations or creations of trust of land to be in writing. There is nothing in the decision in Lincoln v Wright which so confines it. As observed earlier, at least Knight-Bruce LJ considered the issues under the doctrine of part performance. Moreover, if, as Khoury v Khouri indicates, both ss 23C and 54A apply, there is no reason to confine the principles discussed above to cases under s 23C. In any event, Last v Rosenfeld clearly establishes that the principles are not so confined. 80 Last v Rosenfeld was referred to with approval by the High Court in Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at [31], although not on this point. 81 In Wratten v Hunter [1978] 2 NSWLR 367, Needham J also held that the principle in Rochefoucauld v Boustead applies “where land is conveyed to a person as a mortgagee by absolute conveyance, and he subsequently seeks to rely upon the absolute conveyance so as to deny the equity of redemption of the mortgagor” (at 369). 82 This line of authority developed independently of the doctrine of part performance. The doctrine of part performance is itself an illustration of the wider principle that courts will not permit the Statute of Frauds to be used as an instrument of fraud. In Williams, The Statute of Frauds Section IV (1932) Cambridge University Press, at 222-223, the learned author opined that the principle that a party will not be allowed to make the Statute an engine of fraud was restricted in its operation to two classes of case, namely: (i)

Cases where one party has partly or wholly performed his side of the contract, and the other thereupon, designing to secure the benefit of such performance without performing in return the obligations which the contract imposes on him, sets up a plea of non-compliance with the Statute; and

(ii)

Cases where such a plea is set up by one who has by fraud prevented the execution of a sufficient writing.

83 Mr Stack for the defendant submitted that if the agreement could not be enforced in accordance with the doctrine of part performance then the wider principles in relation to a party not being allowed to rely upon the Statute of Frauds as an engine of fraud would not be of assistance. However as I have indicated the doctrine of part performance is but an example of the wider principle. It is also clear from Lincoln v Wright and Last v Rosenfeld that the two principles are discrete. Accordingly the limitations and prescriptions in the doctrine of part performance have no part to play where the wider principle can be invoked. It is also clear that, contrary to Mr Stack’s submission that the wider principle should be confined to the cases of express trusts, the wider principle is not so confined. 84 Mr Stack submitted also that the wider principle is inconsistent with the terms of ss 23C and 54A. However, the wider principle is of long standing. The current provisions were enacted without [3.95]

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Ciaglia v Ciaglia cont. material modification in the light of that well-established doctrine. As Brennan J said in Bahr v Nicolay (No. 2) (1988) 164 CLR 604 at 656, there is no reason the doctrine should be doubted. The limits of the doctrine are unclear. But cases on mortgages, such as the present case, fall within it. 85 For these reasons neither s 23C(1)(a) nor s 54A precludes the plaintiff’s establishing that the true arrangement was a mortgage and not an absolute sale, notwithstanding the absence of writing. However in case I am wrong in concluding that the doctrine of “fraud on the statute” is applicable to s 54A, I will also deal with the issue of part performance. Part performance 86 An agreement to mortgage or charge land is within s 54A (Khoury v Khouri at [5] and cases there cited). There is no note or memorandum of the agreement signed by the deceased or his agent. There is a note or memorandum of the agreement signed by the person to be charged, that is, the defendant. She has verified her defence which admits all of the terms of the agreement. The decisions of the Full Court in Dudgeon v Chie (1954) 55 SR (NSW) 450 and the Court of Appeal in Fletcher v Burns (1997) 12 BPR 22,937 and the earlier decisions in Walters v Morgan (1792) 2 Cox 369; 30 ER 169; Cooth v Jackson (1801) 6 Ves Jun 12 at 39; 31 ER 913 at 927; and Blagden v Bradbear (1806) 12 Ves Jun 466 at 471; 33 ER 176 at 178 preclude reliance upon the defence, and the defendant’s affidavit verifying the defence, as constituting a sufficient note or memorandum. (See also Sugden, A Concise and Practical Treatise of the Law of Vendors and Purchasers of Estates, 14th ed (1862) H. Sweet at 149 and Williams, The Statute of Frauds Section IV at 276-277.) This result has been strongly criticised (Greig & Davis, The Law of Contract (1987) LawBook Co at 696) but the authorities are binding upon me. The plaintiff did not seek to rely upon the defence, or the affidavit verifying the defence, as a sufficient note or memorandum. 87 As to part performance of contracts for the sale of land, it is necessary and sufficient for the plaintiff to establish acts on his part that are “unequivocally and in their own nature referable to some contract of the general nature of that alleged” (Regent v Millett (1976) 133 CLR 679 at 683; Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 432; Khoury v Khouri at [86], [90]). Cases on contracts for the sale or lease of land apply by analogy to the enforcement of agreements creating securities, but the nature of the acts which suffice as acts of part performance differ, because the subject matter of the latter class of agreements is not the ownership or possession of land, but the debt to be repaid and the security to be taken (Cooney v Burns (1922) 30 CLR 216 at 241-242; Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at 623 [28]). 88 The plaintiff’s acts of performance of the agreement were his signing of the transfer, his receipt of $195,000 described as the purchase price, his repayment of the principal of $195,000 and payment of interest. 89 The plaintiff also did work on the property between February and November 2003. That work involved repairing the roof, laying a new driveway, excavating foundations for retaining walls and preparing the formwork and pouring the concrete for the walls, replacement of rotten and badly weathered timbers and painting, refitting banisters, installing a new outdoor veranda light, repairing leaks on the veranda and relaying the veranda floor, replacing the power board, rewiring, removing overgrown trees, renovating a bathroom, installing new drainage, demolishing a rear fence and installing a new fence and retaining wall, other work to a roof, and purchasing and installing a new skylight, and blocking holes to make roof areas unaccessible to possums and pigeons. Some of the work was done by the plaintiff personally; some was done by tradesmen whom he engaged. The plaintiff was not engaged to do the work as a tradesman and was not paid. The plaintiff relied on this work as further acts of part performance of the agreement to mortgage his interest in the property. It is an interesting feature of the doctrine of part performance that improvements made by a purchaser to a property after taking possession with the knowledge of the vendor are regarded as acts of part 124

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Ciaglia v Ciaglia cont. performance (Regent v Millett at 682), although they are not acts done in performance of the contract, but rather in reliance on it. This demonstrates the close relationship of the doctrine to principles of estoppel (Cooney v Burns at 241). 90 The defendant denied that repayments of the loan could be acts of part performance. Counsel for the plaintiff relied upon Khoury v Khouri where Bryson JA said (at [90] and [92]) that payments of money are “unavailable” as acts of part performance and that such payments are “excluded”. Those statements must be understood in the context of the case where the contract was one of sale and purchase and the only acts of part performance relied upon were the payment of money. In Maddison v Alderson at 476 in a passage quoted by Bryson JA (at [77]), Lord Selborne LC posited a case of part performance where the vendor would be charged on the equities such that the contract could be enforced. The case supposed was as follows: 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. (my emphasis) 91 This does not suggest that payments of money are excluded from consideration of whether the contract has been partly performed, as distinct from being insufficient. Similarly in a passage in cited in Khoury v Khouri at [82], Knox CJ said in Cooney v Burns (at 222-223): It is settled that payment of part of the purchase-money is not of itself and apart from other circumstances – eg, delivery of possession – a sufficient act of part performance to take a case out of the statute. (my emphasis) 92 The payment of money in effecting improvements made with the knowledge of the other contracting party may be an act of part performance. 93 In Millett v Regent [1975] 1 NSWLR 62, the Court of Appeal found that the acts of the plaintiffs in entering into and retaining possession, payment off of the owner’s mortgage instalments and making repairs and renovations to the premises all qualified for consideration as acts of part performance. In the High Court, Gibbs J, with whom Stephen, Mason, Jacobs and Murphy JJ agreed said (at 683): In the present case the giving and taking of possession by itself was sufficient part performance of the contract and it is therefore unnecessary to consider whether the other acts relied upon would also, either alone or together, amount to part performance. 94 The High Court did not disapprove of the reasoning of the Court of Appeal insofar as the Court of Appeal treated the payment off of the owner’s mortgage instalments as being relevant acts of part performance. 95 The cases on vendor and purchaser apply only by analogy to an oral contract of loan and mortgage. In Ex parte Whitbread (1812) 19 Ves Jun 209; 34 ER 496 Lord Eldon observed that in a mortgage by deposit of title deeds, the fact that an advance of money is made by the person with whom the deeds are deposited is sufficient to connect the actions so as to conclude that the acts were done in performance of an agreement to lend on security. His Lordship said (at 212): …a person, with whom [title] deeds were deposited, having advanced nothing, could not be the person who was to have an interest in the estate; and where there has been a dealing with the estate by a third person, who had made an advance, by connecting that dealing with the only advance, by that person, the deposit has been held a security for him. In my view it is open to consider the repayments of principal and payment of interest as acts of part performance of the agreement for loan and mortgage, even if the payments would not by themselves be sufficient. 96 If one had regard only to the payments made by Lajido and Mrs Ciaglia to Pasquale, without the defendant’s admission that the loan was repaid, and the plaintiff’s explanation that those payments [3.95]

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Ciaglia v Ciaglia cont. were in repayment of the loan, it could not be said that the payments of their own nature referred unequivocally to some such agreement as that alleged. The payments were not made by the plaintiff to Pasquale. However, in my view the defendant’s admission that the loan was repaid can be used to prove that act of part performance. The defence cannot be relied on as a note or memorandum of the agreement, but there is no reason it cannot be relied on to prove acts of part performance. The requirement that acts of part performance must of their own nature refer unequivocally to some such agreement as is alleged cannot exclude all evidence or admissions to explain the acts. In a typical case of a contract for sale of land, the act of the purchaser of going into possession is treated as an act of part performance. But by itself, and without colour from the surrounding circumstances, such an act cannot be unequivocally referable to an agreement for sale, as distinct from a licence to occupy the property. 97 Support for this approach can be found in the decision of the Court of Appeal in Millett v Regent, where Glass JA (at 71-72), in discussing the degree of proof required for part performance, chose to: … measure the sufficiency of the evidence by asking whether the acts of part performance admit of any other reasonable explanation, except that the defendants agreed to transfer to the plaintiffs an interest in the premises. His Honour concluded (at 72-73) that: … the acts of part performance, viewed in the context of the family dealings, were such as to admit of no reasonable explanation except that of an agreement that upon the fulfillment of certain conditions the plaintiffs should become owners of the property as a matter of right and not of favour. 98 This suggests that regard can be had to surrounding circumstances to establish, objectively, whether acts of part performance can be proven. That must be so because it would otherwise be impossible to say that any acts are unequivocally and in their own nature referable to a contract of the nature alleged. Hutley JA recognised this in stating (at 65) that: If “unequivocal” [in the requirement for part performance referred to above] is given its ordinary meaning, it is hard to see how any acts of part performance would suffice, as any set of acts can have multiple references to ingenious minds. “Unequivocal” is used in a special sense … 99 The High Court did not express disapproval of these statements. 100 In my view, in determining whether there were sufficient acts of part performance, I can have regard not only to the fact that Pasquale was paid moneys by Lajido and Mrs Maria Ciaglia, but to the evidence and admissions that those payments were repayments of the plaintiff’s loan with interest. 101 Cases such as Ex parte Whitbread and Arnick Holdings Limited v Australian Bank Ltd (Supreme Court of NSW, Bryson J, 4 December 1987, unreported) point to the essential ambiguity in saying that the deposit or delivery of title deeds is a sufficient act of part performance of an agreement to give security. Lord Eldon observed that it is possible to infer that the purpose of the deposit was to give an interest in the title deeds themselves rather than creating the security. Bryson J noted that the act of delivering title deeds “could well be referable to a wish to furnish information about their contents, or to a wish to have them kept in safe custody.” However the plaintiff’s execution of the transfer in registrable form as an act of part performance of an agreement to grant security does not invoke the ambiguities identified by Lord Eldon and Bryson J. 102 In my view the execution by the plaintiff of the transfer of his land coupled with his repayment of the moneys paid to him on the taking of the transfer with interest are acts which are unequivocally referable to an agreement for the grant of a mortgage. I think that is further established by the further acts of part performance by the plaintiff in carrying out repairs and renovations to the property with the knowledge of the defendant. 126

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Ciaglia v Ciaglia cont. 103 A complicating factor is that Lajido was apparently the tenant of the property, although the evidence about that was thin. But there was no evidence that the work carried out by the plaintiff was done by him on behalf of Lajido. It was not suggested to the plaintiff in cross-examination, nor was there any evidence, that the directors of Lajido considered or approved of the doing of the work. Lajido did not pay for it. The expenses were paid by their being drawn from an account of the plaintiff’s mother on which the plaintiff was authorised to draw. The plaintiff’s mother considered that the plaintiff was liable to repay her. In my view these acts were the acts of an owner of the property, not acts done on behalf of the tenant, and they were unequivocally referable to an agreement by which the plaintiff was entitled to an interest as beneficial owner of the property. 104 Accordingly if it were necessary for the plaintiff to establish part performance, he has done so. ...

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CHAPTER 4 Old System Title Registration [4.05]

THE EFFECT OF THE DEEDS REGISTRATION SYSTEM ON GENERAL LAW LAND PRIORITY DISPUTES ............................................................................................... 129

Extract from Moore, Australian Property Law: Cases and Materials, 5th ed, Ch 2.

THE EFFECT OF THE DEEDS REGISTRATION SYSTEM ON GENERAL LAW LAND PRIORITY DISPUTES [4.05] Before the introduction of the Torrens system of land registration, a number of

statutory provisions designed to simplify the general law land system were introduced. Probably the most important of these was the establishment of a centralised register in which abstracts or memorials of all dealings affecting an individual piece of land could be recorded. It was considered that the searching process would be simplified by such a system. Registration of deeds legislation was passed in all states. (The current legislation is contained in the following Acts: Conveyancing Act 1919 (NSW), ss 184A – 184J; Property Law Act 1958 (Vic), Pt I (the Transfer of Land (Single Register) Act 1998 (Vic) prevents the registration of any further deeds or instruments under Pt I of the Property Law Act 1958 (Vic)); Property Law Act 1974 (Qld), ss 241 – 249; Registration of Deeds Act 1935 (SA); Registration of Deeds Act 1856 (WA); Registration of Deeds Act 1935 (Tas).) The registration system does not operate to affect the validity of documents creating or passing interests in land: for instance, a deed is still required to create or dispose of a legal estate in land. However, in order to encourage the use of the registration system, priority was conferred on registered over unregistered or subsequently registered instruments. The legislation has been interpreted in a number of cases: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.600] – [2.655].

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CHAPTER 5 Torrens Title Land [5.05]

CENTRAL PROVISIONS .......................................................................................... 131 [5.10] [5.20] [5.30] [5.40] [5.50] [5.60]

[5.75]

Transfer of Land Act 1958 (Vic), s 41(1) ................................. 131 Land Title Act 1994 (Qld), s 184(1) ....................................... 132 Real Property Act 1886 (SA), ss 69, 70 ................................... 132 Land Titles Act 1980 (Tas), s 40(1) and (2) ............................ 133 Transfer of Land Act 1958 (Vic), s 43 ...................................... 133 Transfer of Land Act 1958 (Vic), s 44(2) ................................. 133

MEANING AND EXTENT OF INDEFEASIBILITY: DEFERRED OR IMMEDIATE INDEFEASIBILITY .................................................................................................... 135 [5.80] [5.85]

Frazer v Walker ..................................................................... 136 Breskvar v Wall ..................................................................... 138

Extracts from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 5.

CENTRAL PROVISIONS [5.05] The Torrens statutes provide for a system of title by registration. They also provide

that, subject to certain exceptions, the Register is conclusive (or in other words that title is indefeasible). The set of provisions often referred to as the “paramountcy” provisions contain the most positive statements of indefeasibility of title. Section 42(1) of the Transfer of Land Act 1958 (Vic), for example, provides:

Transfer of Land Act 1958 (Vic), s 41(1) [5.10] Transfer of Land Act 1958 (Vic), s 41(1) 42. Estate of registered proprietor paramount (1) Notwithstanding the existence in any other person of any estate or interest (whether derived by grant from Her Majesty or otherwise) which but for this Act might be held to be paramount or to have priority, the registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever, except (a)

the estate or interest of a proprietor claiming the same land under a prior folio of the Register;

(b)

as regards any portion of the land that by wrong description of parcels or boundaries is included in the folio of the Register or instrument evidencing the title of such proprietor not being a purchaser for valuable consideration or deriving from or through such a purchaser.

[5.15] (See similarly Real Property Act 1900 (NSW), s 42(1); Transfer of Land Act 1893 (WA), s 68(1) – (4); Land Titles Act 1925 (ACT), s 58(1).) As the Privy Council commented in Frazer v Walker [1967] 1 AC 569 at 580-581: It is these sections which, together with those next referred to, confer upon the registered proprietor what has come to be called “indefeasibility of title”. The expression, not used in the [5.15]

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Act itself, is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys. This conception is central in the system of registration. It does not involve that the registered proprietor is protected against any claim whatsoever; as will be seen later, there are provisions by which the entry on which he relies may be cancelled or corrected, or he may be exposed to claims in personam. These are matters not to be overlooked when a total description of his rights is required. But as registered proprietor, and while he remains such, no adverse claim (except as specifically admitted) may be brought against him.

Although differently worded, the paramountcy provisions in Queensland, South Australia, Tasmania and the Northern Territory have a similar effect. In the Land Title Act 1994 (Qld), s 38 provides the “indefeasible title for a lot is the current particulars in the freehold land register about the lot” and s 184(1) provides:

Land Title Act 1994 (Qld), s 184(1) [5.20] Land Title Act 1994 (Qld), s 184(1) 184. Quality of registered interests (1) A registered proprietor of an interest in a lot holds the interest subject to registered interests affecting the lot but free from all other interests.

[5.25] (See similarly Land Title Act (NT), ss 39 and 188(1).) In South Australia, the relevant

parts of ss 69 and 70 of the Real Property Act 1886 provide:

Real Property Act 1886 (SA), ss 69, 70 [5.30] Real Property Act 1886 (SA), ss 69, 70 69. Title of registered proprietor indefeasible, except in cases of– The title of every registered proprietor of land shall, subject to such encumbrances, liens, estates, or interests as may be notified on the original certificate of such land, be absolute and indefeasible, subject only to the following qualifications: Fraud (a) In the case of fraud, in which case any person defrauded shall have all rights and remedies that he would have had if the land were not under the provisions of this Act: Provided that nothing included in this subsection shall affect the title of a registered proprietor who has taken bona fide for valuable consideration, or any person bona fide claiming through or under him;… 70. In other cases title of registered proprietor shall prevail In all other cases the title of the registered proprietor of land shall prevail, notwithstanding the existence in Her Majesty, Her heirs, or successors, or in any person of any estate or interest whatever whether derived by grant from the Crown or otherwise, which but for this Act might be held paramount or to have priority; and notwithstanding any want of notice, or insufficient notice of any application, or any error, omission or informality in any application or proceedings.

[5.35] In Tasmania, Land Titles Act 1980, s 40(1) and (2) provide: 132

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Land Titles Act 1980 (Tas), s 40(1) and (2) [5.40] Land Titles Act 1980 (Tas), s 40(1) and (2) 40. Estate of registered proprietor indefeasible (1)

For the purposes of this section “indefeasible”, in relation to the title of a registered proprietor of land, means subject only to such estates and interests as are recorded on the folio of the Register or registered dealing evidencing title to the land.

(2)

Subject to subsections (3) and (4), the title of a registered proprietor of land is indefeasible.

[5.45] Other sets of provisions, the “notice”, “protection” and “ejectment” provisions, (not

all contained in all jurisdictions) reinforce the indefeasibility concept. Section 43 of the Transfer of Land Act 1958 (Vic) is typical of the notice provisions:

Transfer of Land Act 1958 (Vic), s 43 [5.50] Transfer of Land Act 1958 (Vic), s 43 43. Persons dealing with registered proprietor not affected by notice Except in the case of fraud no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any land shall be required or in any manner concerned to inquire or ascertain the circumstances under or the consideration for which such proprietor or any previous proprietor thereof was registered, or to see to the application of any purchase or consideration money, or shall be affected by notice actual or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.

[5.55] (See Real Property Act 1900 (NSW), s 43(1); Real Property Act 1886 (SA), ss 186, 187;

Transfer of Land Act 1893 (WA), s 134; Land Titles Act 1980 (Tas), s 41(1) and (2); Land Titles Act 1925 (ACT), ss 59, 60(2); cf Land Title Act 1994 (Qld), s 184(2)(a) which provides simply that “… the registered proprietor … is not affected by actual or constructive notice of an unregistered interest affecting the lot”. See similarly Land Title Act (NT), s 188(2)(a).) Although there are differences in wording in the protection provisions, their meanings are similar. For example, s 44(2) of the Transfer of Land Act 1958 (Vic) provides:

Transfer of Land Act 1958 (Vic), s 44(2) [5.60] Transfer of Land Act 1958 (Vic), s 44(2) 44. Certificate etc. void for fraud … (2) But nothing in this Act shall be so interpreted as to leave subject to an action of ejectment or for recovery of damages or for deprivation of the estate or interest in respect of which he is registered as proprietor any bona fide purchaser for valuable consideration of land on the ground that the proprietor through or under whom he claims was registered as proprietor through fraud or error or has derived from or through a person registered as proprietor through fraud or error; and this whether such fraud or error consists in wrong description of the boundaries or of the parcels of any land or [5.60]

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Transfer of Land Act 1958 (Vic), s 44(2) cont. otherwise howsoever.

[5.65] See Real Property Act 1900 (NSW), s 45(1) and (2); Real Property Act 1886 (SA),

s 207; Transfer of Land Act 1893 (WA), s 202; Land Titles Act 1980 (Tas), s 42; Land Titles Act 1925 (ACT), s 159. Cf Land Title Act 1994 (Qld), s 184(2)(b) and Land Title Act (NT), s 188(2)(c). These provisions state that a registered proprietor is liable to a proceeding for possession of the lot only if the proceeding is brought by the registered proprietor of an interest affecting the lot. (But see Land Title Act 1994 (Qld), s 184(3)(b) and Land Title Act (NT), s 188(3)(b) which impliedly provide a similar protection to purchasers.) The ejectment provisions, where they exist, also take different forms and reinforce the paramountcy provisions by providing that no person can maintain an action to recover the land against the registered proprietor except in particular named circumstances. (Real Property Act 1900 (NSW), s 118; Transfer of Land Act 1893 (WA), s 199; Land Titles Act 1980 (Tas), s 149; Land Titles Act 1925 (ACT), s 152.) They are sometimes combined with the protection provisions. [5.70]

Notes&Questions

1.

Whalan, The Torrens System in Australia (The Law Book Co Ltd, Sydney, 1982), p 296, argues that the term “indefeasibility” when defined as annulled, defeated or abrogated is inappropriate to describe the protection given to a Torrens title. Indefeasibility of title under the Torrens system means that the title, if considered at a given time, cannot be defeated. It does not mean that the title is incapable of defeat at that time and any time in the future. A registered proprietor with an indefeasible title may lose that title if another person becomes the registered proprietor without fraud: indefeasibility attaches to the second proprietor, the person currently registered.

2.

There has been considerable discussion as to the meaning of and overlap between these various sets of provisions. See, Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.100]–[4.120]. Do the “notice” and “protection” provisions expand the meaning of indefeasibility set out in the “paramountcy” provisions? What effect do the “ejectment” provisions have?

3.

The notice provisions have the effect of ensuring that the common law doctrine of notice does not apply to Torrens land. (The common law doctrine of notice is discussed in Chapter 2.) How do the provisions achieve this end?

4.

For some time, the courts adopted an interpretation of the paramountcy (for example, s 42 of the Transfer of Land Act 1958 (Vic)) and notice (for example, s 43 of the Transfer of Land Act 1958 (Vic)) provisions which resulted in the notice provision restricting the indefeasibility principle set out in the paramountcy provision. It was said that the protection of indefeasibility was only available to a person registering who had “dealt with the registered proprietor” as required by s 43: see, for example, Clements v Ellis (1934) 51 CLR 217. Thus, for example, a purchaser taking a transfer from a fraudster who forged the name of the registered proprietor to the transfer, would not have dealt with the registered proprietor on the faith of the register. This interpretation

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pursuant to which the s 43 restricts the operation of s 42 is no longer the favoured one. See Frazer v Walker [1967] 1 AC 569 and Breskvar v Wall (1971) 126 CLR 376. 5.

Indefeasibility is under attack in some subtle ways. In Queensland, s 11A of the Land Title Act 1994 (Qld) provides that indefeasibility will be lost if the mortgagee does not take adequate steps to verify the identity of the mortgagor (Backstrom, “Forged Mortgages and Queensland’s careless mortgagee exception to indefeasibility” (2011) 26 Australian Property Law Bulletin 21). Similarly in New South Wales, a mortgagee must take steps to ensure that the person who executes the mortgage is indeed the registered proprietor of the land (s 56C of the Real Property Act 1900 (NSW)). All jurisdictions will be required to have verification of identity guidelines to meet the requirements of the national electronic conveyancing system (see http:// www.arnecc.gov.au (Australian registrars national electronic conveyancing council) and http://www.pexa.com.au (property exchange Australia).

6.

Is it possible that we will see uniform Torrens legislation in Australia: Hunter, “Uniform Torrens Title legislation: is there a will and a way?” (2010) 18(3) APLJ 201. With the introduction of nationally focussed electronic conveyancing protocols (see http://www.arnecc.gov.au for the latest model participation and model operating rules for the electronic conveyancing system), the time is appropriate for close consideration of a national Torrens code. For historical perspectives, see Croucher, “Delenda est Carthago! Sir Robert Richard Torrens and his attack on the evils of conveyancing and dependent land titles: a reflection on the sesquicentenary of the introduction of his great law reforming initiative” (2009) 11(2) Flinders Journal of Law Reform 197; Taylor, “The Torrens System: definitely not German” (2009) 30(2) Adelaide Law Review 195; Lucke, “Ulrick Hubbe and the Torrens system: Hubbe’s German background, his life in Australia and his contribution to the creation of the Torrens system” (2009) 30(2) Adelaide Law Review 213; Raff, “Torrens, Hubbe, stewardship and the globalisation of property law systems” (2009) 30(2) Adelaide Law Review 245.

MEANING AND EXTENT OF INDEFEASIBILITY: DEFERRED OR IMMEDIATE INDEFEASIBILITY [5.75] As the Privy Council in Frazer v Walker [1967] 1 AC 569 at 580-581 stated “…

indefeasibility of title … is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys”. However, since the inception of the Torrens system, much debate has surrounded the time at which indefeasibility of title occurs. The early cases supported what is known as deferred indefeasibility. By 1971, however, the debate appeared settled in favour of immediate indefeasibility. The debate re-emerged in Victoria at the beginning of the 1990s in a slightly different form. An example is the clearest means of demonstrating the distinction between these concepts and of illustrating why and how it can become important. Assume A, the registered proprietor of Blackacre leaves her certificate of title with her solicitor, S, for safekeeping and that S forges A’s name to a transfer of the land in favour of B. Subsequently, the transfer is registered and B becomes the registered proprietor. A and B are both innocent parties. Does B, who is now the [5.75]

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registered proprietor, have an indefeasible title or can A successfully maintain an action to recover “her” land? On the theory of immediate indefeasibility, B’s title is indefeasible. (The “paramountcy” provisions support this result.) On the theory of deferred indefeasibility, B’s title is not indefeasible: indefeasibility is “deferred” to one transaction away from the problem dealing. (The “protection” provisions support this result.) Thus, if B subsequently transferred the land to C and C became the registered proprietor, C’s title would be indefeasible and not subject to any attack by A. (See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.125]–[4.160].) The early Privy Council decision of Gibbs v Messer [1891] AC 248 supports the concept of deferred indefeasibility.

Frazer v Walker [5.80] Frazer v Walker [1967] 1 AC 569 [Mr and Mrs Frazer were the registered proprietors of land. Mrs Frazer borrowed a sum of money from the Radomskis and as security for the loan, she gave the Radomskis a mortgage over the property. Mrs Frazer forged her husband’s signature to the mortgage. She failed to make the payments of interest and the Radomskis exercised their power of sale under the mortgage and sold to Walker. Walker became the registered proprietor and he then tried to obtain possession of the land. Mr Frazer counterclaimed, contending that the mortgage to the Radomskis was a nullity and seeking cancellation on the Register of the mortgage of the Radomskis and the interest of Walker and restoration of his name and Mrs Frazer’s to the Register. After reviewing the key provisions in the relevant Torrens statute the Privy Council considered Mr Frazer’s claim against the mortgagees, the Radomskis.] LORD WILBERFORCE: … The leading case as to the rights of a person whose name has been entered on the register without fraud in respect of an estate or interest is the decision of this Board in Assets Co Ltd v Mere Roihi [1905] AC 176. The Board there was concerned with three consolidated appeals from the Court of Appeal in New Zealand, which had decided in each case in favour of certain aboriginal natives as against the registered proprietors. In each appeal their Lordships decided that registration was conclusive to confer on the appellants a title unimpeachable by the respondents. The facts involved in each of the appeals were complicated and not identical one with another, a circumstance which has given rise to some difference of opinion as to the precise ratio decidendi – the main relevant difference being whether the decision established the indefeasibility of title of a registered proprietor who acquired his interest under a void instrument, or whether it is only a bona fide purchaser from such a proprietor whose title is indefeasible. In Boyd v Wellington Corpn [1924] NZLR 1174 the majority of the Court of Appeal in New Zealand held in favour of the former view, and treated the Assets Co case as a decision to that effect. The decision in Boyd v Wellington Corpn related to a very special situation, namely that of a registered proprietor who acquired his title under a void proclamation, but, with certain reservations as to the case of forgery, it has been generally accepted and followed in New Zealand as establishing, with the supporting authority of the Assets Co case, the indefeasibility of the title of registered proprietors derived from void instruments generally. Their Lordships are of opinion that this conclusion is in accordance with the interpretation to be placed on those sections of the Land Transfer Act 1952 which they have examined. They consider that Boyd’s case was rightly decided and that the ratio of the decision applies as regards titles derived from registration of void instruments generally. As regards all such instruments it established that registration is effective to vest and to divest title and to protect the registered proprietor against adverse claims. 136

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Frazer v Walker cont. The appellant relied on the earlier decision of the Board in Gibbs v Messer [1891] AC 248 as supporting a contrary view, but their Lordships do not find anything in the case which can be of assistance to them. Without restating the unusual facts, which are sufficiently well-known, it is sufficient to say that no question there arose as to the effect of such sections as corresponded (under the very similar Victorian Act) with s 62 and s 63 of the Act of 1952 now under consideration. The Board was then concerned with the position of a bona fide “purchaser” for value from a fictitious person, and the decision is founded on a distinction drawn between such a case and that of a bona fide purchaser from a real registered proprietor. The decision has in their Lordships’ opinion no application as regards adverse claims made against a registered proprietor, such as came before the courts in Assets Co Ltd v Mere Roihi, in Boyd v Wellington Corpn and in the present case. Before leaving this part of the present appeal their Lordships think it desirable, in relation to the concept of “indefeasibility of title”, as their Lordships have applied it to the facts before them, to make two further observations. First, in following and approving in this respect the two decisions in Assets Co Ltd v Mere Roihi, and Boyd v Wellington Corpn, their Lordships have accepted the general principle, that registration under the Land Transfer Act 1952, confers on a registered proprietor a title to the interest in respect of which he is registered which is (under s 62 and s 63) immune from adverse claims, other than those specifically excepted. In doing so they wish to make clear that this principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant. That this is so has frequently, and rightly, been recognised in the courts of New Zealand and of Australia (see, for example, Boyd v Wellington Corpn [1924] NZLR 1174, 1223 per Adams J, and Tataurangi Tairuakena v Mua Carr [1927] NZLR 688, 702 per Skerrett CJ). Their Lordships refer to these cases by way of illustration only without intending to limit or define the various situations in which actions of a personal character against registered proprietors may be admitted. The principle must always remain paramount that those actions which fall within the prohibition of s 62 and s 63 may not be maintained. The second observation relates to the power of the registrar to correct entries under s 80 and s 81 of the Land Transfer Act 1952. It has already been pointed out (as was made clear in the Assets Co case [1905] AC 176 at 194, 195 by this Board) that this power is quite distinct from the power of the court to order cancellation of entries under s 85, and moreover while the latter is invoked here, the former is not. The powers of the registrar under s 81 are significant and extensive (see Assets Co case). They are not coincident with the cases excepted in s 62 and s 63. As well as in the case of fraud, where any grant, certificate, instrument, entry or endorsement has been wrongfully obtained or is wrongfully retained, the registrar has power of cancellation and correction. From the argument before their Lordships it appears that there is room for some difference of opinion as to what precisely may be comprehended in the word “wrongfully”. It is clear, in any event, that s 81 must be read with and subject to s 183 with the consequence that the exercise of the registrar’s powers must be limited to the period before a bona fide purchaser, or mortgagee, acquires a title under the latter section … As the appellant did not in this case seek relief under s 81, and as, if he had, his claim would have been barred by s 183 (as explained in the next paragraph), any pronouncement on the meaning to be given to the word “wrongfully” would be obiter and their Lordships must leave the interpretation to be placed on that word in this section to be decided in a case in which the question directly arises. The failure of the appeal against the second respondents entails (and it was not contended otherwise) that it must equally fail against the first respondent. Their Lordships would add, however, that the action against that respondent was an action for the recovery of land within the meaning of s 63 and that it would be directly barred by that section, quite apart from the fact that it could not be maintained against the other respondents. The appellant could not bring his case against the first [5.80]

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Frazer v Walker cont. respondent within any of the exceptions to that section. Also their Lordships would add, that, if it had been necessary for the first respondent to rely on s 183 of the Land Transfer Act 1952, he would by it have had a complete answer to the claim. The appellant argued that the second respondents were not “vendors” within the meaning of the section – the suggestion being that he is only a vendor who sells the precise estate or interest of which he is the registered proprietor, so that a mortgagee does not fall within the description. It was further contended that the second respondents were not “proprietors”, because they did not own the estate or interest (ie, the fee simple) which they purported to transfer. Their Lordships are in agreement with the Court of Appeal in holding that the section should not be so narrowly read and that it extends to the case of a mortgagee who is “proprietor” of the mortgage and who has power of sale over the fee simple. Their Lordships need not elaborate on this part of the case since they concur with the conclusions agreed on by all three members of the Court of Appeal. Their Lordships will humbly advise Her Majesty that the appeal should be dismissed. The appellant must pay the respondents’ costs.

Breskvar v Wall [5.85] Breskvar v Wall (1971) 126 CLR 376 [The appellants were the registered proprietors of land. As security for a loan, they gave Petrie the duplicate certificate of title and an instrument of transfer signed by them. Pursuant to the Stamp Act 1894 (Qld), this transfer was void because it did not contain the name of the transferee. Subsequently, Petrie fraudulently inserted the name of his grandson, Wall, as the transferee and Wall became the registered proprietor. Before the Breskvars had discovered the fraud, Wall had contracted to sell the land to Alban Pty Ltd and had executed a transfer. Before this transfer was lodged for registration, the Breskvars placed a caveat upon the register.] MENZIES J: The issue between the appellants and the respondent, Alban Pty Ltd, which is the only issue with which this Court is concerned, is one between two persons, neither of whom is the registered proprietor, as to which of them should become the registered proprietor of the land described in certificate of title vol 3730 fol 104. The land is subject to The Real Property Acts, 1861 to 1963 (Q). The claim of the appellants is, firstly, that they were the registered proprietors of the land up to 15th October 1968, and remained thereafter as registered proprietors in law, notwith-standing the registration, on 15th October 1968, of a transfer which they had, on 5th March 1968, signed in blank. This transfer was given, with the duplicate certificate of title, to afford security for a loan from one Petrie. It was, in fraud of them, registered in the name of Wall after his name had, in September 1968, been put into the transfer by Petrie to cheat the appellants out of their land. The learned trial judge found the fraud and found that Wall was a party to it. His Honour said [1972] Qd R, at 30-31: I find that in transferring the land to Wall and selling it in the way he did Petrie acted fraudulently in that he was attempting to cheat the plaintiffs out of the major part of their interest in the land. He was guilty of moral turpitude. His fraud was of the relevant kind under The Real Property Acts. (See Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 273, 274.) But he was an old man born on 24th March 1888 who succumbed to temptation. In the witness box he showed himself to be partially deaf and not very mentally alert. I find that throughout he was acting as the agent of Wall and of his wife and that Wall is affected by his fraud. Alternatively to the claim that they have remained as registered proprietors after 15th October 1968, the appellants claim that they are entitled to registration in place of Wall by virtue of their equitable right to become registered proprietors again. 138

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Breskvar v Wall cont. Before going further it is necessary to refer to an unusual provision, namely s 53(5) of The Stamp Acts (Q) which is, so far as is relevant, in these terms: (5) No instrument of conveyance or transfer executed on or after the first day of November, one thousand nine hundred and eighteen, of any estate or interest in any property whatsoever shall be valid, either at law or in equity, unless the name of the purchaser or transferee is written therein in ink at the time of the execution thereof. Any such instrument so made shall be absolutely void and inoperative, and shall in no case be made available by the insertion of a name or any other particulars afterwards. Moreover, for any breach of this subsection a penalty not exceeding twenty pounds shall be incurred by each party executing the instrument. It is apparent, therefore, that there are two objections to whatever title Wall has. The first is that it was obtained illegally by the use of an invalid instrument made in breach of s 53(5) of The Stamp Acts; the second is that it was obtained by his own fraud. The appellants can, I have no doubt, displace Wall’s title. To succeed, however, at the expense of Alban Pty Ltd, they must go further than they have to go against Wall. They must show either that Wall had no title at all, or, that their claim is to be preferred to that of Alban Pty Ltd. The claim of Alban Pty Ltd is that it holds a transfer from Wall to carry out a purchase of the land, made for valuable consideration by Alban Pty Ltd from Wall, and made, so far as Alban Pty Ltd was concerned, in good faith, without notice of any rights of the appellants. Their rights came to the notice of Alban Pty Ltd only when a caveat to prevent the registration of the transfer to it by Wall had been lodged. The learned trial judge found that Alban Pty Ltd was a purchaser in good faith and for valuable consideration without notice of the appellants’ rights. In support of their claim that Wall is not the registered proprietor, the appellants call in aid certain passages from the judgment of Dixon J in Clements v Ellis. His Honour cited a passage (1934) 51 CLR 217 at 258 from the dissenting judgment of Salmond J in Boyd v Mayor, Etc, of Wellington which concluded as follows [1924] NZLR 1174 at 1205: The registered title of A cannot pass to B except by the registration against A’s title of a valid and operative instrument of transfer. It cannot pass by registration alone without a valid instrument, any more than it can pass by a valid instrument alone without registration. [His Honour stated that this appeared to him as an admirable statement of the true position. For himself, his Honour said (1934) 51 CLR 217 at 237:] The principle, in my opinion, is that a prior registered estate or interest, for the removal of which from the register there is no authority but a forged or void instrument, is not destroyed unless afterwards a person, who, according to the existing condition of he register is entitled to do so, gives a registrable instrument which is taken bona fide for value and registered. The justification for destroying an existing legal estate or interest, which has already been duly established upon the register, is, in other words, found only in the necessity of protecting those who subsequently deal in good faith and for value in a manner, which, upon its face, the register appears to authorise, and who then obtains registration. Clements v Ellis was a case decided under the Transfer of Land Act (Vict) but the provisions of the Real Property Act (Q) are, with one exception to which I will refer later, substantially the same. What Dixon J said has been followed in New South Wales and in Victoria: Caldwell v Rural Bank of New South Wales (1951) 53 SR (NSW) 415 and Davies v Ryan [1951] VLR 283. Since these decisions, however, the Privy Council has decided Frazer v Walker [1967] 1 AC 569. In their opinion in this case their Lordships made no reference to Clements v Ellis, although it had been cited, but they did apply the decision of the majority in Boyd’s Case, preferring the judgment of the majority to the dissenting judgments of Springer and Salmond JJ. Their Lordships said [1967] 1 AC 569, 584: [5.85]

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Breskvar v Wall cont. They consider that Boyd’s Case [1924] NZLR 1174 was rightly decided and that the ratio of the decision applies as regards titles derived from registration of void instruments generally. As regards all such instruments it established that registration is effective to vest and to divest title and to protect the registered proprietor against adverse claims. It is important, however, to observe what their Lordships meant by the words “all such instruments” in the passage which I have just cited. They meant void instruments whereby the name of the person had been registered without fraud in respect of an estate or interest. This appears clearly from the reference to Assets Co Ltd v Mere Roihi [1905] AC 176 on the preceding page [1967] 1 AC 176, 583, and from the statement [1967] 1 AC 176, 584 that the main relevant difference between the majority and the minority in Boyd’s Case was whether the Mere Roihi Case established “the indefeasibility of title of a registered proprietor who acquired his interest under a void instrument, or whether it is only a bona fide purchaser from such a proprietor whose title is indefeasible”. Frazer v Walker was not a case of conflict between unregistered interests. In that case mortgagees, who had registered a mortgage from registered proprietors to which one signature was a forgery, sold the land under their power of sale to a purchaser who was duly registered as proprietor. The only fraud in the case was that of one of the registered proprietors who forged the name of her husband, a co-proprietor with her. Her fraud afforded no statutory basis for impeaching the title of the mortgagees when they were registered, or, of the registered proprietor from them. Both the mortgagees and the registered proprietor acted in good faith and without knowledge of the forgery. The decision in Frazer v Walker cannot, therefore, govern this case. Indeed, one may perhaps be excused from wondering how the former registered proprietor, who suffered from his wife’s forgery, could ever have hoped to succeed against the newly registered proprietor who took a transfer from registered mortgagees. The problem of competition for registration never arose in that case. Indeed, it is a case which would have fallen fairly and squarely within the statement of Dixon J in Clements v Ellis, at 237 cited previously. Nevertheless, Frazer v Walker is important here in establishing that, if and to the extent that earlier decisions were to the effect that an indefeasible title cannot be acquired by the registration of a void instrument, they have lost their authority. It must now be recognized that, in the absence of fraud on the part of a transferee, or some other statutory ground of exception, an indefeasible title can be acquired by virtue of a void transfer. It seems to me to follow that, where there is fraud or one of the other statutory exceptions to indefeasibility, a transferee does, by registration of a void transfer, obtain a defeasible title. In this case, as I have already indicated, Wall, although he became registered proprietor, clearly enough did not obtain an indefeasible title. He obtained registration by the fraudulent use of an invalid instrument. It is the significance of his becoming registered in these circumstances that matters here. The first critical question which I pose is, therefore, whether, when Wall became registered as proprietor of the land, the appellants ceased to be the registered proprietors. With the guidance of Frazer v Walker about the effect of the registration of void instruments, I have reached the conclusion that they did, and I think so regardless of whether the transfer was invalid by virtue of s 53(5) of The Stamp Acts, or, that, by reason of fraud, the title acquired was defeasible. The registration was of an instrument executed by the appellants as registered proprietors, albeit in breach of law, and, upon its registration, they ceased to be registered proprietors. This is not a case where it is possible to apply Gibbs v Messer [1891] AC 248 where, as the Privy Council has explained, there was no real registered proprietor at all but only a fictitious person. After the registration of Wall as registered proprietor the appellants’ rights were no longer those of registered proprietors but were simply to impeach the defeasible title which Wall had obtained by that registration. 140

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Breskvar v Wall cont. [His Honour then went on to consider whether the appellants’ claim should be postponed to the claim of Alban Pty Ltd. This involved a consideration of the relative merits of competing unregistered interests. The following part of the judgment should be considered again in Chapter 6.] This brings me to what I regard as the second critical question, namely, whether the appellants’ claim in equity to registration, which is earlier in time than the claim of Alban Pty Ltd, should nevertheless be postponed to its claim. It is at this point that I think that s 53(5) of The Stamp Acts does introduce an element not to be found in earlier cases where earlier claims of an equitable character have been postponed to later claims. Such cases are Butler v Fairclough (1917) 23 CLR 78 and Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58. What this section says is that no transfer signed in blank “shall be valid either in law or in equity”. If, therefore, Alban Pty Ltd has to depend in any way upon that transfer to maintain the rights which it asserts, it must fail. That transfer cannot, in the face of the statute, be regarded as a good source of equitable rights. What Alban Pty Ltd holds, however, is a transfer from the registered proprietor, albeit a registered proprietor with a defeasible title, and it is necessary to determine what rights it has solely as such transferee. Whatever may be the position in other cases, it seems to me that in this case that question is resolved by a particular enactment which is not to be found generally in state legislation establishing the Torrens system. This enactment is s 48 of the Real Property Act of 1877. It is as follows: 48. Unregistered instrument to confer claim to registration. Every instrument signed by a proprietor or by others claiming through or under him purporting to pass an estate or interest in or security upon land for the registration of which provision is made by this Act shall until registered be deemed to confer upon the person intended to take under such instrument or other person claiming through or under him a right or claim to the registration of such estate interest or security … Wall, as I have already decided, was “a proprietor” and by virtue of the section, therefore, Alban Pty Ltd has a right or claim to the registration of the estate which the transfer purports to pass. Accordingly, there are conflicting claims to be registered in place of Wall and the final problem is which is to be preferred. The authorities already cited establish that the appellants’ right or claim should, in the absence of a good ground for distinguishing them, be postponed and it becomes necessary to determine whether The Stamp Acts, s 53(5), affords any such ground for distinction. By reason of the section it is apparent that what the appellants signed was not an effective transfer. It was a document without effect in law or in equity and no regis-tration should have been based upon it. By giving it to Petrie the appellants did not put him in possession of an effective instrument of transfer. The blank transfer, however, with no effect in law or in equity, once it had been wrongly filled in and lodged with the certificate of title, became the means whereby Wall was able to become registered proprietor and to deal with Alban Pty Ltd as such. Upon the authorities cited, this, I think, is enough to require the post-ponement of the appellants’ right or claim to that of Alban Pty Ltd. They did not put Petrie or Wall in a position to have Wall lawfully registered as proprietor. Nevertheless, in executing the transfer in blank they were in breach of The Stamp Acts, s 53(5), and it was their breach of the law that enabled Wall, in disregard of the section, to become registered as proprietor. The learned trial judge decided that the claim of the appellants must be postponed to that of Alban Pty Ltd and I would, for the reasons which I have given, dismiss this appeal from his judgment. BARWICK CJ [His Honour discussed the facts and the relevant legislative provisions and continued:] [T]he conclusiveness of the certificate of title is definitive of the title of the registered proprietor. That is to say, in the jargon which has had currency, there is immediate indefeasibility of title by the registration of the proprietor named in the register. The stated exceptions to the prohibition on actions for recovery of land against a registered proprietor do not mean that that “indefeasibility” is not [5.85]

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Breskvar v Wall cont. effective. It is really no impairment of the conclusiveness of the register that the proprietor remains liable to one of the excepted actions any more than his liability for “personal equities” derogates from that conclusiveness. So long as the certificate is unamended it is conclusive and of course when amended it is conclusive of the new particulars it contains. The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration. That which the certificate of title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which regis-tration itself has vested in the proprietor. Consequently, a registration which results from a void instrument is effective according to the terms of the registration. It matters not what the cause or reason for which the instrument is void. The affirmation by the Privy Council in Frazer v Walker of the decision of the Supreme Court of New Zealand in Boyd v Mayor, Etc, of Wellington now places that conclusion beyond question. Thus the effect of the Stamp Act upon the memorandum of transfer in this case is irrelevant to the question whether the certificate of title is conclusive of its particulars. [His Honour then went on to consider whether the appellants’ claim should be postponed to the claim of Alban Pty Ltd. His Honour then held that the appellant’s claim should be postponed to the claim of Alban Pty Ltd. See Chapter 6.] McTiernan, Windeyer and Gibbs JJ gave short concurring judgments, and Owen J agreed with Barwick CJ.

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CHAPTER 6 General Law and Torrens Title Mortgages [6.05]

NATURE OF SECURITY AND CREATION OF SECURITY INTERESTS .................... 143 [6.10]

Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd ................. 144

Extracts from Moore, Australian Property Law: Cases and Materials (5th ed), Ch 8.

NATURE OF SECURITY AND CREATION OF SECURITY INTERESTS [6.05] The mortgage of land is the most common transaction whereby a credit provider

obtains a security for repayment of a debt. The security provides the credit provider with rights against property in the event of default by the borrower in repayment of the debt. Commonly the loan is provided to enable the purchase of the land over which the mortgage is granted but the value of the land can be used as security for as many loans as that value justifies. It is the nature of security that the proprietary rights are secondary to the personal obligations and operate in cases of default in performance of the primary obligations which include repayment of the loan. In cases where a loan is provided to enable the purchase of property (whether land or goods) over which security is taken, the credit provider can obtain security by retaining title until payment in full. The hire purchase transaction was developed as a peculiar form of instalment sale of goods where title remained with the seller and the buyer was unable to pass good title to a subsequent buyer as that original buyer had only an option to buy the goods. In relation to produce of the land, stock mortgages, wool liens and liens on fruit, are a peculiar Australian development as property rights by way of security were transferred with respect to a subject-matter which would come into existence in the future – the wool or fruit to be grown. The mortgage is but one form of security over land. Other common security transactions are legal and equitable charges and liens. In many jurisdictions the Torrens system recognises rent-charges as encumbrances on land (see [17.205]ff (Moore)and covenants could be included as part of a rent-charge over land (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [18.30]. The rent-charge provided a means whereby land could be charged with payment of a sum of money where no debt existed. The imposition of a charge on land was often a way of providing for younger brothers and sisters where land was left to the eldest son. Security interests over personal property (including goods and intangible interests such as copyright and shares) can also take the form of a mortgage. In Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; [2005] HCA 28 (see [4.15] (Moore)), the High Court indicated that a division is drawn between security interests in chattels where the lender takes possession (a pledge or pawn) and those where the lender takes a proprietary interest without possession (often a mortgage). Security interests in goods have taken many forms over the centuries as legal and financial advisors have sought a form of transaction most favourable to their clients. In the 19th century a security interest was achieved by the use of a bill of sale which in its simplest form was a document evidencing a transfer of ownership of goods. The bills of sale [6.05]

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legislation provided for the registration of documents providing for non-possessory security interests in goods. Advisors also sought to avoid regulations whereby a person in possession of goods could pass a good title to those goods to third parties. Today parties are free to adopt whatever form of interest in goods best suits them and sellers of goods acting in the course of a business often choose a consumer mortgage. The Personal Property Securities Act 2009 (Cth) regulates the enforceability of interests and priority disputes wherever the substance of a transaction is the grant of a security interest; see [8.76] (Moore) for analysis of priorities in connection with security interests over goods. Licensing requirements apply to providers of credit by way of loans secured over land or goods or without security who act in the course of business in favour of private persons. Credit providers and intermediaries such as brokers must hold an Australian Credit Licence (National Consumer Credit Act 2009 (Cth), s 35). Duties of a credit provider or intermediary to be satisfied as to the financial capacity of a borrower, to disclose financial details of a proposed transaction and the required contents of a consumer credit contract are set out in ss 14 – 17 of the National Credit Code; see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [7.120]–[7.155]). Unjust contracts may be reopened; assistance is available to borrowers facing unexpected difficulties and notice must be given before the exercise of any enforcement action by a mortgagee (National Credit Code ss 72, 76 and 88).

Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd [6.10] Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245; [1999] HCA 20 GAUDRON, GUMMOW AND CALLINAN JJ. Mortgages of old system and Torrens title land 19 The Mortgage, which was registered under the Transfer of Land Act, differed as a matter both of form and substance from a mortgage security over land as understood at common law. The principles involved are well settled but, as they provide the starting point for the particular submissions mentioned above upon which this appeal turns, it is convenient briefly to restate them. 20 In Coroneo v Australian Provincial Assurance Association Ltd, Jordan CJ said: 1 A mortgage at common law is a conveyance of the legal title in property from one person to another to secure the doing of some act, ordinarily the payment of money. Formerly the conveyance was expressed to be made upon the condition that if the conveyor performed the act he should be at liberty to re-enter as of his old estate; and the conveyance was thus defeasible by condition subsequent. In modern times, a conveyance contains a covenant by the conveyee to re-convey if the act, to secure which the conveyance has been made, is duly performed. But at common law the legal title is vested in the mortgagee; and he can therefore give a good common law title to it by executing any form of assurance which conforms with the technical requirements of common law conveyancing. 2 The power of sale, where it occurs in a legal mortgage, is not a common law power. It is an equitable power which is inserted to enable the mortgagee to convey a title which is not only good at common law but good in equity to defeat the equitable rights of the mortgagor. 21 It follows that under an old system mortgage of land, the legal estate having been conveyed to the mortgagee, the mortgagee prima facie is entitled to take possession as soon as the mortgage has 1 2

(1935) 35 SR (NSW) 391 at 394. Maugham v Sharpe (1864) 17 CB(NS) 443 [144 ER 179].

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Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd cont. been executed. 3 However, where the land is under the provisions of the Transfer of Land Act, whilst a mortgage has the effect of security it does not operate as a transfer of the land to the mortgagee. Therefore the mortgage does not confer upon the mortgagee a right of possession “as an incident of a transfer”. 4 Section 74 of the Transfer of Land Act states: (1) The registered proprietor of any land – (a) may mortgage it by instrument of mortgage in an appropriate approved form; (b) (2)

may charge it with the payment of an annuity by instrument of charge in an appropriate approved form.

Any such mortgage or charge shall when registered have effect as a security and be an interest in land, but shall not operate as a transfer of the land thereby mortgaged or charged.

22 Accordingly, the Mortgage had had effect as a security and had been an interest in the Land but had not operated as a transfer of the Land. In so providing, s 74(2) reflected the statement by Dixon, Evatt and McTiernan JJ in English Scottish and Australian Bank Ltd v Phillips that under the Torrens system a mortgage: 5 … is the creature of statute and its incidents depend upon the provisions of the statute and so much of the general law as is availed of by or under those provisions. (emphasis added) The reference to the general law in the portion of this statement which we have emphasised recognises that equitable estates and interests in some circumstances may “lie behind or beyond, the legal interests as determined by the state of the register”. 6 This limited interaction between the Torrens system and the general law may be compared with that in the regimes established under the various Crown lands legislation. The statutes considered in Wik Peoples v Queensland 7 are examples. However, the significance for the present appeal of the statement in Phillips lies elsewhere. 23 The starting point for assessment of the submissions is not what the common law (significantly supplemented by equity) provides with respect to dealings in old system title, but the identification of those statutory provisions which establish the system of “title by registration” 8 and those provisions under which general law principles are adapted to that system. An example of the latter to which reference has already been made is the application to the Torrens system of Div 5 of Pt 2 of the Property Law Act, dealing with leases and tenancies. 24 In Phillips, Dixon, Evatt and McTiernan JJ also pointed out that “the statutory charge described as a mortgage is a distinct interest” and that it “involves no ownership of the land the subject of the security”. 9 The mortgage instrument may provide for the mortgagor, the registered proprietor, to attorn as tenant of the mortgagee at a rent to be accepted in or towards satisfaction of the principal or interest secured by the mortgage. The object will be to give the mortgagee the remedies of a landlord 3

Ex parte Jackson; Re Australasian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285 at 289. However, equity treated this right of the mortgagee “as part of his security, and not as a right to beneficial enjoyment”, so that if the mortgagee did take possession of the security the mortgagee would “be called on to account with strictness for his use of it”: Waldock, The Law of Mortgages, 2nd ed (1950) at 213.

4 5

Ex parte Jackson; Re Australasian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285 at 289. (1937) 57 CLR 302 at 323. See also the observations by Dixon J and Evatt J in Partridge v McIntosh & Sons Ltd (1933) 49 CLR 453 at 466, 472–473 and by Jordan CJ in Ex parte Jackson; Re Australasian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285 at 289. Corin v Patton (1990) 169 CLR 540 at 572. See generally Barry v Heider (1914) 19 CLR 197 at 204–208, 213–216 and, as to restrictive covenants, Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154 at 159–160. (1996) 187 CLR 1. The phrase was used by Barwick CJ in Breskvar v Wall (1971) 126 CLR 376 at 385. (1937) 57 CLR 302 at 321.

6

7 8 9

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Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd cont. as well as those of a mortgagee. In Partridge v McIntosh & Sons Ltd, 10 a decision upon the Real Property Act 1900 (NSW), Starke J observed that a demise need not be express and continued: 11 [A] mere acknowledgment, such as an attornment clause, by a person in possession of land, of tenancy in another, sufficiently establishes a legal reversion in the landlord, to which the rent reserved is incident. However, Partridge established that as the mortgagee of Torrens title land had no immediate right to possession, the mortgagee could not be considered as having let the mortgagor into possession 12. Dixon J pointed out that there was no need. 13 … to consider whether something short of an actual legal estate or interest may now afford a reversion to which a rent service may be incident, because in a mortgage under the Real Property Act not even a right to immediate possession can be ascribed to the mortgagee. The attornment clause operated only to create an estoppel inter partes which was, as Dixon J put it, 14 “entirely conventional”. The result was that the mortgagee in Partridge did not have the right (which was then still enjoyed by landlords in New South Wales) to distrain upon the goods of the spouse of the mortgagor which were on the premises. In addition, whilst the attornment clause altered the legal relationship between the parties, in equity their true position remained that of secured creditor and debtor. The rent was treated in equity as paid on account first of interest, then of principal and was the subject-matter of account between mortgagee and mortgagor. 15 Nevertheless, the arrangement established by the attornment clause may answer the description of a tenancy in legislation protective of the position of tenants. 16 25 Whilst, unlike the position with an ordinary old system mortgage of land, the Mortgage had not, as an incident of a transfer, conferred upon the Bank a right of possession, par (a) of s 78(1) of the Transfer of Land Act had empowered the Bank upon default by the mortgagor to enter into possession of the mortgaged premises “by receiving the rents and profits thereof”. At no stage before the exercise by it of its statutory power of sale did the Bank exercise its power under s 78(1)(a). 26 The effect given by the governing statute to the transfer to SEAA in exercise of the Bank’s power of sale is found in s 77(4) of the Transfer of Land Act. 17 So far as material, this states: Upon the registration of any transfer under this section all the estate and interest of the mortgagor … as registered proprietor of the land mortgaged … shall vest in the purchaser as proprietor by transfer, freed and discharged from all liability on account of such mortgage … and (except where such a mortgagor … is the purchaser) of any mortgage charge or encumbrance recorded in the Register subsequent thereto except – (a) a lease easement or restrictive covenant to which the mortgagee … has consented in writing or to which he is a party; or 10 11 12 13 14 15 16

(1933) 49 CLR 453. (1933) 49 CLR 453 at 461. (1933) 49 CLR 453 at 468. (1933) 49 CLR 453 at 470–471. (1933) 49 CLR 453 at 468. See also City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1 at 11. Ex parte Isherwood; In re Knight (1882) 22 Ch D 384 at 392; Alliance Building Society v Pinwill [1958] Ch 788 at 791. Permanent Finance Corporation Ltd v Flavel; Ex parte Flavel [1968] Qd R 84 at 101– 102; Australian Express Pty Ltd v Pejovic (1963) 80 WN (NSW) 427 at 431–432.

17

The application of the purchase money received on the sale was directed by s 77(3) first to the costs of the sale and secondly in payment of moneys due and owing on the Mortgage.

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Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd cont. (b) a mortgage charge easement or other right that is for any reason binding upon the mortgagee … (emphasis added) To adapt the remarks of Kitto J in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liquidation), 18 Lamina as “mortgagor had the legal title, not an equity of redemption, and the transfer [to SEAA] had operated to deprive [Lamina] of the legal title by virtue only of special statutory provisions”. 27 The title taken by a registered proprietor consequent upon the exercise of a power of sale under s 77 reflects the general proposition stated by Barwick CJ in Breskvar v Wall: 19 The Torrens system of registered title of which the Act[ 20] is a form is not a system of registration of title but a system of title by registration. That which the certificate of title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which registration itself has vested in the proprietor.

18 19 20

(1965) 113 CLR 265 at 275. (1971) 126 CLR 376 at 385–386. Barwick CJ was speaking of The Real Property Acts 1861 to 1963 (Q) but by referring to “the Torrens system” he was identifying “the various Acts of the States of the Commonwealth which provide for comparable systems of title by registration though these Acts are all not in identical terms and some do contain significant variations”: (1971) 126 CLR 376 at 386. [6.10]

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CHAPTER 7 Definition of Land – Fixtures [7.05]

FIXTURES ................................................................................................................ 149 [7.10] [7.15]

[7.20]

TENANT’S FIXTURES ............................................................................................. 151 [7.25] [7.30] [7.35]

[7.40]

Degree of annexation ......................................................................... 150 Object of annexation .......................................................................... 150 Tenant’s fixture or permanent fixture? ............................................. 151 Statutory changes ............................................................................... 152 Removal of tenant’s fixtures ............................................................... 152

SECURITY RIGHTS .................................................................................................. 153 [7.45]

Re Cancer Care Institute of Australia Pty Ltd (admin apptd) .................................................................................. 155

Extracts from Chambers, An Introduction to Property in Australian, Ch 26.

FIXTURES [7.05] Fixtures are goods which get joined to land and thereby become part of an estate. This

is a form of accession. However, there is no difficulty discerning which is the accessory and which is the principal. Goods become part of the land to which they are joined, regardless of value. For example, an office tower worth millions of dollars, constructed on land worth thousands of dollars, becomes part of that land. The difficulty in this area of law is determining when goods have become fixtures. Something which is not attached to land, but merely resting on it (such as a statue in the garden), can be a fixture. Even though it could be removed easily, without damage to it or the land, a fixture will cease to be a separate thing subject to separate property rights. This treatment of fixtures is possible because the owner of an estate has a right to possess a volume of space. The law can then determine which things within that space form part of the estate and which things continue to exist separately as goods. The decision to treat unattached objects as part of an estate was made at a time when personal property could be given away by will, but real property passed to the owner’s heir. The rules were designed to ensure that the assets of deceased persons were properly divided among their heirs and the beneficiaries of their wills. In contrast, the law of accession to goods was designed to ensure that people would not lose their property rights without consent, except as a practical necessity. There are two factors which are used to determine whether goods have become fixtures: the degree of annexation (extent of attachment to the land) and the object of annexation (apparent purpose of attachment). These factors are discussed at [7.10] and [7.15], followed by a discussion of two situations in which people are entitled to remove fixtures from land belonging to others: fixtures installed by tenants (see [7.20]ff) and fixtures that were subject to security rights before they were joined to the land (see [7.40]). [7.05]

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Degree of annexation [7.10] There is no legal uncertainty when goods are joined to land and cannot be removed

again without injury to the land or goods. For example, paint applied to a wall cannot be removed without destroying the paint and a tree planted in the yard cannot be removed without destroying the tree or digging a big hole in the yard. It is clear that these things ceased to be goods and became part of the real estate when they were joined to the land. A legal question arises when goods are joined to land in a way which permits their removal. The assumption is that goods merely resting on land continue to be goods and that any degree of attachment (by bolts, nails, cement, etc) turns them into fixtures. As Kaye J said in Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd: 1 Even slight fixing to the land is sufficient to raise the presumption that a chattel is a fixture. In those circumstances, the onus of proving otherwise rests upon the party so contending.

The greater the degree of annexation, the more likely it is that goods have become fixtures. However, unattached goods can be fixtures and attached goods need not be. Object of annexation [7.15] If it is practical to remove a possible fixture from the land, then its status is determined

by the object of annexation. The essential question is this: was it joined to the land for its better use as a chattel or for the improvement of the land? In Leigh v Taylor, 2 valuable tapestries were tacked to canvasses, which were nailed to strips of wood, which were nailed to the walls of a mansion house. The circumstances revealed an intention that the tapestries would remain goods. They could be removed easily without damage to them or the land. Although their attachment improved the enjoyment of land, that was the only practical way to enjoy tapestries. In Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd, 3 an air conditioning plant was installed on the roof of a building. It was resting on pads on the roof and connected with nuts and bolts to water pipes and electrical cables in the building. It could be removed easily without damage to the plant or building. The purpose of installing the air conditioning plant was clearly not for the better enjoyment of the plant, but for the permanent improvement of the land. Although the company that installed the plant did not own the land, it had been hired to make that improvement on the owner’s behalf. The object of annexation does not depend on what anyone was actually thinking when the thing was joined to the land. It is the apparent purpose for joining something to land, as revealed by observable circumstances. 4 What would a bystander, with knowledge of the relevant facts, assume was intended? Reliance on apparent (objective) intention, rather than actual (subjective) intention, helps create greater legal certainty. A judicial decision that something is or is not a fixture in certain circumstances can guide others dealing with similar circumstances. If the status of each thing on land depended on the actual intention of the person who put it there, it could be very difficult to determine what things formed part of an estate. 1 2 3 4

[1984] VR 947 at 953. [1902] AC 157; [1902] UKHL 1. [1984] VR 947. Reid v Smith (1905) 3 CLR 656; [1905] HCA 54; Elitestone Ltd v Morris [1997] 1 WLR 687; [1997] 2 All ER 513; [1997] UKHL 15; May v Ceedive Pty Ltd [2006] NSWCA 369.

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The physical connection of something to the land is just one of the facts which reveal the object of annexation. Therefore, two things can be joined to land in the same way and yet one will be a fixture and the other will not. Blackburn J used this example in Holland v Hodgson: 5 [I]f the intention is apparent to make the articles part of the land, they do become part of the land … Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder’s yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels.

Tenant’s fixtures [7.20] At common law, tenants of leasehold or life estates are entitled to remove fixtures that

they installed for domestic, trade, or ornamental purposes and not for the permanent improvement of the land. These are called tenant’s fixtures to distinguish them from permanent fixtures which tenants are not entitled to remove. A tenant’s removal of a permanent fixture without the landlord’s consent is not trespass (since the tenant has possession of the land), but waste. It might also be a breach of a leasehold covenant.

Tenant’s fixture or permanent fixture? [7.25] It is not always easy to distinguish tenant’s fixtures from permanent fixtures. This is

because tenant’s fixtures, like all fixtures, are no longer goods, but part of the land. 6 The question is whether the tenant is permitted to remove them and turn them back into goods. As Romer LJ said in Spyer v Phillipson: 7 So long as the article can be removed without doing irreparable damage to the demised premises I do not think that either the method of annexation or the degree of annexation, or the quantum of damage that would be done to the article itself or to the demised premises by its removal, has really any bearing upon the question of the tenant’s right to remove, except in so far as they throw light upon the question of the intention with which the chattel was affixed by him to the demised premises.

In that case, the tenant leased a flat for 21 years and half way through the term installed valuable antique wood panelling and period fireplaces and chimneys. He died and his executors were entitled to remove them, even though that would cause some damage to the flat. Tenants are liable to repair the damage caused by removing fixtures, but this does not affect their right to remove them. The question whether something is a tenant’s fixture or permanent fixture (like the question whether it is a chattel or a fixture) depends a little on the degree of annexation and a lot on the object of annexation. If its removal would cause serious damage to the land or destroy the fixture, then it is permanent. Otherwise, its character depends on the object of annexation: was it attached so the tenant could better enjoy the leasehold estate or as a permanent improvement to the land? There is another way to phrase the question: was the fixture attached to the tenant’s leasehold estate or the landlord’s freehold estate? There is an assumption that tenants are not intending to make valuable gifts to others when they attach things to the land. As Barton J said of a life estate in Registrar of Titles v Spencer, 5 6

7

(1872) LR 7 CP 328 at 335. North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52; [1940] HCA 7 at 68 (CLR); Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10 at [24], [25]; TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; [2010] HCA 49 at [25]. [1931] 2 Ch 183 at 209-210. [7.25]

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the tenant “should be able to improve the estate for his own enjoyment without being thereby compelled to make a present to the remainderman”. 8 The same assumption was used in Leigh v Taylor, 9 discussed at [7.15], to decide that tapestries attached to walls by the life tenant were goods and not fixtures. If they had been fixtures, they would have been tenant’s fixtures. Generally speaking, structural additions or repairs to buildings are normally regarded as permanent improvements to the land, while other fixtures installed by the tenant are tenant’s fixtures. However, the common law treats agricultural fixtures, such as pens and sheds, as permanent improvements to the land.

Statutory changes [7.30] In every State and Territory, short-term residential tenancies are governed by a statute

which regulates the tenant’s rights to install and remove fixtures. 10 The rules vary across Australia, but generally speaking, tenants are not permitted to install fixtures without the landlord’s consent, have a right to remove them at the end of the tenancy unless that would cause damage to the premises, and are responsible for any damages caused by their removal. In Victoria, tenants must remove their fixtures unless the parties agree otherwise. New South Wales, Queensland, and Tasmania also have statutes dealing with fixtures installed by agricultural tenants, 11 while there is a statutory provision in Victoria which applies generally to all tenant’s fixtures. 12 In both Queensland and Tasmania, these fixtures are by statute deemed to be the property of the tenant so long as they are removable by the tenant. 13 This probably means that they are chattels, 14 but they could still be the property of the tenant if they were regarded as fixtures attached to the leasehold estate and not to the freehold. Mining equipment which is attached to land, including buildings and machinery, is treated differently from fixtures. The right to remove the equipment at the end of a mining licence or lease is regulated by statute 15 and therefore the normal rules regarding fixtures do not apply. 16 Also, as discussed at [16.200] (Chambers), mining rights are sometimes treated as forms of personal property and so too are things attached to the land pursuant to those rights.

Removal of tenant’s fixtures [7.35] At common law, tenants are entitled to remove their fixtures at any time during the

lease or while they continue in possession thereafter. In McMahon’s (Transport) Pty Ltd v 8

Registrar of Titles v Spencer (1909) 9 CLR 641; [1909] HCA 69; at 651.

9 10

[1902] AC 157; [1902] UKHL 1. Residential Tenancies Act 1997 (ACT), ss 67, 68 of Sch 1; Residential Tenancies Act 2010 (NSW), ss 67, 68; Residential Tenancies Act (NT), s 55; Residential Tenancies and Rooming Accommodation Act 2008 (Qld), ss 207 – 209; Residential Tenancies Act 1995 (SA), s 70; Residential Tenancy Act 1997 (Tas), s 54; Residential Tenancies Act 1997 (Vic), s 64; Residential Tenancies Act 1987 (WA), s 47.

11

Agricultural Tenancies Act 1990 (NSW), s 10; Property Law Act 1974 (Qld), s 155; Landlord and Tenant Act 1935 (Tas), s 26.

12 13

Property Law Act 1958 (Vic), s 154A. Property Law Act 1974 (Qld), s 155; Landlord and Tenant Act 1935 (Tas), s 26; and also previously in Victoria: Landlord and Tenant Act 1958 (Vic), s 28 (repealed).

14 15

16

Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10. Mining Act 1992 (NSW), ss 244, 245; Mineral Titles Act (NT), s 99; Mineral Resources Act 1989 (Qld), ss 121 – 123, 228 – 230, 312 – 314; Mining Act 1971 (SA), ss 86; Mineral Resources Development Act 1995 (Tas), s 105; Mineral Resources (Sustainable Development) Act 1990 (Vic), s 114; Mining Act 1978 (WA), s 114. TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; [2010] HCA 49.

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Ebbage, 17 the court decided that tenants could also remove their fixtures within a reasonable time after they gave up possession. Pincus JA said: 18 There is authority in favour of the view that once the tenant gives up physical possession … the right to remove fixtures is gone … But the better view, and certainly one more in accordance with practical justice, is that the right to remove continues for a reasonable time after a lease has been terminated.

The time for removing agricultural fixtures is set by statute in New South Wales and Queensland. In New South Wales, “a fixture affixed to a farm by a tenant may be removed by the tenant before or within a reasonable time after the end of the tenancy”. 19 Agricultural tenants in Queensland are allowed to remove fixtures up to two months after the tenancy ends. 20 Tenants in Victoria “may remove them before the relevant agreement terminates or during any extended period of possession of the premises, but not afterwards”. 21 For short residential tenancies in the Australian Capital Territory, New South Wales, and Western Australia, tenants may remove fixtures only while they continue in possession. 22 Most cases and statutes about tenant’s fixtures are concerned with the tenant’s right to remove them. In Wincant Pty Ltd v South Australia, 23 the court decided that a tenant is required to remove fixtures at the end of the lease if they would interfere with the landlord’s use of the premises. The government leased seven floors of an office tower in Adelaide for 25 years and left its fixtures behind at the end of the lease. The premises could not be leased again without removing them at a cost of $58,550. The government was required to pay this cost, because the failure to remove them was a breach of its covenant to leave the “premises in good and substantial repair”. It might also be regarded as waste. If tenants do not remove their fixtures within the allotted time, they are abandoned by the tenant and belong to the landlord. In one sense, the abandonment does not affect the landlord’s property rights, since the fixtures became part of the estate when they were attached to the land (unless they were deemed by statute to be the property of the tenant). However, tenant’s fixtures are attached when the tenant has possession of the land and the landlord does not. Whether they will still be part of the land when the lease ends and possession reverts to the landlord is contingent on the tenant’s decision to leave them behind. Security rights [7.40] In most cases, people do not attach things to their land unless they own them. There is

one common exception. People buy goods under hire-purchase contracts and attach them to land before the purchase price is paid in full. This happened in Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd. 24 A company hired manufacturing machinery from the plaintiff and attached it to its land, which was mortgaged to the defendant. The company 17

[1999] 1 Qd R 185.

18

McMahon’s (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185 at 198. Also see Kyriacou v Manakis [2006] NSWSC 804. Agricultural Tenancies Act 1990 (NSW), s 10.

19 20 21 22 23

Property Law Act 1974 (Qld), s 155. Property Law Act 1958 (Vic), s 154A. Residential Tenancies Act 1997 (ACT), s 68(4) of Sch 1; Residential Tenancies Act 2010 (NSW), s 67(1); Residential Tenancies Act 1987 (WA), s 47(2)(b). (1997) 69 SASR 126; [1997] SASC 6287.

24

[1962] VR 429. [7.40]

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defaulted on both the hire-purchase contract and the mortgage and the court had to decide whether the plaintiff or the defendant was entitled to the machinery. The hire-purchase contract entitled the plaintiff to enter the company’s land and seize the machinery if the company breached the contract. However, the machinery had become fixtures and ceased to exist as goods. They were part of the land and the defendant was entitled to possession of the land, including the fixtures, when the company defaulted on the mortgage. Since the machinery was part of the land, the plaintiff no longer owned it. However, it still had a right to enter the company’s land, remove the machinery, and take it away. As Adam J said: 25 In law, no doubt, fixtures become part of the freehold while they remain annexed thereto and the legal title to them belongs to him who owns the freehold. But the contractual right, which the owner has against the hirer, to repossess on default confers on him a species of equitable interest which entitles him, as against the hirer, to enter upon the premises and sever and remove the chattels which have become fixtures.

The plaintiff’s right to enter the company’s land and remove the machinery was an equitable property right to that land, which had priority over the defendant’s legal property right (see [29.175] (Chambers)). As AL Smith LJ said in Hobson v Gorringe, “this right was not an easement created by deed, nor was it conferred by a covenant running with the land”. 26 It was created both by the contract and by the attachment of the machinery to the land as fixtures. This property right is produced not just by hire-purchase contracts, but by any security agreement which entitles the secured creditor to enter the debtor’s land and seize goods that have become fixtures. It could also be created by a chattel lease or other contract of bailment which gives the bailor the same right, or by a contract of sale of the fixtures which gives the buyer the right to enter the land and remove them. 27 In each case, the right to remove fixtures from the land is not a property right to the fixtures as chattels, but an equitable right to the land. Without a right to enter land and remove goods, the owner of goods fixed to another person’s land will not have an equitable property right to that land. For example, the victim of conversion does not have a right to enter the wrongdoer’s land. Also, he or she would probably not have a right to recover the converted goods even if they had not become fixtures. As discussed at [7.40]ff (Chambers), the normal response to conversion is to compel the wrongdoer to pay the victim for the value of the goods. In Victoria and Western Australia, the Chattel Securities Act 1987 applies to goods that are subject to a security interest, or obtained under a lease or hire-purchase contract, which then become fixtures. They “shall be deemed not to have become fixtures” for the purpose of their removal by the creditor or owner, but he or she “is liable to make good damage done to the land in removing the fixtures”. 28 The Personal Property Securities Act 2009 (Cth) does not apply to interests in fixtures. 29 25

Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 at 436.

26 27 28 29

Hobson v Gorringe [1897] 1 Ch 182 at 192. Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; [2004] VSCA 10 at [48]. Chattel Securities Act 1987 (Vic), s 6; Chattel Securities Act 1987 (WA), s 6. Personal Property Securities Act 2009 (Cth), s 8(1)(j).

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) [7.45] Re Cancer Care Institute of Australia Pty Ltd (admin apptd) (2013) 16 BPR 31,529; [2013] NSWSC 37 BLACK J 1 By Amended Originating Process filed on 24 January 2013, the Plaintiffs, Mr Ronald DeanWillcocks (“Administrator”) in his capacity as administrator of Cancer Care Institute of Australia Pty Limited (administrator appointed) (“CCIA”) and CCIA seek declarations as to the title to certain property (“Property”) situated in premises at Hurstville in which the Defendants have interests. The Plaintiffs also seek directions under s 447D of the Corporations Act 2001 (Cth) that the Administrator is justified in proceeding on the basis that, in effect, CCIA has title to the Property which forms part of its assets and consequential orders. The Defendants are Cortez Enterprises Pty Limited (“Cortez”), which took an active role in the proceedings, and Suncorp-Metway Limited and Strategic Nominees Australia Limited which filed submitting appearances in the proceedings. 2 By way of background, Cortez developed and owns a substantial medical centre situated at Hurstville, known as the Medica Centre. The Medica Centre is a private medical facility containing a surgical hospital, radiology and nuclear imaging service, cancer treatment centre, pathology laboratory and other facilities (“Premises”). The Premises are subject to a first ranking mortgage to the Second Defendant, Suncorp-Metway Limited and a second ranking mortgage to the Third Defendant, Strategic Nominees Australia Limited over lots in the relevant strata plan. CCIA occupies parts of Level B2 and Level 6 of the Premises although no written lease agreement was or is in place between CCIA and Cortez. 3 On 27 April 2009, CCIA contracted to purchase two Clinac iX linear accelerators and associated equipment (“Equipment”) from Varian Medical Systems Australasia Pty Limited (“Varian”) for a total of $8,985,545 (excluding GST). Linear accelerators are used for treatment of cancer patients by delivering high-energy radiation to the precise region of a patient’s tumour. The Equipment was delivered and installed on Level B2 of the Premises between late September 2010 and December 2010. Varian holds a Purchase Money Security Interest in the Equipment, which is registered in the Personal Property Security Register established under the Personal Property Securities Act 2009 (Cth). Reports as to affairs provided by CCIA’s directors to the Administrator acknowledge that CCIA currently owes Varian in excess of $9.8 million in respect of the Equipment. After the Administrator’s appointment, claims have been made by Cortez and Suncorp Metway that the Equipment is a fixture in the Premises, so that title in it has passed to Cortez and is subject to the mortgages over the Premises. 4 During the course of the hearing before me, the scope of the property in dispute between the parties was narrowed and the Court made orders, that were not opposed by Cortez, in respect of certain elements of that property. The substantive issue which remains to be determined is whether the Equipment has become a fixture in the Premises so that the lessor, Cortez, and secured lenders to Cortez now have an interest in the Equipment. An ancillary question arises, because of the manner in which CCIA has put its case and Cortez has put its defence, as to what constitutes the Equipment. The evidence 5 The Plaintiffs rely on the evidence of Mr Matthew Wellings. Mr Wellings has been a Site Solutions Manager for Varian since June 2008, and his responsibilities include organising and overseeing installation, acceptance testing and commissioning, and decommissioning and removal of linear accelerators supplied by Varian. He has relevant tertiary qualifications and has arranged the installation of approximately 61 new linear accelerators and the removal and de-installation of some 30 linear accelerators. Mr Wellings has also recently been responsible, on Varian’s behalf, for decommissioning and relocating two linear accelerators for a large public hospital to a newly built building and is also [7.45]

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. commissioned to undertake a similar task for another public hospital in January and May 2013. Mr Wellings also managed the delivery and installation of the Equipment in the Premises. Mr Wellings is plainly knowledgeable and experienced in the field of installation and removal of linear accelerators and gave evidence in a direct and convincing manner. 6 Each linear accelerator is installed on a steel base frame that is used to anchor its components. Mr Wellings’ evidence is that the steel base frame is not part of, and is separate to, the linear accelerator (Wellings 16.12.2012 [18]). The steel base frame was installed several weeks prior to the installation of the linear accelerator in accordance with the usual installation practice. It is common ground that each base frame is situated in a recessed pit in the concrete slab floor of level B2 of the Premises, and is cemented or grouted into that floor flush with the floor (Wellings 16.11.2012 [10]-[12], Schipp pp 79-83). Mr Wellings’ evidence is that that grouting is not structural in character and it and the base frame could be removed if Cortez wished to do so. Mr Wellings’ evidence is also that the steel base frame is the only piece of the equipment supplied and installed by Varian that was affixed to the floor of the Premises; each linear accelerator attaches to that steel base frame with six removable steel bolts (Wellings 16.12.2012 [14]); and the purpose of bolting the linear accelerator to the base frame is to prevent its movement when in operation so it provides precise movements to ensure that an “isocentre” (or central point) of less than 0.5mm is maintained during treatment. 7 Mr Wellings also gave detailed evidence as to the process that would be adopted to decommission and relocate the equipment, which would be transported on travel frames with air or mechanical skates in the same manner as it was installed. The linear accelerators would be separated for transport into a drive stand; linac gantry; counterweight; and electronics rack (Wellings 16.12.2012 [9]). Mr Wellings’ evidence is that no modification to the Premises was required when the Equipment was delivered and installed, and that steel base frames are ordinarily, and would also in this case, be left in place when a linear accelerator is removed. Mr Wellings’ evidence is also that the door heights and widths as built in the Premises are sufficient for removal of the Equipment; no vibration would be expected to occur during the decommissioning and removal, so other facilities in the Premises could continue to operate; and that the linear accelerators could be removed to a new site to be reinstalled and commissioned, or alternatively placed in storage, following removal. 8 Mr Wellings also prepared a videorecording, which was led in evidence, identifying and explaining the operation of the linear accelerators and their component parts and explaining how they would disassembled and removed. His evidence is that it would take two days to prepare the premises for removal of both linear accelerators and 1-1 1/2 days to remove both linear accelerators from the premises; the cost of removal would be approximately $60,000; and that the removal process using air skates and disassembling the relevant components would not cause damage to the flooring, the finishes or the Premises generally (Wellings 20.12.2012). Mr Wellings also gives evidence that linear accelerators are most commonly relocated in Australia as a result of the owner moving premises, whereas, outside Australia and particularly in the United States, linear accelerators are commonly relocated as a result of their sale to other persons or entities. 9 Cortez relies on the affidavit of Mr Damian Schipp dated 7 December 2012. Mr Schipp is a project manager employed by a third party which was retained by Cortez to act as project manager for the construction of the Premises. Mr Schipp has experience as an architectural draftsman and project manager for construction, but there is no suggestion that he has any particular expertise in the installation, still less the removal or relocation, of linear accelerators. Mr Schipp was primarily responsible for project management of the construction of the Premises at the time the basement levels were handed over by the relevant contractor to Cortez and witnessed the steps involved in the installation of the linear accelerators or was involved in organising those steps. Mr Schipp has also prepared a report which details the steps taken to install the linear accelerators and the way in which they are fixed or connected to the Premises. Mr Schipp’s evidence is that the base frames were 156

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. delivered and installed first, followed by other items. Mr Schipp does not give evidence as to the process which would be adopted to remove the linear accelerators and, importantly, does not take issue with Mr Wellings’ evidence as to that matter. Mr Schipp’s evidence indicates, and I accept, that Cortez as owner of the Premises had designed them to allow the ready installation of linear accelerators in their basement. The proper characterisation of the Equipment 10 An initial issue arises as to the proper characterisation of the Equipment. A schedule to the Amended Summons lists the items that the Plaintiffs seek to establish have not become fixtures and does not include the base frames to which the linear accelerators are bolted or a turntable that rests upon each base frame. Cortez contends that the base frame is part of the linear accelerators and that whether the linear accelerators are fixtures must be determined by reference to the Equipment as a whole, including the base frames. Mr Schipp’s report appears implicitly to assume that the base frame constitutes part of the linear accelerator. In my view, Mr Schipp is not qualified to express an opinion as to that matter and his report contains no reasoning to support that assumption, which is not probative of the fact. I prefer Mr Wellings’ evidence that the linear accelerators and the base frames are distinct, and I refer to several matters that support that conclusion below. 11 Cortez accepts that Mr Wellings distinguishes in his evidence between the steel base frames on the one hand and the linear accelerators on the other, but contends that distinction is artificial because the function of the base frame is not merely to anchor the machinery but also to “provide a turntable on and centre directly under the isocentre”. I accept that, as Cortez points out and consistent with Mr Wellings’ evidence, a combination of the linear accelerator, base frame and treatment couch enables the linear accelerator to maintain a precise location for the “isocentre” which is necessary to the effective operation of the linear accelerator. However, I do not consider that the distinction drawn by Mr Wellings is artificial, where the evidence is that the base frame was separately installed several weeks before the linear accelerator in accordance with the usual installation practice; second, linear accelerators are regularly dismantled or moved from place to place, in circumstances that the base frame is left in the previous premises; and, third, the linear accelerators, once removed, can be installed on separate base frames (which are standardised for Varian equipment) in a new location and other linear accelerators can be installed on the base frames remaining in the Premises. In my view, the steel base frames are in fact distinct items in substance, being steel frames on which complex medical equipment rest, rather than part of that complex medical equipment. 12 Cortez also contends that the distinction in Mr Wellings’ evidence between the base frame and the linear accelerator is contrary to authority that it is necessary to determine whether a machine as a whole is a fixture: Craven v Geal [1932] VLR 172 at 176-177; National Australia Bank Ltd v Blacker [2000] FCA 1458; (2000) 104 FCR 288 at [24]; Loiero (aka Lero) v Adel Sportswear Pty Ltd [2010] NSWSC 1133 at [12]; (2010) 15 BPR 29,689. I do not accept that submission. That principle seems to me to be applicable to the approach to be adopted to items that are in fact part of a single machine, rather than requiring the Court to treat an item that is in fact not part of a machine as part of that machine, merely because that separate item is attached to the machine. Before that principle could apply in this case, it seems to me that it would first be necessary to find that the base frames were part of the linear accelerators in fact, and I consider that the evidence to which I have referred above establishes the contrary. 13 Moreover, as Professor Butt observes in Land Law, 6th ed, 2010 [3 11], the principle that a machine should be treated as a composite whole is also qualified where a part of the machine has a separate and independent viability; see also Macrocom Pty Ltd v City West Centre Pty Ltd [2001] NSWSC 374; (2001) 10 BPR 18,631. Even if, contrary to my view, the base frame and the linear accelerator should be treated as a single item rather than two separate items, they plainly have separate and independent viability because a new linear accelerator may be installed on the existing base frame if it [7.45]

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. is left in the premises, and the linear accelerator, once removed, can be installed on a new base frame in other premises. Indeed, as Mr Wellings’ evidence makes clear, this would be the ordinary approach adopted in the removal and relocation of linear accelerators. 14 Cortez also contends that the base frames should be treated as part of the linear accelerators because they were part of the purchase orders by which the linear accelerators was bought by CCIA. I do not accept that submission, and note that a range of other ancillary items, including free-standing computers and other ancillary equipment, were also part of that purchase order. It does not follow that either they, or the base frames, were part of the linear accelerators because they were purchased at the same time as them or promoted their more effective operation. 15 I therefore find that the base frame is not part of the linear accelerators, although it is plainly used in conjunction with them and promotes their effective operation. For completeness, I note that Cortez also submitted that a turntable (which is placed on the base frame, at ground level, and to which a treatment couch is then attached) was part of the base frame. However, on the basis of Mr Wellings’ evidence, it is properly characterised as a separate item that sits upon the base frame. Whether the linear accelerators are fixtures 16 I now turn to whether the linear accelerators, as distinct from the base frames, are fixtures. There was little dispute before me as to the legal principles to be applied, with both parties accepting that the primary issue was the application of those principles to the relevant facts. 17 Whether chattels have become affixed to land, so that they are to be regarded as fixtures and as part of the land, is to be determined by reference to the objective intention of the chattels’ owner, with relevant factors including the degree of affixation of the chattel to the land and the object or purpose for which it was affixed. In Land Law, 6th ed, 2010 [15 248], Professor Butt summarises the relevant principles as follows: … in determining whether an item that was once a chattel has become a fixture, the guiding principle is the intention with which the item was brought onto the land, and pointers to that intention are the degree and purpose of the annexation. … an intention to permanently improve the realty is easier to discern when an absolute owner brings the item onto the land than when a tenant does so, for a tenant is unlikely to intend to make a present of the item to the landlord. 18 In Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712, Jordan J observed that: A fixture is a thing once a chattel which has become in law land through having been fixed to the land. The question whether a chattel has become a fixture depends upon whether it has been fixed to the land, and if so for what purpose. If a chattel is actually fixed to the land to any extent, by any means other than its own weight, then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not; if it is not otherwise fixed but kept in position by its own weight, then prima facie it is not a fixture and the burden of proof is on anyone who asserts that it is. 19 There is some utility to referring to several of the decided cases addressing similar issues, although each case will depend on its own facts. In Commissioner of Stamps (WA) v L Whiteman Ltd [1940] HCA 30; (1940) 64 CLR 407, machinery attached to a concrete base was held to be a fixture where it had been installed to promote the use of the land to make clay bricks and the shedding in which it was housed would have to be demolished in order to remove it. That result is consistent with the owner of the machinery having affixed it to the land to better use that land. On the other hand, in Attorney-General v RT Company Pty Ltd (No 2) (1957) 97 CLR 146, the High Court held that substantial printing presses were not fixtures although they were affixed to concrete foundations by bolts to steady them while in use and could only be removed by dismantling them at a substantial cost. The Court emphasised (at 157) that the purpose of affixing the presses was to hold them steady while in 158

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. operation. In Anthony v Commonwealth (1973) 47 ALJR 83, the Court held that several steel poles and associated telephone line had not become fixtures, although those poles had been concreted into holes dug in the ground, where their removal would not be a major task or adversely affect the land. In NH Dunn Pty Ltd v LM Ericsson Pty Ltd (1979) 2 BPR 9241, the Court of Appeal held that a PABX system, which had been installed in premises occupied by a company under a long term lease, was not a fixture although it was attached to the structure of the premises at floor and wall level and cabling had been laid in a channel in the floor. The Court of Appeal noted that the relevant affixation was for the purpose of steadying the equipment while in use and that the equipment could be removed without substantial damage to the building and any such damage could be repaired without substantial expense. In Macrocom Pty Ltd v City West Centre Pty Ltd above, Windeyer J held that a satellite aerial erected on the roof of a building was a fixture rather than a chattel (although he also indicated that he would have held that it was a tenant’s fixture), given the weight of the item, the fact that additional steel support to the roof was necessary prior to its installation and the way in which it was connected to the building. 20 In Lees & Leech Pty Ltd v Commissioner of Taxation (1997) 73 FCR 136 at 148, Hill J summarised the relevant principles as follows: There is little room for dispute as to the principles to be applied in determining whether a particular item is or is not a fixture. The generally accepted view is that the question will depend upon the degree of annexation and the object or purpose of that annexation: Commissioner of Stamps (Western Australia) v L Whiteman Ltd (1940) 64 CLR 407 at 411. The two matters are not exclusive of each other. The degree of annexation tells as to the object or purpose of the annexation. When the cases speak of object or purpose, they are not concerned with subjective purpose of some person, although intention will not be irrelevant: Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841 at 4846; N H Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) (2) BPR 9241 at 9244-9245. The prima facie view, as expressed in cases such as Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR(NSW) 700, is that an object merely standing by its own weight on the land will not ordinarily be a fixture. On the other hand, if fixed to any extent prima facie it will be. But that is but a prima facie view as Mahoney JA pointed out in N H Dunn v Ericsson (supra) at 9246. … When the cases refer to the degree and object of annexation to the land, what is meant is that the fixing of the item to the land, whether by bolts, concrete bases or whatever, is such that removal would be difficult as, for example, where the items could be ruined if sought to be removed: Whiteman (supra) at 411. That case is important in that it drew as a relevant distinction the question whether the affixation was for the better enjoyment of the land, in contrast to the case where the affixation was for the enjoyment of the item itself. That distinction is one later taken up by Mahoney JA in N H Dunn v Ericsson (supra), but subject to the qualification that much may turn upon the actual nature of the asset. 21 In Metal Manufacturers Ltd v Commissioner of Taxation [1999] FCA 1712 at [165], Emmett J identified considerations which were relevant to the assessment whether a chattel had become a fixture including whether removal would destroy the chattel; whether the cost of removal would exceed the value of the chattel; whether removal of the chattel would occasion significant damage to the property; whether the attachment was for the better enjoyment of the chattel or for the better enjoyment of the property; the nature and contemplated use of the property; the period of time for which the property was to be in position and the function to be served by the annexation of the property. His Honour also noted (at [170]) the relevance of the intention of the person who affixed the equipment to the land and the degree of annexation, which in turn is indicative of the objective intention of that person. The relevant authorities were also reviewed by Conti J in National Australia Bank Ltd v Blacker above. [7.45]

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. 22 The authorities were also recently helpfully summarised by Ball J in Loiero (aka Lero) v Adel Sportswear Pty Ltd & Ors above at [11], where his Honour noted that: The question whether an item is a chattel or a fixture depends on whether it was placed on the land with the intention that it become part of the land or whether it was placed on the land with the intention that it remain separate from it: Reid v Smith (1906) 3 CLR 656. Generally, the intention of the person who placed the item on the land is to be determined objectively: May v Ceedive Pty Ltd [2006] NSWCA 369 at [65] per Santow JA (with whom Mason P and Beazley JA agreed), although, in some cases, courts have been prepared to look at the subjective intention of the person who placed the item on the land: for discussion, see National Australia Bank v Blacker [2000] FCA 1458; 104 FCR 288 at [12] per Conti J. Of particular significance in determining the party’s intention is whether the item has been affixed to the land and, if so, the degree of annexation: Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712-3 per Jordan CJ. Indeed, it is often said that if an item is affixed to the land then there is a presumption that it is a fixture (the strength of the presumption depending on the degree of annexation) and if it is not affixed then there is a presumption that it is not a fixture: Coroneo (1938) 38 SR (NSW) 700 at 712. However, the fact that the item is affixed to land is not determinative. An item may be a fixture where it simply rests on land by virtue of its own weight. A house resting on wooden piles is an obvious example: Reid v Smith (1906) 3 CLR 656, although even then there may be cases where a demountable house is not regarded as a fixture: Jiwira v PIBA [2000] NSWSC 1094. Conversely, an item that is fixed to land may not be a fixture. A typical case is where machinery is attached to land for the more effective use of the machinery rather than with the intention of improving the land: Reid v Smith (1906) 3 CLR 656 at 680-1 per O’Connor J; cf Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712 per Jordan CJ. 23 I now turn to the application of these principles in these circumstances. The Plaintiffs contend that the Equipment would not tend to improvement of the Premises. On the other hand, Cortez contends that the overall architectural design of level B2 of the Premises was directed to the installation of the Equipment and, specifically, that the Equipment is located and affixed in treatment rooms that were prepared for the performance of radiological medical procedures, for the better use of the Premises. Cortez also points out that steel plating was used in the relevant area to protect against the escape of radiation and that heavy duty conduits and other equipment was installed to facilitate the operation of the equipment. Cortez draws attention to analogies such as, for example, where a milk processing plant was annexed to the land for the better enjoyment and use of the land as a diary processing plant (National Dairies WA Ltd v Commissioner of State Revenue [2001] WASCA 112; (2001) 24 WAR 70) or machinery in a factory plant was annexed for the better use and enjoyment of the land as a furniture factory (Re Starline Furniture Pty Ltd (in liq) (1982) 6 ACLR 312). 24 I accept that the Premises were developed with a view to housing various medical facilities for the treatment of cancer and the treatment rooms were designed in a manner that is well suited for the conduct of radiological medical procedures. However, the design of that area facilitated the use of radiation equipment generally and could be used for equipment other than linear accelerators. On removal of the Equipment and termination of CCIA’s occupation of the Premises, it would be open to Cortez to lease the premises to another entity that used linear accelerators or other radiological equipment or any other form of radiological medical equipment, for example, a CT scanner of the kind contained in an adjoining treatment room, or indeed for other purposes. Moreover, it does not seem to me to follow from the design of the Premises or the treatment rooms that CCIA, as a tenant of the Premises, would have objectively intended that Equipment installed in Premises that had been designed to be suitable for its installation would become the lessor’s property. As the Plaintiffs point out, the position is analogous to that of the owner of a shopping centre which may design its facilities so that it is suitable for the installation of, for example, equipment regularly used in supermarkets or 160

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. other stores likely to be found in shopping centres, without tenants of that shopping centre objectively intending that that equipment should become the owner’s property. 25 Cortez also contends that the installation of the Equipment in the Premises promotes their function as an integrated medical centre; and, conversely, in the absence of the Equipment, the Premises would have a diminished range of medical services to offer to the community. While that is plainly correct, the interests of Cortez as the owner of the Premises are to be distinguished from the interests of CCIA as the owner of the Equipment, and the proposition that the lessor’s interests (or indeed the community’s interests in the use of a particular facility) would be diminished by the removal of Equipment provides little support for a proposition that CCIA would have objectively intended to transfer ownership of the Equipment to Cortez. The position again seems to me to be analogous to the situation where a tenant may install chattels in, for example, a shop in a shopping centre, which no doubt promotes the use of the shopping centre generally, but provides little support for an inference that the objective intention of the tenant was that the equipment should become part of the land or the lessor’s property. Cortez’s submission also tends to prove too much, since much of the equipment installed by many of the tenants in an integrated medical centre will promote its function as such, but those tenants are unlikely to have objectively intended that the equipment installed in their tenancies would become the lessor’s property. 26 In my view, Mr Wellings’ evidence that he has installed some 61 new linear accelerators and arranged the removal or de-installation of 30 linear accelerators, and has also been engaged for two further relocations with two more planned in the near future (Wellings 16.11.12 at [3]) is also relevant both to the determination of the objective intention of CCIA when the equipment was installed in the Premises and to assessing the feasibility of the removal of the equipment and the likelihood that damage would result. CCIA, as a purchaser of very expensive medical equipment, is likely to have known that it was capable of being moved from place to place or removed and that is a factor that tends strongly against an objective intention that that the Equipment should become the property of Cortez as lessor of the premises. Second, the fact that linear accelerators are regularly removed and de-installed is a factor that indicates that the removal of the Equipment is not likely to cause substantial damage to the Premises. That indication is confirmed by Mr Wellings’ detailed evidence, to which I have referred above, of the steps that would in fact be taken to remove and relocate the Equipment, which was not controverted by Cortez. 27 Cortez contends that the Premises would be damaged by the removal of the steel base frames. However, as I have noted above, I do not consider that the base frames should be treated as part of the linear accelerators; it is not presently suggested that the base frames are to be removed; and in any event, the evidence is that any damage resulting from their removal could readily be repaired. Cortez also contends that the use of skates for removal of the linear accelerators would damage the surfaces along the proposed route for removal, but I accept Mr Wellings’ evidence that such damage should not result from the steps proposed to be taken to remove the Equipment. 28 So far as Emmett J identified several other relevant factors in Metal Manufacturers above are concerned, it is also plain that removal would not destroy or damage the Equipment, given the evidence that linear accelerators are regularly removed and replaced. The Equipment has substantial value, which on any view would exceed Mr Wellings’ evidence that the cost of its removal would be in the order of $60,000, and the fact that the cost of removal would not exceed its value is also evidenced by the extent to which other linear accelerators are removed and relocated. The time taken to remove the Equipment would be limited, being several days for its complete removal from the Premises. 29 The Plaintiffs point to another factor that, in my view, strongly tends against a finding that the objective intention of CCIA was that the Equipment should become a fixture in the Premises that are owned by Cortez. CCIA does not presently have a registered or written lease or agreement to lease the [7.45]

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. area of the Premises in which the Equipment is located, and the parties accepted that it occupied that area as a tenant at will, although Cortez is presently unable to terminate that tenancy while CCIA is in administration by reason of s 440B of the Corporations Act. Cortez accepted that CCIA was a tenant at will for an indefinite term, although it submitted that it foreseeably had tenure as secure as Cortez, by reason that CCIA and Cortez were owned by interests associated with their common directors, Messrs Smith and McGrath. 30 The evidence before me is ultimately not sufficient to establish the detail of any corporate relationship between Cortez and CCIA. Two entities associated with Messrs Smith and McGrath, Polar Property and Investments Pty Limited (“Polar”) and Iowa Property and Investments Pty Limited (“Iowa”), each hold 50% of the issued share capital in CCIA. Cortez relies on a draft business plan of a third entity, Australian Health Investment Company Limited (“AHIC”) prepared in 2010 to seek to establish the nature of the corporate relationship between CCIA and Cortez. That draft document appears to be less a traditional business plan than a document prepared to provide third parties with information about AHIC’s then proposed business, and includes a disclaimer as to its content. The document notes that Messrs Smith and McGrath then held a 50% interest in another entity, Cortez Investments LLP, that in turn held a 74% interest in Cortez and indicates that AHIC then intended to purchase the issued capital of CCIA from Polar and Iowa. Cortez also relies on a statement in that draft document that: It is intended AHIC will put in place formal rental agreements between the entity owning the strata units [in the Premises] and [CCIA]… I do not consider that I can place significant weight on that draft document as further illuminating the nature of any corporate relationship between Cortez and CCIA, where it is a draft prepared over two years ago; it refers to structures and transactions that are proposed and may or may not later have been implemented and interests that may or may not later have changed; and where the evidence is that some of those proposed transactions, such as the proposed purchase of the shares in CCIA by AHIC from Polar and Iowa and the entry into a formal lease between AHIC and CCIA, were not in fact implemented. 31 There also seem to me to be several other difficulties with Cortez’s reliance on the corporate relationship between CCIA and Cortez as a basis for a right of occupation of the Premises. First, by contrast with the position considered by Emmett J in Metal Manufacturers above, CCIA was not Cortez’s holding company and did not control it so it had no ability to secure its occupancy of the premises by exercising corporate control. Second, the common directors of CCIA and Cortez could not properly act to secure CCIA’s occupancy of the premises, if it were in Cortez’s interests to terminate the tenancy at will although they also could also not properly prefer Cortez’s interests to those of CCIA in that situation. In my view, the fact that the directors of CCIA did not insist on a long term lease of the Premises before purchasing the Equipment and installing it in the Premises tends strongly against any objective intention of CCIA that the Equipment become a fixture. Had that been CCIA’s intention, its directors would have been bound to take steps to ensure that CCIA had a secure right of occupancy of the Premises to mitigate the risk that its ownership and use of the Equipment that it had purchased at a substantial price and any income stream derived from it would be lost to CCIA. 32 The Plaintiffs contend, and I accept, that it is inherently unlikely that CCIA would objectively intend that medical equipment that it had purchased at a cost of approximately $9 million would become the property of Cortez, where it had no security of tenure and that could have occurred at any time. The position, so far as CCIA as a tenant at will is concerned, is closely analogous to that contemplated by Lord Halsbury LC in Leigh v Taylor [1902] AC 157 at 159, in asking the rhetorical question whether it was likely that a tenant from year to year would have put up expensive tapestries with a value of £7,000 and thereby made a present of their value to the lessor. There seems to be no 162

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. less reason to answer that rhetorical question in the negative where dealings are between associated entities with common directors and a present by CCIA to Cortez of equipment purchased at a price of nearly $9 million would be prejudicial to the interests of CCIA and of its creditors. 33 The Plaintiffs also contend, and I also accept, that another factor tending against an objective intention that the Equipment would become part of the premises was that it was purchased on credit, and the terms and conditions of sale provided that the vendor, Varian: … shall retain a purchase money security interest in all Products and the proceeds thereof until the Customer has made payment in full to Varian of all sums due, including late fees and collection costs. (Dean-Willcocks affidavit, Ex RD 1, Tab 9, Cl 3) The reference to a “purchase money security interest” is to an interest registered in the Personal Property Securities Register created under the Personal Properties Securities Act 2009 (Cth). The fact that CCIA and Varian both proceeded on the basis that CCIA was able to give an effective security interest over the Equipment is inconsistent with any objective intention of CCIA that they would become part of the Premises and the property of Cortez. 34 For these reasons, I find that the Equipment has not become a fixture to the Premises. Whether the Equipment is a tenant’s fixture 35 The Plaintiffs alternatively contend that, if the Court were to hold that the Equipment had become a fixture, then it would properly be characterised as a tenant’s fixture that may be removed by CCIA within a reasonable time of termination of its right to occupy the Premises. I should briefly address this contention, although it is not necessary to do so in detail where I have not found that the Equipment has become a fixture. 36 In Land Law, 6th ed, 2010 [15 248], Professor Butt refers the approach adopted by the common law in permitting tenants to remove fixtures they had brought onto the land, provided that the fixtures were installed for trade, domestic or ornamental purposes, and also points to the qualification that a tenant cannot remove items that are so firmly fixed that removal would destroy their essential character or value or would substantially damage the reality. The authorities indicate that a right to remove fixtures can arise as between lessor and lessee by, inter alia, implication, and such a right may arise where a tenant has affixed chattels to land for the purpose of trade: Reid v Smith (1906) 3 CLR 656 per O’Connor J at 677-678. 37 In Lees & Leech Pty Ltd v Commissioner of Taxation above, Hill J observed that: Prima facie, once an item is a fixture it attaches to the land and becomes part of the realty. In other words, it becomes part of the property of the owner of the land. There is a question as to whether that is the case where the item in question is a “tenants’ fixture”:cf Re Sir Edward Hulse [1905] 1 Ch 406 at 411; Spyer v Phillipa [1931] 2 Ch 183; Registrar of Titles v Charles Spencer (1909) 9 CLR 641; and Commissioner of Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118. When it is said that an item is a “tenants’ fixture”, all that is meant is that the tenant has a right to remove the item at the expiration of the term of the lease or a reasonable time thereafter: cf D’Arcy v Burelli Investments Pty Ltd (1987) 8 NSWLR 317. If the item in question were not a fixture, a fortiori it would belong to the tenant and could be removed by the tenant at any time. Thus, the whole concept of tenants’ fixtures assumes that the items in question have become fixtures but that the tenant has a right in equity in the land, co-extensive with the right of the tenant to come upon the land after the expiration of the lease and remove the fixture. 38 In Macrocom Pty Ltd v City West Centre Pty Ltd above, Windeyer J indicated (at [21]) that, although he had held a satellite dish to be a fixture as I noted above, he would have held, had the case been between landlord and tenant and the question to be determined during the term of the lease, that the tenant could remove that satellite dish where it was erected for the purposes of its trade. [7.45]

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Re Cancer Care Institute of Australia Pty Ltd (admin apptd) cont. 39 Had I held, contrary to the conclusion that I have reached above, that the Equipment had become a fixture, then I would have held that CCIA was entitled to remove the Equipment as a tenant’s fixture. To the extent that such a term was to be implied into the lease in fact, that implication could more readily be drawn given the informality of the relevant tenancy arrangement. The only submission put by Cortez to the contrary was that the removal of the Equipment would cause substantial damage to the Premises. However, that submission depended, first, upon the proposition that the base frame was part of the Equipment, which I have not accepted. I also accept Mr Wellings’ evidence that is a relatively straightforward task to remove the base frame, whether to install the base frame for a linear accelerator manufactured other than by Varian or so that no base frame remains in the Premises, if Cortez ultimately wishes to do so. Orders 40 Accordingly, I propose to make the following orders in the form sought by the Plaintiffs: 1. A declaration that: (a) The property described in Schedule A (“Property”) is not a fixture of the land located at 31 Dora Street Hurstville (“Premises”) in which the Defendants have an interest;

2.

(b)

the Defendants have no title, interest or rights in respect of the Property; and

(c)

the Second Plaintiff has title in the Property.

Order that the First Defendant immediately deliver up the Property to the Plaintiffs or, in the alternative, permit the Plaintiffs to remove the Property from the Premises without impediment.

It will be necessary for the parties to prepare an Amended Schedule A, deleting those items that were previously the subject of orders made by the Court in the course of the hearing. I will also hear the parties further as to any other modifications that may be required to the form of the proposed orders. 41 I note that the Plaintiffs also sought a direction that the Administrator is justified in proceeding in the administration of CCIA on the basis that, aside from any security interests in respect of CCIA perfected under the Personal Property Securities Act 2009 (Cth), CCIA has title to the Property and the Property forms part of its assets. I do not consider that it is necessary or appropriate to make such a direction. I do not consider that it is necessary to make that direction, because no claim to an interest in the Property other than that advanced by the Defendants was addressed in the hearing before me, and that dispute will be resolved by the declaration and order that I will make. I do not consider it is appropriate to make that direction, where there is no evidence before me that would exclude the possibility of other interests in the Property, although no party in the proceedings before me claimed any such other interest. 42 The First Defendant should pay the Plaintiffs’ costs of the proceedings.

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Chapter 8: Taxonomy of Personal Property ..................................... 167 Chapter 9: Identifying Legal Interests in Choses in Possession: Ownership and Possession .............................................. 199 Chapter 10: Engaging in Dealings in Choses in Possession: Transfer of Ownership .......................................................... 215 Chapter 11: Engaging in Dealings in Choses in Possession: Transfer of Possession by Bailment ................................... .. 299

PART2

PART 2: PERSONAL PROPERTY – INTRODUCTION TO CHOSES IN POSSESSION

CHAPTER 8 Taxonomy of Personal Property [8.05]

TYPES OF AND INTERESTS IN PERSONAL PROPERTY ........................................ 167 [8.10]

Colonial Bank v Whinney ....................................................... 169

Extract from Pearson, Commercial Law: Commentary and Materials, Ch 2.

TYPES OF AND INTERESTS IN PERSONAL PROPERTY [8.05] The nomenclature of the two main types of personal property, namely things in

possession and things in action, provides us with some guidance concerning the interests that each type of personal property gives rise to. This section introduces the categories of things in possession and things in action and these are dealt with in more detail below (see Chapter 12). A thing is in possession because it is capable of being possessed. If something is to be “possessed” then, except in a metaphorical sense, that thing must be something that has a real existence as an object. In other words, the thing must be corporeal. By contrast, things in action are intangible. Things in action are legal abstractions derived from legal relationships that the legal system is prepared to recognise and provide remedies for their breach or invasions of those particular interests. The fundamental difference between the two main types of personal property is whether the “thing” is corporeal. In 1769, Yates J said “nothing can be the object of property which has not a corporeal existence”: Millar v Taylor (1769) 98 ER 201 at 232. The Canadian commentator Welling, after citing Yates J in Millar v Taylor (1769) 98 ER 201, goes on to ascribe a restricted meaning for the word “thing” as meaning a “material object, a body; a being or entity (excluding land) consisting of matter, or occupying space”. 1 To adopt this view you would need to also adopt the view that property is a wider in meaning than “things” and the law of property is not only concerned with things which Welling does. 2 For him property is a relationship between people. 3 However, query the correctness of these assertions. Today, choses in action are considered a personal right of property even though they are not corporeal. Moreover, a chose in action has been expressed as a thing. For example, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 915 Lord Hoffmann said: [A] chose in action is property, something capable of being turned into money… [W]hat is assignable is the debt or other personal right of property. It is recoverable by action, but what is assigned is the chose, the thing, the debt or damages to which the assignor is entitled. The existence of a remedy or remedies is an essential condition for the existence of the chose in action but that does not mean that the remedies are property in themselves, capable of assignment separately from the chose. 1

2

B Welling, Property in Things in the Common Law System (Scribblers Publishing, Gold Coast, 1996), p 10. Welling cites Art 90 of the German Civil Code to illustrate the distinction between “property” and “things”: “Only corporeal objects are things in the legal sense”. B Welling, Property in Things in the Common Law System (Scribblers Publishing, Gold Coast, 1996), p 11,

3

B Welling, Property in Things in the Common Law System (Scribblers Publishing, Gold Coast, 1996), p 8. [8.05]

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It is suggested that for the most part property law is concerned with the relationship between people in respect of things. It is also convenient to mention here the distinction between legal and equitable interests in things. The common law recognises only two titles to personal property, namely ownership and possession. Parties can share that title and co-own the subject asset but it is not possible to carve up ownership and possession into different titles; ownership and possession at law are indivisible. Equity, somewhat akin to the doctrine of estates in land, does recognise a division of title, so it is possible for person to have legal title and another person to have equitable title to the same asset, see further Roy Goode, Commercial Law (3rd ed, Penguin, London, 2004) p 31ff. As there is but one asset it is still correct to characterise these parties as co-owners of the asset. Thus, a legal title holder of a debt and an equitable title holder of the same debt, co-own the debt. See also Robert Chambers, An Introduction to Property Law in Australia (2nd ed, Thomson Lawbook Co, 2008) Chapter 13 (equitable interests), Chapter 15 (co-ownership).

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Colonial Bank-v-Whinney [8.10] Colonial Bank v Whinney (1885) 30 Ch D 261 at 285-290 (per Fry LJ dissenting)

[8.10]

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[8.10]

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[8.10]

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174

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Colonial Bank-v-Whinney cont.

[8.10]

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[8.10]

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[8.10]

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[8.10]

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[8.10]

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Colonial Bank-v-Whinney cont.

[8.10]

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188

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Colonial Bank-v-Whinney cont.

[8.10]

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[8.10]

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192

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[8.10]

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194

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[8.10]

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[8.10]

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198

[8.10]

CHAPTER 9 Identifying Legal Interests in Choses in Possession: Ownership and Possession [9.05]

POSSESSION .......................................................................................................... 199 [9.05]

Definition ............................................................................................. 199 [9.10]

[9.20]

Degrees of possession ......................................................................... 200 [9.25] [9.30] [9.35]

[9.40]

An Essay on Possession in the Common Law ........................... 200 An Essay on Possession in the Common Law ........................... 201 The Tubantia ........................................................................ 204 Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd ................................................... 207

OWNERSHIP: DEFINITIONS AND CONCEPTS .................................................... 209 [9.45] [9.55] [9.70]

Report on the Giving of Security by Means of Movable Property ............................................................................... 210 Imported Food Control Act 1992 (Cth), s 20(14) ..................... 211 Re Jigrose Pty Ltd .................................................................. 212

POSSESSION Extracts from Pearson, Commercial Law: Commentary and Materials, Ch 2.

Definition [9.05] The concept of “possession” has continued to evade comprehensive definition (see

United States of America & Republic of France v Dollfus Mieg et Cie SA & Bank of England [1952] AC 502 at 605). At its simplest, “possession connotes power over the article possessed”: Knapp v Knapp [1944] SASR 257 at 262 per Mayo J. Possession is not limited simply to physical possession or custody of tangible property. Legal possession also denotes a state of mind where the person in possession of tangible property (or goods) regards him or herself as having exclusive control over the goods and thus entitled to use those goods free from interference by any other person: see also Knapp v Knapp [1944] SASR 257 at 265. Possession can be categorised as actual or constructive. Actual possession is where a person has physical possession of goods accompanied by an intention to control or exercise power over the goods. Constructive possession is where a person, having the requisite intention, has taken symbolic delivery, as opposed to physical possession, of goods through, for example, obtaining the physical means of control over the goods or entering into an arrangement where the goods are held to the order of that person. 1 Pollock and Wright in their magisterial work entitled An Essay on Possession in the Common Law (Clarendon Press, Oxford, 1888 (reprinted 1990, Law Press, Sydney)) introduce the legal concept of “possession” in the following terms. 1

See S Gleeson, Personal Property Law (Sweet & Maxwell, London, 1997), pp 30-31. [9.05]

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An Essay on Possession in the Common Law [9.10] Pollock and Wright, An Essay on Possession in the Common Law (Clarendon Press, Oxford, 1888) [1] Yet, as the name of Possession is … one of the most important in our books, so it is one of the most ambiguous [Erle CJ in Bourne v Fosbrooke (1865) 15 CB (NS) 515; 34 LJCP a64, 167; Fry LJ in Lyell v Kennedy (1887) 18 QBD 795, 813]. Its legal senses (for there are several) overlap the popular sense, and even the popular sense includes the assumption of matters of fact which are not easy to verify. In common speech a man is said to possess or to be in possession of anything of which he has the apparent control, or from the use of which he has the apparent power of excluding others. [2] Law takes this popular conception and as a provisional groundwork, and builds up on it the notion of possession in a technical sense, as a definite legal relation to something capable of having an owner, which relation is distinct and separable both from real and from apparent ownership, though often concurrent with one or both of them. Possession again, whether in the popular or in the legal sense, does not necessarily concur with title.

[9.15] The difficulty of crafting a legal definition of “possession” is apparent in the statement

of Mayo J in Button v Cooper [1947] SASR 286 at 292 where his Honour said: “Possession connotes a relationship between a person and some material object. It is a relation subsisting in fact.” It is for the purposes of legal discourse that legal commentators and judges have attempted to impose order on possession by introducing legal analysis and concepts. Possession is very much case-specific or instance-specific as noted by Bridge: “Possession takes its meaning very much from the operative facts, so its application differs according to whether it applies to a signet ring or a supertanker.” 2 Although both courts and commentators have readily confessed to the difficulty of defining possession, the efforts of judges in deciding disputed possession and the efforts of commentators in organising the law of possession means that there is a substantial body of opinion from which working principles can be derived, to approach possession as a legal phenomenon and to resolve disputes as to possession. As regards the latter aspect, it is worth noting the dictum of Auld LJ in Waverley Borough Council v Fletcher [1996] QB 334 at 345 that “the English [and Australian] law of ownership and possession, unlike that of Roman law, is not a system of identifying absolute entitlement, but of priority of entitlement”. The commentator Kocourek has summarised the difficulties associated with the concept of possession in the following passage from his work Jural Relations. Degrees of possession [9.20] In [9.05] above, we introduced the framework of the law of possession broken down

according to what were called the elements of possession, namely intention and control. These elements of intention and control function as benchmarks or yardsticks by which to gauge whether a particular person has “possession” of a tangible, corporeal thing (although it must be remembered that the subject of possession can be land as much as it can be goods). To develop a more refined understanding of the concept of possession, commentators have further dissected possession into what might be termed the “degrees” of possession. The most 2

See M Bridge, Personal Property Law (3rd ed, Blackstone Press Ltd, London, 2002), p 16.

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notable attempt is that made by Pollock and Wright in their seminal work An Essay on Possession in the Common Law (Clarendon Press, Oxford, 1888 (reprinted 1990, Law Press, Sydney)).

An Essay on Possession in the Common Law [9.25] F Pollock and RS Wright, An Essay on Possession in the Common Law (Clarendon Press, Oxford, 1888) (footnotes omitted) [12] It appears, then, that even at the earliest stage we have many things to distinguish. De facto possession, or detention as it is currently named in Continental writings, may be paraphrased as effective occupation or control. Now it is evident that exclusive occupation or control, in the sense of a real unqualified power to exclude others, is nowhere to be found. All physical security is finite and qualified. A strong man is worse to meddle with than a weak man or a child, but the strong man also may be overpowered. It is harder to break [13] into a safe than a cupboard, a house than field, a prison or a fortress than a house; but locks may be picked, bolts forced, walls broken. External security means only making intrusion so troublesome, and successful intrusion so little to be hoped for, that under ordinary conditions the risk of the attempt will be out of proportion to the contingent gain of success. And the amount of material difficulty which it is necessary or worth while to set up is found by experience to vary with circumstances. A dwelling-house is not built or guarded like a prison, and we do not lock up tea and candles in a safe; we should call a banker imprudent who used only the same cautions as a private householder. We may say then that, in common understanding, that occupation at any rate is effective which is sufficient as a rule and for practical purposes to exclude strangers from interfering with the occupier’s use and enjoyment. Much less than this will often amount to possession in the absence of any effectual act in an adverse interest … To determine what acts will be sufficient in a particular case we must attend to the circumstances, and especially to the nature of the thing dealt with, and the manner in which things of the same kind are habitually used and enjoyed. We must distinguish between moveable and immoveable property, between portable objects and those which exceed the limited of portable mass or bulk. Further, we must attend to the apparent intent with which the acts in question are done. An act which is not done or believed to be done in the exercise or assertion of dominion will not cause the person doing it to be regarded as the de facto exerciser of the powers of use and enjoyment. Still further, it will often not suffice to regard the intent of the actor alone. I may intend to assert dominion over a given subject of property, and I may do an [14] act, or a series of acts, fitted to manifest that intention. But there may be some other person who appears to be in a position, of right or in fact, to object to my claim; and whether my action be taken with or without the consent or acquiescence of any such person will make a great difference to the practical result. If I act with the consent of the former holder (as a purchaser does when he received delivery of goods or is let into possession of land), whoever respected his will to exclude others may be expected in like manner to respect mine: I get, if one may so use the word, the goodwill of his occupation. But if consent be wanting, and I am confronted by resistance, or even under apprehension of it, other people cannot be expected to assume anything in my favour, and will not give me credit for the powers of an owner until my exclusive power of control is manifest in actual experience. Thus it happens that acts which if opposed would be insignificant are accepted as a sufficient and actual entering on possession when they are fortified by the concurrence of the last possessor, while hostile or ambiguous occupation must make itself good at every step. Delivery is favourably construed, taking is put to strict proof; and this not by calling in aid any presumption of right, but on the ground that the reality of de facto dominion is measured in inverse ratio to the changes of effective opposition. And, in order to ascertain whether acts of alleged occupation, control, or use and enjoyment, are effective as regards a given thing we may have to consider: (a)

of what kinds of physical control and use the thing in question is practically capable; [9.25]

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An Essay on Possession in the Common Law cont. (b)

with what intention the acts in question were done;

(c)

whether the knowledge or intention of any other person was material to their effect, and if so, what that person did know and intend (see Cook v Rider 1834; 16 Pick (Mass) 186).

Hence follows a seeming paradox. Occupation or control is a matter of fact, and cannot of itself be dependent on matter of law. But it may depend on the opinion of certain persons for [15] the time being, or the current opinion of a multitude or a neighbourhood, concerning that which is ultimately a matter of law. Though law cannot alter facts, or directly confer physical power, the reputation of legal right may make a great difference to the extent of a man’s power in fact. Ownership does not make one an occupier, nor necessarily confer any right to occupy; but occupation is easier and more effective, (in a settled country at any rate) when armed with the real or supposed authority of the owner. Physical or de facto possession readily follows the reputation of title; we shall see that possession in law is ordinarily adjudged to follow the true title, in cases where physical possession is contested or ambiguous; and in this the law does not cross, but rather develops and confirms, the practical instinct of mankind. §4 Possession in law [16] To have the actual apparent power of preventing interference with a thing is different, and has to be distinguished, from having the power of such prevention attributed to one by law, so that the intermeddler may be rightfully resisted at the time, or may afterwards be compelled by legal process to make reparation in some form. When the fact of control is coupled with a legal claim and right to exercise it in one’s own name against the world at large, we have possession In reply to: law as well as in fact. We say as against the world at large, not as against all men without exception. For a perfectly exclusive right to the control of anything can belong to the owner, or to some one invested with such right by the will of the owner or some authority ultimately derived therefrom, or, exceptionally, by an act of the law superseding the owner’s will and his normal rights. Such a right is matter of title; the person bearing it has a definite estate or interest known the law, an estate [17] freehold or copyhold or for years if it be in land, a general or special property if it be in goods. If he has not the actual control, the law will help him to it; in other words, he is entitled or has the right to possess the thing in question. When he has obtained control, he will be the actual and rightful possessor. But meanwhile some one else may have possession in fact, and may likewise have actual possession in law, that is, he may be entitled for the time being to repel and to claim redress for all and any acts of interference done otherwise than on behalf of the true owner. Possession in law is most easily understood as associated with possession in fact. This is the normal aspect of the right. It exists, broadly speaking, for the benefit of possessors in fact and in good faith, even if we hold that the ulterior object is the benefit of those who, as being or claiming through true owners, are really entitled to possess. The law would be much simpler than it is if it were held that actual control or custody invariably gives actual legal possession, whether the custodian exercises control on his own account or as the servant or otherwise on behalf of another. But no system of law, so far as we know, has gone that length. A manifest intent, not merely to exclude the world at large from interfering with the thing in question, but to do so on one’s own account and in one’s own name, is required in different degrees both by the Roman law and by the Common Law. One who holds a thing with the owner’s consent must do so on the terms consented to; when we have once conceived legal possession as a definite right or interest, there is no difficulty in conceiving it to be one of the terms on which a thing is handed over that legal possession shall remain with the owner, or in presuming it so to be in certain common cases, or even in making a fixed rule of law that possession shall follow the transfer of physical control (which we may call manual delivery in all cases, though the term is more proper to moveables) only when specified kinds of interest in the property itself are 202

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An Essay on Possession in the Common Law cont. concerned. Accordingly we find in the [18] Roman law that possession is not easily separated from ownership by voluntary manual delivery; whereas the Common Law seems averse to separating possession in law from physical custody, where the thing is in an ascertained custody, and does so only in special cases, as where a servant holds on behalf of his master, and where property taken in distress or execution is said to be “in the custody of the law”. These cases have been though anomalous in our modern system, and indeed the authorities are not wholly clear … Part II of possession generally – Chapter I – The nature of possession [26] Throughout our inquiry we have to bear in mind that the following elements are quite distinct in conception, and, though very often found in combination, are also separable and often separated in practice. They are: i.

Physical control, detention, or de facto possession. This, as an actual relation between a person and a thing, is matter of fact. Nevertheless questions which the Court must decide as matter of law arise as to the proof of the facts.

ii.

Legal possession, the state of being a possessor in the eye of the law.

This is a definite legal relation of the possessor to the thing possessed. In its most normal and obvious form, it coexists with the fact of physical control, and with other facts making the exercise of that control rightful. But it may exist either with or without detention, and either with or without a rightful origin. A tailor sends to JS’s house a coat which JS has ordered. JS puts on the coat, and then has both physical control and rightful possession in law. JS takes off the coat and gives it to a servant to take back to the tailor for some alterations. Now the servant has physical control (in this connexion generally called “custody” by our authorities) and JS still has the possession in law. While the servant is going on his errand, Z assaults him and robs him of the coat. Z is not only physically master of the coat, but, so soon as he has complete control of it, he has [27] possession in law, though a wrongful possession. To see what is left to JS we must look to the next head. iii.

Right to possess or to have legal possession. This includes the right to physical possession. It can exist apart from both physical and legal possession; it is, for example, that which remains to a rightful possessor immediately after he has been wrongfully dispossessed. It is a normal incident of ownership or property, and the name of “property” is often given to it. Unlike Possession itself, it is not necessarily exclusive. A may have the right to possess a thing as against B and every one else, while B has at the same time a right to possess it as against every one except A. So joint tenants have both single possession and a single joint right to possession, but tenants in common have a single possession with several rights to possession. When a person having right to possess a thing acquires the physical control of it, he necessarily acquires legal possession also.

Right to possess, when separated from possession, is often called “constructive possession”. The correct use of the term would seem to be coextensive with and limited to those cases where a person entitled to possession is (or was) allowed the same remedies as if he had really been in possession. But it is also sometimes specially applied to the cases where the legal possession is with one person and the custody with his servant, or some other person for the time being in a like position; and sometimes it is extended to other cases where legal possession is separated from detention. “Actual possession” as opposed to “constructive possession” is in the same way an ambiguous term. It is most commonly used to signify physical, control, with or without possession in law. “Bare possession” is sometimes used [28] with the same meaning. “Lawful possession” means a legal possession which is also rightful or at least excusable; this may be consistent with a superior right to possess in some other person. [9.25]

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An Essay on Possession in the Common Law cont. The whole terminology of the subject, however, is still very loose and unsettled in the books, and the reader cannot be too strongly warned that careful attention must in every case be paid to the context. In the procedure of the Common Law (which no longer exists in England, but must be understood in order to understand the substance of the law) an action of Trespass is the appropriate remedy for a wrong done to existing legal possession. Wrongs affecting the right to possess are remediable by other forms of action, mainly Ejectment (superseding the assizes and other possessory real actions) as to land, and Trover (largely superseding Detinue) as to personal chattels. All actual legal possessor can maintain Trespass (and control in fact is evidence of possession in law); but they may use the other remedies at their option in so far as they can show a right to possess. An owner who has parted with possession but may resume it at will can also maintain Trespass. The right to use in trespass is therefore not a sufficient test of Possession, though it is a necessary one.

Extracts from Pearson, Commercial Law: Commentary and Materials, Ch 3.

The Tubantia [9.30] The Tubantia [1924] P 78 English High Court of Justice, Probate, Divorce and Admiralty Division ACTION for damages for trespass and/or for wrongful interference with the plaintiffs’ salvage services on and attendant at the wreck of the steamship Tubantia and/or her cargo. According to the statement of claim, in January, 1916, the Dutch steamship Tubantia sank in the North Sea in over 100 ft of water after being torpedoed by a German warship. No attempt was made by any one to salve the ship or cargo until the beginning of 1922, when the plaintiffs, Major Sippe, DSO, and others, determined to fit out an expedition in order to raise the vessel or recover anything of value in her. They accordingly engaged steamers and tugs and employed divers and salvage experts. In April, 1922, the plaintiffs started sweeping operations and sent divers down and eventually located the Tubantia, but owing to her broken condition found there was no possibility of raising her. Throughout the summer of 1922 the plaintiffs continued diving operations whenever the weather conditions permitted until the month of November, when it became impracticable to continue working through the winter. The plaintiffs then buoyed the Tubantia so as to indicate her position and left her until April, 1923, when the operations were resumed. On July 9, 1923, the defendants, Vincent Grech and Count Zanardi Landi, British subjects and partners (together with one Cecil Reed, who was added as a defendant in the course of the hearing) in a company called the British Semper Paratus Salvage Company, proceeded with their steamship Semper Paratus to the place of the wreck and anchored her in close proximity to the plaintiffs’ salvage steamer, thereby interfering with the plaintiffs’ operations. Though requested to leave, the defendants remained with the Semper Paratus at or near the wreck until after the issue of the writ in the present action on July 16, 1923. On July 13, when in close proximity to the wreck, the defendants got their sounding lines entangled in the plaintiffs’ lines. On the same day the defendants tried to moor a motor launch to one of the plaintiffs’ buoys and to raise the plaintiffs’ grappling irons and anchor; and on several occasions they sent down divers on to or in close proximity to the wreck. The plaintiffs alleged that the defendants intentionally and without justification or excuse interfered with the plaintiffs’ possession of, and their salvage operations on, the Tubantia and her cargo; that the ultimate success of the operations was imperilled; and that the plaintiffs, who had spent approximately £40,000 up to the beginning of the proceedings in the action, had thereby suffered damage. 204

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The Tubantia cont. The plaintiffs claimed (a) a declaration that they were entitled to possession of the Tubantia and her cargo; (b) damages; (c) an injunction restraining the defendants from proceeding to, remaining at, or interfering with, the Tubantia and/or her cargo; (d) a reference to the registrar and merchants to assess the amount of damage. The defendants denied the plaintiffs’ possessory rights and the alleged infringement of them; and the defendant Count Landi further denied that the plaintiffs had the ability, appliances, or competency to save any of the property, or to do so without aid. He alleged that he was ready and willing to co-operate with the plaintiffs for the purpose of saving any property capable of being saved, and to bring into Court anything he might succeed in recovering from the wreck. The President (Sir Henry Duke) read the following judgment: The plaintiffs in this action – a British subject and four citizens of the French Republic – bring their action in respect of alleged wrongful acts of the defendants upon the high seas. The place in question is a point in the North Sea some fifty miles from our shores, and from twenty to twenty-seven miles from the coasts of France, Belgium and Holland, where, at a depth of nineteen or twenty fathoms, lies so much as is now in being of the hull and cargo of a Dutch steamer, the Tubantia, which was a vessel 541 feet long and of 15,000 tons register. Alleged rights over the Tubantia and her cargo are the real subject matter of the controversy. The vessel was, as the parties say, sunk at the place in question in January, 1916, by a German warship. The plaintiffs assert possessory rights over the wreck and its contents and complain of trespasses thereon and also of wrongful interference by the defendants and their servants with the lawful business of the plaintiffs. They claim a declaration to establish the possessory rights which they allege, an injunction to restrain interference by the defendants with their possession of or operations upon the Tubantia, and damages to be assessed by the registrar and merchants according to the practice of this Division. The defendants against whom the action has proceeded are Cecil Finlay Reed, Vincent Grech and C Zanardi Landi, who constituted, as appears, the partnership called in the pleadings the Semper Paratus Salvage Company and under that name added to the defendants in the cause. The steamship Semper Paratus was used by the defendants, as is alleged, in doing the acts complained of by the plaintiffs. She is of British register. The defendants deny the alleged possessory rights of the plaintiffs, and the alleged trespasses and molestations. The defendant Landi raises alternative defences which treat the plaintiffs as would-be salvers of the Tubantia who were unable to effect their salvage undertaking and assert that the defendants were ready and willing to co-operate with the plaintiffs as salvors and to bring into Court any salved property. There was evidence at the hearing of a serious belief among the parties that the wreck of the Tubantia contains treasure of large value. A salvage agreement into which the three defendants entered for the purposes of their joint undertaking specifies a sum in gold of the German prewar currency worth not less than two million pounds sterling. The particulars I have stated show the controversy between the parties to be of an unusual kind, and the plaintiffs are invoking in respect of it powers of the Court derived from the Judicature Acts which rarely come in question here. On the defendants’ part one short answer which was made to the claims of the plaintiffs was that they are without precedent. The absence of specific authority no doubt necessitates caution in the consideration of the case. What is really to be decided, however, is whether in respect of the Tubantia and her cargo any rights of the plaintiffs have been infringed by the defendants and, if so, what are the appropriate remedies. The things in question here are, as I find, derelict in the limited sense in which that term is constantly used here in cases of salvage-what Lord Stowell called “the legal sense”: The Aquila 1 C Rob 37. They are not in the possession or control of any owner or person acting on behalf of an owner. The possession of a salvor in a ship or cargo, or cargo, or wreck derelict in this sense is, however, as well known to the law as any other right of a salvor. It has often been asserted, and, indeed, vindicated in [9.30]

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The Tubantia cont. the Admiralty jurisdiction. The plaintiffs are, therefore, entitled to a decision as to whether they had in July, 1923, as they assert they had, possession by their agents of the wreck of the Tubantia and the cargo therein. The facts on which the plaintiffs rely in support of their claim that they had possession in July, 1923, are fully set forth in the statement of claim, and, in all material particulars, were proved at the hearing. Their operations began in April, 1922, and for a long time were discontinuous. Their controversy with the defendants arose in July, 1923. They then had, and from that time to the hearing they have kept, craft and divers at the place in question. What had been done, and what was going on in July, 1923, are matters in dispute, and must be stated in some detail. The plaintiffs, by employing during two seasons various vessels suitable for salvage work with competent crews, ascertained and marked out the area occupied by the Tubantia, and by means of buoys properly moored they were able to, and did, keep in position, at and above the wreck, craft from which work could be carried on upon the hull and in the holds. They established and in July, 1923, were using, various buoyed moorings by which they had direct access to the deck at various points. They cut out a hole in the ship’s side 14 ft by ten, which gave them access to No 4 hold, in which a great bulk of cargo appears to have been stowed, and by means of tackle fixed at the side of the hold their divers had a way of approach to and entry upon that hold. The various appliances to which I have referred were of the nature of fixed plant on and around the Tubantia, such that when the weather and the state of the tide permitted, divers could by its use work in and upon the wreck and among the cargo. Two pairs of divers were so at work during May, June, and July, 1923. They explored the wreck, removed obstructions, opened the approaches to and worked upon the cargo, and brought up parts of the structure and of the cargo. The possible working hours in each day, however, did not exceed two spells of one and three-quarter hours at a time, of which 45 minutes at a time were spent in the holds. The number of working days in 1923 seems not to have exceeded 25, and the working plant was liable to be carried away or destroyed by the sea. Some of it sometimes was. The appliances I have mentioned, and the frequently interrupted access to the wreck which the plaintiffs had in the summer of 1923, are the evidences of possession at the dates in question in this case on which the plaintiffs rely. On the question whether in the state of facts I have described the plaintiffs could be found to have had possession of the Tubantia when the defendants appeared on the scene, counsel on both sides cited largely from Sir Frederick Pollock’s well-known treatise on possession: Pollock and Wright, Possession in the Common Law. The questions suggested in this way I have sought to apply. They involve inquiries such as these: what are the kinds of physical control and use of which the things in question were practically capable? Could physical control be applied to the res as a whole? Was there a complete taking? Had the plaintiffs occupation sufficient for practical purposes to exclude strangers from interfering with the property? Was there the animus possidendi? I have also taken this to be a true proposition in English law: A thing taken by a person of his own motion and for himself, and subject in his hands, or under his control, to the uses of which it is capable, is in that person’s possession. “Omnia ut dominum gessisse” is, Sir Frederick Pollock says, a good working synonym for “in possessione esse”, and I cannot doubt that if the owners of the Tubantia in 1916 had put themselves, in 1923, in the position in which the plaintiffs put themselves they would be held to have been in actual possession. It would not be safe, though, to rely on this, for there is a presumption in law which aids the operative effect of the possessory acts of an owner. To illustrate my meaning, I am told that the Trinity House commonly holds possession of the wreck of a ship by mooring upon it a single buoy. I had the advantage of the assistance of the Elder Brethren at the hearing, and I have consulted them as to the practical aspects of the matters in question. They advise me that by reason of the great depth at which the wreck lies the difficulties involved in the work of the plaintiffs are formidable, but that, if I accept the plaintiffs’ evidence, they were in effective control of the wreck as a whole; that they were in a position to prevent any useful work by new-comers; and that, while the plaintiffs’ people remained in 206

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The Tubantia cont. the position they claimed to have taken up, no new-comer could, without violence, have exercised upon the wreck the kind of control the plaintiffs had, or could have made any valuable use of the wreck. They advise me that what the plaintiffs did upon the wreck was what a prudent owner would probably have done, assuming he did not know how the holds of the Tubantia were stowed and desired to inform himself fully as to the situation on the wreck before employing larger craft or more powerful appliances than the plaintiffs were employing. These opinions entirely commend themselves to my judgment, and I have come to certain conclusions which I will now state. There was animus possidendi in the plaintiffs. There was the use and occupation of which the subject matter was capable. There was power to exclude strangers from interfering if the plaintiffs did not use unlawful force. The plaintiffs did with the wreck what a purchaser would prudently have done. Unwieldy as the wreck was, they were dealing with it as a whole. The fact on the other side which is outstanding is the difficulty of possessing things which lie in very deep water and can only be entered upon by workmen in fine weather and for short periods of time. Must it be said that, because the work of the plaintiffs’ divers was that of only one pair at a time, in short spells with long interruptions, and because access to the holds of the Tubantia was often prevented altogether by stress of weather, therefore the vessel, and her cargo, were incapable of possession? To my mind this would be an unfortunate conclusion, very discouraging to salvage enterprise at a time when salvage, by means of bold and costly work, is of great public importance. I do not feel bound to come to it. I hold that the plaintiffs had in July, 1923, the possession of the Tubantia and her cargo, which they allege.

Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd [9.35] Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499; [1979] HCA 67 GIBBS ACJ … 4. I may now turn to the question of substance that arises in the proceedings between the plaintiffs and the Bank. That is whether any books, documents and papers in the safe deposit boxes were in the custody or under the control of the Bank within s 264 (1) [of the Income Tax Assessment Act 1936 (Cth)]. If they were not, it is clear that there was no power to require the Bank to produce them. The Bank maintains at its branch what it calls safe deposit facilities, which are made available to any person (“the depositor”) with whom the Bank chooses to enter into an agreement in a standard and familiar form. Although the notices and the pleadings refer to safe deposit “boxes”, the depositor, by the agreement, is granted the use of a safe deposit “locker”; it may be surmised that the locker contains a box. Each safe deposit locker is double locked: two keys are needed to unlock it. One of those keys is held only by the Bank. The other key is made in duplicate, and the two identical keys are given to the depositor, who retains one and places the other in a sealed envelope and delivers it to the Bank which, under the agreement, is to retain it in safekeeping and use it only to replace the key held by the depositor, upon his written request, in the event of the loss or destruction of the latter key (cl 3). The depositor is entitled under the agreement to have access to the locker during the normal hours when the safe deposit facilities are open to the public for business (cl 5) but in case of emergency the Bank is entitled to close the facilities for such periods as the Bank shall consider reasonably necessary (cl 6). The Bank is entitled to terminate the use of a locker at any time by notice in writing, and if it does so, and the depositor fails to remove his property from the locker, the Bank may remove the same (cl 8). It is clear that it is within the physical power of the Bank to open any locker without the aid or [9.35]

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Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd cont. concurrence of the depositor. To do this it would be necessary for the Bank to use the duplicate key which it retains for safekeeping and if it did so, without the written request of the depositor and otherwise than in the circumstances mentioned in cl 8, it would commit a breach of its agreement with the depositor, unless, in using the key, it was acting under the compulsion of a legal requirement which overrode its contractual duty. However, whatever may be its contractual obligations, the Bank is physically able to abstract from the locker, and produce to the authorized officer, anything movable that the locker contains. If the documents which the Bank is required to produce are kept in a box inside the locker, and the box is secured with a padlock or in some other way, the Bank would have no power to force it open, but could produce the documents by producing the box containing them. On the other hand the depositor can only obtain access to the locker if the Bank provides a key - subject to the terms of the agreement the Bank is, of course, contractually bound to do so. (at p 519) 5. In this situation it may be a nice question whether the relationship between a depositor and the Bank is one of bailment, and whether the Bank has possession of the documents in the box in the safe deposit locker. But s 264 does not speak of “possession”; it uses the wider, and vaguer, words “custody” and “control”. The two words are sometimes used as synonyms. In Pollock and Wright: Possession in the Common Law (1888), at p 26, a distinction is drawn between “physical control, detention, or de facto possession”, which is said to be “an actual relation between a person and a thing matter of fact”, and “legal possession”, which is “a definite legal relation of the person to the thing possessed”. The learned author goes on to state that in this connection physical control is generally called “custody”. In Stephen’s Digest of Criminal Law, 5th ed (1894), p 243, in a passage cited in Moors v Burke (1919) 26 CLR, at p 270, it is said: “The word ’custody’ means such a relation towards the thing as would constitute possession if the person having custody had it on his own account.” The meaning which the words are intended to bear in s 264 depends, amongst other things, on the context in which they appear. The object of the section is to give the Commissioner power to require the production of documents which relate to the income or assessment of any person, and “assessment” in this provision has the wide meaning given to it in s 6 of the Act - “the ascertainment of the amount of taxable income and of the tax payable thereon”: see Smorgon v Australia and New Zealand Banking Group Ltd [1976] HCA 53; (1976) 134 CLR 475, at p 480. The aim is the practical one of having documents produced so that an officer of the Taxation Department can obtain from them information concerning the income or assessment of some person. The section is not concerned with the legal relationship of the person to whom the notice is given to the documents which he is required to produce: it is concerned with the ability of the person to whom the notice is addressed to produce the documents when required to do so. Therefore, in my opinion, a notice can be given under the section to any person who has physical control of the documents in question, whether he has or has not the legal possession. For example, if an employer gives his books of account to a servant to keep on his behalf, a notice under s 264 can be given to the servant, who has physical control, although the master has the legal possession. However, “control” in s 264 (1) is not limited to physical control, and in the example given the notice could be given to the master, who has legal control of the documents, as well as to the servant. Indeed I can see no reason why a notice cannot be given to a person who wrongfully has physical control of the documents, or to a person who has parted with possession but retains a right to legal possession: the question is, has the person to whom the notice is given such custody or control as renders him able to produce the documents? (at p 520) 6. Stephen J accepted that the section is concerned with the existence of the ability to produce the documents, but he held that the Bank lacks the ability to produce such documents as may be in a safe deposit box. He held that the Bank lacks physical custody of the contents of a box, because by its agreement with the depositor and by the circumstances surrounding the disposition of keys to the box it has disclaimed all power over the contents, and has thereby relinquished that degree of positive physical custody which may otherwise attach to articles situated in its premises. He further held that 208

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Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd cont. the agreement with the depositor and the arrangement as to the keys has effectively prevented the Bank from ever having had such control as will enable it to produce the documents to the Commissioner. With the greatest respect, I cannot share this view. In my respectful opinion the Bank has the custody, or physical control, of the documents in the lockers. The documents are in its power in fact; it holds the keys that enable it to open the locker, take out the box and produce the documents - if necessary, in the box in which they are contained. It appears to me that the physical retention of the two keys by the Bank gives it control of the documents contained in the locker to which the keys give access, and that any agreement or arrangement made by the Bank with the depositor does not affect the question whether the Bank has the documents in its control and is able to produce them. The Bank has actual custody or physical control of the contents of the locker, even if it has bound itself by contract to refrain from exercising the power which it has in fact. It can open the locker and produce its contents even if it has agreed not to do so. (at p 521) 7. Section 264 (1) does not itself cast any duty on the person to whom the notice is given, but s 224 of the Act provides that any person who refuses or neglects to produce any book or paper required of him by the Commissioner or any officer authorized by him shall, unless just cause or excuse for the refusal or neglect is shown by him, be guilty of an offence. There is thus a statutory duty to comply with a notice under s 264 (1), and any contractual duty owed by the Bank to the depositor is subject to, and overridden by, this statutory duty: cf. Parry-Jones v. Law Society (1969) 1 Ch 1, at p 9, Brayley v. Wilton (1976) 2 NSWLR 495, at pp 496-497, and the discussion by Stephen J in Smorgon v Australia and New Zealand Banking Group Ltd (1976) 134 CLR, at pp 486-490. Further, in my opinion, the existence of the contractual duty provides no just cause or excuse for refusing or neglecting to produce the documents. It is likely that documents which relate to the income or assessment of a taxpayer will often be entrusted by him to another, for example, to a Bank, a solicitor or an accountant. The Parliament cannot have intended that a person whose taxation affairs were under consideration could protect his documents from disclosure simply by binding the person to whom they were entrusted to refrain from producing them. It is true that the taxpayer himself might be required to produce the documents, but in some cases it might not be possible to give notice to the taxpayer, and in any case the most effective way to obtain production might be to require the person who had the documents in his actual custody or under his physical control to produce them. The terms of a contract made between the taxpayer and the custodian of his documents would appear quite irrelevant for the purposes of s 264 (1), and there is nothing in the provisions of the sub-section that would support the view that the existence of a contractual duty, or an arrangement short of a contract, to refrain from producing the documents should be regarded either as having the effect that the documents were not in the custody or under the control of the person who in fact had them in his custody or under his control, or as providing just cause or excuse for failing to produce them. (at p 522) 8. It follows from what I have said that a requirement addressed to one person is no less valid because a valid requirement might also have been addressed to another. More than one person may have the control of a document within the meaning of the section. In the present case the Bank has the physical control, whereas the Smorgons (or at least some of them) have the legal control: both may be required to produce the documents.

Extracts from Pearson, Commercial Law: Commentary and Materials, Ch 2.

OWNERSHIP: DEFINITIONS AND CONCEPTS [9.40] In this section, we examine the institution of ownership. Ownership is the second (of

two) interests a person can have in personal property, the first being possession (see [9.05] and [9.40]

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[9.15] above). A helpful summary of the meaning of “ownership” of property generally was given by the South African Law Commission in its Report on the Giving of Security by Means of Movable Property (Project 46, Pretoria, February 1991), para [2.2.1].

Report on the Giving of Security by Means of Movable Property [9.45] Report on the Giving of Security by Means of Movable Property (Project 46, Pretoria, February 1991), para [2.2.1] (footnote omitted) Ownership indicates the relationship between a person and a corporeal or incorporeal legal object. Ownership is the most comprehensive real right since it provides the most extensive and absolute dominion over an object. Ownership confers on the owner the competence to enjoy, use, possess, dispose of and alienate the object, as well as the capacity to ward off any encroachment on the object. Ownership may be limited by other rights, but is an independent real right that is not dependent on any other right.

[9.50] This extract provides a hint of the content of what ownership is, and this can be broken

down as follows in this non-exhaustive list: 1.

the power to use (ius utendi);

2.

the use of the fruits of what is owned (ius fruendi);

3.

consumption of the thing owned (ius abutendi);

4.

the power to possess (ius possidendi);

5.

the power to dispose of the thing owned (ius disponendi); and

6.

the power to reclaim the thing from a person who wrongfully takes it from the owner (the right of pursuit) or to resist any wrongful invasion of the thing (ius negandi). 3 Ownership is an abstract relationship between a person and a “thing”. Ownership posits a relationship between a person and an object of some kind, called a thing. It should not be assumed that all legal systems use the term “thing” with the same meaning. For example, under South African law, the term “thing” is confined to corporeal property and does not apply to incorporeal or intangible property. 4 Under Australian law, the concept of a thing is much broader and embraces not only choses in possession but also choses in action (the two main categories of personal property) as well as chattels real and real property. If personal property is owned (that is, it has not been abandoned), then to assert this is to make a claim that a legal person stands in some kind of relationship with the object owned. It is in an attempt to render the abstract concept of ownership more comprehensible that commentators devote attention to the content of ownership of property, much as the list set out above attempts to do. In this context, it is helpful to identify the core concept that informs the legal notion of ownership and that is dominion. The term “owner” prima facie connotes entire dominion over the object owned: Union Trustee Co of Australia Ltd v Federal Commissioner of Land Tax (1915) 20 CLR 526 at 530 per Griffith CJ. Thus, ownership is concerned with claims of dominion concerning the thing that is owned. 3 4

Adapted from CG van der Merwe, “The Law of Things” in CG van der Merwe & MJ de Waal, The Law of Things and Servitudes (Butterworths, Durban, 1993), para [105]. CG van der Merwe, The Law of Things, paras [5] and [104] (the logical extension of this is that the law of “property” is a narrower concept than the law of “things”, a point there made). See also Figures 2.2 and 2.3 at [2.45] (Pearson).

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Ownership is, as stated above, the relationship between a legal person and a legal object, and the content of the relationship is the owner’s claim to dominion over the object owned. The claim of ownership imports a distinction between the legal person and the legal object, so that it is necessary to identify the thing owned as well as its owner. In Myerson v Collard (1918) 25 CLR 154 at 164, Isaacs and Rich JJ said that when the law or lawyers speak of a physical object belonging to a person, without any qualifying expressions or adjectives, the primary natural meaning of that phrase is that the object belongs to the person as his or her own absolute property, and that the person’s interest in the physical object in question is not confined to a mere contractual right (such as an option) which may or may not be exercised by the holder of that supposed right: see also Melluish v BMI (No 3) Ltd [1995] 4 All ER 453 at 464 (HL). So ownership needs to be understood in two important senses. First, the owner’s collection or bundle of rights in relation to the thing owned. Second, the object itself that is owned. The first is always incorporeal (or immaterial) while the second may be either corporeal or incorporeal, depending, in the case of personal property, upon whether it is a chose in possession or a chose in action. The concept of ownership is a common law notion rather than a statutory concept. On occasions, Parliament intervenes and enacts a definition of ownership to accomplish other legislative goals. Consider the following definition of “owner” in the Imported Food Control Act 1992 (Cth), s 20(14).

Imported Food Control Act 1992 (Cth), s 20(14) [9.55] (14) In this section: “owner”, in relation to food that is permitted to be treated or required to be destroyed or re-exported, means a person having a beneficial interest in the good other than a person who has such an interest only because he or she has been given a mortgage or charge, or has a lien over the goods.

[9.60] In this provision “beneficial interest” is used to explain the content of ownership of

certain food. Two of the hallmarks of ownership are, in common with possession, exclusivity and control. These form part of the individual rights that make up the content of ownership (see above). One of the ways in which the operation of exclusivity and control can be demonstrated is by identifying the consequences of property. This has been a feature of both the civil law and the common law. In the case of the civil law, the South African writer Johannes Van der Linden in the work entitled Regtsgeleerd, Practicaal, en Koopmans handboek (1806) described the consequences (or incidents) of ownership in these terms: 1st. The right of enjoying the fruits which result from such thing. 2nd. The right of making such proper use of such thing as the owner pleases. 3rd. The right of altering its shape or form at will. 4th. The right of entirely destroying it at will. 5th. The right of preventing others from making use of it. 6th. The right of alienating it or of transferring to others any other sort of thing e.g. the use of it … All this must be understood, however, subject to his qualification viz that neither the provisions of the law are transgressed nor the rights of third persons injuriously affected. 5 5

The claim is made here that South Africa is a civil legal system. It is probably more accurate to classify it as a mixed system, that is, an amalgam of civil and common law. For such an analysis, see D Carey Miller, “South Africa: A Mixed System Subject to Transcending Forces”, in E Orucu, E Attwooll and S Coyle (eds), Studies in [9.60]

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As for the common law, in Knapp v Knapp [1944] SASR 257 at 261, Mayo J gave this account of the incidents of ownership: The general right of ownership embraces subsidiary rights, such as exclusive enjoyment, to destroy, to alienate or to alter, and, of course, the right to maintain, and to resume and recover possession from other persons.

[9.65]

Questions

1. In The Common Law (Little, Brown and Company, Boston, 1881, p 246) the famous American jurist Oliver Wendell Holmes Jr said: But what are the rights of ownership? They are substantially the same as those incident to possession. Within the limits prescribed by policy, the owner is allowed to exercise his natural powers over the subject-matter uninterfered with, and is more or less protected in excluding other people from such interference. The owner is allowed to exclude all, and is accountable to no one.

Do you agree or disagree? Justify your answer. 2. In Commercial Law in the Next Millennium 49th Hamlyn Lecture (Sweet & Maxwell, London, 1997), p 59 Professor R M Goode said: All legal systems have a concept of property. The concept varies from one legal system to another, and even within a single legal system it is peculiarly difficult to define or even to describe. Nevertheless the distinction between property and obligation, between what I own and what I am owed, is a fundamental principle of our jurisprudence and is of central importance in commercial law. (emphasis in original).

Do you agree that ownership should be differentiated from obligation in terms of the distinction between what a person owns and what is owed to that person? See also the case Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214.

Re Jigrose Pty Ltd [9.70] Re Jigrose Pty Ltd [1994] 1 Qd R 382 [385] Kiefel J: As a general proposition, if I throw something away I truly abandon it. I intend no longer to retain possession. I do not propose to seek it out and I have no further interest in ownership. If however I lose something, I have not those intentions. I could not be said to have abandoned it. The “different intentions, which the law implied in the owners” was explained by Blackstone (Commentaries 17th ed I, 295) in the context of treasure trove lost or hidden. In the Commentaries II, 9 the author explains that title remains with an original acquirer of the property until there is shown an intention to abandon it. It then becomes of public right and is liable to be appropriated by the next occupier. The Roman law dealt with the question of acquisition of such property by the mode of acquisition “occupation”, which permitted the acquisition of ownership in a thing which was without an owner. It was achieved by taking possession with an intention to appropriate: Salkowski, Roman Private Law (1886), 390. Things which could be acquired by occupation included wild animals, thing which had never been owned, and things “the possession of which the owner has given up, intending to renounce ownership in them” (res derelictae) (p 393); and see Buckland, Roman Law from Augustus to Justinian (1990 reprint p 208). Legal Systems: Mixed and Mixing (Kluwer Law International, London, 1996), pp 165-191. Cited by J R L Milton, “Ownership”, in R Zimmerman and D Visser (eds), Southern Cross: Civil Law and Common Law in South Africa (Clarendon Press, Oxford, 1996), p 694 (note 238). 212

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Re Jigrose Pty Ltd cont. Pollock and Wright, Possession in the Common Law (1888), 124 however raised a doubt as to whether it was possible for a possessor to divest himself by willful abandonment, referring to the view of the common law suggested in Hayne’s case (1614) 12 Co Rep 113; 77 ER 1389 and the Doctor and Student (Bk ii c.51). Hayne’s case was an exceptional one, concerning the property in winding sheets. It contains the statement that “a man cannot relinquish the property he hath to his goods unless they be vested in another”, the Court holding that property in the sheets remained with the owner. There is no discussion as to whether they might [386] be considered as a type of gift, nor as to how the owner might claim the property. In the Doctor and Student it is stated (notably by the student) that there is no such law in the realm for “goods forsaken” and that the right to property in abandoned goods remained with the owner. Holdsworth, A History of English Law, Vol VII (495, 496) was of the view that there was consequently “some authority” for a difference in the approach of the English common law from that of the Roman law. There are, as Holdsworth noted, few things which are capable of acquisition following abandonment, given the rights which accrue to landowners concerning property at least attached to the land and given the rights of the Crown to bona vacantia. Indeed, in Queensland the Public Trustee Act 1978 Pt VII “Unclaimed Property” Div 2 permits the Public Trustee to become administrator of unclaimed property and to exercise rights over it. Interestingly, by s 103(2) of that Act property is deemed to be unclaimed where “in the opinion of the Public Trustee”: (a) it is not known after due enquiry who the owner of the property is, or where he is, or whether he is alive or dead, or it appears to have been abandoned. which seems to recognise that abandoned property may not have an owner. Cases involving property which can be said to be truly abandoned will then be relatively rare. The “finder” cases to which I have been referred (see eg Moffatt v Kazana [1969] 2 QB 152 and Parker v British Airways Board [1982] QB 1004) are not of great assistance since they deal with goods apparently lost. In those circumstances it may be said that possession was held without consent of the owner. It certainly could not be said that the owner necessarily intended to abandon the goods. But what if the owner has really proclaimed to the world at large that he or she has no interest in the chattels, desired neither possession or ownership and will not attempt to reclaim them? Wrangham J in Moffatt v Kazana (at 156) appears to accept that such abandonment can divest title. It seems to me that if I do not wish to retain the possession or property in goods (perhaps most clearly shown by throwing them away), there is no reason in principle why the common law would require me to remain owner. The common law is usually concerned to exclude others from interfering with a person’s interest in property, that interest in turn being one to exclude others: see Holmes, The Common Law (1881), 220. If a person no longer holds that interest it is difficult to see what the common law’s concern could be. For my part I do not consider that there is a difficulty at law with the notion of abandonment divesting ownership.

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CHAPTER 10 Engaging in Dealings in Choses in Possession: Transfer of Ownership [10.05]

DELIVERY: AN UNDERLYING PRINCIPLE .............................................................. 215 [10.20]

[10.25]

BY LOSING AND FINDING .................................................................................... 217 [10.30] [10.40]

[10.50]

Nolan v Nolan ...................................................................... 221 Public Trustee v Bussell .......................................................... 248

BY SALE ................................................................................................................... 256 [10.65] [10.68] [10.70]

[10.75]

Armory v Delamirie ............................................................... 218 Parker v British Airways Board ................................................ 219

BY GIFT ................................................................................................................... 221 [10.50] [10.55]

[10.65]

Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd .................................................... 216

Helby v Matthews ................................................................. 256 Robinson v Graves ................................................................ 258 McEntire v Crossley Bros ........................................................ 274

WHEN DOES PROPERTY PASS? ............................................................................. 288 [10.80]

[10.90]

Sale of Goods Act 1923 (NSW), ss 21–23, 25A, 5(4), 60(2), 10(3) ......................................................................... 288

Specific goods ..................................................................................... 290

[10.105] UNASCERTAINED AND FUTURE GOODS ............................................................ 291 [10.115]

Unconditional appropriation with assent ......................................... 291 [10.120] [10.130]

Carlos Federspiel & Co SA v Charles Twigg & Co Ltd ................ 291 Re Goldcorp Exchange Ltd (In Receivership) ............................ 294

Extracts from Pearson, Commercial Law: Commentary and Materials, Ch 2.

DELIVERY: AN UNDERLYING PRINCIPLE [10.05] Central to the concept of delivery is the change of possession of tangible personal

property from one person to another: Re Cole, a Bankrupt [1964] 1 Ch 175 at 187 per Harman LJ. In order to constitute delivery there must be some overt act placing the transferee in possession of property and giving the transferee control of that property: Vorster v Vorster’s Trustees (1910) EDL 132 at 137 per Kotze JA. Where delivery occurs there is, of course, a change of possession. Delivery must result in control of the goods passing from the transferor to the transferee. If the transferor retains the same control over the goods after the putative transfer of possession, then there is, in law, no delivery: Young v Cockman (1943) 149 ALR 1006 at 1010. Delivery requires two legal subjects (the transferor and the transferee) as well as a moveable material object (the “goods”). Delivery can be divided into two types, actual delivery and constructive delivery. Each is examined below. [10.05]

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1. Actual delivery [10.10] Actual delivery is sometimes described as manual delivery: Re Everett; Executor Trustee and Agency Co of South Australia Ltd v Everett [1917] SALR 52 at 58. Normally, actual delivery requires the deliverer to hand over the goods physically to the deliveree: Olsson v Dyson (1969) 120 CLR 365 at 385.

2. Constructive delivery [10.15] Constructive delivery takes place by an alteration in control over goods without any

change in their physical possession: Gamer’s case (1987) 163 CLR 236 at 247 per Mason CJ (citing Minister for Supply & Development v Servicemen’s Co-operative Joinery Manufacturers Ltd (1951) 82 CLR 621 at 641 per Williams J), at 255 per Brennan J and at 263 per Dawson J. Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236 provides a good example of how constructive delivery of goods can take place in the marketplace.

Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [10.20] Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236 (High Court of Australia, Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ) MASON CJ: This appeal raises the important question whether the reference in s 28(2) of the Sale of Goods Act 1923 (NSW) (the “Act”) to “delivery” of the goods by the person who has bought or agreed to buy them under any sale, pledge or other disposition to a person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, is confined to actual delivery and excludes forms of constructive delivery. 12. The word “delivery” is defined in s 5(1) of the Act to mean, unless the context or subject-matter otherwise requires, “voluntary transfer of possession from one person to another”. This is the legal meaning of “delivery” and it differs from the popular meaning of the word which, as Professor Atiyah points out (The Sale of Goods (6th ed, Pitman Publishing, London, at p 71) is the dispatch of goods. The word “possession” is not defined by the Act, though s 6(3) of the Factors (Mercantile Agents) Act provides that, for the purposes of that Act: … an agent shall be deemed to be possessed of goods or documents of title to goods whether the same are in his actual custody or control or are held by any other person subject to his control or for him or on his behalf. 13. Gamer submits that the word “possession” should be given its common or ordinary meaning. This, according to the argument, is actual physical custody. The argument, if accepted, entails the consequence that delivery must be actual. Whether the popular understanding of “possession” confines it to actual custody is open to doubt. But this question may be put to one side as “possession” is an established legal concept, particularly in its application to goods and chattels … 15. Here, as I have said, the word “delivery” is defined in terms of its legal meaning. There is therefore a strong foundation for the conclusion that the statutory definition of “delivery” referred to “possession”, not in its popular sense or as meaning actual custody, but in its legal or technical sense. Indeed, the seller’s obligation under s 30 of the Act cannot always be sensibly discharged by actual delivery. A commodity or chattel incapable of actual physical delivery, except perhaps at great inconvenience and cost, such as a yacht (see Bank of New South Wales v Palmer [1970] 2 NSWR 532), must be capable of constructive or symbolic delivery falling short of actual delivery. And there is no 216

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Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd cont. suggestion in s 30 that “deliver” is used otherwise than in its defined sense. Section 32(3) of the Act expressly recognises constructive delivery by attornment. 16. It is significant that Sir Mackenzie Chalmers, in his Commentary on the original Sale of Goods Bill of 1888 treated the reference in the statutory definition to “possession” as a reflection of the antecedent common law. He drew attention to those features of the Bill which were departures from the common law and did not suggest that the statutory definition of “delivery” constituted such a departure … 26. And it must be accepted, in accordance with what was said in Pacific Motor Auctions that “possession” has the same meaning in s 28(1) and (2). But this does not mean that the meaning which the word has in the context in which it appears at the commencement of the two sub-sections is the meaning which it bears when it appears in the statutory definition of “delivery”. The point is that the object of s 28, the protection of innocent third parties dealing with a seller or buyer in possession of goods or the documents of title thereto and therefore appearing to be the owner of the goods, as well as the legislative history of the provisions, requires that “possession” be construed in a particular way. These considerations have no application at all to the statutory definition of “delivery” which is designed to identify or describe the act which passes title to goods as between seller and buyer. 27. Indeed, to treat “delivery” as embracing constructive delivery is to enhance the protection given by s 28(2) to the innocent purchaser. There is no valid reason why his title should depend upon actual, as distinct from constructive, delivery. The mischief aimed at is a sale by a buyer in possession of goods or documents of title who is not the owner of them, the object being to protect the sub-buyer who is deceived by the appearance of ownership arising from possession. There is no point in confining the protection to the sub-buyer who takes under an actual delivery. Once this is appreciated, the history of s 28(1) and (2), which can be traced through the Factors Acts, beginning with the English Act of 1823, ceases to have any importance. That history shows that the protection afforded to the innocent buyer was gradually extended, but it throws no light on the question now under consideration … 31. … I see no difficulty in regarding the handing over of the delivery receipt as serving the dual purpose already mentioned, namely an acknowledgment that the Dealer holds the vehicle to which it relates for Natwest pursuant to the agreement for sale contemporaneously made and as an acknowledgment that it holds, or will hold, as bailee pursuant to the Agreement. The receipt, though it evidences the terms of sale, is not itself the sale or the agreement for sale. The delivery of the receipt is something apart from the sale so that the constructive delivery which it evidences is something more than a mere change in the right to possession arising from the sale from the Dealer to Natwest. 32. I would dismiss the appeal. [Brennan and Dawson JJ delivered separate judgments dismissing the appeal by Gamer. Toohey and Gaudron JJ dissented on the basis, essentially, that delivery in s 28(2) of the Sale of Goods Act 1923 (NSW) meant actual, not constructive, delivery.]

BY LOSING AND FINDING [10.25] In Gray v Official Trustee in Bankruptcy (1991) 29 FCR 166 at 172, Heerey J

observed that “generations of law students have wrestled with the famous cases which concern disputes between a finder of a chattel and the owner of land on which the chattels was found … or between the finder and his employer”. The finding cases can be approached through five primary rules: [10.25]

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1.

The finder of goods on land, although not having absolute ownership or property in them, has a possessory interest which justifies their retention by the finder of the goods against all but the true owner.

2.

The occupier of land on which goods are found (where the goods are attached to or are under the land) has, in law, possession of those goods.

3.

The possessory title of the finder under 1 above yields to the claim to possession asserted by the occupier in the case of goods found on land if the occupier can prove a manifest intention to control entry to the land by persons or to claim lost property before the finding.

4.

The possessory rights of the finder and the occupier are subordinate to the interest the true owner has in the lost goods.

5.

The overriding policies which inform finding disputes are (a) to maintain peace and order, and (b) to reunite the owner with his or her lost goods. The case extracted next is one of the fundamental cases in the law of finding (as well as the tort of conversion), and it also illustrates the concept of a possessory title to goods in the hands of a possessor.

Armory v Delamirie [10.30] Armory v Delamirie (1722) 1 Stra 505; 93 ER 664 The plaintiff being a chimney sweeper’s boy found a jewel and carried it to the defendant’s shop (who was a goldsmith) to know what it was, and delivered it into the hands of the apprentice, who under pretence of weighing it, took out the stones, and calling to the master to let him know it came to three halfpence, the master offered the boy the money, who refused to take it, and insisted to have the thing again; whereupon the apprentice delivered him back the socket without the stones. And now in trover against the master these points were ruled: 1.

That the finder of the jewel, though he does not by such finding acquire an absolute property or ownership, yet he has such a property as will enable him to keep it against all but the rightful owner, and consequently may maintain trover.

2.

That the action well lay against the master, who gives a credit to his apprentice, and is answerable for his neglect.

3.

As to the value of the jewel several of the trade were examined to prove what a jewel of the finest water that would fit the socket would be worth; and the Chief Justice directed the jury, that unless the defendant did produce the jewel, and show it not to be of the finest water, they should presume the strongest against him, and make the value of the best jewels the measure of their damages: which they accordingly did.

[10.35] The case extracted next, Parker v British Airways Board [1982] 1 QB 1004, is the

leading modern decision on the law of finding (see also, Tamworth Industries Ltd v Attorney-General [1991] 3 NZLR 616).

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Parker v British Airways Board [10.40] Parker v British Airways Board [1982] 1 QB 1004 Facts: On November 15, 1978, while the plaintiff, Alan George Parker, was waiting as a passenger in the executive lounge at terminal one of London Heathrow Airport he found a gentleman’s gold bracelet lying on the floor. The bracelet had been lost by its rightful owner. The plaintiff delivered the bracelet to an employee of the defendants, British Airways Board, together with particulars of the plaintiff’s name and address and orally requested that in the event of the bracelet not being claimed by the rightful owner it should be returned to the plaintiff. The bracelet was never claimed. But despite the plaintiff’s requests for its return to him, the defendants sold it on June 17, 1979. The plaintiff issued proceedings in the county court alleging that he suffered loss and damages, namely £850, being the value of the bracelet and sought the return of the bracelet or its value and damages for the defendants’ wrongful interference therewith; and alternatively, damages for conversion and interest. DONALDSON LJ: [His Lordship dealt the facts of the case and then gave this summary of the law] [1017] Rights and obligations of the finder 1.

The finder of a chattel acquires no rights over it unless (a) it has been abandoned or lost and (b) he takes it into his care and control.

2.

The finder of a chattel acquires very limited rights over it if he takes it into his care and control with dishonest intent or in the course of trespassing.

3.

Subject to the foregoing and to point 4 below, a finder of a chattel, whilst not acquiring any absolute property or ownership in the chattel, acquires a right to keep it against all but the true owner or those in a position to claim through the true owner or one who can assert a prior right to keep the chattel which was subsisting at the time when the finder took the chattel into his care and control.

4.

Unless otherwise agreed, any servant or agent who finds a chattel in the course of his employment or agency and not wholly incidentally or collaterally thereto and who takes it into his care and control does so on behalf of his employer or principal who acquires a finder’s rights to the exclusion of those of the actual finder.

5.

A person having a finder’s rights has an obligation to take such measures as in all the circumstances are reasonable to acquaint the true owner of the finding and present whereabouts of the chattel and to care for it meanwhile.

Rights and liabilities of an occupier 1.

An occupier of land has rights superior to those of a finder over chattels in or attached to that land and an occupier of a building has [1018] similar rights in respect of chattels attached to that building, whether in either case the occupier is aware of the presence of the chattel.

2.

An occupier of a building has rights superior to those of a finder over chattels upon or in, but not attached to, that building if, but only if, before the chattel is found, he has manifested an intention to exercise control over the building and the things which may be upon it or in it.

3.

An occupier who manifests an intention to exercise control over a building and the things which may be upon or in it so as to acquire rights superior to those of a finder is under an obligation to take such measures as in all the circumstances are reasonable to ensure that lost chattels are found and, upon their being found, whether by him or by a third party, to acquaint the true owner of the finding and to care for the chattels meanwhile. The manifestation of intention may be express or implied from the circumstances including, in particular, the circumstances that the occupier manifestly accepts or is obliged by law to accept liability for chattels lost upon his “premises” eg an innkeeper or carrier’s liability. [10.40]

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Parker v British Airways Board cont. 4.

An “occupier” of a chattel, eg a ship, motor car, caravan or aircraft, is to be treated as if he were the occupier of a building for the purposes of the foregoing rules.

Application to the instant case The plaintiff was not a trespasser in the executive lounge and, in taking the bracelet into his care and control he was acting with obvious honesty. Prima facie, therefore, he had a full finder’s rights and obligations. He in fact discharged those obligations by handing the bracelet to an official of the defendants’ although he could equally have done so by handing the bracelet to the police or in other ways such as informing the police of the find and himself caring for the bracelet. The plaintiff’s prima facie entitlement to a finder’s rights was not displaced in favour of an employer or principal. There is no evidence that he was in the executive lounge in the course of any employment or agency and, if he was, the finding of the bracelet was quite clearly collateral thereto. The position would have been otherwise in the case of most or perhaps all the defendants’ employees. The defendants, for their part, cannot assert any title to the bracelet based upon the rights of an occupier over chattels attached to a building. The bracelet was lying loose on the floor. Their claim must, on my view of the law, be based upon a manifest intention to exercise control over the lounge and all things which might be in it. The evidence is that they claimed the right to decide who should and who should not be permitted to enter and use the lounge, but their control was in general exercised upon the basis of classes or categories of user and the availability of the lounge in the light of the need to clean and maintain it. I do not doubt that they also claimed the right to exclude individual undesirables, such as drunks, and specific types of chattels such as guns and bombs. But this control has no real relevance to a manifest intention to assert custody and control over lost articles. There was no evidence that they searched for such articles regular or at all. [1019] Evidence was given of staff instructions which govern the action to be taken by employees of the defendants if they found lost chattels were handed to them. But these instructions were not published to users of the lounge and in any event I think that they were intended to do no more than instruct the staff on how they were to act in the course of their employment. It was suggested in argument that in some circumstances the intention of the occupier to assert control over articles lost on his premises speaks for itself. I think that this is right. If a bank manager saw fit to show me round a vault containing safe deposits and I found a gold bracelet on the floor, I should have no doubt that the bank had a better title than I, and the reason is the manifest intention to exercise a very high degree of control. At the other extreme is the park to which the public has unrestricted access during daylight hours. During those hours there is no manifest intention to exercise any such control. In between these extremes are the forecourts of petrol filling stations, unfenced front gardens of private houses, the public parts of shops and supermarkets as part of an almost infinite variety of land, premises and circumstances. This lounge is in the middle band and in my judgment, on the evidence available, there was no sufficient manifestation of any intention to exercise control over lost property before it was found such as would give the defendants a right superior to that of the plaintiff or indeed any right over the bracelet. As the true owner has never come forward, it is a case of “finders keepers”. I would therefore dismiss the appeal. [Eveleigh LJ and Sir David Cairns gave judgments dismissing the appeal (at 1019-1021).]

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[10.45]

Questions

1. Construct a hierarchy of rules which prioritises the entitlements of the dramatis personae in finding disputes, namely the finder, the occupier and the (usually absent) true owner. Can you draw any conclusions from the hierarchy you construct about the importance of property and claims to it? 2. The “true owner” of the bracelet Parker found was not, of course, a party to the proceedings. If that person had intervened in the proceedings, what would the outcome have been? Justify your answer. 3. S Gleeson, Personal Property Law (Sweet & Maxwell, London, 1997), p 55 says “the outcome in Parker would have been different if Mr Parker had been the bearer of a business-class ticket and was illegitimately in the first-class lounge” (emphasis in original). Do you agree? Why or why not? 4. What lesson(s) does Parker signal to an occupier of land concerning the ability to claim lost property? How would someone in the position of the British Airways Board better secure any entitlement to lost property knowing of the decision in that case and the reasoning of the court? 5. How secure or fragile is the finder’s title to lost and found property? 6. Is legislative intervention necessary to better regulate the entitlements and interests of the parties to finding disputes? If you agree it is, what are the important principles you would act on if you had a brief to reform the law governing finding disputes?

BY GIFT Nolan v Nolan [10.50] Nolan v Nolan [2003] VSC 121 HER HONOUR, DODDS-STREETON J: A. The Proceeding 1 In this proceeding the plaintiff seeks a declaration that she is the full beneficial owner, and entitled to possession, of three paintings by the late Sir Sidney Nolan entitled “Hare in Trap” 1946, “Royal Hotel” 1948 and “Italian Crucifix” 1955. The plaintiff also seeks orders for delivery up of the paintings and damages pursuant to s 82 of the Trade Practices Act 1974 (Cth). B. The Parties 2 The plaintiff, Ms Mosca Gai Jinx Margaret Ellery Nolan (usually known as “Jinx Nolan”) is the daughter of the late Cynthia Nolan (“Cynthia”) and the celebrated Australian artist, the late Sir Sidney Nolan (“Sidney Nolan”). 3 The first defendant, Mary, Lady Nolan, is the widow of Sidney Nolan, having been married to him from 28 January 1978 until his death on 28 November 1992. 4 The second defendant, Sotheby’s Australia Pty Ltd (“Sotheby’s”) is the auction house which was commissioned by Lady Nolan to auction on her behalf in Melbourne on 16 September 2001, a number of paintings by Sidney Nolan, including the three paintings the subject of this proceeding.

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Nolan v Nolan cont. C. Background to Claim 5 The plaintiff claims title to, and delivery up of “Hare in Trap” 1946, “Royal Hotel” 1948 and “Italian Crucifix” 1955 by Sidney Nolan, in her capacity as a beneficiary of both the Australian and English wills of her mother, Cynthia, who died on 24 November 1976. 6 The plaintiff claims that the three paintings constituted assets of the estate of Cynthia, in that each painting was given to Cynthia by Sidney Nolan at a date prior to Cynthia’s death in 1976. It is common ground that the paintings, executed by Sidney Nolan were originally his absolute property. 7 It is also undisputed that Sidney Nolan gave a number of his paintings to his wife Cynthia during their marriage, which, upon her death, constituted assets of Cynthia’s English and Australian estates. Some of those paintings were distributed to Ms Jinx Nolan by the trustees of Cynthia’s English and Australian wills in 1985 and 1986 respectively. Sidney Nolan was aware of, and did not dispute, the trustees’ claim that those paintings constituted assets of Cynthia’s estate. 8 It is undisputed that the three paintings the subject of this proceeding were in the possession of Sidney Nolan from (at the latest) a date in 1976 until his death on 28 November 1992. Upon the death of Sidney Nolan, his widow, Lady Nolan, took possession of the paintings. Subject to the outcome of the present proceeding, Lady Nolan acquired title to the three paintings pursuant to the will of Sidney Nolan executed on 6 February 1978, under which she was sole beneficiary. The trustees of Cynthia’s estates and the plaintiff, Ms Jinx Nolan, have not, at any stage, been in possession of any of the three paintings. 9 The plaintiff contends, in essence, that she believed from a date prior to her mother’s death in 1976 that “Hare in Trap” 1946 had been the property of her mother, Cynthia, and hence constituted an asset of her mother’s estate, but she did not, until approximately September 2001, have proof of Cynthia’s entitlement. 10 The plaintiff claims that until recently, she believed that “Italian Crucifix” 1955 was identical to a painting entitled “Crucifixion” 1955 or “Crucifixion, South Italy” 1955, which had constituted an asset of Cynthia’s Australian estate, but had been sold by the trustees in 1983. 11 The plaintiff claims that she did not apprehend until approximately September 2001 that there were grounds to believe that the painting the subject of the present proceeding, entitled “Italian Crucifix” and sometimes entitled “Italian Crucifix, Puglia”, was also the property of Cynthia during her lifetime. Her confusion is said to have arisen because Sidney Nolan painted a number of paintings entitled, or sometimes entitled, “Italian Crucifix” or a closely related variant of that title. The painting in dispute which remained in the possession of Sidney Nolan, is of different dimensions to the painting of similar title, which was sold by the trustees of Cynthia’s Australian estate in 1983. The plaintiff contends that she only recently became aware that Cynthia had owned two paintings with a similar theme and title, only one of which was sold by the trustees of Cynthia’s Australian estate, while the other remained in the possession of Sidney Nolan after Cynthia’s death. 12 The plaintiff claims that she was not aware until shortly before the Sotheby’s sale in September 2001 that there was evidence to establish that “Royal Hotel” 1948 was the property of Cynthia. 13 The recently discovered information which the plaintiff claims alerted her to Cynthia’s entitlement, or to proof of Cynthia’s title, and on which she relies to establish her claim in this proceeding, was identified or assembled by Mr Geoffrey Smith, a senior curator at the National Gallery of Victoria, in the course of his preparation for the National Gallery’s projected exhibition of Sidney Nolan’s Australian Outback works, scheduled for 2003. Mr Smith had conducted research into the life and art of Sidney Nolan for some years. His research into the provenance of Nolan paintings, including those the subject of this proceeding, continued during 2002. 222

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Nolan v Nolan cont. D. Brief Outline of Facts 14 Sidney Nolan was already an established artist when he married his second wife, Cynthia Hansen (née Reed), in 1948. Soon after the marriage, Sidney Nolan adopted Cynthia’s daughter, Jinx, who was then seven years of age. 15 In 1950 the Nolans travelled extensively in Europe and in 1953 they settled in England, in a residence situated at 79 Deodar Road, Putney. 16 Cynthia was closely involved in assisting Sidney Nolan with his work and in promoting his reputation. She was also the author of several books on themes based on her travels with Sidney Nolan. 17 It is undisputed that both Sidney Nolan and Cynthia Nolan owned Nolan paintings and made them available to various exhibitions. 18 During the course of the Nolans’ marriage, a number of exhibitions of Sidney Nolan’s works took place. 19 It is principally on documentation associated with certain of those exhibitions that the plaintiff bases her claim that Sidney Nolan made a gift of each of the three paintings to Cynthia. The plaintiff claims that: (a) “Italian Crucifix” 1955 was first acknowledged as belonging to Cynthia in the catalogue for the Whitechapel Art Gallery Exhibition held in June and July 1957; (b) “Hare in Trap” 1946 was first acknowledged as being in the collection of Cynthia in the catalogue for the New Metropole Gallery, Folkestone Exhibition held between 21 February and 18 April 1970; (c) “Royal Hotel” 1948 was first acknowledged as belonging to Cynthia in the catalogue for the Moderna Museet Exhibition held in Stockholm between 17 January and 7 March 1976. 20 The plaintiff relies upon the catalogues, including the above, and other documents containing alleged acknowledgments of Cynthia’s ownership of the three paintings, in order to establish a valid gift. The catalogues and documents are discussed in detail below. 21 The plaintiff contends that Sidney Nolan participated in the preparation of the exhibition catalogues and in associated documents or correspondence. As such, it is asserted that acknowledgments contained therein constituted admissions, or proof of a valid gift of each of the three paintings by Sidney Nolan to Cynthia. 22 In 1958, Ms Jinx Nolan left England to attend boarding school in the United States. The United States has remained her permanent residence from that time up to the present. She nevertheless continued to visit her parents in England regularly and maintained her family bonds with both Cynthia and Sidney Nolan. 23 In 1974, Cynthia Nolan despatched 26 paintings to Australia pursuant to an alleged loan agreement dated 21 November 1974 between herself and the Power Gallery of Contemporary Art, University of Sydney, under the care of her friend or associate, the curator, Elwyn (Jack) Lynn. Those paintings included “Hare in Trap” 1946 and “Italian Crucifix” 1955. The paintings deposited with the Power Gallery were subsequently made available for the David Jones Art Gallery Exhibition held in Sydney in 1975. In 1976, Cynthia and Elwyn Lynn (on her behalf) offered some of the 26 paintings for sale to the National Gallery. The paintings offered for sale included “Hare in Trap” 1946. The National Gallery did not take the opportunity to purchase any of the paintings. 24 The plaintiff acknowledges that Sidney Nolan did not know, at the time, that the paintings had been despatched to Australia, of Cynthia’s arrangements with the Power Gallery or of the offer to sell some of the paintings to the National Gallery. [10.50]

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Nolan v Nolan cont. 25 The plaintiff also conceded that Sidney Nolan did not know of, or consent to, the David Jones Art Gallery Exhibition in 1975 and was upset when he subsequently learnt of it. 26 It is undisputed that Cynthia maintained a separate “business” address, care of Mrs J. Griffin, 7 Sharples Street, Regents Park Road, London and required that her arrangements with the Power Gallery and the proposed sale of paintings be kept confidential. 27 There is also evidence that the alleged loan of paintings by Cynthia to the Power Gallery was in fact a private arrangement between Cynthia and Elwyn Lynn. That issue is discussed in detail below. 28 In 1976, Cynthia wrote at least two letters to Jinx Nolan in Boston. By a letter dated May 1976, Cynthia stated that she was considering sending “a few really good large … paintings” to Jinx Nolan in America and “‘Hare in Trap’ came to mind.” By a letter dated September 1976, Cynthia referred to her plan to send certain paintings to Jinx Nolan in Boston. The letter asserted that the paintings belonged to Cynthia, but urged that Sidney Nolan must not be informed, as he had apparently “given” paintings to Cynthia in the past, but had subsequently retracted or reclaimed such gifts and dealt with the paintings as his own. 29 On 24 November 1976, Cynthia committed suicide in London. Jinx Nolan was notified of her death and travelled to London immediately. Cynthia left two wills. By an English will executed on 13 February 1976 and an Australian will executed on 22 April 1976, each in very similar terms, she devised her estate to trustees on trust, broadly, for Jinx Nolan for life, with the remainder to the issue of Jinx Nolan or to certain heritage bodies. However, a “power of encroachment” permitted the trustees of the wills, in their absolute discretion, to pay the whole or any part of the capital of the estate to or for the benefit of Jinx Nolan. 30 Sidney Nolan was surprised and distressed to receive no benefit under either of Cynthia’s wills. Shortly after Cynthia’s death he began to reside at the home of the first defendant, Mary, Lady Nolan, then known as Mary Perceval, née Boyd. 31 On 6 February 1978 he married Mary Nolan. 32 Despite some strain and distress over the terms of Cynthia’s wills, Sidney Nolan maintained a relationship with Jinx Nolan until his death. They corresponded and Jinx Nolan visited, and stayed with, Sidney Nolan and Mary Nolan in their Whitehall flat. The topics of Cynthia’s wills and the benefits they conferred on Jinx Nolan were a source of tension, which occasionally resulted in emotional scenes. In 1978, after a disagreement with Sidney Nolan while staying as a guest in the Whitehall flat, Jinx Nolan left a note to Sidney Nolan which stated: Sid Won’t stay this time Am going to be rushing a bit. I’ll be at Shepherds until late pm probably so might not be able to make the concert. Sorry if there are feelings re possessions. I didn’t mean there to be, everything is yours as far as I’m concerned including anything at the warehouse or lawyers. I’ll probably be off tomorrow but will phone before I leave. Love to Mary. Love Jinx. ps I made a couple of long distance phone calls (inland) think this should cover it. 33 It is not disputed that following Cynthia’s death, the three paintings remained in Sidney Nolan’s possession until his death in 1992. “Hare in Trap” 1946 was displayed in the Nolans’ Whitehall flat for at least part of that time. Jinx Nolan, visited and stayed with Sidney Nolan and his third wife, Mary (now Lady Nolan) at their Whitehall residence on many occasions. She was aware that “Hare in Trap” 1946 was in Sidney Nolan’s possession. She believed, during Sidney Nolan’s lifetime, on the basis of the letter from Cynthia dated May 1976 that Cynthia had owned “Hare in Trap” but had no further 224

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Nolan v Nolan cont. proof of title. Further, she believed that “Italian Crucifix” 1955 had been owned by Cynthia, but had been sold by the Australian trustees of Cynthia’s will during the 1980s. 34 Jinx Nolan gave evidence that she was anxious to preserve her relationship with Sidney Nolan and generally avoided discussion of Cynthia’s wills or challenging him. She therefore, during Sidney Nolan’s lifetime, did not raise specific questions about paintings or the possibility that there was property remaining in Sidney Nolan’s possession which should have been included in her mother’s estate. 35 In 1985, Jinx Nolan received a number of paintings as a distribution in specie from Cynthia’s English estate. In 1986 she received a distribution of property, which apparently included some paintings, from Cynthia’s Australian estate. 36 Following Sidney Nolan’s death on 28 November 1992, Jinx Nolan, in 1994 and 1995, sought and obtained legal advice in relation to certain items which she believed to be assets of Cynthia’s estate, but which had remained in Sidney Nolan’s possession after Cynthia’s death. 37 Jinx Nolan obtained further legal advice and representation. She asserted a claim to certain furniture and other items from the Estate of Sidney Nolan. The claim was rejected. In the course of rejecting the claim, Diana Rawstron, a solicitor acting for the executors of the Estate of Sidney Nolan, by letter dated 10 February 1995 wrote to Jinx Nolan’s solicitor in the following terms: I put this on the record because I wish to make the point that the executors’ position is not to say that everything in Sir Sidney’s possession at the date of his death automatically belongs to the estate. If anything belonged to Cynthia, then it has been or will be returned to Ms Nolan. However, the position of the Chinese chairs, screen and carpet is that they belonged to Sir Sidney and therefore fell into his estate. Finally, if Ms Nolan is able to produce compelling evidence to the contrary, for reasons you are aware of, it would be necessary to put the matter before the Inland Revenue. 38 Although rejecting Jinx Nolan’s claim to furniture, the executors of the Estate of Sidney Nolan, with the approval of Lady Nolan, acknowledged that a painting by Sidney Nolan depicting a railway steam train, inscribed “Cynthia with love Sidney 1969” belonged to Jinx Nolan after it was discovered at a London art dealers in February, 1993. The painting was returned to Jinx Nolan. 39 In 1997, the executors of Sidney Nolan’s estate or Lady Nolan, instructed the London art dealer, Agnews, to sell a number of Nolan paintings, including the three paintings in dispute. The paintings were offered for sale by Agnews between 11 June and 25 July 1997 but were not sold. Ms Jinx Nolan became aware of the attempted sale. She sought further legal advice in relation to her claim to “Hare in Trap” 1946 and was advised that the evidence constituted by the letters of Cynthia to Jinx Nolan of May and September 1976 were insufficient to establish title. 40 In 2001, Mr Geoffrey Smith, in the course of research and preparation for a planned Nolan “Outback” Exhibition scheduled for 2003, made contact with both Lady Nolan and Ms Jinx Nolan. He visited Lady Nolan. Mr Smith entered into regular communication with Ms Jinx Nolan and in July 2001 visited her at her residence in Boston. Ms Nolan made her own records available to Mr Smith and apprised him of other possible sources of documents. In the course of his subsequent researches, Mr Smith located certain documents and catalogues which led him to believe that “Italian Crucifix” 1955 (which the plaintiff believed was the title of a painting which had belonged to Cynthia but had been sold by the Australian trustees) was in fact a different painting of similar title, which had also been given by Sidney Nolan to Cynthia. He formed the belief, on the basis of certain documents, that Cynthia had also owned “Hare in Trap” 1946 and “Royal Hotel” 1948. [10.50]

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Nolan v Nolan cont. 41 In the course of his investigations and research, Mr Smith advised Ms Jinx Nolan of his findings and of his opinion that there was evidence of Cynthia’s ownership of “Hare in Trap” 1946, “Royal Hotel” 1948 and “Italian Crucifix” 1955 (which, unlike a painting of similar name, had not been sold by Cynthia’s Australian trustees). 42 In September 2001, Lady Nolan instructed Sotheby’s, the second defendant, to auction the three paintings in dispute. The plaintiff applied for an interlocutory injunction restraining the sale. The application for an interlocutory injunction was dismissed by Nathan J on 14 September 2001. The Sotheby’s auction took place on 16 September 2001. The three paintings were sold at auction. The purchasers of “Hare in Trap” 1946 and “Royal Hotel” 1948 have executed undertakings to abide the determination of the court in this proceeding. The sale of the third painting, “Italian Crucifix” 1955 was not completed and that painting has been returned to Sotheby’s by the purchaser. E. The Situation of the Paintings 43 There is evidence that “Hare in Trap” 1946 was situated in England in the Nolans’ Putney residence at the date of Cynthia’s death on 24 November 1976. There is evidence that “Hare in Trap” 1946 and “Italian Crucifix” 1955 were both despatched to Australia at an unspecified date in 1974 and remained there, stored at the Power Gallery, Sydney, (save for when they were exhibited at the David Jones Art Gallery in Sydney between 7 July and 26 July 1975) until at least June 1976. At a later date in 1976 (which I find to be prior to Cynthia’s death on 24 November 1976) they were returned to England. 44 It is not disputed that “Hare in Trap” 1946 was also exhibited at the New Metropole Gallery, Folkstone, Kent, in April 1970. It is not disputed that “Italian Crucifix” 1955 was exhibited at the Redfern Gallery, London in 1955 and at the Art Gallery of New South Wales’ Sidney Nolan Retrospective Exhibition from 13 September 1967 to 4 February 1998. There is evidence to suggest that it may also have been exhibited at the Wakefield Gallery, London, in about 1956 and at the Whitechapel Art Gallery, London, from 12 June – 31 July 1957. 45 It is not disputed that “Royal Hotel” 1948 was transported to England at an unspecified date (probably in the 1950s) and was exhibited at the Moderna Museet in Stockholm in 1976. 46 Other than for the above, there is no evidence of where each of the three paintings was situated during the marriage of Sidney Nolan and Cynthia from the 1950s until Cynthia’s death in 1976. There is evidence that Sidney Nolan maintained a studio in London where paintings were kept. There is evidence that Nolan paintings were sometimes situated at the Nolan’s residence, and were sometimes loaned to exhibitions or stored. However, there is no evidence, other than as noted above, of where each of the three paintings was situated at any given time. There is no evidence of what level of control, custody or access Sidney Nolan conferred on Cynthia in relation to the three paintings prior to the alleged gifts, whether they were situated at the Nolans’ residence, in the studio, in storage, or elsewhere. 47 Such evidence, or the lack of it, may be relevant to the question whether the plaintiff has established that delivery, as distinct from donative intention or acknowledgment of ownership, was satisfied in relation to each of the three paintings. … H. Gifts of Chattels 121 There are three recognised methods for making a valid gift of a chose in possession, such as a painting, inter vivos. 122 They are: (a)

deed

(b)

declaration of trust

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Nolan v Nolan cont. (c)

delivery.

123 In the present case, the plaintiff does not assert that a gift was effected by deed or declaration of trust. No deed has been identified or pleaded. Although various constructive trusts are pleaded, they are relevant only in reply to defences of limitations legislation and delay. They depend, for their effect, on the prior establishment of a valid gift to Cynthia by Sidney Nolan. 124 In establishing a valid gift of a chose in possession inter vivos, which is fundamental to her claim in this proceeding, the plaintiff encounters several significant hurdles represented by well-recognised principles and maxims applicable in this context. 125 First, it is well established that equity will not assist a volunteer. From that flows the equally venerable principle that equity will not complete an imperfect gift. 126 Secondly, possession is prima facie evidence of property. As Isaacs and Rich JJ observed in Russell v Wilson: 1 Possession in the relevant sense, is not merely evidence of absolute title; it confers a title of its own, which is sometimes called a “possessory title”. This possessory title is as good as the absolute title as against, it is usually said, every person except the absolute owner. 127 Limitations of action legislation reflects the policy that lengthy possession must ultimately operate to preclude a remedy in relation to a title, “however clear and indisputable”, when a title holder comes “too late”. The legislation recognises the public’s interest in having “a certain fixed period, after which the possessor may know that the title and right cannot be called in question” in order to avoid an opening to “interminable litigation, exposing parties to be harassed by stale demands, after the witnesses of the facts are dead, and the evidence of the title lost”. 2 128 In the present case, Sir Sidney Nolan and the first defendant, Lady Nolan, as his beneficiary, have successively been in continuous peaceable possession of the disputed paintings for an unbroken period of approximately 27 years. The “witnesses of the facts” of the alleged gift transactions are dead. 129 Thirdly, the plaintiff bears the onus of establishing the necessary elements of a gift of chattels effected by delivery. The presumption of advancement, or absolute gift, applies in favour of, inter alia, a wife who takes legal title to property for which a husband provided the purchase price. 3 In such circumstances, it is a rebuttable presumption that the husband intended to advance the wife by way of gift, rather than intending her to hold legal title as a resulting trustee, for himself. The plaintiff sought to rely on authority in which the presumption of advancement was approved. The present case, however, involves an alleged common law gift of chattels, to which presumptions of advancement or resulting trust are equally inapplicable. 130 The plaintiff also contended that the fact that Sidney Nolan made many undisputed gifts of his paintings to Cynthia demonstrated a propensity on his part to make such gifts, which should assist the plaintiff in the present case. In my opinion, the fact that Sidney Nolan made many gifts to Cynthia which he did not dispute during her life or after her death, is more consistent with the conclusion that he did not make gifts to his wife of those paintings he retained after her death. There is evidence that Sidney Nolan was upset by the terms of his wife’s wills, under which he took no benefit. Nevertheless, he made no attempt to challenge Cynthia’s estates’ entitlement to a considerable number of paintings. Such conduct suggests that Sidney Nolan “honoured” gifts and recognised them as binding. 131 The essential elements of a valid gift of a chattel inter vivos, in the absence of a deed of gift or a declaration of trust, are: 1 2 3

(1923) 33 CLR 538. Per Sir Thomas Plummer MR in Marquis Chomondeley v Lord Clinton (1820) 2 Jac. E.W.I, 139-40; 37 ER 527. Calverley v Green (1984) 155 CLR 242. [10.50]

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Nolan v Nolan cont. (a) an intention to make a gift, usually expressed by words of present gift; (b) intention on the part of the donee to accept the gift; and (c) delivery. Intention to make a gift 132 Donative intention is characteristically accompanied by words of gift which evince the intention and delineate the object and extent of the intended benefaction. 4 133 The plaintiff in the present case, although reliant on a valid gift, is unable to produce any witnesses to the alleged gift transactions. Instead, reliance is placed on documents, the admissibility of which is largely disputed. Those documents, to the extent to which they contain admissible statements, must be approached not only with the degree of caution generally applicable to claims against a deceased estate, but with added caution based on circumstances peculiar to the present case, discussed in detail below. Are words of gift essential? 134 The documents on which the plaintiff relies contain statements which, even if admissible, do not amount to words of present gift by Sidney Nolan. 135 Many of the decided cases have involved undisputed “words of present gift”. It was submitted by the plaintiff that words of gift are not required provided that donative intention is established. The issue has not received detailed consideration in any of the authorities of which I am aware. 136This method of effecting a gift of chattels is commonly characterised as “delivery”. 5 137 In many of the cases, however, reference is made to a “parol gift” or a “gift by word of mouth” 6 The question arises whether words of gift are an essential constituent of this method. It is clearly established that donative intention and delivery are required. In most decided cases, words of gift have been undisputed or appear to have been assumed. Argument has centred on whether the requirement of delivery was satisfied. In re Cole, (a bankrupt) Ex parte The Trustees v Cole 7 the Court of Appeal appeared to assume that “words of gift” must be spoken. Words of gift had indisputably been spoken in that case, so the effect of the absence of words of gift was not addressed. Recently, in Horsley v Phillips Fine Art Auctioneers Pty Ltd, 8 Santow J expressly stated that oral words of gift with delivery were required. 9 The plaintiff’s submission, however, draws support from the observation of Mason CJ and McHugh J in their joint judgment in Corin v Patton 10 that “Just as a manifestation of intention plus sufficient acts of delivery are enough to complete a gift of chattels at common law, so should the doing of all necessary acts by the donor be sufficient to complete a gift in equity”. 11 Corin v Patton did not concern a gift of chattels, but a voluntary transfer of an interest in Torrens land. The observation is therefore obiter. 138 If donative intention and delivery only are essential for a valid gift of chattels, that intention must nevertheless be made manifest and expressed with certainty. Words of present gift show “an intention to give over property to another, and not to retain it in the donor’s hands for any purpose, 4 5 6 7

Per Stuart V.C., Howard v Fingall (1853) 22 LTOS 12. Crossley Vaines on Personal Property, London 1973 at 301, Fisher S. “Commercial & Personal Property Law”, Butterworths, 1997 at 451. In re Stoneham; Stoneham v Stoneham [1919] 1 Ch 149 at 153. [1964] Ch 175.

8

(1995) 7 BPR 14,360.

9

Ibid, at 9.

10

(1989-1990) 169 CLR 540.

11

Ibid, at 588.

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Nolan v Nolan cont. fiduciary or otherwise”. 12 Words of gift are usually necessary to achieve that certainty in relation to matters such as defining the extent of the benefit the donor intends to confer. 139 Nevertheless, in my opinion, the better view, as expressed in the dictum in Corin v Patton, is that donative intention need not be manifested by words of gift. Although donative intention would normally be manifested, and its extent defined, by words, unusual circumstances may be imagined where other means fulfil those functions. 140 If a valid gift may be effected without words of gift in unusual cases, the putative donee who seeks to rely on alternative means of establishing donative intention, would bear the onus of proving the existence of a present, unequivocal donative intention, attended by the requisite certainty as to object, extent, and whether the gift would take immediate effect. 141 The question is relevant to the present case, because, in contrast to most decided cases, the plaintiff adduces no evidence of words of present gift. Rather, statements in the documents on which the plaintiff relies constitute, at their highest, ex post facto admissions or acknowledgments by Sidney Nolan, the alleged donor, that a particular painting belongs to Cynthia, is “Cynthia’s” or is part of “Cynthia’s collection”. 142 In my opinion, evidence that Sidney Nolan believed that he had made a gift to Cynthia of an absolute interest, which had already taken effect and which he did not desire to retract, would be capable of manifesting donative intention. A comparable case is that of Re Ridgeway, 13 in which the alleged donor apparently believed that he had made a gift of port to his children and thereafter acknowledged the port’s reputation as “Tom’s port” or “Alice’s port”. It was apparently accepted in Re Ridgeway that the putative donor intended to make a gift and believed that he had done so. That belief was found to be mistaken as a matter of law, because the essential requirement of delivery was not fulfilled. The port remained within the father’s possession in the cellar. The gift, although intended, was held to be incomplete and equity will not perfect an imperfect gift. 143 Further, although a putative donor’s acquiescence in an ascription of ownership to the donee may, in my opinion, constitute evidence that donative intention existed at a particular time, it may be more equivocal than words of present gift. Where the donor or donee is available to give direct evidence of the matter, any ambiguity or doubt may be resolved. That is not possible in the present case. 144 A further problem which arises in the present case in relation to the plaintiff’s reliance on the alleged donor’s apparent acknowledgment of the alleged donee’s ownership is that, although delivery can precede, accompany or follow the gift, delivery must occur while the donative intention subsists. At any stage until delivery occurs, the donor can validly retract the gift. 145 The authorities establish that a promise to make a gift, or an expression of gift by words of future intention, however clear and unqualified, is not sufficient to establish a perfect gift. It follows that the donor’s expression of belief or conclusion that he or she has made a gift which has taken effect, so that property has passed to the intended donee, is equally insufficient. At best, it satisfies only the first requirement of a valid gift of chattels. It manifests donative intention. The second necessary element of delivery must also be satisfied in order to give complete effect to the donative intention. That is a question of law which the putative donor rarely addresses and would usually be unqualified to determine, when expressing a conclusion that property in the chattel had passed to the donee. Thus in Re Ridgeway, 14 the intending donor believed the gift of port complete, denominating it “Tom’s port”. 12 13 14

Richards v Delbridge (1874) LR 18 Eq. 11 at 15 per Jessel, M.R. (1885) 15 QB 447. Ibid. [10.50]

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Nolan v Nolan cont. In The National Trustees Executors & Agency Company Limited v O’Hea 15 the intending donor undoubtedly intended to make the gift of a coach and horses to his coachman, and believed it valid. In neither case was the intending donor’s conclusion correct. Delivery had not been effected and the intended gift failed. I. Circumstances Relevant to Weight Claims against deceased estates 146 In the present case, both the alleged donor and the alleged donee are dead, the donee for nearly 30 years. In seeking to discharge the onus of establishing the necessary elements of a perfect gift, the plaintiff must rely on documents, rather than on oral testimony which may be tested by cross-examination. Where the alleged donor is dead, the authorities require the claimant donee’s account of events to be approached with caution. Where both the alleged donor and donee are dead, and reliance is placed on documents, caution is particularly necessary. 147 In Re Garnett, Gandy v McCauly 16 Brett MR observed: The law is that when an attempt is made to charge a dead person in a matter, in which if he was alive he might have answered the charge, the evidence ought to be looked at with great care; the evidence ought to be thoroughly sifted and the mind of any judge who hears it ought to be, first of all, in a state of suspicion. He nevertheless noted that: … if, in the end the truthfulness of the witnesses is made perfectly clear and apparent, initial suspicion would yield to belief. 148 In Thomas v The Times Book Co, 17 Plowman J applied the approach of Brett MR in a case where the poet, Dylan Thomas, had died shortly after allegedly making a gift of the manuscript of his poem “Under Milk Wood” to a BBC executive. Plowman J stated: … [N]ot only in this case is the onus of proof on the defendants, but I am enjoined by authority to approach their story with suspicion, having regard to the fact that the other actor in this story, the late Dylan Thomas, is dead and cannot therefore give his own version of what took place. 18 149 Plunkett v Bull 19 involved an action for debt against a deceased estate. Isaacs J noted that the plaintiff bore the burden of establishing “the original creation” of the deceased’s indebtedness and stated: … undoubtedly it is established in cases of this sort the Court scrutinizes very carefully a claim against the estate of a deceased person. It is not that the Court looks on the plaintiff’s claim with suspicion and as prima facie fraudulent, but it scrutinizes the evidence very carefully to see whether it is true or untrue. 20 150 Recent decisions of this Court have reiterated the need for caution, if not suspicion, in determining claims made against the estate of a deceased person. In Stick-on Signs Pty Ltd v Sign Gear Ltd, 21 Osborn J observed the caveat of Isaacs J in Plunkett v Bull. 22 15

(1904) 29 BLR 814.

16

(1885) 31 Ch D 1 at 8, 9.

17

[1960] 2 All ER 241.

18

Ibid, at 244.

19

(1915) 19 CLR 544.

20

Ibid, at 548.

21

[2002] VSC 320.

22

(1915) 19 CLR 544 at 548-9.

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Nolan v Nolan cont. 151 Similarly, Hansen J in Richardson v Armistead 23 stated that … in such circumstances the self-interest of a claimant to give evidence favourable to his or her case is obvious … in such a case much caution is exercised before the evidence of the claimant is accepted. 24 152 In Plunkett v Bull and Thomas v The Times Book Co, in contrast to the present case, one party to the alleged transaction was still alive and gave evidence which, although scrutinised with due caution, was believed and accepted by the trial judge. 153 In addition to the caution generally appropriate to claims against the estate of a deceased person, the defendants in the present case point to several additional circumstances which may independently dictate a cautious approach. 154 In particular, the defendants submit that many of the documents on which the plaintiff relies have been selectively produced from a source which was assembled and deposited surreptitiously, so that there can be no confidence that all relevant documents have been brought forward. 155 In Plunkett v Bull 25 Isaacs J cited with approval some observations of the Privy Council in Lachmi Parshad v Mararajah Narendro Kishore Singh Bahadur 26 in relation to the sufficiency of proof of claims against deceased estates. Lord Morris there stated: In an action brought to recover money against an executor, or as in this case, the heir, of a deceased person, it has always been considered necessary to establish as reasonably clear a case as the facts will admit of, to guard against the danger of false claims being brought against a person who is dead and thus “is not able to come forward and give an account for himself”. 27 156 Isaacs J, in Plunkett v Bull, referred to the failure of the claimant in Lachmi Parshad “to bring forward evidence which he ought to have brought forward and which was available” 28 which had contributed to the Privy Council’s holding that a reasonably clear case was not established. Isaacs J observed that in Plunkett “it has not been suggested, and on the facts before us I do not see how it could be suggested, that any further evidence could be given or any further light thrown upon the case from the plaintiff’s side”. 29 157 Many of the documents upon which the plaintiff relies in the present case are produced from an archive known as “The Cynthia Nolan Papers” which was given to the National Library of Australia by Cynthia in successive consignments during 1975 and 1976. Cynthia apparently deposited the papers in circumstances of some secrecy. She placed a 45 year restriction on public access to the Cynthia Nolan Papers. 158 The defendants further submit that Cynthia’s despatch of paintings to the Power Gallery of Contemporary Art, University of Sydney, in 1974, her arrangements with the curator, Elwyn (Jack) Lynn, and the exhibition at the David Jones Art Gallery in 1975, were concealed from Sidney Nolan and occurred without his consent, so that associated documents created by Cynthia or as a result of information she supplied should not be admitted, or alternatively, should be viewed with suspicion. 159 The defendants also submit that Cynthia’s conduct, as evidenced by her letters to Jinx Nolan dated May 1976 and September 1976, represents an additional ground for declining to admit documents on which the plaintiff seeks to rely. 23 24 25 26 27 28 29

[2000] VSC 551. Ibid, at para 36. Supra. LR 19 IA, 9. Ibid, at 9 – 10. Supra at 549. Ibid. [10.50]

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Nolan v Nolan cont. 160 The defendants further submit that information included in exhibition catalogues is of variable reliability, depending for its accuracy on the information supplied to the compiler. 161I consider each of those matters in detail below. The Cynthia Nolan Papers 162 Many of the documents on which the plaintiff seeks to rely in this proceeding are produced from a collection known as “the Cynthia Nolan Papers” held by the National Library of Australia. The Cynthia Nolan Papers consist of a considerable volume of papers related to Sidney Nolan, Cynthia and their circle, donated by Cynthia in successive consignments to the Australian National Library between 1975 and 1976. The last consignments were apparently received by the National Library shortly after Cynthia’s death in November 1976. 163 The defendants rely on several documents which, in their submission, establish that Cynthia donated and delivered the papers after having taken elaborate precautions to conceal her actions from Sidney Nolan. The defendants also contend that the documents on which the plaintiff relies have been produced erratically and selectively. They contend that, in the circumstances, the court can have no confidence that the plaintiff has brought forward all available evidence. It is submitted that that circumstance constitutes a ground for rejecting documentary evidence on which a claim against a deceased person’s estate is based. 164 The defendants tender series of papers passing between the officers of the National Library of Australia, Ivan Page (Chief Liaison Librarian, Europe, at the Australian High Commission) and Cynthia, which indicates that Cynthia, in 1975, offered to donate a collection of Nolan papers to the National Library of Australia. 165 The correspondence indicates that the National Library’s representatives were instructed to communicate with Cynthia care of Mrs J. Griffin, 7 Sharples Street, Regents Park Road, London. Ms Jinx Nolan gave evidence that Cynthia used that address as a business address. 166 The donated papers were to be documented by “confidential file”, which was to be “kept under lock and key”. 167 Cynthia requested that the papers should not be looked at or opened by library personnel. The correspondence was conducted care of Cynthia’s business address. National Library representatives agreed to her stipulation of a 45 year period of restricted access, assuring her that the confidential nature of the collection would be strictly respected. 168 A letter of Mr Page to Ms Pauline Fanning (a library officer) dated 14 January 1976 stated that “I shall be grateful if you will send another letter of thanks to Mrs Nolan when you receive these papers. Mrs Nolan would prefer that we did not call this gift simply ‘the Nolan papers’. She said that it includes her own literary manuscripts. Further, if it were not for her, her husband would not be as famous as he is today, nor would the National Library ever have acquired the papers. She proposed therefore that the gift be named after herself. I did not catch all her names. … Perhaps in your letter to her you could refer to them as the Cynthia Nolan Papers. Mrs Nolan does enjoy a certain reputation for eccentricity. Her husband knows she is transferring papers to the library, but she does not want him to see documents leaving the house. She therefore asked me to call at a time when he was out. After putting the cartons into the car I was sitting in the kitchen taking tea with her. A footstep was heard on the stairs. Mrs Nolan flew out to intercept her husband, explained loudly that she was having a cup of tea with someone she had picked up in the park, and persuaded him to continue on his way upstairs. Back in the kitchen she thrust my overcoat into my hands, whispered ‘I’m always picking up people in the park’ and turned me out of the house. I felt as if I was playing a scene from a farce by Feydeau.” 169 A letter of Cynthia to Dr Chandler, Director-General of the National Library (undated) states, “Your poor journeyman almost ran into Mr N. last time – not that it would matter for he knows I’m sending things to archives, but experience has taught me better not to involve him …” 232

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Nolan v Nolan cont. 170 After the death of Cynthia, Mr Page wrote to an officer of the National Library by letter dated 5 January 1977, in which he advised against the Library’s acknowledgment of some recently arrived consignments. It further stated, “Mrs Nolan always assured me that her husband knew the papers were going to the National Library but she took elaborate precautions to ensure that he knew not the day nor the hour of it. I suggest we do nothing at this stage to bring them to the forefront of his mind.” 171 From 11 to 13 October 2002, Mr Smith was given access to the Cynthia Nolan Papers. Mr Smith examined the Cynthia Nolan Papers in the company of Ms Jinx Nolan and her instructing solicitor, Mr Gary Singer, during a three day period. Mr Powell of the National Library gave evidence that that was the only occasion on which, to his knowledge, the Cynthia Nolan Papers have been examined. 172 Mr Smith’s evidence was that the Cynthia Nolan Papers constitute “a huge archive”. The collection consists of 19 different series of documents (classified by reference to topic) contained in approximately 90 boxes. Mr Smith did not look at all 90 boxes. He could not remember all of the series of documents he had looked at. He thought that he had looked at some and “scanned” others. He was sure that he had looked at some series, sure that he had not looked at some series and unsure whether he had looked at others. Mr Smith was unable to state exactly how many of the 90 boxes he had looked at, other than to say that it was “a lot”. He did not keep a note of what he had looked at and had no record of his examination, except where he had taken copy documents. 173 Mr Singer, by affidavit sworn 9 December 2002, deposed in relation to his search of the Cynthia Nolan Papers from 11 to 13 October 2002 that “there were literally tens of thousands of documents in the collection”, and “time did not permit us to examine every paper in the collection”. 174 The correspondence passing between National Library representatives and Cynthia should be approached with some caution because, as in the case of the documents relied on by the plaintiff, the authors are not available to give evidence. Nevertheless, I consider that the correspondence supports the contention that the Cynthia Nolan Papers is a collection which was not assembled or donated by Cynthia openly with the full knowledge, consent, and participation of Sidney Nolan. 175 Cynthia’s conduct, as described in the correspondence, appears inconsistent with Sidney Nolan’s knowledge and approval of her actions. It was not limited to “not bothering” the artist, but extended to deceit. In my opinion, it is probable that Sidney Nolan did not know of, or consent to, the assembly or the donation of the Cynthia Nolan Papers, despite the written assertions of Cynthia Nolan to the contrary. There can be no confidence that the Cynthia Nolan Papers constitutes a comprehensive source which contains a complete record of all relevant matters, that all relevant papers were available to Cynthia or that she did not filter, censor or remove material selectively for purposes of her own. 176 In relation to the search of the Cynthia Nolan Papers conducted by Messrs Smith and Singer and Ms Nolan, whilst I do not consider that any of those persons would be likely deliberately to suppress or withhold relevant documents, given the size of the collection, the relatively short space of time allotted for their search, the admitted impossibility of examining all papers, the failure to keep any written record of the search process and the lack of access afforded to any other party, it is not possible to conclude that a thorough and comprehensive search was conducted. 177 In the circumstances, neither the Cynthia Nolan Papers as a collection, nor the search of it in October 2002, can safely be considered comprehensive. I cannot conclude that the plaintiff has brought forward all relevant documents. While I do not consider that documents produced from the

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Nolan v Nolan cont. Cynthia Nolan Papers should therefore be rejected, the circumstances add to the necessity for a cautious approach to the documents in this context. 30 The difficulty of establishing “a reasonably clear case” is also increased. The Power Gallery Arrangements and the David Jones Art Gallery Exhibition 178 It is not disputed that Cynthia, on a date in 1974, arranged for the despatch of 26 Nolan paintings to the Power Gallery of Contemporary Art, University of Sydney. Documents relevant to Cynthia’s arrangements for the deposit of paintings at the Power Gallery are tendered by consent. 179 By letter dated 3 September 1974 Elwyn Lynn of the Power Gallery wrote to Cynthia, at her business address, care of Mrs J. Griffin, 7 Sharples Hall, Regents Park Road, London. The letter refers to the expected unloading of two crates [of paintings], their expected collection and the University’s exemption from duty and customs charges. 180 It further states, “At present only I, Lily [Mr Lynn’s wife], my secretary and my assistant and legal and customers agents are aware of the consignment … I shall supply you with a list and a statement that they are on loan from you. This will also be entered in our files and I think it wise to give a copy to the Vice Chancellor for his confidential files. I think it wise to have the documents stored in several confidential files.” 181 By letter of Elwyn Lynn to Lily and Victoria Lynn dated 14 November 1974 Mr Lynn states, “Sid met me and all is well … of course, he had guessed intuited or suspected about the paintings, but now he knows and Cynthia knows he knows. I walked on a bomb field for a while but all is well and it just had to come out and the sooner the better. We are all at peace …” 182 A letter of Elwyn Lynn (then visiting England) to Anne Bryant of the Power Gallery dated 18 November 1974 refers to his despatch of some additional Nolan works, including a sketch, recently drawn by Sidney Nolan expressly for the Power Gallery. The letter indicates that Sidney Nolan intended to give certain prints to the Power Gallery. 183 The letter adds, “Sid Nolan doubts if any ptgs [paintings] are in Australia from Cynthia! She’s got a lot in her room! Wants to give some to Manchester and Edinburgh, but where is our original. The whole business is quite messy and a great worry to me to keep the peace – takes the enjoyment away.” 184 A letter of Elwyn Lynn to Cynthia dated 1 June 1975 refers to a proposal to offer one third (or six) of the 26 paintings for sale to David Jones. It also referred to a proposed gift of a painting by Cynthia to Lily Lynn. 185 A letter of Lily Lynn to Cynthia dated 9 September 1975 acknowledges Cynthia’s gift of a painting to Lily Lynn. The letter refers to Cynthia’s problems, and states, “I fear by some ‘Irish luck’ the paintings will somehow return to London and McAlpine. It is all difficult and a wrong decision could cause a lot of anger and tears … As Jack and I talked about you, Sid rang from London. A private deal would be better. But who should do it? The few collectors we know are all private dealers themselves and sharks as money is tight.” The Mollison Letters 186 Two letters to James Mollison, then director of the National Gallery, Canberra, are tendered by consent. The plaintiff submits that they constitute evidence that the Cynthia Nolan collection of paintings (including “Hare in Trap” 1946 and “Italian Crucifix” 1955) remained in Australia until at least June 1976. 187 The letter of Cynthia Nolan to James Mollison, dated 28 May 1976 states that “I would very much like you to see the paintings that I own. I hope that you might find something that your gallery 30

Plunkett v Bull; The Perpetual Executors and Trustees Association of Australia Limited v Wright (1917) 23 CLR 185, Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785.

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Nolan v Nolan cont. would like to purchase”. The letter requests Mr Mollision, if interested, to get in touch with Jack Lynn, who would show him the paintings. The letter requests Mr Mollison to contact Cynthia not at the Putney residence she shared with Sidney Nolan, but at her business address “care of Mrs J. Griffin” in Regents Park, London. It also requests that the matter “remains at the moment between ourselves”. 188 The letter of Elwyn (Jack) Lynn to James Mollision dated 10 June 1976 refers to the possible purchase by the National Gallery of works by Sidney Nolan “at present stored by me at The University of Sydney” and available to be shown “at any time”. Mr Lynn states “I am compelled to request that the matter be kept confidential”. Listed as one of the available paintings is “Hare in Trap” 1946. Although a painting entitled “Crucifixion, South Italy” 1955, dimensions “50.8 x 60.9 cm” is also listed, its measurements do not accord with those of the similarly titled painting the subject of this proceeding. 189 The letter of Elwyn Lynn to Cynthia Nolan dated 21 June 1976 states, “Meanwhile I have written to James Mollison … listing the works, sizes, dates, media and so on that are available: eleven with a choice of six (6). I told him that he and/or his committee could see them by arrangement, but I’ve not said where they are. I’ve told him that I am not an agent, but that I could suggest prices and sale would depend upon your agreement …” 190 The letter of Elwyn Lynn to Cynthia Nolan dated 6 August 1976 states, “No response from Canberra. As I shall be away three months, viewing the works in the Power Storage would be difficult but Kelly could arrange it. … However, he is not competent to negotiate. Rudy could contact Kelly and Kelly could contact Canberra for viewing without Rudy’s being aware of where the pictures are. But, I really think it better for the pictures to be at Rudy’s for the three months I am away. In that way he can make further approaches to Canberra and not involve anyone as to the whereabouts of the works. Maybe I won’t give him the lot, but we have told Canberra the titles and number, of course.” 191 A letter of Elwyn Lynn (from England) to Lily and Victoria Lynn dated 6 November 1976 relevantly states, “Sid Nolan phoned me at 5.30 a.m. this morning. He and Jinx are living at the Dorchester; he won’t go back to the house and Jinx collects the mail. The place is stripped and as probate interferes he can do nothing about the place in London … the inquest is over and Lord Clarke made some kindly remarks about Cynthia in the press, Cynthia left a couple of unbitter and generous notes, declaring she was doing the best thing. … Jinx had to tell him [Sidney Nolan] about the crate of ptgs arriving in London but nothing else as yet, because it may be in her will. Sid said that she tried to make her wills very clear, but he’s afraid that it is a bit of a mess.” 192 I conclude from the above letters that on the balance of probabilities “Hare in Trap” 1946 was in Australia as at June 1976 and as late as August 1976. The letters cast no further light on the whereabouts of “Italian Crucifix” 1955, or any other paintings originally stored at the Power Gallery, save for those nominated for sale. I am unable to determine from the letters whether “Italian Crucifix” 1955 was in Australia as at June 1976. 193 I conclude that the attempted sale by Cynthia of paintings including “Hare in Trap” 1946 was conducted without the knowledge of Sidney Nolan. The use of a separate business address and the repeated stipulations of confidentiality support that conclusion. 194 In giving evidence at trial on the Power Gallery deposit of paintings by Cynthia Nolan, Mr Tim Kelly, an officer at the Power Gallery at the time, stated that he believed that the “loan” of the works was “a private arrangement between Cynthia Nolan and Jack Lynn, and the Power Gallery was just holding the paintings”. Mr Kelly was aware, at the time, of the offer to sell paintings in June 1976 to the National Gallery on behalf of Cynthia. He stated that he knew that the matter was confidential because he knew that the paintings were not part of the Power Gallery collection. Mr Kelly supervised the despatch of the paintings to the David Jones Art Gallery in 1975. At the end of that exhibition, when they were returned to the Power Gallery, he put them back in storage where they remained until they left the Power Gallery collection, but he could not recall a specific date. [10.50]

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Nolan v Nolan cont. 195 Although it is not possible to discern the full meaning of the correspondence and documents relating to Cynthia’s deposit of paintings at the Power Gallery, it appears (and is conceded by the plaintiff) that Sidney Nolan did not know of, or consent to the arrangements made by Cynthia in relation to the 26 paintings during 1974 to 1976. Lily Lynn, the wife of Elwyn Lynn, and an executor of Cynthia’s Australian will may have given evidence on those matters. There is evidence that Mrs Lynn visited Melbourne in October 2002. The plaintiff’s failure to call her is unexplained. I infer, pursuant to Jones v Dunkel, 31 that Mrs Lynn could have given no evidence which would assist the plaintiff’s case. On the balance of probabilities, I find that the purported loan by Cynthia to the Power Gallery was not a regular loan to the Power Gallery, University of Sydney. Further, I find that Sidney Nolan did not authorise or endorse any related assertions of ownership or other conduct by Cynthia. I further find that Cynthia took deliberate steps to conceal her activities from Sidney Nolan. The defendants submit that such conduct requires or justifies the rejection of associated documents. The plaintiff submits that Cynthia’s conduct is consistent with an owner of property seeking to protect it from the demands of a spouse and to avoid marital disharmony. I consider that the documents relating to the relevant activities must be viewed with great caution, rather than rejected outright. Cynthia’s deliberate concealment of her dealings or claims in relation to those paintings from Sidney Nolan is also, in my opinion, an additional justification for caution in assessing claims by Cynthia in documents relating to other paintings. Status of Exhibition Catalogues 196 The plaintiff submitted that exhibition catalogues, particularly when prepared by reputable galleries, are likely to be accurate records of title in determining the ownership of disputed paintings. In that context, the plaintiff relied on the decision of the United States Court of Appeals for the Second Circuit, in Kunstsammlungen Zu Weimer v Grand Duchess of Saxony-Weimer, 32 in which the court referred to the attribution in a catalogue in the course of determining a dispute over the ownership of paintings. 197 In that case, it was necessary to determine which of a number of competing claimants was entitled to recover certain paintings stolen in Germany after the Second World War. Both at first instance and on appeal, it was held that early in the twentieth century, title to the paintings in question had passed from the ruling house of Thuringia to the State of Thuringia, pursuant to certain agreements. The Court of Appeal referred, in the course of its judgment, to the absence in an early twentieth century museum catalogue of any acknowledgment that the paintings were owned by the Grand Duke. It is clear that the curial determination of title did not depend on the catalogue, but on the construction of relevant agreements. The court’s reference to the catalogue appeared to fortify a conclusion it had reached on the basis of the construction of those agreements. 198 There is no indication in the judgment of the status of the museum catalogue, of the circumstances of its preparation or its probable accuracy. The catalogue was nevertheless accorded some weight in relation to the determination of ownership, but in a merely supplementary or confirmatory role. 199 For the defendants, it was submitted that exhibition catalogues do not have the status of a register of titles and that those preparing such catalogues are totally dependent, in relation to attribution of ownership, on the accuracy of the information supplied to them.

31 32

(1959) 101 CLR 298. 678 F. 2d 1150.

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Nolan v Nolan cont. 200 Following the defendants’ objections to the admissibility of his evidence, I permitted Mr Daniel Thomas to give “expert” evidence in relation to the status of catalogues, as a “convenient helper of the court”. 33 201 Mr Thomas held the position of Senior Curator of Australian Art at the National Gallery of Australia and was the Director of the Art Gallery of South Australia. He has an MA in modern history from Oxford University and decades of professional experience as a curator. 202 Mr Thomas’ evidence was to the effect that: (a) It is common practice for art galleries, public galleries, reputable commercial galleries and auction houses to take great care in relation to all matters that assist in identifying a work of art, including ownership provenance. (aa) Mr Thomas considered that the Whitechapel Art Gallery, London, the Arts Centre, New Metropole, Folkestone, Kent, the Power Gallery of Contemporary Art, University of Sydney, the David Jones Art Gallery, Sydney, and the Moderna Museet, Stockholm, were reputable galleries at the dates relevant to the present proceeding. (b) Provenance investigation of art works in Australian museums and galleries was routine by 1958 and is now standard art museum practice. (b) Galleries vary in their standards, and within an institution, the standards depend on the particular person who is preparing the catalogue. (c) Although Mr Thomas considered himself to have high standards, a catalogue that he had prepared for the Nolan Retrospective Exhibition in 1967 for the Art Gallery of New South Wales which he intended to contain a complete reproduction history, did not do so. He conceded that sometimes, errors are made in catalogues, and they are not complete or accurate. (d) Sometimes catalogues deliberately withhold the identity of the owner of paintings. It is not uncommon for the catalogue to provide that unless otherwise stated, a work comes from a private collection. (e) Catalogues are variable in the degree and extent of information they provide. (f) Catalogues are prepared in a variety of ways for a range of reasons – for example, they may contain a reproduction history of relevant works, but not an exhibition history. (g) “The compiler of the catalogue is only as good as the source of the information to the compiler”. (h) A “credit line” is the means of “crediting” ownership in some published documents (including catalogues). (i) The credit line which ultimately appears in the catalogue might not accord with the credit line the lender has requested. (j) The lender of a painting may differ from the owner. If a painting is loaned by someone other than the owner, Mr Thomas would expect that the owner might be consulted as to credit lines. (k) It was possible that a painting might be attributed in a catalogue to the collection of someone who was in long-term possession, as distinct from the absolute owner, but if the compiler were aware of an absolute or “true owner”, he or she would try to include both the owner and the custodian in the acknowledgment. 33

Per Cussen J in R v Parker [1912] VLR 152 at 160. [10.50]

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Nolan v Nolan cont. (l) Private owners may not wish to be identified for fear of burglary, so that anonymous loans or attributions to “private collection” are fairly common. Mr Thomas said that “sometimes credit lines are sort of fantasy like ‘Lent by the Melbourne/Sydney collection’ or ‘lent by some [place/name] collection’ which has no real relevance, at all. It might be the owner’s birthplace or it might be the birthplace of their favourite aunt or grandmother. Quite strange things get into credit lines which are always the owner’s preference.” (m) Sometimes mistake are made in credit lines. 203 In the light of Mr Thomas’ evidence, I conclude that although persons compiling or preparing exhibition catalogues at reputable galleries would generally endeavour to attribute ownership or other entitlements accurately, and would probably take some steps to investigate a problem or uncertainty of which they became aware, they lack the incentive, means and skills to investigate title claims forensically and routinely to identify or resolve problems in relation to title. In some cases, credit lines are not only inaccurate, but deliberately uninformative or fictional, when that is requested by the person identified as the owner. 204 I consider that the compilers of such catalogues are dependent on the accuracy of the information provided by the purported owner, who is frequently obliging a gallery by agreeing to lend a painting. I consider it likely that in the absence of cause for suspicion, compilers would make an attribution of ownership according to the instructions of a lender who asserted ownership, or in reliance on that person’s appointed or apparent agent. 205 In the context of the present case, I consider it likely that in the case of the Nolans, where (as the plaintiff asserts) Cynthia, as Sidney Nolan’s spouse, also acted as an assistant closely involved in Sidney Nolan’s work, galleries would act upon Cynthia’s information and instructions as to attribution in catalogues, unless aware that Sidney Nolan disputed them. When Cynthia dealt with galleries in relation to such matters, it is unlikely that gallery officers would seek Sidney Nolan’s independent verification of her representations. I consider that the documentary evidence of Cynthia’s dealings with Moderna Museet, on which the plaintiff relies, (discussed in detail below) is consistent with that conclusion. 206 I therefore conclude that although an attribution of ownership in a reputable catalogue provides some evidence of ownership, exhibition catalogues are in no sense equivalent to a register of title and must be approached with considerable caution, independently of the caution which is generally required in assessing claims against a deceased estate. Letters of Cynthia to Jinx Nolan 1976 207 Certain additional correspondence of Cynthia is tendered by consent. 208 The letter of Cynthia Nolan to Jinx Nolan dated May 1976 stated that Cynthia had been “for some time considering the advisability of getting a few really good large (3 x 2 ft, probably not so large!) paintings to you in America. for eg: Bird in landscape that perhaps you remember in the hall at 79 Deodar. Hare in trap came to mind … Anyway good to have the possibility of some cash some time and paintings sold in USA …” 209 On the basis of the letter, Ms Jinx Nolan formed the belief that “Hare in Trap” 1946 belonged to Cynthia. The letter does not contain, in terms, an assertion of ownership of “Hare in Trap” 1946 by Cynthia. It is equally consistent with ownership by either Sidney or Cynthia, or by them jointly, or with a promise by Sidney Nolan to make a gift in future. It is not clear whether Sidney Nolan knew of, and consented to, the tentative proposal. “Hare in Trap” 1946 was not forwarded to Ms Jinx Nolan. In my opinion, the letter throws no light on the ownership of “Hare in Trap” 1946. 210 The letter of Cynthia to Jinx Nolan dated September 1976 states, “Have arranged to air 5 pics. to Bloomer marked for Ms Jinx Nolan … They are your possessions so should not have trouble getting 238

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Nolan v Nolan cont. in … S. does not and should not know anything about them. He would simply borrow them for an exhibition and they’d not be seen again. Remember they were given to me so would only be charged on if around when/if I went up above – others will be – and many were taken back and sold by S. and I did work for him extensively for many years without any secretary etc. salary (never thought of it) and kept him going often (all this for your conscience, not mine).” 211 The letter of September 1976 does not identify the paintings which Cynthia had arranged to send to Ms Jinx Nolan. The letter casts no light on the ownership of any of the paintings the subject of the present proceeding. Ms Nolan gave evidence that she received the five paintings, which included four paintings by Sidney Nolan different from those the subject of this proceeding. 212 The letter does, however, constitute an assertion of ownership by Cynthia to the unidentified paintings. Further, Cynthia asserts that Sidney Nolan had “given” her paintings in the past but “many were taken back and sold by S[idney]”. The letter discloses that Cynthia required her actions to be concealed from Sidney Nolan [“S does not and should not know anything about them”] in order to prevent such a retraction. [“He would simply borrow them for an exhibition and they’d not be seen again.”] 213 The plaintiff submits that this letter is not inconsistent with Cynthia’s ownership of the paintings. It is contended that although a party to a marriage may own property and have a clear legal entitlement to deal with it, such dealing may give rise to disharmony in the relationship. In such circumstances, it is said that secret dealings may be consistent with Cynthia’s “attempting to protect her ownership of the works from her husband”. 214 The defendants, on the contrary, submit that the letter constitutes an implicit acknowledgment by Cynthia of Sidney Nolan’s right to “take back” paintings. 215 In my opinion, the letter is consistent with a number of different possibilities. It is consistent with Sidney Nolan having, on occasion, expressed words of gift in relation to certain paintings, or otherwise manifested a donative intention to Cynthia, but retaining control of, and continuing to assert rights over, the paintings, disposing of them as absolute owner contrary to Cynthia’s wishes. 216 There are several other possibilities. Sidney Nolan may have promised to make a gift in future, or gifted a limited interest with a reserve of rights to himself, such as to exclude an intention to transfer absolute ownership to Cynthia. Sidney Nolan may have expressed equivocal words, which Cynthia interpreted as words of gift but which Sidney Nolan interpreted differently. Additionally, or alternatively, he may have spoken words of gift but made no delivery of possession to Cynthia. Clear and absolute words of gift are ineffective to constitute a complete gift if delivery is wanting. The donor may retract the purported gift at any time prior to delivery. A further possibility is that Sidney Nolan reclaimed valid gifts which he had made to Cynthia. 217 It is unnecessary for me to make a finding on whether Sidney Nolan, on occasion, promised to make gifts but failed to fulfil his promise; or expressed words of gift but failed to complete the gift by delivering possession to Cynthia; or made valid gifts and Cynthia subsequently acquiesced in their retraction. It is sufficient, in the present context, to observe that Cynthia’s readiness to deal with paintings behind Sidney Nolan’s back, her consciousness of the insecure status of some “gifts” which, in her view, Sidney Nolan failed to recognise or honour and her willingness to address that problem by a measure of secretive self-help, constitute added reasons for strict scrutiny and a cautious approach. … Conclusion on Donative Intention - “Italian Crucifix” 1955 402 From the above it follows that, in my opinion, the documents relied on by the plaintiff do not contain, in terms, an unequivocal statement made, or alternatively approved, by Sidney Nolan to the effect that he was making or had made an gift of “Italian Crucifix” 1955 to Cynthia or acknowledged [10.50]

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Nolan v Nolan cont. it to be her property. For reasons discussed above, I do not consider ascription to a collection in an exhibition catalogue as tantamount to an acknowledgment of absolute ownership. Further, the principal formal assertions of Cynthia’s ownership or ascriptions to her collection are either certainly made by Cynthia herself or possibly made by Cynthia, rather than Sidney Nolan, or made on the basis of information which was, or may have been, supplied by Cynthia or persons other than Sidney Nolan. … Conclusion on Donative Intention - “Hare in Trap” 1946 426 In my opinion, the documents relied on by the plaintiff do not contain an unequivocal statement made, or alternatively approved, by Sidney Nolan to the effect that he was making or had made gift of “Hare in Trap” 1946 to Cynthia or acknowledged it to be her property. … Conclusion on Donative Intention - “Royal Hotel” 1948 455 Having exercised the required scrutiny and caution in assessing the documents and statements, I am unable to conclude that they evidence words of gift or an unequivocal acknowledgment of Cynthia’s ownership of “Royal Hotel” 1948 by Sidney Nolan. … Delivery 457 As I have found that the plaintiff has not established words of gift or the requisite donative intention in relation to any of the three paintings, it is unnecessary to consider the further requirement of delivery. However, for the sake of completeness I do so. 458 Delivery in the present context does not function merely as evidence of donative intention. It is the legal act essential to complete the gift. It transfers both possession and (by perfecting the gift) ownership of the chattel to the donee. Accordingly, a valid delivery marks the termination of the donor’s dominion. A continuation of control or power in the donor is inconsistent with a valid delivery and hence inconsistent with a perfect gift. 459 This was well-expressed in Young v Cockman 34 a decision of the Maryland Court of Appeals, in which Delaplaine J, delivering the judgment of the court, observed: To make an effectual delivery the donor must not only part with possession of the property, but must relinquish all present and future dominion and control over it beyond any power on his part to reclaim it. It is obvious that a transfer is not a transfer of possession unless the transferor intends that it shall take effect immediately. If he retains the same control over the propery that he had before the transfer was made, there remains a locus poenitentiae, in which he may revoke what he has done, and consequently there is no delivery. 35 460 It is well-established that delivery may be actual (by way of manual or physical transfer of the goods), 36 or constructive. 37 Constructive delivery may take various forms. Where the nature or bulk of the goods renders manual delivery impossible or impractical, acts falling short of manual delivery have been held sufficient to signal a change in possession. 38 34 35 36 37 38

149 ALR 1006. Ibid, at 1010. Re Everett; Executor Trustees and Agency Company of South Australia v Everett [1917] SASR 52 at 58; Olsson v Dyson (1969) 120 CLR 365 at 385. Re stoneham; Stoneham v Stoneham [1919] 1 Ch 149 at 156. Winter v Winter (1861) 4 LT 639; Rawlinson v Mort (1905) 93 LT 555.

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Nolan v Nolan cont. 461 A further form of constructive delivery occurs when the donee is already in possession or, according to some authorities, when the donee already has custody, of the chattels. 39 Delivery can also occur after the manifestation of intention, or (in the usual case) contemporaneously with it. 40 462 As the gift can be retracted at any time prior to delivery, where delivery takes place subsequently, it would be necessary to establish that the previously expressed donative intention was still on foot when delivery occurred. 463 Alternatively, it would be necessary to establish that the chattels were already in the possession (or at least the custody – see discussion below) of the purported donee at the time when the words of gift were expressed or donative intention was otherwise made manifest. 464 Where possession of the chattels by the intended donee precedes the words of gift, the gift may be perfected without the necessity for the donor to retake possession of the chattels in question in order to effect a valid delivery. In Re Stoneham; Stoneham v Stoneham, 41 the chattels in question were already situated in a house occupied by the donee when the donor spoke the words of gift. Laurence J, having reviewed Cochrane v Moore, 42 held that where the chattel the subject matter of a parol gift is already in the possession of the donee at the time when the gift is made, a further delivery or a change of possession is unnecessary. Rather, “in order to constitute a perfect gift by word of mouth of chattels capable of delivery the donee must have had the chattels delivered into his possession by the donor or by someone on his behalf. In principle, I can see no distinction between a delivery antecedent to the gift and a delivery concurrent with or subsequent to the gift. Nor can I see any reason in principle why the rule should not apply to a case where chattels have been delivered to the donee before the gift as bailee or in any other capacity, so long as they are actually in his possession at the time of the gift to the knowledge of the donor”. 43 465 Laurence J reaffirmed the requirement of a delivery and, in the case of antecedent possession by the intended donee, appeared to assume that a delivery to the donee whether “as bailee or in any other capacity” had already occurred. Delivery in Common Establishments 466 The question of how delivery of household goods or chattels is to be validly effected between spouses or other cohabitants in a common establishment poses special difficulties. The determination of whether an establishment is “common” is a question of fact. 44 There is no reason why the concept should be restricted to particular categories of social or familial relationships. 467 The National Trustees Executors and Agency Company Limited v O’Hea 45 is an early Victorian decision dealing with a purported gift from employer to employee within a shared establishment. The deceased, when close to death, stated clear words of gift of his coach and horses to his servant, the coachman. There was no doubt that the deceased intended to make a gift. However, no change in possession occurred. The coach and horses continued to be maintained at the deceased’s premises. 468 A’Beckett J found that the requirement of delivery was not satisfied. Although delivery could be antecedent, in the present case, although the servant had actual possession, it was not possession as a 39 40 41

Horsley v Phillips Fine Art Auctioneers Pty Ltd (1999) 7 BPR [97557[ at 14,367. Re Stoneham, supra, at 153-154. [1919] 1 Ch 149.

42

(1890) 25 QBD 57.

43 44 45

In Re Stoneham; Stoneham v Stoneham, supra, at 153-154. Horsley v Phillips Fine Art Auctioneers Pty Ltd (1996) 7 BPR [97557] at 14,370. [1905] 29 VLR 815. [10.50]

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Nolan v Nolan cont. bailee, but legally, was the possession of the donor, his master. 46 Further, nothing was done which would indicate a change in possession. “It could not be said that the [donor] had at any time made delivery to his coachman of any of the chattels which were in his custody at the time when they were given to him, or that the custody differed from the ordinary custody by a servant of his master’s goods. When things are in such custody I hold that there can be no effectual gift of them by the master merely telling the servant that he may keep them as his own.” 469 In requiring delivery, A’Beckett stated, “It would be dangerous to relax a rule which requires some visible act as an essential, when the only other essential is that certain words should be spoken.” 47 470 The question of delivery between spouses in a common establishment was considered in Re Cole – (a Bankrupt) Ex p. The Trustees v Cole. 48 In that case, a husband purchased a house as a family home, equipped it with valuable furniture and introduced his wife to the house, escorting her through the house indicating items and stating, “Look, it’s all yours”. The spouses continued to reside together in the house. 471 On the husband’s subsequent bankruptcy, the trustee in bankruptcy claimed entitlement to the house contents. The wife contested that claim, on the ground that she was the beneficiary of a valid gift. 472 Cross J, at first instance, held that there was a valid gift, observing, “I do not see what more Mr Cole could have done to put Mrs Cole into possession of the gift which he thought he was making”. 473 On appeal, the Court of Appeal held that there was no valid gift. Harman LJ observed: It is, I think, trite law that a gift of chattels is not complete unless accompanied by something which constitutes an act of delivery or a change of possession. The English law of the transfer of property, dominated as it always has been by the doctrine of consideration, has always been wary of the recognition of gifts … in the absence of consideration, delivery is still necessary, except in the cases of a gift by will or by deed, which latter itself imports both consideration and delivery. 49 474 Reviewing applicable authorities, Harman LJ, although recognising that delivery could be constructive and could accompany, precede or antecede the gift, held that delivery was necessary in every case of a parol gift inter vivos. 475 Relying on Bashall v Bashall, Harman LJ emphasised that the requirement of delivery was as essential in a case of husband and wife as in a case of two strangers. He considered that in such a case, although small items, such as jewellery could readily be delivered, in the case of voluminous or unwieldy items, the requirement of delivery, (which must be more than words or the mere introduction of a wife to a matrimonial home in which the chattels were situated), could be difficult. He considered that the wife’s usage of, or access to the chattels, would not suffice. 476 Harman LJ held that there was no change in possession in Re Cole. He observed that “it is true that it may be doubtful who is in possession of the furniture and that you must look to the title.” 50 477 Pearson LJ, observed, “it has been established that oral words of gift or even written words of gift not embodied in a deed or will, are not sufficient to make an effective gift unless there has been or 46

Ibid, at 825.

47

Ibid, at 825.

48

[1964] Ch 175.

49

Ibid, at 185.

50

Ibid, at 190.

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Nolan v Nolan cont. is delivery of possession to the donee. The basic idea is that there must be giving and taking, and if the donor retains possession, has not yet given and the donee has not yet taken”. 478 Pearson LJ also took the view that in the case of a husband and wife living together or other persons having a common establishment, the possession, as it would otherwise be doubtful, is attached by law to the title. 51 479 Pearson LJ concurred with Harman LJ and Pennycuick J in holding that applicable authority required delivery in the case of husband and wife within a common establishment, endorsing the statement in Bashall v Bashall 52 that in the case of delivery between spouses, “if the facts proved were equally consistent with the idea that he intended to deliver the thing to the wife so as to be her property, and with the idea that he intended to keep it as his own property then the wife failed to make out her case”. 53 480 As such, Pearson LJ observed that delivery must be an act which in itself shows an intention of the donor to transfer the chattel to the donee. “If the act is in itself equivocal – consistent equally with an intention of the husband to transfer the chattels to his wife or with an intention on his part to retain possession but give to her the use and enjoyment of the chattels as the wife – the act does not constitute delivery”. 54 481 His Lordship noted that in the case before him, there was no pre-existing possession in the donee prior to any words of gift and the acts relied on, being equivocal in the relevant sense, did not satisfy the requirement of delivery. 55 482 If Lord Pearson’s approach be correct, although delivery is not merely evidence of intention to make a gift, but rather an integral component of the gift transaction, it is nevertheless necessary that the act of delivery unequivocally evidence the donor’s intention to transfer, and not retain, possession of the chattel in question. 483 Interestingly, Pennycuick J expressed himself as constrained by authority rather than persuaded as a matter of principle to hold that an act of delivery was required when one spouse spoke words of gift to the other spouse, who was already sharing the physical enjoyment of the relevant chattel. 56 His Honour’s approach appears to foreshadow that of Santow J in Horsley v Phillips Fine Arts Auctioneers Pty Ltd, discussed below. 484 The peculiar problems posed by spouses or other cohabitants in a common establishment have received recent consideration in two Australian cases, which evince differing and perhaps irreconcilable approaches. 485 In Horsley v Phillips Fine Art Auctioneers Pty Ltd, 57 Santow J questioned the authority of Re Cole. His Honour held that where chattels are situated in a residence of which the intended donee is occupier or titleholder, and there is no shared control of the chattels, the chattels may be regarded as being in the pre-existing possession, or at least the custody, of the donee, and subsequent words of gift may suffice to perfect the gift, without any requirement for the donor first to retake possession or to execute a deed. His Honour’s observations also evinced an expansive approach to delivery, suggesting that prior custody by a donee in a common establishment may suffice. 51 52 53

Ibid, at 192. (1894) 11 TLR 152 at 153. Re Cole, supra, at 192.

54 55 56 57

Ibid. Ibid. Ibid, at 193. BC 950 5362 SC NSW, Santow J, 31 July 1995, 5 September, 1995. [10.50]

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Nolan v Nolan cont. 486 In Horsley v Phillips Fine Art Auctions Pty Ltd 58 a credit corporation which seized certain valuable household chattels as assignee of a bill of sale resisted a cross-claim for conversion on the grounds that the cross-claimant had, inter alia, divested himself of that interest by joining with his brother in an effective gift of their half interests in the chattels to their mother, prior to the granting of the bill of sale from which the credit corporation purportedly derived title. 487 The brothers (who held joint title to the chattels in question) occupied a very large mansion property with their parents. The cross-claimant occupied a separate cottage and his brother, although residing within the main house with the parents, occupied a separate suite. Santow J held that the arrangement did not constitute a “common establishment”. 488 The relevant furniture was kept in those parts of the main house which were under the control of the parents, so that if the brothers used the rooms they did not do so “as co-possessors with their parents, but by leave of their parents; though no doubt their access was in practice untrammelled”. 59 Santow J accepted the cross-claimant’s evidence that the brothers “did unequivocally state to their mother that they were gifting the furniture to her and had the celebratory drink”. 60 489 His Honour considered that the cross-claimant probably walked around the various items of furniture, but was unable to determine whether he was accompanied by his mother or brother, or, if his mother accompanied him, whether he placed his hand on the items, although he did not hand anything to his mother. 490 Santow J concluded that a valid gift of the chattels had been effected. In that context, he relied upon the principle that further delivery is unnecessary if the intended donee “already had possession or at the least custody of the chattels at the time of the words of gift”. 61 491 His Honour discussed the distinction between legal possession (animus possidendi and a degree of physical control sufficient to exclude strangers from interfering) and mere custody (de facto possession or mere physical control). He referred to Flinn v White 62 in which words of gift by a father to his daughter in relation to a piano, which remained throughout situated in the family home of which the father was occupier, were held to be ineffective, for want of pre-existing possession or custody in the donee, or a further act of delivery. 492 Santow J questioned whether, although the daughter had “no more than a licence, revocable by the father at will” to use the piano, she did not in fact have custody. In his view, “status as a licensee, as such, need not be fatal; a licensee can have the degree of physical control required for custody”. 63 His Honour found, however, that the decision could, in any event, be justified by reference to onus. The daughter had not dispelled the implication of her having only limited access, a right to use the piano at the father’s pleasure, which was shared with at least one other family member. More directly relevant were Hislop v Hislop 64 and Re Cole which involved a purported gift between husband and wife residing together in the matrimonial home. Santow J considered the results in Hislop v Hislop and Re Cole were explicable because joint de facto control of the furniture, (based on being permitted to use and enjoy it) did not suffice to establish pre-existing possession. 493 In Horsley v Phillips Fine Art Auctioneers Pty Ltd, Santow J held that the intended donee, the mother, had (jointly with her husband) physical control and therefore custody of the chattels. On one 58 59 60 61 62 63 64

Ibid. Ibid, at 192. Ibid. Horsley v Phillips Fine Art Auctioneers Pty Ltd, supra, at 10. [1950] SASR 195. Horsley v Phillips Fine Art Auctioneers Pty Ltd, supra, at 12. [1950] WN Eng 125.

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Nolan v Nolan cont. view, she also had exclusive possession of the house and therefore of the rooms in which they were situated. The fact that the mother had such custody or possession jointly with her husband was, in his view, irrelevant. 494 On Santow J’s findings, there was no joint custody or possession between the putative donors and donee. Although not deciding the question, Santow J was inclined to think that shared control between a putative donor and donee should not be fatal. He observed: This is especially where there is no suggestion of shared control between putative donor and donee. I do not need to decide whether the feature, absent here, should be fatal to an effectual gift, though I am inclined to think it should not be fatal. 65 495 In Horsley v Phillips Fine Arts Auctioneers Pty Ltd, Santow J questioned the authority of Re Cole and Hislop v Hislop because the cases failed to deal with custody as a separate basis from possession. His Honour considered that, “They appear to have proceeded on an implicit, and I suggest, questionable assumption. That is, that where goods are in the shared use of the putative donor and donee, but where the putative donor has the superior right to those goods through ownership of the home in which kept [sic] that necessarily precludes a finding of custody on the part of the claimant donee”. 66 496 Santow J’s observation may suggest that the purported donors in Re Cole and Hislop v Hislop had de facto mixed possession, but a superior right to the goods, not because they had legal ownership of the goods, but because they had legal title to the house in which they were situated. However, the reference to “possession following title” in those cases related to the title to the chattels, not title to the residence in which they were situated. 497 Horsley v Phillips Fine Art Auctioneers Pty Ltd did not concern a common establishment or a situation of shared control and Santow J’s observations were therefore obiter dicta. 498 In Tudberry v Sutton, 67 a case decided after Horsley v Phillips Fine Art Auctioneers Pty Ltd, Judge McGill SC strongly reaffirmed the primacy of the requirement for an identifiable act of delivery. He considered that recognised exceptions based on prior possession or custody should not be extended. In Tudberry v Sutton, the deceased’s sister and her family resided in his house, visiting from interstate, while he was gravely ill in hospital. The sister gave evidence that her brother expressed an intention to make an immediate gift of a memento to her children (his niece and nephew). The sister selected and named two paintings in her brother’s house, informed him, and he appeared to nod assent. The sister then removed the paintings from the brother’s residence. The brother subsequently died. 499 Judge McGill SC held that there was no valid gift. He adverted to the necessity for the donor to give, rather than the donee to take, possession. 68 He questioned the status of Thomas v Times Book Co Ltd, which he identified as the only decision in which the taking of possession by the donee had been upheld. He considered that if it correctly decided that an effective delivery had occurred, such delivery was effective not because the donee took possession with consent, but because, on proper analysis, the custodian of the place where Thomas had mislaid the manuscript gave it to the donee in the

65 66 67 68

Horsley v Phillips Fine Art Auctioneers Pty Ltd, supra, at 15. Ibid, at 12. (1998) 20 Qld Lawyer Reps 13. Ibid, at 15. [10.50]

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Nolan v Nolan cont. capacity as the bailee of the donor. Nevertheless, Judge McGill S.C. concluded that, taken at face value, the decision in Thomas v Times Book Co Ltd is “simply wrong and is an example of a hard case making bad law”. 69 500 Judge McGill SC considered that Santow J’s unqualified extension of prior possession to prior custody in any capacity at all in Horsley v Phillips Fine Art Auctioneers Pty Ltd failed to accord with the tenor of applicable authority and with the underlying governing principle that delivery is the formal step which effects the gift. 501 He considered that the only case where mere custody, as distinct from possession, is legitimately within the exception would be where the donee is in the degree of physical control that would otherwise require the donor first “to retake” the chattels. 70 That would have been the case in both Re Stoneham and Horsley v Phillips Fine Art Auctioneers Pty Ltd, as the donees were in exclusive occupation of the residences in which the chattels were situated. It would not be the case where the donor and donee occupied a common establishment and where there was only “such custody as is afforded by actual use from time to time”. 71 In such cases, mere words of gift unaccompanied by any further act of delivery would not suffice. Some manual or constructive act of delivery would be necessary “unless the donee already has ‘such a degree of possession that there would have to be re-delivery before there could be delivery’.” 72 On that basis, Re Cole was correctly decided. 502 In reiterating a preference for continued observance of the strict requirement of delivery, and confining the exception of pre-existing possession to strict limits, Judge McGill SC noted “I suspect that part of the reason for the survival of the rule in its strict form has been a desire to prevent a deathbed gift inter vivos or donatio mortis causa from evading statutes which require wills to be made in a particular form, coupled with a general suspicion as to the genuineness of claims of oral gifts from persons who were either unable to dispute them (because they were dead) or happy to connive at them (because they were bankrupt)”. There is, however, in my opinion, no justification for relaxing these rules. 73 503 Judge McGill SC held that the temporary residence of the deceased’s sister as a guest in his house did not confer custody of the premises or the chattels therein, although the owner was temporarily absent. The exception did not apply, because re-delivery to the donor was not necessary in order to complete the gift. 74 504 In my opinion, there is force in Judge McGill S.C.’s insistence on maintaining delivery as a pre-eminent independent requirement. In the absence of an unambiguous act, the enforcement of voluntary transfers against donors and their successors in title could produce unjust outcomes. That approach does, on occasion, result in the failure of some purported gifts which were genuinely intended. However, greater harm may result from undue relaxation of the delivery requirement, particularly in the context of common establishments. A proliferation of claims between cohabitants, trustees in bankruptcy and executors, together with increased uncertainty in the determination of such claims, may result. In my opinion, the principles expressed in The National Trustees Executors and Agency Company Limited and Re Cole should be maintained. 69

70

Ibid. It is possible to view Thomas v Times Book Co Ltd as an example of constructive delivery by the donor, whose provision of information on the whereabouts of the mislaid manuscript conferred access on the donee to the extent possible in the circumstances. Ibid, at 18.

71

Ibid, at 19.

72

Ibid.

73

Ibid, at 17.

74

Ibid, at 19.

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Nolan v Nolan cont. 505 In the present case if, contrary to my findings, the relevant documents expressed Sidney Nolan’s clear donative intention or acknowledgment of Cynthia’s owernship, the plaintiff must also establish a delivery of the paintings. 506 There is no direct evidence of any act of delivery, whether manual or constructive, by Sidney Nolan to Cynthia. 507 In the present case, it is undisputed that Sidney Nolan and Cynthia occupied a common matrimonial home during the course of their marriage. 508 The question arises whether there is any basis on which the plaintiff can discharge the onus of establishing delivery. 509 As set out in paragraphs 43 to 46 above, there is no evidence that the paintings in dispute were situated in the Nolans’ matrimonial home during the course of their marriage. 75 Other than for the period from 1974 to mid 1976 (in relation to “Hare in Trap” 1946 and “Italian Crucifix” 1955) and the periods of the relevant exhibitions, there is no evidence as to where the paintings were situated. 510 Further, other than for the period from 1974 to mid 1976 there is no evidence of Cynthia’s level of access to, or power, rights of user and control over, any of the paintings in dispute. 511 Given such lacunae, the liberal approach of Santow J in Horsley v Phillips Fine Art Auctioneers Pty Ltd to pre-existing custody in a common establishment, even if extended, cannot assist the plaintiff to establish delivery in the present case. 512 There is no evidence that Cynthia was, at any stage, in possession of “Royal Hotel” 1948. There is evidence that Cynthia caused 26 paintings including “Hare in Trap” 1946 and “Italian Crucifix” 1955 to be despatched to Australia in 1974 and that she exercised control and dominion over “Hare in Trap” 1946 and (probably) “Italian Crucifix” 1955 until at least June 1976. 513 Cynthia at that time took possession of the paintings in question and assumed the rights of an owner in relation to them. There is no evidence that Sidney Nolan delivered possession to Cynthia. On the contrary, he did not know of, or consent to, her actions. If, contrary to the views expressed in Tudberry v Sutton, a valid delivery may be established by the donee’s taking possession with the knowledge and consent of the donor, that did not occur in the present case. Unauthorised appropriation by the purported donee could not constitute a valid delivery on any view. In the circumstances, the plaintiff has failed to establish the essential element of delivery. Conclusion 514 In this proceeding, the cases for the plaintiff and the defendants have been clearly presented and well-argued. For the reasons set out above, in my opinion, the plaintiff has failed to establish the requisite elements of donative intention and delivery in relation to the three paintings. I conclude that a valid gift of the paintings to Cynthia, on which the plaintiff’s claim to relief in this proceeding depends, is not made out. Notes [10.53] The unsuccessful plaintiff appealed against the judgment of Dodds-Streeton J. The Victorian Court of Appeal (Nolan v Nolan [2004] VSCA 109) dismissed the appeal on the basis that the plaintiff’s claim to the paintings had been statute barred. However, Chernov and Eames JJA, Ormiston concurring in this regard ([2]), stated that Dodds-Streeton J had erred in failing to assess the evidence as a whole in respect of whether Sydney Nolan had made a gift of the painting to Cynthia Nolan. Their Honours said at [137]-[138)]: 75

Mr Danziger-Miles’ evidence was to the effect that “Italian Crucifix” 1955 was in the house at some stage, but no date was given. [10.53]

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Nolan v Nolan cont. At the conclusion of her examination of each of the documents pertaining to “Italian Crucifix”, her Honour said: “From the above it follows that … the documents relied on by the plaintiff do not [establish a gift by Sidney Nolan of Italian Crucifix or an acknowledgment by him that it was Cynthia Nolan’s property]”. In our view, however, her Honour’s reasons make it apparent that she came to this conclusion on the basis of her “above” assessment of each document and not on the basis of the totality of the evidence. Contrary to the approach that should be adopted in analysing evidence of this nature as explained by the authorities to which we have referred earlier, her Honour assessed each document in isolation “as though running through items on a check list”. (footnote omitted) Although the above examples of her Honour’s approach relate to “Italian Crucifix”, her Honour’s analysis of the documents pertaining to “Hare in Trap” and “Royal Hotel” suffer from the same vice. Her Honour’s failure to consider the whole of the evidence relating to the respective paintings for the purpose of determining whether, on the balance of probabilities, Sidney Nolan acknowledged their ownership by Cynthia Nolan and whether, in all the circumstances, the inference could be drawn that he had made an absolute gift of them to Cynthia Nolan, amounted to a fundamental error which vitiated her conclusion that the appellant had not established her case. It is at least arguable that, if the evidence were looked at as a whole it is open to conclude that Sidney Nolan had made the acknowledgment contended for by the appellant and further, that he had made an absolute gift of the three paintings to Cynthia Nolan. In the circumstances, but for the conclusion we have reached concerning the statute of limitations, her Honour’s decision would have to be set aside and a new trial ordered. Given that conclusion, it becomes unnecessary to consider the appellant’s other grounds on which she challenges her Honour’s decision.

Public Trustee v Bussell [10.55] Public Trustee v Bussell (1993) 30 NSWLR 111 COHEN J. The Public Trustee is the administrator of the intestate estate of Alfred Ronald Staples who died on 10 January 1989. In this amended summons the plaintiff seeks declarations that each of the shares set out in schedules to the summons forms part of the estate of the deceased and that the plaintiff as administrator is entitled to be registered as holder of the shares. Those shares are in a number of companies and they are registered in the name of the deceased. Some were issued after his death and rights arising out of other shares were sold. This does not affect the general principles which arise in the proceedings and which relate to the main part of the shares. The defendant in his amended cross-claim seeks a number of declarations and orders. First, he seeks to have it declared that the shares set out in the schedule, and all accretions thereto, are the absolute property of the cross- claimant and an order is sought that the plaintiff execute appropriate transfers of those shares. A further declaration is sought that the cross- claimant is entitled to damages arising out of a breach of an agreement by the deceased that he would make a will leaving to the cross-claimant all of his estate. Alternatively it is claimed that the cross-claimant is entitled to prove as a creditor of the estate for an amount equal to the value of the shares, or as a further alternative, for an amount equal to the whole of the value of the estate. Effectively, the defendant claims that there was an agreement under which the deceased promised to leave to the defendant the whole of his estate, but he failed to make any will to give effect to that promise; independently of that claim the defendant relies upon a donatio mortis causa of the shares by virtue of the share certificates having been handed to him by the deceased. The defendant, who was born in July 1924, first met the deceased in 1939. They became friends and remained so for the whole of the deceased’s life. In 1947, as the result of a car accident, the 248

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Public Trustee v Bussell cont. deceased suffered an injury which left him semi-paralysed in the left arm. After that the defendant used to make his car available for the deceased’s transport. They used to go out together to activities such as films, rugby league football and on a regular basis to the Marrickville Bowling Club. Although the deceased played bowls on occasions until about 1975, he and the defendant went to the club each day on a social basis. The evidence makes it clear that the defendant was the deceased’s closest friend and it would seem that the deceased had no relatives. In about 1987 or 1988, the deceased was admitted to hospital and on discharge he was apparently weaker and had difficulty in moving around. The defendant then commenced to do the deceased’s shopping for him. About four months before his death his condition was diagnosed as being a form of lung cancer. Dr Sloane, who was treating him, has given evidence that they had a number of discussions about the deceased’s financial position and about his health. About two weeks before his death the doctor told him that he was suffering form a terminal illness and that he would probably die in the near future. Dr Sloane expressed concern about the care of the deceased, as he lived alone and could not look after himself. The deceased said that he had things organised, and that the defendant would look after him and he would look after the defendant. The doctor said that he discussed with the defendant on several occasions the fact that he did not have long to live. The defendant has given evidence of occasions from 1970 until late 1978 when the deceased made various statements about his assets or his intentions. Because these relate to the claim of an agreement to execute a will I should set out what those various statements were. One, in 1970, was: “You can have the shares when I die. You look after me and no one else does.” In 1980 he said to the deceased, in relation to some shares which he intended to buy: “You’ll be getting them when I die.” In about 1982 the deceased said: “I’ll look after you because you look after me.” In 1988, at the deceased’s home, he said to the defendant: “When I die I’m going to leave everything to you because of how you look after me.” Finally, in about December 1988, shortly before his death, he said to the defendant: “I’m going to leave everything to you. I don’t have any family.” On Saturday, 7 January, the defendant, with two other friends, Mr Clark and Mr Hamshere, went to visit the deceased at his home. He appeared to be very weak, he was dressed in his pyjamas and was sitting on the edge of his bed. The defendant in cross-examination said that they arrived at the house at about 4 pm. In the course of the conversation the deceased went to a cupboard in his bedroom, took out an envelope and handed it to the defendant. He said to him: “You may as well take these shares now and I’ll have them transferred over.” The envelope contained share scrip for most of the shares which are the subject of these proceedings. It also contained some handwritten notes which are in evidence. They set out details of the dates of purchase and allotment of shares and particulars of dividends paid over a period of years. The defendant said that shortly before he left the house that day, between 6 pm and 7 pm, the deceased said to him that he had arranged for his solicitor to come on the following Monday so that he could make a new will. He asked the defendant whether he would also be there. A time, which is thought to have been about 2 pm, was nominated. The defendant went to the deceased’s house on Monday, 9 January and noticed that he did not look well. The deceased said that the solicitor could not come to the house that day but would be coming on the following morning. He asked the defendant if he would return the next day at noon. When the defendant went to the deceased’s house on the following day he found that he had died. The evidence of the conversation concerning the handing over of the share scrip and certificates was corroborated in the affidavits of Mr Clark and Mr Hamshere. They were long-standing friends of the deceased through the Marrickville Bowling Club and during 1988 they used to visit the deceased at his home on Saturdays on a regular basis. Mr Clark said that during the visit on 7 January he saw the deceased hand an envelope to the defendant and there was some discussion. The deceased said: “I’m giving you the certificates now Mick, as the solicitors are [10.55]

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Public Trustee v Bussell cont. coming down on Monday to make my will.” Mr Hamshere gave similar evidence, to the effect that the share certificates were referred to and it was said that someone was coming down to the house so that the deceased could make his will. In cross-examination the defendant did not recall that the deceased had said that the defendant might as will take the share certificates and he would have them transferred on Monday when the solicitor arrived, nor that the deceased spoke of the solicitor coming to make the will immediately after the handing over of the share certificates. He agreed with the suggestion that the reference to the solicitor coming on Monday was part of the conversation during which the envelop was handed over. In re-examination however he said that the request to return on the Monday, because the solicitor would be calling, would have been shortly before the defendant left the deceased’s house between 6 pm and 7 pm. He was not asked at what time the shares were handed over although the affidavit suggests strongly that this had occurred soon after the visitors arrived at the house. In claims such as this, where a party to the proceedings is alleging acts or conversations by a deceased which cannot be answered, the Court must look with great care at the evidence before accepting it. Mr Clark and Mr Hamshere were not cross-examined and I am quite satisfied that the deceased handed over to the defendant the envelope containing all of the share certificates which he had in his possession and which represented nearly all of the shares which he then owned. I have seen and heard the defendant and I am satisfied that he has given an honest and accurate account of the conversations which he had with the deceased and the events of 7 January 1989. The issues which arise in these proceedings are whether those and earlier conversations and events amount to an agreement by the deceased that he would leave to the defendant the whole of his estate or, alternatively, whether the handing over of the share certificates amounted to a donatio mortis causa. The defendant relies on the various parts of conversations which I have set out above as indicating an intention of the deceased to leave all of his assets to the defendant in return for the defendant continuing to look after him. It was submitted that the deceased had regarded the arrangement as a reciprocal bargain and that this was confirmed by his conversation with the doctor, when he said that the defendant would be looking after him at his home, by his intention to make a will on the day of his death and by what he had said on various occasions as to his intentions to leave everything to the defendant. I am unable to find in the conversations evidence of an agreement whereby, in return for services to be rendered to the deceased by the defendant, the deceased promised that he would leave to the defendant the whole of his estate. The conversations of 1970, 1980 and 1982 indicate an intention on the part of the deceased to leave his shares, or in one case, shares which he was anticipating purchasing, to the defendant, by a means not specified but which might reasonably be assumed to be under a will. The indication was no more than one of intention and in my opinion does not embrace any contractual term. Similarly, the 1982 conversation was no more than an indication of intention to provide for the defendant in some unspecified way because of what the defendant was doing for the deceased in caring for him. The same might be said of the two conversations in 1988. In none of these can there be spelt out a promise to leave either shares or part or the whole of the deceased’s estate in return for a promise by the defendant to look after the deceased in some unspecified manner. In my opinion there is no evidence of any consideration passing by way of a promise by the defendant, whether express or implied, that he would continue to look after the deceased by way of care in the house as the basis for receiving the deceased’s estate. The evidence, which I accept, undoubtedly indicates that the deceased intended to provide in a will for the defendant in gratitude for the friendship and help which the defendant had given to him over many years. In particular the defendant had acted as a close friend might well do in going on holidays and outings with the deceased and in driving him to sporting events and social activities at the club. There was no need before 1988 for the deceased to be looked after in his home and there was no 250

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Public Trustee v Bussell cont. suggestion that the consideration flowing from the defendant was a promise to remain a friend and to carry out those same acts of friendship. When the conversations in 1988 took place the defendant had extended his friendly acts by helping with the shopping and checking on the deceased’s welfare by calling regularly at his home. Even then, there was no promise given by the defendant to continue to do this, although the two may well have assumed that this would happen. I cannot spell out of these conversations any contract which would have been binding upon the deceased. He was continuing to say what he intended to do, but he was not asking for anything to be done by the defendant in return for that. Reliance was placed upon what he had said to the doctor, namely, that the defendant would look after him in the house and he would look after the defendant in some unspecified way. A contract cannot be created out of a conversation of this nature with a third party. It does provide some evidence of the intentions of the deceased but without evidence of the creation of a contract, there is nothing of a contractual nature which that conversation could seek to support. In my opinion the claim for damages for breach of contract must fail. There are three essential matters required to constitute a donatio mortis causa. They are: (1) the gift must be made in contemplation of the donor’s death, although not necessarily in expectation of death; (2) there must be delivery of the subject matter of the gift to the donee or a transfer of the means or part of the means of getting at the property, or, as has been said, the essential indicia of title; and (3) the gift must be conditional upon it taking effect on the death of the donor, being revocable until that event occurs: Harneiss v Public Trustee (1940) 40 SR(NSW) 414 at 416-417; 57 (WNNSW) 157 at 157-158; Dufficy v Mollica [1968] 3 NSWR 751 at 758; Sen v Headley [1991] Ch 425 at 431. It was accepted by the plaintiff that the first condition has been satisfied because of the evidence that the deceased was aware that because of his condition he had only a limited time to live. The plaintiff however disputes that either of the second or third conditions has been satisfied. It was submitted that there must be delivery of the subject matter of the donation or something amounting to that. Where physical delivery is impossible, as in the case of a chose in action, then there must be delivery of the essential indicia of title, as opposed to evidence of title. It was submitted that a share certificate is not a title but mere evidence of what is shown in the share register as the shareholding. It would be necessary to have an executed transfer, which, both under the articles of association of the various companies and under the Companies (New South Wales) Code or Corporations Law is essential for the purpose of putting the shares into the name of another person. As to the third requirement, it was submitted that it could not be implied that there was a conditional gift, but that the handing over of the shares was merely part of the indication that the deceased intended making a will in which, it could be implied, he would leave the shares to the defendant. Courts have accepted that the principle of the donatio mortis causa is an anomaly in English law, since it is neither consistent with the law relating to the making of a gift nor with that relating to the passing of property by way of testamentary disposition. Nevertheless, it has been accepted in respect of chattels, choses in action and, at least in England, unregistered real property. In Duffield v Elwes (1827) 1 Bli NS 497; 4 ER 959, the deceased had certain moneys owing to him which were secured both by a mortgage and a bond. On his death bed he sought to give to his daughter the benefits of the debt due to him, in the event of his dying, and he caused to be handed to her the deeds which established the mortgage and the bond, which were required in order to recover the debt due. It was held that this was a valid gift mortis causa and that the donor’s personal representative became trustees for the donee to make the gift effectual. The deeds were not sufficient in themselves to allow a repayment of the moneys and it was necessary that appropriate demands be made by the personal representatives of the donor. The judgment of Lord Eldon is lengthy and has been referred to on a number of occasions since. I shall come back to that shortly. It was significant in that it was held not to be necessary that the so-called indicia of title must be sufficient without more to obtain the chattels or [10.55]

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Public Trustee v Bussell cont. payment of a debt. The giving of the documents was a sufficient donatio and it created a trust which was binding on the personal representative after the death of the donor. In the case of Re Beaumont; Beaumont v Ewbank [1902] 1 Ch 889, Buckley J referred to that part of the decision of Lord Eldon in Duffield v Elwes where it was said that the test was not the same as that which arises on the question of whether there has been a complete gift inter vivos. Buckley J said (at 893) that the question is not whether there is a complete title, but whether the donee can call upon the legal personal representative of the G donor to make good his title. He pointed to a number of cases in which there had been delivery of an essential document which was not itself sufficient to pass title but there had been found to be a valid donatio mortis causa. These cases dealt with gifts of a promissory note payable to the deceased’s order but not endorsed, a bill of exchange in favour of the deceased or his order and a cheque payable to the donor’s order and not endorsed. He pointed out that in none of these cases had the donee got the complete title but had obtained the indicia of title. In Re Wasserberg; Union of London and Smiths Bank, Ltd v Wasserberg [1915] 1 Ch 195, a person in anticipation of his death gave to his wife the key to a bank deposit box with the intention that she should have the contents of it. It was necessary to have not only the key but the written authority of the donor, in order that the box might be opened. It was held that although this was an incomplete gift of the contents of the box it was a valid donatio mortis causa. It had been argued that in the case of chattels there must be a complete delivery, even though in the case of mortgage debts or deposits or the like it is sufficient to have indicia of title. Sargant J said (at 203-204): …When it is once admitted that any property is a possible subject- matter for a donatio mortis causa – and in fact chattels of all kinds are much more obviously and readily within this category than choses in action – I can see no more reason for declining to give effect to an incomplete or inchoate gift in the case of the one class of property than in the case of the other?. There is no reason in the nature of things why chattels as well as choses in action should not be in such a position that there should be some physical thing the possession of which should be required in order to get at the property and the transfer of which should accordingly amount to a transfer of the means or part of the means of getting at the property. A number of cases have held that there is a sufficient gift mortis causa where a bank passbook is handed over even though it is necessary to have a signed withdrawal form in order to obtain the moneys standing to the credit of the account; for example, see Public Trustee v Young (1940) 40 SR(NSW) 233; 57 WN (NSW) 93. In Birch v Treasury Solicitor [1951] Ch 298, it was held that delivery of passbooks relating to bank accounts was sufficient, even though they may not set out all of the terms and conditions of the deposit of moneys. It is not clear whether in that case it was necessary that there be a signed withdrawal form in order that moneys in the account may be obtained. Reliance was placed by Mr Walton, for the plaintiff, on a passage in the judgment of the Court delivered by Evershed MR (at 308) where he said: …As a matter of principle the indicia of title, as distinct from mere evidence of title, the document or thing the possession or production of which entitles the possessor to the money or property purported to be given, should satisfy Lord Hardwicke’s condition. The condition to which his Lordship was referring was that if it is not possible to deliver the actual subject of the gift then there must be a transfer of something amounting to that. In Sen v Headley, the principles were extended to the delivery of the deeds of title of unregistered land. Nourse LJ, who delivered the judgment of the court, referred at some length to the judgment of Lord Eldon in Duffield v Elwes, and to the fact that a gift of a debt secured by a mortgage, by the delivery of the deeds of title, resulted in a trust which was binding upon the legal personal representative of the donor. This principle was extended to the title deeds, as being the essential indicia of title to unregistered land. Leave to appeal from the judgment of the Court of Appeal was granted by the Appeal Committee of the House of Lords. The dispute between the parties was settled 252

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Public Trustee v Bussell cont. at the door of the House: see reference in (1993) 109 LQR 19 at 21. The case has been the subject of academic comment: JWA Thornely, “Laying Lord Eldon’s Ghost: Donatio Mortis Causa of Land” [1991] CLJ 404 and PV Baker, “Land as a Donatio Mortis Causa” (1993) 109 LQR 19, support the judgment. The finding of a constructive trust was criticised by P Sparkes, “Death Bed Gifts of Land” (1992) 43 NILQ 35. It has been held in New South Wales that there cannot be a donatio mortis causa of real estate, at least where it is registered under the Real Property Act 1900: Watts v The Public Trustee (1949) 50 SR (NSW) 130; 67 WN (NSW) 29; Bayliss v Public Trustee (1988) 12 NSWLR 540. These cases however did not deal with the principles which were discussed in Sen v Headley, namely whether a trust arose on the handing over of the title deeds. If that case is correct, then the constructive trust may also affect land registered under Torrens title. It seems to me that on principle there is no distinction between the delivery of a bank passbook, where it is necessary to have a signed withdrawal slip in order to obtain the money in the account, and the delivery of a share certificate where it is necessary to have a signed transfer in order to have the shares put in the name of the donee. In each case there has not been an immediate gift but a necessary means of obtaining the property has been delivered on a conditional basis. There have been earlier English decisions where it has been held that the principles of donatio mortis causa do not apply to share scrip. These seem to have had their origin in Ward v Turner (1752) 2 Ves Sen 431; 28 ER 275, where it was held that the delivery of receipts for annuities was insufficient, apparently on the basis that the receipts did not amount to anything significant. They were referred to in the judgment of Lord Hardwicke as nothing but waste paper. In Moore v Moore (1874) 18 LR Eq 474, it was held that share certificates for railway stock were not distinguishable from receipts for annuities, as dealt with in Ward v Turner and accordingly the same principles should apply. That decision in due course was followed in Re Weston; Bartholomew v Menzies [1902] 1 Ch 680. In New South Wales however it has been held that a delivery of share certificates can be a valid donatio mortis causa. In Dufficy v Mollica, Holmes JA delivered a dissenting judgment. The issue upon which he dissented, however, was whether the handing over of a key to the deceased’s deposit box was intended as a gift conditional upon his death or whether it was to be held only for safe-keeping. As Holmes JA, contrary to the views of the other members of the Court of Appeal, was of the opinion that the key was delivered as a gift, he had to consider whether share certificates which were in the deposit box could be part of a valid donatio mortis causa. He concluded (at 759) that share certificates could be regarded as the subject of a valid gift if the instrument handed over is the essential evidence of title, possession or production of which entitled the possessor to the property purported to be given. He was of the view that the handing over of the share certificates came with the principles referred to in Birch v Treasury Solicitor. If shares in building societies and deposit books for savings bank accounts are good subjects of a donatio mortis causa there is no reason for saying that share certificates cannot also be so regarded. Although it was not necessary for the other members of the Court of Appeal to express a view on this aspect, Wallace A-CJ stated his opinion that, consistent with the decisions in Duffield v Elwes and Birch v Treasury Solicitor, certificates and securities of public companies can be the subject of a donatio mortis causa. I regard myself as being bound by the views of two members of the Court of Appeal, notwithstanding that one was expressed in a dissenting judgment and the other was obiter. I would in any case agree with the principles which they have stated. Section 180(1) of the Companies (New South Wales) Code, which was the appropriate Act in January 1989, and s 1087(2) of the Corporations Law provide that a share certificate is prima facie evidence of the title of the member to the share. It was submitted by Mr Walton that subs (3) of each of those sections, which states that failure to comply with the section does not affect the rights of a holder of shares, indicates that the rights of ownership are not related to the certificate which cannot constitute [10.55]

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Public Trustee v Bussell cont. a deed of title or an essential indicia of title, as distinct from mere evidence. Reliance was placed upon what was said in Birch v Treasury Solicitor. The compliance to which subs (3) applies is the requirement that the certificate is to be under the common seal of the company and is to state certain specified matters. The memorandum and articles of association of each of the companies in which the deceased held shares are in evidence. They all contain a requirement that a transfer of shares shall be effected by the lodging of a transfer executed by both the transferor and transferee. They also have a requirement in each case that there also be lodged the share certificate and such other evidence as the directors may require to prove the title of the transferor or his right to transfer the shares. Certificates of shares are required to issue and several of the sets of articles refer to them as certificates of title of the shares. All of the articles require certificates to be issued under the company’s common seal or a share certificate seal. In those circumstances I do not regard the certificates as merely being evidence of title in the way in which that phrase was used in Birch v Treasury Solicitor. They in fact constitute the indication of title which is issued by the company and which is an essential document for the purpose of the shares being transferred. Apart from the share register, which is not within the control of any of the shareholders, there is no other form of indication of entitlement to the shares. In my opinion they constitute indicia of title and not merely evidence of the shareholding. The handing over of the share certificates in this case therefore was a sufficient compliance with the second condition because it was a delivery of part of the means of getting at the property. In respect of the third condition, it is not sufficient that there be merely an expression of testamentary intention; nor is it enough that there be delivery of chattels or means of transferring property only for the purpose of safe- keeping. The act must amount to a gift, conditional upon the death of the donor and revocable by the donor in the event of his or her recovery. In the present circumstances it is a question of fact as to whether the deceased handed over the share certificates to the defendant as a gift or only so that he should hold them until a will was executed two days later. Reliance was placed upon the supporting evidence of Mr Clark and Mr Hamshere. They spoke of the delivery of the share certificates and thereference to the solicitors coming to make a will as happening at practically the same time. The implication sought to be drawn by the plaintiff was that in each case this amounted to a continuing testamentary intention and not to a gift. In the defendant’s cross-examination this was explored somewhat further. To some extent his evidence was at variance with that of the two witnesses. Having heard him, I feel satisfied that he was being truthful in the giving of his evidence and that the handing over of the share certificates occurred at an earlier time during the afternoon of 7 January than the reference to the solicitor calling on the following Monday. The first occurred shortly after the visitors had arrived and the reference to the solicitor was at about the time of their departure. Although the defendant agreed that the reference to the solicitor coming on Monday was part of the conversation during which the envelope was handed over, it was not made clear whether this meant within a few sentences spoken at almost the same time or the conversation which occurred during the afternoon of 7 January. Having heard the way in which the answer was given I am not satisfied that the defendant was accepting the position that the reference to the intended visit of the solicitor was made almost at the same time as the handing over of the share certificates and the statement that the defendant might as well take the shares when they were given to him. The words “I’ll have them transferred over” are somewhat equivocal. The deceased may have been indicating that the gift would only be complete when the transfers were handed over or he may have been saying that he was making a conditional gift of the shares by delivering the certificates but would later make an unconditional gift by delivering transfers. If the latter were to occur then this would constitute a gift inter vivos. 254

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Public Trustee v Bussell cont. In the conversations in and before 1988 the deceased had indicated a general testamentary intention in respect of the shares or at least some of them. On 7 January 1989, the deceased in my view was intending to give the shares to the defendant in anticipation of and conditional upon his death. The likelihood of this being a gift rather than a handing over of the shares for safe-keeping is reinforced by the fact that the deceased had held the shares for many years. The certificates were contained in an envelope and that in turn was stored in a cupboard. There is nothing to suggest that the deceased thought that they would have been safer in the defendant’s possession for the next two days rather than remaining in the cupboard for that time. The only logical explanation for the deceased going to the cupboard, getting the share certificates and handing them to the defendant is that he intended the defendant to have them and to retain them upon his death. The fact that a solicitor was to call on the following Monday was in any case not necessarily connected to the gift of shares. The deceased had other assets, and although it may be assumed that the defendant would be a beneficiary, there was no reason why the deceased could not have intended making provision for other friends, and not have dealt with the shares at all in his will. In all of these circumstances I am satisfied that the third condition referred to above has been fulfilled. Since the death of the deceased one of the companies in which he held shares has been the subject of a takeover and the shares were sold by the Public Trustee. In another instance some renounceable rights were sold and in a third case rights to new shares were taken up and the shares were paid for by the plaintiff. It was not contested that any rights which flowed from shares which were the subject of the gift would pass to the defendant and that any liability arising out of the taking up of new shares would be debited to him. The result is that I am satisfied that there has been a valid donatio mortis causa in respect of the shares held by the deceased and delivered to the defendant and accordingly that the defendant is entitled to retain those shares and any accretions which have resulted from bonus issues, and is further entitled to have transfers executed by the plaintiff as administrator of the estate of the deceased. The defendant fails in his claim that there was a contract between him and the deceased whereby the deceased was to leave the whole of his estate to the defendant in his will. I declare that the shares which are identified in the schedule to the cross- claim and all accretions to those shares, whether in the form of dividends or bonus issues, are the absolute property of the defendant. I order that the plaintiff execute and deliver to the defendant transfers of the said shares and of any shares purchased since the death of the deceased as the result of the taking up of rights. I order that the plaintiff pay to the defendant the nett proceeds of sale of 277 renounceable rights to shares in Lend Lease Corporation Ltd and 4,423 fully paid ordinary shares in Woolworths Ltd less the amount paid by the plaintiff for the acquisition costs of further shares in Lend Lease Corporation Ltd, together with the interest earned on the balance of those amounts. I order that the plaintiff pay to the defendant all dividends received in respect of the shares of the deceased together with interest earned on those dividends. I order that the summons and the balance of the cross-claim be dismissed. I order that the plaintiff as administrator of the estate of Alfred Ronald Staples deceased pay the defendant’s costs. The exhibits may be returned.

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BY SALE Extracts from Pearson, Commercial Law: Commentary and Materials, Ch 6.

Helby v Matthews [10.65] Helby v Matthews [1895] AC 471 [Mr Helby owned a piano which he hired to Mr Brewster, the hirer. Under the terms of the agreement the hirer agreed to pay a monthly rent or hire, to preserve the goods from injury, to keep the goods at the hirer’s premises. Clause 4 said that if the hirer breaks the conditions of the hire the owner may terminate the hiring and take repossession of the piano. Clause 5 said: 5. That if the hiring should be terminated by the hirer (under clause A below), and the said instrument be returned to the owner, the hirer shall remain liable to the owner for arrears of hire up to the date of such return, and shall not on any ground whatever be entitled to any allowance, credit, return, or set-off for payments previously made. The owner agrees: A. That the hirer may terminate the hiring by delivering up to the owner the said instrument. B. If the hirer shall punctually pay the full sum of £18.18s. by 10s.6d. at date of signing, and by 36 monthly instalments of 10s.6d. in advance as aforesaid, the said instrument shall become the sole and absolute property of the hirer. C. Unless and until the full sum of £18.18s be paid, the said instrument shall be and continue to be the sole property of the owner. Before he had paid all the instalments, Mr Brewster pledged the piano with Matthews who were pawnbrokers as security for an advance. Mr Helby brought an action of trover against Matthews. Matthews argued they were protected by the Factors Act 1889, s 9 (equivalent SGA s 28(2)). The County Court found that s 9 did not apply; this was upheld by the Divisional Court; the Court of Appeal found that s 9 did apply.] LORD HERSCHELL LC: [475] My Lords, it is said that the substance of the transaction evidenced by the agreement must be looked at, and not its mere words. I quite agree. What, then, was the real nature of the transaction? The answer to this question is not, I think, involved in any difficulty. Brewster was to obtain possession of the piano, and to be entitled to its use so long as he paid the plaintiff the stipulated sum of 10s. 6d. a month, and he was bound to make these monthly payments so long as he retained possession of the piano. If he continued to make them at the appointed times for the period of three years, the piano was to become his property, but he might at any time return it, and, upon doing so, would no longer be liable to make any further payment beyond the monthly sum then due. My Lords, I cannot, with all respect, concur in the view of the Court of Appeal, that upon the true construction of the agreement Brewster had “agreed to buy” the piano. An agreement to buy imports a legal obligation to buy. If there was no such legal obligation, there cannot, in my opinion, properly be said to have been an agreement to buy. Where is any such legal obligation to be found? Brewster might buy or not just as he pleased. He did not agree to make thirty-six or any [476] number of monthly payments. All that he undertook was to make the monthly payment of 10s. 6d. so long as he kept the piano. He had an option no doubt to buy it by continuing the stipulated payments for a sufficient length of time. If he had exercised that option he would have become the purchaser. I cannot see under these circumstances how he can be said either to have bought or agreed to buy the piano. The terms of the contract did not upon its execution bind him to buy, but left him free to do so or not as he pleased, and nothing happened after the contract was made to impose that obligation. I cannot think that an agreement to buy, “if he does not change his mind,” is any agreement to buy at all in the eye of the law. If it rests with me to do or not to do a certain thing at a future time, 256

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Helby v Matthews cont. according to the then state of my mind, I cannot be said to have contracted to do it. It appears to me that the contract in question was in reality a contract of hiring, and not in name or pretence only. I think it very likely that both parties thought it would probably end in a purchase, but this is far from shewing that it was an agreement to buy. [477] In such a case how could it be said that he had agreed to buy when he had not only come under no obligation to buy, but had not even made up his mind to do so? The agreement is, in its terms, just as applicable to such a case as to one where the hirer had resolved to continue the payments for the three years, and it must be construed upon a consideration of the obligations which its terms create, and not upon a mere speculation as to what was contemplated, or what would probably be done under it. It was said in the Court of Appeal that there was an agreement by the appellant to sell, and that an agreement to sell connotes an agreement to buy. This is undoubtedly true if the words “agreement to sell” be used in their strict legal sense; but when a person has, for valuable consideration, bound himself to sell to another on certain terms, if the other chooses to avail himself of the binding offer, he may, in popular language, be said to have agreed to sell, though an agreement to sell in this sense, which is in truth merely an offer which cannot be withdrawn, certainly does not connote an agreement to buy, and it is only in this sense that there can be said to have been an agreement to sell in the present case. Reliance was placed on the decision in Lee v Butler [1893] 2 QB 318 and it was said that the present case was not, in principle, distinguishable from it. There seems to me to be the broadest distinction between the two cases. There was there an agreement to buy. The purchase-money was to be paid in two instalments, but as soon as the agreement was entered into there was an absolute obligation to pay both of them, which might have been enforced by action. The person who obtained the goods could not insist upon returning them and so absolve himself from any obligation to make further payment. Unless there were a breach of contract by the party who engaged to make the payments the transaction necessarily resulted in a sale. That there was in that case an agreement to buy appears to me, as it did to the Court of Appeal, to be beyond question. It was further urged for the respondents that when Brewster pledged the piano with them it became impossible for him to return it to the appellant, and he became, therefore, from that time bound to make the stipulated payments and to become the purchaser. I cannot accede to this argument. In my opinion, it is impossible to hold that Brewster, having only a right under the contract to buy, provided he complied with the prescribed conditions, could convert himself into a purchaser as against the owner by violating the conditions of the contract. I think the judgment appealed from must be reversed. [480] [Lord Watson, Lord MacNaghten and Lord Shand delivered judgments to a similar effect, Lord Morris concurred.]

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Robinson v Graves [10.68] Robinson v Graves [1935] 1 KB 579

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Extracts from Pearson, Commercial Law: Commentary and Materials, Ch 7.

WHEN DOES PROPERTY PASS? [10.75] It is important to remember that if the contract cannot be classified as a contract for

the sale of goods then the following rules with respect to the passing of property do not apply. This may be important in the context of particular types of contracts. In the case of construction contracts for instance, if the contract is classified as a work and materials contract, the sale of goods rules will not apply and the property in the goods and materials will not pass until the materials become “fixed” or earlier if an effective contrary intention is expressed in the contract. 76 Many of the following English cases are the leading cases on the point. It is important to note the relevant sections of your jurisdiction when an English SGA section is referred to.

Sale of Goods Act 1923 (NSW), ss 21–23, 25A, 5(4), 60(2), 10(3) [10.80] 21. Goods must be ascertained Subject to section 25A, where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. 22. Property passes when intended to pass (1)

Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.

(2)

For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.

23. Rules for ascertaining intention Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Rule 1. Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed. Rule 2. Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state, the property does not pass until such thing be done and the buyer has notice thereof. Rule 3. Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh measure test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing be done and the buyer has notice thereof. Rule 4. Where goods are delivered to the buyer on approval or on “sale or return” or other similar terms, the property therein passes to the buyer: (a) when the buyer signifies approval or acceptance to the seller, or does any other Act adopting the transaction; 76

See P Barber, “Title to Goods, Material and Plant under Construction Contracts” in N Palmer and E McKendrick, Interests in Goods (London, Lloyd’s of London Press, 1993), p 101. The doctrines of accession, commingling and specification may then come into play: see [3.25] (Pearson) and S Fisher, Commercial and Personal Property Law (Butterworths, Sydney, 1997), Chapter 4.

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Sale of Goods Act 1923 (NSW), ss 21–23, 25A, 5(4), 60(2), 10(3) cont. (b) if the buyer does not signify approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact. Rule 5. (1) Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. (2) Where in pursuance of the contract the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer and does not reserve the right of disposal, the seller is deemed to have unconditionally appropriated the goods to the contract. 25A. Contracts of sale for goods forming part of bulk quantity (cf Sale of Goods Act 1979 of the United Kingdom, sections 20A and 20B) (1) This section applies to a contract of sale for a specified quantity of unascertained goods of which some or all form part of a single bulk quantity of goods of the same kind (“the bulk”) if: (a) the bulk is identified, either in the contract or by subsequent agreement between the parties, and (b) the buyer has paid for some or all of the goods that form part of the bulk. (2) Unless the parties agree otherwise: (a) property in an undivided share in the bulk is transferred to the buyer, and (b) the buyer becomes an owner in common of the bulk, as soon as both of the conditions referred to in subsection (1) have been met. (3) The buyer’s undivided share in the bulk at any time is such share as, at that time, is equivalent to the quantity of goods paid for and due to the buyer out of the bulk divided by the quantity of goods in the bulk. (4) If at any time the aggregate of all buyers’ undivided shares in the bulk exceeds the whole of the bulk, those shares are to be reduced proportionately so that their aggregate is equal to the bulk. (5) If a buyer has paid for some only of the goods due to the buyer out of the bulk, any delivery to the buyer out of the bulk is to be attributed to the goods for which payment has been made. (6) Part payment for any goods is taken to be payment for a corresponding part of the goods. (7) A person who becomes an owner in common of the bulk is taken to consent to: (a) any delivery of goods out of the bulk to any other owner in common of the bulk, being goods that are due to that other owner under a contract to which this section applies, and (b) any dealing with, or removal, delivery or disposal of, goods in the bulk by any other owner in common of the bulk, but only to the extent of that other owner’s undivided share in the bulk. [10.80]

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Sale of Goods Act 1923 (NSW), ss 21–23, 25A, 5(4), 60(2), 10(3) cont. (8) No cause of action lies against any person by reason of that person’s having acted in accordance with subsection (7)(a) or (b) in reliance on the consent that exists by virtue of that subsection. (9) Nothing in this section: (a) imposes an obligation on a buyer of goods out of the bulk to compensate any other buyer of goods out of the bulk for any shortfall in the quantity of goods received by that other buyer, or (b) affects any contract or other arrangement between buyers of goods out of the bulk for adjustments between themselves, or (c) affects the rights of any buyer under a contract to which this section applies. (10) This section does not apply to a contract of sale entered into before the commencement of the Sale of Goods and Warehousemen’s Liens Amendment (Bulk Goods) Act 2006. 5. Definitions (4) Goods are in a “deliverable state” within the meaning of this Act when they are in such a state that the buyer would under the contract be bound to take delivery of them. 60. Auction sales (2) a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner: until such announcement is made any bidder may retract his bid. 10. Existing or future goods (3) Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.

Questions [10.85] 1.

What is the fundamental rule as to the time at which property in the goods will pass?

2.

What is the relationship of the rules in SGA s 23 to the intention of the parties?

3.

If the seller and the buyer have not expressed any intention as to the time when property is to pass, how do we work out if and when property has passed?

4.

What are the rules in SGA s 23 subject to?

5.

If goods are not specific goods, what must happen to the goods before property may pass? Why?

6.

What are the prerequisites for passing property in unascertained goods forming part of a single bulk?

Specific goods [10.90] Read Sale of Goods Act 1923 (NSW), ss 22, 23 rr 1-3, extracted above in [10.80]. Question [10.95] 1. 290

What are the elements of the rule in SGA s 23 r 1? See also SGA s 60(2). [10.85]

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[10.100] It is critical to the application of SGA s 23 r 1 to show that the goods are specific

goods, that there is an unconditional contract, that the goods are in a deliverable state and that there is no contrary intention to the application of the rule.

UNASCERTAINED AND FUTURE GOODS [10.105] It is clear that property cannot pass in a thing unless it is clear what that thing is,

hence the importance of the distinction between specific goods and unascertained or future goods. The SGA provides for property in unascertained goods to be transferred in one of three ways. Under rule 5 the property in unascertained goods may be transferred when the goods are unconditionally appropriated to the contract with assent. The concept of unconditional appropriation is distinct from the concept of ascertainment. Goods may be ascertained yet not unconditionally appropriated. Goods cannot be unconditionally appropriated unless they are ascertained. The second method by which property in unascertained goods may pass is by the intention of the parties as expressed in the general rule in s 22, as s 23 rule 5 is also subject to a contrary intention. However no property may pass unless the goods are ascertained. For property to pass via an intention contrary to that as expressed in s 23 r 5, the inquiry is as to whether the goods have been ascertained prior to an unconditional appropriation. Two forms of ascertainment have been recognised in this context: ascertainment “by exhaustion” and ascertainment “by segregation and constructive delivery”. Of course ascertainment of the goods is not sufficient to pass the property unless the intention that property is to pass is also found. There may be congruence between an unconditional appropriation and the intention of the parties that property should pass. The parties may intend that property should remain with the seller after the unconditional appropriation – as with reservation of title. It may be that property may pass by the intention of the parties and the ascertainment of the goods that falls short of an unconditional appropriation. The second method is of less importance since SGA s 25A sets out how property may pass in a specified quantity of unascertained goods forming part of a bulk. Questions [10.110] 1.

What are the elements of SGA s 23 r 5 extracted at [10.80] above?

2.

Unascertained goods are always sold by description. Are future goods always sold by description?

3.

What do “goods of that description” and “in a deliverable state” mean?

Unconditional appropriation with assent [10.115] Note SGA s 23 r 5(2) whereby delivery to a buyer or carrier or other bailee in order to send the goods to the buyer is an unconditional appropriation so long as the seller has not reserved a right of disposal.

Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [10.120] Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240 (Queen’s Bench Division, Commercial Court, Eng) [The plaintiffs, merchants in Costa Rica, entered into a contract to purchase cycles and tricycles from the defendants, English manufacturers. The contract was a FOB contract, although it contained [10.120]

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Carlos Federspiel & Co SA v Charles Twigg & Co Ltd cont. some CIF features. A FOB contract imposes a duty on the seller to put the goods on board the ship and to procure a bill of lading in terms usual in the trade (Martin v Hogan (1917) 24 CLR 234 at 257, 259; 18 SR (NSW) 153; 35 WN (NSW) 78 per Isaacs and Rich JJ; Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402 at 424; [1954] 2 All ER 158 at 167; [1954] 2 Wlr 1005; [1954] 1 Lloyd’s Rep 321 at 332 per Devlin J). The FOB seller must bear the expense of putting the goods on board the ship (J Raymond Wilson & Co Ltd v Norman Scratchard Ltd (1944) 77 Ll L Rep 373 at 374 per Lord Caldecote CJ, KB). Correlatively, the buyer must, under the classic form of FOB contract, nominate the ship on board which the goods must be loaded: see Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 1 Lloyd’s Rep 321 at 332 per Devlin J; J & J Cunningham Ltd v Robert A Munro & Co Ltd (1922) 28 Com Cas 42 at 45 per Lord Hewart LCJ. The buyer must also bear all expenses associated with the provisions of the vessel upon which the goods will be transported, including port charges, stowage charges, freight duties, consular fees and arrival charges: see Cargill UK Ltd v Continental UK Ltd [1989] 2 Lloyd’s Rep 290. The CIF seller must: (1) make out an invoice of the goods sold; (2) ship at the port of shipment goods of the description contained in the contract; (3) procure on shipment a contract of affreightment by sea under which the goods will be delivered at the destination contemplated by the contract; (4) arrange for marine insurance upon the terms current in the trade which will be available for the benefit of the buyer; and (5) with all reasonable dispatch, send forward and tender to the buyer shipping documents comprising the invoice, bill of lading and policy of assurance. Leading CIF cases include Plaimar Ltd v Waters Trading Co Ltd (1945) 72 CLR 304 at 311; [1945] ALR 469 per Rich, Dixon and McTiernan JJ; Ross T Smyth & Co Ltd v TD Bailey, Son & Co [1940] 3 All ER 60 at 68; (1940) 164 LT 102 per Lord Wright; Comptoir d’Achat et de Vente du Boerenbond Belge SA v Luis de Ridder Lda (The Julia) [1949] AC 293 at 309; [1949] 1 All ER 269 per Lord Porter. [See [7.205] (Pearson).] The plaintiffs paid for the goods. Soon after the defendant company went into receivership. The receiver refused to deliver the goods. The plaintiffs brought an action and argued that the property in the goods had passed to them as the goods were appropriated to the contract by the sellers with the assent of the buyers.] PEARSON J: [244] This is a case in which the contract is for the sale of unascertained goods by description, for the sale of future goods probably still to be manufactured. Afterwards certain goods were manufactured, and the sellers at one time apparently expected to use them in fulfilment of the contract. The question is whether there was an appropriation of those goods to the contract by the sellers with the assent of the buyers within the meaning of Rule 5 of s 18. I think it is convenient just, in effect, to lay a foundation for the understanding of the exact meaning and effect of s 18 by reading a short passage from an old case, Mirabita v Imperial Ottoman Bank (1878) 3 Ex D 164. The relevant passage is from the judgment of Lord Justice Cotton, at p 172, where he says: Under a contract for sale of chattels not specific the property does not pass to the purchaser unless there is afterwards an appropriation of the specific chattels to pass under the contract, that is, unless both parties agree as to the specific chattels in which the property is to pass, and nothing remains to be done in order to pass it. In the case of such a contract the delivery by the vendor to a common carrier, or (unless the effect of the shipment is restricted by the terms of the bill of lading) shipment on board a ship of, or chartered for, the purchaser, is an appropriation sufficient to pass the property. There was an old case called Wait v Baker (1848) 2 Ex 1, in which there was a discussion by Baron Parke which is of considerable interest. I think it is convenient to read only a short passage from it. He said, at p 7: it is perfectly clear that the original contract between the parties was not for a specific chattel. That contract would be satisfied by the delivery of any 500 quarters of corn, provided the corn answered the character of that which was agreed to be delivered. By the original contract, therefore, no property passed; and that matter admits of no [245] doubt whatever. 292

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Carlos Federspiel & Co SA v Charles Twigg & Co Ltd cont. In order, therefore, to deprive the original owner of the property, it must be shown in this form of action – the action being for the recovery of the property – that, at some subsequent time, the property passed. It may be admitted, that if goods are ordered by a person, although they are to be selected by the vendor, and to be delivered to a common carrier to be sent to the person by whom they have been ordered, the moment the goods, which have been selected in pursuance of the contract, are delivered to the carrier, the carrier becomes the agent of the vendee, and such a delivery amounts to a delivery to the vendee; and if there is a binding contract between the vendor and vendee, either by note in writing, or by part payment, or subsequently by part acceptance, then there is no doubt that the property passes by such delivery to the carrier. It is necessary, of course, that the goods should agree with the contract. Later, on p 9, having referred to Roman law, he says on this subject: The law of England is different: here, property does not pass until there is a bargain with respect to a specific article, and everything is done which, according to the intention of the parties to the bargain, was necessary to transfer the property in it. [248] … if and so far as this contract was in its true nature a FOB contract, the natural time at which the property would pass would be on shipment. Undoubtedly this contract also contained some CIF features, and there is an express reference to what is called “approximate CIF charges’” in the pro forma invoice. If and in so far as it was a CIF contract, the effect of the authorities is that the property would pass not earlier than shipment, perhaps later than shipment … [249] … Therefore, under the contract, it was to be expected that the ownership of the goods would pass to the buyers on shipment of the goods, or possibly at some later time, when the bill of lading and insurance policy and final definitive invoice would be handed over to the buyers. The goods were not in fact shipped, and indeed they were not even dispatched from the sellers’ works to the port of shipment. They were, however, packed, and the packages were marked “CF & Co, San Jose, Costa Rica, Port Limon”. There were some answers to interrogatories which admitted certain facts, showing that the preparatory steps towards shipment had been taken by the sellers. Goods to the quantity and proper description required had been manufactured. They were packed, and they were marked with these shipping marks. The steps can be regarded, not as intended appropriation, but as being preparation for the shipment. It was contended that in August or September, 1953, there was an appropriation of the goods to the contract by the sellers with the assent of the buyers … [255] … I think one can distinguish these principles. First, Rule 5 of s 18 of the Act is one of the Rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer unless a different intention appears. Therefore the element of common intention has always to be borne in mind. A mere setting apart or selection of the seller of the goods which he expects to use in performance of the contract is not enough. If that is all, he can change his mind and use those goods in performance of some other contract and use some other goods in performance of this contract. To constitute an appropriation of the goods to the contract, the parties must have had, or be reasonably supposed to have had, an intention to attach the contract irrevocably to those goods, so that those goods and no others are the subject of the sale and become the property of the buyer. Secondly, it is by agreement of the parties that the appropriation, involving a change of ownership, is made, although in some cases the buyer’s assent to an appropriation by the seller is conferred in advance by the contract itself or otherwise. Thirdly, an appropriation by the seller, with the assent of the buyer, may be said always to involve an actual or constructive delivery. If the seller retains possession, he does so as bailee for the buyer. There is a passage in Chalmers’ Sale of Goods Act, 12th ed, at p 75, where it is said: In the second place, if the decisions be carefully examined, it will be found that in every case where the property has been held to pass, there has been an actual or constructive delivery of the goods to the buyer. [10.120]

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Carlos Federspiel & Co SA v Charles Twigg & Co Ltd cont. I think that is right, subject only to this possible qualification, that there may be after such constructive delivery an actual delivery still to be made by the seller under the contract. Of course, that is quite possible, because delivery is the transfer of possession, whereas appropriation transfers ownership. So there may be first an appropriation, constructive delivery, whereby the seller becomes bailee for the buyer, and then a subsequent actual delivery involving actual possession, and when I say that I have in mind in particular the two cases cited, namely, Aldridge v Johnson, supra, and Langton v Higgins, supra. Fourthly, one has to remember s 20 of the Sale of Goods Act, whereby the ownership and the risk are normally associated. Therefore as it appears that there is reason for thinking, on the construction of the relevant documents, that the goods were, at all material times, still at the seller’s risk, that is prima facie an indication that the property had not passed to the buyer. Fifthly, usually but not necessarily, the appropriating act is the last act to be performed by the seller. For instance, if delivery is to be taken by the buyer at the seller’s premises and the seller has completed his part of the contract and has appropriated the goods when he has made [256] the goods ready and has identified them and placed them in position to be taken by the buyer and has so informed the buyer, and if the buyer agrees to come and take them, that is the assent to the appropriation. But if there is a further act, an important and decisive act to be done by the seller, then there is prima facie evidence that probably the property does not pass until the final act is done. Applying those principles to the present case I would say this. Firstly, the intention was that the ownership should pass on shipment (or possibly at some later date) because the emphasis is throughout on shipment as the decisive act to be done by the seller in performance of the contract. Secondly, it is impossible to find in this correspondence an agreement to a change of ownership before the time of shipment. The letters, especially those of Aug 27 and Sept 14, which are particularly relied on by the plaintiff, do not contain any provision or implication of any earlier change of ownership. Thirdly, there is no actual or constructive delivery; no suggestion of the seller becoming a bailee for the buyer. Fourthly, there is no suggestion of the goods being at the buyer’s risk at any time before shipment; no suggestion that the buyer should insist on the seller arranging insurance for them. Fifthly, the last two acts to be performed by the seller, namely, sending the goods to Liverpool and having the goods shipped on board, were not performed. Therefore, my decision that the prima facie inference which one would have drawn from the contract is that the property was not to pass at any time before shipment, is in my view not displaced by the subsequent correspondence between the parties. It follows, therefore, that there was no appropriation of these goods and therefore the action fails.

Re Goldcorp Exchange Ltd (In Receivership) [10.130] Re Goldcorp Exchange Ltd (In Receivership) [1994] 3 WLR 199; [1994] 2 All ER 806 (Privy Council) [A New Zealand company dealt in gold coins and ingots for the consumer market. It sold bullion to investors on terms that they were purchasing “non-allocated metal” which would be stored and insured free of charge by the company. The investor received a certificate of ownership and had the right on giving seven days notice to take physical delivery of the metal purchased. The company told investors that bullion was not set aside as a customer’s metal, but was stored in safe-keeping as part of the company’s overall stock of bullion and was insured by the company and that the stock of bullion held by the company from which customers could call for delivery if they so wished would always be sufficient to meet the company’s obligations under all outstanding contracts of sale. The company did 294

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Re Goldcorp Exchange Ltd (In Receivership) cont. not appropriate specific and segregated parcels of bullion to the individual purchase contracts of non-allocated investors. One of its predecessor companies had stored the bullion sold to investors separately from the general trading stock and in precise amounts to cover all the bullion sold. The company became insolvent. It did not have sufficient bullion to cover its debts or the purchase contracts. The non-allocated claimants claimed that they were entitled to trace a proprietary interest to the remaining stock of bullion. The New Zealand Court of Appeal held that the non-allocated claimants had no proprietary rights to the bullion but held that the entire amount of the purchase moneys could be traced into the general assets of the company. The receivers and the bank appealed to the Privy Council.] LORD MUSTILL: [206] Sales [to non-allocated claimants] were promoted in various ways, particularly through glossy, illustrated brochures. So far as presently material the brochures offered two methods of purchasing bullion: “The first is what we call physical delivery and the second is non-allocated metal”. After explaining how purchases of granules, ingots and coins could be made for physical delivery a typical brochure described the procedure for purchasing non-allocated metal, which (it was said) was “preferred by the majority of investors and … recognised as the most convenient and safe way of purchasing metal”. [The wording of the brochures and the certificate were set out.] In addition to the documentation there were of course preliminary discussions between the customer and the company. Whilst these varied in detail from one occasion to another, the following general description by McKay J was accepted as correct for the purposes of argument ([1993] 1 NZLR 257 at 296-297): The wording makes it clear that the investor is not merely depositing money or acquiring a contractual right to be supplied at some later date after giving seven days’ notice. The wording describes an actual purchase of gold or silver which will then be stored free of charge and insured by Exchange [ie the company]. Delivery is available on seven days’ notice and on payment of a small fee for ingotting. This suggests that although there will be physical bullion held in storage for the investor and insured for him, it will be part of a larger bulk and will require ingotting before he can take delivery of his specific [207] entitlement. In the meantime, he will have an interest, along with other investors, in the bulk which is being held and stored by Exchange for him and for other investors. That certainly was the perception of investors. As the Judge said: “No one could read the claimants” affidavits, still less hear the evidence given by them on cross-examination, without being convinced of the depth and genuineness of their belief that by accepting the invitation to purchase on a non-allocated basis they were not simply buying “gilt edged investments”, but gold itself….. II. The issues As already seen, by the time the judgment in the Court of Appeal had been delivered the proprietary claims of the customers had been widened to comprise not only bullion but also the general assets of the company, to an extent representing the sums originally paid by way of purchase price. The following issues now arise for consideration. (i)

Did the property in any bullion pass to the customers immediately upon the making of the purchases (a) simply by virtue of contract of purchase itself, or (b) by virtue of the written and oral statements made in the brochures and by the company’s employees? (Although these were referred to in argument as representations their [208] Lordships believe them to be more in the nature of contractual undertakings, and therefore call them “the collateral promises”).

(ii)

Did the property in any bullion subsequently acquired by the company pass to the customer upon acquisition?

(iii)

When the customers paid over the purchase moneys under the contract of sale did they retain a beneficial interest in them by virtue of an express or constructive trust? [10.130]

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Re Goldcorp Exchange Ltd (In Receivership) cont. (iv)

Should the court now grant a restitutionary remedy of a proprietary character in respect of the purchase moneys?

If the answer to any of these questions is in the affirmative it will be necessary to consider the extent to which the customer’s rights in the relevant subject matter can be applied to the bullion or other assets now in the possession of the company. III. Title to bullion: The sale contracts Their Lordships begin with the question whether the customer obtained any form of proprietary interest, legal or equitable, simply by virtue of the contract of sale, independently of the collateral promises. … It is, however, convenient to pause for a moment to consider why the answer must inevitably be negative, because the reasons for this answer are the same as those which stand in the way of the customers at every point of the case. It is common ground that the contracts in question were for the sale of unascertained goods. For present purposes, two species of unascertained goods may be distinguished. First, there are “generic goods”. These are sold on terms which preserve the seller’s freedom to decide for himself how and from what source he will obtain goods answering the contractual description. Secondly, there are “goods sold ex-bulk”. By this expression their Lordships denote goods which are by express stipulation to be supplied from a fixed and a pre-determined source, from within which the seller may make his own choice (unless the contract requires it to be made in some other way) but outside which he may not go. For example, “I sell you 60 of the 100 sheep now on my farm”. Approaching these situations a priori common sense dictates that the buyer cannot acquire title until it is known to what goods the title relates. Whether the property then passes will depend upon the intention of the parties and in particular on whether there has been a consensual appropriation of particular goods to the contract. On the latter question the law is not straightforward, and if it had been decisive of the present appeal it would have been necessary to examine cases such as Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240 and other cases cited in argument. In fact, however, the case turns not on appropriation but on ascertainment, and on the latter the law has never been in doubt. It makes no difference what the parties intended if what they intend is impossible: as is the case with an immediate transfer of title to goods whose identity is not yet known. As Lord Blackburn wrote in his Treatise on the Effect of the Contract of Sale (1st ed, 1845), pp 122-123, a principal inspiration of the Sale of Goods Act 1893: The first of [the rules] that the parties must be agreed as to the specific goods on which the contract is to attach before there can be [209] a bargain and sale, is one that is founded on the very nature of things. Till the parties are agreed on the specific individual goods, the contract can be no more than a contract to supply goods answering a particular description, and since the vendor would fulfil his part of the contract by furnishing any parcel of goods answering that description, and the purchaser could not object to them if they did answer the description, it is clear there can be no intention to transfer the property in any particular lot of goods more than another, till it is ascertained which are the very goods sold. This rule has existed at all times; it is to be found in the earliest English law books … It makes no difference, although the goods are so far ascertained that the parties have agreed that they shall be taken from some specified larger stock. In such a case the reason still applies: the parties did not intend to transfer the property in one portion of the stock more than in another, and the law which only gives effect to their intention, does not transfer the property in any individual portion. Their Lordships have laboured this point, about which there has been no dispute, simply to show that any attempt by the non-allocated claimants to assert that a legal title passed by virtue of the sale would have been defeated, not by some arid legal technicality but by what Lord Blackburn called “the very nature of things”. The same conclusion applies, and for the same reason, to any argument that a 296

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Re Goldcorp Exchange Ltd (In Receivership) cont. title in equity was created by the sale, taken in isolation from the collateral promises. It is unnecessary to examine in detail the decision of the Court of Appeal in Re Wait [1927] 1 Ch 606; [1926] All ER Rep 433 for the facts were crucially different. There, the contract was for a sale ex-bulk. The 500 tons in question formed part of a larger quantity shipped on board a named vessel; the seller could supply from no other source; and once the entire quantity had been landed and warehoused the buyer could point to the bulk and say that his goods were definitely there, although he could not tell which part they were. It was this feature which prompted the dissenting opinion of Sargant LJ that the sub-purchasers had a sufficient partial equitable interest in the whole to found a claim for measuring-out and delivery of 500 tons. No such feature exists here. Nevertheless, the reasoning contained in the judgment of Atkin LJ ([1927] 1 Ch 606 at 625-641; [1926] All ER Rep 433 at 441-448), which their Lordships venture to find irresistible, points unequivocally to the conclusion that under a simple contract for the sale of unascertained goods no equitable title can pass merely by virtue of the sale. This is not, of course, the end of the matter. As Atkin LJ himself acknowledged ([1927] 1 Ch 606 at 636; [1926] All ER Rep 433 at 446): [The rules in the statute] have, of course, no relevance when one is considering rights, legal or equitable, which may come into existence dehors the contract for sale. A seller or a purchaser may, of course, create any equity he pleases by way of charge, equitable assignment or any other dealing with or disposition of goods, the subject-matter of sale; and he may, of course, create such an equity as one of the terms expressed in the contract of sale. [213] IV. Title to after-acquired bullion Having for these reasons rejected the submission that the non-allocated claimants acquired an immediate title by reason of the contract of sale and the collateral promises their Lordships turn to the question whether the claimants later achieved a proprietary interest when the company purchased bullion and put it into its own stock. Broadly speaking, there are two forms which such an argument might take. [214] According to the first, the contracts of sale were agreements for the sale of goods afterwards to be acquired. It might be contended that quite independently of any representation made by the company to the non-allocated claimants, as soon as the company acquired bullion answering the contractual description the purchaser achieved an equitable title, even though the passing of legal title was postponed until the goods were ascertained and appropriated at the time of physical delivery to the purchaser. In the event this argument was not separately pursued, and their Lordships mention it only by way of introduction. They will do so briefly, since it was bound to fail. The line of old cases, founded on Holroyd v Marshall (1862) 10 HL Cas 191; [1861 -73] All ER Rep 414 and discussed in Benjamin’s Sale of Goods (3rd edn, 1987), pp 80, 218-219, paras 106, 357 which might be said to support it, was concerned with situations where the goods upon acquisition could be unequivocally identified with the individual contract relied upon. As Lord Hanworth MR demonstrated in Re Wait, the reasoning of these cases cannot be transferred to a situation like the present where there was no means of knowing to which, if any, of the non-allocated sales a particular purchase by the company was related. Since this objection on its own is fatal, there is no need to discuss the other obstacles which stand in its way … [217] V. Conclusion on property in bullion For these reasons their Lordships reject, in company with all the judges in New Zealand, the grounds upon which it is said that the customers acquired a proprietary interest in bullion. … The question is not, however, novel since it has been discussed in two English authorities very close to the point. The first is the judgment of Oliver J in Re London Wine Co (Shippers) Ltd [1986] PCC 121. The facts of that case were not [218] precisely the same as the present, and the arguments on the present appeal [10.130]

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Re Goldcorp Exchange Ltd (In Receivership) cont. have been more far-reaching than were there deployed. Nevertheless their Lordships are greatly fortified in their opinion by the close analysis of the authorities and the principles by Oliver J, and in other circumstances their Lordships would have been content to do little more than summarise it and express their entire agreement. So also with the judgment delivered by Scott LJ in Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (In Receivership) [1992] BCLC 350 which is mentioned by Gault J ([1993] 1 NZLR 257 at 284), but not discussed since it was not then reported in full. This was a stronger case than the present, because the separate fund which the contract required the insolvent company to maintain would have been impressed with a trust in favour of the other party, if in fact it had been maintained and also because the floating charge which, as the Court of Appeal held, took priority over the contractual claim, expressly referred to the contract under which the claim arose. Once again, their Lordships are fortified in their conclusion by the fact that the reasoning of Scott LJ conforms entirely with the opinion at which they have independently arrived … [223] VIII. Non-allocated claimants: Conclusions Their Lordships fully acknowledge the indignation of the claimants, caught up in the insolvency of the group of which the company formed part, on finding that the assurances of a secure protection on the strength of which they abstained from calling for delivery were unfulfilled; and they understand why the court should strive to alleviate the ensuing hardship. Nevertheless there must be some basis of principle for depriving the bank of its security and in company with McKay J they must find that none has been shown. [224] X. The Walker & Hall claims These claims are on a different footing. It appears that until about 1983 the bullion purchased by customers of the predecessor of Walker & Hall was stored and recorded separately. Thereafter, the bullion representing purchases by customers was stored en masse, but it was still kept separate from the vendor’s own stock. Furthermore, the quantity of each kind of bullion kept in this pooled mass was precisely equal to the amount of Walker & Hall’s exposure to the relevant categories of bullion and of its open contracts with customers. The documentation was also different from that received by the customers who later became the non-allocated claimants. The documents handed to the customer need not be quoted at length, but their general effect was that the vendor did not claim title in the bullion described in the document and that the title to that bullion, and the risk in respect of it, was with the customer. The document also stated that the vendor held the bullion as custodian for the customer in safe storage. These arrangements ceased when the shares of Walker & Hall were purchased by the company, and the contractual rights of the customers were transferred. The features just mentioned persuaded Thorp J at first instance to hold, in contrast to his conclusion in relation to the non-allocated claimants and Mr Liggett, that there had been a sufficient ascertainment and appropriation of goods to the individual contracts to transfer title to each customer; and that thereafter the customers as a whole had a shared interest in the pooled bullion, which the vendors held on their behalf. The Dublin City Distillery case [1914] AC 823 was cited in support of this conclusion. It followed that when the company [225] absorbed the hitherto separated bullion into its own trading stock upon the acquisition of Walker & Hall’s business, and thereafter drew upon the mixed stock, it wrongfully dealt with goods which were not its own. [There followed a discussion of tracing.]

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CHAPTER 11 Engaging in Dealings in Choses in Possession: Transfer of Possession by Bailment [11.05]

Classification schemes of bailment .................................................... 299 [11.10] [11.15] [11.20] [11.25] [11.30] [11.35]

[11.40]

Coggs v Bernard ................................................................... 299 Chapman Bros v Verco Bros & Co Ltd ...................................... 300 The Pioneer Container ........................................................... 302 Pangallo Estate Pty Ltd v Killara 10 Pty Ltd ............................. 310 Hobbs v Petersham Transport Co Pty Ltd ................................ 313 Pitt Son & Badgery Ltd v Proulefco SA ..................................... 320

Interaction between bailment and sale ............................................ 322 [11.40]

Matthew Short & Associates Pty Ltd v Riviera Marine (International) Pty Ltd ........................................................... 322

Extracts from Pearson, Commercial Law: Commentary and Materials, Ch 4.

Classification schemes of bailment [11.05] Bailment is typically divided into a series of categories, the best known classification

being that laid down by Chief Justice Holt in Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107 at 109.

Coggs v Bernard [11.10] Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107 HOLT CJ: [912] The case is shortly this. This defendant undertakes to remove goods from one cellar to another, and there lay them down safely, and he managed them so negligently, that for want of care in him some of the goods were spoiled. Upon not guilty pleaded, there has been a verdict for the plaintiff, and that upon full evidence, the cause being tried before me at Guildhall. There has been a motion in arrest of judgment, that the declaration is insufficient, because the defendant is neither laid to be a common porter, nor that he is to have any reward for his labour. So that the defendant is not chargeable by his trade, and a private person cannot be charged in an action without a reward. I have had a great consideration of this case, and because some of the books make the action lie upon the reward, and some upon the promise, at first I made a great question, whether this declaration was good. But upon consideration, as this declaration is, I think the action will well lie. In order to show the grounds, upon which a man shall be charged with goods put into his custody, I must show the several sorts of bailments. And there are six sorts of bailments. The first sort of bailment is, a bare naked bailment of goods, delivered by one man to another to keep for the use of the [913] bailor; and this I call a depositum, and it is that sort of bailment which is mentioned in Southcote’s case. The second sort is, when goods or chattels that are useful, are lent to a friend gratis, to be used by him; and this is called commodatum, because the thing is to be restored in specie. The third sort is, when goods are left with the bailee to be used by him for hire; this is called locatio et conductio, and the lender is called locator, and the borrower conductor. The fourth sort is, when goods or chattels are delivered to another as a pawn, to be a security to him for money borrowed of him by the bailor; and this is called in Latin vadium, and in English a pawn or a pledge. The fifth sort is when goods or chattels are delivered to be carried, or something is to be done about them for a reward to be paid by the [11.10]

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Coggs v Bernard cont. person who delivers them to the bailee, who is to do the thing about them. The sixth sort is when there is a delivery of goods or chattels to somebody, who is to carry them, or do something about them gratis, without any reward for such his work or carriage, which is this present case.

Chapman Bros v Verco Bros & Co Ltd [11.15] Chapman Bros v Verco Bros & Co Ltd (1933) 49 CLR 306 (High Court of Australia) Facts: Verco Bros & Co Ltd (the respondent) was a wheat merchant and miller carrying on business in South Australia. Chapman Bros were farmers. During December 1931 and January 1932, the appellants (Chapman Bros) delivered to the respondent 2,559 bags of wheat. The bags of wheat delivered by the appellants to the respondent had no mark, symbol or other indication identifying those bags as the property of the appellant. On delivery, the respondent gave the appellant a storage warrant which acknowledged receipt of the total number of bags delivered, their total weight and provided extensive “conditions of storage”. The respondent received from other farmers many bags of wheat. All of the bags of wheat received from the various farmers were intermingled into various stacks, so that no individual farmer could say whether any particular bags were delivered by that farmer to the respondent. The respondent went into voluntary liquidation, and sought a declaration that upon delivery by the appellants of the wheat and bags, the property in the wheat passed to the respondent so that the appellants retained no right to, or property, the wheat or any part of it. The appellants counter-claimed seeking declarations and an injunction restraining the respondent (and the liquidator of the respondent) from using, selling, pledging, charging or disposing of the wheat. RICH J: [313] The question in this case is whether, in a South Australian “wheat storage” contract, the property in wheat passed upon delivery by the farmer to the merchant or miller. The contract is elaborately drawn upon a printed form. The effect of its material provisions is that the person supplying the wheat ceases upon delivery to be entitled to receive back the wheat he has delivered. He may require the persons to whom it is delivered up to the end of the wheat season (30th November) to purchase and pay for the wheat or any part of it. He may require them before that date to deliver to him a quantity of wheat corresponding to the wheat supplied, so far as it is yet unpurchased. On 30th November the persons receiving the wheat become the purchasers of the quantity remaining. The purchase price in every case is the current market price on the day or days of purchase. The form contains additional provisions concerning wheat of an inferior quality, the determination of equivalents of faq wheat, advances against price, “storage charges” if equivalent wheat is demanded, and some other subsidiary matters. The supplier of wheat is called the storer and the receiver the purchaser. The important provision in the contract is in these words: “The purchaser shall not be required to return the identical wheat.” It is, therefore, evident that, at some stage, the property, in the wheat must pass to the purchasers, except possibly, if by chance they did return the identical wheat pursuant to a demand for an equivalent quantity. It is argued, however, that the property in the wheat did not pass until the end, that is to say, when “a purchase” was declared or corresponding wheat returned. In support of this view the nomenclature of the contract is relied upon – “storage”, “storage charges”, “storer”. I attach little weight to these expressions. They seem to be current [314] in South Australia as a description of a special contract for the disposal of wheat by producers to merchants and millers on terms which enable the producer to fix a price at dates subsequent to delivery, or, if he wishes to obtain an equivalent in wheat, presumably for the purpose of carrying over stocks of wheat to another season, to require delivery to him of a proper quantity on paying storage charges appropriate to that quantity. The important thing to my mind is that the contract contemplates immediate delivery of the commodity, the loss of its identity and the payment for the commodity in money or in kind. The commodity is one in which identity is commercially unimportant, and when 300

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Chapman Bros v Verco Bros & Co Ltd cont. large quantities of wheat are concentrated, difficulty and expensive to preserve. One ought not to shut one’s eyes to the fact that the reason why the contract stipulates against preserving the identity of wheat is to enable the receiver of the wheat forthwith to deal with it, regardless of its identity, in such a way that it becomes indistinguishable. Why then should a transaction involving the immediate delivery of the thing, contemplating the immediate destruction of its identity and, in exchange for the wheat, reserving to the supplier only a personal obligation of the recipient to render money or kind, be considered a bailment only? The arrangement is inconsistent with the very idea of bailment according to English law, which involves the redelivery of a specific thing in its original or some altered form to the bailor or to some other person in accordance with the terms of the bailment. Our attention was called to some decisions of State Courts in the United States of America in which the identity of subject matter was held to be unessential to a bailment when the subject matter was wheat. This is a departure from the common law. Apparently the Canadian decisions do not sanction it (Lawlor v Nicol (1898) 12 Man LR 224). I am unable to understand how there can be a bailment of a thing which does not remain identifiable. Indeed it was not suggested that after identity was destroyed bailment persisted. Mr Cleland met the difficulty by suggesting that, although the wheat might be confused with other wheat immediately upon delivery, the result was a bailment of the whole mass, each separate supplier of wheat being transformed into a joint bailor with all his fellows. This supposes that the [315] suppliers are acting in combination, which they are not, and that under the contract “the purchasers” are bound to retain in their possession all wheat received. There is no trace of such an obligation in the contract, and little knowledge of the course of business is needed to be certain that the entire object of the contract would be frustrated if neither gristing nor exportation of wheat received under such contracts were possible. Indeed the very description of the respondent is “merchant and miller”. In my opinion there was no bailment, and the property passed immediately, and accordingly the appeal should be dismissed. STARKE J: Chapman Bros, who are farmers, delivered, on terms set forth in a document described as a storage warrant, some 2,559 bags of wheat to Verco Bros & Co Ltd, which carries on the business of a merchant and miller. It is admitted that upon delivery the bags were stacked on land belonging to Verco Bros & Co Ltd, together with other wheat delivered to it by other farms on sale or in exchange for like storage warrants, that all such wheat was stacked together, that the wheat delivered by Chapman Bros to Verco Bros & Co Ltd had no mark or symbol or other means of identification thereon, and that the bags were of the same type as used by all other farmers in South Australia. The question is whether the wheat delivered by Chapman Bros to Verco Bros & Co Ltd was transferred to it for value, or was deposited in bailment so that the bailor might require its restoration. The answer depends upon the intention of the parties, gathered from the terms of the storage warrant. This warrant is set out in the judgment under appeal and in the transcript prepared for this Court, and I need not repeat its terms; suffice it to say that Verco Bros & Co Ltd agreed, at any time Chapman Bros so desired, to purchase and pay for the whole or any part of the wheat covered by the warrant at the current market price on the day of purchase, but so that on 30th November 1932 it should purchase and pay for the balance of the wheat then covered by the warrant. The third clause stipulated that Verco Bros & Co Ltd would at any time upon request return to Chapman Bros a quantity of fair average quality wheat equal to that then remaining [316] unpurchased on storage with it, but a proviso is added that it should not be required to return the identical wheat. In case the wheat were purchased, Verco Bros & Co Ltd bore storage and insurance charges, but, in case of the return of any wheat, Chapman Bros agreed to pay buyer’s commission, advances and accrued interest and dockages, together with storage charges. The principles of law applicable have been authoritatively stated in South Australian Insurance Co v Randell (1869) LR 3 PC 101. If the identical subject matter is to be restored, either as it stood or in [11.15]

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Chapman Bros v Verco Bros & Co Ltd cont. altered form, the case is one of bailment. If, on the other hand, the identical subject matter, either as it stood or in altered form, is not to be returned, but a different thing of equal quantity and quality may be given as an equivalent, then a bailment is not created: it is a transfer of property, and the title to the thing originally delivered vests in the transferee. I have looked at the passages cited in Benjamin on Sale, 6th ed (1920) pp 380-382, especially that, at p 381, attributed to Mr Justice Holmes of the Supreme Court of the United States (though I have been unable to obtain the American Law Review), and also at the cases referred to in Benjamin. But my impression is that both the Canadian and the American cases accord with the view of the Judicial Committee (see Benedict v Ker (1878) 29 UCCP 110; Powder Co v Burkhardt (1877) 97 US 110. However this may be, the principle of the decision in South Australian Insurance Co v Randell is decisive so far as this Court is concerned. Some differences in detail exist between the facts proved in that case and those proved in the case now before us. But the critical fact is the same in both, namely, that the respondent was under no obligation to return the identical wheat as it stood or in altered form, but only some other wheat equivalent in quantity and quality. [Dixon J and McTiernan J delivered separate judgments dismissing the appeal on the ground that on delivery of the wheat by the appellants to the respondent, the property in the wheat passed to the respondent and the appellant received only a bare contractual obligation for the redelivery of an equivalent quantity, quality and value of wheat (to the extent that the wheat delivered had not been purchased by the respondent by a nominated date). Evatt J dissented on the ground that his Honour considered that the parties did not intend for the property in the wheat delivered by the appellant to the respondents to pass to the respondents until the respondents either elected to purchase the wheat delivered or to redeliver an equivalent quantity and value of that wheat.]

The Pioneer Container [11.20] KH Enterprise (Cargo Owners) v Pioneer Container (Owners); The Pioneer Container [1994] 2 AC 324 (Privy Council) Facts: The first two groups of plaintiffs each engaged carriers to ship goods by sea under bills of lading which gave the carriers authority to sub-contract the whole or part of the carriage of the goods “on any terms”. The carriers sub-bailed the goods to the defendant shipowners for carriage on board their vessel for part of the voyage, from Taiwan to Hong Kong, under feeder bills of lading containing an exclusive jurisdiction clause which provided that any claim or other dispute thereunder was to be determined in Taiwan. A third group of plaintiffs engaged the shipowners directly for the carriage of goods from Taiwan to Hong Kong on board the vessel. Following a collision in fog, the vessel sank with all her cargo off the coast of Taiwan. The plaintiffs issued a writ in rem in Hong Kong against a sister ship of the vessel for damages for failure to take care of, or deliver, the goods. The shipowners issued a notice of motion in the High Court in Hong Kong seeking a stay of the proceedings in reliance on the exclusive jurisdiction clause. The judge made a preliminary ruling that the clause was valid and was binding on the plaintiffs notwithstanding that the first two groups of plaintiffs had not been parties to the contracts between the carriers and the shipowners contained in the feeder bills of lading; but he subsequently exercised his discretion to dismiss the motion for a stay on the ground that the plaintiffs’ claims in Taiwan had become time-barred and, since they would have been required to provide advance costs and security in that jurisdiction, they had not acted unreasonably in allowing the time bar to expire. On the shipowners’ appeal, the Court of Appeal of Hong Kong held that the exclusive jurisdiction clause was binding on the plaintiffs; that the plaintiffs had acted unreasonably in failing to commence proceedings in Taiwan and the judge had erred in the exercise of his discretion; and, on a fresh exercise of discretion, stayed the proceedings in Hong Kong. 302

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The Pioneer Container cont. [332] Lord Goff of Chieveley [333] The plaintiffs fall into three groups, which have become known as “the Kien Hung plaintiffs”, “the Hankin plaintiffs” and “the Scandutch plaintiffs”. (1)

The Kien Hung plaintiffs shipped goods on board the vessel at Taiwanese ports for carriage to Hong Kong under bills of lading issued in Taiwan and signed on behalf of the shipowners. There was therefore a direct contractual relationship between the Kien Hung plaintiffs and the shipowners, and there is no doubt that the exclusive jurisdiction clause contained in the bills of lading is binding upon these plaintiffs. There are 213 claims under the bills of lading in this category. In virtually all cases, the shippers were in Taiwan, and the receivers in Hong Kong.

(2)

The Hanjin plaintiffs shipped goods on board another vessel in the United States under bills of lading issued by Hanjin Container Lines (“Hanjin”), a Korean company, in respect of the carriage of the goods from the United States to Hong Kong. Each bill of lading contained the following provision: 6. The carrier shall be entitled to sub-contract on any terms the whole or any part of the handling, storage or carriage of the goods and any and all duties whatsoever undertaken by the carrier in relation to the goods.

Hanjin in turn sub-contracted to the shipowners the carriage of the goods over the last stage of the voyage, from Taiwan to Hong Kong. The goods were transshipped onto the vessel in Taiwan, and in respect of all the goods of the Hanjin plaintiffs the shipowners issued a single feeder bill of lading (feeder 103) in the same form as those issued to the Kien Hung plaintiffs (and so incorporating clause 26) acknowledging receipt of [334] 41 container for shipment from Keelung in Taiwan to Hong Kong. There are 15 claims in this category, of which one has Taiwanese connection and 14 have a Hong Kong connection. (3)

The goods of the Scandutch plaintiffs were shipped on board the vessel in Taiwanese ports. Each plaintiff was issued with a bill of lading issued on behalf of Scandutch A/S (“Scandutch”) covering the carriage of the goods from a Taiwanese port to an ultimate destination in Europe or the Middle East. Each bill of lading contained the following provision: 4(1) The carrier shall be entitled to sub-contract on any terms the whole or any part of the carriage, loading, unloading, storing, warehousing, handling and any and all duties whatsoever undertaken by the carrier in relation to the goods.

For the carriage of the goods from Taiwan to Hong Kong, which was sub-contracts by Scandutch to the shipowners, the latter issued a single feeder bill of lading (feeder 104), again in the same form (including clause 26), acknowledging receipt of 140 containers for shipment from Taiwan to Hong Kong, with a view to the containers being transshipped in Hong Kong. There are 214 claims in this category, or which have a Hong Kong connection. The difficulty which has arisen with respect to the Hanjin plaintiffs and the Scandutch plaintiffs is that, on ordinary principles of law, there was no contractual relationship between them and the shipowners; and accordingly these two classes of plaintiff have claimed that the exclusive jurisdiction clause, clause 26, is not binding upon them. However that contention was rejected, both by Sears J and by the Court of Appeal of Hong Kong, on the ground that there was a bailment to the shipowners on terms (including clause 26) which these plaintiffs had expressly or impliedly authorised; and that, on the principles stated by Lord Denning MR in Morris v CW Martin & Sons Ltd [1966] 1 QB 716, these plaintiffs were bound by clause 26. Whether the courts below were correct in so holding is the principal issue which falls for consideration on this appeal; but the further question arises whether, if the plaintiffs were bound by the exclusive jurisdiction clause, the Court of Appeal were justified in interfering with the exercise by the judge of his discretion to refuse a stay of proceedings and, if so, whether the court of Appeal were entitled, exercising their discretion afresh, to order a stay. [11.20]

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The Pioneer Container cont. The central problem Their Lordships turn immediately to the central problem in the case, which is whether the shipowners can rely, as against the Scandutch and Hanjin plaintiffs, on the exclusive jurisdiction clause (clause 26) in the feeder bills of lading to which these plaintiffs were not parties. They think it right to observe, at the outset, that in commercial terms it would be most inconvenient if these two groups of plaintiffs were not so bound. Here is a ship, upon which goods are loaded in a large number of containers; indeed, one container may contain goods belonging to a number of cargo owners. One incident may affect goods owned by several cargo owners, or even (as here) all the cargo owners with goods on board. Common sense and practical convenience combine to demand that all of [335] these claims should be dealt with in one jurisdiction, in accordance with one system of law. If this cannot be achieved, there may be chaos. Much expense may be wasted on litigation in a number of different jurisdictions, as indeed happened in the present case, where there was litigation in eight other counties as well as Hong Kong and Taiwan. There is however no international regime designed to produce uniformity of jurisdiction and governing in the case of a multiplicity of claims of this kind. It is scarcely surprising therefore that shipowners seek to achieve uniformity of treatment in respect of all such claims, by clauses designed to impose an exclusive jurisdiction and an agreed governing law, as in the present clause 26 in the shipowners’ standard form of bill of lading. Within reason, such an attempt must be regarded with a considerable degree of sympathy and understanding. However, so far as English law and the law of Hong Long are concerned, a technical problem faces shipowners who carry goods, for example under the feeder bills of lading in the present case, where there is no contractual relationship between the shipowners and certain cargo owners. This is because English law still maintains, though subject to increasing criticism, a strict principle of privity of contract, under which as a matter of general principle only a person who is party to a contract may sue upon it. The force of this principle is supported and enhanced by the doctrine of consideration, under which as a general rule only a promise supported by consideration will be enforceable at common law. How long these principles will continue to be maintained in all their strictness is now open to question. But, in the middle of this century, judges of great authority and distinction were in no doubt that they should be so maintained. Their Lordships refer in particular to the speech of Viscount Simonds in Midlands Silicones Ltd v Scruttons Ltd [1962] AC 446, 467-468. The present case is concerned with the question whether the law of bailment can here be invoked by the shipowners to circumvent this difficulty. Bailment and sub-bailment Their Lordships are here concerned with a case where there has been a sub-bailment – a bailment by the owner of goods to a bailee, followed by a sub-bailment by the bailee to a sub-bailee – and the question has arisen whether, in an action by the owners against the sub-bailee for loss of the goods, the sub-bailee can rely as against the owner upon one of the terms upon which the goods have been sub-bailed to him by the bailee. In the case of the Hanjin plaintiffs, the goods were received for shipment by Hanjin Container Lines from the shippers, for through carriage from the North American port to Hong Kong, and then sub-bailed to the shipowners for the last leg of the voyage, viz from Taiwan to Hong Kong. In the case of the Scandutch plaintiffs, the goods were received for shipment by Scandutch for through carriage from Taiwan to the Middle East or Europe, and sub-bailed by the shipowners for the first leg of the voyage, again from Taiwan to Hong Kong. The question is whether the shipowners can in these circumstances rely upon the exclusive jurisdiction clause in the feeder bills of lading as against both groups of plaintiffs, notwithstanding that the plaintiffs in neither group were parties to the [336] contract with the shipowners contained in or evidenced by such a bill of lading, having regard to the fact that the plaintiffs are seeking to hold the shipowners liable for failing to care for the goods so entrusted to them or failing to deliver them to the plaintiffs – in other words, for committing a breach of duty which is characteristic of a bailee. 304

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Engaging in Dealings in Choses in Possession: Transfer of Possession by Bailment CHAPTER 11

The Pioneer Container cont. The question whether a sub-bailee can in circumstances such as these rely upon such a term, and if so upon what principle he is entitled to do so, is one which has been considered in cases in the past, but so far neither by the House of Lords nor by the Privy Council. It has been much discussed by academic writers. Their Lordships are grateful to counsel for the citation to them of academic writings, especially Palmer, Bailment, 2nd ed (1991) and Bell, Modern Law of Personal Property in England and Ireland (1989), to which they have repeatedly referred while considering the problems which have arisen for decision in the present case. In approaching the central problem in the present case, their Lordships wish to observe that they are here concerned with two related questions. The first question relates to the identification of the relationship between the owners and the sub-bailee. Once that question is answered, it is possible to address the second question, which is whether, given that relationship, it is open to the sub-bailee to invoke as against the owners the terms upon which he received the goods from the bailee. The relationship between the owners and the sub-bailee Fortunately, authoritative guidance on the answer to the first question is to be found in the decision of the Privy Council in Gilchrist Watt and Sanderson Pty Ltd v York Products Pty Ltd [1970] 1 WLR 1262, an appeal from the Court of Appeal of New South Wales. There, two cases of clocks were shipped from Hamburg to Sydney. On arrival of the ship at Sydney the goods were unloaded, sorted and stacked on the wharf by the defendants, who were ship’s agents and stevedores. The plaintiffs were the holders of the relevant bills of lading. When their agents sought delivery of the two cases from the defendants, one was missing and was never found. The plaintiffs sought to hold the defendants responsible as bailees of the goods. The Privy Council proceeded on the basis that there was a bailment to the shipowners, and a sub-bailment by the shipowners to the defendants; and that the defendants as sub-bailees received possession of the goods for the purpose of looking after them and delivering them to the holders of the bills of lading, who were the plaintiffs. Accordingly, the defendants “took upon themselves an obligation to the plaintiffs to exercise due care for the safety of the goods, although there was no contractual relation or attornment between the defendants and the plaintiffs”: see p 1267 per Lord Pearson, delivering the judgment of the Judicial Committee. In support of that conclusion, the Privy Council relied in particular on Morris v CW Martin & Sons Ltd [1966] 1 QB 716, and on the statements of principle by Lord Denning MR. Diplock LJ and Salmon LJ in that case, at pp 729, 731 and 738 respectively. There a mink stole, sent by the plaintiff to a furrier for cleaning, was sub-bailed by the furrier to the defendants, who were cleaning specialists, under a contract between [337] them and the furrier. The stole was stolen by a servant of the defendants, and the plaintiff claimed damages from them. Both Diplock and Salmon LJJ held that the defendants, by voluntarily receiving into their possession goods which were the property of another, became responsible to the plaintiff as bailees of the goods. Lord Denning MR invoked an authoritative statement of the law in Pollock and Wright, Possession in the Common Law (1888), at p 169, where it is stated: If the bailee of a thing sub-bails it by authority, there may be a difference according as it is intended that the bailee’s bailment is to determine and the third person is to hold as the immediate bailee of the owner, in which case the third person really becomes a first bailee directly from the owner and the case passed back into a simple case of bailment, or that the first bailee is to retain (so to speak) a reversionary interest and there is no direct privity of contract between the third person and the owner, in which case it would seem that both the owner and the first bailee have concurrently the rights of a bailor against the third person according to the nature of the sub-bailment. In addition, Lord Pearson invoked two 19th century cases concerned with the liability of railway companies where the plaintiff buys a ticket from one railway company, and claims liability from [11.20]

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Part 2: Personal Property – Introduction to Choses in Possession

The Pioneer Container cont. another which has undertaken responsibility for part of the services to be rendered to the plaintiff under the contract evidenced by the ticket: see Foulkes v Metropolitan District Railway Co (1880) 5 CPD 157 and Hooper v London and North Western Railways Co (1880) 50 LJQB 103. He also relied on the duty imposed by law on the finder of goods who takes them into his possession. He concluded [1970] 1 WLR 1262, 1270: Both on principle and on old as well as recent authority it is clear that, although there was no contract or attornment between the plaintiffs and the defendants, the defendants by voluntarily taking possession of the plaintiffs goods in the circumstances assumed an obligation to take due care of them and are liable to the plaintiffs for their failure to do so (as found by the trial judge). The obligation is at any rate the same as that of a bailee, whether or not it can with strict accuracy be described as being the obligation of a bailee. In a case such as this the obligation is created by the delivery and assumption of possession under a sub-bailment. In this passage, Lord Pearson was cautious about describing the obligation of the defendants as bailees vis-a-vis the plaintiffs. Even so, both Diplock and Salmon LJJ described the relationship between the owner of the goods and the sub-bailee in Morris v CW Martin & Sons Ltd [1966] 1 QB 716 as that of bailor and bailee, and their Lordships are generally in agreement with this approach. However, Diplock LJ restricted his statement of