Australian Mutual Provident Society v Gregory [1908] HCA 7; (1908) 5 CLR 615 (23 March 1908)

The Australian Mutual Provident Society and Others Defendants, Appellants; and Arthur James Gregory and Others Plaintiffs and Defendants, Respondents.

James Gregory by his will and codicil devised land in Tasmania to trustees to pay to his widow out of the income an annuity of £200, and to pay the residue of the income to his eight sons and the widow of a son in equal shares. The testator directed that upon the death of his widow the trustees should sell the land (with a discretionary power to postpone the sale for seven years), and divide the proceeds equally among the same nine persons, of whom G. W. Gregory was one.

The testator died on 7th January 1904. It is not in controversy that G. W. Gregory's interest in the proceeds of the land so directed to be sold became a vested interest at the testator's death, or that by the municipal law of Tasmania that interest was for the purpose of succession to be regarded as personalty. It was further contended that the notional conversion took effect from the testator's death.

On 21st June 1904 G. W. Gregory's estate was placed under sequestration by the Supreme Court of the British Colony of Natal upon his own petition, and the respondent Green was appointed trustee of his estate. The insolvent subsequently returned to Tasmania, and executed successive assignments of his interest under the testator's will to the appellants and other persons for valuable consideration, the first being dated 17th February 1905, and the others being all antecedent in date to the death of the widow, which occurred on 16th October 1905. Notice of all these assignments was duly given to the trustees of the will before that date. On 6th November 1905 Green gave them notice that he claimed the interest by virtue of the sequestration. The jurisdiction of the Supreme Court of Natal to make the order of sequestration was not disputed.

Both parties appealed to the recognized rule of private international law that the assignment of a bankrupt's property to the representatives of his creditors under the law of a foreign country which has jurisdiction over the bankrupt's person operates as an assignment of the moveables of the bankrupt wherever locally situated, but not of his immoveables: Dicey, Rules 107, 108; Westlake, secs. 134-140.

The rules of what is called international law are, after all, only general principles which, by the comity of nations, are adopted by civilized States as part of their own municipal law, and effect is given to them, not as laws paramount, but as part of the municipal law. The rule just stated is accepted as part of the law of England and of Tasmania.

The appellants contend that G. W. Gregory's interest was an immoveable, the respondents that it was a moveable, within the meaning of this rule. The appellants further contend that, even if it was a moveable, notice to the trustees of the will was necessary to complete the respondent Green's title as against the other assignees. The Supreme Court decided in favour of that respondent on both points.

The distinction between moveables and immovables is primarily, as the words themselves denote, a distinction of fact.

It is generally possible by the use of the senses to say whether in rerum naturâ an object is moveable or immoveable. This question of fact is not affected by the municipal laws of the place where the object is situated. With advancing civilization there come into existence incorporeal rights of property with respect to both moveables and immoveables. No one doubts that incorporeal rights with respect to moveables are themselves regarded as moveables. And I am unable to see any reason why in the case of immoveables also the incorporeal right should not follow the character of the thing to which it is an accessory. The circumstance that the municipal law of a country thinks fit to treat some kinds of immoveable property as having for certain purposes some of the qualities or incidents of personal property seems to be quite irrelevant to this question of fact. Thus, a leasehold estate in land is an immoveable, because the land is in fact immoveable, and the circumstance that English law regards such an estate as what it calls "personal property" does not alter the fact. For the purposes of international law the fact, and not the epithet, is regarded: Freke v. Lord Carbery[1]. So a rentcharge, which is an incorporeal right accessory to land, is an immoveable, although some rent-charges are by the Wills Act treated for certain purposes as personal property: Chatfield v. Berchtoldt[2]. Some confusion has been caused in discussion on this point by reference to the analogous division of property into realty and personalty under English law. The analogy no doubt exists, and, but for some positive rules of that law, might be complete. But it is a mistake to argue that, because the English technical distinctions between real and personal estate no longer depend entirely upon physical facts, the distinction between immoveables and moveables in the application of the rule of international law has been equally qualified. So far as I am aware, such a doctrine has never been suggested by any English judicial authority.

Law, as has often been pointed out, deals with rights and not with things. But, so far as regards property, the rights with which it deals are rights with respect to things, that is, physical objects capable of being apprehended by the senses. International law deals with things as they are, and not with words as they may chance to be defined in dictionaries of municipal law.

In my opinion the question whether a particular right is to be regarded as a moveable or an immoveable for the purposes of international law depends upon the nature of the thing with respect to which the right is asserted, and not upon the municipal law of the country in which it is locally situate.

No doubt the law may treat as an immoveable a thing which in its apparent form is moveable, if it is so closely connected with an immoveable as to be a mere accessory to it, as, for instance, in the case of title deeds. But this is not a real exception, for the deed, except so far as the material on which it is written is concerned, is a mere record of a right to a physical object.

What, then, was the subject matter of G. W. Gregory's interest at the date of sequestration? Plainly the subject matter was land in Tasmania. Gregory's interest was a right (which could not be enforced for seven years) to have the trusts of the will administered and, for that purpose, to have the land sold. If authority were needed to support the proposition that this right could only be enforced in the country of the situs of the land, it is afforded by the cases of Whitaker v. Forbes[3], and British South Africa Company v. Companhia de Mo¸cambique[4]. In my judgment, this right followed the nature of the land to which it related, and was in law as well as in fact an interest in land (see per Lord Cairns L.C. in Brook v. Badley[5]), although for some municipal purposes treated as if it were personal property. It was therefore an immoveable. No authority, nor even an expression of opinion, was cited to us to the contrary effect. Mr. Dicey, indeed, treats this view as so obvious as not to require elucidation. Dealing with the term "personal property" as used in English municipal law, he says (page 312):—"Personal property includes land (immoveables) of two different descriptions. In the first place, it includes ... chattel real. It includes, in the second place, land which, though not a chattel real, is by any rule of law treated as personalty, or, in other words, made subject to the incidents of personal property. Such, for example, is land which under a rule of equity is, as the expression goes, converted into personalty." In other words, land which under a rule of equity is deemed to be converted into money is, although included in the term personalty, an immoveable. No doubt, he says (page 72) that "immoveables are equivalent to realty, with the addition of chattels real or leaseholds; moveables are equivalent to personalty, with the omission of chattels real." But that this general statement was not intended to contradict the other is shown by the passage on page 73:—"Immoveable property includes all rights over things which cannot be moved, whatever be the nature of such rights or interests."

In my opinion, therefore, the respondent Green never acquired any right to Gregory's interest by virtue of the sequestration. I will, however, proceed to deal with the second point, on the assumption that that interest was a moveable and not an immoveable. It appears to be accepted as the law of England that under the Bankruptcy Act of 1869, as well as the Act of 1883, the rule in Dearle v. Hall[6] applies to assignees in bankruptcy as well as to assignees under assignments by act of parties, so that a person claiming under an assignment of an equitable chose in action executed by a bankrupt after sequestration, who took his assignment without notice of the bankruptcy, and has given notice of it to the trustee of the property, is entitled to priority over the trustee in bankruptcy who has not given notice. The doubt suggested by Lord Selborne L.C. in Palmer v. Locke[7] seems not to have been regarded as diminishing the authority of the cases of In re Barr's Trust[8]; and In re Atkinson[9]: See In re Stone's Will[10]. The law of Tasmania is in this respect the same as the law of England. It is said, however, that by the law of Natal the rule is otherwise, and I will assume this to be so. It was then contended that the law of Natal governs the case. But I think it is clear in principle that the recognition afforded by the rules of private international law to an assignment to creditors under the law of a foreign country extends only to recognizing it as having the same validity as an assignment made in accordance with the laws of the situs of the moveable. The law of one country can never have effect per se as law in another country. Whatever effect it has is given it by the law of the country whose jurisdiction is invoked. If that country for reasons of international comity gives effect to such a law, it is because it adopts the rule of the foreign law as part of its own law quoad illud. No authority was cited to us to show that the provisions of a foreign law as to the perfecting of a title to local property have ever been so adopted. The authorities, such as these are, all point the other way. Dicey (page 334) says:—"When, further, a bankruptcy in one country is an assignment of property situate in another, it passes the property subject, speaking generally, to any charge acquired thereon prior to the bankruptcy under the laws of the country where the property is situate, and subject also to the requirements, if any, of the local law as to the conditions necessary to effect a transfer of such property"; citing, amongst other authorities, the dictum of Jessel M.R. in Ex parte Rogers[11], and adding that this dictum applies apparently to moveable property as well as to immoveables.

Story (Conflict of Laws, sec. 550) says:—"Although moveables are for many purposes to be deemed to have no situs, except that of the domicil of the owner, yet this being but a legal fiction, it yields whenever it is necessary for the purpose of justice that the actual situs of the thing should be examined. A nation within whose territory any personal property is actually situate has as entire dominion over it while therein, in point of sovereignty and jurisdiction, as it has over immoveable property situate there. It may regulate its transfer, and subject it to process and execution, and provide for and control the uses and disposition of it, to the same extent that it may exert its authority over immoveable property. One of the grounds upon which, as we have seen, jurisdiction is assumed over non-residents, is through the instrumentality of their personal property, as well as of their real property, within the local sovereignty. Hence it is that, whenever personal property is taken by arrest, attachment, or execution within a State, the title so acquired under the laws of the State is held valid in every other State; and the same rule is applied to debts due to non-residents, which are subjected to the like process under the local laws of a State."

The recent case of Kelly v. Selwyn[12] before Warrington J. is to the same effect. The Supreme Court thought that the law of Na governed the case on this point. For the reasons I have given I am unable to agree with them. I think, therefore, that in either view of the nature of Gregory's interest the respondent Green has failed to establish any title to it, and that the appellants are entitled to succeed.

It is not disputed that if the interest which is the subject of the assignments to the several appellants is an immoveable that conclusion is fatal to the claim of Mr Green, the respondent trustee of the estate of G. W. Gregory under The Insolvency Act of 1867, a law of Natal. See Dicey's Conflict of Laws, Rules 107, 108.

In the exercise of international comity the Courts will apply the maxim "mobilia sequuntur personam," in favour of the trustee or assignee under a foreign bankruptcy or insolvency. But nations in self-protection refrain from allowing foreign laws either to accomplish or to regulate the transfer of land and other immoveables within the domestic bounds. The Natal insolvency is a foreign one in respect of its relation to the laws and the Courts of Tasmania. For the purposes of the argument the direction to the trustees of James Gregory, by his will, to sell the realty within 7 years of the death of the widow, which happened in October 1905, was taken to have operated as a conversion on and from the testator's death in January 1904, a few months before the adjudication in Natal and the appointment of the respondent Green as trustee thereunder, and for the same purposes G. W. Gregory was taken to have acquired domicil in Natal before his insolvency. Was then G. W. Gregory's interest under the will, the land having been, in equity, converted into personalty in January 1904, from that time a moveable or an immoveable?

Under the head of "Interpretation of Terms," Mr. Dicey, in his book already referred to, says, at p. 72:—"The division of the subjects of property into immoveables and moveables does not square with the distinction known to English lawyers between things real, or real property, and things personal, or personal property. For though all things real are, with certain exceptions, included under immoveables, yet some immoveables are not included under things real; since chattels real, or, speaking generally, leaseholds, are included under immoveables, whilst they do not, for most purposes, come within the class of realty, or things real. On the other hand, while all moveables are with certain exceptions included under things personal, or personalty, there are things personal, viz., chattels real, or, speaking generally, leaseholds, which are immoveables, and are in no way affected by the rules hereafter laid down as to moveables. To put the same thing in other words, immoveables are equivalent to realty, with the addition of chattels real or leaseholds; moveables are equivalent to personalty, with the omission of chattels real."

But this eminent jurist, later in the same book, expands his view of the subjects of personal property included among immoveables. At p. 312 he says:—"Personal property includes land (immoveables) of two different descriptions. In the first place, it includes land in which a person has less than a freehold interest, e.g., a leasehold. ... It includes, in the second place, land which, though not a chattel real, is by any rule of law treated as personalty, or, in other words, made subject to the incidents of personal property. Such, for example, is land which under a rule of equity is, as the expression goes, converted into personalty, as where freehold property is under a settlement conveyed to trustees in trust to sell the same, and after the death of A to stand possessed of the proceeds of the sale for the purposes of the trust."

If this is correct, the interest of G. W. Gregory under his father's will, which for the purpose of succession has become personal property, is nevertheless an immoveable. And it must be remembered that the author is speaking of immoveables in the character which, in the view of English jurists, they maintain as subjects of private international law. If that interest is an immoveable then the assignment of G. W. Gregory's property to the respondent Green, under the Insolvency Act of Natal, does not pass the interest to him, as that law does not affect an immoveable of the insolvent situate in Tasmania.

Let me put the question thus. In considering the effect of a foreign bankruptcy on property physically within the domestic bounds, that is, in applying the principles of private international law, does the law of England, which for this purpose is the law of Tasmania, keep in mind the substance of the thing, or the rules and methods which dictate its treatment for certain municipal purposes? I am of opinion that it is the substance alone that is to be considered. One may leave aside mere accessories, which follow the substance of necessity. Title deeds, for instance, must go with the land because without the former the right to the latter could not be proved, and the law will not give the property in the land to the owner, say, in Tasmania, and the property in the means of proof to another person, who may take them anywhere. But take the case of chattels real, or leasehold lands. They are personal property for all purposes of devolution. The physical possession, or the right to the possession of them, must be proved in order to sustain an action for trespass upon them. And no such action can be brought except in the country which includes them. So as to lands held in trust for conversion and deemed in equity to be personalty. The trustees must still defend the possession or the title when either is assailed, and no law of a foreign country can force them to defend anywhere but in the locus rei sitæ. But then, it is said, these considerations do not apply to a mere reversionary interest in the trust property directed to be sold. I think they still apply, for whatever affects the right of the testator or the trustee to the unsold land, by consequence affects the right to receive the proceeds. As to the land itself, from the inception of the trust it is in equity merely money for the limited purposes of the trust, but only so far as those purposes extend. Apart from those purposes it remains land, and as an immoveable is in relation to international law governed by the doctrines applied by the lex situs in administering that law. Similar considerations have prevailed in the case of a rent-charge pur autre vie issuing out of English land, which was held liable to legacy duty as personal estate under the English Statutes, 14 Geo. II. c. 20, and 1 Vict. c. 26: Chatfield v. Berchtoldt[13]. These Statutes make estates pur autre vie applicable as personal estate in the hands of personal representatives. In the case just cited the testatrix was domiciled in Hungary, and it was argued that the English Statutes had so completely impressed the interest with the character of personalty, notwithstanding its original character of reality, that it was not liable to legacy duty because mobilia sequuntur personam. The decision (on appeal) was that it was only made personal property for the limited purpose of charging it with legacy duty, to which the Court held it liable, and that, apart from that purpose, it was English real estate, and subject to English law. Of this decision Mr. Foote, in his work on Private International Jurisprudence, 1st ed., p. 219, says:—"Had it been the law of the testator's domicil that assumed to declare English realty to be personal estate, the case would have been too clear for argument; but in the actual circumstances the lex situs was given much stronger effect, being allowed to change the nature of realty into personalty for its own purposes, without exposing it as such to the law of the foreign domicil." Here is a strong illustration of the truth that, notwithstanding any rule or method of treatment applied for limited purposes municipally, yet so far as those purposes do not extend, there is no change in the substance of the thing as between nations and their laws. This again is clearly the ratio decidendi of the case of Freke v. Lord Carbery[14]. There the question was of leaseholds in England devised by a testator, whose domicil was Irish, on trust to sell and to accumulate the proceeds for certain trust purposes for a period prohibited by the Thellusson Act. That Act has no force in Ireland. The argument rejected was that all questions as to personal property of the testator must be determined by the law of his domicil; that this was personal property, for leaseholds are such by English law; and, therefore, that the trusts were good. Lord Selborne L.C. on the contrary held that the trusts, though good as to certain other and purely personal estate, were void as to the leaseholds. These, he held, though for some purposes regarded by English law as chattels, were land, and land, whether held for a freehold or for a chattel interest, is as a matter of fact, and in the nature of things, immoveable, and therefore untouched by the rule which the Roman law expresses in the maxim mobilia sequuntur personam. It is the idea that "personal property" and "moveables" are co-extensive terms that causes confusion on this subject. To use Mr. Foote's words again, 1st ed., at p. 170, chattels real are personal property "merely in name, and only in the contemplation of the English law." That law, however, when it turns its attention to that branch of it which is called international jurisprudence, does not class these as moveables, because in the nature of things they are not such. It is not prompted to set the nature of things at nought by "the deference which, for the sake of international comity, the law of England pays to the law of the civilized world generally" (Lord Selborne L.C. in Freke v. Lord Carbery[15]. Now, as the interests in land known as chattels real and as estates pur autre vie are, as above shown, dealt with according to their substance and the nature of things, is there any reason why an interest in land subject to a trust for conversion should fare differently? I have not heard any such reason from the bar. Certainly it was urged that chattels real were the only immoveables included in personal property, but upon what reason could they be so included, and such an interest in land as we are now dealing with excluded? Though they are both personal property for some purposes, what is there to make the one interest a moveable when the other is an immoveable? In my opinion they stand or fall together. If it is contended that, because such an interest as that of G. W. Gregory is for some purposes personal property, it is so for all purposes, and therefore a moveable, the cases of Brook v. Badley[16], Ashworth v. Munn[17], and In re Watts; Cornford v. Elliott[18], show that it is an interest in land. And in the case of Murray v. Champernowne[19], Andrews J. expressly held that real estate, vested in trustees upon trust to sell and to hold the proceeds upon certain trusts, was while it remained unsold an immoveable, notwithstanding the direction to sell.

For these reasons I am of opinion that G. W. Gregory's Tasmanian interest was at the time of the Natal adjudication an immoveable, and, therefore, the Natal adjudication and the appointment of Mr Green as trustee did not operate to vest the interest in that respondent.

This conclusion is sufficient to dispose of the case in favour of the appellants.

But in view of possible further proceedings it is perhaps desirable that we should give an opinion on the second question debated at the bar, which can be dealt with only on the assumption that G. W. Gregory's interest is a moveable. On that assumption the respondent Green affirms that an assignment of an insolvent's property to the representative of his creditors under the Insolvents Act of Natal is, or operates as, an assignment of the moveables of the insolvent situate in Tasmania, at least if he is domiciled in Natal. So much may be granted, but the matter does not end there. And first, it is convenient to clear the question of any contention founded on such cases as In re Bright's Settlement[20] and later cases on the same point. The present claim arises under an insolvency which, as I have pointed out, is a foreign one in its relation to the laws and the Courts of Tasmania. Though by the comity of nations the law of Tasmania will give effect to that as an assignment of the moveables, applying the maxim so often quoted, it will not also favour the foreign creditors by giving effect to special conditions for their protection, such as are contained in the negative words at the end of sec. 51 of the Natal Statute, to the detriment of Tasmanian claimants under Tasmanian transfers otherwise good. Internationally, the law of that State will recognize the universal effect of the assignment on moveables, but as an assignment only. It gives no more extensive operation to the assignment than could be claimed for it if made in Tasmania.

But, further, the assignee, appealing to the Tasmanian law to give effect to his claim on international principles, will not be allowed to dispense with the ordinary requirements of that law in respect of priorities acquired by reason of acts done for the perfection of title, where such requirements have been complied with by local assignees. The Natal assignee takes the Tasmanian moveables subject to any equities administered in the local Courts: In re Barr's Trusts[21].

What then are the equities in this case? The rule in Dearle v. Hall[22] is thus clearly expressed in White and Tudor's Equity Cases, 17th ed., p. 116, in the notes to Ryall v. Rowles[23]. "If the assignee of a chose in action, or a trust estate of personalty, does not perfect his title by giving notice of the assignment to the debtor or trustees, a subsequent purchaser or incumbrancer without notice of the former assignment giving notice of his assignment will thereby acquire priority." Sir Thos. Plumer M.R., in deciding Dearle v. Hall[24], put it that the assignee of a thing which does not admit of actual tangible possession must do that which is tantamount to obtaining possession by placing every person who has an equitable or legal interest in the matter under an obligation to treat it as the assignee's property. He said[25]:—"Possession, or what is tantamount to possession, is the criterion of perfect title to personal chattels, and he who does not obtain such possession must take his chance." After notice, the trustees of the fund become trustees for the assignee who has given them notice. See also In re Atkinson[26] as to insolvency, and In re Barr's Trusts[27], where Lord Hatherley, then Page-Wood V.C., held that the reasoning of the Master of the Rolls in Dearle v. Hall[28] applies as fully and as forcibly to an assignee in bankruptcy (or in insolvency) as to an assignee for valuable consideration. And on the whole I do not think that the authority of either of the last-mentioned cases is impeached by Palmer v. Locke[29] The rule in Dearle v. Hall[30], in its application to equitable interests, was exhaustively considered by the House of Lords in Ward v. Duncombe[31], where it was stated by Lord Macnaghten to be:— "That an assignee of an equitable interest in personal estate without notice of an existing prior assignment may gain priority simply by the act of giving notice to the person who has legal dominion over the fund before notice is given by the earlier assignee." In the Court of Appeal Stirling J. quoted these words as a final expression of the law, in In re Dallas[32]. And to come closer to the case of a foreign assignment, Warrington J., in Kelly v. Selwyn[33], held that where an English Court is administering an English trust fund settled by the will of an English testator, the rights of the claimants to that fund must be regulated by English law. Accordingly he decided that the plaintiff, who held a second assignment but had given the first notice to the trustees, was entitled to priority over the defendant, who held an assignment prior in point of time, executed in the State of New York, where the assignor was at that time domiciled, although the law of that State did not exact notice to the trustees to render perfect an assignment of a chose in action or a reversionary interest in personalty. The question, in the opinion of the learned Judge, was, not whether the assignment in New York was valid, but in what order English law was to treat claimants with charges on the fund; and until notice was given to the trustees the assignee of a share in the fund was not completely constituted a cestui que trust by English law. This case seems to me to apply completely to the present on the assumption that the interest in dispute is a moveable. On grounds, then, both of principle and of authority, I am of opinion that, on the assumption stated, the claim of the trustee in the Natal insolvency is postponed to those of the several local assignees, for valuable consideration and without notice of the insolvency, who anticipated him by giving prior notice to the trustees under the will of James Gregory. But, apart from that assumption, the claim, in my opinion, fails completely on the ground that the interest of G. W. Gregory did not pass to the claimant, because it is an immoveable.

The first question is as to the nature of the property claimed by the Natal trustee in bankruptcy, that is to say, the nature of the property to which George William Gregory was entitled under his father's will.

That question must, in my opinion, be determined by the law of the situs. Before the maxim mobilia sequuntur personam can be applied it is obviously requisite to determine whether a given property is a moveable or an immoveable. In the absence of any specific rule by the lex loci rei sitæ the actual nature of the thing itself is taken as the criterion to determine the matter. But if the lex situs lays down any specific rule with regard to any property actually situate within its jurisdiction—whether as to mobility, immobility, assignability, mode of transfer, &c.—there is no principle, so far as I know, requiring or permitting the Courts of that jurisdiction to apply any other rule. It is really not necessary here to determine how the Courts of a foreign jurisdiction would for the purposes of their own causes regard such a rule if differing from the inherent nature of the property, but, if it were necessary, I should think the canons of international law as understood in British Courts would lead them to recognize and respect the sovereignty of the country where the thing is situate, and to accept the legal quality which the law of that country has impressed upon property under its exclusive jurisdiction.

Thus in Ex parte Rucker[34], reversed on another point in 2 Mont. & Ayr., 398, an English Court of Bankruptcy held slaves to be realty because the lex situs—in that case Antigua—pronounced them so.

Dicey on the Conflict of Laws, Ch. 21, on the Nature of Property, formulates a rule in accordance with this view, though with doubt. Story, in sec. 447, says:—"For every nation having authority to prescribe rules for the disposition and arrangement of all the property within its own territory, may impress upon it any character which it shall choose; and no other nation can impugn or vary that character. So that the question, in all these cases, is not so much what are or ought to be deemed, ex sua natura, moveables or not, as what are deemed so by the law of the place where they are situated. If they are there deemed part of the land, or annexed (as the common law would say) to the soil or freehold, they must be so treated in every place in which any controversy shall arise respecting their nature and character. In other words, in order to ascertain what is immoveable or real property, or not, we must resort to the lex loci rei sitce."

In the case quoted by Story, Chapman v. Robertson[35], Wallworth C. says:—"And it has been decided that the lex loci rei sitce must also be resorted to for the purpose of determining what is or is not to be considered as real or heritable property, so as to have locality within the intent and meaning of this latter principle." The principle the learned Chancellor is referring to is that the creation of a trust must be made according to the lex situs.

The Courts of the lex situs at all events must be bound by the law of that place, and though the general rule of actual nature, primâ facie, applies, it can be overridden by special rules of law, however arising, whether out of Statute or common law. In Chatfield v. Berchtoldt[36], a case as to a rent-charge out of English lands, the Court of Appeal decided against the respondent's contention that the property was personalty. But the ground of decision was clear. James L.J. said[37]:—"The statutory provision is not that it shall be personal estate, but that in certain circumstances, and certain circumstances only, it shall be applicable as personal estate. Simile non est idem. It lay on the respondent to show that by the law of England estates pur autre vie in land had been converted into pure personalty or moveables; and we are of opinion that he has not discharged this burthen by showing that by some statutory provisions in some cases they are to be applied in the same manner as personal estate."

Therefore the law of Tasmania must govern the question as to the nature of the property. There is no difference in this respect between the law of Tasmania and that of England. I proceed to consider what is that law. The trustees of the will contend that the property is by that law pure personalty, and must be so regarded.

Reliance is placed upon the principle of Fletcher v. Ashburner[38] by which land, directed to be sold and the proceeds disposed of, is considered in equity as personal estate and passes to personal representatives. Undoubtedly many cases may be found lending great support to the contention. In Buchanan v. Angus[39] Lord Westbury L.C. said:—"If real or heritable property be vested in trustees upon an absolute and unconditional trust for sale, either declared or necessarily implied, and the proceeds of such sale are disposed of, there is (in the quaint phrase of the English law) an out and out conversion for the purposes of that disposition; and the interest of every beneficiary taking under the disposition is of the nature of personal or moveable property."

In Bolling v. Hobday[40] Chitty J., speaking of the interest of two beneficiaries under a will devising land in trust to sell and divide the proceeds, said:—"They were not equitable tenants in common of an estate under the will; they were only entitled to the one-fourth share each of the proceeds of the sale of the real estate, and in that sense—but in that sense only—had they any equitable interest in the land."

Perhaps the strongest case in this direction is that of Du Hourmelin v. Sheldon[41], where Lord Langdale M.R. was pressed with an argument very much resembling the argument of the trustees of the will in this case. Land in England was by will of a testatrix who died in 1829 appointed to trustees to sell, and after certain payments to invest the proceeds in trust for certain persons some of whom were aliens. It was contended that the aliens had an interest in the realty. The Master of the Rolls said[42]:—"But it is argued, that taking the case as it stood at the death of the testatrix, and as it must remain until the conversion shall be completely made, the land is the source, from which the money, or stock, in the shares of which the aliens are to be interested, is to be realized; and that, in that respect, the aliens have an interest in the land." His Honor proceeds to advert to the distinction between the case in which land is given to a trustee to be held by him in trust for an alien—in which case the alien takes in the land, a permanent equitable interest—and the case in which no interest in land was ever intended to vest in the alien, and his right, if right he has, is only to have the land converted into money, and is so far of a transitory nature that it endures only till the purposes of the donor can be performed by the due execution of the trusts he has created. Further on in his judgment Lord Langdale describes more specifically the interest which the alien has in the last mentioned case. He said[43]:—"During the time which may elapse, before the conversion can be completed, the alien is, by the peculiar doctrine of this Court, considered to have an interest in the land which is to be converted: i.e., an interest that the land should be sold to persons that can legally hold it, in order to raise the money, which he, the alien, can legally hold." That decision was affirmed on appeal by Lord Cottenham L.C.[44]. I shall quote only one passage from the Lord Chancellor's judgment which sufficiently shows how he regarded the point. He said[45]:—"Decisions, that aliens cannot enjoy, against the Crown, trusts of land, any more than the land itself, leave untouched the present question."

In accordance with this too is Craig v. Leslie[46], where the Supreme Court of the United States previously came to the same conclusion on the same question.

In Tyrrell v. Painton[47], a case to which we have been referred since the argument, it was held that a similar interest is personalty, and not an interest in land, that is so as to be subject to an elegit under a particular Statute.

But however general the expressions in some of the cases, they were not, in my opinion, intended to lay down a universal rule that such property was to be deemed in English law to be personalty for all purposes and under all circumstances. For purposes of succession, and certain fiscal purposes, it is so considered. Again, for determining the question as to the right of the Crown to take the interest of the alien, the law was declared to be that the alien's interest in the land was too slight and transitory—at all events until he validly elected to take the land itself—to come within the rule by which an alien's realty could be claimed by the Crown.

But, even in some of the cases already mentioned, the Court refers to the interest in the land. In Du Hourmelin v. Sheldon[48] the Master of the Rolls declares the nature of that interest to be that the beneficiary has an interest that the land should be sold in order to raise the money. But though transitory it is real, and though slight it is essential. Without that interest in the land itself, the benefit of the trust might be lost. In short, equity, while for purposes of substance it looks rather at the ultimate benefit intended to be conferred, does not obliterate the interest in the land itself, which is the link, slender but indispensable, to the attainment of the real bounty conferred.

In Pearson v. Lane[49] Sir William Grant M.R., said:—"Where land is given upon a trust to sell, and to pay the produce to A., though no interest in the land is expressly given to him, in equity he is the owner; and the trustee must convey, as he shall direct. If there are also other purposes, for which it is to be sold, still he is entitled to the surplus of the price as the equitable owner subject to those purposes; and, if he provides for them, he may keep the estates unsold."

It will be seen presently that the principle remains the same where there are more than one beneficiary.

A number of cases decided under the Mortmain Act, not cited in argument but which I have since examined, illustrate this doctrine very strongly. In Attorney-General v. Harley[50], Sir John Leach V.C. said:—"That money to arise from the sale of land is an interest in land, admits of no doubt."

Brook v. Badley[51] is most distinct. The Act enacted by the 3rd section that, inter alia, any gift of lands or of any estate or interest therein to a charitable use should be void. Lord Cairns L.C. had to determine whether the bequest by a beneficiary under a will of a legacy, payable out of personalty and the proceeds of sale of real estate, was a gift of an interest in land within the meaning of the Act. The Act itself provided no definition, and the Court was consequently thrown back on general principles. The Lord Chancellor was very decided that the interest of the legatee which she bequeathed to the charity was an interest in the land. He said[52]:—"If a testator devises his land to be sold, and the proceeds given, not to one person, but to four persons in shares, and if one of those four persons afterwards makes his will, and gives either his share of the proceeds or all his property to charity, the position of that second testator with regard to the estate which is to be sold is in substance that of a person who has a direct and distinct interest in land. The estate is in the hands of trustees, not for the benefit of those trustees, but for the benefit of the four persons between whom the proceeds of the estate are to be divided when the sale takes place. It may very well be that no one of those four persons could insist upon entering on the land, or taking the land, or enjoying the land quà land, and it may very well be that the only method for each one of them to make his enjoyment of the land productive, is by coming to the Court and applying to have the sale carried into execution, but nevertheless the interest of each one of them is, in my opinion, an interest in land; and it would be right to say in equity that the land does not belong to the trustees, but to the four persons between whom the proceeds are to be divided." His Lordship then proceeds to practically overrule two cases so far as they are at variance with his own views.

Two Courts of Appeal have since approved of Lord Cairns' view, viz., in Ashworth v. Munn[53] and In re Watts; Cornford v. Elliott[54].

In the result, it cannot, as I conceive, be regarded as a principle or rule of English or Tasmanian law that property of the nature given to the bankrupt under his father's will is pure personalty—i.e., with no element of immobility—and therefore such as would, by the law of the situs, be considered simply as mobilia and as passing under a universal assignment by the law of a foreign domicil. The case of the Natal trustee therefore must fail independently of any consideration of notice of assignment. But as this further and important question has been agitated, and has, indeed, formed the basis of the decision of the Full Court of Tasmania, it is desirable to deal with it. Assuming the interest of the bankrupt is pure personalty, and in the nature of a chose in action, the right of his trustee in bankruptcy is challenged on the ground that the particular assignees gave prior notice to the trustees of the will. It is admitted that in a controversy arising out of a Tasmanian bankruptcy this argument would prevail.

The contention is advanced, on the part of the trustee in bankruptcy, that the ordinary rules of equity are inapplicable to a case of international competition, and it is said that the title of the trustee under the law of Natal where the bankrupt was domiciled is complete there under the Natal Statute, and independent of any formalities or requirements which would have been necessary to give a perfect title to a Tasmanian assignment, and will therefore be respected and enforced in Tasmania. On this ground it was urged that the principle of such cases as Palmer v. Locke[55], per Jessel M.R. (not overruled); Stuart v. Cockerell[56]; In re Barr's Trusts[57]; and In re Atkinson[58] is not applicable.

The argument is presented, and the Supreme Court of Tasmania has determined that, inasmuch as sec. 51 of the Natal Statute (No. 47 of 1887), not only vests all property of every kind in the Master of the Supreme Court in the first instance and subsequently in the trustee, but goes on to say that after the order for sequestration has been made "neither the insolvent nor any person claiming through or under him shall have power to alienate, give, cede, deliver, mortgage, pledge, or recover, or to release or discharge the same or any part thereof" the ordinary rule of equity as laid down in Dearle v. Hall[59] is displaced, and the bankrupt is incompetent even in Tasmania of making an assignment which can on the doctrine of that case, under any circumstances, confer a right to the property.

Reliance is placed on In re Bright's Settlement[60], and In re Coombe's Trusts[61], where similar negative words were held to protect the assignee in bankruptcy. But the point of these cases is that the Court was giving effect to an Act of Parliament in force in England, prohibiting, and therefore nullifying, any attempted subsequent assignment by the bankrupt. It is plain that these and similar cases are irrelevant to the matter in hand. That prohibition was no part of the assignment to the assignee, and no part of his title, but a separate and independent enactment of a legislature whose determinations bound the tribunals. The fallacy on this branch of the argument of the trustee in bankruptcy is in treating the prohibitory words in sec. 51 of the Natal Act as part of and completing the trustee's title. They are simply a law operating in Natal and not beyond it, and having no force or effect in Tasmania on transactions entered into in that State. Had Gregory after bankruptcy assumed while in Natal to mortgage his interest, it might be that the act, being forbidden in the place where done, would be disregarded in Tasmania. That is possible, I do not say more of it, but that is not the present case. The trustee's contention amounts to importing into Tasmania, by way of appeal to international law, and for the benefit of the foreign trustee in the bankrupt's domicil, the binding force of the Natal prohibition as such, and to say it supersedes in his favour the Tasmanian requirement of notice of assignment.

He does this directly by invoking the maxim of international law mobilia sequuntur personam, by which he fictionally transfers to Natal both the property and the assignment by the bankrupt to the appellants, and assumes a contest before the Natal Court and the decision of that Court that the assignment was contrary to the Statute there in force, and then contends that the Tasmanian Court is bound to give the same decision.

In my opinion the fiction mobilia sequuntur personam cannot be pushed so far. Unless the trustee establishes one of two things he must fail. These are either that the negative words in the Statute are part of his title, and not merely a prohibition against the bankrupt doing an act which, notwithstanding the trustee's title, he might otherwise have lawfully done; or that the prohibition is in force as a law in Tasmania. But neither of these positions can be sustained.

The property in fact being in Tasmania, and the assignment to the appellants in fact taking place there, it is the law of Tasmania which must decide the matter and not the law of Natal: See Turner V.C. in Caldwell v. Vanvlissingen[62].

Lord Stowell's observations in a Scotch marriage case Dalrymple v. Dalrymple[63] before him are in point:—"Being entertained in an English Court, it (the cause) must be adjudicated according to the principles of English law, applicable to such a case." The words "applicable to such a case" are in the highest degree important. In some cases the English law enforces one set of rules as appropriate, and in others quite different rules. Thus, in determining the validity of a marriage ceremony, it depends (with certain exceptions) upon the law of the place of celebration. The law is taken as the test of validity, not because it is in force ex proprio vigore in England, but because English law says it is appropriate to such a case. But is it appropriate in such a case as the present that the Tasmanian rule of priority according to notice should be set aside in favour of the Natal prohibition?

There are two considerations which limit the application—ex comitate, ob reciprocam utilitatem—of foreign law.

They are shortly stated in Wheaton's International Law, 4th ed., at p. 131, as follows:—"In modern times, all States have adopted, as a principle, the application within their territories of foreign laws; subject, however, to the restrictions which the rights of sovereignty and the interests of their own subjects require. This is the doctrine professed by all the publicists who have written on the subject." See also Lord Wensleydale's speech in Fenton v. Livingstone[64].

Both these considerations, viz., that of the right of sovereignty, and that of the interests of the citizens of Tasmania, are involved in the present case. As to the first, it is a distinct part of the law of Tasmania—and it is I apprehend quite immaterial how it has become the law whether by Statute or common law—that the title of the assignee of such a right as that now in question is not perfect until notice to the trustee of the fund: Lloyd's Bank v. Pearson[65]; Foster v. Cockerell[66]; In re Lake; Ex parte Cavendish[67]; Ward v. Duncombe[68]. In Montefiore v. Guedalla[69] Cozens-Hardy L.J. says:—"The rule laid down in Dearle v. Hall63 Russ., 1. is now part of the law of the land." Starting with that position, why should it be disregarded in favour of the Natal trustee? Why should he be held to have perfected his title without complying with the special mode of transfer appropriate by Tasmanian law to the particular class of property dealt with?

In Mr. Dicey's work, at p. 334, it is stated that bankruptcy in one country is an assignment of property in another, but subject (inter alia) to the requirements, if any, of the local law as to the conditions necessary to effect a transfer of such property, and the learned author, after quoting the authority of Ex parte Rogers[71] for this position as to realty, adds:—"And this dictum, though confined to immoveable property and to property in the Colonies, applies apparently to moveable property and to property situate in any foreign country."

It is in accordance with Scottish law as appears from Erskine's Institute of the Laws of Scotland, ed. of 1871, pp. 717 and 718, where it is said:—"On a similar principle, where a foreign ground of debt, perfected secundum legem domicilii, is sustained by our Supreme Court, the diligence which is to proceed upon it, and the other judicial steps necessary for giving it full effect, must be governed by the law of Scotland; because these previous steps are required to deeds of the same kind, even supposing them perfected in the Scottish form; and that Judge within whose territory the debt is situated, and under whose authority it is to be recovered, must necessarily determine all questions of diligence and competition concerning it, according to the laws of his own country, and not according to those of a foreign state, which may be utterly unknown to him, and which have no authority, nor were ever designed to bind the Judges of any State which is not subject to the legislature who enacted them. Thus because no assignation is, by the law of Scotland, effectual against an arrester, if it has not been intimated previously to the arrestment; neither is a foreign assignment, not intimated, effectual against him, though the lex loci should not require assignations to be intimated."

The second consideration to which, as stated in the passage from Wheaton, the application of foreign law is subject here is the interests of Tasmanian subjects. Whatever else may have formed the ground of judgment in Dearle v. Hall[72] there was certainly involved in the decision the prevention of fraud against future assignees. The appellant society resident in Tasmania would undoubtedly have been protected if the assignor had become bankrupt in Tasmania where it might more easily have learnt the fact of bankruptcy, and why should it lose its protection when his bankruptcy occurred so far from its probable means of knowledge? On the ground also that the principle of Dearle v. Hall[73] would apply to this case if the bankrupt's interest were a moveable, notwithstanding a Natal assignment in bankruptcy, I am of the opinion the appeal should be allowed.

The order of the Court will be as follows:—Appeal allowed. Order appealed from discharged. The first question will be answered—"The respondent Green is not entitled to any portion of the share." The fifth question will be answered—"The one-ninth part is payable to the other assignees thereof from G. W. Gregory who have given notice of their assignments to the trustees of the will to the extent of their respective charges thereon, and in priority according to the dates of their respective notices." Costs of the trustees of the will in the Supreme Court to be paid out of the fund. All other parties except the respondent Green to be at liberty to add their costs in the Supreme Court to their securities. The respondent Green to pay the appellants' costs of the appeal. The appellants to be at liberty to add their costs to their respective securities so far as they are not recovered from the respondent Green. The appellants to pay the costs of appeal of the trustees of the will and recover them from the respondent Green, and to be at liberty to add them to their respective securities as far as they are not recovered from him. The trustees' costs to be taxed as between solicitor and client.

[1] L.R., 16 Eq., 461.

[2] L.R., 7 Ch., 192.

[3] 1 C.P.D., 51.

[4] (1893) A.C., 602.

[5] L.R., 3 Ch., 672, at p 674.

[6] 3 Russ., 1.

[7] 18 Ch D., 381.

[8] 4 K. & J., 219.

[9] 2 D.M. & G., 140.

[10] (1893) W.N., 50.

[11] 16 Ch. D., 665, at p. 666.

[12] (1905) 2 Ch., 117.

[13] L.R., 7 Ch., 192.

[14] L.R., 16 Eq., 461.

[15] L.R. 16 Eq., 461, at p. 466.

[16] L.R., 3 Ch., 672.

[17] 15 Ch. D., 363.

[18] 29 Ch. D., 947.

[19] (1901) 2 I.R., 233.

[20] 13 Ch. D., 413.

[21] 4 K & J., 219, at p. 229.

[22] 3 Russ., 1.

[23] 1 Ves., 371.

[24] 3 Russ., 1.

[25] 3 Russ., 1, at p. 24.

[26] 2 D.M. & G., 140.

[27] 4 K. & J., 219.

[28] 3 Russ., 1.

[29] 18 Ch. D., 381.

[30] 3 Russ., 1.

[31] (1893) A.C., 369, at p. 384.

[32] (1904) 2 Ch., 385, at p. 415.

[33] (1905) 2 Ch., 117

[34] 3 Deac & Ch., 704.

[35] 6 Paige (N.Y.), 627, at p. 630.

[36] L.R. 7 Ch., 192.

[37] L.R. 7 Ch., 192, at p. 198.

[38] [1779] EngR 98; 1 Bro. C.C., 497.

[39] 4 Macq. H.L. Cas., 374, at p. 379.

[40] 31 W.R., 9, at p. 11.

[41] [1839] EngR 426; 1 Beav., 79.

[42] [1839] EngR 426; 1 Beav., 79, at p. 89.

[43] [1839] EngR 426; 1 Beav., 79, at p. 91.

[44] 4 My. & C., 525.

[45] 4 My. & C., 525, at p. 533.

[46] [1818] USSC 34; 3 Wheat., 563.

[47] (1895) 1 Q.B., 202.

[48] [1839] EngR 426; 1 Beav., 79.

[49] 17 Ves., 101, at p. 104.

[50] [1821] EngR 356; 5 Madd., 321, at p. 327.

[51] L.R. 3 Ch., 672.

[52] L.R. 3 Ch., 672, at pp. 674.

[53] 15 Ch. D., 363.

[54] 29 Ch. D., 947.

[55] 18 Ch. D., 381.

[56] L.R. 8 Eq., 607.

[57] 4 K. & J., 219.

[58] 2 D.M. & G., 140.

[59] 3 Russ., 1.

[60] 13 Ch. D., 413.

[61] [1859] EngR 785; 1 Gif., 91.

[62] [1851] EngR 980; 9 Ha., 415, at p. 425.

[63] [1811] EngR 463; 2 Hag. Con., 54, at p. 58.

[64] 3 Macq. H.L. Cas., 497, at p. 548.

[65] (1901) 1 Ch., 865.

[66] 3 Cl. & F., 456.

[67] (1903) 1 K.B., 151.

[68] (1893) A.C., 369.

[69] (1903) 2 Ch., 26, at p. 37.

[70] 3 Russ., 1.

[71] 16 Ch. D., 665.

[72] 3 Russ., 1.

[73] 3 Russ., 1.

High Court of Australia

Australian Mutual Provident Society v Gregory [1908] HCA 7; (1908) 5 CLR 615 (23 March 1908)

HIGH COURT OF AUSTRALIA