Facey v Rawsthorne

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.