Campbell v Campbell [1916] HCA 20; (1916) 21 CLR 308 (3 April 1916)

HIGH COURT OF AUSTRALIA

Campbell Plaintiff, Appellant; and Campbell and Others Defendants, Respondents.

H C of A

On appeal from the Supreme Court of New South Wales.

3 April 1916

Griffith C.J., Barton and Rich JJ.

Bignold (with him Waddell), for the appellant.

Loxton K.C. (with him Bethune and R. K. Manning), for the respondents James Campbell senior and George Malcolm Campbell.

Griffith C.J.

This suit has apparently been brought under a curious misunderstanding as to the nature of the plaintiff's rights, if he has any. The plaintiff's father, Alexander Campbell, was, in 1893, a member of a partnership which owned a pastoral property in New South Wales, and in which he held a one-fifth share. In 1893 he was adjudged bankrupt and an official assignee was appointed. The effect in law was that the partnership became dissolved altogether, and the official assignee became entitled to the bankrupt's share in the assets. Probably he became a tenant in common of the land and chattels. But practically all his rights were to have the partnership wound up and to receive the value of the bankrupt's share in the partnership estate. That was the only right which he acquired by the adjudication, and that right has never been increased by anything that has happened since. But his right to an account of the partnership assets was hampered by a mortgage of his interest in the partnership, which the bankrupt had before his bankruptcy given to his brother, the defendant James Campbell, who also was a member of the partnership. The amount due on the mortgage at the date of the bankruptcy amounted, in the opinion of Harvey J., to about £3,800. In 1894 James Campbell advertised the bankrupt's interest in the partnership for sale by auction. At the auction it was knocked down to George Malcolm Campbell, son of James Campbell, for the sum of £3,000. A deposit of £50 was paid, afterwards repaid, but no other part of the £3,000 was ever paid. Some of the land was transferred to George but shortly afterwards retransferred to his father, and from that time forward James enjoyed that one-fifth share as owner of it. There were three possible grounds on which he could have founded his claim to ownership—(1) as having bought it from George, (2) as upon a rescission of the contract with George, or (3) as mortgagee in possession. He has, in any event, held it and dealt with it as owner from 1894 to the present time.

The real legal position was that the partnership had become dissolved by the bankruptcy of Alexander, and that a new partnership had been formed consisting of the other four partners, in which it was tacitly understood that James had a two-fifths share. The official assignee's right was, as I have said, to an account of the value of the interest of the bankrupt at the date of the bankruptcy and nothing else. There was no specific property held by the mortgagee which the official assignee could claim. His right to an account was against the members of the original partnership other than the bankrupt. Although, therefore, the official assignee was not hampered in maintaining a suit for an account by the mere existence of the mortgage, he was hampered to this extent, that it would have been a good defence that all the bankrupt's interest had been assigned to someone else. In order, therefore, to maintain such a suit successfully, the official assignee would have had to get rid of the alleged sale under the mortgage, and this suit is brought for that and nothing else. The plaintiff, who claims as purchaser from the official assignee, impeaches the sale solely on the ground that it was at a gross undervalue. It was suggested very faintly in the statement of claim that the sale might have been attacked on another ground, namely, that it was not a real sale at all, and even, indeed, fraudulent. But this suggestion is not made in such a form as to call upon the defendants to answer it. The only relief that the plaintiff asks is to have the sale by the mortgagee set aside.

Supposing, then, that the sale were set aside, what would be the position of the official assignee and of the plaintiff, who stands in his shoes? He would then have an unrestricted right to sue the members of the old partnership of 1893 other than the bankrupt for an account of the partnership assets as in 1893. But this action is not brought against those partners, and it is now too late to bring such an action, for the Statute of Limitations would be an obvious bar. Under those circumstances the decree which the Court is now asked to make would be futile even if the plaintiff proved his case.

But there are other answers to the action. The suit is to set aside a sale made in 1894. It is clear that a mortgagee's sale made at a gross undervalue is, at best, voidable and not void, and the rules applicable to suits to set aside voidable transactions are well known. In 1904, the bankrupt, hoping, no doubt, to get back his property and share in the partnership estate—and I believe that his brother James had promised to let him have it back—obtained releases from all his creditors, so that he remained the sole beneficiary of his bankrupt estate. The official assignee appears to have regarded him as such, and to have been fully aware of all that happened. Amongst other creditors from whom the bankrupt asked for a release was his brother James, who in 1904 released the mortgage debt. At that time Alexander knew, as he himself said in evidence, that James then claimed to retain the property as his own. The official assignee to whom the releases were produced also knew the facts. In the face of all this, it seems impossible to deny that the assignee not only did not elect to impeach the transaction under which James claimed to be entitled to the property but actually affirmed it, for James gave the release on the faith of the transaction, whatever it was, by which he claimed to have acquired the bankrupt's interest being valid. It is, at least, highly improbable that a mortgagee would give a release of his mortgage debt and at the same time intend to return the mortgaged property to the mortgagor. The evidence of an intention on the part of the official assignee to affirm the transaction seems to me conclusive. On the authority of Kennedy v. De Trafford[1] such an intention followed by inaction for a period of eight years constitutes of itself such laches as to prevent its subsequent impeachment.

For these reasons I think that the plaintiff's claim wholly fails.

I express no opinion as to the questions of fact whether or not the sale to George was a bonâ fide sale and valid, or whether the sale was voidable as a sale at a gross undervalue, which were the only points decided by the learned Judge.

The appeal must therefore be dismissed.

Barton J.

I am quite of the same opinion.

Rich J.

I agree.

Appeal dismissed with costs.

Solicitor for the appellant, E. W. Warren.

Solicitors for the respondents, Pigott & Stinson.

[1] 65 L.J. Ch., 465.