Nullagine Investments Pty Ltd v The Western AUstralian Club Incorporated

[1992] HCATrans 302

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No Pl2 of 1992

B e t w e e n -

NULLAGINE INVESTMENTS PTY

LIMITED

Appellant

and

THE WESTERN AUSTRALIAN CLUB

INCORPORATED

Respondent

BRENNAN J
DEANE J
DAWSON J
TOOHEY J

GAUDRON J

Nullagine(2) 1 14/10/92

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON WEDNESDAY, 14 OCTOBER 1992, AT 12.47 PM

Copyright in the High Court of Australia

MR C.J.L. PULLIN, QC:  May it please the Court, with

MR D.A. DAWES, I appear for the appellant.

(instructed by Rikhraj)

MR E.M. HEENAN, QC:  May it please Your Honours, I appear

with my learned friend, MR C.W. SANDERSON, for the

respondent. (instructed by T.B. Bannerman)

BRENNAN J:	Mr Pullin.
MR PULLIN:	Your Honours, I hand up the outline of

submissions and I also hand up a copy of a case

that was missing from the folder of documents which

was provided. The case which I am handing up is

the Pennanent Trustees Nominees decision which
should under tab 10 of the folder of authorities

which was supplied to the Court.

BRENNAN J:	Thank you, Mr Pullin.
MR PULLIN:	Does the Court wish to read the outline or

should - - -

BRENNAN J:  Is there anything further you wish to hand up

because we propose now to adjourn until 2 pm.

MR PULLIN: Yes. There is some additional material which I

would hand up a little later on in the submissions;

I can deal with that now, if Your Honour wishes.

BRENNAN J: Well, it might be convenient.

MR PULLIN: Distribute it now?

BRENNAN J: Yes.

MR PULLIN:  And there is another group of cases which were

not reproduced that I think I need to refer to, and

I will organize that a little later. It looks as

though I have insufficient copies at this juncture.

BRENNAN J: Yes, very well. Is there anything that you wish

to give us, Mr Heenan?

MR HEENAN:  Your Honour, we have handed to Your Honours'

several associates a copy of our outline of

submissions and photocopies of the authorities

relied upon and they should be available to

Your Honours.

BRENNAN J: Thank you, Mr Heenan. Court will adjourn until

2 pm.

AT 12.50 PM LUNCHEON ADJOURNMENT

Nullagine(2) 2 .. 14/10/92

UPON RESUMING AT 2.02 PM:

BRENNAN J: Yes, Mr Pullin.

MR PULLIN:  Thank you, Your Honour. Your Honours, this is

an appeal against a judgment of the Full Court of

the Supreme Court of Western Australia, dated

20 February 1992, which reversed the judgment of

Mr Justice Rowland in October of 1990. The action

was a partition action, in which the appellant

sought an order for sale in lieu of partition, and

the case raises the following issues: first, the
proper construction of the particular provision of

the occupation deed that we are concerned with;

and secondly, if the construction is that found by

the Full Court, then questions.about whether the

provision is void as an impermissible or unlawful

restraint on alienation would then arise.

The facts were not in dispute in the action

itself, although there was some oral evidence, but

briefly stated I will just mention at this stage

the facts necessary to support the appellant's cause of action for partition. In 1970 the WA
Club, which was described in the judgments as a

"gentlemen's club" which had been founded in 1893,

decided to move from its premises in

St Georges Terrace down to the Esplanade, which is

just over the road now. It there built a 10 storey

building and a car park building on the land which

is known as 18 The Esplanade.

In 1976 the Club ran into some financial

difficulties and wished to raise some money and the

way that it approached that problem was to decide
to sell a half interest in the property, thereby

raising some capital and provide it with funds.

The parties then became tenants in common in equal

shares in relation to the property and, of course

they have unity of possession which, if no other

agreement existed, would mean that they could all

roam around the whole of the building.

Now, they did reach an agreement concerning

the rights to use parts of the building which I

will come to a little later, but what I want to

deal with now is to look at the position if that is

all that had been known to the court and all that

was relevant so far as the court was concerned.

The application was made under section 126 of the

Property Law Act, which reflects the English

statute of 1868. We are particularly concerned

with section 126, which - I am not sure whether the

Act has been provided; if not, it is to be found

Nullagine(2) 14/10/92

in the judgment set out under tab 8.	The Court
will see that section 126(1) reads:

Where in an action for partition -

and this is a kind of drafting that assumes

knowledge about a rather interesting legal

history -

the party or parties interested, individually
or collectively, to the extent of a half share

or upwards in the land to which the action

relates request the Court to direct a sale of

the land and a distribution of the proceeds, instead of a division of the land between or among the parties interested, the Court shall

unless it sees good reason to the contrary,

direct a sale accordingly.

The section has been understood to mean that the court had no discretion at all when making a

decision about whether it would grant relief. It
did have a choice between granting partition or

ordering sale. That discretion is conceded, but

the authorities are clear beyond any doubt that it

was - and in fact in one of the decisions, a

Queensland decision, there is a very helpful

analysis of what used to happen where it was said

that it was almost a formality that one received

judgment in a partition action, and all that has

happened as a result of this change to the law

which was introduced in the middle of the last
century was to introduce the possibility of sale
instead of partition, because of the problems

associated with partition in the past.

TOOHEY J: Is it your argument, Mr Pullin, that the words

"unless it sees good reason to the contrary" in

section 126(1) simply postulate a choice between

partition or sale and no more?

MR PULLIN: It does, Your Honour, that is correct, and I

think the authorities - I will briefly refer to the authorities - but there seems to be no doubt at all

about that being the case. If I refer to

Re B. Cordingly, for example, under tab 15, which -

would Your Honour wish me to give the citations in

circumstances where I have the list?

BRENNAN J: Yes, it may be just as well to give the citation

for the purpose of the transcript.

MR PULLIN:  Very well, Re Cordingly is (1948) 48 NSW(SR)

248, and at 249 this is said by Justice Sugarman,

just over a third of the way down, just after the

start of the second paragraph:

Nullagine(2) 14/10/92

The right to partition was incident to the

property in an undivided share. Partition

might be refused and sale ordered under the

provisions of the Partition Act, 1900. But

the co-owner was entitled to one or the other;

and one co-owner was entitled as of right to

an order for sale as against the other

co-owner who did not ask for partition but

merely opposed sale.

Bray v Bray was a pronouncement by the High Court,

and Bray v Bray is under tab 12, (1926) 38 CLR 542.

I might add that the section under consideration

there, that is the Partition Act 1900 (NSW), was

the same as the legislation we have here, and it is

important to note that both in New South Wales and

in Queensland and in England, there has been a

change to the law which does give the court

complete discretion in what is now hardly a

partition action; it is a vesting in trustees for

sale, but that is a different procedure and I will mention that a little later. So this section, the

section under consideration in Bray v Bray, the

Partition Act 1900 is the same as our section 126

of the Property Law Act, which is the same as the
1868 English Statute of Partition.

In Bray v Bray the Court will see that on page 544 it was actually argued there, and this is

in argument, you will see the reference to "Bonney,

for the appellant" - page 544:

In a suit for partition, which this is, the

plaintiff who asks for a sale is not

absolutely entitled to a sale -

it was argued -

If the defendant only opposes a sale at that

time, the contest is then not between

partition and sale, but between sale and

leaving things as they are -

was the argument that was presented to the Court.
And the Court in the short judgment said this, at

the next page, 545, just about half-way down, the

sentence beginning in the middle of the page:

So far as I can see, the object of the Act was

to provide an alternative remedy to partition.

Recognizing the absolute right of a tenant to

partition, and seeing that it might be

disastrous for all parties to have a

partition, Parliament provided by sec 4(l)(a)

that if any person interested requested a sale

instead of a partition and if it appeared to

the Court that a sale would be more beneficial

Nullagine(2) 5 14/10/92

than a partition the Court might order a sale

accordingly.

And then a little further down, a couple of

sentences:

I think that it is clear that under sec

4(l)(b) what the Court has to consider is

which is the better course for all parties

between two alternatives, namely, is it better

that there should be a partition or that there

should be a sale, and the onus of showing that

partition is better ..... is upon the person

opposing a sale.

TOOHEY J: But that question does not really arise here on

the judgment of the Full Court unless you jump the

hurdle of the contractual provisions.

MR PULLIN: Entirely so, Your Honour, but I thought I should

stress that the law is absolutely clear that apart

from the contract, we would be entitled to an order

of sale or partition. The choice was there, but I

do not think anybody was suggesting partition and

it is the case that everyone delights in quoting in

the judgments, I think Turner v Morgan, an ancient

case where this was the reason for introducing

power of sale.

There was a partition at a time when partition

was the only remedy where a house was partitioned
with one party getting all the chimney stacks, the

only staircase and all the conveniences in the

yard, and the other party getting everything else,

and the stage was reached where it was considered

in 1868 in England that this used to happen too

often, and hence the reform which was introduced by

the 1868 Act which is under tab 5, which is the English legislation of 1868, which is the basis

Court is aware of the history, under tab 7 is the	for - just to follow through the history so the
West Australian Partition Act of 1878 which
followed the English 1876 Partition Act, which has
then been replaced by 126 of the Property Law Act,
and as I say, this English Partition Act under
tab 5 is the Act which formed the basis for the legislation throughout Australia until some of the States have gone the way of giving the court a
complete discretion - as I say, in some of the
States, but not all of them.

Could I then take the Court to what His Honour

the Chief Justice said about the whole history of

partition. His Honour has summarized the law in

just a couple of pages, having indicated these

authorities. Could I take the Court to page 208 of

Nullagine(2) 6 14/10/92

the appeal book. Opposite line 25 His Honour said

this:

It is well-established that a tenant in common

is entitled, both at law and in equity to

partition as a matter of right -

and then there is a citation of cases including

Bray v Bray and a WA case -

At common law -

and this is going back into ancient history -

joint tenants and tenants in common did not

have a right to compel partition. The right

was originally created by the Statutes of

Partition 1539 and 1540 -

those being statutes in the time of Henry VIII -

which extended the right by means of the writ

de partitione facienda to joint tenants and

tenants in common.

And for interest I have included that statute under tab 1 and I will mention that briefly later on

because of the policy which is stated in the
preamble to it, but I will come back to that when

looking at the alternative argument that we advance

in this case. So no right to partition at common

law, then the right created at law by virtue of the

creation of a writ which would provide a remedy and

then:

The procedure was improved and made less

cumbersome by the Partition Act 1697.

Notwithstanding this reform the common

law procedure remained extremely cumbersome.

The writ de partitione facienda was finally

abolished bys 36 of the Real Property

Limitation Act -

which was the Act that abolished mixed real and

personal actions. The Master of the Rolls:

gives an account of the decline of common law

writ in Leigh v Dickson. Because the common

law procedure was so cumbersome, equity

assumed jurisdiction to decree partition from

very early times. Unlike the common law

judgment which vested the legal estate in the

parties after partition, the decree in equity

could only direct the parties to execute the

conveyances necessary to pass the legal estate

and give effect to the partition.

Nullagine(2) 14/10/92

One tenant was entitled to insist on

partition, however inconvenient it might be.

In this respect equity followed the law.

There is a reference to Turner and Morgan, which is

that case where Lord Eldon, having warned the

parties what would happen then, did see an order

made where this division, this rather amusing

division, was made of the House.

So equity is following the law, there is no

question of discretion. Because it followed the

law, it said if a tenant was entitled to insist on

partition under this writ which had been

established by the statute of Henry VIII, then

equity would follow the law:

In England the Court was not empowered to

order a sale in lieu of partition until the Partition Act 1868 (Imp), as amended by the

Partition Act 1876 (Imp). This legislation

was followed in Western Australia by the

Partition Act 1878 (WA).

And there is a reference to the sections, and over the page:

Section 126(1) of the Property Law Act

1965 is substantially to the same effect ass

4 of the 1878 Act -

there is a reference to the WA Act -

The latter, of course, only applied where a

decree of partition might have been made.	The
former -

that is our Act -

applies where, "in an action for partition" -

and His Honour said:

This difference has nowhere been regarded as

of any substance or significant -

and in case the Court wonders what the difference

is, it is the difference between the fact that in

the English legislation it talked about

circumstances where a decree of partition might

have been made and the court had this power,

whereas in Western Australia there has been a

reference to an action for partition, but we accept that that should be read in the same way. And then

His Honour - I will just complete the quotation:

Nullagine(2) 14/10/92

Section 126(2) of the 1969 Act is likewise
substantially to the same effect ass 3 of the
1878 Act. Section 4(l)(b) of the Partition

Act 1901 (NSW) was also substantially the

same -

That was the one which Bray v Bray considered.	And
then there is the passage that I quoted.

Now, we respectfully agree with His Honour's

scholarly assessment of the history of the law

relating to partition of land when there are

co-owners who seek to disengage, where in the past

there had been no remedy. As I indicated, in New

South Wales, the United Kingdom and Queensland, there has been a discretion which has now been

given to the court. I have just included section

66G under tab 9, if I could just refer to that.

The reason I refer to it is because there are a

number of cases which talk about what this section

means which are referred to in the judgments and

it is important that I just point out the

difference. Section 66G reads:

Where any property (other than chattels)

is held in co-ownership the court may -

and the word "may" has been considered in a great

many judgments of courts in Queensland and New

South Wales -

on the application of any one or more of the

co-owners, appoint trustees of the property

and vest the same in such trustees, subject to

incumbrances affecting the entirety, but free

from incumbrances affecting any undivided

shares, to be held by them on the statutory

trust for sale or on the statutory trust for

partition.

The existence of that discretion which exists in	that legislation, now the Queensland legislation
and in the English legislation, means that the
Court must be very careful in looking at some of
the authorities that might appear to be relevant
and which, as I say, are referred to later.

In fact, I should refer to them now, I think.

If I could take the Court to the case of Ngatoa v

Ford under tab 13, (1990) 19 NSWLR 72, at 75. It

is a judgment of Justice Needham. You will see on

page 73 that there is a statement of the facts:

The partnership agreement provided that

the parties would carry on a pastoral business

on the land the subject of these proceedings.

It was a partnership at will and the land is

Nullagine(2) 9 14/10/92

not a partnership asset. The agreement

provided in cl 14, for an option in surviving partners to purchase the share of any partner

dying during the continuance of the

partnership -

An application was made under section 66G, which I

have just referred to. If the Court then goes to

page 74, at the beginning of the last paragraph:

The question of whether the Court has a

discretion to refuse an order under s 66G(l)

when application is made by a co-owner has bee.n the subject of a number of decisions.

Unfortunately, there is no decision on the point by the Court of Appeal or the High

Court, although I was referred to a decision
of the Full Court of the Supreme Court of

Queensland, to which I will later refer. The related question of whether the word "may" in

s 66G(4) is permissive or mandatory was left

open by the Court of Appeal in Pannizutti v

Trask ..... Hayward v Skinner -

Then there is a reference to a whole lot of

authorities where this debate has gone back, ebbed

and flowed, with some judges thinking that because

the old partition remedy was followed as of right,
then therefore perhaps the word "may" should be

read as continuing on that same procedure. There

is a summary of various cases. I need not refer to

them because I only refer to it to say that in this

case and Re Cordingley, which I have already

referred to, the same point was raised. It is

debated in Ex parte Eimbart, (1982) Qd R 398.

As I say, the decision in each of those cases

which, when it considers the question of whether or

not a contract should affect the making of an order

under section 66G or others, can be taken into

account, is debated. That is not something which

could be taken into account here, we say, although

that arises for consideration and is considered by
the court as to whether or not we can contract out

of the right which exists, that is the right to

partition or sale in lieu of partition.

Finally on this area, the right to partition,

as I have already mentioned from that passage in Re

Cordingley, has been regarded as an incident of

property, that is something that a property owner

can do. Just as a property owner can lease a piece

of land, a joint owner of property can approach the

court and as of right seek partition if he wishes

to be rid of the association that he has with his

co-owner. So that summarizes, I think, the law in

relation to partition and the right to partition.

Nullagine(2) 10 14/10/92

The pleadings in the case, if I start with

page 1 of the appeal book, you will see it is a

very simple document in the sense that it pleads

the fact that there is a half share of the land

held by the plaintiff and the defendant. On that

basis, that is all that is necessary to approach

the court under section 126 and ask for an order
for sale.

The defence, which is on the next page, the

relevant aspects come out of paragraphs 3 and 6 in
the counter claim. Paragraph 3 pleads that since

1 October 1976, the parties have been in possession

of certain areas of the building under a deed, and

pursuant to that deed:

(a) the Defendant -

that is the Club -

has the sole and exclusive use and occupation

of the eighth floor, the ninth floor and

certain portion of the tenth

floor ..... together with rights for its

employees, guests, members and invitees to
pass and re-pass at all times over the

foyer ..... and to use the lift facilities;

(b) the Plaintiff -

on the other hand, that is Nullagine -

has the sole and exclusive use and occupation
of the ground floor and floors 1-7 inclusive
subject to the said rights of passage and

access.

There was then in paragraph 4 a reference to a

agree is no longer of any relevance - probably was	lease of the car park, which everyone seems to
not of any relevance. Paragraph 5 pleads that:

Since the expiration of the term of the

lease of the car park ..... the defendant has
held -

That is not of any relevance either. Paragraph 6

pleads the clause in the occupation deed in full.

In paragraph 7 it is pleaded that:

The Plaintiff has not offered its share

or interest in the land to the Defendant at

any price which the Defendant has agreed nor

has ..... by arbitration -

pursuant to the clause.

Nullagine(2) 11 14/10/92

In the premises, the Plaintiff is unable to

sell, transfer, assign or otherwise dispose of

its share or interest in the land, nor is it

able to seek an order for the sale of the land

by this Court ..... without first complying with

the terms of clause 4(b) -

Then in the counter claim, there was in effect a

request by the Club for an injunction to restrain

us from proceeding, or a stay of proceedings, until

we had complied with clause 4(b). At the time of
sale there were in fact four documents signed.

There was the sale agreement, a lease of the car park owners for 10 years, a deed of covenant, which

is irrelevant also - that dealt with the right to

consent, whether or not there had to be consent of the mortgagee to the sale, but apart from that, it

does not appear to be of any relevance - and the

occupation deed.

We should now go to the occupation deed at

page 76. Your Honours, you will see that it is

dated 1 October 1976. It is between the Club of the one part and a group of companies, including

Nullagine Investments Pty Ltd, Nullagine

Investments being the co-owner of the land of the

Club. The reason, as I understand it, that the

other parties were involved is because I think one

of the companies held the licence. I am not sure

of the other reasons, but they were associated

companies and it was thought fit to include them as

well. They are called the Nullagine Group.

It then recites the fact that the Club is the

registered proprietor of the land. It recites the

existence of the car park, it recites an agreement

for sale whereby the Club agreed to sell and

Nullagine Investments agreed to purchase the undivided half interest:

to the intent that the Club and Nullagine

shall own the Land and the fixed improvements

thereon as tenants in common in equal shares -

Then an important recital which we say was not paid

any attention to by the court:

The parties have agreed to enter into this

deed for the purpose of evidencing the terms

and conditions upon which they shall mutually

use and occupy the land and the fixed

improvements thereon upon Nullagine entering

into possession of the Land and the fixed
improvements thereon pursuant to the terms of

the said agreement for sale.

Nullagine(2) 12 14/10/92

So it is "for the purpose thereon pursuant to

the terms of the said agreement for sale". So it

is "for the purpose of evidencing the terms and

conditions upon which they shall mutually use and

occupy the land." The reason why that is important

is because the Full Court has held that one of the

clauses, the critical clause, has application

whether or not they occupy the land, and we say

that is contrary to the recital in the deed and the

other side should not be permitted to argue

contrary to that recital. They would be estopped

from arguing to the contrary.

Clause l(A) says:

For a period commencing on the third day of

October 1976 and expiring on the Second day of

October 1986:

(a) The Club shall have the sole and exclusive

use and occupation of the -

various floors, the foyer, et cetera. Then:

(b) The Nullagine Group shall subject to the

rights granted in the preceding sub-clause

(a) have the sole and exclusive use and

occupation of the ground floor and floors

one to seven inclusive of the Residential

Building.

I am sorry. When I shortened l(A)(a), it is not

the foyer that the club has occupation of, it is

the right to use the foyer and its members are

entitled to use it. Then (B) refers to the fact

that there is an area of fire escapes and lifts and

so on which are for the common usage of the

parties. Then there are some covenants by the

club, in 2, which oblige the club to:

carry on and conduct on the Club Premises a

club in accordance with the constitution and

rules of the Club -

which, I might add, cannot be done without, of

course, exclusive occupation. It could hardly conduct a club without the rights of exclusive
occupation. Then in 3:

The Nullagine Group HEREBY COVENANTS AND

AGREES ..... The Nullagine Group shall conduct

the business of a first class restaurant on

the seventh floor ..... and shall provide first

class accommodation for the public on floors

one to six inclusive of the Residential

Building and shall provide first class

Nullagine(2) 13 14/10/92

reception facilities on the ground floor of

the Residential Building.

In other words, they ran and do run a hotel on

those floors and the club members are entitled,

under another provision, to gain a discount if they

go to the restaurant. In fact, that is found in

the next clause, in (c), and then (e) is a discount

on accommodation provided by the group to - - -

TOOHEY J:  Mr Pullin, some of these subclauses have lines

through them. Is that of any significance?

MR PULLIN:  No, I think it is best if they are ignored,

Your Honour.

TOOHEY J:  So we take the document at its face value?

MR PULLIN:  Yes. Then there are a number of other

provisions which are standard type of provisions on

page 80 about recarpeting, honouring accommodation

reservations, taking out insurance.	Then we come
to the critical clause, 4:

The parties hereto MUTUALLY COVENANT AND AGREE

as follows:

Now, the other side immediately point to the fact that there is no 10 year limitation period, as

there is in clause l(A), at this point and, in

short, the Full Court accepted that and said,

"Well, it just continues to operate for all time
while the parties are co-owners of the property".

We say, and I say this now, that that is contrary

to the proper interpretation of this document,

including the fact that the parties have recited

the fact that terms and conditions were to evidence

the terms and conditions upon which they should

mutually use and occupy the building and, quite

clearly, that use and occupation as specified in the document is for a period of 10 years. But	anyway, that is the point that is made and I say
that while we are at the page.

So 4(a) says:

Contemporaneously with the execution of this

Agreement -

TOOHEY J:  I am sorry, could I just understand the use that

you seek to make of recital (e), Mr Pullin. Is it that it evidences an intention that clause 4, like

any other clause in the agreement, would only

operate so long as the parties mutually used and

occupied the land in accordance with the terms of

the agreement.

Nullagine(2) 14 14/10/92

MR PULLIN:	Yes.
TOOHEY J:	Is that the way in which you put it?

MR PULLIN: That is correct, Your Honour.

BRENNAN J: What happens on the expiration period limited by

1 (A)?

MR PULLIN: Well, that has been the subject of debate

through the courts. Mr Justice Rowland thought

that at the end of the 10 year period it came to an

end; it was a licence which came to an end. The

Full Court considered that, although they did not

really need to consider it given that they said

that 4(b), which we have not yet reached, applied

irrespective of whether or not there was any joint

occupation pursuant to this deed. The Full Court

said that it applied so long as they were co-owners

of the property. The Full Court reached this

conclusion - and there is a lot of very interesting
law in the judgment on the subject - that at the

end of the 10 year period there was a holding over,

in fact the Chief Justice said a "tenancy at

sufferance", which we would agree with, because a

tenancy at sufferance arises when you have gained

possession of land pursuant to some proper title

and then you hold over afterwards without proper

authority and then instead of - I suppose the law,

to develop some kind of order, has said, "Well, in

those circumstances you are not a trespasser
immediately; you are a tenant at sufferance". So

the Full Court has said, and we would accept this

and it is not challenged on the other side, that at

the end of the 10 years the parties become tenants
at sufferance in relation to the areas that they

are occupying.

The Full Court also held that that holding

over or tenancy at sufferance could be terminated

by either party giving notice under section 72 of	the Property Law Act, because what is actually
happening - and there has been a lot of law
considering this point about what happens when two
parties who are co-owners grant a lease to one
person, what is actually happening. Are they joining the title together, as it were, and leasing
it; or in fact is each person granting a lease of
its undivided share in the property?

BRENNAN J: Is your submission that 4(b) ceases to operate

on 2 October 1986 whether or not there is a tenancy

at sufferance?

MR PULLIN: That is the argument, Your Honour, and the one

accepted by the trial judge, and we would seek to

support that, but if it is not correct - and I can

Nullagine(2) 15 14/10/92

see the argument, it is fairly easy to see the

argument that there is a tenancy at sufferance

where the parties continue to occupy - it is still

very important that we know whether or not the

Full Court's assessment of the document is correct.

That is, that 4(b) applies while they are co-owners

of the property or does it only apply - this is

another alternative - during the period of the

10 years plus holding over. The third alternative

is that it only applies during the 10 year period.

They are the three possibilities.

So, in other words, 4(b) applies during the

10 years; alternatively 4(b) applies during
10 years and any holding over; or the one that the

Full Court found, it applies during the period

while they are co-owners.

TOOHEY J:  Of course, on one view it might be thought

curious that the parties regulate their

relationship on the acquisition by Nullagine of a
half interest and include this right of pre-emption

which, on your argument, ceases at the end of the period of 10 years, although they may continue to

be co-owners indefinitely.

MR PULLIN: Yes, but that can easily be understood, in my

submission, when one recognizes that given the

Full Court's conclusion that there is a 10 year period where the parties are guaranteed exclusive occupation, that then there is a holding over which

can be terminated on one month's notice. After

10 years, in effect, why should not the parties

simply return to their ordinary rights, their

statutory rights, and if they have an argument that

they cannot resolve they just come down and seek

partition or sale in lieu of partition pursuant to

section 126.

That is our argument, that it is simply unnecessary to say that this binds the parties

together because it is an occupancy deed, dealing

with occupancy, recited to be a deed that has

conditions in it to govern the mutual use and
occupation of the land. What they were concerned

about it is the sale by one other party - say, the

Club might have been concerned about Nullagine

selling to somebody else during the 10 year period

and finding that that new owner did not want to

comply with the provisions of this occupancy deed.

So one can see the value of making sure that the

parties were bound to observe the covenant that

there should be exclusive occupancy for 10 years.

TOOHEY J: It may tell in your favour - I do not know - that

the parties to the agreement include not only the

co-owners but the other companies that make up the

Nullagine(2) 16 14/10/92

Nullagine Group, which might lend some support to

the argument that clause 4(b) is looking at the

situation in which the group is participating in

occupancy which, presumably, is occupancy for a

period of 10 years.

MR PULLIN: Well, the view that the court seemed to reach

was that 4(b) could only be referring to Nullagine

because it only applied to the rights of

co-ownership and what should happen about the land.

TOOHEY J:  Then that would tell against you.

MR PULLIN:  And it was used against us. It was said to be

while they were co-owners and not just during occupancy. But we say, the fact that some

one of the reasons - it was the reason why the applied

parties have been thrown in as part of the

Nullagine group for reasons which, as I say, I do

not think were explained in the evidence at all, it

is drawing too much from it and not enough regard

was had for the recital which charted the course

for this deed, which is an occupancy deed.

BRENNAN J:  Does this mean that the second of your grounds

of appeal really opens up the construction of the

occupancy deed so far as it relates to the term

during which clause 4(b) operates.

MR PULLIN:  Yes, and it really has - - -

BRENNAN J: And it requires, not only a finding by this

Court as to whether it operates while the parties

remain co-owners, but if the answer to that is

negative, then for what other period?

MR PULLIN: Yes, and if we lose the appeal, that is a very

important matter which we would ask the Court to

determine, because the parties are at daggers

drawn, being restrained by the good efforts of

their solicitors, but clearly there has to be a

resolution; the whole machinery has broken down and

there is evidence to the fact that the occupation

need is not being complied with at all and if it

cannot be resolved, if we lose the appeal, then the

procedure would then have to be followed to

disengage; that is that the pre-emption provisions

would have to be followed through. Almost

certainly there would be no agreement as to price,

because that has already been attempted

unsuccessfully. There would then be an

arbitration, which the clause provides for, and

there was already an argument on foot about whether
the existence of the pre-emption clause would

affect the value determined by the arbitrators.

Nullagine(2) 17 14/10/92

And so, it is very important that we know

whether we can bring this to an end at the end of

the holding over or whether we are stuck with it

regardless of whether we terminate the occupancy

arrangement between the parties. So it is a matter

that we do ask the Court to say something about,

even though it might be possible to simply say that

- well, we would say that matter really should be

considered and is necessary to be considered if one is construing the clause and that a decision has to

be reached.

BRENNAN J:  I can understand that this Court might be in a

position to answer it on one of two bases, namely:

as a matter of construction does clause 4(b)

operate after 2 October 1986; and, as a matter of

construction, does it operate so long as the

parties are co-owners. But if there is some third

proposition, then to what extent does that turn

upon findings of fact as to the nature of the

relationship between the parties after 2 October

1986?

MR PULLIN: Well, that was all canvassed, Your Honour, and

there really was not a dispute about it; in fact,
there was a handing up of a document which

indicated the breakdown of relations during the

appeal, and I might just hand up that document.	I
do not think there is any dispute about this at
all. It just - - -

BRENNAN J: What do you say the relationship is between the

parties?

MR PULLIN: Well, our primary argument, Your Honour, is that

the clause 4(b) ceased to operate in 1986.

BRENNAN J: Yes, I appreciate that, but leave aside 4(b) for

a moment; what do you say is the present

relationship between the parties, so far as the

occupation of the premises is concerned?

MR PULLIN: Well, I suppose there is a possibility that they

are, in fact, tenants at sufferance as the

Full Court has concluded and so therefore they are

holding over on the same terms and conditions; or

alternatively they are trespassers and they are

trespassing by exclusively occupying certain of the

building to the exclusion of the other. They are

the two possibilities and - - -

BRENNAN J: Well, one can see that 4(b) would arguably apply

if there is a tenancy acceptance, but it might be

very difficult to see that a clause in an

occupation deed is intended to apply if there has

been mutual or common trespassing.

Nullagine(2)	18	14/10/92
MR PULLIN:	Yes.	You see, we could still lose the appeal if

this Court said, "The Full Court was wrong to say

that the clause 4(b) applied when the parties were

co-owners", because this Court might say, "But it

still applies during the period of holding over and

we agree with the Full Court which concluded that

clause 4(b) in fact applied during the period of

holding over". So, in other words, because we are

still stuck with 4(b) and if we fail on our

restraint in alienation point, then we are still

obliged to comply with 4(b), but we would be happy

with that, because if the Court here said that 4(b)

only applied during the period of holding over and

we can terminate on one month's notice, well, we

will take that as a second prize. So, you can see

the importance of a decision on that point, because

we will lose the appeal but win the war if, in

fact, that is the correct instruction.

TOOHEY J:  I assume that would be the result if, by some

reason, the periodic tenancy had come into

existence. In other words, it would be terminable

depending on the nature of the tenancy, either on a

month's notice or on some other notice.

MR PULLIN: 

Yes, if the Court holds that clause 4(b) did

continue to apply after 10 years, but only during
the holding over; yes, we would agree with that,

Your Honour.  And, I think it is section 72 of the

Property Law Act, which, I am sorry, I do not think

that whole Act has been made available, but at

section 72 of the Property Law Act which provides,

as follows:

Without prejudice to any other lawful mode of termination available or to any express

agreement by the parties to a periodic tenancy

or tenancy of uncertain duration as to its

termination, a periodic tenancy or a tenancy

of uncertain duration may be terminated by one

month's written notice by either party thereto	to the other expiring at any time whether at
the end of a rent period or not.

So we would be able to terminate. So, it is a very

important aspect that we would ask the Court to say

something about for the sake of the parties, even

if we - I mean, if we win the appeal, then of

course that is the end of the matter, but if we do
not succeed on the appeal, that is a very important

question which, if it is not pronounced on now, is

almost bound to generate some further litigation.

BRENNAN J: Are you in a position, having regard to the

limited grant of special leave, to challenge the

conclusion of the Full Court as to the tenancy at

sufferance, and if you are, do you wish to do so?

Nullagine(2) 19 14/10/92

MR PULLIN:	I am in a position to do so, Your Honour, and I do seek to have the Court uphold the decision of
Mr Justice Rowland, which was to the effect that
the proper conclusion to be drawn was that clause 4(b) comes to an end at the end of the
10 year period.

BRENNAN J: Yes, I am not dealing with the question of 4(b);

I am thinking of this intermediate situation and,

as I read the grounds of appeal which correspond with the grant of special leave, I do not see in

those grounds or in the grant of special leave,

anything which allows you to open up the question

of the relationship between the parties after

2 October 1986, though consistently with that it

would be open to you to argue, I should have

thought, on ground 2.2, that if that is the

relationship, namely tenancy at sufferance, 4(b)

does not apply.

MR PULLIN:  Yes, but there would be no reason, we would say,

why the Court should not say whether or not 4(b)

applied during any period of holding over. There

is no evidence to be led on that subject; it is a

matter which would quiet disputes between the

parties and we would ask the Court to consider the

construction and reach a conclusion about the
proper construction of the document and whether or
not clause 4(b) applies. If it does not apply for

all times while they are co-owners - well, if the

Court supports the Full Court on that point, then

that is the end of the matter; if the Court

considers that Justice Rowland was right, that is

the end of the matter; but there is this other

possibility which needs to be considered as well as

a possible construction of the document.

BRENNAN J: That is, if 4(b) applies, so long as the

relationship of tenancy at sufferance exists

between the parties, it being accepted for the

purposes of this appeal, that there is a tenancy at

sufferance.

MR PULLIN: Yes, we have to accept that, Your Honour, yes

that is right.

Now, I am sorry, we had stopped before we

reached the critical clause. 4(a) on page 80:

Contemporaneously with the execution of this Agreement Nullagine and the Club shall enter

into a lease agreement whereby Nullagine and

the Club as owners of the Land shall lease the

Club the Car Park for a term and upon the

covenants and conditions therein contained.

Nullagine(2) 20 14/10/92

And that also was for a 10 year period, so the
lease for the car park was for a 10 year period and
that is relevant because it shows once again the

pattern of the relationship between the parties - it was an identical term, my learned junior tells me, in the lease.

Now, 4(b) is then set out on page 81, and I

have broken it up into five parts.	The first part
reads as follows:

Neither party -

and, as I say, the court considered this and

considered that that should mean, Nullagine and

the Club and not the Nullagine group and the Club -

Mr Justice Franklyn, in particular, goes through

the clauses on this point -

shall sell, transfer assign or otherwise

dispose of its share or interest in the Land

and the fixed improvements thereon unless as a

condition precedent thereto it first offers

its share and interest in the Land to the

other of them at such price as may be mutually

agreed -

That is the first part, and that is the restraint

on alienation.	The second part is the arbitration
clause:

in default of agreement at a price equal to

fifty per cent of the value of the Land at

that date such value shall be determined by

arbitration under the provisions of the

Arbitration Act 1895 provided that the
arbitrators shall be three members of the

Australian Institute of Valuers nominated by

the President for the time being of such

Institute -

Then, the next lines deal with terms for payment -

upon such terms as may be mutually agreed and

in default of agreement within 28 days of the

determination of the purchase price -

and I need not read all of that; it runs down to

the end of the sentence.

Then there is another part which is the grant of a right to sell at any price if the offer to

sell is not accepted. It says:

If the offer to sell is not accepted within

28 days of the determination of the purchase

price as aforesaid then the party desiring to

Nullagine(2) 21 14/10/92

sell or transfer its interest in the Land

shall be at liberty -

and then brackets need to be inserted here, there

are some words missing. If you put brackets at

that point, after the word "liberty" - so "shall be

at liberty (within twelve months from the original offer to sell to the other party)" - and then, the

words which have to be inserted are either to:

sell, transfer assign or otherwise dispose -

which are the words right at the beginning, or it

might be just "to sell", but I suspect it is those

words which have to be for consistency, although

this sentence is begun with:

If the offer to sell is not accepted -

so, and there is a possibility that one should only

insert the words "to sell"; another possibility is

"to sell, transfer assign or otherwise dispose of"

and then:

its interest is the Land to any other person

at such price and upon such terms as it shall

see fit without making a further offer to the
other party pursuant to the terms of this

clause -

And then we come to what I have called the

perpetual proviso, the one that works a perpetual

effect to this clause:

provided however that no party shall sell,
transfer assign or otherwise dispose of its

interest in the Land unless its proposed successor in title enters into a deed of

covenant with the other party for the time

being to be bound by and comply with the terms

and conditions herein contained as amended

from time to time and subject thereto such

successor shall be entitled to all the

benefits but subject to all the duties and

obligations created and imposed by this deed

in substitution for his or its predecessor - And then there is a final part which might be

called the testing of Hall v Busst, because it

says:

provided further neither party shall sell or
dispose of its interest in the Land for a

period of three years from the first day of

October 1976.

Nullagine(2) 22 14/10/92

That is an absolute restraint and I suppose the

draftsman thought, "Well, I will try it for three

years and see how it goes and if it falls out we

have all the rest there". So that is an absolute

restraint, of course, in those terms.

Now, so far as the rest of the facts are

concerned, if I could just mention some pages of
correspondence which are referred to in the outline

of submissions in paragraph 3, starting at page 121

of the appeal book. This is a letter from Growth

Equities Mutual Limited, which was acting on behalf

of the Club and writing to my client, and we need

not read all of it, but it indicates that the

parties were interested in reaching a commercial
settlement and that the Club was interested in
acquiring Nullagine's 50 per cent interest in the

building and was saying that:

The Club's 50 per cent interest is definitely

not for sale -

and then, in the third paragraph, it says - The figure which we discussed as being our

assessment of the maximum amount the Club

could afford to pay for the Nullagine interest

was $3,000,000.

And then at page 130, a company associated with

Nullagine wrote back and said that it was:

always ..... happy to accommodate the Club in

its desire to be 100 per cent owner -

and that it was -

prepared to entertain an offer from the Club

of $11,000,000 and we will consider vendor

finance terms if the Club so desires.

And then, at 131, Growth Equities Mutual Limited

write back and thank Mr Teo for his letter and

there is a reference to some:

recent market transactions relating to

comparable properties.

Page 132, Laredo Pty Ltd writes back and Mr Teo says, "Well, you would have to be substantially

reviewing your offer of $3,000,000", which you will
remember was an amount which was all the Club could

afford; that is what they offered, they said it was

"what we could afford"; maximum they could afford.

Then at page 134 - and this is an important aspect

- opposite line 40, the Club's attitude is this:

Nullagine(2) 23 14/10/92

While we are prepared to respond in this

matter, we can only do so on a reasonable

basis. You will appreciate that such a basis

must reflect the provisions of our Occupancy

Deed which contemplates an arbitrated price

that would necessarily take into account the

requirements of the Deed.

And this has become a sticking point between the

parties, because the view of the party selling,

whoever the selling party would be, is that the

price to be determined for sale is going to be affected if in fact there is a provision which

requires you to always observe the terms of the

occupancy deed and whenever you then come to sell,

the terms of the occupancy deed are going to be

adhered to, and so -

TOOHEY J: Except, Mr Pullin, that on your approach, it only

had 10 years to run, so that if one of the parties
wished to sell eight years down the track, it would

not necessarily affect the price substantially,

would it?

MR PULLIN:  Not substantially; it still would, but

TOOHEY J: Yes, I understand that, but the outline says it

was common ground that the effect of the proviso
was to depress the price; I suppose literally that

is true, but how much would depend on the timing of

the sale?

MR PULLIN: Yes, well, if it is only 10 years, of course,

Your Honour, we would succeed in the appeal and the

sale would go through and it is not of concern.

What we are concerned about is if it has perpetual

effect and continues to apply at all times after

the 10 year period.

And finally, at page 135, Mr Teo writes back

and in the second last paragraph says:

Your current offer of $3,000,000 even if you

averaged the valuations that you provided is

unrealistic and certainly does not relate to

market price.

And then I have referred in my outline to

Justice Rowland and what he said at page 155 and 156, where he noted the effect on price. I need

not take the Court to that, and I note that even
today the other side, in its outline of
submissions, accepts this to be so. It says in the

outline of submissions of my learned friend, in

paragraph 12:

Nullagine(2) 24 14/10/92

It is the inability to obtain partition which

would be the principal influence on the price

that may be achieved.

So, the parties have proceeded on the basis that

the price is going to be affected by the fact that

we cannot simply go down and ask for partition,
which is the result of this case; we cannot

exercise our right, which we should be able to

exercise, which is an incident of property, to seek

an order for partition at any time we wish to do

so. So that would then have an effect on price and

I am afraid the Chief Justice overlooked that in

his judgment and in his judgment thought that there was not any problem between the parties of the kind that resulted in, in the case of Saliba v Saliba
which I will come to later, where Mr Justice Kneipp

in Queensland held that a pre-emption clause which

provided for a sale back at a price which was way
below market value was in restraint of alienation,

because somebody is attempting from some time past

to affect the price at which the subsequent owners

will sell the land. And we say that is the effect

of this proviso and the parties have accepted that,

and His Honour the Chief Justice failed to note

that that is how the parties had approached the

case; Mr Justice Rowland had accepted that; and how

the parties, even today, as I say, are still

approaching it on that basis.

Without going to Mr Justice Rowland's

judgment, what he said was that the occupation deed

expired by effluxion of time on 2 October 1986. He

said accordingly clause 4(b) ceased to operate at that time and he said that the agreement involved
the grant of an exclusive licence, as I say, which

had expired. As a result of all that, of course,

there was no impediment at all to granting a sale

in lieu of partition under section 126 in
accordance with the principles in Bray v Bray.	So
that was a fairly simple approach to the problem.

The Club then appealed to the Full Court, and

the notice of appeal can be seen at page 163 of the

appeal book.	The grounds of appeal to the Full
Court are found at page 163.	The first ground,

without reading it, was a challenge to

Mr Justice Rowland's conclusion that clause 4(b)

ceased to operate on 2 October 1986. The second

ground, in short, was that the judge was wrong to

say that it was a licence and not a lease, and this

contends that it was a lease which, after

2 October 1986, was one where the parties held over

under that lease.

I might say that the reason for arguing that

was because the argument advanced was that one

Nullagine(2) 25 14/10/92

party could not terminate in the holding over

period, that both parties had to give notice of

termination, which would of course mean that we
were stuck with the holding over for the rest of
time as long as the Club wanted that to be so. On
that point alone, the other side was unsuccessful.

The court held that the tenancy at sufferance could

be termina_ted by one party on one month's notice.

The third ground was that clause 4(b) was an

independent provision unrelated to the occupation

provisions. Ground 4 was that clause 4(b)

constituted a negative covenant and that the
enforcement of the clause prevented its compulsory

alienation. In other words, that the existence of

clause 4 meant that we could not seek partition

under section 126 or sale in lieu of partition

without first going through the pre-emption steps.

In short, the Full Court agreed with all of those grounds and found in favour of the Club.

As His Honour the Chief Justice said, the

first question that had to be confronted was

whether or not there could be a contracting out in

relation to rights of partition. At page 211, His

Honour the Chief Justice said this, opposite line

15:

The question in the present case,

however, is whether parties can by contract

bargain away or fetter the right to partition.

Rowland J, in the fifth proposition which he

stated in his judgment to which I have

referred earlier clearly considered that they

could. In my opinion, it is on this point

that the outcome of the present appeal

depends. The question arises at the threshold

on the footing that, if the case was not one

in which partition was available, no question

of directing a sale will arise.

So in other words, going back into legal history,

if we could not have gained a partition order or a

decree of partition, then there is no question of

sale arising because that only arises where, if in

a partition action or suit, we could have obtained

partition.

Then there is a proposition referred to from

the first edition of Halsbury. It is necessary to
go back there because of the Law of Property Act

which introduced this new system of trust for sale

with a complete discretion. The page from Halsbury

is reproduced under tab 11 and it is volume 21,

Halsbury, first edition, paragraph 1516.	The
proposition is contained in two lines:

Nullagine(2) 26 14/10/92

The right to partition may be lost by

agreement between the parties for disposal of

the property in a different manner -

and what follows is irrelevant. So it is that

statement, supported by the cases cited in

footnote (n), that is Peck v Cardwell, Dale v

Hamilton, Redwood v Redwood and Dimsdale v

Robertson. His Honour the Chief Justice considered

those cases. In fact, they are very difficult

cases to follow, as a lot of these old reports are,

but we have had prepared a list which your
associate - I will try this a little later. There

is a digest which I will make available which

provided a summary of each of those cases. If I

could just tell the Court about each of those cases

briefly, without going into the facts at all. Peck

v Cardwell was, despite what the Chief Justice

said - on page 212 one can see a reference to Peck

v Cardwell. You will see that:

Counsel for the appellant argued that this case and the other cases cited in

Halsbury all related to partnership

situations. Peck v Cardwell was not a

partnership situation.

I am afraid, with respect to His Honour, it was.

The reason why this is important is because there

has been a specific set of rules developed in
relation to partnership, and that is the doctrine

of conversion that real estate is to be treated as

personalty and that then rights accrue when a
partnership comes to an end which are all governed

by the Partnership Act, and that includes a right

to sell the assets and dispose of them. So there

is a specific set of rules which must make one set

aside a case, if it is a partnership case, for that
reason.	As I say, the doctrine of conversion was

originally part of the common law and now

incorporated into the partnership legislation

throughout Australia.

TOOHEY J:  Mr Pullin, before you take us to those cases,

what is it that you say impedes a co-owner from

agreeing not to invoke the jurisdiction of the

Court to order partition or sale? Is it because it

constitutes some sort of a restraint on alienation,

or is it not a contract that the courts will

recognize, or is it seen as ousting the

jurisdiction of the Court? How do you put it?

MR PULLIN:	We have cited two authorities which deal with the point, Your Honour. We say that the purpose of
partition legislation is to disengage parties where
they no longer wish to be associated as co-owners.
Perhaps now is the time to go back to that point

Nullagine(2) 27 14/10/92

that I indicated a little earlier, which is stated

in the recitals to the 1539 legislation, which

still applies today. This was the recital in 31

Henry VIII, chapter 1, under tab 1, and I will not read all of it:

FORASMUCH as by the common laws of this realm

divers of the King's subjects, being seized of

manors, lands ..... tenants in common - I am reading this selectively -

and everyone of them so being joint tenants,

or tenants in common ..... and none of them by the law doth or may know their several parts or portions in the same -

in other words, as a unity of possession -

and cannot by the laws of this realm otherwise

occupy or take the profits of the same, or

make any severance, division or partition

thereof, without either of their mutual

assents and consents; by reason

whereof ..... many of them -

and then it talks about the consequences where

people then go in and cut down the woods and trees

growing upon the same and pull down and destroy the

meadows, et cetera -

and they have been always without assured

remedy for the same.

That statement of the existence of the problem is

still the same today, that if you do not have a
remedy for disengaging co-owners, then you will get

the kind of ructions that are talked about here and

that in more modern terms, one would describe other

problems arising. So we say that this statute is a

between parties; it is a contract with a public	statute which is not to be avoided by contracts
purpose, and we have referred to two authorities.

TOOHEY J: Just before you take us to them, I am trying to

see the way in which your proposition is

formulated. On the face of it, leaving aside the

statute, there does not seem to be anything
particularly objectionable to two parties agreeing
that one will not sell his or her interest without

offering the other co-owner a right of pre-emption.

MR PULLIN: Except, Your Honour, that what it means is that

in reality, it is saying you cannot exercise what

is regarded as a right given by statute.

Nullagine(2) 28 14/10/92

TOOHEY J:  You are begging the question when you put it that

way. I invited you to stand aside from the

statute. Just as a matter of contract, there does

not seem to be anything particularly objectionable

about two co-owners entering into an agreement of

that sort, subject to arguments going to restraint

on alienation. Then the statute comes into play,

and you say that overrides what, the capacity of

the parties to enter into a contract of this sort,

or does the statute strike down the agreement in

some way?

MR PULLIN:	Yes, we say that the parties cannot contract out of their right to seek partition or sale in lieu of
partition.

TOOHEY J: Is that because it is thought to oust the

jurisdiction of the Court, or is it something more

fundamental than that?

MR PULLIN:  No, I do not think that is the rationale for it,

Your Honour. The two cases I refer to are Brooks v

Burns Philp and Felton v Mulligan, which are under
tabs 21 and 22. Brooks v Burns Philp is (1969) 121
CLR 432, particularly at 456. Felton v Mulligan is
(1971) 124 CLR 367, at 386. Justice Windeyer at

page 456 of Brooks v Burns Philp said this:

When a statute creates and confers rights

and imposes corresponding duties, persons for

whose benefit this was done may by contract

waive or renounce their rights, unless to do

so would be contrary to the statute. It may

be seen that it would be so, because of an

express prohibition against "contracting out", or because the provisions of the statute, read

as a whole, are inconsistent with a power to

forgo its benefits: or the policy and purpose

of the statute may shew that the rights which

their benefit alone, but also in the public	it confers on individuals are given not for	interest, and are therefore not capable of
being renounced.

Then there is a quotation from Davies v Davies:

· "Anyone is at liberty to renounce a right

conferred by law for his own sole benefit;
but he cannot renounce a right conferred for

the benefit of society."

TOOHEY J: That seems to be putting it, at least in this

present context, on the basis of public policy.

MR PULLIN:  Yes. There are two arguments, Your Honour. One

is based on these two decisions, which is public

policy, and the other is that it is a restraint on

Nullagine(2) 29 14/10/92

alienation. The public policy argument is based

upon the statute or evidenced by the existence of the statutory provisions which have existed for a very long period of time to ensure that parties are

not left languishing in a situation where they must

try and deal with each other.

TOOHEY J:  Then do you put it on the basis that the

restraint in clause 4(b) is simply void as against

public policy, having regard to the history and

evident purpose of the legislation?

MR PULLIN: Yes, and that is how we have stated it,

Your Honour, in our outline at paragraph 7. This is an opportunity perhaps to look at how our outline proceeds. Paragraph 4 puts forward the primary contention, the matter of construction,

saying that it came to an end in 1986. Then, in

the alternative there is an argument I have not yet

addressed and then, as a further alternative, if

the contract does involve a promise not to

forebear - I am sorry, that should be to forebear.

Could I just correct something in paragraph 7.

It should read, "In the alternative to the contention in paragraph 6, if the contract does
involve a promise to forebear from approaching the
Court to seek partition" - so delete the "not" -

"then such an agreement is void as against public

policy." Brooks and Felton v Mulligan are

mentioned. In Felton v Mulligan, Justice Windeyer

again pronounces on it at page 386 and says this,

relevant to what Your Honour Justice Toohey has

been saying, just over a third of the way down:

It is a mistake to speak of the ouster of a

statutory jurisdiction as being against public

policy regardless of the nature of the

statutory rights involved. Lord Wright's

statement has often been quoted:  "Wherever there is a question whether

there can be contracting out or waiver of

statutory provisions, the problem must be

solved on a consideration of the scope and

policy of the particular statute."

Then he repeated what he had said in Brooks v Burns

Philp.

BRENNAN J: This takes me back to a problem that I have had

since the argument commenced, and it is this: it

seems to me that the Partition Act, if I can call

it that, has to do with the realization of the

land; 4(b) has to do with the disposition of an

interest in the land held by one party. It seems

Nullagine(2) 30 14/10/92

as though they are like ships crossing in the

night.

MR PULLIN: That is our submission, Your Honour, which has

been advanced before and not given any credence,
but if Your Honour looks at our alternative

contention in paragraph 6 of our outline, we say

clause 4(b) does not involve any promise by the

appellant to forebear from exercising its right to

seek partition or sale in lieu under section 126 of

the Property Law Act.	The Full Court's conclusion
to the contrary is wrong, we say.	We say

clause 4(b) is a covenant affecting a party wishing

to sell a half interest; it does not have any

operation in relation to the sale of the whole land

pursuant to a court order under sectiort 126.

BRENNAN J: That argument is countered, if I understand it

correctly, by paragraph 7, I think it is, of the

respondent's submissions, namely that there is an

implied limitation, that you cannot do indirectly

what you could not do directly.

MR PULLIN:  Could I address that by -

BRENNAN J: Well, no, it may take you out of your order.

MR PULLIN:	No, not at all.
BRENNAN J:	It just seemed to me that if you were talking

about questions of public policy, it is one thing

to talk about public policy restraining alienation

of one's own interests in a piece of property, it
is another thing to speak about public policy which

prevents the realization of the land in a way which

will avoid the mischiefs to which the statute

relates.

MR PULLIN:  Yes. I am just following through what the

consequences of that are.

BRENNAN J:  I think it is in your favour if it is anything.

I give you no warranty about that.

MR PULLIN: No. Well, Your Honour, perhaps if I just

restate our arguments, starting from 6, which is

that there is no promise in 4(b) to stop us coming

down to the court, seeking relief under 126, and we

say in the alternative, if the proper way to

construe the agreement is that it does, then as a

matter of public policy that agreement should not

be given effect to because it was public policy

that first drove the legislature and then equity to

make sure that there was a remedy and equity

followed because it was seen that the law was not

operating very efficiently, and then adopted the

approach of the common law and said there must

Nullagine(2) 31 14/10/92

always be a right to seek partition and, indeed,

one of those very rare cases where equity said

there is no discretion and accepted that there was

no discretion involved in it, that there was a

right to partition because it was an incident to

property in the same way as if somebody wants to

lease their property, you do not have to seek

anyone's permission, it is a right that is bound up

with the bundle of rights which are found in the

ownership of land; ownership of land being really a

bundle of rights to do various things, one of them

to go down to the court and get away from a

co-owner if you happen to be owning land as a

co-owner.

So that is how our argument rides,

Your Honour. Could I stay though with this - and

it is opportune to deal with this point about

whether or not the agreement is an agreement to

stop us coming down to the Court, which on its

proper construction stops us coming down to the

Court asking for relief under 126. Could I take

you to tab 10, which is the Permanent Trustee

Nominees case, and I am not sure whether members of

the Court have had added to the volume the decision
on appeal. Originally it was provided with only

the unreported decision of Justice McPherson; does

everyone now have a copy of the decision of

Justices Kelly, Connolly and Moynihan in tab 10?

DAWSON J:	No.
DEANE J:	No, I do not.

BRENNAN J: It was handed up this morning.

MR PULLIN:  I handed that up this morning. Just for

everyone's assistance, it was the one handed up

this morning and not the one provided at lunchtime. In any event, if members of the Court cannot find	it, I can deal with on the basis of the judgment of
Justice - - -

BRENNAN J:  I think most of us have it at the moment, Mr Pullin.

MR PULLIN: Perhaps I will use Justice McPherson's judgment

because it is in bigger type, page 4 of that

judgment. At this stage I only want to refer to it

for the purpose of seeing a clause which would have

that effect if it is not against public policy and

which would generate the result that has been

contended for by the other side and which was

accepted by the Full Court. On page 4 there was a

clause in this contract - this was a contract where

the parties were tenants in common; there was a

supplementary agreement, just like here; there was

Nullagine(2) 32 14/10/92

a provision for preemption, just like here,

although different terms, and there was a separate

clause on page 4, as you will see, a clause 6 which

read:

As a separate and severable covenant, the

Parties hereby agree that neither of them will

(except after twelve (12) months prior notice

in writing to the other of them) make

application to the Court for the appointment
of trustees on statutory trusts for sale or
partition pursuant to the provisions of

Division 2 of Part V of the Property Law Act

1974, as amended.

Now, putting aside questions of public policy or

restraints on alienation, that is how the clause

should be drafted if you want to stop the party

corning down to the court, except if you insert a

reference to not seeking sale in lieu of partition

or partition pursuant to section 126.

If the Court looks at the clause, that is

clause 4(b), Your Honours will see that it is not

such a prohibition, that is back on page 81, but

will see it opens with these words:

Neither party shall sell, transfer assign or

otherwise dispose of -

and then these are the words -

its share or interest in the Land ..... unless

as a condition precedent -

et cetera. What you must not do, according to this

provision, is sell your half interest to somebody

because the other party is concerned that that

other party might want the opportunity of gaining

the whole of the land. It says nothing at all, in

our respectful submission, about not going down to

the court seeking an order pursuant to section 126.

Now, I might add that Permanent Trustees went

off on this basis that Justice McPherson had to

look at this new legislation where a complete

discretion is given to the court. He said, "I

think that this legislation is really like the old

partition legislation where there is really no

discretion and so therefore I am not going to have

any regard to such an agreement", and he also

talked about the possibility of it being a

restraint on alienation, but looking at page 15 of
his judgment he said this, at the bottom of the

page - and we would adopt this as the correct

approach in this case - page 15 of his judgment

under tab 10, the last five or six lines:

Nullagine(2) 33 14/10/92

It is not seeking to sell and transfer to

another simply its own interest as tenant in

common in the land, but, with the assistance

of the Court under s.38, to sell the entire interest of both parties in the land with a

view to receiving, after meeting the expenses

of sale, its share of the proceeds of sale.

It then talks about the fact that a trustee

appointed is not a party, but that is not relevant

here. But that sentence, we say, is the correct
approach here. Now, the decision was overturned on

appeal, but only because the legislation was viewed

by the Court as being legislation which go to

complete discretion and therefore the contract is

just one factor which should be taken into account.

DEANE J: What would be the effect of an order for partition

or sale during the 10 year period?

MR PULLIN:  When Your Honour says, "What would be the

effect"; on the agreement?

DEANE J:  On the occupancy rights.

MR PULLIN: Well, the position is, Your Honour, that

obviously there would be a breach of covenant,

perhaps by one of the parties who said - if one of

the parties then said, "I would like to continue to occupy the premises" - or "the club premises" if it

were the club - "and I now cannot do it because it

is not any longer possible".

DEANE J: Well, is that so, or would the sale have to be

subject to the occupancy lease.

MR PULLIN: Well, yes.

DEANE J: Because if the sale would be subject to the

occupancy rights, you can see logic in a situation

where 4(b) would operate to prevent either party

disposing of its separate interest and, as it were,

thereby bring about an uncongenial co-occupant.

MR PULLIN:  I am just having a look to see under 126

what - - -

DEANE J: That would support the construction of 4(b) for

which you contend; that is, that 4(b) is intended

to operate during the period of occupancy to

preclude either party being landed with someone who

was incompatible with what they wanted. But it has

some assumptions and I do not know if they are

right or not.

MR PULLIN:  Yes, I am just not sure whether the section actually - one assumes that if there are other

Nullagine(2) 34 14/10/92

interests that they have to be had regard for, but

I am just having a look.

DEANE J: Well, if for example the co-owners had leased the

whole to one of them: without looking at it, I

would be very surprised if the Court had power to

do more than order the sale of the reversion.

MR PULLIN:  Yes, and I think that is contemplated by the

section. Looking at the section, the Court can

give directions plus all parties who:

if this Act had not come into operation, would

have been necessary parties to the action -

(c)shall be served with a notice of the decree

or order on the hearing;

(e) ..... have liberty to attend the proceedings

and any of those persons may within a time

limited by rules of Court apply to the Court

to add to the decree or order.

So it contemplates that if one went - one assumes

that the draftsman has looked at the law and found

that that is, in fact, what happened on a partition

So, that is really quite a simple point that

we advance, that the provision 4(b) really does not

stop us from coming down to the court, nor does it

interfere in any way with the court making an

order. So we need to look at how the Full Court

dealt with this and it dealt with it at page 213.

At the bottom of page 213 His Honour the Chief

Justice said, on the last three lines on the page:

In my view the making of an order for sale in lieu of partition would have the effect of

enabling the granter to avoid his contract.

In such a case both partition and sale would

be inconsistent with the contract.

Before I refer to Buchanan-Wollaston and Jones v

Challenger can I say that I think His Honour must

be accepting two cases which were cited to the

court at the time and appear again in my learned

friend's outline, I see, and that is O'Keefe v

Williams, (1910) 11 CLR 171 at 191 and Secured

Income Real Estate (Australia) Ltd v St Martins,

(1979) 144 CLR 596 at 607 and, in particular, the

passages from those two cases - and these are not

reproduced in our papers. Sir Samuel Griffith said

in the O'Keefe v Williams case at page 191: Every contract ..... involves an obligation,

implied if not expressed, that neither party

Nullagine(2) 35 14/10/92

shall do anything to destroy the efficiency of

the bargain which he has made -

and Mr Justice Mason in the Secured Income case

said, quoting Sir Samuel Griffith in Butt v

M'Donald:

"It is a general rule applicable to every

contract that each party agrees, by

implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract."

Now, we do not argue with those authorities.

We simply say, as Justice McPherson did, you cannot

interpret a clause so widely to get a breach of

such an implied term; that the clause, clause 4(b),

is talking about someone wishing to sell his half

interest, it just is not talking anything about

somebody exercising his right of property, that is

the right to partition or sale in lieu of

partition, which has been recognised as one of the

rights of property.

So we say that it is too simply stated and

ignores a proper analysis of the problem, the

sentence that I have just read from His Honour

the Chief Justice's judgment at the bottom of

page 213, and we say that is one of the areas where

the Full Court went wrong.

The other judgment to this effect,

Mr Justice Pidgeon at page 220, the sentence

opposite line 30:

I also agree with the conclusion that the right of partition of both parties is subject to the rights of pre-emption and could not be exercised unless and until those provisions

had been carried out.

So, that is where we say the court went wrong.

Mr Justice Franklyn did not address that point.

So just restructuring the argument, I have

dealt with our primary contention in paragraph 4; I

have now dealt with the proper interpretation of

the contract. If it does extend for longer than

the period specified, the tenure specified, we say

that it does not involve any contract which

precludes us seeking an order under section 126.	I
have addressed the point in paragraph 7, that is,
that the contract is void as against public policy;
and in paragraph 8 I have stated what I have
already made clear to the Court, the right of of partition is the right to an incident of property.

Nullagine(2) 36 14/10/92

I was then at the point some time ago where we

were just looking at the statement in 21 Halsbury's

Laws of England First Edition. I am going to refer

to the - I will try handing out the authorities

again at this stage, may it please the Court. Now,

there is a digest of the cases and I do not wish to

do anything more than describe why they are not

support for the proposition stated in Halsbury.

The first one, Peck v Cardwell, contrary to what

the Chief Justice said, was most definitely a

partnership case. You will remember that I said

that the Chief Justice said, after referring to the

statement in Halsbury, that a right of partition

may be lost by agreement and we then dealt with

each of the authorities which are set out in

footnote (n). Peck v Cardwell, the Chief Justice

said, was not a partnership case. It certainly

does not look like a partnership case in the necessary to struggle through the rather dense prose. In Peck v Cardwell, All ER 1132 - - -

headnote, the summary, but could I just draw the

BRENNAN J: Which page reference?

MR PULLIN: It is in the bundle I handed up, Your Honour.

Peck v Cardwell is the first case reproduced and it

is page 1132, down at the bottom of the page, where

there is a description of the facts and then just

above the appearances there are a few sentences

about 10 lines up:

By this bill the Plaintiffs insisted, that on

of the purchase of Helme's share.

the retirement of Helme from the partnership, benefit

the parties interested under the will of

So, there is a reference to the fact that it was a

partnership there, and then the Master of the Rolls, at page 1134, half-way down the page, there is a reference to:

cestuis que trust -

half-way across the page and then this is said -

but considering it, as it is, a partnership

transaction, in which the interest of a

deceased partner was affected -

et cetera. So, quite clearly, it was a partnership
case, contrary to what the Chief Justice has said,

where he said, at page 212 line 20 in the appeal

book:

Nullagine(2) 37 14/10/92

Peck v Cardwell was not a partnership

situation -

so therefore accepted that as authority for the

statement in Halsbury when it is not, because we

say the partnership cases do have to be set aside

because of the doctrine of conversion.

The next authority which is referred to in

footnote (n) in Halsbury is Dale v Hamilton. That

is entirely relevant, as it turns out, once you

read the case, because partition was only mentioned

as a description whereby two of three parties had

entered into an agreement to divide up the land and
instead of saying they had agreed to divide up the

land, the word partition was used, but in fact

Dale v Hamilton, we say, is not a partition action

that is totally irrelevant. In the summary, the

digest that we have handed up, case 3 is

Dale v Hamilton again, when it went on appeal.	It
is not referred to in Halsbury, but it is not

relevant in any way either. Then Redwood v Redwood

is referred to in Halsbury, but it simply states a

rule of partnership law that where there is a: dispute between ..... partners

and -

whether there should be a partition or a sale

of a jointly owned -

property, and Mr Justice Cooper held that the court

would:

only decree a partition if the partners agree

and will otherwise order a sale.

Well, that is what the partnership legislation

requires.	So that provides no authority for the
statement in Halsbury.

Dinsdale v Robertson was referred to in the

footnote. It was a partition suit, but the ratio
of the case is that the party who was seeking

partition was only using it as a device to avoid an

arbitration which was already on foot, and it was

said, "There is an arbitration which is dealing

with all of this and therefore, until that

arbitration has been dealt with, you cannot deal

with the subject-matter in this way", and so the

point went off on that basis. So, the statement in

Halsbury is an assertion not supported by any of

the authorities which have been cited.

Nullagine(2) 38 14/10/92

If all of those contentions are not accepted,

we then come to the Hall v Busst - the restraint on

alienation point.

DEANE J: Is it correct that implicit in your argument on

the statute is the submission that, where you have

joint ownership, rights of pre-emption in relation

to shares between the joint owners can never be

effective?

MR PULLIN: Sorry, Your Honour, I am not entirely clear on

the point.

DEANE J:  I appreciate the complications in this case, but

are they irrelevant to this submission in the sense

that your submission really is that if A and Bown land jointly and each gives to the other the right

of pre-emption of his share, that right of

pre-emption can never be effective?

MR PULLIN:  Yes, it is effective if a party does not down

and seek partition.

DEANE J: Well, he can always effectively escape from the

disadvantage of the right of pre-emption by seeking

an order for sale of the whole.

MR PULLIN: Well, it depends from whose point of view one

looks at it, but if a party who wishes to get out

of the arrangement and does not want to offer it to

the other party can go down and seek sale in lieu

of partition, then I suppose I will have to concede

that that is the case, Your Honour, yes.

DEANE J:  The only answer you could really give, I suppose,

is if they want to do it that way they have got to
frame it differently; for example, an option

arising on an application for sale.

MR PULLIN: Well, they could do it, Your Honour, if it is

possible to contract out of rights to seek

partition or sale in lieu of partition, if the

clause that was drawn in the Permanent Trustees

case in Queensland is effective and is not struck

down as against public policy, then that is one way

that the parties could protect themselves.

DEANE J: But it is very hard to see how there could be

anything against public policy in provisions which

are directed to allowing a sale and an escape from

the fetters of joint ownership.

MR PULLIN: Well, there is just a question of balance, I

suppose, Your Honour, because property rights are

hedged round with restraints of all kinds and it is

a policy decision as to whether or not there should

be adherence to this view that property owners

Nullagine(2) 39 14/10/92

should always, if they wish, be able to come down

to the court and get the court to exercise its

power of sale, because bear in mind that the

statute itself contemplates that the unwilling

party can still secure the property, because it

contains a provision which enables a valuation of
the property and then the other party may have the

option of purchasing at that valuation so

determined.

So, the section itself recognizes that the

party who has been taken to court might not want to

actually leave the land and if he wishes he can

then secure the land. And then you get around to the other question about, well, if there has been an attempt to control the price of the land, you

then get into the restraint and alienation point
where there has been four cases, I think - three,

possibly four cases - where it has been decided

that it is a restraint on alienation if you try

and, from the grave, control what people in the

future might receive by way of a purchase price.

So that takes us on to the restraint on alienation point.

Now, the restraint on alienation point has

generated yet another authority which has just - in

fact it was referred to in the ALJ which arrived on

all our desks yesterday; as so often in cases there

seems to be something that comes along just as the
case comes up, and it has been handed up in that

bundle of cases that I provided at lunchtime. It

is the case of Wollondilly Shire Council v Picton

Power Lines Pty Ltd. The only report at the moment

I have, and I think the other side, has been able

to find, is (1992) NSW ConvR para 55 at 614.	Now,
I just draw that to the attention of the Court.	I
do not know that there is anything that
particularly assists either of the parties, other
than the fact that there is a useful discussion of

authorities in that case.

What I would like to do is to begin by just

reading from part of Megarry and Wade at page 72.

I do not know that I have reproduced this, but it

is only a short passage. It is Megarry and Wade,

The Law of Real Property, Fifth Edition, at page 72

when talking about conditions associated with the

disposal of land:

The condition must not take away the power of

alienation. One of the incidents of ownership

is the right to sell or otherwise dispose of

the property. A condition against alienation

is said to be repugnant to this right, and

contrary to public policy. If it

Nullagine(2) 40 14/10/92

substantially takes away the tenant's power of

alienation; and such conditions are void -

and then there are some examples given -

the question is, however, one of degree, and

it is possible for some kinds of "partial

restraint" to be valid. An example, well
known but much criticised, is given by a case

where land was devised to A "on the condition

that he never sells it out of the family."

The condition was held valid on the grounds

that it did not prohibit any form of any

alienation except sale, it did not prohibit

sales to members of the family, and it bound

only A and not subsequent owners of the

land ..... But it would not be safe to treat

these decisions as examples of the court's

normal attitude to restraints on alienation.

Now, what I have done is to make available to the

Court a summary of the English cases, which I

handed up this morning. I would just like to

quickly go through that document, and this is a

chronological summary. I start with the Statute of

Quia Emptores, and I might just say why I start

with that by referring to Megarry and Wade again on

pages 28 and 29 - I have given a reference to it.

Going right back to feudal times:

In early times there was no theoretical limit

to the number of intervening tenders between the King and the tenant in occupation of the land. A new rung could always be added at the

bottom of the feudal ladder by the creation of

a further tenure. This process was called

subinfeudation ..... But for obvious reasons -

it is said by the authors -

this system was excessively cumbrous and

inconvenient.

The alternative to subinfeudation was

substitution. B might grant to C not by

granting a new tenure but by letting C step

into his shoes so that C became, and B ceased

to be, a tenant of A.

Now, it was then at the point where Magna Carta was

drawn. The lords saw concern with this because

they thought that they might end up with a tenant

who might not be suitable to provide the services

that were associated with the tenures, and Megarry

and Wade continues:

Nullagine(2) 41 14/10/92

But dissatisfaction continued until a

revolutionary settlement was made by the

Statute of Quia Emptores 1290.	The effect of
this was was as follows:

(i) Alienation by subinfeudation was
prohibited.

(ii)  All free tenants were authorised to alienate the whole or part of their

land by substitution, without the

lord's consent, the new tenant to
hold by the same services as the
old.

And then there is a reference to the effect of a

statute. It is said by the authors at page 30: Quia Emptores marked the victory of the modern

concept of land as alienable property over the

more restrictive principles of feudalism. For
no new tenures in fee simple could

thence-forth be created except by the Crown. And then at the bottom of page 30:

Quia Emptores 1290 is still in force today and

it may be regarded as one of the pillars of

the law of real property. It operates every

time that a conveyance in fee simple is

executed, automatically shifting the status of
tenant from granter to grantee and fulfilling
the rule that all land held by a subject shall

be held in tenure of the Crown.

I mention Littleton and Littleton's Tenures in 1470

because, of course, Coke writing on Littleton was,

of course, summarizing - as Sir Victor Windeyer

says, in a rather disorderly fashion - what was

said in Littleton's Tenures and Coke on Littleton,

as I have quoted the passages there in 1628 when

Coke on Littleton dates them, is referred to in

many of the authorities as being the source of the

rule that there should be no restraint on

alienation.

In fact, there is one case that I found

reference to, which is Muschamp v Bluet, which

preceded Coke on Littleton, which as I say is

always cited. Then there is the case of Doe v

Pearson; in that case there has been gift to

daughters:

If no issue, then no power to dispose of

estates except to her sister or sisters and

children. This was held to be a good

condition and not void.

Nullagine(2) 42 14/10/92

And this case has been much criticized and in the

Wollondilly case it is noted by Mr Justice Young

that it:

was decided by at least one of the Judges not

only misunderstanding the whole point but even
reading counsel's argument in a previous case

as the authority instead of the reasons of the

Judges.

And then I have given some references to other

cases which constantly crop up in discussions on

this subject. Attwater v Attwater was:

Bequeath to son of land with an injunction

never to sell it out of the family but if sold

to be sold to brothers. Held ..... that this

was against the rules "laid down by Coke" and

said that he made his decision notwithstanding

Doe v Pearson.

So he simply ignored the result in Doe v Pearson.

Re MacLeay is the decision which is much

criticized and in fact referred to in Megarry and

Wade in the passage that I read earlier, where Sir

George Jessell held that a devised way on condition

he never sells it out of the family was held to be

good. He considered Coke on Littleton and

concluded that the test is whether the condition

takes away the whole power of alienation

substantially and he said, "Well, this one only

restricted alienation by sale and not by

settlement, lease or mortgage, and it was not

limited to one person". As I say, that should be

seen as an anomolous decision and a much criticized

one.

And then, two other cases which I want to

refer to because they are pre-emption cases.	In
both cases there was a limit on the price at which

sale could be effected, and that is the same effect

that we have here by reason of the pre-emption

clause. In both of those cases it was held that

the condition was void, in Re Rosher and Re

Cockerill, and they are reproduced in the bundle of cases.

In 1954, Re Brown, Mr Justice Harman discussed the earlier cases. That was one where there was a:

bequest of a business ..... for life with

remainder to 4 sons ..... He devised the

freehold properties ..... to his trustees in

trust for his wife for life and then after her

death on his youngest son ..... Clause 6 of the

will then stated that if any of the sons

Nullagine(2) 43 14/10/92

execute an assurance whereby the share of

properties might become vested in any person

other than a brother or brothers of such son

then I direct that the share of such son shall

be held by my trustees on discretionary trust

for the son and his wife and children.

It was held that was void.

Then we get the case which must be set against

Hall v Busst because this is where the law in

England and Australia differ and has been recorded

as being different by Sir Nigel Bowen, and it is

obvious that the law is different. That is one of

the cases that I have handed up. This was a case

where there were two plots of land purchased.

There was an agreement that the purchaser should

not sell the small piece separately from the larger plot of land, and a successor in title acquired the

two plots and then tried to sell off the small plot

of land, and the plaintiff commenced proceedings to

restrain him from doing this because this was a

breach of a covenant against taking such a step.

The Court of Appeal, in effect, said this: the law

in England is that you cannot impose that kind of

condition in a conveyance, but it is all right to

do it in a contract, and that is where Australia in

Hall v Busst the High Court has said, "In Australia

that is not all right, you cannot do as a condition

in the conveyance and you cannot do it as a

contractual arrangement either".

Could I refer to Caldy Manor, which is the

bundle of documents that I handed up at lunch-time.

I think it is the third case of that bundle that I

hand up.	The first one is Reuthlinger
v Reuthlinger.	I would say that my estimate is

rather an under-estimate at this stage,

Your Honour, I would say I had another three

quarters of an hour to go.

In Caldy Manor Estate v Farrell one can see

that the restraint not to sell the land separately

was in a contract, and it is important to note the
distinction between making it a condition of the
conveyance or having such a restriction in a

contract which will emerge in a moment.

Lord Justice Russell said this on page 1307 of the

report. Caldy Manor Estate v Farrell, (1974) 1 WLR

1303, and it is at page 1307. In fact one needs to

go down to the foot of page 1306. The last

paragraph reads as follows:

This leaves the question whether the

covenant in clause 2(e) is of no effect on the

ground that it is repugnant to the estate

conveyed. Hereunder it is to be observed that

Nullagine(2) 44 14/10/92

if the answer is yes, it would have been

ineffective against Lord Fairfield himself.

Both below and in this court the argument in

favour of repugnancy was based on authorities

relating to conditions restrictive of
alienation attached to a grant of a fee simple

or absolute interest, starting with Coke

upon Littleton ..... and continuing through

decisions not easy to reconcile with each

other, such as -

and then he cites the cases, most of which I have

referred to on that summary.

In our judgment, this line of cases and

authority is not relevant to a case such as

this of the covenant by Lord Fairfield. There

is a most important distinction to be drawn
between two matters different in kind: on the

one hand, an attempt to attach to a grant of

an absolute interest a condition which, if

valid, would upon a purported alienation in

breach of the condition confer a right of

re-entry or result in cesser of the absolute

interest, and so destroy the very thing

granted, and, on the other hand, a covenant against alienation which would have no such operation; for, if the covenant be broken, the alienation would operate, the covenantee

having at law no more than a right to damages,

which might well be nominal; and the

covenantee could only prevent a threatened

alienation in breach of covenant by obtaining

an injunction, which relief might or might not

be granted.

Now, in Re Leahy which is also in that bundle of

cases, in the Estate of Leahy, (1975) 1 NSWLR 246,

Sir Nigel Bowen said this, at page 250. There is a

paragraph to be read here because it does summarize	the difference in the law. This was a case where
there had in fact been a restraint imposed by
undertakings to a court in the TFM, Testator's
Family Maintenance, application, undertakings to
the court, where the party taking the property in settlement of the proceedings agreed not to dispose
or deal with the land except under certain
conditions. And then there was a return to the court saying, "Well, look, this is in restraint of
alienation" and this is what was said at page 250,
after talking about the undertakings, opposite
line C:

This brings me to the question whether

the restrictions, particularly those contained

in pars (b) and (c), constitute unlawful

restraints upon alienation. The labours of

Nullagine(2) 45 14/10/92

counsel have provided me with references to

the cases by which I may trace the rather long
and varied history of this principle.

Differing explanations have from time to time

been given as to the basis of the principle,

ranging from the idea that a general restraint

on alienation was repugnant to the grant, to

the idea that it was public policy that

private property should be fully alienable.

It has also been suggested that it may be

attributed to an indirect effect of the

statute Quia Emptores. It has always been

reasonably clear that to attach to the grant
of an absolute interest restraints upon the

powers of alienation of the grantee in the

form of a condition subsequent, which upon

breach will result in loss or destruction of

the interest, will infringe the principle, and

will lead to the condition being held to be invalid. What has, historically, been less clear is the extent to which practical

devices, not being conditions attached to the

grant, but which lead in practice to the

grantee's being inhibited in exercising his

powers of alienation, will likewise be held to
be invalid. As late as 1974 in England it has
been held by the Court of Appeal that

contractual arrangements having this effect

will not be invalid: Caldy Manor Estate Ltd.

v Farrell. However, this appears to be an

instance (not the first) where the general law

of Australia differs from the general law of

England. The High Court of Australia

considered the question whether the principle
applied to contractual arrangements in Hall
v. Busst and came to the opposite conclusion,
that is, the High Court, by majority, held

that the principle did apply to invalidate

such contractual arrangements.

So, in England what you cannot do is, in a will or

in a gift or a settlement, grant an interest in fee

simple which says, "I grant you this estate in fee

simple but there is a condition subsequent which

provides that if you sell it to anyone other than a

member of my family, then your interest will

immediately cease and it will be then left to

somebody else".	Now, that is in a will or a gift
or something of that kind.	What the effect of

Caldy Manor v Farrell is that you can do that in a

contract because in a contract you can still
alienate the land and that will be effective;

there will be a claim for damages but that is

nothing to do with alienation of the property and

maybe an injunction will be granted or not, but

that is a different matter and nothing to do with

restraint on alienation. That is the approach of

Nullagine(2) 46 14/10/92

the English courts. So you cannot do it in the

grant, in the conveyance, in other words; you can

do it in a contract which is independent of the

deed of conveyance.

So that means we have to then look at Hall

v Busst, which I am afraid is a difficult case

which probably some members of the Court, perhaps

all members of the Court, have had opportunity to read on other occasions. But it requires careful

reading; it is under tab 17. It is a terrible

thought that I have to embark on this case at

4 o'clock in the afternoon after a long day,

because - - -

BRENNAN J: It is a stimulating discussion.

MR PULLIN: Perhaps I should tell a joke at this stage.

This was a case about a sale of an island, a piece

of land which happened to be an island off

Queensland, and the headnote shows the provisions

which were contained in a contract which was

executed after the contract to sell. Sorry, it was

a contract to sell and then there was a separate

agreement something like this, where you have an
agreement regarding the land and then a

supplementary agreement, and the terms in the

supplementary agreement are set out in the

headnote. Clause 3 read as follows. You have to

remember that the reference to the granter is in

fact a reference to the purchaser rather than the

other way round just to complicate things. So, the

purchaser:

shall not at any time transfer assign set over

or lease any part of the said lands (other

than by the way of mortgage to a banking

institution) without the consent in writing of

the Grantee first obtained.

And then 4 is the pre-emption clause:

For the purpose of obtaining the consent of

the Grantee in the preceding clause mentioned
the Granter shall give to the Grantee one

calendar month's notice in writing of her

intention so to deal with the said fee simple

or any part thereof and during the currency of
that notice the Granter doth hereby give and

grant to the Grantee the first option of

purchasing the said fee simple and all

improvements thereon on the terms and

conditions herein contained.

And then clause 5:

Nullagine(2) 47 14/10/92

The purchase price relating to such option

shall be the sum of 3,157 pounds 4s 0d to

which shall be added the value of all

additions and improvements to the said

property since the date of purchase.

The thing to notice about 5 is that the purchase

price, if the option or the pre-emption was

exercised, was the same as the sale price. So,

therefore, it was not to be of market value; it

was to be at a fixed price. And the other thing to

notice is that to that must be added the value of
all additions and improvements to the property

since the date of purchase by the purchaser.

Now, it went all the way through the courts

without anyone talking about restraint on

alienation at all. The questions which were posed to Justice Jeffriess referred to on page 208, just

over half-way down:

Without any pleadings, the parties stated

a case for the opinion of the Supreme Court in

which its opinion was sought as to whether the

said deed or indenture ..... imposed upon the

defendant any legal obligation (a) to obtain

the consent of the plaintiff ..... to give to

the plaintiff any notice of her intention to

so sell, (c) to give to the plaintiff any

option of purchasing the said land .....

Jeffriess J answered each of the questions in

the affirmative -

that is he did have to give consent; he did have
to give notice of intention and there was an

option. And there was an appeal to the Full Court

of Queensland which dismissed the appeal. It was

then argued and you will then notice starting on

page 212, His Honour Sir Owen Dixon sets out

clauses in the contract, which I have referred to

in the headnote. At page 213 there is a reference

to the submission of the questions in the case

stated, at page 214 a reference to the appeal, and

then on page 214, this is how the question of
restraint on alienation came up. This is about a

third of the way down, starting with the first

paragraph:

The appeal was supported by counsel on

the ground that the price payable on the

exercise of the option under ell 4 and 6 - was unenforceable because of uncertainty. In other
words, the figure of 3,000 pounds plus or minus the

value of additions was said to be so uncertain as

Nullagine(2) 48 14/10/92

to be unenforceable. And then Sir Owen Dixon said

this:

The question was raised upon the hearing of

the appeal whether, if it were a provision

having an independent effect, cl 3 would not

be void as a restriction upon alienation which

was unqualified.

So somehow or other the subject was raised on

the appeal in the High Court and the question was therefore one of the questions that the Court had
to address, having posed it perhaps by
themselves.All members of the Court had to deal

with the question of uncertainty, whether it was

void - uncertainty, and Sir Owen Dixon said the

contract was uncertain.

Now, you would think that he might have

stopped there and not gone on to deal with it, but

he said "If clause 3 does have independent effect

we still like to look at it because there could

still be a breach of that provision which might

only give rise to nominal damages", because the

property had in fact been sold to somebody else,

contrary to the provision, "and so there might be a

breach of clause 3 having sold without consent

which would give rise to nominal claim for damages

of one pound. So the case really goes off and the
question arose in that context. Getting to that

question then, the question of whether or not

clause 3, if it is to be treated as an independent

stipulation which Sir Owen Dixon said it did, at

page 217 he deals with this problem. He says at

the top of the page, having concluded that the

price was unascertained and it was too uncertain,

the option is therefore unenforcible because of the

uncertainty point, and he said:

But I have already expressed the view

that cl. 3 may be treated as an independent

stipulation.

And that:

damages would be only nominal.

But, the question arises whether ..... cl.

3 is not void as an attempt wholly to restrain

alienation.

And a little further down:

we are concerned with a contract always

operating upon the defendant and her "estate",

that is, upon her legal personal

representative (upon whom the land may

Nullagine(2) 49 14/10/92

devolve) until an alienation occurs.	The
question whether a bond or covenant or contract purporting to impose a total

contractual restraint upon alienation is void

does not seem to be settled. A condition

doing so -

and that is the condition in the grant or the

conveyance -

attached as a condition subsequent to the

estate is of course void. The invalidity may

be put on the ground of repugnancy to the

grant or upon public policy or for that matter

it may conceivably be attributed to an

indirect effect of Quia Emptores. That is

immaterial, for it is a known rule that the

condition is void. But with contractual

restraints there is no fetter upon alienation

which does more than sound in damages, that

is, unless a doctrine of equity intervenes to

make it bind the land. Coke at one time

seemed to think that a bond with a condition

against alienation of an estate was good.

And he refers to Coke on Littleton.

And in Freeman v Freeman a bond against

barring an entail was held valid. But

according to Tatton v Mollineux Coke is said

to have taken a contrary view -

and then there is a reference to the article of

Charles Sweet where the problem is said not to have

been directly addressed.	I think we have
reproduced that.	I have referred to it but have

not reproduced that article:

Dr Glanville Williams has attacked the logical

basis of invalidity for repugnancy -

and if I can just deal with that side issue, we

would say that it is founded in public policy, not

on the basis of the repugnancy to grant. And I

will refer to that a little later, the articles

that cover that.

Then, Sir Own Dixon said:

In the course of doing so the learned

writer ..... invoked the alleged contrast of a

contract covenant or bond not to alienate as

something inconsistent with the theory that a

condition against alienation is repugnant. In

effect he suggested that the distinction was

untenable. The ground for denying the

validity of a contractual restriction upon

Nullagine(2) 50 14/10/92

alienation is that it is a principle of the

law that private property should be fully

alienable.

TOOHEY J:  Mr Pullin, what are you seeking to gain from this

decision, other than the proposition that

restraints on alienation may arise from contractual

rights and obligations?

MR PULLIN: Well, there is one other aspect, Your Honour,

and that is that there has to be a decision

reached, we would say, about whether or not the

reason why restraints on alienation are bad, is a

matter of public policy, or whether or not it is

because that you cannot have a condition which is

repugnant to the grant. We say that in the case of

contracts, it cannot be that latter because, of

course, the contract is nothing to do with the

grant, so therefore we say that the basis of the

rule lies in public policy and, indeed, there are a

number of text writers who reached that conclusion.

TOOHEY J: 

Can you derive that principle from the present case, that is Hall v Busst?

MR PULLIN: 

What is obvious from it, Your Honour, is that

this Court, and the Bench in this case does not
make a decision, because going back to page 217,

half-way down the page:

The invalidity may be put on the ground of

repugnancy to the grant or upon public

policy -

and we say that it cannot be upon grounds of
repugnancy if you are dealing with a contract

because it is - - -

TOOHEY J: Yes, I understand that, but in that sense the

decision is neutral, is it not?

MR PULLIN:  On that point, yes. So, probably having pointed

out that fact, once that point is understood, I

need not refer any more to what the Chief Justice

was saying, but I do need to just point out that

Justice Fullagar, who also said that selling at a price or selling at a price plus or minus the

adjustments made the contract unenforcible, he then

said that he approached the contract on the basis

that even if clause 3 was not standing

independently and was in fact linked with the

pre-emption clause so that properly understood,

clause 3 was really part of the means of securing a

pre-emption for the parties, that even so, it was

void as being a restraint on alienation, which

means it is the same as this case construed in that

way.

Nullagine(2) 51 14/10/92

BRENNAN J: What page is that of Justice Fullagar?

MR PULLIN: That can be found starting on page 223. It

starts there, I will not read all of this, but

about two-thirds of the way down after His Honour

said:

I am of opinion that this appeal must succeed.

But I think that the appellant is entitled to

succeed on another ground also, although this

ground was not argued either before -

the other courts. And then he starts into the

argument and the analysis of it, and then he says,

at the top of page 224:

If cl. 3 stood alone, I should say that

it would be obviously void, for it is absolute

in terms -

and then he analyses the operation of the three

clauses and says that, about half-way down the

page:

The expressed purpose of the notice is "to
obtain consent." The notice is a notice of

"intention to deal with the fee simple." The

"purpose" could not be achieved, and the

"intention" could not be carried out, unless
cl. 4 were construed as, in effect, giving to
the respondent not merely an option to

purchase but an option to purchase or consent.

But I am of opinion that the restriction,

even so construed, is void.

And so, His Honour has really approached it on the

basis, even if clause 3 does not stand alone but is

just·seen as part of the overall machinery of

securing a pre-emption, it was void.

Of course, Justice Menzies agreed with both of

those judgments which means that he is agreeing
with really a different approach, that the two

Judges - well, I suppose in the sense that

Justice Menzies said "I agree with both", he is

agreeing with what Sir Owen Dixon had said,looking

at clause 3 alone, and what Justice Fullagar had

said at the top of page 224 where he said, "Well

even if clause stood alone it is obviously void",

but Justice Fullagar then goes on to say, even

construed as part of the pre-emption arrangement it

was void.

The other Judges who dealt with the subject: Justice Kitto said it was not void because clause 3

Nullagine(2) 52 14/10/92

was not independent and therefore it was all right

so he did not really ..... If one has to decide

whether it is independent or not, he decided it was

not independent and therefore did not go on and

deal with the problem as Justice Fullagar did.	And
Justice Windeyer said that if clause 3 was

independent then it was void, but it was all right

because it was linked with the other provision.

So, in that sense, Justice Windeyer is at odds with what Justice Fullagar said on page 224. As I say,

Justice Menzies simply agrees with Justices

Sir Owen Dixon and Fullagar.

But at the end it is quite true, as

Your Honour Justice Toohey has said, that the

proposition is that contracts in the restraint of

alienation are void just as conditions in a grant

in England are void.

BRENNAN J: This might be a suitable time, Mr Pullin.

AT 4.30 PM THE MATTER WAS ADJOURNED

UNTIL THURSDAY, 15 OCTOBER 1992

Nullagine(2) 53 14/10/92