Big Country Developments v Hollingsworth

[2001] HCATrans 446

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S295 of 2000

B e t w e e n -

BIG COUNTRY DEVELOPMENTS PTY LIMITED

Applicant

and

JEFFREY HOLLINGSWORTH and GILLIAN GAI HOLLINGSWORTH

Respondents

Application for special leave to appeal

GUMMOW J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 20 NOVEMBER 2001, AT 2.01 PM

Copyright in the High Court of Australia

MR B.A.J. COLES, QC:   I appear with MR P.P. STRASSER for the applicant.  (instructed by Denes Ebner)

MR V. STEFANO:   I appear for the respondents.  (instructed by Shaddick Baker & Paull)

GUMMOW J:   Yes, Mr Coles.

MR COLES:   The applicant’s summary of argument commences at page 400 of volume 2 and the short point really is whether section 51 of the Real Property Act produces the consequence that the respondents, as intermediate assignees of the lease, are liable to the applicant ‑ ‑ ‑

HAYNE J:   For what their successors do.  That is the nub of it, is it not?

MR COLES:   Yes.

HAYNE J:   It is a fairly large proposition, is it not, that one should be liable for what your successors do?

MR COLES:   That is the proposition, that the ‑ ‑ ‑

GUMMOW J:   And that is quite different to the common law.

MR COLES:   Yes, that is true too.  The propositions shortly are these:  the submission we make depends, of course, on the literal terms of the section and they are, if your Honours wish to consult them, in various places, but at 399 of the ‑ ‑ ‑

GUMMOW J:   Has section 51 been in that form since the 1862 Real Property Act?

MR COLES:   Pretty much, your Honour, yes.  Relevantly it provides that:

Upon the registration of any transfer, the estate or interest of the transferor as set forth in such instrument, with all rights, powers and privileges . . . shall pass to the transferee and –

significantly –

such transferee shall thereupon become subject to and liable for all and every the same requirements and liabilities to which the transferee would have been subject and liable if named in such instrument originally as –

inter alia –

lessee of such land, estate, or interest.

One thing of course, it is fair to observe that there is no particular reason why the words should not be given their literal effect.  The fact that the general law was otherwise prior to the enactment of the provision is not a circumstance justifying reading down the section according to its terms.  Indeed, one supposes that statutory provisions frequently amend or alter the antecedent general law.

HAYNE J:   But it has been understood to have this meaning since the early New Zealand case to which reference is made.

MR COLES:   Since Brightling’s Case in 1884.  We accept all that.  We have some criticisms to venture about Brightling’s Case.  So our first proposition really is that prima facie the statute should be understood in accordance with its literal terms rather than glossed or read down.  Secondly, there are two important policy reasons we have identified which justify the construction we have given.  The first is that the idea of the Real Property Act is really to put each successive transferee in the case of the lease in the same position as if the original lessee under the original lease – that is to say, upon registration of the transfer of the lease there is thereby effected a situation which gives both privity of estate and privity of contract as between the lessor and the assignee lessee.

If that is so, then if one is prepared to recognise, as the cases have done, that the original lessee remains liable notwithstanding successive transfers, why should each successive transferee of the lease not be so liable?  In other words, there is an anomaly only justified by, in effect, history in treating the original lessee as remaining liable notwithstanding the transfer to subsequent assignees and not treating each successive assignee as so liable when that assignee has stepped into the shoes, according to section 51, of the original lessee.

HAYNE J:   Why should we interrupt what seems to have been the accepted view of section 51 for so long?

GUMMOW J:   In saying that, we are looking at, for example, Hogg, 1905, which refers to section 51 and the sections in Queensland, South Australia and New Zealand and treats the law as settled.

MR COLES:   Brightling’s Case in 1884 can withstand some just criticism.

GUMMOW J:   That may be right.

MR COLES:   In fact, certain of the judgments would not withstand any just criticism – that is to say, the judgment of Justice Prendergast.  Chief Justice Prendergast’s judgment is, we would wish to contend, significantly flawed in at least three areas.  The principal judgment is really one which depends on treating the registered party as a transferee and holding that he loses the status as a transferee upon a later transfer.

GUMMOW J:   This interpretation of 51 and the corresponding provisions in at least two other States, I think – has that ever been subjected to criticism by the commentators on the Torrens System?

MR COLES:   We have not been able to find any commentary on Brightling’s Case.

HAYNE J:   Wiseman, for example, in Victoria, where the provision is not identical, simply refers to it as if it is settled law.  No occasion to subject it to critical analysis, I know, but I just wonder how much Mr Wiseman was reflecting the generally accepted view of those knowledgeable in the area.

MR COLES:   He may well have been, but one needs to bear in mind that Brightling’s Case is not really this sort of case anyway.  Brightling’s Case really was a case where, in effect, one of the lessees was seeking contravention or indemnity from a later lessee, a result that could have followed these days by the conventional application of principles in Moule v Garrett and did not really necessitate calling in aid section 51 at all.  So there is a case to be made for treating much of what is said about the section as really just by the by in Brightling’s Case.  It is a three‑judge case.  We accept it is the only authority that really purports to deal with the matter and we accept it is very old.

HAYNE J:   Would it be possible to contract to the opposite effect?

MR COLES:   I see no reason why not, your Honours, but one of the ‑ ‑ ‑

HAYNE J:   If that is so, is it not then left to the parties to bargain for this?

MR COLES:   Except that one cannot imagine commercially any reason for them doing so when one appreciates that the almost universal experience, I suppose – I appreciate there is no evidence of this before his Honour in the court – but it is inevitable that lessors exact from an incoming lessee as a transferee, not from them but of course from the outgoing lessee, a covenant to be and remain liable notwithstanding successive subsequent transfers.  That technique has been judicially upheld.  We have referred to the authorities in the outline.  There is no reason why contractually each successive lessee cannot be kept on the hook

notwithstanding the successive transfers – and the commercial tendency is to do so – and to construe the section as simply in accord with what we would commend as prevailing commercial practice would not only be to do no violence to the language of it but to recognise its, in effect, consistency with the expectations of those who deal in these sort of transactions.

The other policy matter to which we have referred, of course, is twofold:  one, by having them all co‑ordinately liable as if original lessees, which is what we say is the proper meaning of the section.  You do more fairly spread the burden if there is an eventual contribution requirement enlivened.  Not only that, but you do make each successive transferor more responsible for the selection of his own transferee instead of flicking the problem forward into the future for the next generation and getting out, in effect, from under, leaving the original lessee and the assignee to bear the burden.  Of course, the fault may be as much – as this case really illustrates, Mr Karacominakis by – and I appreciate this is one stage down the track – but if Mr Karacominakis by misrepresentation burdened Chadlace with a new lease but he, in effect, unless there is a covenant and if he were not of course in the present case the registered lessee, then somebody in his position who has brought about the attraction, has garnered into the fold the new lessee, he walks, whereas the new lessee, in effect, bears the burden along with the original lessee but all the intermediate assignees are off the hook.  That is not a fair result, in our submission, and it is not one compelled by the legislation on its literal term.  That is the argument we would wish to contend if special leave were granted.

GUMMOW J:   Having regard to long‑settled authority which, in our view, should not be disturbed in a field such as this, the Court is of the view that there are insufficient prospects of success in this matter to warrant a grant of special leave.  Accordingly, special leave is refused with costs.

The Court will now adjourn to reconstitute.

AT 2.11 PM THE MATTER WAS CONCLUDED