* Section 51 (1) of the Trustee Act 1958 (Vict.) invests power in the Supreme Court to make vesting orders. Sub-section (2) provides that a vesting order may be made in any of a number of cases, including "(o) where property is vested in a trustee and it appears to the Court to be expedient to make a vesting order."

BARWICK C.J. In January 1970 the "Republic of China" became registered as (Vict.), being the whole of the land comprised in Certificate of Title Vol. 8603, Folio 932. The land was a residential block in North Balwyn, Melbourne, on which a domestic dwelling was erected. For what purpose the land was acquired does not appear: nor does it appear to what use the land was put between the date of its acquisition and the date of its disposal in 1972. (at p179)

2. On 21st December 1972, a contract for the sale of this land was signed by duly authorized agents of the registered proprietor. Mr. and Mrs. J. Chang, who were the purchasers, are the appellants in this appeal. The contract provided for a deposit of $5,000, the assumption by the purchaser of liability under the mortgage to which the land was then subject and payment of $6,222.74, being the balance of the total price, on 10th January 1973. Clause 5 of the contract provided that all moneys falling due under this contract might be paid free of exchange to the vendor's solicitors, Messrs. David Ting and Byrne, 414 Lonsdale Street, Melbourne. By the contract, the purchaser attorned tenant to the vendor from week to week at a rental equivalent to the interest and instalments from time to time due by the purchaser. However, the contract did not provide either for interest or for instalments. The third special condition of the contract provided as follows:

"3. The parties hereby mutually acknowledge that all

moneys paid hereunder with the exception of the amount

paid to discharge the Mortgage at present secured over the

property in favour of the A.N.Z. Bank Limited will be

retained in the trust account of the Vendor's Solicitor until

such time as the Purchasers have obtained registration of the

Transfer to themselves at the Office of Titles provided

however that the benefit of this condition shall apply to the

Purchasers only insofar as they fulfil their undertaking to

make all usual and necessary steps as may be required of

them to obtain registration of the said Transfer at the Office

of Titles at the earliest possible date. In the event of the

Purchaser being unable to obtain registration of the Transfer

on or before the 28th day of February 1973 the deposit and

any other moneys paid in excess of the amount secured by

the Mortgage to the A.N.Z. Bank Ltd., shall be refunded and

the Purchaser shall cease to be liable for any sum or sums

unpaid in respect of the said Mortgage and this Contract

shall be at an end. Provided however that the Purchaser

shall be entitled at his option to a further extension of one

month from the 28th day of February 1973 in order to obtain

registration." (at p179)

3. The appellants paid the sum of $5,000 on the date of the execution of the contract and paid the balance of $6,222.74 to the named solicitors for the vendor. The appellants went into possession of the property on 5th March 1973 and have remained in possession ever since. Apparently they have been willing to assume liability for the amount secured to the A.N.Z. Bank under mortgage of the land. Presumably meantime they have paid all interest and other moneys falling due thereunder. But no indemnity has been executed by the appellants in favour of the vendor, nor has there been any novation of the liability of the personal covenant under the mortgage. No doubt, on registration of the transfer of the land subject to the mortgage, an indemnity would come into existence by reason of the provisions of the Transfer of Land Act and the liability for the payment of the mortgage would have been assumed by the appellants. (at p180)

4. On 21st December 1972 and 3rd January 1973, respectively, two memoranda of transfer of land were executed on behalf of the vendor in favour of the appellants and were handed over to them. The execution of the transfers would appear to have been authorized on the part of the vendor: but, of course, their delivery before payment of the price would mean that they were delivered in escrow. However, the price would appear to have been paid to the vendor's solicitors according to the contract. But it is at best doubtful whether it has been received by the vendor. What effect, if any, the changes in political recognition had on the availability of these memoranda of transfer remains a question. (at p180)

5. However, these were presented to the Registrar of Titles for registration but he refused to register either of them. An application was made to the Registrar under s. 47 of the Transfer of Land Act for a vesting order: but, as I gather from discussion with counsel for the Registrar in the course of the argument of this matter, the application has not yet been finally disposed of, though the Registrar so far has been disinclined to grant it. (at p180)

6. On 21st December 1972, the government of Australia recognized the Peking government as the government of the People's Republic of China and withdrew its recognition of the government of Taiwan as the government of the Republic of China. So far as appears, the Peking government has not adopted any specific attitude towards the sale of the land to the appellants and has not been asked by the appellants to perform the contract or to facilitate the registration of the memoranda of the transfer of the land to the appellants. (at p180)

7. On 3rd April 1975, the appellants, by summons, sought in the Supreme Court of Victoria an order vesting the land in them and an order that the Registrar of Titles make the necessary entry in the Register Book to give effect to such vesting order when made. Apparently the summons sought the exercise by the Court of the power given to it by s. 51 of the Trustee Act 1958 (Vict.). The appellants relied on those parts of the section which empower the making of a vesting order where it is convenient or expedient for the order to be made; and where a trustee refuses or neglects to convey any property: see s. 51 (2). No notice of this application was served on any person other than the Registrar of Titles. Apparently the Peking government became aware of the application and counsel sought the relisting for hearing of the application before judgment was delivered. Subsequently, however, it abandoned any further participation in the proceedings. (at p181)

8. The Supreme Court of Victoria (Jenkinson J.) dismissed the summons on the ground that the vendor of the land was not a trustee thereof within the meaning of the Trustee Act. From this order of dismissal, the present appeal is brought. (at p181)

9. The appellants submit that upon the execution of the contract for the sale of the land they became its equitable owners and that the vendor's interest in the land was limited to its security for the balance of purchase money. It was submitted that the appellants had paid the balance of the purchase money as provided by the contract and that therefore the vendor had become their trustee of the land with no other right or duty than to convey it to them. The appellants then submitted that it was expedient or convenient to make a vesting order in the circumstances because of the difficulties which they would experience in obtaining the concurrence of the vendor to the registration of the memorandum of transfer which had been executed on 21st December 1972. (at p181)

10. However, I see many flaws of reasoning in these submissions. In the first place, it is only true that the purchaser of land under a contract of sale of land becomes it equitable owner if the contract is specifically enforceable. Here, by the appellants' own submissions, there are very serious questions to be decided in favour of the appellants before it can be said that this contract is specifically enforceable. Leaving aside the effect of the changed attitude on the part of the Australian government to the governments of Peking and Taiwan, there must at best be serious doubt as to whether the appellants could have sued the Republic of China whilst the government in Taiwan was recognized by the Australian government. The appellants' counsel advances by repetition the arguments of McKenna Q.C. in the Sultan of Johore v. Abubakar Tunku Aris Bendahar (1952) AC 318 , submitting that in the case of an immovable within the jurisdiction acquired by a foreign sovereign for commercial purposes the courts can give a citizen relief in respect of the immovable. These submissions were neither accepted nor denied by the members of the Privy Council in the case in 1952. The questions they raised remain open for decision. Clearly, for want of appropriate parties, they are not matters which could be decided in the present application. (at p182)

11. Then there is the question of the proper construction of the special condition 3 which I have set out in these reasons. It may be, as the appellants submit, that the clause is wholly for the benefit of the purchaser and that the lapse of time within which the transfer has been unregistered will not inure for the benefit of the vendor. But, again, in the absence of the vendor, this is not a matter which can be decided in this application. (at p182)

12. There remains the question as to who is the right party. The effect of the change of attitude as to recognition by the Australian government needs exploration. This, in my opinion, cannot be done ex parte. Clearly enough, the Registrar of Titles was not a proper party to the application. He had no interest therein: and the order sought against him was otiose having regard to the provisions of s. 58 (1) of the Transfer of Land Act. (at p182)

13. Finally, there remains a question whether the appellants have paid the balance of the price. Quite apart from the absence of any novation of or indemnity in respect of the covenants of the mortgage, there is the question whether the vendor has received the cash balance due under the contract. Again, that question cannot be so decided in this matter. Further there is the question whether the payment made by the appellants to the solicitor amounted in the circumstances to payment to the vendor. (at p182)

14. In the result, the application to the Supreme Court presents itself as an ex parte application and as an attempt to avoid proceedings for specific performance. I could not conclude in these proceedings for the reasons I have given that the appellants became entitled to an equitable estate in the land on the execution of the contract or that the price for the land had been duly paid. Further, it seems to me that an unpaid vendor, as the vendor here may prove to be, cannot be regarded as a trustee under the Trustee Act: and it may be that a paid vendor cannot be so regarded where there is any doubt as to the enforceability of the contract of sale. (at p182)

15. In my opinion, the order of the Supreme Court was right. It was not shown that there was a trustee who had refused or neglected to convey. Indeed, it may be doubted whether the provisions of s. 51 of the Trustee Act may ever be used as a substitute for specific performance. It may well be that in any case until a vendor has been fully paid and acknowledged the validity of the contract of sale and the receipt of the purchase price, he does not assume any duties of a trustee with respect to land. (at p183)

16. However, the reasons I have given are sufficient to support the order of the Supreme Court. Consequently, I have no need to go further into other questions which might otherwise have arisen. (at p183)

MASON J. In my opinion this appeal should be dismissed. (at p183)

2. The circumstances in which the appellants entered into a contract to purchase a property at North Balwyn, near Melbourne, and made an application for a vesting order under s. 51 of the Trustee Act 1958 (Vict.), in relation to that property have been recited by Jacobs J. and I need not recount them. Whether the appellants could succeed in obtaining a decree for specific performance of the contract in a suit against the sovereign State of China depends upon a number of issues none of which are easy to resolve. (at p183)

3. First, there is the question whether proceedings could be brought against the sovereign State of China without infringing the rule that the courts of this country cannot implead a foreign sovereign. The application of the rule to a foreign sovereign who is trustee of property within the jurisdiction has been the subject of much discussion: see, e.g., Rahimtoola v. Nizam of Hyderabad (1958) AC 379, at p 401, and esp at pp 416-417 , where Lord Denning suggested that a foreign sovereign which has "a legal title without any equitable right" may not be entitled to the immunity. (at p183)

4. Secondly, there is the question whether in the circumstances of this case, apart from the problem of sovereign immunity, a court would grant specific performance of the contract. Special condition 3 of the contract provides that if the appellants were unable to obtain registration of the transfer before 28th February 1973 the contract would be at an end. The condition conferred on the appellants at their option an entitlement to an extension of one month from 28th February 1973 to obtain registration. Whether they attempted to secure this extension we do not know. A possible answer to the appellants' failure to secure registration within the time initially specified or the extended time is to say that the condition was inserted for the exclusive benefit of the purchasers and that they waived it. (at p184)

5. In the absence of argument on behalf of the vendor I am not prepared to assume that either of these questions should necessarily be answered favourably to the appellants. The importance of this observation is that the availability of the remedy of specific performance is itself relevant to the appellants' entitlement to a vesting order. (at p184)

6. Section 51 of the Trustee Act 1958 enables the Supreme Court to make vesting orders in various circumstances. One such circumstance is "where property is vested in a trustee and it appears to the Court to be expedient to make a vesting order" (s. 51 (2) (o)). By s. 3 of the Act it is provided that "the expressions 'trust' and 'trustee' extend to implied and constructive trusts". It has long been established that a vendor of real estate under a valid contract of sale is a trustee of the property sold for the purchaser. (at p184)

7. However, there has been controversy as to the time when the trust relationship arises and as to the character of that relationship. Lord Eldon considered that a trust arose on execution of the contract (Paine v. Meller [1801] EngR 400; (1801) 6 Ves 349 (31 ER 1088) ; Broome v. Monck (1805) 10 Ves 597, at p 606 [1805] EngR 110; (32 ER 976, at pp 979-980) ). Plumer M.R. thought that until it is known whether the agreement will be performed the vendor "is not even in the situation of a constructive trustee; he is only a trustee sub modo, and providing nothing happens to prevent it. It may turn out that the title is not good, or the purchaser may be unable to pay" (Wall v. Bright (1820) 1 Jac & W 494, at p 501 [1820] EngR 472; (37 ER 456, at p 459) ). Lord Hatherley said that the vendor becomes a trustee for the purchaser when the contract is completed, as by payment of the purchase money (Shaw v. Foster (1872) LR 5 HL 321 ). Jessel M.R. held that a trust sub modo arises on execution of the contract but that the constructive trust comes into existence when title is made out by the vendor or is accepted by the purchaser (Lysaght v. Edwards (1876) 2 Ch D 499 ). Sir George Jessel's view was accepted by the Court of Appeal in Rayner v. Preston (1881) 18 Ch D 1 . (at p184)

8. It is accepted that the availability of the remedy of specific performance is essential to the existence of the constructive trust which arises from a contract of sale. The difficulty of determining upon a petition for a vesting order under the English Trustee Act 1850 whether specific performance would be granted led Page Wood V.C. to hold that a constructive trust must first be declared by decree in a suit before the statutory concept of "trust" in the Trustee Act was satisfied. However, in In re Cuming (1869) 5 Ch App 72 , Giffard L.J. distinguished the contract which remains unperformed on either side (when a precedent decree is necessary) and the contract which has been executed by payment of the purchase money and a formal covenant to surrender (when no such decree is required as a preliminary to the making of the vesting order). (at p185)

9. Whether this distinction was correctly taken need not presently be decided. It is enough to say that it has been accepted in decisions in England and Australia that at least when the purchaser has paid the purchase money the vendor becomes a constructive trustee of the property sold and that he is a trustee of property within the meaning of the provisions of the Trustee Act relating to vesting orders (In re Colling (1886) 32 Ch D 333 ; Re Campbell; Ex parte Muir (1861) SCR (Q) 39 ; Weigall v. Barber [1884] VicLawRp 12; (1884) 10 VLR (E) 90 ; Re Clarke and Solomon's Agreements Trusts (1905) 5 SR (NSW) 498 It may be safely concluded, then, that the Supreme Court can exercise the power to make a vesting order conferred by s. 51 when the vendor of real estate who has been paid the purchase money refuses or declines to execute a transfer or is disabled from so doing. (at p185)

10. The appellants paid to the solicitors named in the contract the balance of the purchase price payable in cash. Whether the solicitors are holding this money for the account of the People's Republic of China we do not know. Nor do we know whether the appellants have by document or otherwise made arrangements to assume liability under the existing mortgage to the exclusion of the vendor's liability. (at p185)

11. Accordingly, there is in my view a serious question to be determined, namely whether in the events which have transpired the sovereign State of China is a constructive trustee of property for the appellants so that a vesting order should be made in favour of them. This question, as it seems to me, cannot be decided in the absence of the vendor, the sovereign State of China. It was not made a party to the application by means of its intervention before Jenkinson J., an intervention from which it subsequently withdrew. It is not enough that it had notice of the application; as the party in whom the outstanding estate vested it should have been made a respondent to the application. The failure to make it a respondent is in my opinion a fatal defect. (at p185)

12. Perhaps the procedure by way of application for a vesting order was devised to avoid the difficulty otherwise posed in a suit for specific performance by the rule that a foreign sovereign cannot be impleaded. If this be so, the application was misconceived. The vesting order procedure was not designed to obviate difficulties which would be encountered in a suit for specific performance. It was intended as a summary procedure for clear cases in which recourse to traditional procedures would have been time-consuming. Had the sovereign State of China been joined as a respondent to this application or as a defendant in a suit for specific performance it would have been possible to determine whether the rule relating to the impleading of a sovereign had any operation in this case. It is undesirable, if not impossible, to decide that question in the absence of the foreign sovereign. (at p186)

13. In the result I would dismiss the appeal on the ground that the sovereign State of China, a necessary party to the application, was not joined as a respondent. (at p186)

JACOBS J. From the conclusion of 21st December 1972, Australia recognized the government of the People's Republic of China as the sole legal government of China and withdrew recognition of the government in Taiwan. Some three years previously the Republic of China had been registered as the proprietor of an estate in fee simple in land in Melbourne situated at 18 Millicent Avenue, North Balwyn. During the day of 21st December 1972, an agreement was made for the sale of this land to the appellants. There were two copies of the agreement. One of them was under a seal of the Republic of China which was impressed upon this copy in the presence of the Consul-General and the Vice-Consul, who were representatives of the Taiwan government, and the sealing was attested by them. The other copy of the agreement was signed by the appellants during that day. On the same day a deposit of $5,000 was paid to Messrs. David Ting & Byrne, solicitors acting on the instructions of the Consul-General as solicitors for the Republic of China. The sealed copy of the agreement was delivered to the first-named appellant on that day and the copy signed by the appellants was retained in those solicitors' offices. (at p186)

2. The contract provided for the sale of the land and certain furniture for a sum in all of $43,800. There was provision for the deposit of $5,000, and the balance of $38,800 was to be paid as to the sum of $6,222.74 on 10th January 1973 and as to the balance by the purchaser assuming liability under a certain registered mortgage over the land to the English Scottish & Australian Bank Ltd. (at p187)

"All moneys falling due under this Contract may be paid

free of exchange to the Vendors Solicitors, David Ting &

Byrne, 414 Lonsdale Street, Melbourne." (at p187)

"The parties hereby mutually acknowledge that all monies

paid hereunder with the exception of the amount paid to

discharge the Mortgage at present secured over the property

in favour of the A.N.Z. Bank Limited will be retained in the

trust account of the Vendors Solicitor until such time as the

Purchasers have obtained registration of the Transfer to

themselves at the Office of Titles provided however that the

benefit of this condition shall apply to the Purchasers only

insofar as they fulfil their undertaking to make all usual and

necessary steps as may be required of them to obtain

registration of the said Transfer at the Office of Titles at the

earliest possible date. In the event of the Purchaser being

unable to obtain registration of the Transfer on or before the

28th day of February 1973 the deposit and any other moneys

paid in excess of the amount secured by the Mortgage to the

A.N.Z. Bank Ltd., shall be refunded and the Purchaser shall

cease to be liable for any sum or sums unpaid in respect of

the said Mortgage and this Contract shall be at an

end. Provided however that the Purchaser shall be entitled

at his option to a further extension of one month from the

28th day of February 1973 in order to obtain registration." (at p187)

5. On that same day, 21st December 1972, an instrument of transfer was executed under seal in favour of the appellants. It would appear that this instrument of transfer was delivered on that same day. (at p187)

6. On 3rd January 1973, a further instrument of transfer was executed under the seal of the Republic of China which seal was affixed in the presence of the Consul-General and Vice-Consul appointed by the previously recognized government. On 19th January 1973, the appellants paid to Messrs. David Ting & Byrne the balance of the purchase price which was payable in cash, and on 5th March, took possession of the land. (at p187)

7. The first instrument which had been executed on 21st December 1972, was not formally lodged, but the second instrument of transfer was lodged for registration. The Registrar of Titles refused to register it. (at p187)

8. On 3rd April 1975, the appellants applied to the Supreme Court for a vesting order. It may be assumed that the order was sought under s. 51 of the Trustee Act 1958. The appellants joined the Registrar of Titles as a respondent, but the application was in truth an ex parte application. The Registrar of Titles had no interest in the proceedings. The joining of him as a party gave a spurious appearance of forensic regularity to the proceedings but no more than this. If a vesting order had been made, it would have been the duty of the Registrar of Titles to make the appropriate entries in accordance with the provisions of the Transfer of Land Act 1958 and, in the most unlikely event that he had refused so to do, application could have been made to the Supreme Court under s. 116 of the last-mentioned Act. Likewise, application could have been made under that section requiring the Registrar-General to register the transfer which he had refused to register. However, he had no interest whatsoever in the question whether or not a vesting order should be made. The party interested in the application was the Republic of China. No attempt was made to join the latter as a respondent and the reason frankly stated was that to do so would have raised difficulties in establishing the right to relief. (at p188)

9. It happened that after reservation of judgment by Jenkinson J. of his decision on the application for the vesting order, application was made to him in the Practice Court by counsel on behalf of the presently recognized government of the Republic of China. A request was made that the matter be listed again for hearing. Subsequently this request was withdrawn. I do not think that these events affect the issue. They amount to no more than evidence that the present government of the Republic of China had notice of the application for a vesting order. At no stage was the Republic of China made a party to the application. (at p188)

10. Jenkinson J. dismissed the summons upon the ground that no occasion had been shown for the exercise of the power to make a vesting order. I am of the opinion that this was a correct conclusion. I should, however, first mention that, in my view, a serious question arises whether this appeal is competent. If no more is involved than the perfection of a title by the making of a vesting order, then the judgment was not one which involved directly or indirectly any claim demand or question to or respecting any property amounting to or of the value of $3,000 (Judiciary Act 1903-1973, s. 35 (1) (a) (2) ). No question would arise on this approach whether or not the appellants are in contract or in equity entitled to the land. The application would be limited to a claim demand or question respecting perfection of title to the land not respecting the land itself. The appeal would be incompetent and should be struck out. (at p188)

11. On the other hand, if not only perfection of title but also the right to title and ownership of the land was involved, then the proceedings were defective for want of a necessary party interested in the substance of the application and the rights thereby sought to be established. That party is the vendor of the land, the Republic of China, against whom the relief, on this approach equivalent to specific performance of the contract of sale, was sought. Upon this view of the application, substantive relief was sought against the Republic of China by extinguishing its title to the land and vesting its title in the appellants. The appellants frankly concede that there may be a dispute about who is entitled to the purchase money but say that this is not their concern. However, the title to the land is the security of the vendor that it, and nobody else, will obtain that purchase money. The Republic of China, which can now only be represented by its government recognized by Australia, must necessarily be heard on the question whether it should be divested of its title before it has actually received the purchase money. (at p189)

12. The appeal must necessarily fail either because it is incompetent or because Jenkinson J. was correct in refusing substantive relief in the circumstances. That is a dilemma from which the appellants cannot escape. (at p189)

13. The ground upon which Jenkinson J. refused relief was that no circumstances existed which justified the making of a vesting order. In my opinion he was correct in this conclusion. (at p189)

14. The only case under s. 51 (2) conceivably applicable to the present circumstances is provided in par. (o), namely, where property is vested in a trustee and it appears to be expedient to make a vesting order. However, a vesting order is not a substitute for an action for specific performance. Such an order consequent upon an order for specific performance of a contract concerning any interest in land may in particular circumstances be made under s. 57 of the Act. Before such a vesting order can be made, the Court must declare that the party to the action for specific performance against whom the order is made is a trustee of the land within the meaning of the Trustee Act. So long as the rights of the respective parties to a contract for the sale of land rest in contract, that is to say before payment of purchase price on a settlement after which the vendor has no rights of his own outstanding but is a bare holder of the legal estate, none of the provisions of the Trustee Act in relation to vesting orders is a substitute for an action for specific performance. (at p189)

15. Moreover, it is doubtful whether a vendor under a contract of sale can properly be described as a trustee within the meaning of the Trustee Act unless settlement has taken place and all that remains to be done is to transfer or convey an outstanding legal estate. It is true that a vendor at the stage of contract where the contract is enforceable by specific performance has at times been described as a trustee: see, e.g. Shaw v. Foster (1872) LR 5 HL 321 ; Lysaght v. Edwards (1876) 2 Ch D 499 ; and if by that no more is meant than that the purchaser is regarded by equity as the beneficial owner of the estate of which the vendor is the legal owner then there is no difficulty in describing the vendor as a trustee. However, if by such a description it is sought to transpose into the law of vendor and purchaser the law governing the rights and duties of trustees, statutory or otherwise, considerable difficulties arise. The present case is an example of the confusion which can arise from giving this description to a party to a contract for the sale of land assumed to be capable of specific performance simply because he has the obligation under the contract to transfer property to the other party on completion of the contract and because equity regards the other as beneficial owner. Where there are rights outstanding on both sides, the description of the vendor as a trustee tends to conceal the essentially contractual relationship which, rather than the relationship of trustee and beneficiary, governs the rights and duties of the respective parties. (at p190)

16. I say nothing upon the question whether the instrument of transfer executed on 21st December 1972, and apparently delivered in escrow on that date was one which the transferees were entitled to have registered. No application was made to the Registrar of Titles to register it. However, if it should have been so registered, then as Jenkinson J. observed that is an additional reason why a vesting order should not be made. (at p190)

17. I think that it is important in the present case not to embark upon any of the questions which may arise if the appellants now take other steps or institute other proceedings. This applies not only to any application to register the first instrument of transfer but also to questions which might arise if action be commenced for specific performance of the contract against the Republic of China. One can see that matters of considerable complexity could arise not only in the field of private international law but also upon the question whether the contract is still on foot and whether, if so, the appellants are bound to offer payment of that part of the purchase money payable in cash or any part thereof to the Republic of China as a condition precedent to their right to an order for specific performance. I would dismiss this appeal without any determination of questions which may arise in later proceedings. (at p191)