Haque v Haque

Haque v Haque - [1965] HCA 38 - HCA 1965 case summary — Zoe

[111]

(1) The first question concerns three parcels of freehold land in Western Australia. In respect of each parcel there was in force at the death of the deceased a contract by which he had bound himself to sell and convey the land to a purchaser upon payment of a price of which the whole or part was still unpaid. Unfortunately the terms of the contracts were not proved in the Supreme Court and are therefore not before us; but it is not suggested by any party that in any instance the time for completion had arrived or that the deceased had tendered a transfer. It is to be assumed, therefore, that the contracts were still in fieri. In each instance the deceased had the legal title to the land at his death, and subject to the contract he held it for his own benefit absolutely. But by the operation of well-known equitable principles the making of the contract had to an extent transferred the beneficial ownership to the purchaser. The deceased was not a mere trustee for the purchaser, but his position was something between that of a mere trustee and a mortgagee. He could exercise for his own benefit such rights with regard to the land as were consistent with the contractual rights of the purchaser until payment of the purchase money in full, and until that event he had a lien or charge for the unpaid purchase money: see Lysaght v. Edwards [1] . Sir George Jessel M.R. (ibid.) would have described him as being in a position analogous to (though not identical with) that of a mortgagee, one point of similarity being that if the contract should be validly cancelled for nonpayment of the purchase money the land would become his absolute property once more. Accordingly for some purposes he was in the position of a trustee, though for some he was not, as may be seen by contrasting Lysaght v. Edwards [2] with Rayner v. Preston [3] and In re Colling [4] . A fuller exposition of the matter appears in the judgment of Sir Thomas Plumer M.R. in Wall v. Bright [5] . The vendor is "in progress towards" trusteeship; and the incidents of trusteeship exist only if and so far as a Court of Equity would in all the circumstances of the case grant specific performance of the contract: Howard v. Miller [1] ; Central Trust and Safe Deposit Company v. Snider [2] .

[112]

Thus there devolved upon the deceased's executor both a right to enforce the contract, which in substance was a right to receive payment of the purchase money, and also a beneficial interest in the land. A right to receive a payment of money is undoubtedly a movable. An interest in land, on the other hand, is an immovable. The private international law in force in Western Australia must choose from three possibilities what rules of municipal law are to govern the succession to the right and to the interest. One possibility is that the law of the domicile governs the succession to the right in respect of the money, but that the law of the situs governs the succession to the interest in the land. But the right and the interest are not independent of one another, and it seems inconceivable that private international law should treat them as if they were. If this possibility be put aside, both the right and the interest must be governed by the one municipal law, either the law of the domicile notwithstanding the immovable character of the interest in the land or the law of the situs notwithstanding the movable character of the debt. Thus an exception covering the case must be allowed either to the general rule that succession to immovables is governed by the lex situs or to the general rule that succession to movables is governed by the lex domicilii. There seems to be no clear authority on the point, strangely enough, but an analogy, not complete but sufficiently close, may be found in the case of a debt secured by a mortgage of land, and some degree of judicial consideration has been given to that case. The appellant relied particularly upon the judgments delivered in the Court of Appeal in In re Hoyles [3] , and they require careful consideration. A testator domiciled in England gave by his will a share of his real and personal estate to charity. The estate included certain debts secured by mortgage of freehold lands in Upper Canada. By the law of England a testamentary gift of impure personalty to charity was void under the Mortmain Act, 1736, and by the law of Upper Canada such a gift was void under legislation which applied the provisions of the Mortmain Act to that country. The law of each country regarded mortgage debts secured on freehold property within the country itself as impure personalty. It was accordingly conceded that a bequest by a domiciled Englishman of a mortgage debt charged on land in England to a charity would be invalid, and that a bequest by a person domiciled in Upper Canada of a mortgage debt charged on land there to a charity would have been invalid. The dispute which came before the English courts arose because the Mortmain Acts had only local application and a mortgage debt charged on land out of England was not regarded as impure personalty by English municipal law. The decision was that English law regarded the law of Upper Canada as applicable to determine whether English courts would hold void a gift of land (including impure personalty) in Upper Canada, and that since according to the Mortmain law of Upper Canada a gift of a mortgage debt charged on land there was a gift of impure personalty and consequently void if made to a charity, the gift in question should be treated in England also as void. Both Cozens-Hardy M.R. and Farwell L.J. approved the statement of Story in his Conflict of Laws, that "not only lands and houses, but servitudes and easements, and other charges on lands, as mortgages and rents, and trust estates, are deemed to be, in the sense of law, immovables, and governed by the lex rei sitae ". It may be that in this passage the word "mortgages" refers only to the mortgagee's interests in the mortgaged land, and in In re Hoyles [1] it was unnecessary for the purposes of the judgments to consider whether it refers also to the debt. The reasoning of the Court may, I think, be reduced to three propositions: (i) a mortgagee's interest in mortgaged land is no less an immovable than any other interest in land; (ii) the Mortmain Act of Upper Canada therefore invalidated a gift to charity of the interest of a mortgagee in mortgaged land in Upper Canada; and English law will for its own purposes give effect to that invalidation; and (iii) because (as Cozens-Hardy M.R. said) "a mortgagee cannot assign the mortgage debt effectually without also transferring the security upon the land" [2] , a gift of a mortgage if invalid as a gift of the security should be held to fail as a whole. Fletcher-Moulton L.J., though joining in the decision, felt doubts about it, and Farwell L.J. expressed himself as guided by the policy of the Mortmain Acts rather than by any considered conclusion upon what he termed "a preliminary abstract question whether mortgages on land are movable or immovable" [3] . To treat the case as an authority on that abstract question because of expressions occurring in the judgments but going beyond what the Court had actually to decide is to take a step that requires caution.

[114]

In In re O'Neill; Humphries v. O'Neill [1] the New Zealand Supreme Court, in a judgment prepared by Sir John Salmond, held that it did not follow from In re Hoyles [2] that for all purposes mortgage debts were to be treated as immovable property. The Court decided that for the purposes of intestate succession such debts were to be treated as movables and accordingly as governed in regard to succession by the lex domicilii. The conclusion does not rest only upon the language used by the Privy Council in cases such as Harding v. Commissioners of Stamps for Queensland [3] and Lambe v. Manuel [4] , which arose under taxing statutes and on that account have been put aside, perhaps somewhat too readily, by some writers. Fundamentally it rests upon the view that English private international law, having to choose between diverting the security from its prima facie destination in order to make it follow the debt and diverting the debt from its prima facie destination in order to make it follow the security, accepts as of general validity the ingrained principle of English municipal law - namely that the debt is the principal thing and the mortgagee's interest in the mortgaged property is an accessory only - and accordingly makes the security follow the debt. It was that ingrained principle, "absolutely settled and determined centuries ago", which had led Palles C.B. to the same conclusion in Lawson v. Commissioners of Inland Revenue [5] ; and the weight to which the opinion of that learned Judge is entitled is not lessened by the fact that what he said should no doubt be understood as confined to the case where the mortgage debt itself is to be considered as situate (e.g. because the specialty is there) in a country where the rules of English law apply. Sir John Salmond mentioned the contrast which is provided by the case of heritable bonds. Such bonds resemble mortgages when they contain both a charge of money upon land and a personal obligation. In Scottish courts, and consequently in English courts, such bonds, if they are situate in Scotland at the material time, are held to be immovables; but this is because Scottish law, rejecting the English principle that the debt is the principal thing, adopts the opposite rule that the land is to be considered "the principal debtor": Drummond v. Drummond [6] and that therefore the immovable "draws after it the moveable or personal security": Jerningham v. Herbert [7] . There is here the clearest precedent for conceding that the rules in force in a country for the choice of law on the subject of intestate or testate succession may specially allow for the case of a movable and an immovable which are inherently connected with one another, and may select the law of that one which is considered the principal to govern the succession to them both.

[120]

(2) Questions next arise in regard to certain parcels of land in Western Australia belonging to partnerships of which the deceased was a member at his death. There were two such partnerships, called respectively A. & N. Haque and A. Haque & Co., the business of each being carried on in Western Australia. The former partnership was dissolved by the death of the deceased: see s. 44 of the Partnership Act, 1895 W.A.; but according to the judgment of Wolff C.J. there was a provision to the contrary in the partnership agreement of A. Haque & Co., in which it is said that there were numerous partners. The terms of the agreements are not before us, but so much is common ground. Moreover, throughout the case it has been tacitly assumed, and I therefore take it as the fact, that both partnerships were solvent at the death of the deceased. It is proper of course to put aside the provision in s. 32 of the Partnership Act that as between the partners (including the representatives of a deceased partner) land which has become partnership property is to be treated as personal and not real estate, for as is shown by In re Berchtold; Berchtold v. Capron [1] the distinction between personal and real estate does not coincide with the distinction between movable and immovable property, and the equitable doctrine of conversion to which s. 32 gives statutory effect has no counterpart in private international law. But in relation to both the partnerships with which we are concerned the preliminary question is: what asset of the estate is it material to consider for the purpose of deciding the right of succession? The deceased in his lifetime had, in relation to each partnership, rights of two kinds. On the one hand he had rights with respect to each individual item of partnership property, constituting an interest in each such item, which he was entitled to assert as against all the world: In re Holland; Brettell v. Holland [2] ; In re Fuller's Contract [3] . On the other hand he had his share in the partnership as a whole, consisting of a right as against his co-partners - and this was his whole right as against them - to have the assets realized on dissolution of the partnership, to have the proceeds applied in discharging the debts and liabilities, and to have his share of the surplus paid to him: see Partnership Act, s. 33; In re Ritson; Ritson v. Ritson [4] ; Rodriguez v. Speyer Brothers [5] . When he died, his beneficial interest in the individual assets no doubt devolved upon his executor, but the executor could not realize such an interest or dispose of it as if it were by itself an asset of the estate. The asset to be administered was (in the case of A. & N. Haque) the share in the partnership as a whole, and (in the case of A. Haque & Co.) the money which the partnership agreement provided should be paid to the estate by the surviving partners in satisfaction of the share. The question of succession therefore arises with respect only to the share in the partnership in the one case and the obligation of the co-partners in the other. These assets, being choses in action, are in my opinion to be classed as movables.

[128]

A share in a partnership seems to me, by its nature, to be a movable in that there is nothing to fix it unchangeably in any particular place, regardless of the will of the partners, or of the place or the places where they may choose to reside or carry on their partnership business. Since Commissioner of Stamp Duties (Q.) v. Livingston [1] there can be no doubt that, when a partnership is dissolved by the death of a partner and is being wound up, the personal representative of the deceased partner has no proprietary interest in the specific assets belonging to the partnership. His right is to a share of the surplus ascertainable only when the partnership is wound up. Accordingly, the fact that there is land among the partnership assets which, in winding up, would have to be realized does not inevitably give the interest the character of an immovable. Of course, in such a case the land itself would be an immovable and, if the legal title to it were to be effected by the death of the partner, that title would devolve according to the lex situs. We are not, however, concerned here with the title to land; we are concerned with the beneficial rights of the estate of a deceased partner by virtue of the deceased's membership of the partnership. The position would seem to be not unlike that of a person possessed of an interest in a trust fund. The mere fact that there is land subject to the trust would not result in the beneficiary's interest in the fund being an immovable in the place where the land is situated. The interest in the fund is situated in the country which is the forum of administration of the trust or whose law is the proper law of the trust: Ewing v. Orr Ewing [2] . An interest in a partnership is not to be fragmented into as many different interests as the partnership has assets with the consequence that each fragment should be treated as located where the asset with which it is concerned might happen to be. We are here concerned with the interest of the personal representative of a deceased partner in the partnership assets as a whole. What, then, is the consequence of the fact that among the assets of the partnership there is land? Does this give the interest of the personal representative the character of an immovable? I think not. Even if the rights of the personal representative were to be regarded as secured upon the land, the authorities to which I will refer hereafter upon the question whether a mortgage debt is a movable or immovable seem to me to require the conclusion that a right to participate in a partnership surplus to be derived in part from land comprised in the partnership assets is nevertheless a movable.

[130]

The question whether the balance of purchase money under an uncompleted contract for the sale of land is a movable or immovable is, so it seems to me, to be determined according to the same principles which determine whether a mortgage debt is a movable or immovable for, upon analysis, each is of the same character, a debt secured upon land. Payment of such a balance is a personal right secured by the land, the title of which remains in the creditor until payment in a similar way to which the title to land subject to a common law mortgage remains in the mortgagee until repayment of the mortgage. Notwithstanding the decision of the Court of Appeal in In re Hoyles [1] and the decisions following it in Canada and in New South Wales (i.e. Re F. Donnelly [2] ), I am satisfied that In re Williams [3] , where the contrary was decided, is in accord with decisions of the Privy Council which were not referred to in In re Hoyles [1] . These decisions are Harding v. Commissioner of Stamps for Queensland [4] ; Payne v. The King [5] ; Lambe v. Manuel [6] and Toronto General Trusts Corporation v. The King [7] . These cases are discussed in the judgments in In re Williams [3] and to what is there said I do not wish to add anything. The decision in In re Williams [3] is supported by an earlier decision of the Supreme Court of Victoria in In re Ralston [8] , per Cussen J. [9] , by the decision of the Supreme Court of New Zealand in In re O'Neill [10] and by the observations of Dixon J. (as he then was) in McClelland v. Trustees Executors and Agency Co. Ltd. [11] . These authorities, while treating mortgage debts as movables, recognize that in some circumstances the debt and the accessory security may have to be regarded separately and differently, for, of course, there is no doubt that in itself a security upon land is an immovable. I have carefully considered the criticism of In re Williams [3] by Professor Falconbridge in chap. 26 of his Essays on the Conflict of Laws, 2nd ed. (1954), at pp. 573-580, but I am unable to accept his view that decisions of the Privy Council in the taxation cases to which I have referred to the effect that mortgage debts are movables have no application in succession cases. In none of the decisions did the characterization of the mortgage debt as a movable depend upon the statutory provision that was under consideration. In each case it was necessary to determine the true character of the debt as a movable or immovable for the purpose of applying the material tax law to it.

[135]

(i) The res: It is, of course, critical to decide what are the things that are to be classified, or, if one prefers the expression, characterized. Are we here concerned primarily with the right of a vendor to be paid the contract price for land he has sold, or with his interest as landowner in land that he has agreed to sell? Is the thing in dispute a share in a partnership business, or the interest of a partner as co-owner of land that is partnership property? Counsel sought to get over some of the difficulties of this stage of the inquiry by saying that in each instance the property in question should be regarded as the aggregate of rights that one person has in relation to another or others. But this view, however satisfying in jurisprudential analysis, seems to me not to accord with the premise, perhaps unsophisticated, on which the distinction between things movable and immovable is founded. That distinction can really relate only to the physical quality of tangible things - to chattels on the one hand and land upon the other. But, even in countries where for the purposes of the local law it is a basic division of property, it has necessarily had to be elaborated by law. Some tangible things that are movable in fact have been immobilized in law because of their relation to land. In French law, for example, horses and cattle or equipment kept for the service and working of a farm are said to be not immovable by nature but immovable by destination. Whether a particular thing is a movable or immovable thus depends upon the particular system of law by which the question is to be resolved. Moreover it is only by legal artificialities that an incorporeal thing can ever be said to be either movable or immovable. The civil law did not apply the distinction to res incorporales. And the German Civil Code, I think, does not, because for it a thing is a tangible thing. But our law, and as I understand it the law of France, gives a quality, movable or immovable, to incorporeal things. But it is not to be thought of as a distinction based upon the rights that one person has in relation to another person. It continues to be based upon a distinction between two sorts of things in relation to which, or in or over which, rights exist. This was pointed out by the late Professor Cook in his helpful and thought-provoking work, Logical and Legal Bases of the Conflict of Laws (1942). The character of a thing is the determinant of the character of rights in relation to it. And this is possible because, whatever be the position in ultimate analysis, English law, and also the laws of other countries, speaks of a legally enforceable claim that one person has against another as itself a thing that can be the subject of ownership. Coke said that "a debt is a thing consisting merely in action": Co. Litt. 292 b. But in later times the phrase "chose in action" has enabled us to think and speak of a debt as a thing which can have both a local habitation and a name, a thing the ownership of which can be transferred from one person to another, a thing to which one person may succeed on the death of another. English law never baulked at the idea of an incorporeal thing. Maitland said that "mediaeval law was rich in incorporeal things". And incorporeal hereditaments were readily fitted into the common law of real property: see Challis, Real Property, 3rd ed. (1911), Sweet's note pp. 48-58.

[138]

(ii) The situs of the res: If the thing be land the question of course admits of only one answer. Land is where it lies. It can never be moved. And any interest in or over the land must, it seems to me, also be considered as a thing having its situs where the land is. For only by the aid of the law of the country where the land is can such possession of it be had as is ultimately requisite to an enforcement of that interest. A chattel, on the other hand, is a movable, and at any given time it is where it then in fact is. When we go from the field of corporeal things, lands and chattels, and rights and interests related to them, to purely incorporeal things, questions of situs become artificial. Such things can have no actual place anywhere. But law for its own purposes puts all its incorporeal creatures in their proper places. The conventional rules that have been adopted to this end had their beginnings in early ecclesiastical law. It was necessary to determine, for purposes of administration of the goods of a deceased, which ordinary had jurisdiction, and that meant deciding within which province or diocese debts owing to a deceased were bona notabilia. The rules are old. The first statement of them seems to be the notes in the margin of Dyer's Reports 305 a. It is enough to quote here a passage from the judgment of Lord Abinger C.B. in Attorney-General v. Bouwens [1] as follows: Whatever may have been the origin of the jurisdiction of the ordinary to grant probate, it is clear that it is a limited jurisdiction, and can be exercised in respect of those effects only, which he would have had himself to administer in case of intestacy, and which must therefore have been so situated as that he could have disposed of them in pios usus. As to the locality of many descriptions of effects, household and movable goods, for instance, there never could be any dispute; but to prevent conflicting jurisdictions between different ordinaries, with respect to choses in action and titles to property, it was established as law, that judgment debts were assets, for the purposes of jurisdiction, where the judgment is recorded; leases, where the land lies; specialty debts, where the instrument happens to be; and simple contract debts, where the debtor resides at the time of the testator's death: and it was also decided, that as bills of exchange and promissory notes do not alter the nature of the simple contract debts, but are merely evidences of title, the debts due on these instruments were assets where the debtor lived, and not where the instrument was found [1] .

[143]

"The asset in each case, from the economic or business point of view, is, of course, the security in its entirety; the personal obligation to pay money, plus the charge upon the mortgaged property to pay money, plus the charge upon the mortgaged property by which the payment is guaranteed. But from the legal point of view, the personal obligation is for many purposes regarded as distinct from the charge, although the relation between them is such that the mortgagee cannot effectively transfer the personal debt while retaining ownership of the charge, or enforce payment of the debt without releasing the mortgaged property, or, by appropriate proceedings, converting it into money applicable in reduction of the debt. The mortgage does, unquestionably, create an interest in the mortgaged property in the jurisdiction where the property is situate " [5] . Nevertheless, constrained by the decision in Commissioner of Stamps v. Hope [6] , he treated the location of the mortgage instruments as decisive for the case before the Court. Whatever be the position when the question is as to the construction and reach of taxing statutes, it seems that when the question is whether a debt secured by mortgage of land is to be considered as a movable or immovable the situs of the res is taken to be where the land is. In re O'Neill; Humphries v. O'Neill [1] , a case to which I shall make further reference later, accords with that view, for there it was held that whether a mortgage debt is movable or immovable depends upon the law of the place where the mortgaged land lies. I mention this at this point because it was strongly argued that the interest of an unpaid vendor could be likened to that of a mortgagee: and therefore that we could be guided to a decision on one aspect of the case by considering whether a mortgage debt is properly to be called a movable or immovable. To that question I shall come. On the preliminary question of the situs of the things to be classified it is, I think, of no consequence in this case. For here both the lands, the subject of contracts of sale, and the purchasers who had to pay for them were in Western Australia at the date of the death of the deceased. And as to the other items of property in question, namely lands that were partnership property, a share in a partnership is situate where the business is carried on: Commissioner of Stamp Duties v. Salting [2] . That was in Western Australia, and the partnership lands were there too.

[148]

(a) The three parcels of freehold land: These had been sold by the deceased in his lifetime, but the time for completion of the contracts had not arrived. In each case the purchase money, or part thereof, was still unpaid when the deceased died. The contracts are not in evidence, but it seems they provided for payment by instalments. I shall assume that the purchasers had in fact been let into possession by the deceased. The rights of the vendor and purchaser respectively in the land the subject of a contract of sale depend upon the combined effect of the terms of the contract and doctrines of law and equity. The purchaser's interest in the land arises because, pending the time for completion, equity will restrain the vendor from dealing with the land in any manner inconsistent with his contract; and will, when the time arrives and subject to discretionary defences, compel him to perform it. For private international law it matters not whether the purchaser's interest in the land is the creature of law or of equity. It is no doubt a proprietary interest, not a merely contractual right. It is a ius in personam ad rem. But it is less than ownership. Contract is not the equivalent of conveyance. Whatever the terms of the contract, the legal estate in the land remains in the vendor until conveyance. Until he be paid in full he has more than a bare legal estate. Even after conveyance he has a lien upon the land if he had not in fact been paid in full. As I see it the res that has to be classified as movable or immovable is the land, or the interest of the deceased in the land. It was argued that it should be regarded as simply a debt owed by the purchasers to the deceased for land that he had sold, the vendor's interest in the land being merely a security for the due payment of the debt. In support of that view we were asked to treat an unpaid vendor as in virtually the same position in reference to the land the subject of the contract of sale as a mortgagee is in reference to the mortgaged land. But the differences in legal consequences of the positions of a mortgagee and a vendor are not inconsiderable; and the differences in economic purpose between an investment of money on mortgage and a sale of lands are, generally speaking, great. I do not regard the two situations as sufficiently alike in legal result or practical purpose to make decisions concerning the movable or immovable quality of mortgage debts and mortgage interests decisive of this case. But they are close enough to it to make it important to consider them.

[149]

All the decisions and dicta concerning the quality, movable or immovable, of the interest of a mortgagee cannot, I think, be satisfactorily reconciled. This, perhaps, is partly because many of the cases cited dealt primarily with the scope of Acts imposing taxation in one way or another by legacy, succession or probate duties; and it was found necessary to confine by construction the operation of unrestricted words in some of the statutes. Cases on whether or not particular assets fell within the range of dutiability thus do not necessarily determine absolutely their quality as movable or immovable. And therefore textbook writers have ignored or deprecated the decisions in Harding v. Commissioners of Stamps for Queensland [1] and Lambe v. Manuel [2] , and been content to say that In re Hoyles [3] determines that mortgages are immovables. That view has been accepted in Canada in at least three cases: Royal Trust Co. v. Provincial Secretary-Treasurer of New Brunswick [4] ; Re Burke [5] ; and Re Hole [6] . But in Australia and New Zealand it has been strongly challenged in a line of cases that begins with the judgments of Cussen J. in In re Ralston [7] , and of Salmond J. in In re O'Neill [8] . The cases are arrayed in In re Williams [9] , and the opinion they assert, that a mortgage is a movable, was accepted as correct by Dixon C.J. in Livingston v. Commissioner of Stamp Duties (Q.) [10] . It is founded upon the principle that a mortgagee holds his interest in mortgaged land merely as a security for the recovery of his debt. That, of course, is old law. In Martin d. Weston v. Mowlin [11] Lord Mansfield said: "A mortgage is a charge upon the land: and whatever would give the money, will carry the estate in the land along with it, to every purpose". But that statement really says nothing as to the distinction between movables and immovables. It is concerned with the distinction between personalty and realty, with principles that are succinctly stated in Cruise's Digest, vol. ii, p. 89, as follows: "Although the mortgagee enters into possession, yet as long as the right of redemption exists the mortgage is only considered as personal estate; the debt being the principal, and the land the accessory. And, if the mortgagor does not redeem, the personal representatives of the mortgagee will be entitled to the land".

[156]

The contrast between the position of heritable bonds under the law of Scotland and mortgages of land under the law of England seems to me to illustrate the problem, but not to provide, even by way of contrast, an answer. The lex situs of a heritable bond is the law of Scotland when the land infefted as security is there. The question of the movable or immovable quality of the res is thus referred to a system of law, the lex loci rei sitae, in which the fundamental division of property is into immovables (called heritables) and movables. Because immovables formed part of the heritage and not of the executry, the terms used are heritable and movable; but together, as I understand it, they comprehend in the law of Scotland all things and rights, the quality of any incorporeal right or interest as heritable being determined by its relation to a thing that is corporeally heritable. The law relating to heritable bonds was modified in 1868 (31 & 32 Vict. c. 101), but until then such bonds were, as their name indicates, heritable not movable: see Erskine , Bk. 2 t. 2 (20th ed. pp. 122-126). The case of Drummond v. Drummond [1] is instructive as to the nature of a heritable bond at that time. But it is not concerned with succession to the interest of a mortgagee, but with succession to the mortgagor's property, to use English terms. It established that the heir to land in Scotland, which by heritable bond and infeftment had been made the security for a debt of the deceased, took the heritage encumbered. Although the deceased had been domiciled in England, the heir could not require the encumbrance to be paid off at the expense of property passing to the executor, as before Locke King's Act he could have done had the matter been governed by English law. The case is thus another example of the dominance of the lex situs in a matter concerning rights and interests in land and of the answer that the lex situs gives in a system which distinguishes immovables and movables for its own purposes. But neither it nor other Scottish cases that I have read provide guidance, I think, in a case when the lex situs is silent upon that question because it is not one that for its own purposes it has to answer except in cases involving a conflict of laws.

[162]

But that is not the matter that we have to decide. Maugham J., as he then was, said in In re Anziani; Herbert v. Christopherson [2] , speaking of In re Hoyles [1] : "That is a case which decided that a mortgage of land is an immovable. Careful attention to the judgment in that case shows, I think, not only that the question is one of some difficulty, but that the decision is based upon the fact that the mortgagee is for many purposes regarded as the owner of the land" [3] . Whatever the position of a mortgagee, the deceased here was, it seems to me, the owner in a relevant sense of the lands in question. I think that his interest in those lands in that character was an immovable, simply because the thing he owned, land, was immovable. That is not altered by his having contracted to sell the land. The equitable doctrine of conversion, which arose to modify the consequences of the distinction between realty and personalty, has no place in the law of Western Australia when that law has to say whether a particular thing is a movable or an immovable. This proposition may be debatable, but it is in accord with the views that Russell J., as he then was, expressed in In re Berchtold; Berchtold v. Capron [4] , and see In re Cutcliffe's Will Trusts; Brewer v. Cutcliffe [5] . The position would, it seems, be different if the land were in Scotland. By the law of Scotland a contract of sale does transform a heritable into a movable, as appears from the elaborate discussion of the matter in Heron v. Espie [6] . But that merely illustrates once again that rules distinguishing movables and immovables are peculiar to particular systems of law, not universal. My conclusion is that the interest of the deceased in, or in relation to, the three parcels of land at the time of his death is to be considered an immovable. So much of the proceeds of the sales of those lands as, since the date of death, has been or will be actually gathered in belongs I consider to the persons entitled to the immovables: cf. Philipson-Stow v. Inland Revenue Commissioners [1] . I pass to the other items in question.

[166]

The question as formulated in the judgment under appeal refers to "lands owned by the partnership". And counsel for the respondents spoke of what he called looking behind the partners' share to the partnership assets. But property is not owned by a partnership. It is owned by the partners. As it is put in Lindley on Partnership, 10th ed. (1935), p. 147, "the law, ignoring the firm, looks to the partners comprising it what is called the property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities". The term "partnership property" as used in the Partnership Acts (in the Western Australian Act No. 23 of 1895, s. 34) does not alter this. Nor is it material for present purposes that the Acts (s. 32 of the Act of Western Australia) apply the equitable doctrine of conversion to partnership property. A share in a partnership is the interest that a partner has in the surplus of assets over liabilities upon realization. A partner has no separate interest in any particular part of the partnership property. Yet his interest, subject to the claims of the creditors of the partnership business, is it seems to me not, for present purposes, unlike the interest that an owner of an undivided interest in property has. In my view of the matter, the res in question here is the deceased partner's interest in the lands that the partners owned. The land is the tangible thing by reference to which the quality of that interest must, I think, be determined. Being partnership property in a business conducted in Western Australia, the partner's interest in the land is, as between himself and his representatives and the other partners, personal estate by the law of Western Australia and will devolve accordingly if that law governs its devolution. But that does not, for me, answer the preliminary question, is its devolution governed by the municipal law of Western Australia or by the lex domicilii of the deceased. If A and B be simply co-owners of a tract of land, their interests therein must be considered as immovables. Suppose then that they decide to commence some business as partners for the exploitation of their land, say by cutting the timber on it, or mining for minerals, the land becoming partnership property. I do not see that, for purposes of international law, this transforms the character of their interests in it from immovable to movable. In the same way, if land be bought by persons carrying on in partnership the business of dealing in land so that it becomes part of the stock in trade of their business, as in Darby v. Darby [1] , it seems to me that their interests in it are still interests in an immovable and are to be considered as immovable for the purposes of private international law, although personalty for the purposes of local law. That the lex situs of the immovable, the land, subjects it to the debts of the partnership and provides for the realization of it along with other partnership property on a winding up, does not in my view of the matter affect its quality or that of the partners' interests in it as immovable. That the right of a partner as coowner in equity of land held for partnership purposes remains an interest in land, although for many purposes converted into personalty, is illustrated by the judgments of Neville J. in In re Holland; Brettell v. Holland [2] , of Luxmoore J. in In re Fuller's Contract [3] , of Cussen J. for the Supreme Court of Victoria in Duckett v. Collector of Imposts [4] ; cf. Brannigan v. Brannigan [5] , and see the comments of Mr. Higgins in his book The Law of Partnership in Australia and New Zealand (1963), p. 145. It would, no doubt, be possible for the Legislature of Western Australia to provide that land, locally situate, which is partnership property should for all purposes of devolution be a movable. That would be the converse of the case of In re Cutcliffe's Will Trusts [6] and Re A. S. Crook (Deceased) [7] , where the statutory directions were that a movable should be considered as land. But it has not done so. The provision of the Partnership Act that partnership property is personalty falls short of that.

[168]

We were, however, pressed with the decision in Forbes v. Steven [8] . There it was held that English legacy duty was payable upon the share of a deceased partner in the proceeds of sale of certain warehouses in Bombay that had been partnership property. The case turned upon the doctrine of conversion, the question being taken to be whether the property was exigible as personalty. No attention was there given to the question of movables or immovables. This was pointed out in Re Stokes; Stokes v. Ducroz [1] , a case concerning legacy duty upon a gift by a testator of his share as a partner in a sheep property in New Zealand. North J. recognized the force of the criticism of the earlier decision, but nevertheless he held that he must follow it. Perhaps the best comment on Re Stokes is that of Lord Radcliffe in Philipson-Stow's Case [2] where he said: "Mr. Vaughan Hawkins, whose arguments for the Crown in this and other cases seem to have formed no small part of the law on the subject, maintained: "The case of Forbes v. Steven [3] cannot be distinguished. It has never been doubted, always followed in practice, and it is incontestably right in principle". North J. agreed or succumbed" [4] . Whether or not these two cases were for purposes of the conflict of laws right in principle or in result, they do not bear directly upon the present question. In Halsbury's Laws of England, 3rd ed. vol. 7, p. 29, it is said of them: "There have been cases where the proceeds of sale of foreign land have been regarded as personalty in the eyes of English law. However, these cases may not, strictly speaking, constitute an exception to the general rule , because the distinction in English law between real property and personal property is not the same as the distinction for the purposes of the conflict of laws between immovable property and movable property, and because in certain of such cases, the question that arose was whether the property was caught in the net of a taxing statute".

[171]

The firm known as A. & N. Haque consisted until 1953 of the deceased and his brother Nural, the appellant. Then, as Wolff C.J. noted, "it is said Nural's wife, who was in India, and Adbul's first wife (also in India) each took a quarter share". But it was stated to us that in fact the deceased and Nural were the only members of the firm and that they were partners in equal shares. For present purposes it matters not which statement be correct. What is undisputed is that the partnership agreement, dated 31st March 1937, provided that, in the event of dissolution of the partnership by death or otherwise, the assets should be realized, the liabilities paid and the balance divided in equal shares. The business of the partnership was dealing in land. At the date of the death of the deceased the partnership assets consisted of several house properties unsold. Four of these stood in the name of the deceased as registered proprietor, another was held by the two partners as joint tenants, and two others as joint tenants. The total value of this unsold land and buildings appears to have been about £35,000. In addition there were moneys due from purchasers under uncompleted contracts of sale, a small amount of rents due, some furniture and about £1,300 cash on deposit. In all, the assets amounted to over £40,000. The only liability was a debt due to an electrician, £239. In these circumstances it seems to me the property of the partners consisted of both immovables and movables, mainly immovables. Suppose that the electrician's bill had been paid before the death of the deceased so that in fact there were then no partnership liabilities, the mere fact that, by the partnership agreement and the Act, all the partnership assets would have to be sold and the proceeds divided in equal shares would not, I think, have made movable those things which were in fact immovable or altered the quality or character of the partners' interests in them. The existence of the unpaid debt does not, I think, alter this position. The debt is no doubt payable out of the whole of the assets as a blended fund. And the land being in Western Australia and the partnership business conducted there, any proceedings for the dissolution of the partnership and the payment of the partnership debts would be within the jurisdiction of the Western Australian court. But an immovable does not cease to be an immovable because by the law of the place where it is it may be taken in execution for a debt or is charged with a debt.

[175]

Turning to the other firm known as A. Haque & Co. This was a family partnership. There were twenty partners, including the deceased and his brother Nural. This firm had conducted at North Fremantle a drapery business originally established by the father of the deceased. In September 1955, that is two years before the deceased died, the drapery business was sold, but with the intention of buying another similar business elsewhere. The new business had not been opened when the deceased died, although some moneys had been paid out for the acquisition of shop premises and goodwill. The main items of partnership property at the date when the deceased died were debts due to the estate upon the sale of the business, money in banks, and the leasehold of the new shop with fixtures and fittings. There was also a freehold, a block of flats apparently, bought it seems as an investment of partnership moneys. This property had a value, it is said, of £12,325. The total value of the partnership assets at the date of death appears to have been about £25,000. The partnership liabilities amounted to about £3,000. This partnership was not dissolved by the death of the deceased. By the terms of the partnership agreement his executors might permit his share to remain in the business. If they did not I assume that the continuing partners were to buy out his interest. This it seems is what was done, or is to be done. The full terms of the partnership agreement are not before us and the information about the matter seems incomplete. But on the facts, so far as I have been able to collect them, this case seems to differ significantly from that of the other partnership. It seems that, by reason of the agreement the deceased partner had made in his lifetime, his estate ceased to have any interest in the partnership property on his death, having instead a claim upon the continuing partners; and, so far as appears, this claim was not secured by a charge or lien that the law of Western Australia would enforce upon any immovable. It seems to me, therefore, that the difference between the two partnership agreements does produce a different result, and that in respect of the partnership of A. Haque & Co. the appeal fails.

At a glance

Court

Decision date

Before

Source

Judgment (177 paragraphs)

Parties