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high_court_of_australia:/showbyHandle/1/10325 | decision | commonwealth | high_court_of_australia | text/html | null | Muir v Open Brethren [1956] HCA 14 | https://eresources.hcourt.gov.au/showbyHandle/1/10325 | 2024-09-13T22:44:32.762806+10:00 | High Court of Australia
Dixon C.J. Webb, Fullagar and Kitto JJ.
Muir v Open Brethren
[1956] HCA 14
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
April 13
Dixon C.J., Webb and Kitto JJ.
This appeal concerns the residuary bequest contained in the last will of Charles Edmund Button late of Burnie who died on 10th November 1945. The will was duly admitted to probate. The question is whether the residuary provision is a valid charitable bequest or is void. The contest is between parties representing those who would take as on an intestacy on the one side and, on the other side, the Attorney-General representing the interest of charities and the particular body in question, namely the Open Brethren. The Open Brethren constitutes a religious body which, according to the affidavit, is known throughout the English-speaking world. There is a branch at Burnie in Tasmania consisting of an assembly which is self-governing. At Burnie there is a gospel hall held upon trust for the Open Brethren.
After appointing executors and trustees the testator's will gives, devises and bequeaths to his trustees all his real and personal property upon trust for conversion. Subject to payment of debts, the will directs that the net proceeds of conversion should be dealt with by the trustees in the manner which it proceeds to direct. There are certain specific bequests and certain directions to pay sums of money to named charitable institutions. The residuary gift the validity of which is now in question is as follows:—"To pay the balance (if any) of the said net proceeds into the funds of the Assembly or body of Christians commonly known as "Open Brethren" meeting at the date of this my Will in the Gospel Hall Wilson Street Burnie aforesaid such sum to be employed by them in relieving cases of need and distress and in assisting persons in indigent circumstances and in particular (but not exclusively or in any way that shall limit their discretion) in assisting and relieving persons who have been or shall be adversely affected by the effects of the War in which the British Commonwealth of Nations is now engaged and I declare that the receipt or acknowledgement of not less than three of the Elder Brethren belonging to the said Assembly or body of Christians shall be a good discharge to my Trustees in respect of the said monies and I declare that any Brethren who are accustomed to regularly attend the business meetings of the said Assembly shall be deemed to be "Elder Brethren" within the meaning of the said term so used in my said Will."
The validity of this provision is attacked upon the ground that a valid charitable purpose is not expressed by so much of it as provides that the sum bequeathed shall be employed by the Open Brethren in assisting and relieving persons who have been or shall be adversely affected by the effects of the war. On that footing it is contended that it forms an inseverable part of the objects for which the money may be employed so that the whole bequest is void.
It is not seriously contended that if the earlier part of the provision stood alone it would not be valid as a bequest to a charitable object although it is not conceded that it would be so. There is little doubt, however, that if it were not for the words following the expression "and in particular" the provision would amount to a bequest for the relief of poverty. Clearly it must be so if the words "in relieving cases of need and distress" are confined to the relief of poverty, and upon the true construction of these words it can hardly be doubted that they do not go further than the relief of necessitous cases. In Kendall v. Granger [1] , Lord Langdale M.R. says: "In this case the direction is to apply this fund "for the relief of domestic distress, assisting indigent but deserving individuals". I confess, in my view, that if the sentence had ended here, I should have said that this was a good charitable purpose; for its object is to relieve distress by assisting indigent but deserving individuals and that would be a valid charitable purpose because of the word "indigent" " [2] . It is, of course, undeniable that the words "in assisting persons in indigent circumstances" relate only to the relief of poverty.
1. (1842) 5 Beav. 300 [49 E.R. 593].
2. (1842) 5 Beav., at p. 303 [49 E.R., at p. 594].
On the other hand, it was maintained on the part of the Attorney-General and of the Open Brethren that the words "in assisting and relieving persons who have been or shall be adversely affected by the effects of the War", if they stood alone, would not go beyond a valid charitable object. But unless some very narrow construction be given to the words "adversely affected" this would indeed be a difficult view to sustain. As will appear the earlier part of the clause does enable, and in fact require, a restricted meaning to be placed upon them. But on the hypothesis that they stood alone there would not be a justification for construing them narrowly.
The real question is whether the words "in particular" confine that part of the bequest so as to make it only a special instance of that for which the earlier part of the clause provides, viz. of the relief of cases of need and distress and the assistance of persons in indigent circumstances. In the Supreme Court Gibson J. construed the bequest in this manner and upon that construction upheld it as valid.
There is a considerable amount of tautology in the provision. The same conception of poverty is referred to by the words "need", "distress" and "indigent". It is hard to distinguish between "relief" in the case of "need and distress" and "assistance" in the case of indigency. But clearly enough the purpose of the bequest so far is alleviation of necessitous circumstances. The challenged portion of the bequest immediately follows and is introduced by the words "in particular". It is an expression commonly used when a special example is given of what precedes. Indeed the words "in particular" can have no other meaning. The bracketed words "but not exclusively or in any way that shall limit their discretion", inevitably suggest a fear on the part of the draftsman that what he intended as but one example might be treated as covering the whole ground, so that the general and wider discretion he had given would be limited by his particular example. The words "assisting and relieving" are repeated from the earlier part of the clause. Although "adversely affected" is an extremely wide expression it would not be inappropriate to use it as a compendious though perhaps vague reference back to the earlier words. Probably the purpose of the provision beginning with the words "in particular" was to state that among persons in need or in distress or indigent those affected by the war formed a special object of the testator's solicitude. It is equivalent to saying "and in particular the Open Brethren are to prefer that class in employing the money". To treat the words "in particular" as introducing a new and different class not falling at all within the earlier words would be to give the expression a very unnatural meaning. Once the clause is construed as merely giving a special example of persons in need or in distress and of persons in indigent circumstances no difficulty exists in holding it to be a good charitable bequest.
It follows that the order made by Gibson J. is correct. The appeal should be dismissed with costs.
Fullagar J.
In this case I am of opinion that the decision of Gibson J. was correct, and I agree with the judgment of the Chief Justice and Webb and Kitto JJ.
If the will, on its proper construction meant that the trust for "assisting and relieving persons adversely affected by the effects of the War" was a trust for a specific purpose additional to that of "relieving cases of need and distress and assisting persons in indigent circumstances", it must, I think, have been held that we have here a trust for mixed charitable and non-charitable purposes. And, since there is in Tasmania no such statutory provision as that contained in s. 131 of the Property Law Act 1928 Vict., it must have followed that the whole trust of residue failed for uncertainty.
But the words "in particular"—reinforced and emphasised, as they seem to me to be, by the words in brackets, which immediately follow—make it clear, in my opinion, that no such specific additional purpose is intended. They show that the words "persons adversely affected by the war" are intended to describe a particular class of "persons in indigent circumstances"—a class to which the testator desires, but does not command, that preferential consideration be given. The whole trust is thus seen to be a trust for the relief of poverty, and nothing else, and such a trust is a charitable trust.
The appeal should, in my opinion, be dismissed. |
high_court_of_australia:/showbyHandle/1/10804 | decision | commonwealth | high_court_of_australia | text/html | null | Latec Investments Ltd v Hotel Terrigal Pty Ltd [1965] HCA 17 | https://eresources.hcourt.gov.au/showbyHandle/1/10804 | 2024-09-13T22:44:35.001886+10:00 | High Court of Australia
Kitto, Taylor and Menzies JJ.
Latec Investments Ltd v Hotel Terrigal Pty Ltd
[1965] HCA 17
ORDER
Appeal allowed and the decree of the Supreme Court of New South Wales in its equitable jurisdiction discharged. In lieu thereof declare that the lands comprised in Certificates of Title Registered Volume 4283 Folio 224, Volume 3969 Folio 66, Volume 4747 Folio 243, Volume 5315 Folio 214 and Volume 7232 Folio 233 are subject to a first equitable charge in favour of the appellant Southern Hotels Pty. Limited (receiver appointed) to secure the payment to the appellant of the principal sum advanced under Memorandum of Mortgage Registered No. G. 830055 together with interest accrued thereon such principal sum and interest being calculated on the basis that the said Memorandum of Mortgage has never been discharged and that the appellant Southern Hotels Pty. Limited (receiver appointed) is entitled in equity to exercise all of the rights and powers which were conferred by the said Memorandum of Mortgage upon the mortgagees thereunder. Further declare that subject to the rights of the appellant Southern Hotels Pty. Limited (receiver appointed) under such equitable charge the lands comprised in the said Certificates of Title are subject to the charge created by Deed of Trust dated 8th March 1960, and are charged with the payment to the appellant The M.L.C. Nominees Limited as trustee under the said Deed of Trust of the whole of the moneys payable under the said Deed of Trust and are subject to all the rights and powers conferred by the said Deed of Trust upon the said trustee thereunder or upon any receiver appointed thereunder in respect of property subject to the charge created by the said Deed of Trust. Further declare that Memorandum of Mortgage Registered No. G. 920299 was at the time of the execution thereof and has been at all relevant times a valid and enforceable mortgage of the lands comprised in the said Certificates of Title. Further declare that subject to the rights of the appellant Southern Hotels Pty. Limited (receiver appointed) under the said first equitable charge and to the rights of the appellant The M.L.C. Nominees Limited and any receiver appointed by it under the said Deed of Trust the respondent Hotel Terrigal Pty. Limited (in liquidation) is entitled to an order setting aside the Contract of Sale dated 26th November 1958 made between Latec Investments Limited and Southern Hotels Pty. Limited for the sale of the lands comprised in the said Certificates of Title and Memorandum of Transfer Registered No. H150682 and for cancellation by the respondent The Registrar-General of the said Memorandum of Transfer and the memorials endorsed upon the said Certificates of Title upon payment by the said respondent Hotel Terrigal Pty. Limited (in liquidation) to the appellant Southern Hotels Pty. Limited (receiver appointed) of such sum as may be found to be payable upon the taking of all proper accounts as between mortgagor and mortgagee in respect of Memorandum of Mortgage Registered No. G. 920299 and that subject to the said rights of the said appellants Southern Hotels Pty. Limited (receiver appointed) and The M.L.C. Nominees Limited and any receiver appointed by the said The M.L.C. Nominees Limited under the said Deed of Trust upon such payment as aforesaid the said Respondent Hotel Terrigal Pty. Limited (in liquidation) is entitled to an order that the appellants do cause to be registered a memorandum of discharge of the said Mortgage. Further order that it be referred to the proper officers of the Supreme Court of New South Wales in its equitable jurisdiction and of this Court to tax and certify the respective costs of the respondents Tooth & Co. Limited and The Registrar-General as submitting parties and that such costs when so taxed and certified be paid by the respondent Hotel Terrigal Pty. Limited (in liquidation) to the said respondents Tooth & Co. Limited and The Registrar-General respectively or their respective Solicitors. Further order that it be referred to the proper officer of the Supreme Court of New South Wales in its equitable jurisdiction to tax and certify the costs of the respondent Idlewise Pty. Limited of the suit excluding the costs occasioned by the counterclaim of the said Idlewise Pty. Limited and that such costs when so taxed and certified be paid by the respondent Hotel Terrigal Pty. Limited (in liquidation) to the said respondent Idlewise Pty. Limited or its Solicitors. Further order that it be referred to the proper officer of this Court to tax and certify the costs of the appellants of this appeal and that such costs when so taxed and certified be paid by the respondent Hotel Terrigal Pty. Limited (in liquidation) to the appellants or their Solicitors, Messrs. Freehill Hollingdale & Page. Further order that liberty be reserved to all parties to apply on seven (7) days notice to the other parties to the Supreme Court of New South Wales in its equitable jurisdiction for any orders and enquiries necessary better to carry into effect the above declarations and by consent further Order that the sum of fifty pounds (£50.0.0) paid into Court by the appellant Latec Investments Limited (receiver appointed) as security for the costs of this appeal be paid out to the said appellant Latec Investments Limited (receiver appointed) or its solicitors Messrs. Freehill Hollingdale & Page.
Cur. adv. vult.
The following written judgments were delivered:—
1965, March 25
Kitto J.
This is an appeal from a decree of the Supreme Court of New South Wales in its equitable jurisdiction setting aside a contract of sale and a memorandum of transfer of certain land under the provisions of the Real Property Act, 1900 N.S.W. by which the first appellant purported to exercise its power of sale under a memorandum of mortgage given to it by the first respondent as security for a loan. The decree went on to declare the memorandum of mortgage unenforceable and to restrain the first appellant from exercising any power, right or remedy thereunder, the ground for this relief being, as appears from the reasons for judgment, that in respect of the contract of loan and the securities therefor the provisions of the Money-lenders and Infants Loans Act, 1941 N.S.W. had not been complied with. Since the making of the decree this Court has given a decision, in Motel Marine Pty. Ltd. v. I.A.C. (Finance) Pty. Ltd. [1] , which shows that the Money-lenders and Infants Loans Act has no application to the present case. So much of the decree as is based upon the provisions of that Act must therefore be vacated. The order setting aside the contract of sale and transfer, however, was based upon a conclusion of fact that the mortgagee's power of sale had been exercised not in good faith but in fraud of the mortgagor. Whether relief should have been granted upon this ground is the question to be decided now.
1. (1964) 110 C.L.R. 9.
The second appellant is the purchaser from the mortgagee, and the third is the trustee of a debenture deed who claims a charge over the assets of the purchaser. The second and third respondents do not need to be considered on this appeal.
The mortgagee lent the mortgagor £36,365 on 10th March 1958, taking as security a memorandum of mortgage over the subject land (subject to an earlier mortgage) and an equitable mortgage over its undertaking and assets generally. On the subject land was a hotel called the Hotel Terrigal and a guest house. The mortgagee appointed a receiver under its equitable mortgage in June 1958, and on 23rd July 1958 the mortgagor went into voluntary liquidation. The mortgagee took no steps to effect a sale until late in September 1958, and not until after its directors had learned that a stranger might be interested to purchase the property. It made no endeavour to sell to the stranger or to find any other purchaser by private contract. Instead, its board determined at some stage to sell the property to the second appellant, which was one of several subsidiaries of the mortgagee. They had identically composed boards of directors, and the mortgagee held all the shares in the second appellant. Before any sale was made, a firm of estate agents was instructed to put the property up for auction on Friday, 3rd October 1958. A Friday was generally recognized as not a good day for such a sale, and the interval of time available for advertisements was significantly less than usual. Nevertheless the auctioneers made efforts to attract potential buyers and some thirty-five people attended the auction. The highest bid received was £58,000. Although the mortgagee's directors knew that an experienced valuer had valued the property six months before at £54,000 for the hotel and £2,500 for the guest house, a reserve of £85,000 had been fixed and the property was accordingly passed in. The auctioneers then advised the mortgagee to accept the offer of £58,000 if a better should not be forthcoming. The mortgagee, however, made no attempt to negotiate with any of the bidders or to obtain any higher offer. Its directors determined—indeed it is a reasonable inference from the unusual features of the submission to auction that for some time they had had it in mind—that to have the Hotel Terrigal owned by one of their group of companies would be better for them than selling it to a stranger. One of the group owned a competing hotel in the same district, and the benefits to be derived from peaceful co-existence had attractions too obvious to be overlooked. The fact that an exercise of the power of sale so as to bring about this result would amount to a virtual foreclosure did not deter them. Without any further attempt having been made to find an outside purchaser, the mortgagee entered into a contract with its subsidiary, the second appellant, to sell the mortgaged property to the latter at the price of £60,000. There was, of course, no bargaining between them. The common board of directors simply fixed the figure and had a contract prepared and executed by both companies. The contract, dated 26th March 1958, provided for payment of £6,000 as a deposit, but fixed no time for payment either of that amount or of the balance of £54,000. The memorandum of transfer, acknowledging receipt by the mortgagee of £19,675, was registered on 25th February 1959. In fact nothing had been paid at that stage. The first mortgage over the property was paid off by the purchaser in the following July, but it was not until a year after the date of the contract that any of the purchase money was paid to the mortgagee. Then the whole outstanding amount was paid in one sum.
The amount owing under the mortgage at the time of the sale was of the order of £86,000. It may be that by no means could a purchaser have been found to buy the property at so high a price, but the course that was followed in respect of the auction was not calculated to test the question. Vis-à-vis the mortgagor, the mortgagee was not bound to use its best endeavour to obtain the highest price procurable; but what it in fact did points pretty clearly to the conclusion that its intention was not really to sell the property but was to ascertain what kind of figure, being put into a contract of sale to the subsidiary, would look like a genuine sale price. As between the mortgagee and the subsidiary it did not matter much what the figure was; but there was an obvious advantage, in case of a possible impeachment of the sale, in selecting a price a little higher than the best bid obtained at an auction. The only danger in holding the auction was that a bid might be obtained which exceeded the amount owing under the mortgage. If that should happen, there could be no excuse for not accepting it, and the hotel would have to pass into a stranger's hands; but, by fixing a short date for the auction and choosing an unpropitious day of the week, as much was done to obviate this unfortunate result as was possible consistently with employing an auctioneer who was no party to the scheme and creating an appearance of a genuine attempt to sell at a proper price.
The onus clearly lay upon the purchaser, being a subsidiary of the mortgagee, to satisfy the court that the power of sale was exercised in good faith, and that reasonable steps were taken to obtain a fair price: Farrar v. Farrars Ltd. [1] . That onus it signally failed to discharge. The learned trial judge concluded that there was a lack of that kind of good faith which in the eyes of a court of equity is essential to the validity of a mortgagee's sale on the principles discussed in such cases as Kennedy v. De Trafford [2] ; Barns v. Queensland National Bank Ltd. [3] and Pendlebury v. Colonial Mutual Life Assurance Society Ltd. [4] ; and he also concluded that the collaboration of the mortgagee and the purchaser through their common directors amounted to fraud in the sense of ss. 42 and 43 of the Real Property Act, 1900 N.S.W., so that the mortgagor's claim to have the sale set aside is not defeated by the indefeasibility which those sections accord to a registered title. I have already said enough to show that in the first of these conclusions I agree. As to the second, we were invited to hold that nothing is fraud in the sense which is relevant under the Real Property Act unless it includes a fraudulent misrepresentation. The whole course of authority on this branch of the law is to the contrary. Moral turpitude there must be; but a designed cheating of a registered proprietor out of his rights by means of a collusive and colourable sale by a mortgagee company to a subsidiary is as clearly a fraud, as clearly a defrauding of the mortgagor, as a cheating by any other means: cf. Waimiha Sawmilling Co. v. Waione Timber Co. Ltd. [1] . In the present case it is all very well to say that the directors had reason to think that on a genuine sale they would not have got more than £60,000 for the property. The fact remains—I see no escape from concluding that it is a fact—that the reason why there was only a pretence of attempting to get a better price was simply that the object in view was not really to effect a sale, but was to destroy the mortgagor's interest and get the hotel for the mortgagee's group of companies, without allowing the mortgagor the opportunities to pay off the mortgage which the procedure for foreclosure would have afforded. It is impossible to regard the case as only one of constructive or equitable fraud—there was much more in it than a mere fraud upon the power, as it is sometimes called. There was pretence and collusion in the conscious misuse of a power. It may be that those concerned salved their consciences by telling themselves that the mortgagor company, being already in liquidation, was in so parlous a financial condition that the course they were taking was unlikely in the long run to do anyone any harm. But it was a dishonest course none the less, and the proper name for it is fraud.
1. (1888) 40 Ch. D. 395, at p. 398.
2. [1897] A.C. 180.
3. (1906) 3 C.L.R. 925.
4. (1912) 13 C.L.R. 676.
5. [1926] A.C. 101, at p. 106.
If the mortgagor had sought the intervention of the court without delay, the findings of fact with which so far I have dealt would necessarily have led to a decree setting aside the sale as against the mortgagee and the purchaser and granting consequential relief. But nearly five years went by before proceedings were commenced, and it is necessary to consider whether the mortgagor's right to relief is affected by what occurred in that time. First let me be clear about the nature of the right which the mortgagor might have asserted. To say that the court would have set the sale aside as against the mortgagee and its purchaser is not to say that either the contract or the ensuing transfer would or could have been rendered void at law. It means only that the purchaser would (in effect) have been declared compellable to act in relation to the mortgagor as if the mortgagee had sold and transferred not the mortgaged property but only the mortgage and the moneys thereby secured: see Selwyn v. Garfit [2] ; Stump v. Gaby [3] . The appropriate consequential relief would not have been granted, as in the case of a mortgage of land under common title, on the footing that the sale and transfer had been ineffectual to extinguish an equity of redemption and that the mortgagor was therefore entitled to redeem as against the purchaser: cf. Bailey v. Barnes [1] ; Parkinson v. Hanbury [2] ; Sewell v. Agricultural Bank of Western Australia [3] ; Coroneo v. Australian Provincial Assurance Association Ltd. [4] , for the mortgagor had the legal title, not an equity of redemption, and the transfer had operated to deprive him of the legal title by virtue only of special statutory provisions: see ss. 58 and 59 of the Real Property Act and ss. 109, 110 and 111 of the Conveyancing Act, 1919-1954 N.S.W.. The right which the mortgagor had immediately before the sale was a right to have the mortgagee ordered (notwithstanding that the contractual date for payment had passed) to receive what should be found on a taking of accounts to be owing under the mortgage and thereupon to execute a discharge of the mortgage: Greig v. Watson [5] ; Perry v. Rolfe [6] ; see also Re Forrest Trust [7] . After the sale, however, the reasoning which would have led a court of equity, if the land had been under common law title, to refuse to recognize the sale as having destroyed the equity of redemption would have led necessarily to the conclusion that equity would treat the purchaser as if it had taken a transfer of the mortgage only, though with this difference, that since the purchaser, unlike the mortgagee, had acquired the legal estate in the land the mortgagor must be accorded a true equity of redemption. Against the assertion of this equity of redemption, s. 112 (3) (a) of the Conveyancing Act, 1919-1961 N.S.W. would have afforded no protection, because the purchaser had had the clearest notice of the invalidity of the mortgagee's exercise of its power of sale: see Bailey v. Barnes [8] .
1. (1888) 38 Ch. D. 273, at p. 280.
2. (1852) 2 De G. M. & G. 623, at p. 630 [42 E.R. 1015, at p. 1018].
3. [1894] 1 Ch. 25, at p. 27.
4. (1860) 1 Dr. & Sm. 143 [62 E.R. 332].
5. (1930) 44 C.L.R. 104, at p. 114.
6. (1935) 35 S.R. (N.S.W.) 391, at p. 394.
7. (1881) 7 V.L.R. (Eq.) 79.
8. [1948] V.L.R. 297.
9. [1953] V.L.R. 246.
10. [1894] 1 Ch. 25.
But, as I have said, the mortgagor took no step to establish its equity of redemption for nearly five years. One reason was that the voluntary liquidator had no funds available for litigation. But whatever the full tally of the reasons may have been, if there were nothing more to consider than the bare fact of the delay it may be that the mortgagor would not be precluded from asserting its rights even after so long a time: see Fysh v. Page [9] . But an important change in the situation occurred a little more than a year after the sale. On 18th March 1960, the first appellant executed a trust deed in respect of debentures to be issued, and it put out to the public a series of prospectuses which led many persons to take up debentures. The prospectuses showed, as the fact was, that the purchaser of the mortgaged property, the second appellant, had joined in the trust deed as a guarantor and had given the trustee, who is the third appellant here, a floating charge over all its assets as security for the debentures. Each prospectus, moreover, contained an explicit statement that the Hotel Terrigal was owned by the second appellant. The statement, of course, would have been true if the second appellant's title had been unimpeachable by the mortgagor, and neither the trustee nor the persons who took up debentures were given any cause to doubt it. It is a fair inference that the liquidator of the mortgagor company had notice of what was happening, for he was the auditor of the mortgagee. After another two and a half years the floating charge crystallized. The trustee of the debenture deed appointed a receiver of both the first and the second appellants, but it was not until a year later still that a new liquidator of the purchaser was appointed and the present proceedings were begun.
1. (1956) 96 C.L.R. 233, at p. 243.
In these circumstances the trustee, with the support of its co-appellants, contends that the mortgagor ought not to be given the relief to which, according to the views I have expressed, it would otherwise be entitled. As between the trustee and the mortgagor I am of opinion the contention should succeed. In all cases where a claim to enforce an equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having given rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. This is the true meaning of the maxim qui prior est tempore potior est jure: Rice v. Rice [1] . But where the merits are unequal, as for instance where conduct on the part of the owner of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist, the maxim may be displaced and priority accorded to the later interest. In the present case it seems to me that there is much to be said for holding that, since during the long period of the mortgagor's delay in setting up the invalidity of the purchaser's title persons were induced to lend money on debentures in the belief that an unencumbered fee simple in the subject property formed part of the security under the trustee's floating charge, the mortgagor ought not to be allowed to insist upon its equity of redemption as against the equitable interest of the trustee.
1. (1853) 2 Drew. 73, at p. 78 [61 E.R. 646, at p. 648].
But apart altogether from any question of estoppel by conduct, in my opinion the equitable charge of the trustee for the debenture holders stands in the way of the mortgagor's success because it was acquired for value and without any notice either of the existence of the mortgagor's right to set aside the sale or of any facts from which such a right might be inferred. The trustee, of course, has not the legal estate; its rights are purely equitable; but the case falls within one of the categories described in the judgment of Lord Westbury in Phillips v. Phillips [1] in which the legal estate is not required in order that a defence of purchase for value without notice may succeed. It is the case of a suit "where there are circumstances that give rise to an equity as distinguished from an equitable estate—as, for example, an equity to set aside a deed for fraud, or to correct it for mistake" [2] . In such a case, his Lordship said, if the purchaser under the instrument maintains the plea of purchase for value without notice "the Court will not interfere" [2] . It is true that if the mortgagor in the present case was entitled to have the mortgagee's sale set aside it had more than a mere equity: it had, as I have pointed out, an equity of redemption, and such an interest, being in respect of an estate in fee simple, has been considered an equitable estate ever since Lord Hardwicke decided Casborne v. Scarfe [3] see also [4] . But each of the illustrations Lord Westbury chose was also a case where the equity was accompanied by an equitable interest which might constitute an equitable estate. So much had been shown by decisions of most eminent judges, at least twice in the ten years before his Lordship spoke: see Stump v. Gaby [5] ; Gresley v. Mousley [6] , and Lord Westbury's judgment gives every indication of an intention to state systematically the effect of previous decisions, and not to depart from them in any degree. The illustrations therefore make it clear, it seems to me, that the cases to which his Lordship was referring were not only those in which there is an assertion of an equity unaccompanied by an equitable interest (as was held to be the case in Westminster Bank Ltd. v. Lee [7] and National Provincial Bank Ltd. v. Hastings Car Mart Ltd. [8] —indeed he may not have had them in mind at all—but those in which an equity is asserted which must be made good before an equitable interest can be held to exist. In the latter class of cases the equity is distinct from, because logically antecedent to, the equitable interest, and it is against the equity and not the consequential equitable interest that the defence must be set up. That the defence of purchase for value without notice (in the absence of the legal estate) is a good defence against the assertion of the equity in such a case had been established long before Lord Westbury's time. In Malden v. Menill [1] , for example, Lord Hardwicke had refused rectification of an instrument for mistake, as against a purchaser of an equitable interest without notice, on the ground that the mistake should not "turn to the prejudice of a fair purchaser". Such cases as Garrard v. Frankel [2] and Bainbrigge v. Browne [3] were soon to be decided on the same principle. See generally Halsbury's Laws of England, 3rd ed. vol. 14, p. 537, par. 1008. The reason of the matter, as I understand it, is that the purchaser who has relied upon the instrument as taking effect according to its terms and the party whose rights depend upon the instrument being denied that effect have equal merits, and the court, finding no reason for binding the conscience of either in favour of the other, declines to interfere between them. Consequently the party complaining of the fraud or mistake finds himself unable to set up as against the other the equitable interest he asserts; but the fact remains that it is against the preliminary equity, and not against the equitable interest itself, that the defence of purchase for value without notice has succeeded. The maxim qui prior est tempore is not applicable, for it applies only as between equitable interests, the logical basis of it being that in a competition between equitable interests the conveyance in virtue of which the later interest is claimed is considered, as Lord Westbury pointed out, to be innocent, in the sense of being intended to pass that which the conveyor is justly entitled to and no more: [4] . Where a claim to an earlier equitable interest is dependent for its success upon the setting aside or rectification of an instrument, and the court, notwithstanding that the fraud or mistake (or other cause) is established, leaves the instrument to take effect according to its terms in favour of a third party whose rights have intervened, the alleged earlier equitable interest is unprovable against the third party, and consequently, so far as the case against him discloses, there is no prior equitable interest to which his conveyance can be held to be subject.
1. (1861) 4 De G.F. & J. 208, at p. 218 [45 E.R. 1164, at p. 1167].
2. (1861) 4 De G.F. & J., at p. 218 [45 E.R., at p. 1167].
3. (1861) 4 De G.F. & J., at p. 218 [45 E.R., at p. 1167].
4. (1737) 1 Atk. 603 [26 E.R. 377].
5. (1738) 2 J. & W. 194 App. [ 37 E.R. 600].
6. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
7. (1859) 4 De G. & J. 78 [45 E.R. 31].
8. [1956] Ch. 7.
9. [1964] Ch. 9.
10. (1737) 2 Atk. 8, at p. 13 [26 E.R. 402, at p. 405].
11. (1862) 30 Beav. 445 [54 E.R. 961].
12. (1881) 18 Ch. D. 188.
13. (1861) 4 De G. F. & J. 208, at p. 215 [45 E.R. 1164, at p. 1166].
On the principle to which Lord Westbury referred it seems to me inevitable that the mortgagor's claim in the present case to have the mortgagee's sale and the transfer to the purchaser "set aside", i.e. treated as if they were only a sale and transfer of the mortgage, should fail as against the trustee for the debenture holders, though it should succeed as against the mortgagee and the purchaser. It appears that the mortgage was a second mortgage and that after the sale the purchaser paid off the first mortgage. The purchaser is entitled therefore to stand in the shoes of the first mortgagee. The result is that the mortgaged property is subject, first, to the purchaser's rights in respect of the discharge of the first mortgage; secondly, to the trustee's charge; and thirdly, to the purchaser's rights as notional transferee of the second mortgage under the (otherwise invalid) sale. The mortgagor is entitled to anything that may remain of the property or its proceeds after these encumbrances have been satisfied. The indications seem to be that after the rights of the trustee have been satisfied there will be nothing left, and for that reason it seems unnecessary to make an order for working out the rights of all parties in detail.
On the views I have stated, the appeal should be allowed, the greater part of the decree of the Supreme Court should be set aside, and a declaration should be made establishing the rights of the purchaser in respect of the first mortgage and of the trustee for the debenture holders. Perhaps any further relief might be left to be given by the Supreme Court under a general liberty to apply. Probably, though I express no final opinion at the moment, the costs both here and in the Supreme Court should be paid by the first and second appellants so far as they relate exclusively to the question whether the mortgagee's sale and transfer were impeachable for lack of good faith, but otherwise the costs in both courts (except those of the counterclaim by the defendant Idlewise Pty. Ltd.) should be paid by the plaintiff, the first respondent here, in view of the fact that it fails both on its claim under the Moneylenders Act and on its claim to priority over the trustee for the debenture holders. The proper course is, I think, to direct that short minutes of the order to be made be brought in by the appellants, preferably after consultation between counsel for all parties. The appeal may then be restored to the list and the appropriate order may be made.
Taylor J.
In the suit which has led to this appeal the respondent Hotel Terrigal Pty. Limited (in liquidation) sought a decree setting aside a transfer of land made by the first-named appellant, Latec Investments Limited, to the second-named appellant, Southern Hotels Limited, a wholly-owned subsidiary of the first-named appellant with a common board of directors. The transfer was made in purported exercise of Latec's power of sale as the registered mortgagee of the land in question and it was attacked by the mortgagor, Hotel Terrigal, on the ground that the sale which led to the transfer was not made bona fide in the exercise of the mortgagee's power of sale. A further contention based upon the provisions of the Money-lenders and Infants Loans Act was not pursued upon the appeal in view of the recent decision of this Court in Motel Marine Pty. Ltd. v. I.A.C. (Finance) Pty. Ltd. [1] . Some time after the transfer to Southern Hotels, Latec and its subsidiaries gave to the third-named appellant, The M.L.C. Nominees Limited, security by way of equitable charge over all their assets and a further question arises whether, if it be shown that Hotel Terrigal is otherwise entitled to relief against the first and second-named appellants, that relief can be afforded subject only to the subsequently acquired interest of The M.L.C. Nominees. On the view of the facts which the learned judge of first instance accepted, it was held that the sale was not made bona fide in the exercise of the mortgagee's power of sale, that it was part of a fraudulent scheme to which both the vendor and purchaser were party "to acquire the Hotel Terrigal for the Latec chain", that the claim of Hotel Terrigal was not barred by laches and that it prevailed over the interest of The M.L.C. Nominees. Further his Honour rejected the contention that ss. 58 and 59 of the Real Property Act so operated, in any event, to confer an indefeasible title upon Southern Hotels.
1. (1964) 110 C.L.R. 9.
The relevant facts are set out in the reasons of the learned judge and in my view his conclusions on the matters which arose as between Hotel Terrigal and the first and second-named appellants were soundly based. I think that upon the proved facts it is undeniable that the sale to Southern Hotels was not made bona fide in the exercise of Latec's power of sale as mortgagee and that his Honour's assessment of the conduct of the parties was completely justified. I should add that I entirely agree with the observations of Kitto J. on this branch of the case and, having passed over the argument in so far as it was based on ss. 58 and 59 of the Real Property Act as being without substance, content myself with dealing with the contention advanced on behalf of The M.L.C. Nominees that its claim should prevail over that of Hotel Terrigal.
This contention was based upon an observation of Lord Westbury in Phillips v. Phillips [2] , a case in which the proposition was asserted in argument that a court of equity "would give no relief whatever to any claimant against a purchaser for value without notice" [1] . His Lordship was "struck with the novelty" [1] of the proposition and for the purpose of dealing with it found it "necessary to revert to first principles" [1] . He said: "I take it to be a clear proposition that every conveyance of an equitable interest is an innocent conveyance, that is to say, the grant of a person entitled merely in equity passes only that which he is justly entitled to and no more. If, therefore, a person seised of an equitable estate makes an assurance by way of mortgage or grants an annuity, and afterwards conveys the whole estate to a purchaser, he can grant to the purchaser that which he has, viz., the estate subject to the mortgage or annuity, and no more. The subsequent grantee takes only that which is left in the grantor" [1] . Having further examined the doctrine he went on to say: "where there are circumstances that give rise to an equity as distinguished from an equitable estate—as for example, an equity to set aside a deed for fraud, or to correct it for mistake—and the purchaser under the instrument maintains the plea of purchase for valuable consideration without notice, the Court will not interfere" [2] . However, in the case before the Court on that occasion the plaintiffs had, as his Lordship found, an equitable estate and so what passed to the defendants by virtue of the deed upon which they relied was necessarily subject to the plaintiff's earlier interest and, so, the case was not affected by the quoted proposition. Lord Westbury's observations were quoted by Fry J. in Cave v. Cave [3] but this again was a case in which the plaintiffs were held to have an equitable interest in the subject-matter of the litigation.
1. (1861) 4 De G. F. & J. 208 [45 E.R. 1164].
2. (1861) 4 De G. F. & J., at p. 215 [45 E.R., at p. 1166.]
3. (1861) 4 De G. F. & J., at p. 215 [45 E.R., at p. 1166.]
4. (1861) 4 De G. F. & J., at p. 215 [45 E.R., at p. 1166.]
5. (1861) 4 De G. F. & J., at p. 215 [45 E.R., at p. 1166.]
6. (1861) 4 De G. F. & J., at p. 218 [45 E.R., at p. 1167].
7. (1880) 15 Ch. D. 639.
In the present case it is contended on behalf of The M.L.C. Nominees that after the sale and transfer to Southern Hotels, Hotel Terrigal had on the view of the facts most favourable to it nothing more than a mere equity to set aside the transaction and, as I understand the argument, this proposition is put upon the authority of the examples given by Lord Westbury of cases where the right which is being asserted is "an equity as distinguished from an equitable estate—for example, an equity to set aside a deed for fraud, or to correct it for mistake". But to my mind the argument misconceives the significance of Lord Westbury's observation and the assertion that Hotel Terrigal had nothing more than a mere equity is made in the face of abundant authority to the contrary to which I shall presently refer. Before doing so, however, it should be observed that this is not a case of a common law mortgage; it is a case where the registered mortgage created a statutory charge over the mortgagor's land leaving the whole of the legal and beneficial ownership thereof in the mortgagor. No doubt the registration of the transfer operated to transfer the legal title in the land to Southern Hotels but I find it difficult to see why it should be thought that a sale and transfer made and given by a mortgagee not bona fide "within the limits of the power" (Pendlebury v. Colonial Mutual Life Assurance Society Ltd. [1] ) can operate to strip the mortgagor of the whole of his equitable interest in the land: cf. Cloutte v. Storey [2] . However this may be, there is, as I have said, abundant authority for the proposition that the owner of land a transfer of which has been obtained by fraud retains an equitable interest therein. Uppington v. Bullen [3] was such a case as also were Stump v. Gaby [4] and Gresley v. Mousley [5] . In Stump v. Gaby [4] Lord St. Leonards said: "I will assume that the conveyance might have been set aside in equity for fraud: what then is the interest of a party in an estate which he has conveyed to his attorney under circumstances which would give a right in this Court to have the conveyance set aside? In the view of this Court he remains the owner, subject to the repayment of the money which has been advanced by the attorney, and the consequence is that he may devise the estate, not as a legal estate, but as an equitable estate, wholly irrespective of all question as to any rights of entry or action, leaving the conveyance to have its full operation at law, but looking at the equitable right to have it set aside in this Court. The testator therefore had a devisable interest. My strong impression is that this very point is concluded upon authority, but if not I am ready to make an authority on the present occasion, and to decide that, assuming the conveyance to have been voidable, the grantor had an equitable estate which he might have devised " [6] . In Gresley v. Mousley [5] the earlier cases were cited and Knight Bruce L.J. said: "The questions accordingly are, first, whether if Sir Roger Gresley had a title in equity to be relieved against the sale" (on the ground of fraud), "he had after the sale a devisable interest in the property sold " [7] . His Lordship then formulated the other questions which arose and added: "The first is concluded by the cases decided by Lord St. Leonards that were mentioned in the argument, if we are bound by those authorities. But if we are not, I still think that the decisions were correct and ought to be followed" [1] . Turner L.J. was of the same opinion. However these cases were, as was pointed out to us, decided before Phillips v. Phillips [2] and it was urged upon us that we should in this case treat Lord Westbury's observation as conclusive on the point. But the point has received attention since then and I refer first of all to Dickinson v. Burrell [3] where Lord Romilly held that the right to institute a suit to set aside a conveyance of property upon equitable grounds passed by the grantor's subsequent conveyance of the same property though he pointed out that it would be otherwise in a case where the subsequent conveyance was not a conveyance of the property itself but merely of the right to sue. In re Garnett; Robinson v. Gandy [4] is another case which illustrates the proposition that the execution of a release voidable in equity for fraud does not deprive the releasor of his equitable title to the subject fund. The contention raised in this case was that upon the setting aside of a release given by a wife before marriage she and her husband then acquired a new title so that it could be said, in accordance with the provisions of a marriage settlement made after the release was executed, that they had become entitled to the subject fund during coverture. The contention was rejected, Cotton L.J. observing: "The setting aside of the release did not give them any new right, but merely had the effect of removing that which, if it had stood, would have been a bar, and have prevented their previously existing right to assert their title to the residuary personal estate of their uncle a right which they had at the time the settlements were executed, and a right which was not obtained by them in consequence of the release having been set aside" [5] .
1. (1912) 13 C.L.R. 676.
2. [1911] 1 Ch. 18.
3. (1842) 2 Dr. & War. 184.
4. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
5. (1859) 4 De G. & J. 78 [45 E.R. 31].
6. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
7. (1852) 2 De G. M. & G., at p. 630 [42 E.R., at p. 1018].
8. (1859) 4 De G. & J. 78 [45 E.R. 31].
9. (1859) 4 De G. & J., at p. 89 [45 E.R., at p. 35].
10. (1859) 4 De G. & J., at p. 90 [45 E.R., at p. 35].
11. (1861) 4 De G. F. & J. 208 [45 E.R. 1164].
12. (1866) L.R. 1 Eq. 337.
13. (1886) 33 Ch. D. 300.
14. (1886) 33 Ch. D., at p. 303.
In the same case Lindley L.J. said: "Then Mr. Justice Kay, taking that view of the settlement, decided in favour of the trustees upon the ground that the husband in her right did acquire, or become entitled to, or possessed of, the property in question by reason of the circumstance that the release which had been given prior to the marriage was set aside by this Court, and that the setting aside of the release was the acquisition of some fresh title. With great deference to the learned Judge I cannot take that view. Setting aside a release confers no new title. It removes an impediment to the enjoyment of a pre-existing title. The lady did not acquire a title when the release was set aside. She always was entitled notwithstanding the release" [1] .
1. (1886) 33 Ch. D., at p. 306.
Finally in Melbourne Banking Corporation Ltd. v. Brougham [2] the question again arose before the Judicial Committee of the Privy Council. In this case a discharged bankrupt who had obtained from his official assignee a conveyance of all his estate then vested in the former, sought a decree setting aside a release of his equity of redemption with respect to land mortgaged by him to the appellant bank before the commencement of the bankruptcy. The release had been given by the official assignee during the subsistence of the bankruptcy and the respondent claimed that it was voidable on the ground that it had been obtained by misrepresentation. Objection was taken to the maintenance of the suit by the respondent and on this point Lord Selborne, on behalf of their Lordships, observed: "It was contended at the bar that this conveyance was not sufficient to enable the respondent to institute a suit to set aside the release of May, 1870, from Goodman to the appellants; but if that release was voidable in equity, it is clear, both on principle and on authority, that there was an equitable interest in the Alma station, which, in 1877, continued to be part of the estate vested in the official assignee, and that the deed executed by Jacomb (the official assignee at the time) was sufficient to pass that interest. Their Lordships, therefore, do not doubt that the respondent, when he instituted this suit, had the same locus standi in curiâ which Jacomb would have had if the deed of 2nd March 1877, had not been executed" [3] . Stump v. Gaby [4] was cited to their Lordships in this case and their Lordships' decision accepts it as authoritative. I regard these authorities as establishing that where the owner of property has been induced by fraud to convey it the grantor continues to have an equitable interest therein and that that interest may be devised or assigned inter vivos and that the grantor's interest in the property does not come into existence only if and when the conveyance is set aside.
1. (1882) 7 App. Cas. 307.
2. (1882) 7 App. Cas., at p. 311.
3. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
These cases, however, have nothing to say concerning the principles upon which the priority of competing equitable interests is to be determined. But they do serve to indicate that where a grantor is entitled to set aside a conveyance for fraud he has, in every sense of the term, an equitable interest in the subject land and that if he is to be postponed to an equitable interest acquired without notice at some later time it is not because it can be said, in the sense in which the appellants use that expression, that he has a mere equity as distinguished from an equitable estate; if he is to be postponed then there must be some other reason.
In his "Chapters on Equity in New South Wales" the late Sir Frederick Jordan mentions that "The equitable assignee of property other than a chose in action takes subject to any equities which are in substance interests in the property; but not subject to equities in the nature of rights of set-off" (6th ed. (1945) p. 61). He then makes reference to the proposition that as against a person who has an equity as distinguished from an equitable estate, the defence of purchaser for value without notice may be maintained by a person who has an equitable interest only. But on the authority of Stump v. Gaby [1] and other cases to which I have referred he expressed the view that an equity is in itself an equitable estate and the real principle upon which the title of the owner of a subsequent equitable estate has been allowed to prevail is that the claimant under the prior equity has been estopped by his conduct from disputing the title of the person who has purchased the interest in good faith. For this proposition the learned judge cited Hunter v. Walters [2] ; Bickerton v. Walker [3] ; and French v. Hope [4] ; and these are cases where, if the proposition advanced in this case be sound, it would have been unnecessary to enquire whether the claimant earlier in point of time had been negligent or to examine the consequences of that negligence.
1. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
2. (1871) 7 Ch. App. 75.
3. (1885) 31 Ch. D. 151.
4. (1887) 56 L.T. 57.
It must be remembered that there was a considerable conflict of opinion between Lord Westbury and Lord St. Leonards concerning the availability of the defence of purchaser for value without notice in the case of competing equitable interests and this is to be noticed in Lord St. Leonards' writings in the year following the decision in Phillips v. Phillips [5] . (The Law of Vendors and Purchasers—Sugden—1862). He maintained that the defence was always available to the bona fide purchaser of an equitable interest and observed (at p. 798) that: "Till the case of Phillips v. Phillips [5] the validity of the defence against an equitable title appears not to have been questioned". Yet that case, which Lord St. Leonards thought departed from the earlier law, did not deny the availability of the defence to a subsequent purchaser of an equitable interest without notice of an earlier interest which was of the character under consideration in the present case. It cannot, of course, be disputed at the present time that the defence of purchaser for value without notice of a prior equitable interest cannot be generally maintained but it does appear that it has always—that is to say, both before and after Phillips v. Phillips [1] —been allowed to prevail where the person entitled to the earlier interest required the assistance of a court of equity to remove an impediment to his title as a preliminary to asserting his interest. In such cases it seems that the court will not interfere and to me it does not seem to matter much whether it be said that this is because, as Lord Westbury's observations suggest, that a plaintiff seeking to set aside a deed for fraud or to reform it for mistake is, at that stage, asserting an equity as distinguished from an equitable estate, or, because a plaintiff in such cases will be denied the assistance of a court of equity to remove the impediment to his title if, before he seeks that assistance, an equitable interest in the subject property has passed to a purchaser for value without notice of the plaintiff's prior interest. I prefer the latter as a more precise statement of the law and, indeed, I think this is the true meaning of Lord Westbury's observations. But either statement leads to the same result which in the present case means that the interest of The M.L.C. Nominees should be taken to prevail over that of Hotel Terrigal.
1. (1861) 4 De G.F. & J. 208 [45 E.R. 1164].
2. (1861) 4 De G.F. & J. 208 [45 E.R. 1164].
3. (1861) 4 De G.F. & J. 208 [45 E.R. 1164].
For these reasons I am of the opinion that the appeal should be allowed and that it should be otherwise disposed of in the manner suggested by Kitto J.
Menzies J.
The respondent Hotel Terrigal Pty. Limited (which I shall call "Terrigal") was the registered proprietor of land subject to a mortgage to the first-named appellant, Latec Investments Limited (which I shall call "Latec"). Upon the land there was erected the Terrigal Hotel. The mortgage being in arrears, Latec on 26th November 1958, in purported exercise of its powers of sale as a mortgagee, sold the land to one of its wholly-owned subsidiaries, the second-named appellant Southern Hotels Pty. Limited (which I shall call "Southern"), and that company became registered as the proprietor of an estate in fee simple in the land free from any encumbrances in favour of Terrigal. Subsequently, on 18th March 1960, Southern gave the third-named appellant The M.L.C. Nominees Limited (which I shall call "M.L.C. Nominees") security by way of floating charge over its assets, including the land in question, to support a guarantee, so that M.L.C. Nominees became in equity the mortgagee of the land. The contest in this suit, which was not instituted until 22nd October 1963, is really between Terrigal and M.L.C. Nominees, the former affirming, and the latter denying, three main propositions: (1) that the mortgagee's sale was voidable; (2) that accordingly Terrigal has an equity or an equitable interest in the land taking priority—in the absence of any special circumstances warranting its postponement—over the later equitable interest of M.L.C. Nominees; and (3) that by reason of the foregoing, and notwithstanding Terrigal's inaction for five years, the conveyance to Southern giving effect to the mortgagee's sale should be set aside and Terrigal should be restored to the register as the proprietor of the land subject to the original mortgage. Else-Mitchell J. decided in favour of Terrigal and this appeal is from his judgment.
Before Else-Mitchell J. the case was complicated by a question arising under s. 22 of the Money-lenders and Infants Loans Act N.S.W.. However, since the case was before him this Court has decided that s. 13 of the Tasmanian Moneylenders Act, which corresponds with s. 22 of the New South Wales Act, does not apply to borrowing by a company. We are thus enabled to confine our attention to the three matters already stated. It is agreed, moreover, that they are to be determined on the footing that M.L.C. Nominees took its security from Southern for value and without notice that Terrigal had any rights in, or in respect of, land the subject of the charge.
As to the first of these three matters, I agree with Else-Mitchell J. that the mortgagee's sale was voidable. What happened was that on 27th June 1958 Latec, exercising its power under the mortgage, appointed a receiver of Terrigal who, on 24th September and to the knowledge of Latec, instructed L. J. Hooker Ltd. to offer the Terrigal Hotel for public auction on Friday, 3rd October, with a reserve of £85,000. These instructions, stipulating Friday as the day of the sale, leaving insufficient time for proper advertising and fixing a reserve of £85,000, made it virtually certain that there would be no sale of the hotel, and so it turned out. The hotel was passed in at £58,000. By a contract dated 26th November 1958 but arranged earlier, the Terrigal Hotel was sold by Latec to Southern for £60,000, payable by a deposit of £6,000 upon the signing of the contract and the balance of £54,000 on completion. It seems that the £60,000 was paid as follows:—
To Beattie & Frost on 23rd June 1959 to discharge a mortgage given to them as builders: £17,040 10s. 5d. To L. J. Hooker Ltd. on 23rd June 1959: £ 1,800 0s. 0d. To I.A.C. (Finance) Pty. Ltd. £ 2,350 0s. 0d. To Latec Investments Limited on 27th November 1959—balance: £38,809 9s. 7d.
Else-Mitchell J. held that this sale by Latec to Southern was not an honest sale and, in my opinion, there were ample grounds for his so holding. What Mr. Mahoney referred to as a genuine attempt at an open sale hardly bears that aspect upon a critical appraisal. The auction could well be regarded as nothing but a piece of camouflage to hide Latec's plan for a private sale to a subsidiary company and to provide a not-too-high figure as the minimum at which that sale might, with some measure of safety, be made. It was argued by Mr. Mahoney for the appellant that the price of £60,000 was in fact a fair price, but the evidence does not warrant this Court in making such a finding. There was evidence for and against such a conclusion but, without making any finding as to the value of the Terrigal Hotel in November 1958, Else-Mitchell J. found that the sale was not made in good faith, and this was a finding open upon the evidence. Furthermore, as the learned judge thought, it is the character of the transaction as a virtual foreclosure, rather than the particular price fixed, that warranted the intervention of the Court. The finding of lack of good faith on the part of Latec, to which, of course, its creature, Southern, must have been a party, is sufficient ground for avoiding the sale to Southern: Kennedy v. De Trafford [1] ; so that as against Latec and Southern, Terrigal is entitled to be registered as proprietor of the land subject to the mortgage.
1. [1897] A.C. 180.
The second question—that is, the question of priority between Terrigal's and M.L.C. Nominees' equitable rights—I find one of substantial difficulty. If the maxim " Qui prior est tempore potior est jure " applies, Terrigal's right to have the conveyance set aside and to be restored to the register, without regard to M.L.C. Nominees' equitable interest, prevails, but the appellants' contention is that this right is a mere equity and the maxim has no application when the contest is between such an equity and an equitable interest of the character held by M.L.C. Nominees. This contention rests upon the line of authority based upon Phillips v. Phillips [2] . Lord Westbury there said: "Hence grantees and incumbrancers claiming in equity take and are ranked according to the dates of their securities; and the maxim applies, " Qui prior est tempore potior est jure ". The first grantee is potior—that is, potentior. He has a better and superior—because a prior—equity. The first grantee has a right to be paid first, and it is quite immaterial whether the subsequent incumbrancers at the time when they took their securities and paid their money had notice of the first incumbrance or not Now, the defence of a purchaser for valuable consideration is the creature of a Court of Equity, and it can never be used in a manner at variance with the elementary rules which have already been stated But there appear to be three cases in which the use of this defence is most familiar:— Thirdly, where there are circumstances that give rise to an equity as distinguished from an equitable estate—as for example, an equity to set aside a deed for fraud, or to correct it for mistake—and the purchaser under the instrument maintains the plea of purchase for valuable consideration without notice, the Court will not interfere" [1] . In Cave v. Cave [2] , Fry J., referring to the defence of purchaser for value without notice, said: "That defence, as we all know, has been the subject of a great deal of decision, and it is by no means easy to harmonize the authorities and the opinions expressed upon the subject. Criticisms upon old cases lie many strata deep, and eminent Lord Chancellors have expressed diametrically opposite conclusions upon the same question. The case of Phillips v. Phillips [3] is the one which has been principally urged before me, and that, as being the decision of a Lord Chancellor, is binding upon me, notwithstanding the subsequent comments upon it of Lord St. Leonards in his writings" [4] . His Lordship went on to cite the passage I have already quoted from Lord Westbury's judgment in Phillips v. Phillips [3] and, having come to the conclusion that he was dealing with a contest between equitable estates and not between an equitable estate and a mere equity, concluded: "Therefore I shall conclude that, within the case of Phillips v. Phillips [3] , the interest of the plaintiff in this case is an equitable interest, and not merely an equity like the equity to set aside a deed, and therefore it must take its priority according to the priority of date" [5] .
1. (1861) 4 De G.F. & J. 208 [45 E.R. 1164].
2. (1861) 4 De G.F. & J., at pp. 215-218 [45 E.R., at pp. 1166, 1167].
3. (1880) 15 Ch. D. 639.
4. (1861) 4 De G.F. & J. 208 [45 E.R. 1164].
5. (1880) 15 Ch. D. at p. 646.
6. (1861) 4 De G. F. & J. 208 [45 E.R. 1164].
7. (1861) 4 De G. F. & J. 208 [45 E.R. 1164].
8. (1880) 15 Ch. D., at p. 649.
There is, however, as Fry J. said, another line of cases, the authority of which is beyond question, establishing that where there is an equity to have the voidable conveyance of an estate set aside, there remains in the conveyor, notwithstanding the conveyance, an equitable estate which may be devised or transferred. Thus, in Stump v. Gaby [6] , Lord St. Leonards, speaking of a conveyance by an heir at law to his solicitor, said: "I do not deny that a deed may be so fraudulent as to be set aside at law; this, however, is not such a case; but I will assume that the conveyance might have been set aside in equity for fraud: what then is the interest of a party in an estate which he has conveyed to his attorney under circumstances which would give a right in this Court to have the conveyance set aside? In the view of this Court he remains the owner, subject to the repayment of the money which has been advanced by the attorney, and the consequence is that he may devise the estate, not as a legal estate, but as an equitable estate, wholly irrespective of all question as to any rights of entry or action, leaving the conveyance to have its full operation at law, but looking at the equitable right to have it set aside in this Court. The testator therefore had a devisable interest. My strong impression is that this very point is concluded upon authority, but if not I am ready to make an authority on the present occasion, and to decide that, assuming the conveyance to have been voidable, the grantor had an equitable estate which he might have devised" [1] . Likewise, in Gresley v. Mousley [2] , Knight Bruce L.J., in deciding that a conveyor of land who has an equity to be relieved against a sale, has a devisable interest in the property sold, said that the Lords Justice were bound by the cases cited to the Court, including Stump v. Gaby [3] . He added that, if the Lords Justice were not so bound, "I still think that the decisions were correct and ought to be followed" [4] . The argument that Stump v. Gaby [3] proceeded on a sound principle, which seems to have been accepted, was as follows: "When a decree is made for setting aside a conveyance it relates back, and the grantee is to be treated as having been, from the first, a trustee for the grantor, who, therefore, has an equitable estate, not a mere right of suit" [5] . As to the conveyance inter vivos of such an interest carrying the right to sue the original conveyee, see Dickinson v. Burrell [6] .
1. (1852) 2 De G.M. & G. 623 [42 E.R. 1015].
2. (1852) 2 De G. M. & G., at p. 630 [42 E.R., at p. 1018].
3. (1859) 4 De G. & J. 78 [45 E.R. 31].
4. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
5. (1859) 4 De G. & J., at p. 90 [45 E.R., at p. 35].
6. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
7. (1859) 4 De G. & J., at p. 86 [45 E.R., at p. 34].
8. (1866) L.R. 1 Eq. 337.
If there is a difference between the two lines of authority, that difference seems to me to arise from concentration upon different aspects of what follows from a voidable conveyance. Thus, Phillips v. Phillips [7] , in so far as it says that a person with the right to have a voidable conveyance set aside has but a mere equity, directs attention to the right to have the conveyance set aside as a right to sue which must be successfully exercised as a necessary condition of there being any relation back of the equitable interest established by the suit. Stump v. Gaby [3] directs attention to the result of the eventual avoidance of the conveyance upon the position ab initio and throughout of the persons by whom and to whom the conveyance of property was made and says that, in the event of a successful suit (which may be maintained by a devisee), the conveyor had an equitable estate capable of devise and that the conveyee holds, and has always held, as trustee.
1. (1861) 4 De G. F & J. 208 [45 E.R. 1164].
2. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
There is no doubt that the two lines of authority are well established. See, for instance, Halsbury's Laws of England, 3rd ed., vol. 14, pars. 1009 and 1030. Furthermore, there is room for the application of each in appropriate circumstances. Thus, if Terrigal were a person instead of a company and the question were whether, in the circumstances here, that person had a devisable interest in the hotel property by virtue of his equity to have the conveyance to Southern set aside, Stump v. Gaby [1] would require an affirmative answer on the footing that, in the circumstances, Terrigal had an equitable interest in the hotel property. Where, however, the question arises in a contest between Terrigal and M.L.C. Nominees, the holders of an equitable interest in the hotel property acquired without notice of Terrigal's rights, the authority of Phillips v. Phillips [2] is (i) that the contest is between Terrigal's equity to have the conveyance set aside and the equitable interest of M.L.C. Nominees and (ii) that in that contest, Terrigal's equity is not entitled to priority merely because it came into existence at an earlier time than the equitable interest of M.L.C. Nominees. In the circumstances here, therefore, the maxim " Qui prior est tempore potior est jure " has no application.
1. (1852) 2 De G. M. & G. 623 [42 E.R. 1015].
2. (1861) 4 De G. F. & J. 208 [45 E.R. 1164].
The conclusion I have just expressed with regard to the second matter in issue makes reference to the third matter unnecessary.
Accordingly, it is because I think that the equitable estate of M.L.C. Nominees takes priority over the equity of Terrigal that I would allow this appeal.
I agree that, in the circumstances, the course we should follow is that proposed by Kitto J.
Having heard counsel for the respective parties the Court made the following order:— |
high_court_of_australia:/showbyHandle/1/10902 | decision | commonwealth | high_court_of_australia | text/html | null | Gibb v Commissioner of Taxation (Cth) [1966] HCA 74 | https://eresources.hcourt.gov.au/showbyHandle/1/10902 | 2024-09-13T22:44:37.959468+10:00 | High Court of Australia
Barwick C.J. McTiernan, Taylor, Windeyer, and Owen JJ.
Gibb v Commissioner of Taxation (Cth)
[1966] HCA 74
ORDER
Questions in the case stated answered as follows:
(1) No.
(2) No.
Costs of the case stated reserved for the decision of the Justice disposing of the appeal.
Cur. adv. vult.
The following written judgments were delivered:—
Nov. 29
Barwick C.J., McTiernan and Taylor JJ.
The question to be resolved in this case is whether an amount of £41,000, which was received by the appellant on 17th May 1962 from the liquidator of Gibbsons Investments Limited (Gibbsons) in the course of the winding up of that company was, within the meaning of the Income Tax and Social Services Contribution Assessment Act 1936-1961 Cth, assessable income of the appellant. As appears from the case stated this distribution was made out of a fund constituted by the proceeds of the sale of shares in another company—Gibb & Miller Limited—which had been allotted to Gibbsons in 1956 following a resolution of the shareholders of Gibb & Miller Limited that an amount representing profit disclosed by revaluation of the company's freehold property be capitalized and distributed amongst its shareholders in the same proportions as they would be entitled to receive the same if distributed by way of dividend on the footing that they become entitled thereto as capital and that all such capitalized fund be applied in paying up in full at par 90,000 unissued ordinary shares of the company which will be issued and distributed accordingly and that such issue distribution and payment shall be accepted by such members in full satisfaction of their interest in such capitalized fund.
The respondent's assessment for the relevant year, which included the amount of £41,000, was supported by reference to s. 47 of the Act, it being asserted that it was a payment made in the course of a distribution of the character referred to in the section and that the payment was made out of a fund consisting of income derived by Gibbsons and was, therefore, deemed to be a dividend paid out of profits derived by that company. It was not contended that the shares had been acquired by Gibbsons for the purpose of resale at a profit or in the course of carrying on or carrying out any profit-making undertaking or scheme. The only question is whether the fund out of which the distribution was made can be said to have been income derived by Gibbsons.
Two propositions were advanced on behalf of the respondent both of which were denied by the appellant. It was said, first of all, that the bonus shares received by Gibbsons represented income of that company in the ordinary or commercial sense of that term and, secondly, that even if they did not, the effect of the Act was to attribute the character of income to the allotment of the shares made pursuant to the resolution.
Each of these propositions was the subject of discussion in the reasons of the members of the Court who decided Federal Commissioner of Taxation v. W. E. Fuller Pty. Ltd. [1] and it is as well to commence our consideration of the present problem with an examination of what that case decided. The actual question in that case was whether the face value of bonus shares acquired in circumstances similar to those of the present case represented "net exempt income" of the taxpayer for the purposes of s. 80 of the Act and, by majority, the Court held that it did. Dixon C.J. dissented holding that the shares received by the taxpayer did not constitute income in any sense, that is to say, that they did not constitute income in the ordinary and commercial sense of that term and that the allotment of the shares was not given that character by any of the provisions of the Act. Fullagar J., on the other hand, disagreed on both points. Menzies J. agreed with the Chief Justice on the first point but disagreed on the second and, in the result, the appeal of the taxpayer was dismissed. There is, therefore, at least implicit in the respective arguments advanced in this case by both counsel an invitation to reconsider the decision in Fuller's Case [1] .
1. (1959) 101 C.L.R. 403.
2. (1959) 101 C.L.R. 403.
In the reasons of Dixon C.J. cases relevant to the first point were discussed and he regarded it as settled law that an issue of shares made in such circumstances could not according to ordinary principles be regarded as the receipt of income by the shareholder. With this view Menzies J. agreed. We entertain the same view and having regard to what was said in that case and in earlier cases—particularly Dickson v. Federal Commissioner of Taxation [2] —we think it unnecessary to do more than to express our concurrence with that view. If, therefore, this were the only point in the case the appeal should be allowed.
1. (1940) 62 C.L.R. 687, at pp. 713-71.
The respondent, however, points to certain provisions of the Act and asserts that their effect is to give to the issue of shares made to Gibbsons the character of income—though exempt income—for the purposes of the Act and relies upon the fact that a majority of the Court in Fuller's Case [1] so decided. The reasons of Fullagar J. for the conclusion which he reached are shortly stated. He was, of course, primarily concerned with the question whether the bonus shares were, for the purposes of s. 80, "exempt income" and he pointed out that that expression "means income which is exempt from income tax and includes income which is not assessable income". Then he said:
To read this definition as not comprising anything which is not income in the ordinary and commercial sense is, in my opinion, to stick too much to the letter and to miss the substantive intention.
And after quoting part of the passage in Dickson's Case [1] , to which we have already given a reference, he proceeded [2] :
On the taxpayer's reading of that definition the second part of it would add nothing and would be altogether otiose. Obviously income which is exempt from income tax is not assessable income. I think it reasonably clear that the second part of the definition was added in order to bring within its scope, in addition to receipts which the Act in terms "exempts" from income tax, receipts which the Act treats as income but excludes from assessable income. Section 44 (1), read with the definitions in s. 6 of "dividend", of "income from personal exertion", and of "income from property", clearly treats the amount represented by the face value of bonus shares as income—income for all the purposes of the Act, including the definition of exempt income in s. 6. Being income, it is prima facie assessable income (s. 25 (1) (a)). But then s. 44 (2) takes out of the category of assessable income the amount represented by the face value of specified classes of bonus shares. Section 44 (1) makes them income, but s. 44 (2) makes them non-assessable income. These two facts make them, in my opinion, for the purposes of the Act, "income which is not assessable income", and therefore, by virtue of the definition, "exempt income" for the purposes of s. 80.
1. (1959) 101 C.L.R. 403.
2. (1940) 62 C.L.R., at pp. 713-715.
3. (1959) 101 C.L.R., at p. 421.
With great respect to the learned judge we do not think that the appellant's argument in that case treated the word income in the definition of "exempt income" as confined to income in the ordinary and commercial sense for it is obvious, so far as the first part of the definition is concerned, that the Act operates to exempt from income tax certain "assessable income" whether the receipts which constitute the assessable income are or are not income according to ordinary concepts. We refer, for example, to the provisions of s. 26, the effect of which is to include specific classes of receipts in the assessable income of a taxpayer "some of which" (as Fullagar J. points out [3] ) "would, and some of which would not, be comprehended within the ordinary meaning of the word "income" " and, then, to the many exemptions contained in s. 23. Nor do we think that on the taxpayer's reading of the definition of exempt income "the second part of it would add nothing and would be altogether otiose". It is sufficient to point out that the assessable income of a non-resident taxpayer is limited to his "gross income derived directly or indirectly from all sources in Australia". His ex-Australian income is not assessable income for the purposes of the Act though s. 23 (r) goes on to exempt from income tax income derived by such a taxpayer from sources wholly out of Australia. However, the dividend income of a non-resident taxpayer paid out of profits derived partly in Australia and partly outside Australia is not the subject of an express exemption, but it is clear that his assessable income for the purposes of the Act includes only those dividends to the extent to which they are paid out of profits derived by the company from sources in Australia (s. 44 (1) (b)). The remainder of his dividend income is, therefore, income which is not "assessable income" but it is "exempt income" pursuant to the second part of the definition of that term for the purposes of the Act including s. 80. The remainder of his Honour's observations treats s. 44 (1) "read with the definitions of "dividend" and of "income from personal exertion" and of "income from property" " as investing with the character of assessable income, all dividend receipts and then regards s. 44 (2) as removing them from the category of assessable income.
1. (1959) 101 C.L.R., at p. 416.
We shall deal with the final step in his Honour's reasoning after referring briefly to the basis upon which Menzies J. reached his conclusion on this point. First of all, his Honour referred to the definition of dividend. The effect of this was, his Honour said, to include "bonus shares (which are by their nature capital) within the definition of dividends (which are by their nature income)". The result of this, prima facie, he said, "is to give everything that falls within the definition of dividends the character of dividends, that is, income". The next step in his reasoning was that the purpose of the several sections of the Act to which he referred was, "to make provision for the inclusion of dividends (which are prima facie income) in the category of assessable income by reference to their source".
Thereafter, he proceeded [1] :
What s. 44 (2) does is to take out of the category of "assessable income" dividends which are "income" and which are "assessable income" by virtue of sub-s. (1), but in doing so it does not deny to those dividends the character of income. It is clear, for instance, that what falls within sub-s. (2) (b) (i), (c) and (d) are dividends which are by their nature income, and I see no reason for treating the sub-section as negativing the character of income accorded by the definition to which I have already referred to bonus shares issued in the manner provided by sub-s. (2) (b) (iii).
1. (1959) 101 C.L.R., at p. 425.
In our view, and with respect to the learned judge, we cannot agree that the definition of "dividend" operates to invest the allotment of bonus shares in circumstances such as the present with the character of income for the purposes of the Act; it does no more than define the meaning to be assigned to the word "dividend" as used in the Act. Consequently, any distribution of the character mentioned in the definition is for the purposes of the Act a "dividend" whether it constitutes an income or a capital receipt to the shareholders. The line of reasoning employed to support the respondent's contention does not, of course, suggest that the effect of the definition is to convert every distribution of the nature described in the definition into dividends in the ordinary sense of that term. It asserts that, since dividends, in the ordinary and natural sense of that term, are income it follows that when the Act defines the term in a different and artificial sense—that is, to include distributions which are not dividends or income in the ordinary sense—it operates to invest dividends as so defined with the character of income. In our view, and with respect to those who think otherwise, this line of reasoning is fallacious. The function of a definition clause in a statute is merely to indicate that when particular words or expressions the subject of definition, are found in the substantive part of the statute under consideration, they are to be understood in the defined sense—or are to be taken to include certain things which, but for the definition, they would not include. Such clauses are, therefore, no more than an aid to the construction of the statute and do not operate in any other way. As was said by Sutherland (Statutes and Statutory Construction, 2nd ed., vol. 2, p. 687),
Such definitions can, in the nature of things, have no effect except in the construction of the statutes themselves.
Consequently the effect of the Act and its operation in relation to dividends as defined by the Act must, we think, be found in the substantive provisions of the Act which deal with "dividends". We agree with Dixon C.J. when he said:
the conception of "dividend" does not affect the meaning or application of the word "income"; at all events so it appears to me. The Act is not expressed to bring the defined conception of dividend within the word "income" [1] .
1. (1959) 101 C.L.R., at p. 409.
The substantive provisions of the Act dealing with what dividends shall be included in a taxpayer's assessable income of dividends is to be found in s. 44. Sub-section (1) of that section provides that the assessable income of a resident shareholder shall, subject to this section, include "dividends paid to him by the company out of profits derived by it from any source" and sub-s. (2) (b) (iii) provides that his assessable income shall not include dividends of the nature in question in this case. Can it properly be said that s. 44 (1) "clearly treats the amount represented by the face value of bonus shares as income" [1] and that "s. 44 (2) takes out of the category of assessable income the amount represented by the face value of specified classes of bonus shares" [1] or that the effect of s. 44 (2) "is to take out of the category of "assessable income" dividends which are "income" by virtue of sub-s. (1)" [2] . In our view it cannot. Of course, if the definition of "dividend" operated to attribute the character of income to an allotment of bonus shares no further inquiry would be necessary. The same result would follow if the definition of "income from personal exertion" and "income from property" had a like effect. But when the question is whether, in substance, s. 44 (1) produces the result contended for by the respondent it is important to observe that, in terms, sub-s. (1) does not purport to deal with all dividends as defined; it deals, subject to this section, with all such dividends and we find that sub-s. (2) declares that the assessable income shall not include dividends of the description here in question. Consequently it is, we think, erroneous to say that dividends of that character are, first of all, comprehended by sub-s. (1) and then excluded by sub-s. (2). On the contrary at no time do dividends of the kind referred to in sub-s. (2), by force of sub-s. (1), achieve the character of assessable income. It is, of course, clear that some classes of dividends which by force of sub-s. (2) are not assessable income would, apart from that sub-section, be income of the taxpayer. But this is because they would be income according to ordinary concepts, not because the provisions of sub-s. (1) make them assessable income. This, however, is not so in the case of dividends falling within sub-s. (2) (b) (iii).
1. (1959) 101 C.L.R., at p. 421.
2. (1959) 101 C.L.R., at p. 421.
3. (1959) 101 C.L.R., at p. 425.
Further we are of opinion that even if s. 44 (1) operates initially to make "dividends" of the latter character "assessable income", and sub-s. (2) then operates to remove them from that category, the effect of the section is not to leave them with the character, merely, of "income".
It seems to us that in reaching the contrary conclusion in Fuller's Case [3] Fullagar J. and Menzies J. did not travel by the same paths to their respective conclusions and, that being so, we feel that we should, particularly having regard to the dissent of Dixon C.J., express our own views on the question which now arises.
1. (1959) 101 C.L.R. 403.
One further matter may be mentioned which, it seems to us, operates to confirm the views which we have expressed. By force of s. 47 of the Act, distributions to shareholders of a company by a liquidator in the course of winding up the company, to the extent to which they represent income derived by the company other than income which has been properly applied to replace a loss of paid-up capital, are deemed to be "dividends" paid to the shareholders by the company out of profits derived by it. But although in the language of the Act they may to this extent be properly described as "dividends" they do not, by force of their character as such, further assume the character of assessable income, or, for that matter, of income. This, we think, is clear enough from the observations in Glenville Pastoral Co. Pty. Ltd. v. Commissioner of Taxation of the Commonwealth [1] and Commissioner of Taxation of the Commonwealth v. Uther [2] . The "statutory fiction" (see Muller v. Dalgety & Co. Ltd. [3] ) introduced by s. 47 merely provides a basis for the operation of s. 44 which is concerned exclusively with what dividends shall or shall not form part of a taxpayer's assessable income. It would, in our view, be anomalous to hold that distributions which constitute "dividends" because they are comprehended by the definition of that term thereby, necessarily, achieve the character of income whilst distributions of a character which are not comprehended by the definition but which are deemed by s. 47 to be "dividends", do not by force of that provision achieve that character.
1. (1963) 109 C.L.R. 199, at pp. 205-207.
2. (1965) 112 C.L.R. 630, at pp. 641, 642.
3. (1909) 9 C.L.R. 693, at p. 696.
In the circumstances we would answer the questions raised by the case stated:
(1) No.
(2) No.
Windeyer J.
The question in this case arises under the Income Tax and Social Services Contribution Assessment Act 1936-1961 Cth.
It comes to this: Did the moneys which Gibbsons Investments Limited (which I shall call Gibbsons) received when it sold the bonus shares in Gibb & Miller Limited represent income derived by it, Gibbsons, within the meaning of s. 47 (1) of the Act? If they did, then the aliquot part thereof which the appellant as a shareholder in Gibbsons received on the winding up of that company was taxable in his hands. That is because it would in that case be deemed to be a dividend paid to him as a shareholder out of profits derived by the company; and pursuant to s. 44 would be assessable income in his hands.
It was said for the Commissioner, first, that the receipt of the bonus shares by Gibbsons had involved a receipt by it of income according to ordinary concepts of the distinction between receipts of capital and of income. The transaction by which the bonus shares were issued was analysed to support this contention. But I think that we should accept as now settled law that the receipt by Gibbsons of the bonus shares did not, nor did any incident of the transaction by which they were issued to it, amount to a receipt by it of income in the ordinary economic sense of that term. The moneys which Gibbsons received when it sold the shares were therefore the proceeds of the sale of a capital asset. Therefore these moneys were not "income derived by the company" in any ordinary sense of that phrase. The first answer which the Commissioner made to the appellant's case fails.
Secondly, it was argued for the Commissioner that the word income in s. 47 was not restricted to income, in the ordinary sense of a receipt on income account as distinct from a distribution of capital or a capital gain. The section had, it was said, a wider application. The decision of this Court in Federal Commissioner of Taxation v. W. E. Fuller Pty. Ltd. [1] , was relied upon as supporting this view. The conclusion of the majority in that case (Fullagar J. and Menzies J., Dixon C.J. dissenting) undoubtedly does accord with the position which the Commissioner has taken in this case, although in that case the question arose in a different way. But the somewhat diverse reasoning by which their Honours who there formed the majority arrived at the same conclusion means, I think, that we should not simply take what was decided in that case as determining this case.
1. (1959) 101 C.L.R. 403.
The argument for the Commissioner that the word income in s. 47 (1) had a larger application than income in the ordinary economic sense was, as I gathered it, put in several ways. The first is that the word comprehends everything which would, under any provision of the Act, be brought to charge as part of what the Act calls "assessable income". This proposition was expressed as being that anything which the Act treats as income is income within the meaning of that word in s. 47. But that is misleading, because the Act, as I read it, does not treat as income, or describe as income, anything which is not income according to ordinary concepts of the distinction between capital and income. What it does is to provide how a tax described as a "tax upon incomes" shall be assessed and collected. The tax is imposed by reference to income receipts in the strict sense and also by reference to certain capital receipts and other benefits which are not income in that sense. In Resch v. Federal Commissioner of Taxation [1] , Dixon J. said that
the distinction between profits of a capital nature and profits in the nature of income in the strict sense is not one which the Act maintains. Nor is it a discrimination which the legislature is bound to regard.
That, however, is far from saying that capital profits and other gains which are brought to charge along with income profits are thereby comprehended by the word "income" wherever it is used in the Act. That is not the method by which the Act brings within the tax net receipts which are not income. Its method is to impose the tax in respect of all receipts of an income nature, except such as it expressly exempts from charge, and also in respect of certain receipts not of an income nature which it expressly brings to charge. This it does by stating that receipts of money or other benefits in respect of which tax is levied are all included in a taxpayer's "assessable income". That term "assessable income" is not defined by reference to the word "income". It means "all the amounts which under the provisions of this Act are included in the assessable income".
1. (1942) 66 C.L.R. 198, at p. 225.
Even if one assumes, as the argument for the Commissioner does—erroneously I think—that the word income in s. 47 is to be given a meaning which would comprehend anything which under any provision of the Act is brought to charge as part of the assessable income, I am unable to agree that something which is both not income in the strict sense, and not by the Act made part of the assessable income of a company, can be "income derived by the company" within the meaning of s. 47. And that is the position here. Section 44 (2) (b) (iii) states expressly that the assessable income of a taxpayer shall not include dividends paid wholly and exclusively out of profits arising from a revaluation of assets not acquired for the purpose of resale at a profit, if the dividends paid from such profits are satisfied by the issue of shares, as occurred here. It is conceded by the Commissioner that the assets of Gibb & Miller Ltd. which were revalued when the bonus shares were issued had not been acquired for the purpose of resale at a profit. The result is that, by virtue of s. 44 (2) (b) (iii), no assessable income was derived by Gibbsons from the transaction in relation to the bonus shares. The provisions of s. 44 (1) are expressly made subject to s. 44 (2). Therefore, as the acquisition of the bonus shares did not mean that Gibbsons got any income in the ordinary sense, or that its assessable income was increased, I am unable to accept the view that when the proceeds of their sale were distributed the distributions could in any sense "represent income derived by the company". They were I consider capital in its, Gibbsons', hands and the proceeds of their sale were capital too.
There was, however, a further argument advanced for the Commissioner which was supported by reference to some passages in the judgments in the case of W. E. Fuller Pty. Ltd. [1] . This, as I followed it, was based on the definition of "dividend". Section 6 states that where that word appears in the Act it
includes the paid-up value of shares distributed by a company to its shareholders to the extent to which the paid-up value represents a capitalization of profits.
The assumption apparently is that the word "profits" here can include an increase in value. Whether that be so or not, the effect of s. 44 (2) (b) (iii) is to make some dividends not taxable by excluding them from assessable income. Nevertheless, the argument, which fastened upon a sentence which Menzies J. used in the course of his judgment in the case abovementioned, ran, as I understood it, as follows. Dividends which a company pays to shareholders out of its profits have the character of income according to ordinary concepts. Therefore anything which for the purposes of the Act is included within the term "dividend" is, for all purposes of the Act, given the character of income: therefore wherever the word "income" appears in the Act it comprehends everything which the word "dividend" would comprehend.
1. (1959) 101 C.L.R. 403.
But, with respect to those who have found this reasoning acceptable, it is I think fallacious. When a word is said in an interpretation section or clause to "include" certain objects some of them may be objects which according to its ordinary connotation would not be within its denotation. But thus giving a term an enlarged denotation, as "a device to avoid repetition", does not thereby result in all objects brought within the enlarged denotation gaining all the characteristics which the term in its ordinary usage connotes. I am therefore unable to accept the view that, because the word "dividend" is made to comprehend bonus shares, and because dividends are ordinarily income, the proceeds of the sale by Gibbsons of its bonus shares are made income for the purposes of s. 47. And I do not think that the definition of "income from personal exertion" carries the matter any further.
For the reasons I have given I think that we must prefer the dissenting decision of Dixon C.J. in the case of W. E. Fuller Pty. Ltd. [1] , to the conclusion of the majority in that case.
1. (1959) 101 C.L.R. 403.
I would answer the questions:
(1) No.
(2) No.
Owen J.
The amount of £41,000 treated by the Commissioner as part of the appellant's assessable income was a distribution made to him by a liquidator in the course of winding up Gibbsons Investments Limited, a company in which the appellant was a shareholder. To the extent to which the amount so distributed represented "income derived" by Gibbsons Investments Limited, s. 47 (1) deems the amount received by the appellant to have been a dividend paid to him by that company out of profits derived by it. The appellant's contention is, however, that the payment to him by the liquidator did not represent "income derived" by Gibbsons Investments Limited and that s. 47 (1) has therefore no application to the case.
The question is then whether the transaction by which Gibb & Miller Limited allocated so much of the profit fund arising from the revaluation of its assets as represented the share of Gibbsons Investments Limited in that fund to pay up the face value of the bonus shares and issued those shares to Gibbsons Investments Limited resulted in that company deriving "income" within the meaning of s. 47 (1).
I agree that, if the word "income" in the sub-section is used only in its ordinary commercial sense, the receipt by a shareholder of bonus shares would not be a receipt or derivation of income nor, I think, would the notional or actual crediting to a shareholder in a company in circumstances such as here existed of an amount appropriated by the company to pay up shares issued to him as fully paid be a receipt or derivation of income by the shareholder. In this I agree, with respect, with what Dixon C.J. said in Fuller's Case [2] . But it is, in my opinion, necessary to go further and ask whether income in s. 47 (1) does not include everything which, for the purposes of the Act, is given the character of income, whether or not the actual word "income" is used in the Act to describe it. If the word is given this extended meaning, then I am of opinion that the transaction as a result of which Gibbsons Investments Limited received the bonus shares resulted in the derivation by it of an amount of "income" equivalent to the paid-up value of the shares.
1. (1959) 101 C.L.R. 403, at p. 408.
The conclusion to which I have ultimately come is that when s. 47 (1) speaks of "income derived by the company", that is to say by the company which is in course of liquidation, the phrase covers not merely those receipts which would be regarded as income in the ordinary sense of the word but also all those transactions and things which, for the purposes of the Act, are treated as the derivation of income and that if Gibbsons Investments Limited derived a benefit which the Act treats as income, whether it was or was not part of that company's assessable income, then the distribution made by its liquidator to the extent to which it represented that benefit falls, in my opinion, within s. 47 (1). The paid-up value of the bonus shares issued to Gibbsons Investments Limited was a "dividend" within the definition of that word in s. 6 which includes
the paid-up value of shares distributed by a company to its shareholders to the extent to which the paid-up value represents a capitalization of profits.
And the effect of the definitions of "income from personal exertion" and "income from property" is, in my opinion, to bring dividends into the category of "income from property". This was the conclusion reached by Menzies J. in Fuller's Case [1] and, with respect, I agree with it. Section 44 (1) appears to me to proceed upon this footing and provides that, subject to the section, the assessable income of a shareholder in a company shall—if he is a resident—include dividends paid to him by the company out of profits derived by it from any source. It is true that s. 44 (2) (b) (iii) provides that the assessable income of a shareholder shall not include dividends paid wholly or exclusively out of profits arising from the revaluation of assets not acquired for the purpose of resale at a profit if the dividends paid from such profits are satisfied by the issue of shares in the company declaring the dividend. Its effect is to take such a dividend out of or perhaps to prevent it falling into the category of assessable income with the result, in the present case, that the paid-up value of the shares issued by Gibb & Miller Limited to Gibbsons Investments Limited, being a "dividend paid wholly or exclusively out of profits arising from the revaluation of assets not acquired for the purpose of resale at a profit", formed no part of the latter company's assessable income. But although this dividend did not form part of the company's assessable income, the Act, in my opinion, regards it as income. This accords, I think, with the view stated by Fullagar J. in Fuller's Case [1] . His Honour had earlier expressed the opinion that the application by a company on behalf of a shareholder of an amount representing the latter's share of capitalized profits in payment of bonus shares issued to that shareholder in circumstances similar to those in the present case was a derivation of "income" by the latter in the ordinary or commercial sense of that word. He went on, however, to say that even if it were wrong to hold that the taxpayer in such a case had derived income in the generally accepted sense of that word
s. 44 (1), read with the definitions in s. 6 of "dividend", of "income from personal exertion", and of "income from property", clearly treats the amount represented by the face value of bonus shares as income—income for all the purposes of the Act .
With respect, I agree, and I think the same view should be taken of the meaning of the word income in s. 47 (1). The judgment of Menzies J. in that case seems to me to have followed the same line of reasoning. The Act, his Honour said, expressly includes
"bonus shares (which are by their nature capital) within the definition of dividends (which are by their nature income). The result, prima facie, is to give everything that falls within the definition of dividends the character of dividends, that is, income" [2] , and "It is my opinion, therefore, that the Act does give to the paid-up value of bonus shares, the character of income" [3] .
1. (1959) 101 C.L.R. 403.
2. (1959) 101 C.L.R., at p. 421.
3. (1959) 101 C.L.R., at p. 424.
4. (1959) 101 C.L.R., at p. 425.
I would answer the questions as follows:
(1) Yes.
(2) Yes. |
high_court_of_australia:/showbyHandle/1/9419 | decision | commonwealth | high_court_of_australia | text/html | null | Psaltis v Schultz [1948] HCA 31 | https://eresources.hcourt.gov.au/showbyHandle/1/9419 | 2024-09-13T22:44:41.968038+10:00 | High Court of Australia
Latham C.J. Dixon and Williams JJ.
Psaltis v Schultz
[1948] HCA 31
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 25
Latham C.J.
In this action Jessie Boyd Schultz sued George Victor Psaltis for damages for breach of promise of marriage. She was a married woman. Her husband on 31st August 1945 obtained a decree nisi for divorce against her. The promise to marry upon which the plaintiff sued was made in the middle of February 1946. On 29th July the plaintiff's solicitors wrote to the defendant claiming performance of his promise, and on 1st August the defendant's solicitor replied denying any promise to marry. The plaintiff issued the writ in the action on 6th August, alleging a promise to marry within a reasonable time, and relying upon the defendant's repudiation of his promise as a cause of action: Hochster v. De La Tour [4] . In November the plaintiff took proceedings for prematernity expenses against the defendant, and it was then discovered that the decree nisi had not been made absolute, though it might have been made absolute upon the application of either the plaintiff or her husband at any time after the end of February 1946—Matrimonial Causes Act 1899, s. 23. The decree was made absolute on 12th December 1946 upon the application of the husband. In February 1947 the plaintiff's declaration was amended. The first count of the amended declaration alleged a promise to marry after the decree nisi should be made absolute, and the second count alleged a promise to marry subject to and after the taking by the plaintiff within a reasonable time of any necessary steps to enable the marriage to be lawfully celebrated.
1. (1853) 2 El. & Bl. 678; [ 118 E.R. 922].
At the trial Owen J. directed the jury that the general rule was that an agreement to marry made between two persons, one or both of whom were then married, was against public policy and would not be enforced by the courts. There was, however, an exception (see Fender v. St. John-Mildmay [1] ) where a decree nisi for divorce had been made against one of the parties. In that case a promise to marry expressly after the decree should be made absolute had been held to be enforceable. His Honour said that if both parties knew that there was an impediment in the way of the plaintiff marrying it would be possible to imply a term in their agreement that the marriage was to take place only when the decree was made absolute, but that unless both parties knew that there was such an impediment such a term could not be implied. Accordingly his Honour left the following three questions to the jury:—
(1) Did the Defendant promise to marry the plaintiff?
(2) If so, did the Plaintiff and the Defendant then believe that something further remained to be done in connection with the divorce proceedings against the plaintiff before they could marry?
(3) Damages?
1. (1938) A.C. 1.
The answers of the jury were as follows:—
(1) Yes—by majority.
(2) No.
(3) £500.
The parties agreed that his Honour might discharge the jury and that he should be at liberty to enter whatever he thought was the appropriate judgment on the verdict which the jury had given. His Honour applied the Common Law Procedure Act 1899, s. 116, which provides that in all cases of variance between the proof and the record on the trial of any action the court or judge, instead of causing the record or document on which the trial is proceeding to be amended at the trial, may direct the jury to find the fact or facts according to the evidence; and, further, that the court shall, if it appears to the court that the variance was immaterial to the merits of the case and such as could not have prejudiced the opposite party in the conduct of the action or defence, give judgment according to the rights and justice of the case. The verdict of the jury did not support either of the promises alleged in the counts of the declaration as amended. There was therefore a variance between the proof and the record and the section became applicable. His Honour regarded the negative answer to the second question as excluding the possibility of implying a term that the marriage should not take place until after the decree nisi had been made absolute. He was of opinion that a simple promise to marry a person who was still married, though a decree nisi for divorce had been made, was not enforceable if the promise contained neither an express nor an implied term that the marriage was to take place after decree absolute, and he therefore gave judgment for the defendant.
Upon appeal to the Full Court it was held by Jordan C.J. that Fender v. St. John-Mildmay [1] had decided that a promise to marry made by a party in the position of the plaintiff was not contrary to public policy, that in the present case it could be legally performed—all the plaintiff had to do was to make an application, which she could make at any time, for the decree nisi to be made absolute. Davidson and Street JJ. concurred in the view that the plaintiff was able to make herself capable of marrying lawfully within a reasonable time of the promise, and accordingly the Full Court directed that judgment be entered for the plaintiff for £500 damages. The defendant now appeals to this Court.
1. (1938) A.C. 1.
The relevant general rule is that a promise by a married person to marry another who knows that the promisor is married is void. Such a promise involves a continuance of marriage to one person and of betrothal to another, and is therefore inconsistent with the marriage obligation of loyalty to the other spouse. Thus a promise to marry after the death of a wife is void (Spiers v. Hunt [2] ; Wilson v. Carnley [3] ). But the decision in Fender v. St. John-Mildmay [1] has introduced an exception to the general rule, viz.—a promise by a married person made after decree nisi for divorce to marry another person after the decree should be made absolute is valid. In that case the promise to marry was made expressly subject to the decree nisi being made absolute. In the present case the only finding of the jury is that a promise to marry was made after a decree nisi had been made, but with no reference to the time at which the marriage was to take place. A promise to marry with no time mentioned is a promise to marry within a reasonable time.
1. (1908) 1 K.B. 720.
2. (1908) 1 K.B. 729.
3. (1938) A.C. 1.
The rights of the parties must be determined upon the answers of the jury to the questions submitted to them by the learned trial judge. Those answers show that the jury did not accept the evidence of the plaintiff that the defendant told her, and therefore knew or believed, that she would have to get some papers from the Divorce Court before she could remarry. The answer of the jury to the second question establishes that it was not the case that both parties believed that it was necessary to do something further before the woman could remarry. This answer leaves open the possibilities that one only of the parties so believed, or that neither of them so believed. Upon the findings of the jury it cannot be said that it was proved that either party thought of the necessity of getting the decree nisi made absolute.
If, however, the answer of the jury to the second question can be interpreted as meaning that at the time when the promise was made both parties believed that they were free to marry lawfully, then it can be argued (as it was argued) for the plaintiff that the fact that the parties did not advert to a particular contingency is just the ground upon which in some cases the courts have added a term by implication to a contract. Is there adequate ground, upon the basis that both parties believed that they were free to marry, for implying a term that the marriage should take place only after decree absolute? If such a term can be implied, this case would become identical in all relevant particulars with Fender's Case [1] . But such an implication can properly be made only if it is so obvious that it "went without saying"—"so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common "Oh, of course" " (Shirlaw v. Southern Foundries (1926) Ltd. [2] ). In my opinion no such assumption with respect to the suggested implied term can be made in this case. It must, I think, be purely a matter of speculation as to how the defendant (believing, as supposed, that the plaintiff was quite free to marry him) would have acted if he had been told that the woman was only half-way through divorce proceedings and still had a living husband. It appears to me to be as likely that he would have drawn out of his intended marriage as that he would have said: "Of course we will marry, but only after decree absolute."
1. (1938) A.C. 1.
2. (1939) 2 K.B. 206, at p. 227.
Upon the findings of the jury the case should be considered upon both of the two hypotheses which the findings leave open:—(1) promises to marry made by a man and a woman who both think that both parties are free to marry, but where the woman in fact is only part way on to such freedom by having had a decree nisi for divorce made against her; (2) promises to marry made when one or other, but not both, of the parties believe that a decree nisi would have to be made absolute before they could marry. The decision in Fender's Case [1] shows that there is nothing unlawful in such promises on the ground of public policy. All the arguments which were raised in the present case with reference to public policy were dealt with fully in Fender's Case [1] . It is true that in that case both parties knew that it was necessary for the decree to be made absolute before they could marry. But, so far as public policy is concerned in relation to the institution of marriage, the absence of knowledge by one or both parties that it was necessary to obtain a decree absolute can make no difference where, if the facts had been known, the promise to marry would have undoubtedly been lawful. What Fender's Case [1] decides is that when both parties who exchange promises to marry know that there must be a decree absolute before marriage is lawfully possible, the promises are binding. If the promises are lawful when the parties know of this removable impediment, it is difficult to suggest any reason why promises made in identical circumstances, except that there is no such knowledge, should be held to be unlawful. Accordingly, I am of opinion that the main contention for the defendant fails.
1. (1938) A.C. 1.
2. (1938) A.C. 1.
3. (1938) A.C. 1.
It was argued that the defendant was entitled to judgment on the ground of mutual mistake—that he promised to marry a woman whom both he and she believed to be a marriageable person, and that she was not a marriageable person. I have already said that in my opinion the answer of the jury to the second question does not establish that both parties had this belief. In my opinion there are other answers to this contention, but it is sufficient to say that no case of mistake was made on the pleadings and that there is no finding of the jury which can be relied upon to support this contention.
It was also argued that the plaintiff had not shown readiness and willingness to marry because willingness included capacity to marry, and she had issued her writ before she was in a position to marry. But the defendant repudiated the promise before performance had become due, and the plaintiff was thereupon entitled to bring her action. As already stated, she was able at short notice to put herself in the position to perform her promise lawfully.
In my opinion the appeal should be dismissed.
Dixon J.
As sometimes happens a nice point of law has been brought to the surface of an unedifying contest between unmeritorious suitors by the findings of a jury. It remains as the residual question governing the liability of the defendant to the plaintiff. At this stage the merits, and the facts upon which the merits depend, may be disregarded and the problem stated in the abstract.
Is an unqualified contract to marry enforceable against a bachelor by a married woman against whom a decree nisi for dissolution of marriage had been pronounced before the contract was made but had not been made absolute? To be enforceable must it be qualified by a term that the decree shall first be made absolute?
To the abstract question three facts should be added which are special to the case. First at the time when the promise of marriage was given only two or three weeks of the period remained at the expiration of which the decree nisi might be made absolute. Secondly the plaintiff, the promisee, believed that her divorce was complete and that she was entitled to re-marry and she informed the defendant, the promisor, that she was divorced. Thirdly the defendant repudiated the contract and the plaintiff issued her writ before the decree nisi was in fact made absolute. It was made absolute before the trial on the application of her husband, the petitioner in the suit for dissolution.
The law is that a contract to inter-marry is invalid if, at the time it is made, one of the parties is to the knowledge of the other married, and this is so notwithstanding that the contract between them is that they will marry when the existing marriage is dissolved by death or is dissolved or annulled by decree (Spiers v. Hunt [1] ; Wilson v. Carnley [2] ; Skipp v. Kelly [3] ; Siveyer v. Allison [4] ).
1. (1908) 1 K.B. 720.
2. (1908) 1 K.B. 729.
3. (1926) 42 T.L.R. 258.
4. (1935) 2 K.B. 403.
But a contract to inter-marry between parties, one of whom is married, is enforceable by the other if at the time when the contract was made the latter was unaware of the fact (Wild v. Harris [5] ; Millward v. Littlewood [6] ). "Here the ground of liability is either estoppel, or better, implied warranty to perform the promise lawfully": Sir Frederick Pollock, Principles of Contract, 12th ed., p. 266, note 68, basing his statement on the observation of Phillimore J. in Spiers v. Hunt [7] . In such a case "the promise by the defendant to marry the plaintiff implies, on his part, that he is then capable of marrying, and he has broken that promise at the time of making it" (Millward v. Littlewood [8] , per Parke B.).
1. (1849) 7 C.B. 999 [157 E.R. 395].
2. (1850) 5 Ex. 775 [155 E.R. 339].
3. (1908) 1 K.B., at p. 723.
4. (1850) 5 Ex., at p. 778 [155 E.R., at p. 340].
A decree nisi for dissolution makes all the difference. The marriage of course subsists until decree absolute but the considerations are gone which invalidate a contract to marry after the existing marriage ends. Accordingly if, after decree nisi and before decree absolute, either the petitioner or the respondent to the suit enters into a contract to marry when the decree has been made absolute, that contract is enforceable by or against him or her. That is the result of the decision of the majority of the House of Lords in Fender v. St. John-Mildmay [1] . There the promisor was the respondent in the suit for dissolution. But the proposition decided by the House of Lords was general, namely that a promise made by one spouse, after a decree nisi has been pronounced, to marry a third party after the decree has been made absolute is valid and enforceable (see [2] ). But general as the proposition is, in terms it extends only to the case where according to the intention of the contract the marriage was to take place after decree absolute.
1. (1938) A.C. 1.
2. (1938) A.C., at pp. 9, 26, 37.
In the present case the promise was, or the promises were, general and no such condition was intended, because the parties believed that the prior marriage of the plaintiff had been dissolved. On the part of the plaintiff this must be taken to be due to ignorance of the legal necessity of making the decree nisi absolute: on the part of the defendant to her statement to him that she had been divorced. A general promise of marriage amounts to a contract to marry within a reasonable time upon request (Harrison v. Cage [3] ).
1. (1698) 1 Ld. Raym. 386 [91 E.R. 1156].
It is true that the cases deciding that a promise of marriage is enforceable against a married person at the instance of a promisee who believed that the promisor was free to marry do not include a case where the promisee knew that the promisor had been married but supposed the marriage had been dissolved. They appear to have been cases in which the innocence of the promisee arose from a belief that the promisor never had been married. But the distinction does not seem material. Here the defendant believed, it must be assumed, that the plaintiff was free to marry and she, owing to the like belief, so represented.
It would have made no difference to the parties at that stage if they had known of the necessity of having the decree made absolute before the wedding ceremony. She would have taken the steps necessary: cf. s. 23 of the Matrimonial Causes Act 1899 N.S.W. and O'Connor v. O'Connor [4] . Her innocent misrepresentation of her status has not been relied upon for a plea, equitable or otherwise. At the time of his anticipatory breach the defendant was not aware of her mistake if that matters. But in any case he might have had difficulty in the circumstances of this case in showing materiality and inducement.
1. (1942) 60 W.N. (N.S.W.) 13.
The plaintiff's readiness and willingness to perform the promise on her part were put in issue. That involves a question requiring close consideration. It may be said that the quotations from Sir Frederick Pollock's Principles of Contract, 12th ed. (1946), p. 266, note 68, and from Parke B., Millward v. Littlewood [1] which have been set out, mean that when an unqualified promise to marry is given by one party to another in general terms, it implies a warranty, essential to the contract, that he or she is then and there legally capable of marrying without awaiting any further event or contingency.
1. (1850) 5 Ex., at p. 77 [155 E.R., at p. 340].
To be ready and willing to perform a contract a party must not only be disposed to do the act promised but also have the capacity to do it. But the tenor of the promise will show when and how the act is to be performed and it is to that time and mode of performance that the capacity and disposition to fulfil the promise are to be directed. It is enough that he is not presently incapacitated from future performance and is not indisposed to do, when the time comes, what the contract requires. It is here that a distinction arises between the case of a promise given to a third party by a husband or wife whose marriage is not in process of dissolution and one given by a husband or wife for or against whom a decree nisi has already been pronounced. In either case, supposing the parties to contract on the footing that neither has the status of a married person, the mutual promises are to be interpreted as obliging them to marry within a reasonable time determined with reference to the actually free position of the one and the supposedly free position of the other (see Serjeant Mannings' Note (a) 1 to Wild v. Harris [2] ). But in the former case the promisor is incapacitated from the beginning from fulfilling his or her engagement except by the barest chance, namely the immediate death of the other spouse, a chance which ex hypothesi the promisee did not bargain to depend on for performance. In the latter case however the party may be in a position to marry within a reasonable time although the time is fixed as reasonable as for persons free from the beginning to marry. She may be in a position to do so notwithstanding that something remains to be done to obtain her full freedom. That appears to have been the position between the present plaintiff and defendant. They did not contemplate an immediate marriage when the promises were first exchanged. Within a fortnight from that time, or little more, the period expired for making absolute the decree nisi. Either party to the suit for dissolution might then have applied. The defendant did not obtain a finding that the plaintiff was not ready and willing to marry him and on the facts he does not seem to have been entitled to such a finding.
1. (1849) 7 C.B., at p. 1004 [137 E.R., at p. 398].
The considerations to which I have adverted will dispose of the contention that the promise of marriage, the contract, sued upon was void on the ground of mistake. There was no mistake by one party known to the other as to the terms intended. There was no mistake by the plaintiff as to the identity of the defendant, only as to the existence in her of an absolute, instead of an inchoate, freedom to marry. The object or subject matter of the transaction was beyond mistake; it was intermarriage. The nature of the contract was not affected by the impediment to be removed before there could be performance.
Mr. T. H. Tylor concludes an important study of the General Theory of Mistake in the Formation of Contract 1948 Modern Law Review, vol. 11, p. 257, by saying that for no contract to come into existence through fundamental error, the mistake must be as to the identity of the other party—as opposed to his attributes; as to the substance of the subject matter—as opposed to its qualities: or as to the nature of the transaction—as opposed to its terms. It is apparent that the present case is not of any such description.
Again the contract was not incapable of performance legally. A contract based upon the supposition that proceedings for dissolution of marriage are completed does not necessarily involve a promise to go through the ceremony of marriage although the proceedings are never completed. It may include or involve a promise to marry within a time that does not permit of the completion of the proceedings judicially to dissolve the marriage. But that is another matter and it has been dealt with. If the stipulated time allows of the removal of the impediment, there is no illegality necessarily involved in a marriage in strict pursuance of the contract. The question comes down in the end to one of public policy.
It is against public policy, as it has been held, for a married person, while the marriage is intact, to promise marriage to a third party if and when the existing union is dissolved, whether by death of the other spouse or judicially. But it is not against public policy, if by decree nisi there has already been an inchoate dissolution. The reason is to be found in the change in the matrimonial relations of the parties to the suit when a decree nisi is pronounced and in the imminence of the change of status that the decree absolute will produce. The parties are relieved from most of the duties and obligations attending the marriage, though the status remains and incontinence is still adultery. "A decree nisi puts an end to the whole content of the marriage contract, leaving only the shell, that is, the technical bond": per Greer L.J. Fender v. Mildmay [1] . The contrast between cases in which a husband during the lifetime of his wife promises to marry another woman on the death of his wife and cases in which after decree nisi, he promises another woman to marry her when the decree is made absolute is insisted upon by Lord Atkin in Fender v. St. John-Mildmay [2] .
1. (1936) 1 K.B. 111, at p. 117.
2. (1938) A.C., at pp. 15-17.
In the first case his Lordship thought that "there is real substance in the objection that such a promise tends to produce conduct which violates the solemn obligations of married life. If the moral ideal and the legal obligation are expressed in the promise to love and to cherish it may well be doubted whether they can exist unimpaired in the presence of a betrothal to another. But let us consider how far the normal obligations and conditions of marriage continue in ordinary circumstances after decree nisi. They have disappeared: there is no consortium, and the parties are living apart: they owe no duties each to the other to perform any kind of matrimonial obligation: the custody of the children has been provided for by the court: the maintenance of the wife, if petitioner, is similarly provided for: the petitioning spouse has said: "I have done with you." In these circumstances what possible effect can a promise to marry a third person have by way of interference with matrimonial obligations?" [3] . Speaking of the latter case Lord Wright said: "If realities are to be looked at and not mere form, by the Court, as the Court did in regard to judicial separation, the marriage is at an end, and the parties are entitled to provide for their future, at the end of the period fixed for the decree absolute, when by English law they are entitled to marry again. How can the public interest in regard to marriage be prejudiced if the innocent petitioner then desires to enter into an engagement, conditional on the decree absolute, for a fresh marriage?" [4] . So far the reasoning of Fender v. St. John-Mildmay [5] is applicable alike whether the promise of marriage is made either expressly or impliedly conditional upon the pronouncing of a decree absolute or is general importing only marriage upon request within a reasonable time. But a point made in Fender v. St. John-Mildmay [5] is that the promise was to do a perfectly lawful act. "From the point of view of law it ought to be remembered as an essential factor in this discussion that by legislation it has been established that it is not contrary to public policy that married persons should obtain a divorce and not contrary to public policy that immediately after final divorce either of them should marry. To me I must confess it appears lamentable that the law should set its ban upon promises made to do a lawful act by persons who in the interval between the promise and its fulfilment do nothing, and are not induced by the promise to do anything, contrary to the public interests" (per Lord Atkin [1] ).
1. (1938) A.C., at pp. 16, 17.
2. (1938) A.C., at p. 46.
3. (1938) A.C. 1.
4. (1938) A.C. 1.
5. (1938) A.C., at p. 17.
It is at this point that the question again arises whether the contract between the parties did mean the performance of the ceremony of marriage whether the decree had been made absolute or not. In a sense it is a simple case of the parties supposing that a condition had been fulfilled which they treated as necessary but which remained to be fulfilled and could be fulfilled before the time for performance. Without fulfilment of the condition performance would be not only unlawful, it would be impossible. Fulfil it and there would be no difficulty. Why in these circumstances should the contract be interpreted as one to do the act, be it lawful or be it unlawful? The true intent of the parties was to avail themselves of the completion of the divorce to marry lawfully. Their erroneous supposition that nothing more was needed to complete it, leaves them in the position of parties encountering or discovering an uncontemplated requirement which must be fulfilled before performance is possible, but which can be so fulfilled.
An actual intention to make performance depend on the making absolute of the decree nisi cannot be attributed to the parties, for they were unaware that it was necessary. But an actual intention is not the only means by which the operation of their agreement is ascertained.
"The very purpose of implied terms is to supplement the defective actual intention of the parties by filling up lacunae and making the necessary provision for casus omissi. By necessary implication is meant such an implication as is necessary to give efficacy to the contract by so supplementing its express terms as to make it a workable and complete agreement in such manner as the parties would presumably have themselves adopted had the question been brought to their minds and been made the subject of express provision at the time when the contract was made. The law attributes to parties by this process of interpretation the intention which as reasonable men they must necessarily have formed and expressed on the making of the contract if the matter had then been called to their attention. The intention so attributable to them is imported into the contract by the law as an implied term thereof" ( Salmond and Williams on Contracts, (1945) pp, 39, 40).
To imply that each party shall take all lawful steps required for the solemnization of a valid marriage between them is almost inherent in their engagement. Such an implication may properly be made. Under it the plaintiff became bound, if she could, to complete by decree absolute the dissolution of her former marriage. Provided that she could do so within the reasonable time measured in accordance with the supposition of the parties at the time of the promise that they were free people, there would seem to be no reason why the contract should not be so performed and no reason why it should be regarded as tainted with illegality or as contrary to public policy.
It follows from the foregoing that the contract was enforceable. The defendant's anticipatory renunciation of course relieved the plaintiff from any necessity thereafter of fulfilling conditions precedent in respect of which she was not already in default.
For the defendant appellant a contention was advanced to the effect that under the findings of the jury there was a variance between the contract declared upon and that upon which by the judgment of the Full Court she had recovered.
The answer given in the Full Court by Davidson J. was that s. 116 of the Common Law Procedure Act enabled the Supreme Court to give judgment according to the right and justice of the case. I see nothing unsatisfactory in this view. A combination of ss. 116 and 260 of the Common Law Procedure Act seems to warrant the course taken by the Full Court.
In my opinion the appeal should be dismissed with costs.
Williams J.
This is an appeal by the defendant in an action in which he is being sued by the plaintiff for breach of promise of marriage. In the middle of February 1946, the date of the alleged promise, the plaintiff was a married woman but the Supreme Court in its matrimonial causes jurisdiction had made a decree nisi for dissolution of the marriage on the suit of her husband. As the decree nisi was made on 31st August 1945, and the period after which an application could be made to make it absolute was the usual period of six months, less than one month of this period was still unexpired at the date of the promise. The plaintiff gave evidence that at the time of the promise the defendant told her that there were some formalities which would have to be fixed up about her divorce and that she should go down to the Divorce Court and get some papers and she said that she would do so. On 29th July 1946 the plaintiff's solicitors wrote to the defendant stating that she would proceed against him unless he fulfilled his promise to marry her. On 1st August 1946 the defendant's solicitors replied stating that the defendant most emphatically denied any agreement to marry the plaintiff. The period of six months had then expired but no application had been made by either the husband or the plaintiff to have the decree nisi made absolute. The decree nisi was not made absolute until 12th December 1946 when it was made absolute on the motion of the husband.
The plaintiff issued the writ in the action on 6th August 1946. The declaration at first contained the usual count that the plaintiff and defendant agreed to marry one another; and a reasonable time for such marriage had elapsed, and the plaintiff had always been ready and willing to marry the defendant yet the defendant had neglected and refused to marry the plaintiff. But the plaintiff subsequently amended the declaration by deleting this count and substituting two fresh counts, the first alleging an agreement to marry after the decree nisi should be made absolute, and the second alleging an agreement to marry subject to and after the taking by the plaintiff within a reasonable time of any necessary steps and the happening within a reasonable time of any and all events which might be or become necessary so to be taken or to happen to enable the marriage to be lawfully celebrated.
At the trial the learned judge left three questions to the jury—(1) Did the defendant promise to marry the plaintiff? (2) If so, did the plaintiff and the defendant then believe that something further remained to be done in connection with the divorce proceedings against the plaintiff before they could marry? (3) Damages? The jury answered the first question in the affirmative and the second question in the negative. In answer to the third question the jury assessed the damages at £500. The parties then agreed that his Honour might discharge the jury and be at liberty to enter whatever he thought was the appropriate verdict on their answers. His Honour said that, in his opinion, mutual promises of marriage between two persons, one of whom was then married, were prima facie void as being against public policy. He said that there was an exception to the general rule where at the time of the promise a decree nisi had been made for the dissolution of the marriage, provided that it was a term of the agreement to marry that it was to be performed after the decree had been made absolute. He said that such a term would be implied by law in the contract if both parties knew of the impediment at the time of their agreement, but that it followed from the second answer of the jury that no such term could be implied in the present case. The defendant was therefore entitled to a verdict on the first and second counts and there must be judgment accordingly.
The plaintiff appealed to the Full Supreme Court of New South Wales. In separate judgments the Full Court (Jordan C.J., Davidson J. and Street J.) held that the agreement to marry was not unlawful, that it was capable of being performed in a lawful manner, and that whilst it was still capable of being performed in a lawful manner the defendant repudiated his obligations under it. The Chief Justice pointed out that no point was taken throughout the trial that the necessity for obtaining the decree absolute prevented the contract from being performed within a reasonable time, and that this was not surprising seeing that the agreement was alleged to have been made in the middle of February and the decree absolute could have been obtained at the end of that month. The Full Court therefore allowed the appeal with costs, set aside the verdict and judgment for the defendant and entered judgment for the plaintiff on the first count for £500.
The defendant has appealed to this Court from the order of the Full Supreme Court. It is evident from the answers of the jury that they must have accepted the plaintiff's evidence only to the extent that the defendant promised to marry her, both believing she was divorced and then free to marry, and that the jury did not accept her evidence that at the date of the promise they both believed that she was not completely divorced and that something further had to be done before she could marry the defendant. The evidence did not therefore sustain the counts in the amended declaration, but s. 116 of the Common Law Procedure Act 1899 N.S.W. provides that in all cases of variance between the proof and the record on the trial of any action the court, instead of causing the record or document on which such trial is proceeding to be amended at such trial, may direct the jury to find the facts according to the evidence. Davidson J. relied on this section in agreeing that judgment should be entered for the plaintiff on the first count.
Mr. Shand submitted that on the jury's findings there was no evidence to support either count of the declaration but I did not understand him to press this submission strongly. In any event the substantial issue of fact was whether the defendant had promised to marry the plaintiff and I agree with Davidson J. that this is a case in which the section should be applied if the plaintiff is entitled to succeed on the answers of the jury.
The four submissions pressed by Mr. Shand were (1) that the evidence disclosed that there was mutual mistake as to the existence of facts material to the contract found by the jury; (2) that this contract was void as being against public policy in the sense that it tended to cause immorality and crime; (3) that it was void as being a contract to procure an illegal act; (4) that the plaintiff had failed to establish readiness and willingness to perform the contract as she was not in a position lawfully to marry the defendant at the time when her rights crystallized by his repudiation.
There is, in my opinion, no substance in the first submission. On the findings of the jury it must be assumed that both parties believed that the plaintiff was divorced. But before a contract can be invalidated on the ground of mutual mistake, the mistake must be as to a fact at the root of the contract. Here there was no such mistake. The root of the contract was the agreement to marry. There was no mistake as to the subject matter of the contract or the identity of either party. The defendant knew that he was marrying a woman who had been married. The only mistake was that the parties both believed that the plaintiff was free to marry at the date of the promise. But this mistake was not material to the making of the contract. It related entirely to the immediate ability of the plaintiff to perform the contract. It did not in any way affect the reality of the consent of the parties.
The other three submissions can be disposed of together, the crucial question being whether a promise to marry is void ab initio when it is made by a married person whose marriage has reached such a stage of dissolution that divorce proceedings have been taken and a decree nisi for dissolution of marriage has been made. There is no statute which makes such a promise unlawful. It can only be void on the ground that it is contrary to public policy. In Fender v. St. John-Mildmay [1] , Lord Atkin said that this doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable. Its effect on the validity of promises to marry has been discussed in a number of recent cases. The leading case is, of course, Fender v. St. John-Mildmay [2] . The House of Lords did not express any final opinion whether Spiers v. Hunt [3] and Wilson v. Carnley [4] were rightly decided. Assuming that they were rightly decided (and they are supported by the remarks of Lord Dunedin in delivering the judgment of the Privy Council in Skipp v. Kelly [5] ) the only case in which it has been held that a promise to marry is void on this ground is where the promisor is to the knowledge of the promisee a married person. The contract under discussion in Fender v. St. John-Mildmay [1] was a promise by a married person against whom a decree nisi had been made to marry immediately the decree nisi had been made absolute. But the basis of the decision is that after a decree nisi there is no ground of public policy which prevents a married person making a fresh promise to marry. Lord Atkin said "But let us consider how far the normal obligations and conditions of marriage continue in ordinary circumstances after decree nisi. They have disappeared: there is no consortium, and the parties are living apart: they owe no duties each to the other to perform any kind of matrimonial obligation: the custody of the children has been provided for by the court: the maintenance of the wife, if petitioner, is similarly provided for: the petitioning spouse has said: "I have done with you." In these circumstances what possible effect can a promise to marry a third person have by way of interference with matrimonial obligations? There is no single duty which is being observed by either to the other: and it appears to me merely fanciful to suggest that the public interests are in any respect being impaired. from the point of view of law it ought to be remembered as an essential factor in this discussion that by legislation it has been established that it is not contrary to public policy that married persons should obtain a divorce and not contrary to public policy that immediately after final divorce either of them should marry" [2] . Lord Thankerton said "it is conceded that public policy prevents the enforcement of a promise of marriage by a married person to a third party made prior to the decree nisi, but the appellant maintains that the principle no longer applies after the decree nisi is pronounced" [3] . Lord Wright said "the order nisi in truth determines the status of the parties though its final operation is suspended and it is subject to a contingency" [4] . "But it is obvious that in truth and in substance there is no longer any marriage. There is no longer any matrimonial home, no consortium vitae, no right on either side to conjugal rights" [5] .
1. (1938) A.C., at p. 12.
2. (1938) A.C. 1.
3. (1908) 1 K.B. 720.
4. (1908) 1 K.B. 729.
5. (1926) 42 T.L.R. 258.
6. (1938) A.C. 1.
7. (1938) A.C., at pp. 16, 17.
8. (1938) A.C., at pp. 23, 24.
9. (1938) A.C., at p. 45.
10. (1938) A.C., at p. 46.
In my opinion there is no objection on the ground of public policy to a married person making an unconditional promise to marry after a decree nisi has been made. It is not a contract in the performance of which there will be generally any tendency to do wrong. The contract itself is lawful and it can only become unlawful if it is entered into for an unlawful purpose, that is to say, if it is a contract to marry before the decree nisi is made absolute. It is to be noted that in Spiers v. Hunt [1] the contract expressly provided that the marriage should take place after the death of the defendant's wife, whereas in Wilson v. Carnley [2] there was no express provision when the marriage should take place. But Vaughan Williams L.J. evidently thought that such a term should be implied because he said, "The question in this case is whether a promise made by a married man during the lifetime of his wife to marry some other woman, presumably after his wife's death, because he could not do so in her lifetime, can be enforced" [3] . It would seem to follow that in the case of a promise to marry by a married person whose divorce has proceeded to the stage of a decree nisi to the knowledge of the promisee, a term should also be implied that the marriage should not take place until the decree nisi has been made absolute. But it is to my mind immaterial that the promisee does not know that the decree has not been made absolute. Each party to the contract must be ready and willing to marry the other. Readiness and willingness include ability to perform the contract. But the contract is a contract to marry in a reasonable time upon request. The plaintiff was never requested by the defendant to perform the contract. If she had been so requested, she would have been entitled to reasonable notice, and she would have been a person who was ready and willing to perform the contract if she had been able to obtain the decree absolute in the meantime. But the contract was repudiated by the defendant before any such request and therefore before the time for performance had arrived, and this entitled the plaintiff to treat the contract as discharged and to sue immediately for damages for breach of contract (Frost v. Knight [4] ).
1. (1908) 1 K.B. 720.
2. (1938) 1 K.B. 729.
3. (1908) 1 K.B., at p. 733.
4. (1872) L.R. 7 Ex. 111.
For these reasons I would dismiss the appeal. |
high_court_of_australia:/showbyHandle/1/9228 | decision | commonwealth | high_court_of_australia | text/html | null | Seamen's Union of Australia v Matthews [1957] HCA 53 | https://eresources.hcourt.gov.au/showbyHandle/1/9228 | 2024-09-13T22:44:45.249731+10:00 | High Court of Australia
McTiernan J. Dixon C.J. Williams, Webb, Kitto and Taylor JJ.
Seamen's Union of Australia v Matthews
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
July 23
McTiernan J
. delivered the following judgment:—
Mr. Gowans moves on behalf of the Seamen's Union of Australia for an order nisi directed to the judges of the Commonwealth Industrial Court and Leonard George Matthews with a view to obtaining a writ of prohibition under s. 75 (v.) of the Constitution. The order nisi for which counsel moves would call in question the validity of the Commonwealth Industrial Court; in the alternative it would call in question the jurisdiction of that court to proceed upon nine informations which Matthews laid against the union for contempt of court. The union contends that he had no locus standi to lay any of them.
The Commonwealth Industrial Court heard the nine informations together. On 24th May 1957 it found the union guilty upon all of the informations, imposed penalties in three cases and ordered the union to pay the costs of all the informations.
Every contempt of which the court found the union guilty was of the nature of disobedience by it to an order which had been made pursuant either to cl. (a) or (b) of sub-s. (1) of s. 109 of the Conciliation and Arbitration Act 1904-1956.
Both of these orders were made at the instance of the Commonwealth Steamship Owners' Association which desired to enforce cl. 38 of the Seamen's Award 1955—a prohibition of certain strikes and other practices which would cause interference with work. The union and the association, respectively, are registered pursuant to the Act and each of these organisations and its members are bound by the award.
The locus standi of Matthews as informant appears to have rested upon an authority which the Steamship Owners' Association had given him. I am clearly of the opinion that the question whether the locus standi of Matthews was satisfactory is merely a question of procedure. The Commonwealth Industrial Court being a superior court of record, it was within its province while exercising the jurisdiction defined in s. 111 of the Act to pass upon the locus standi of Matthews. The union's objection to the locus standi of Matthews raises no point upon which it could possibly obtain a writ of prohibition. Mr. Gowans did not argue this ground of the application. However, it was not formally abandoned. In my opinion, it must be rejected as being beyond the scope of prohibition.
I return to the other ground on which the order nisi is sought. This ground was skilfully argued by Mr. Gowans but I am clearly of opinion that it is not tenable. What he argued is that the Parliament created the Commonwealth Industrial Court to exercise dual functions, some judicial and others non-judicial, and that, therefore, the Parliament offended against the doctrine of Reg. v. Kirby; Ex parte Boilermakers' Society of Australia [1] . Admittedly, the court possesses powers which are judicial. Section 111 is one of these powers.
1. (1956) 94 C.L.R. 254.
Provisions of the Act were referred to which, it was argued, confer powers on the court referable to s. 51 (xxxv.) of the Constitution. If this argument about these provisions is wholly or partly true, it does not follow that the court is not validly created and cannot exercise the judicial powers vested in it. Section 15A of the Acts Interpretation Act 1901-1950 saved the arbitral powers of the Conciliation and Arbitration Court, the subject of the Boilermakers' Case [1] , because the primary and dominant purpose or character of that tribunal was arbitral. Mr. Gowans argued that what is given to the Commonwealth Industrial Court is a miscellany of powers in which neither the judicial nor the non-judicial element predominates. There is tacit in this argument an assumption that s. 15A is not applicable to preserve the provisions defining the court's strictly judicial jurisdiction. The plan of the present Act is, in my opinion, clear. The Parliament created the Commonwealth Industrial Commission pursuant to its powers under s. 51 of the Constitution; and it plainly intended to create the Commonwealth Industrial Court pursuant to its powers under s. 71 of the Constitution, and to define its jurisdiction according to the requirements of s. 77 (ii.) of the Constitution. Accordingly, arbitral and judicial powers are distributed between the commission and the court respectively.
1. (1956) 94 C.L.R. 254.
I think it follows from this legislative plan that, if a power which on examination is found to be strictly judicial, has been assigned by the Parliament to the commission, it is severable under s. 15A; and conversely, if any power conferred on the court is not within the realm of the judicial power, it is invalid and likewise severable. If this is correct, the legislative intention manifested by ss. 98 and 99 of the Conciliation and Arbitration Act 1904-1956 is effective; and the Commonwealth Industrial Court is a valid federal court, even though the Conciliation and Arbitration Act 1904-1956 purports to attach to its jurisdiction some power which is not within the realm of the judicial power.
I entertain no doubt that the jurisdiction which is defined by s. 111 of the Act is constitutionally vested in the Commonwealth Industrial Court. It was by an exercise of that jurisdiction that the court convicted the Seamen's Union of the contempts and made the orders for the payment of penalties and costs, from which the union seeks relief by this application. No ground is shown for doubting that the Commonwealth Industrial Court had jurisdiction to convict the union upon any of the informations laid by Matthews and thereupon to make the orders of which the union complains. I therefore refuse the application.
It was brought by an ex parte motion. When Mr. Gowans moved the Court, Mr. Wallace applied for leave to be heard. I do not find it necessary to trouble him to argue any question.
From this decision the applicant appealed to the Full Court. The arguments addressed to the Court on behalf of the appellant appear sufficiently in the judgment of the Court hereunder.
Cur. adv. vult.
The Court (Dixon C.J., Williams, Webb, Kitto and Taylor JJ.) delivered the following written judgment:—
Sept. 12
Dixon C.J., Williams, Webb, Kitto and Taylor JJ.
This is an appeal from an order of McTiernan J. refusing an application made ex parte for a writ of prohibition. The appeal was instituted by the applicant pursuant to O. 70, r. 27 of the Rules of the High Court. The writ of prohibition was sought against an order of the Commonwealth Industrial Court made on 24th May 1957, adjudging the applicant guilty of contempts of that court consisting in acts or omissions contrary to certain orders of the court. Fines were imposed in respect of the contempts found to have been committed. Section 111 of the Conciliation and Arbitration Act 1904-1956 is expressed to confer upon the Commonwealth Industrial Court the same power to punish contempt of its power and authority as is possessed by this Court in respect of contempts of this Court. The writ of prohibition was sought substantially on the ground that the Commonwealth Industrial Court is not validly established. The attack was made upon the validity of the provisions establishing the court and conferring jurisdiction upon it. The attack was supported by the contention that the purpose of the legislature, as disclosed by the Act, in setting up the court was to invest it with a conglomerate mass of powers and authorities some only of which fell within the judicial powers of the Commonwealth, that there was no predominant intention to give it judicial power and that, in spite of the provisions of the Act which set it up in apparent conformity with ss. 71 and 72 of the Constitution, it was in fact a body established for the purpose of the fulfilment of functions conferred without regard to the question whether by their nature they fell within the judicial power of the Commonwealth or outside that power. In short, it was said that the Commonwealth Industrial Court was a body established for the fulfilment of purposes of a mixed character and the learned counsel explained away the establishment of the court under ss. 71 and 72 by saying that only because some of them happened to be judicial had the legislature given it the status of a court and provided the judges with a tenure satisfying the requirements of s. 72 of the Constitution.
In support of this argument a number of sections was examined with a view of showing that they conferred or included power or authority which fell outside the judicial power of the Commonwealth. In particular, it was said that the following sections of the Conciliation and Arbitration Act 1904-1956 conferred an authority falling outside Chap. III of the Constitution: viz. ss. 134, 112, 109 (1) (c), 144, 159, 161, 165, 167, 107, 140 and 143. We are by no means prepared to say that in the case of each of these provisions the contention that it fell outside the conception of federal judicial power was made out. But as we are unable to agree with the basal conception upon which the argument is based we think that the proper course is to avoid any unnecessary discussion of the characterisation of the provisions of these various sections as belonging or not belonging to judicial power. We think that, however the argument may be stated, in the result it comes back to a contention that in the powers conferred upon the Commonwealth Industrial Court some non-judicial powers are included and that there is no sufficient indication in the Act to show which in the view of the legislature is the principal and which is the accessory set of provisions, the provisions within the judicial power or the provisions outside the judicial power. On the footing that you cannot tell which is the principal and which is the accessory set of provisions it is said that it is impossible to say whether the judicial powers are to be held good and capable of exercise by a validly created court or the non-judicial powers are to be held good and the judicial powers are to be severed from them so that the creation of the court as a federal court is not to be referred to Chap. III of the Constitution and is not effectual to enable the tribunal to receive a grant of any part of the judicial power of the Commonwealth.
We think that it is simply not correct to treat the establishment of the court and its investment with judicial power as well as with powers possibly going outside Chap. III as providing no basis for saying that the intention of the legislature to set up the tribunal as a federal court and arm it with judicial powers was paramount. By ss. 98, 99, 100, 102 and 103 the Commonwealth Industrial Court is clearly established in pursuance of ss. 71 and 72 of the Constitution and with the object of its being another federal court of the Commonwealth capable of receiving judicial power. Jurisdiction forming part of the judicial power of the Commonwealth is immediately conferred upon the court by ss. 108, 109 (1) (a) and (b), 110, 111, 113, 115, 116 and, as we think, by s. 107, although that was disputed. Judicial power is conferred upon it also by s. 119 (1).
It appears to us to be quite clear that the purpose of establishing the court was to enable it to exercise these powers and whatever other judicial powers have been conferred. If upon a proper examination of some of the provisions conferring powers that are now said to be non-judicial they are hereafter found to be outside the judicial power of the Commonwealth, those provisions should be treated as severable. We do not agree that the history of the legislation is of no importance. We think that the fact that it was passed after the decision of this Court in Reg. v. Kirby; Ex parte Boilermakers' Society of Australia [1] the judgment in which was pronounced on 2nd March 1956, is confirmatory of the view which we have expressed. But independently of that consideration the character of the statute (No. 44 of 1956) by which the Conciliation and Arbitration Act 1904-1956 was brought into its present form provides abundant evidence of the intention to establish a Commonwealth Industrial Court for the purpose of exercising judicial power even if some of the functions conferred upon it may in truth go outside Chap. III of the Constitution. It is unnecessary to go over the provisions of the Act. It is enough to refer to Pt. III containing a complete legislative scheme for dealing with industrial matters falling within the main purpose of s. 51 (xxxv.) of the Constitution and to the separation of those powers from those conferred on the Industrial Court, to the fact that the Industrial Court was set up under ss. 71 and 72 of the Constitution and to the particular provisions which we have mentioned conferring upon the Industrial Court its main judicial powers. When you look at the powers of the Commonwealth Industrial Court which it is said go beyond the judicial power of the Commonwealth it will be seen that they are of a kind which the legislature might well have thought appropriate to a judicial tribunal and are not manifestly and clearly of an industrial or arbitral character. We think that it is quite plain that in the light of the decision of the Court in Reg. v. Kirby; Ex parte Boilermakers' Society of Australia [1] the legislature attempted to set up a new court for the judicial enforcement of the provisions of the Act and of the award and for the exercise of other judicial functions arising out of the Conciliation and Arbitration Act. On the assumption that provisions conferring authority upon the court are found which do go outside Chap. III of the Constitution we think it is quite clear that the only result is that they must be severed as bad and that the Commonwealth Industrial Court is validly established and remains in possession of the judicial powers conferred on it by the Act.
1. (1956) 94 C.L.R. 254.
2. (1956) 94 C.L.R. 254.
At the conclusion of the argument for the appellant we intimated that we would dismiss the appeal and reserve our reasons. An application for costs was made which we said we would consider. We can see no reason why the appeal should not be dismissed with costs. The order will be appeal dismissed with costs. |
high_court_of_australia:/showbyHandle/1/11941 | decision | commonwealth | high_court_of_australia | text/html | null | Re Colina; Ex parte Torney [1999] HCA 57 | https://eresources.hcourt.gov.au/showbyHandle/1/11941 | 2024-09-13T22:44:45.306168+10:00 | "High Court of Australia\nGleeson CJ McHugh, Gummow, Kirby, Hayne and Callinan JJ\nRe Colina; Ex par(...TRUNCATED) |
high_court_of_australia:/showbyHandle/1/10240 | decision | commonwealth | high_court_of_australia | text/html | null | Dawson v Perpetual Trustee Co (Ltd) [1953] HCA 83 | https://eresources.hcourt.gov.au/showbyHandle/1/10240 | 2024-09-13T22:44:52.495684+10:00 | "High Court of Australia\nDixon C.J. Kitto and Taylor JJ.\nDawson v Perpetual Trustee Co (Ltd)\n[195(...TRUNCATED) |
high_court_of_australia:/showbyHandle/1/11266 | decision | commonwealth | high_court_of_australia | text/html | null | Barton v Deputy Commissioner of Taxation (Cth) [1974] HCA 43 | https://eresources.hcourt.gov.au/showbyHandle/1/11266 | 2024-09-13T22:44:59.140191+10:00 | "High Court of Australia\nMenzies, Gibbs and Stephen JJ.\nBarton v Deputy Commissioner of Taxation ((...TRUNCATED) |
high_court_of_australia:/showbyHandle/1/8876 | decision | commonwealth | high_court_of_australia | text/html | null | Stow v Mineral Holdings (Australia) Pty Ltd [1979] HCA 30 | https://eresources.hcourt.gov.au/showbyHandle/1/8876 | 2024-09-13T22:45:02.565793+10:00 | "High Court of Australia\nBarwick C.J. Stephen, Mason, Murphy and Aickin JJ.\nStow v Mineral Holding(...TRUNCATED) |
high_court_of_australia:/showbyHandle/1/10314 | decision | commonwealth | high_court_of_australia | text/html | null | Mraz v The Queen [1955] HCA 59 | https://eresources.hcourt.gov.au/showbyHandle/1/10314 | 2024-09-13T22:45:02.860609+10:00 | "High Court of Australia\nMcTiernan, Williams, Webb, Fullagar and Taylor JJ.\nMraz v The Queen\n[195(...TRUNCATED) |
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