Ashmore Developments Pty Ltd v Eaton

[1991] HCATrans 163

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No Bl0 of 1991

B e t w e e n -

ASHMORE DEVELOPMENTS PTY LTD

Applicant

and

PETER STANAGE EATON, CLAIRE
ANNE EATON and PETER JAMES

O'GRADY

First Respondents

PETER CHARLES HUXTABLE and

NICHOLAS PHILLIP ANDERSON

Second Respondents

Application for special

leave to appeal

BRENNAN J

TOOHEY J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON THURSDAY, 27 JUNE 1991, AT 12.16 PM

Copyright in the High Court of Australia

Ashmore 1 27/6/91

MR M.A. MARTIN:  May it please the Court, I appear for the

applicant. (instructed by Worcester & Co)

MR R.M. BOURKE:  May it please the Court, I appear on behalf

of the respondents. (instructed by Primrose Couper

Cronin Rudkin)

MR MARTIN:  May it please the Court, if I could hand up four

copies of the authorities and materials to which I

may refer in the course of my submissions.

Your Honours, the point which arises in this

application is whether clause 14A, as it then was

of the standard REIQ contract, which is now

clause 16(a) of the current REIQ contract,

constitutes or has the effect of assigning back

outstanding rents at the date of completion which

are by virtue of section 117 of the

Property Law Act assigned to the purchaser. As

Your Honours would be aware, in this case, the

applicant sold premises. There was outstanding

rent owing to the vendors as at the date of

completion. They, at first instance, recovered a

judgment for the amount of the rent. The Full

Court - the majority decision of His Honour the

Chief Justice and His Honour Mr Justice Ryan - found that section 14A of the REIQ contract, in

effect, worked an assignment back of the

outstanding rent back to the vendor which, in

effect, had been assigned or statutorily assigned

by section 117.

Your Honours, the matter is of general

application in that, as I have handed up to you,

section 117 of the Queensland Property Law Act is

mirrored in both New South Wales, Victoria,

Western Australia and Tasmania - and the relevant,

as I have said, copies have been handed up, as well

as section 141 of the English equivalent of this

statute.

BRENNAN J:  Mr Martin, the relevant question is whether this

clause by itself affects a legal assignment, is

that right? And the question is not as between the
assignor and the assignee, but as between the

assignee and the debtor.

MR MARTIN: With respect, Your Honour, that is not my

submission. As can be seen from the judgment of

His Honour Mr Justice Byrne, who dissented in the

Full Court, he states - and my submission is that

this is the appropriate way to apply clause 4(a) of the REIQ contract and the other similar sections of

other standard form contracts adopted in other

States of this country - that it is a renunciation of a right conferred solely for the benefit of the purchaser.

Ashmore 2 27/6/91

BRENNAN J: That cannot be right, because there were three

parties, not two. There were three parties because

there is the purchaser, there is the vendor and

there is the debtor, and the debtor must know to

whom he can pay his rent.

MR MARTIN:  Yes, Your Honour. His Honour Mr Justice Byrne

deals with that point at page 5 of his judgment, if

I could take the Court to that, which is at page 29

of the application book, starting at about line 21

where His Honour says:

Until apprised of the terms of the new

lessor's contract, the lessee may be in doubt

whether to pay vendor or purchaser. Yet this

possibility does not give the lessee an

interest which should prevent the renunciation

of the assignee's statutory entitlement to the

arrears.

I should point out

BRENNAN J: Why not? If he pays one, does the other then

have a right to come and claim against him the
amount that is already paid? Can he plead payment

if he pays the wrong one?

MR MARTIN:  Possibly that may give rise to an action then

between the vendor and purchaser.

BRENNAN J: Well it may; that is a different problem. The

proposition is that the effect of the statute is
simply the creation of a right in favour of the

purchaser which the purchaser can renounce in

favour of the vendor.

MR MARTIN:  Yes.

BRENNAN J:  And the proposition which I have put to you is that that analysis is inadequate, because it

concerns the lessee as well. The lessee must know

to whom he has to pay his rent, else he will be met

with perhaps a claim for a double amount if he pays

the wrong one.

MR MARTIN: Yes, I do accept that point, Your Honour,

but - - -

BRENNAN J:  I thought you were starting on the assignment

point.

MR MARTIN:  Yes, well I was. That was the point that I

wished to deal with. My submission is that the

clause of the contract cannot constitute an

assignment back of the rights for two reasons. The

first is that to assign something the assignor must

have a right to it. Now the assignme·nt back, in

Ashmore 3 27/6/91

effect, if it is to be accepted as that, is

contained within the contract, so therefore before
the contract was signed there must have been a

right in the purchaser to the rent which accrued prior to the date of completion of the contract,

otherwise there is nothing to assign. Secondly, in

any event, under the Torrens system, the legal

estate does not pass until the

memorandum of transfer is registered.

TOOHEY J:  I was going to ask you about the Torrens system

statute, Mr Martin. Does that say nothing about

the position of the registered proprietor and a
person ceasing to be the registered proprietor in

regard to moneys owing under a lease?

MR MARTIN:  I have not considered that point, but my

recollection of legislation is that it is not dealt

with. It is more dealt with by section 117 and my

submission is that the reference in section 117 to

the transfer of the estate or the reversion must be

the legal estate. Authority for that proposition

is found in a decision of the New South Wales

Supreme Court in Dalegrove Pty Ltd v Isles Parking

Station Pty Ltd, (1988) 12 NSWLR 546. His Honour

Mr Justice Bryson says at page 550, at about

paragraph C, dealing with the New South Wales

equivalent:

Subsection 117(1) appears to me to divide

itself into two parts the first of which

relates to rights which are annexed and

incident to and go with the reversionary

estate in the land, referring to the legal

estate -

So my submission is, Your Honours, that on any

construction of section 117, whether the right to

the rent passes at the time the contract is signed

when the purchaser obtained an equitable interest

in the land or the right is when the legal estate

passes, when the memorandum of transfer is

registered with the Registrar of Titles, at either

points in time the purchaser did not have the right

to the rent, especially with the transfer of the

legal estate, he certainly did not, because he

signed a contract some - at least 30 days prior to

registration, so therefore he had nothing to assign

back to the vendor. If it is to be accepted that

the assignment took place upon the signing of the

contract, it was contemporaneous with the signing

of the contract. It was not as though the

purchaser obtained the benefit prior to the

contract going ahead. If that is to be accepted,

for the parties to achieve what they are trying to achieve under clause 14A of an REIQ ~ontract, they

would, in effect, have to sign an agreement prior

Ashmore 4 27/6/91

to entering into the agreement saying, we are

contemplating and entering into a contract for the

sale of land, but the purchaser does not wish to

take the benefit which will arise upon the signing

of the contract of the benefits under section 117

of the Property Law Act.

TOOHEY J:  I may be missing something here but, you have a

situation of the owner of - registered proprietor

of land who enters into a lease.

MR MARTIN:	Yes.
TOOHEY J:	As a result of which there is presumably a

contractual obligation on the part of the lessee to

pay the rent.

MR MARTIN:	Yes.
TOOHEY J:	The registered proprietor subsequently enters

into a contract for the sale of the land; that sale

is perfected and someone else becomes a registered

proprietor. What is it that deprives the original

lessor of the entitlement to recover rent, that is,

not as against the subsequent registered
proprietor, but as against the lessee? What
deprives the lessor of the right to recover rent
due in respect of a period before registration of

the transfer of the land?

MR MARTIN:  Section 117 of the Property Law Act,

Your Honour.

TOOHEY J: And how does it do that? Certainly, as between

vendor and purchaser, it has that effect but,

before you get to that, is that sufficient then to
preclude the lessor in proceedings between lessor

and lessee from recovering rent due contractually

in respect of the period before sale is effected?

MR MARTIN:  Yes it does, because that was exactly what the

Full Court found in this case. At first instance, before His Honour Justice Hanger, he ordered that the rent is recoverable pursuant to the contract

which existed at the time between the lessor and

the lessee.	The only defence raised at the trial
was section 117 of the Property Law Act.	On
app~al, His Honour the Chief Justice and

Mr Justice Ryan overruled the trial judge finding

on the grounds that the vendor of the land had not either sued in the name of the purchaser or joined the purchaser as a party to the action.

TOOHEY J:  Why should he if he is suing on the contract?

MR MARTIN: Well, that is precisely my point. It is my

submission that - - -

Ashmore 27/6/91

TOOHEY J: Well, I did not think it was really, that is what

prompted the question. Section 117 is one of those

sections that is designed to ensure covenants run with the land and therefore benefit the purchaser when otherwise the purchaser might not obtain that

benefit.

MR MARTIN:	Yes.
TOOHEY J:	I would have thought that under the Queensland Torrens statute, without knowing anything much
about it, that that Act would achieve that result
in any event.
MR MARTIN:	Yes, upon registration, it does.

TOOHEY J: Yes. Well, there was registration in this case,

was there not?

MR MARTIN:  Yes, there was.

TOOHEY J: At the relevant time? By "relevant time" I mean

when the proceedings were commenced.

MR MARTIN: With respect, Your Honour, it was the vendor who

was suing, the person that sold the land. It was

not the purchaser, so - - -

TOOHEY J: Yes, I appreciate that.

MR MARTIN:  Yes. As I understand the memorandum of

transfer had been registered and then proceedings

were commenced for the arrears of rent owing up to

the date of completion of the contract.

TOOHEY J: So, the proposition is that section 117, which

operates to annex certain rights and obligations to

the land so that the purchaser will benefit from

them - - -

MR MARTIN: Yes.
TOOHEY J:	- - - also operates to preclude a lessor from

recovering moneys contractually due to him under a

lease.

MR MARTIN: ·Yes, it does, Your Honour.

GAUDRON J:  You conceded that at first instance, did you

not?

MR MARTIN: Yes, Your Honour, we did.

GAUDRON J: So, that issue is the subject-matter of the

concession rather than decision?

Ashmore 6 27/6/91

MR MARTIN:  Yes, and it was accepted by the Full Court that

that was the case. What the applicant says in this

case is that clause 4(a) of the contract, in

effect, amounted to a renunciation of that right.

BRENNAN J: Well, there are three questions altogether.

The first is, what is the effect of section 117?

That is the subject of a concession and it follows

the authority of In re King.

MR MARTIN:  Yes.

BRENNAN J: So, we are not concerned with that.

MR MARTIN:	No, Your Honour.
BRENNAN J:	The next question is whether the right, which is

conferred upon the transferee by section 117, is

simply a right of a kind which the transferee can

renounce in favour of the transferor and thereby

nullify the effect of section 117.

MR MARTIN:	Yes, Your Honour.
BRENNAN J:	And the third proposition is that even if it is

not a right of that kind, does a contract, drawn as

this contract was drawn, work an assignment back by

the transferee to the transferor of the statutory

right to receive the rent, which has been acquired

pursuant to section 117, and whether or not that

that assignment is a legal assignment, so that the

transferor can sue directly the lessee?

MR MARTIN: Yes, Your Honour.

BRENNAN J: Well now, you have really got to deal, have you

not, with those two separate points; that is the

renunciation point and the assignment point?

MR MARTIN: Yes. Well, Your Honour, with respect to the

first of those points, I would submit, as I already

of renunciation or agreement between the parties	have, that it is clearly a section which is capable	that the purchaser will not take the benefit of that. Authority for that proposition can be found
in Dalegrove's case at page 555.

BRENNAN J: ·Page 555 of Dalegrove.

MR MARTIN: Yes.

BRENNAN J: Whereabouts?

MR MARTIN:  On page 555, the start of the third paragraph,

between paragraphs Band C, starting with the

words:

Ashmore 7 27/6/91

In my view the operation of covenants and

conditions in a lease for the benefit of
assignees of the reversion is not wholly a
matter of the intention of the parties. It is

possible that the parties may evince an

intention that the benefit of some particular

covenant or condition should not pass to the

assignees.

It was put in stronger terms in Re King. I should

point out in Dalegrove that the statement there of

His Honour Mr Justice Bryson was not necessary to

determine the actual issues in the matter.

In Re King at page 488 at the bottom of the

large paragraph about point 8, Lord Justice Upjohn
says:

Of course, the assignor and assignee can always agree that the benefit of the covenant

shall not pass, in which case the assignor can

still sue, if necessary, in the name of the

assignee.

I should also point out that that case,

Your Honours, dealt with the enforcement of a

pre-existing condition to rebuild a factory and

there was a subsequent purchaser and what the court

had to consider there was whether the English

equivalent of section 117 of Property Law Act

transferred such a covenant. So, of course, it was

not dealing with outstanding rent at the date of

completion.

Whilst I am on that passage of

Lord Justice Upjohn, that is a matter in which, in my respectful submission, the Chief Justice and

His Honour Mr Justice Ryan erred in that they found

that the applicant's case, at first instance, had

to fail because they did not sue in the name of the

party to whom they sold the land and they relied on

the paragraph to which I have just referred the

Court in Re King.

If I could take Your Honours firstly to the

judgment of His Honour Mr Justice Ryan, page 6 of

his judgment which is page 21 of the application

book, starting at the bottom. He first sets out

above that the passage to which I have just

referred the Court, then he says:

Though His Honour purported to apply the

principle stated by Lord Justice Upjohn, he

overlooked the significance of the words which

made it necessary for the assignor to sue in

the name of the assignee.

Ashmore 8 27/6/91

Now with the greatest respect, that simply is not

what Lord Justice Upjohn said.

GAUDRON J:  What was he saying?

MR MARTIN: Well, he was saying, as I would adopt the

argument of His Honour Mr Justice Byrne, that

parties can agree not to take the benefit of this

clause and, depending on the subject nature or the

wording of the agreement, it may be necessary to

sue in the name of the purchaser or, alternatively,

the vendor retains the right to sue in its own

name. And that is exactly what clause 14A of the

REIQ contract says.

BRENNAN J:  I think, perhaps, you are misreading what

His Honour was saying. This is not a case of dealing with the question Mr Justice Byrne was considering at all; this was simply a question of

assignments which are equitable assignments and

which therefore require the joining of the legal

creditor as a party.

MR MARTIN: Yes, I concede that point, Your Honour, but as I

have stated earlier, it is my submission that the

contract did not constitute an assignment back of

the rights and what His Honour the Chief Justice

and Mr Justice Ryan did, by saying that the learned

trial judge erred in not following what

Lord Justice Upjohn said, was simply an incorrect application of Lord Justice Upjohn's statement in

Re King.

BRENNAN J: Well now, if it did not constitute an assignment

back of the rights,· how is it that the plaintiff

could succeed?

MR MARTIN:  Because it was a renunciation of the rights; the

rights never went to the purchaser to be assigned

back.

BRENNAN J:  So we are back solely to Mr Justice Byrne's

judgment.

MR MARTIN: Yes.

BRENNAN J: _And that raises a question of whether it is

correct to say that this is simply a right as·

between two parties which one of them can renounce?

MR MARTIN: Yes, Your Honour.

BRENNAN J: If you fail on that, do you fail entirely?

MR MARTIN: Yes, I do, Your Honour. My submission is though that it has been referred to by the New South Wales

Supreme Court in Dalegrove; that it is possible

Ashmore 9 27/6/91

the parties agree this will not be the case and

similarly in Re King's case it is quite clear that

if the parties can agree in circumstances such as

these that the purchaser will not retain that

right.

Your Honour, this Court has dealt with the

question of renunciation of rights on a number of
occasions, the first of which is in the decision of
The Equitable Life Assurance of the United States v

Bogie, (1906) 3 CLR. I have only photocopied

page 897, the relevant judgment of His Honour

Mr Justice Barton. At the top of that page:

Everyone has a right to waive, and to agree to

waive the advantage of a law or rule made

solely for the benefit and protection of the

individual, in his private capacity.

BRENNAN J: Well, that proposition is undoubted. The

question is whether this is a right which is

created solely for the benefit of one party?

MR MARTIN:  I would submit that it is, notwithstanding that

the tenant may have some confusion as to whom it

may have to pay, having regard to section 117 of

the Property Law Act.

BRENNAN J: That is the issue, is it not?

MR MARTIN:  Yes, it is Your Honour. I would submit - - -

BRENNAN J:  Have you any authority on it?

MR MARTIN: Other than the judgment of His Honour

Mr Justice Byrne, no, Your Honour, I do not. It is

the first occasion that this section has been

considered in any court on this particular basis.

BRENNAN J: Well, the argument will not be developed by

repeating it.

MR MARTIN:	Yes, Your Honour.
BRENNAN J:	Is there anything further that you can say on

it?

MR ·MARTIN:  No, Your Honour, I cannot. Your Honour, with

respect to the question of general importance, as I

have already outlined, there is mirrored provisions

in a number of the other States; there are similar

sections in other standard form contracts and, of

course, it would be of general application to

conveyancing practice, not only in this State but

in other States in Australia, and is certainly

something which would warrant special leave.

Ashmore 10 27/6/91

BRENNAN J: Mr Martin, the time has come when we have to

adjourn. We will resume sitting at 2.15 pm. If at

that time you have anything further in support of

the notion of renunciation as being solely a right

conferred by section 117, then you can put it

forward at that time.

MR MARTIN:  Thank you.

AT 12.43 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.22 PM:

BRENNAN J: Yes, Mr Martin.

MR MARTIN:  Thank you, Your Honour. There is only one

authority to which I would like to take the Court

and that has already been handed up to the Court. It

is a decision of the Full Court of the

Supreme Court of Queensland in Re Permanent Trustee Nominees (Canberra) Limited, (1989) 1 Qd R 314. If

I could take Your Honours to the judgment of

His Honour Mr Justice Connolly at page 322 starting

at about line 15, dealing with the question of

renunciation of statutory rights, where His Honour

says:

Cases in which it has been held that a party

may not renounce the benefit of a statutory

provision abound. They will all be found to

involve an element of public as opposed to

private benefit.

I would submit, in this case, there is no question

that section 117 involves a public benefit. It is

clearly a private benefit for the benefit of the

purchaser. There may be some confusion, and as

His Honour Mr Justice Byrne recognized in his

judgment as to whom the tenant may be liable for

its rent, but in light of the authority of the

Full Court of the Supreme Court of Queensland and

the_other authorities which are authorities for the proposition that a party should be able to renounce a statutory benefit unless it gives rise to public
benefits which would make it improper or otherwise

unjust to renounce that. That does not arise here.

I therefore respectively submit that section 117

of the Property Law Act can be properly renounced

as it was in this case. Those are my submissions,

Your Honours.

Ashmore 11 27/6/91

BRENNAN J:  We need not trouble you, Mr Bourke.

Having regard to the concession made as to the operation of section 117 of the Property Law Act

,_	(1974) Queensland, the conclusion arrived at by the
Full Court is not attended with sufficient doubt to
justify the grant of special leave to appeal. Accordingly, special leave to appeal is refused.

MR BOURKE:	May it please the Court, I ask for costs.
MR MARTIN:	I have nothing to say.
BRENNAN J:	It will be refused with costs.

AT 2.26 PM THE MATTER WAS ADJOURNED SINE DIE

Ashmore 12 27/6/91