Director of War Service Homes v Law [1955] HCA 22; (1955) 92 CLR 643 (18 April 1955)

HIGH COURT OF AUSTRALIA

DIRECTOR OF WAR SERVICE HOMES v. LAW [1955] HCA 22; (1955) 92 CLR 643

Bankruptcy

High Court of Australia
Dixon C.J.(1), Williams(1), Webb(1), Fullagar(1) and Taylor(1) JJ.

CATCHWORDS

Bankruptcy - Agreement - Debtor - Director of War Service Homes - Land and dwelling-house to be erected thereon - Purchase by debtor - Deed of arrangement - Execution by debtor - "Assignment" of property to "trustees" - Discharge of liability under agreement - Interest in land and dwelling-house - Entitlement - Claim by trustee - War Service Homes Act 1918-1951, ss. 19A, 23, 29, 33*, 35* - Bankruptcy Act 1924-1950, ss. 91 (iv), 192 (1) (a), (5), 199 (1) (a), (c), (d), (2), (4).

HEARING

Sydney, 1955, April 5, 6; 18. 18:4:1955
APPEAL from the Court of Bankruptcy.

DECISION

April 18.
THE COURT delivered the following written judgment: -
James Bramwell Bird on 25th January 1949 entered into an agreement with the dwelling-house to be erected thereon. The site was in Kallaroo Road Lane Cove and the house was numbered 54. The capital cost of the land and dwelling was ultimately fixed at 2,295 pounds. Bird paid a deposit of 295 pounds. The balance of purchase money, together with interest at three and three-quarter per cent per annum, was payable in 540 equal monthly instalments. By 21st October 1952 the amount owing under the agreement had been reduced to 1,948 pounds. On that date Bird executed a deed of arrangement which on 30th October 1952 was registered under Pt. XII of the Bankruptcy Act 1924-1950. The operative words of the assignment contained in the deed of arrangement, in which he is called "the Debtor", are as follows: - ". . . the Debtor as beneficial owner hereby conveys grants releases assigns and transfers unto the Trustees their heirs executors administrators and assigns as joint tenants all the property which if a sequestration order were made in respect of his estate on the date of his execution of this Deed would vest in the Official Receiver named in such sequestration order and would be divisible amongst the Creditors of the Debtor in accordance with the provisions of the said Bankruptcy Act of which the Debtor or any person in trust for him is possessed or to which he or any such person is entitled legally or equitably in possession reversion remainder or expectancy (a true and particular account whereof so far as the Debtor can set it forth is contained in the First Schedule hereto)." (at p649)

2. Unfortunately only one person, the respondent Law, was named in the deed as a trustee. His name and description are inserted in the printed form, which then goes on with the words: - "and duly registered under Part VIII of the Bankruptcy Act 1924-1950 as qualified to act as trustees (hereinafter called the Trustees)". Whether an attempt to vest a piece of land in several persons as joint tenants when one only is named or identified can be effective without rectification may be doubted, but it is not a question to which the parties were prepared to address themselves and it may be put on one side. The schedule to which the operative words of the deed refer contains the following reference to the land and dwelling: -

"Residence - 54 Kallaroo Rd., Lane Cove 4,000 0 0 pounds
Less due to War Service Homes ..1,500 0 0
2,500 0 0" (at p650)

3. The trustee under the deed claimed that the deed operated as an assignment to him of Bird's interest under the contract with the Director of War Service Homes in the land and dwelling-house thereon. The trustee accordingly applied to the Federal Bankruptcy Court for a declaration that he is entitled to the benefit of the agreement and that, upon discharge of the liability of Bird, under the agreement, to the Director of War Service Homes, he is entitled to the land. The Bankruptcy Court made certain declarations to that effect. From the decree of the Bankruptcy Court the Director of War Service Homes now appeals. (at p650)

4. In that court it seems to have been assumed that, unless s. 33 of the War Service Homes Act 1918-1951 applied directly to the deed as an instrument divesting an estate or interest from Bird as a purchaser and doing so under a law relating to bankruptcy or insolvency, the deed would operate to pass Bird's interest in the land, under the contract, to the trustee. Section 33 provides that the estate or interest of any purchaser or borrower in any land or land and dwelling-house included in a contract of sale, mortgage or other security under the War Service Homes Act shall not be divested from the purchaser or borrower under any Act relating to bankruptcy or insolvency. The section goes on to confer upon the Director in case of bankruptcy the power of cancelling the contract or forfeiting the deposit. The Federal Court of Bankruptcy construed s. 33 as not extending to an assignment amounting to a deed of arrangement. The Bankruptcy Court treated s. 33 as inapplicable on the ground that a deed of arrangement operates to pass the property by reason of the general law governing assurances of property and does not divest the property from the debtor by virtue of the Bankruptcy Act or any other law relating to bankruptcy or insolvency. (at p651)

5. That may be so, but there is an antecedent question. Section 33 clearly would prevent an actual sequestration from passing the interest in the contract to the Official Receiver. How then could that interest be comprised in the parcels of the deed of 21st October 1952? The parcels are expressly confined to the property which, if the sequestration order were made in respect of the debtor's estate, would vest in the Official Receiver named in the sequestration order and would be divisible amongst the creditors of the debtor in accordance with the provisions of the Bankruptcy Act. The operation of s. 33 is to take the estate or interest of the purchaser under such a contract out of the property upon which a sequestration order would operate. If it be suggested that the mention of the residence in the schedule to the deed of conveyance is a ground for construing the parcels so as to include it, the answer is that the schedule is nothing but a true and particular account of the property contained under the general description so far as the debtor can set it forth. That is the language of the deed. Mention of the property in the particulars cannot extend the operation of the parcels. It is nothing but a misdescription of the property upon which the words of the deed are capable of operating: cf. Ex parte Jardine ; Re McManus (1875) 10 Ch App 322 . (at p651)

6. It is true that after the words quoted from the parcels of the deed there follow the words : - "of which the Debtor or any person in trust for him is possessed or to which he or any such person is entitled legally or equitably in possession reversion remainder or expectancy". It was contended on behalf of the trustee that the latter part of this phrase amounted to an assignment of property which fell outside the previous words of the parcels limiting the property to that which would vest in the Official Receiver on sequestration. In other words, the clause beginning "or to which he or any person is entitled legally or equitably in possession reversion remainder or expectancy" was treated as an alternative, not to the expression "of which the Debtor &c. is possessed", but to the whole of the relative clause following the word "property". In support of this contention the language of s. 192 (5) was referred to, which, it was maintained, bore the meaning sought to be placed upon the parcels. It seems reasonably clear, however, that that is not the meaning either of s. 192 (5) or of the deed. All that is covered is the property which would vest on sequestration if the debtor or any person holding in trust for him is possessed thereof or if he or any such person is entitled thereto legally or equitably in possession reversion remainder or expectancy. (at p652)

7. It follows from this that the trustee's claim to the purchaser's interest in the land under the contract fails in limine. (at p652)

8. But had the deed of arrangement contained language sufficient to include that estate or interest the trustee's claim would have encountered s. 35 of the War Service Homes Act 1918-1951. Section 35 (1) provides that "so long as any land or land and dwelling-house is subject to a contract of sale, mortgage or other security in accordance with this Act a transfer (other than a transfer by or to the Director) of that land or land and dwelling-house or any estate or interest therein shall not have any force or effect unless it . . . (c) is made with the consent in writing of the Director." The remainder of the provision is not material. (at p652)

9. The land and dwelling-house in question are of course subject to a contract of sale. The word "transfer" is defined by sub-s. (4) of s. 35 to include conveyance, assignment and surrender. If the hypothesis be adopted that the parcels of the deed suffice to include the interest under the contract, they amount to an assignment of an interest in the land and dwelling-house. The director has not given his consent, whether in writing or otherwise. It is difficult, therefore, to see how the trustee could have any right in relation to the land or dwelling-house even on the hypothesis stated. For that reason alone the decree made by the Federal Court of Bankruptcy would be erroneous. (at p652)

10. It was suggested, however, that possibly the trustee might obtain a right in virtue of s. 91 (iv) of the Bankruptcy Act 1924-1950 considered in its relation to the deed of arrangement. That enactment provides that the property of the bankrupt divisible amongst his creditors shall include the claim or right of the bankrupt to property under any contract, bill of sale, hire-purchase agreement, mortgage or lien made by or with the bankrupt or debtor on his trustee discharging or offering to discharge any legal liability with respect thereto. The argument was that there might be rights in the contract which, on the hypothesis that the parcels to the deed extended to it, were comprised within the description of s. 91 (iv) of the Bankruptcy Act 1924-1950 but yet were not caught by the language of s. 35 (1) of the War Service Homes Act 1918-1951. It was then suggested that perhaps the trustee might resort to s. 29 of the War Service Homes Act 1918-1951 and by paying the money referred to in that section to the director call for a transfer of the land. But it is a sufficient answer to this contention that the claim or right of the debtor Bird under the contract with the Director to the land, by its very nature, necessarily involved an interest within the meaning of s. 35 which accordingly would prevent the supposed assignment having any force or effect. (at p653)

11. It follows that the decree of the Court of Bankruptcy cannot stand. The appeal should be allowed and the order of the Court of Bankruptcy discharged. (at p653)

ORDER

Appeal allowed with costs. Order of Court of Bankruptcy discharged. In lieu thereof order that the motion of the respondent trustee to that court be dismissed with costs.