Brown v Heffer

[1967] HCA 40

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Kitto, Windeyer and Owen JJ.

BROWN v. HEFFER

(1967) 116 CLR 344

19 October 1967

Wills

Wills—Ademption—Devise of land—Subsequent contract of sale—Transfer subject to ministerial consent—Death of testator—Minister's consent granted after death—Devise not adeemed—Scope of doctrine of ademption—Nature of right of purchaser of land where transfer subject to ministerial consent—Entitlement to specific performance.

Decisions

October 19.
The following written judgments were delivered: -
BARWICK C.J., MCTIERNAN, KITTO and OWEN JJ. The question in this case is whether a specific devise of land was adeemed by either of two contracts entered into by the testator with respect to the land after the date of the will. The first contract employed the printed form of "Contract for Sale of Land" approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales, containing two provisions of present importance. One was in cl. 5 (e) which is expressed to apply to land under (amongst other Acts) the Closer Settlement Acts (N.S.W.). It provided that "If the Minister's consent to the transfer of the property to the purchaser is requisite the vendor shall at his own expense make application for such consent and use his best endeavours to obtain the same as soon as possible. The purchaser shall promptly at his own expense join in such application as may be necessary. If the Minister's consent to transfer is refused this agreement shall thereupon be rescinded and cancelled and the deposit paid by the purchaser shall be refunded to him in full." The other was in cl. 13 (e) and provided: "The property is sold subject to . . . the provisions of (inter alia) the Closer Settlement Acts . . . so far as the property or any part thereof is subject thereto . . . . " (at p347)

2. The land comprised two settlement purchase leases under the provisions of the Closer Settlement Acts, and was subject to the provisions of s. 11 of the Closer Settlement Amendment (Conversion) Act, 1943 (N.S.W.), which, as amended, provides in sub-s. (2) that a transfer or other dealing with a settlement purchase lease shall not be effected, or if effected shall not be valid, unless the consent thereto of the Minister has been obtained. Sub-section (2) adds that the Minister shall have discretion to give or refuse such consent; and sub-s. (3) provides, without prejudice to the generality of the discretion thus conferred, that the Minister, in considering an application for permission, shall have regard to the desirability of preventing undue increases in the price of land and its use for speculative or uneconomic purposes, taking account of the circumstances of the particular case and all other relevant considerations including certain particular matters. Other provisions of sub-s. (3) need not be mentioned here, except a proviso the effect of which is that the Minister shall refuse his consent where the amount of the purchase money exceeds by ten per cent or more the fair market value of the land as determined by an advisory board or by a local land board on appeal from the advisory board's determination. (at p347)

3. The contract which has been mentioned was for a sale of the settlement purchase leases at a price which proved in the event to exceed by more than ten per cent the value determined by an advisory board. The testator was notified by the Lands Department that unless the value as determined were increased on an appeal lodged within a month, or unless a fresh proposal were submitted, the Minister's consent must be refused. No appeal from the determination was lodged, but in view of recent sales of comparable lands a fresh application for consent was submitted. The testator and the intending purchaser, presumably to prevent any question arising as to whether cl. 5 (e) of the first contract had taken effect, entered into a further contract whereby they agreed to be bound in all respects by the terms and conditions of the first contract "subject to the Minister giving his consent to the transfer at the price aforesaid", that is to say at the original contract price. (at p348)

4. Some months later the Minister gave his consent to the proposed transfers, but in the meantime the testator died. His will, made before the date of the first contract, gave, bequeathed and devised the property comprising the settlement purchase leases, together with livestock and furniture, to the respondent subject to the payment by him of death and estate duties thereon, and the residue of the estate it gave to the appellant. The appellant and the respondent were appointed the executors and trustees of the will. (at p348)

5. The appellant then asserted that by reason of the testator's contracts with respect to the settlement purchase leases the gift of the leases to the respondent was adeemed and the proceeds of sale thereof fell into residue. The question thus raised was submitted to the Supreme Court by originating summons, and Hardie J. held that the devise was not adeemed. With respect we agree. Ademption of a specific gift by will occurs where the property the subject of the gift is at the testator's death no longer his to dispose of: Stanley v. Potter (1789) 2 Cox 180 (30 ER 83) . An obvious case of ademption is that in which the testator has completely divested himself of the property in his lifetime so that at his death there is in his estate nothing which even substantially (see McBride v. Hudson (1962) 107 CLR 604, at pp 613, 614 ) answers the words of gift. But ademption occurs also where the property has been so dealt with that by the rules of equity it must be considered at the death as having been converted into other property, such as money, which the words of gift are not apt to comprehend: Watts v. Watts (1873) LR 17 Eq 217 ; McArthur's Executors v. Guild (1908) SC 743 ; In re Edwards dec'd; Macadam v. Wright (1958) Ch 168, at pp 175, 176 . Thus, in the case of a simple devise of land, if it is found at the testator's death that after making the will he became bound by a contract to convey or transfer the land to another, and the contract is still subsisting, so that when he died he was, in the sense of Lysaght v. Edwards (1876) 2 Ch D 499 , a trustee of the land for the purchaser and entitled only to money in its place, there is no property in respect of which the words of devise are capable of taking effect: Bennett v. Tankerville (Earl) (1811) 19 Ves Jr 170 (34 ER 482) ; Farrar v. Winterton (Earl) (1842) 5 Beav 1 (49 ER 476) . It is true that in such a case the testator still held the legal estate at his death, and under the old law that estate would have passed to the devisee though only as a trustee for the purchaser and without any right to retain the purchase money when received; but now that the legal estate passes on the death to the personal representative there is no subject matter at all to which the words of gift can apply - in the absence, that is to say, of a sufficient special context as in In re Lewis's Will Trusts; O'Sullivan v. Robbins (1937) Ch 118 . What is meant by a contract being so binding upon the testator as to effect a notional conversion of the land into money is that the state of affairs existing immediately before his death was such that a court of equity if applied to at that time would have ordered specific performance by him of his obligation under the contract to convey or transfer the land to the purchaser upon performance of such of the purchaser's obligations as the contract required to be performed at or before settlement: Re Thomas; Thomas v. Howell (1886) 34 ChD 166 . As Lord Parker of Waddington observed for the Privy Council in Central Trust and Safe Deposit Co. v. Snider (1916) 1 AC 266 : "It is often said that after a contract for the sale of land the vendor is a trustee for the purchaser . . . . But it must not be forgotten that in each case it is tacitly assumed that the contract would in a Court of Equity be enforced specifically . . . . Their Lordships (in Howard v. Miller (1915) AC 318 ) . . . came to the conclusion that, though the purchaser of real estate might before conveyance have an equitable interest capable of registration such interest was in every case commensurate only with what would be decreed to him by a Court of Equity in specifically performing the contract, and could only be defined by reference to the relief which the Court would give by way of specific performance" (1916) 1 AC, at p 272 . (at p349)

6. The argument submitted for the appellant in the present appeal relied upon cases such as Egan v. Ross (1928) 29 SR (NSW) 382 for the proposition that under such contracts as those with which we are here concerned specific performance will be granted in favour of the purchaser even before the Minister's consent has been obtained, and that therefore the land is notionally converted into money at the date of the contract notwithstanding that unless the consent be given no effectual conveyance or transfer under the contract can ever be made. The first part of the proposition, however, is too widely stated and the second cannot be maintained. The specific performance which will be granted before the Minister's consent has been obtained is not specific performance of the obligation to convey or transfer, for that obligation has not yet arisen: McWilliam v. McWilliams Wines Pty. Ltd. (1964) 114 CLR 656, at p 661 . As Harvey C.J. in Eq. made clear in Egan v. Ross (1928) 29 SR (NSW) 382, at p 388 the decree that will be made will go no further than directing that the proper steps be taken for the purpose of obtaining the Minister's consent and, "if that is obtained", to transfer the land to the purchaser: see also the more explicit form of order made by this Court in Kennedy v. Vercoe (1960) 105 CLR 521, at pp 530, 531 . Accordingly until the consent has been obtained the purchaser's interest, being "commensurate only with what would be decreed to him", does not extend to ownership of the land and the interest of the vendor is not yet converted into a right to receive money in place of the land. Many authorities on the topic are discussed in the valuable judgment of Callan J. in In re Rudge; Curtain v. Rudge (1949) NZLR 752 . (at p350)

7. In the present case it is clear that the contracts for the sale of the settlement purchase leases, though absolute in so far as they bound the parties to do what was necessary for obtaining the Minister's consent, were inchoate in so far as they provided for sale and transfer. Not until, after the testator's death, consent was obtained so that transfers having legal operation could be made did any contract of sale emerge from the inchoate stage (to adopt language used in Roach v. Bickle (1915) 20 CLR 663, at p 671 ). It follows that the land, not having been converted into money under the principles of equity during the testator's lifetime, was still his to dispose of at his death, though it was even then bound by a contract which, if the Minister's consent should thereafter be obtained, would become a contract of sale with the result that the respondent as devisee would in the end receive only the purchase money. (at p350)

8. In our opinion the decision of Hardie J. was correct, and the appeal should be dismissed. (at p350)

WINDEYER J. I have read the judgment which has just been delivered. I entirely accept the analysis of the proprietary rights at law and in equity in the land which the testator specifically devised by his will. Nevertheless I have not been able to find an answer altogether satisfying to myself to the question in this case, and this has made me hesitate and delay in coming to a decision. (at p351)

2. The statutes which regulate the incidents of various kinds of holdings of Crown lands in Australia commonly prohibit, in one way or another, transfers of or dealings with these holdings except with the consent of the Minister. These statutory provisions are not construed as preventing parties entering into a transaction on the basis, express or implied, that their contract or dealing is subject to the requisite consent being obtained. The cases on this are numerous and most of them are well known. They are usefully collected in Mr. R. M. Stonham's book, The Law of Vendor and Purchaser (1964), pp. 293-299. (at p351)

3. If when the Minister's consent is required for a transaction to be valid and effective his consent is finally and conclusively refused, the transaction is at an end. That is quite clear. It has been expressed in various ways in the cases - that the transaction never became "operative" or "binding", that it "goes off", that it "never emerged from the inchoate stage". In the present case the contract itself provided that if the Minister's consent should be refused it should be "rescinded and cancelled". But, strictly speaking, it is the provisions of the statute, apart from the agreement of the parties, that would have rendered the transaction nugatory if the Minister had refused to consent. Whether in a particular case the result of refusal of consent is best expressed as that the transaction never became effective or as that it ceased to have effect may depend upon the words of the particular statute and also on the words the parties used if they had not left the need for consent to implication. But how the result of a refusal of consent should be expressed is not of any importance in this case. Here consent was never finally refused. In fact it was given but not until after the testator's death. Immediately before his death he still held the land. At no time before he died could he have been compelled by an order for specific performance to transfer the land to the purchaser, because up till then the Minister had not consented. (at p351)

4. While the question whether the Minister would consent was still pending, the testator or his executor was not at liberty to enter into any transaction inconsistent with an obligation to perform his contract with the purchaser. The purchaser's rights to have the testator and his executor do nothing to his prejudice were enforceable in equity by injunction. But they did not create an equitable interest in the land. However, accepting all this, as soon as the Minister consented the instrument between the parties was no longer conditional. It became absolute and operative. And, as I understand the position, it then operated according to its tenor. It became effective because consent was given but the effect it got accorded with its terms. The result it seems to me is that the giving of the consent had a kind of retroactive effect making the instrument effective as from its date. (at p352)

5. Therefore had the Minister consented to the sale before the testator died (and assuming his will remained unaltered), the proceeds of the sale would have gone to the persons entitled to the testator's residuary estate whenever the contract was in fact completed by transfer and payment. It seems a capricious consequence that the effect of a will can depend upon whether a Minister should put his signature on a document on one day or the next - on the day before or the day after a man died - when the Minister's act, whenever done, would make operative an instrument which the deceased had executed before his death. He had then, so far as he was able to do so, sold the land. The purchaser became obliged after his death to take a transfer and pay for it in accordance with the contract then made. However, although I confess that I cannot rid myself of some misgivings, I agree that the appeal should be dismissed. (at p352)

Orders

Appeal dismissed with costs.