Brickwood v Young [1905] HCA 12; (1905) 2 CLR 387 (14 April 1905)

Brickwood Appellant; and Young and Others, and The Minister for Public Works of New South Wales Respondents.

Griffith C.J.—[Having referred to the facts as already set out, His Honor continued:]

The doctrine relied upon by the appellant is of comparatively recent development. The earliest reported case is Swan v. Swan[1]; and as late as 1883 so learned a Judge as Fry J. expressed doubts as to the validity of the doctrine. In Leigh v. Dickeson[2], however, decided in the following year, it is asserted by Cotton L.J. as follows[3]: "No remedy exists for money expended in repairs by one tenant in common, so long as the property is enjoyed in common; but in a suit for partition it is usual to have an inquiry as to those expenses of which nothing could be recovered so long as the parties enjoyed their property in common; when it is desired to put an end to that state of things, it is then necessary to consider what has been expended in improvements or repairs: the property held in common has been increased in value by the improvements and repairs; and whether the property is divided or sold by the decree of the Court, one party cannot take the increase in value, without making an allowance for what has been expended in order to obtain that increased value. ... There is, therefore, a mode by which money expended by one tenant in common for repairs can be recovered, but the procedure is confined to suits for partition." The application of the doctrine was extended in In re Jones; Farrington v. Forrester[4] to a case of an expenditure by a tenant for life in entirety, who was also owner in remainder of a moiety in fee; and in In re Cook's Mortgage; Lawledge v. Tyndall[5], to a case of division of funds in an administration suit. In Boulter v. Boulter[6], the same learned Judge from whose decision this appeal is brought held that the rule applies in suits for administration as well as in suits for partition, and when the improvements are made while the estate of the tenant in common is only an estate in remainder, as well as when his estate is an estate in possession. In the present case the person who made the improvements was tenant pur autre vie of the whole, and also tenant in remainder of an undivided fourth. It appears from the case of Leigh v. Dickeson[7] that the equity in question is not one which can be asserted actively, except in a suit for partition or administration, in which all the parties are equally regarded as actors, but is what was called in argument a defensive equity. And this point was relied on by Mr. Knox for the respondents, who contended that the appellant, having accepted his own fourth of the purchase money payable on the resumption, must be considered as an actor in respect of the other three fourths paid into Court. He also contended that this payment to the appellant operated as a partition of the land and an allotment to the appellant of his one fourth share, so that the fund in Court represents only the other three fourths to which he has no title.

With regard to the second ground of the learned Judge's decision, I cannot regard the equitable right of a tenant in common to compensation as against his co-tenants as merely personal to the individual tenant who effects the improvements. The principle appears to be that the making of permanent improvements by one tenant in common in sole occupation gives rise to an equity attaching to the land, analogous to an equitable charge created by the owners for the time being, but enforceable only in the event of partition or a distribution of the value of the land amongst the tenants in common. There can be no reason why such a charge should not run with the land in favour of purchasers from the person originally entitled to it. It is clearly a right incidental to the possession of the land, and cannot be asserted until that possession is disturbed. It appears to me, therefore, that the equity passes with the land, and may be asserted by the possessor for the time being, who, I think, may claim the benefit of the improvements effected by his predecessor in title. It is true that Porter, who made the improvements, has been paid for them, but not by the respondents. The purchase money which the appellant paid for the land primâ facie included the enhanced value, and I can see no reason why he should not stand in the place of Porter, whose rights he acquired for valuable consideration. This view was acted on without objection in In re Jones; Farrington v. Forrester[8], where the claim to compensation was successfully asserted by the heir-at-law of the person who made the improvements. And in Williams v. Williams[9], mentioned in Seton's Judgments and Orders, 6th ed., Vol. II., p. 1860, the right of the tenant in common in possession to take advantage of the expenditure of his predecessors in title was allowed, apparently as a matter of course. In my opinion this objection fails. With regard to the other objection, regard must be had to the substance rather than to the form of the matter. When the land was resumed, the appellant was in possession as tenant in common, and the respondents could only have asserted their title against him by a suit for partition, in which he could have set up his equity to compensation for the improvements. Upon the resumption the land was represented by the purchase money. By sec. 56 of the Public Works Act the appellant, as the person in possession of the land, is to be deemed to have been lawfully entitled to the land until the contrary is shown. It is the respondents, therefore, who are in the position of actors, asserting a claim to that which primâ facie is the property of the appellant. The equity set up by him is, therefore, a "defensive" equity, namely, to claim compensation before effect is given to the better title of the respondents. Having regard to the principle of the doctrine invoked by the appellant, it seems quite immaterial that he has already received without objection part of the property to the whole of which he is primâ facie entitled. The parties asserting the adverse claim are in either case equally bound to do equity. Nor, in my judgment, can the payment of one fourth of the purchase money to the appellant affect his right to set up this equity. No one disputed his right to receive it, and his solicitor's letter to the Crown Solicitor of 13th October, 1903, which asked for payment of the one fourth, and contained a request that the other three fourths should be paid into Court, added "upon which I would made application for payment out." It is clear that under these circumstances no abandonment of the appellant's right to the three fourths or any part of it can be inferred, any more than if, on an application for payment of part of a fund in Court to a person admittedly entitled to it, it were ordered to be paid to him without prejudice to his right to claim the residue, he could be said to have abandoned his claim to the residue.

For these reasons it appears to me, both on principle and authority, that the appellant, who is defending his primâ facie claim to the fund representing the three fourths, is entitled to assert his lien upon it for the value of the improvements. It was, however, contended that he is debarred from doing so, because it may turn out that he is indebted to the respondents, in respect of three fourths of the rents and profits received by him since the death of the tenant for life, in an amount greater than that which he is entitled to claim under his lien, and that in that event the respondents ought to be in a position to take the difference out of his fourth share which he has already received. The indebtedness is not disputed. The claim to recover from him three fourths of the rents and profits existed before the resumption, and is not affected by it. The respondents had no lien for it upon the land, and the payment into Court of the three fourths did not give them any lien upon the sum paid in, and, a fortiori, gave them none upon the other fourth. No doubt the Court may, and I think ought to, impose as a condition of allowing the appellant to assert his equity in respect of the improvements that he shall account for the rents and profits so far as they may exhaust the amount of his charge: see Teasdale v. Sanderson[10]. I doubt whether in this proceeding any more onerous terms could be imposed upon him without his consent; but, as he is willing to submit to pay any amount that may be found due from him upon a balance of accounts, it is not necessary to express any opinion on the point.

In my opinion, therefore, the learned Judge ought to have directed an account of the money expended by the appellant or his predecessors in title in permanent improvements on the land since the deed of the 18th May, 1869, and an inquiry as to the extent to which the compensation money paid on resumption was increased by such expenditure, and there should have been a declaration that the appellant is entitled to a lien upon the fund in Court for an amount equal to three fourths of the amount of such increase. There should then have been directed an inquiry, prefixed by the appellant's submission, as to what sum is due by the appellant to the respondents, in respect of three fourths of the rents and profits of the land received by him since the death of the tenant for life, with a direction that the amount so found due shall be set off against the amount found due to him in respect of the improvements, and that the resulting balance, if in his favour, shall be paid to him out of the fund in Court, and, if against him, be paid by him into Court in augmentation of the fund before any claim is made by him to receive costs out of the fund. The order for payment of costs by the appellant must be omitted, and an order substituted for payment of his costs and those of the Minister occasioned by adverse litigation between adverse claimants out of the fund. The order appealed from must be varied accordingly. The appellant's costs should be paid out of the fund.

I have had the opportunity of reading the judgment which has just been delivered by the Chief Justice, and I entirely concur in it.

[Having shortly stated the facts His Honor proceeded.] It was admitted by the respondents' counsel that if the appellant had during his possession of the land made the improvements, and if the one fourth share of the compensation money had not been paid over to him, he would have been entitled to be recouped to the extent claimed, less certain deductions which I shall mention later on; but they contended that under the circumstances existing there were two fatal obstacles in his way—the first, that the moneys disbursed for improvements had been expended not by him but by his predecessor in title, who had been reimbursed for that expenditure in the purchase money he had received. The second, that the appellant's receipt of the one fourth of the compensation money was a severing of the tenancy in common which disentitled him from making this claim in the distribution of the fund.

As to the first objection, I entirely agree with my learned brother the Chief Justice in his statement of the principles to be applied in such circumstances as this, namely, that the making of permanent improvements by one tenant in common in sole occupation gives rise to an equity attaching to the land analogous to an equitable charge created by the owners for the time being, awaiting enforcement pending partition or distribution of the value of the land as against the tenants in common. If the resumption had taken place during the possession of the person, who actually expended money on the improvements, the respondents would have been bound to recoup him. But in the purchase money which the appellant paid for his interest a sum representing that expenditure must have been included. It is difficult to see on what principle the respondents are entitled on distribution to get the benefit of that expenditure without any obligation to reimburse anyone. As to the other objection it seems to me that a complete answer is to be found in the provisions of the Public Works Act 1900. Under secs. 36, 37, and 39 the notification of resumption vested in the Minister the estate and interest of every person interested, and converted that estate and interest into a claim for compensation to the extent of the interest.

At the date of the resumption the appellant was tenant in common with the respondents in the land resumed, and his interest in the compensation money was two-fold—first his fourth interest in whole sum as tenant in common, and second, the right to be reimbursed out of the respondents' share to the extent of three fourths of the value added to the compensation by the permanent improvements. If the whole compensation money had been paid into the Equity Court there can be no doubt that the Court would have been bound, apart from other objections, to give effect to both of those rights. I do not see how the appellant can lose one of them—the right to reimbursement out of that portion of the compensation money—which belongs to the respondents, because before the money had been paid into Court he accepted, without prejudice to his rights, that portion of the compensation money which admittedly belonged to him. In other words the rights of all parties interested are fixed and stereotyped as at the date of resumption, and the compensation money must be distributed in accordance with those rights subject to proper allowances for part payments if any made before final adjustment. In my view, therefore, the appellant was entitled to make his claim for reimbursement, notwithstanding the fact that the improvements were made by his predecessor in title, and that he was paid his fourth share of the compensation before the fund was paid into Court. I agree with the Chief Justice that the principle laid down by Lord Justice Cotton in Leigh v. Dickeson[11], and which has been applied in the distribution of the fund in partitions and administration, ought to be applied to the case of a distribution of compensation for land resumed under the Public Works Act. It is true that the principle applied as what is called a defensive equity, but it is properly raised here. The respondents in this appeal are the moving parties in this proceeding for distributing the fund. The appellant, who came into Court to deny the respondents' right to any of the fund, is at least entitled to set up this defensive equity as to portion of it. He is entitled to say: "Although I have no right to more than the one fourth of the compensation money, which I have received, you are not entitled to take the enhancement of your compensation money brought about by my expenditure without reimbursing me." In order to effectually exercise this right the appellant is entitled to the inquiry he asks, and I concur with the Chief Justice that it should be on the lines indicated in his judgment, proper provision being made for the inquiry as to appellant's indebtedness to the respondents in respect of rents and profits. I do not think that the appellant is bound to bring his one fourth share of the fund into Court as a condition precedent to his right to the inquiry claimed by him. But, as it might turn out on the inquiry that the amount of rents and profits for which the appellant is accountable to the respondents exceeds the amount of reimbursement for improvements, thus turning the balance against him, I think it should be made a condition of his right to get any costs out of the fund that he bring into Court the amount of the balance, if any, found against him.

Appeal allowed. Order of the Chief Judge in Equity varied accordingly. Costs of the appellant to be paid out of the fund.

[1] 8 Price, 518; 22 R.R., 770.

[2] 15 Q.B.D., 60.

[3] 15 Q.B.D., 60, at p. 67.

[4] (1893) 2 Ch., 461.

[5] (1896) 1 Ch., 923.

[6] 19 N.S.W. L.R. (E.), 135.

[7] 15 Q.B.D., 60.

[8] (1893) 2 Ch., 461.

[9] 81 L.T., N.S., 163; 68 L.J. Ch., 528.

[10] [1864] EngR 316; 33 Beav., 534.

[11] 15 Q.B.D., 60, at p. 67.

High Court of Australia

Brickwood v Young [1905] HCA 12; (1905) 2 CLR 387 (14 April 1905)

HIGH COURT OF AUSTRALIA