by vendor for benefit of creditors-Act of bankruplcy by vendor-Objection to title of vendor-Order allowing purchaser to rescind and staying decree-Bankruptcy SYDNEY,

Act 1898 (N.S.W.) (No. 25 of 1898), secs. 4 (g), 57, 58, 63 (2), 67-Conveyancing April 27, 28

Act 1919 (N.S.W.) (No. 6 of 1919), secs. 187-195. May 7.

A obtained a decree in the Supreme Court of New South Wales on 26th February 1924 for the specific performance by B of two interdependent contracts, one for the sale by A to B of certain real property and the other for the sale by B to A of other real property, the time fixed for the completion of the contracts having then expired. Shortly afterwards A by deed assigned all his property to trustees for the benefit of his creditors. Cross-appeals from the decree were withdrawn on terms, including a term that the properties sold should be transferred to the respective purchasers. Subsequently, on 23rd August,

A committed an act of bankruptcy by failing to comply with a bankruptcy notice served on him by a creditor. B having objected that A was unable to give a good title to the property to be transferred by him, the Master in Equity certified that A was unable to give a good title as there might be a sequestration (based on the act of bankruptcy) at any time before 23rd February 1925. On a summons to vary the Master's certificate, which was heard when two months had still to run within which a petition in bankruptey might be instituted founded upon the act of bankruptcy, Harrey J., having allowed the trustees of the deed of assignment to be added as plaintiffs, upheld the Master's

35 CLR 567

certificate, and made an order declaring that B was entitled to rescind the H. C. OF two contracts, and ordering that the decree for specific performance should be stayed. On appeal to the High Court,

Held, by Isaacs and Higgins JJ. (Knox C.J. dissenting), that in the circumstances of the case the order was wrongly made :-

By Isaacs J.: The matter should have been deferred until the two months above mentioned had expired, when a good title could be given by the plaintiff or the trustees

By Higgins J.: There was no ground whatever for rescission as the decree was binding on the trustees of the deed and would be binding on the official assignee if the estate of A should be sequestrated but even if the decree were not thus binding, the discretion of the primary Judge, if exercised, was wrongly exercised: after a decree for specific performance a defendant purchaser cannot repudiate the title or the contract without the leave of the Court (Halkett v. Earl of Dudley, (1907) 1 Ch. 590, at p. 601): and, under the circumstances, leave ought not to have…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Facey v Rawsthorne

Details

AGLC: Facey v Rawsthorne [1925] HCA 10
Case: [1925] HCA 10
Decision Date: 7 May 1925

CaseChat Overview and Summary

The case involved a dispute between Edward Facey and Joseph Edward Rawsthorne concerning two interdependent contracts for the sale of land. Facey had obtained a decree for specific performance from the Supreme Court of New South Wales, ordering Rawsthorne to complete the purchase of certain property known as "Burwood Markets" and to accept a transfer of another property, "Eulandool." Shortly after this decree, Facey assigned all his property to trustees for the benefit of his creditors. Subsequently, Facey committed an act of bankruptcy. Rawsthorne then objected that Facey was unable to provide a good title due to the potential for sequestration of his estate. The Master in Equity certified that Facey could not give a good title, a view upheld by Harvey J. on further consideration, who allowed Rawsthorne to rescind the contracts and stayed the decree for specific performance. Facey and his trustees appealed this decision to the High Court.

The legal issues before the High Court were whether, in the circumstances, the order allowing Rawsthorne to rescind the contracts and stay the decree for specific performance was correctly made. Specifically, the court had to consider the effect of Facey's assignment for the benefit of creditors and his subsequent act of bankruptcy on his ability to provide a good title, particularly after a decree for specific performance had already been granted. The court also had to determine whether the primary judge had correctly exercised his discretion in allowing rescission, or if the matter should have been deferred until the period for bankruptcy proceedings had expired.

The High Court, by a majority (Isaacs and Higgins JJ., with Knox C.J. dissenting), held that the order allowing rescission was wrongly made. Isaacs J. reasoned that the matter should have been deferred until the period within which a bankruptcy petition could be filed had expired, at which point a good title could have been provided by Facey or the trustees. Higgins J. found no grounds for rescission, arguing that the decree was binding on the trustees and would be on an official assignee if sequestration occurred. He further stated that even if the decree were not binding, the discretion to allow rescission was wrongly exercised, as a defendant purchaser cannot repudiate a contract after a decree for specific performance without the court's leave, which ought not to have been granted in these circumstances.

The High Court reversed the decision of Harvey J. and dismissed Rawsthorne's application to rescind the contracts. The appeals were allowed, and the order of the Supreme Court of New South Wales was set aside.

Orders