Choice of Law and Real Property
93 With respect to the real property situated in New South Wales, over which claims have been made in these proceedings, the lex situs must be referred to in the first instance, if only to determine whether any special rules apply to dealings with the property in a manner relevant to the claims raised in the proceedings. Real property has always been treated specially in the conflict of laws because it is essential to acknowledge the capacity of the lex situs to render futile any conflicting law with respect to title to such property.
94 Subject to any mandatory law of the lex situs, a court of the situs will, in an appropriate case, apply a choice of law rule which determines that an issue in dispute will be governed by the law of another jurisdiction. (See, eg, In re Ross: Ross v Waterfield [1930] 1 Ch 377 esp at 396, 403; In re Duke of Wellington: Glentanar v Wellington [1947] Ch 506 at 513-514.) The validity of this approach is reinforced by the adoption of the "no advantage" principle with respect to choice of law in tort by the High Court in Neilson v Overseas Project Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331 esp at [89]-[91], [176], [271]. (See also Amaca Pty Ltd v Frost [2006] NSWCA 173; (2006) 67 NSWLR 635 at [93]-[100].)
95 In the present case the choice is between New South Wales as the lex situs and Indonesia as the law of the matrimonial domicile. The evidence on Indonesian law is clear and uncontradicted. Professor Lindsey testified that the Indonesian principle of common marital property, or harta gono-gini, operates upon all property acquired during a marriage. Assets held by either husband or wife prior to a marriage are not included in the common marital property. Subject to any prenuptial agreement, common marital property will be divided equally upon divorce. Where, subsequently to separation, one spouse dies, his or her estate includes both his or her personal estate and his or her share of the harta gono-gini. Professor Lindsey also noted that the harta gono-gini system is "relatively well known in Indonesia".
96 It is relevant to note that, because the parties to the marriage are not Muslim, their affairs are subject to determination in accordance with the Civil Code in Indonesia, rather than under sharia law. The critical Code provisions, set out by Professor Lindsay are:
"Article 232 (First Book - Tenth Chapter - Third Section)
Civil Code:
If the divorced spouses were married on the basis that there would be a joint matrimonial property between them, the division of assets will take place pursuant to, and in the manner stipulated in, the Sixth Chapter.
Article 128 (First Book - Sixth Chapter - Third Section)
Civil Code:
Following the dissolution of a marriage, the joint matrimonial property shall be divided into equal parts between the husband and wife, or each of their heirs, without taking into consideration from which party the goods originated. The rules stipulated in the Seventeenth Chapter of the Second Book concerning separation of estate shall be applicable to the division of joint matrimonial property based on law."
97 It is clear from the whole of the proceedings, especially Judgment No 203, that these sections of the Code applied to the marriage underlying these proceedings. Accordingly, the deceased and the first respondent were married on the basis identified in Article 232, with the effect specified in Article 128.
98 The present situation appears to me to be indistinguishable from that considered by the House of Lords in De Nicols v Curlier [1900] AC 21. In that case, as in this, a husband and wife had not, as the law of the matrimonial domicile permitted, entered into a prenuptial contract modifying the rules applicable under the Civil Code. The French marriage law of community of goods was held to apply, notwithstanding the subsequent change of domicile of the couple to England, where no such principle applied.
99 The French community of goods law is jurisprudentially equivalent to the harta gono-gini system under Indonesian law. Each party to the marriage has an equal right to the assets acquired during the marriage. Under the French and Indonesian law, the parties are entitled to determine that these provisions do not apply to their marriage.
100 In De Nicols the House of Lords restored the order at first instance of Kekewich J, who had been overturned in the Court of Appeal. (De Nichols v Curlier [1898] 1 Ch 403.) This phase of the proceedings was concerned with the moveable property acquired during the marriage.
101 Pursuant to the French law in force at the time of De Nicols the parties to a marriage had a choice as to how matrimonial property could be treated. They could opt out of the 'community of goods' rule, which was the default position in the absence of an express election to the contrary.
102 At first instance, Kekewich J held at 411:
" … [T]he parties did for all proprietary purposes enter into a contract although not expressed."
103 In the House of Lords the relevant principle was variously expressed in the respective judgments:
Lord Chancellor Halsbury referred to a "contract which the law created between" the parties to the marriage (at 26) and went on to say that French law conferred "not only an implied but an actual binding partnership proprietary relation fixed by the law" (at 29).
Lord Macnaghten referred to "a valid compact between spouses as to their property, whether it be constituted by the law of the land or by convention between the parties" (at 33) and characterised the effective French marriage law as "equivalent … to an express contract" (at 33). His Lordship concluded by stating that effect of French law in the present case "was to all intents and purposes … equivalent to a written contract" (at 36), having just referred to characterising another case in terms of "an implied contract" (at 36).
Lord Shand concluded that the parties to the marriage "were … substantially and for all legal purposes in the same position as if they had made their contract in writing" (at 37).
Lord Brampton said the system of community of goods operated by "mutual assent" (at 41) and added: "… they were married …" under French law and "… upon the faith and under the belief that its provisions would regulate the property of both" (at 41). He went on to say, at 44:
"In every civilised country marriage is treated as a contract of grave importance … It involves incidentally an agreement that the spouses will mutually respect and fulfil those marital rights and obligations which are imposed upon them by that law, as incidents inseparable from their matrimonial union … once established, the system becomes a regulation or settlement of their choice, and the expression of their mutual intention to be bound by its provisions, creating mutual legal rights and obligations binding upon each, throughout their married lives."
He concluded at 45:
"In these voluntary and mutual intentions and acts are to be found all the essential elements of a legal contract, rendered so complete and obligatory by the law of France that nothing could in that country annul or give it greater force."
104 As I have indicated this phase of the proceedings in De Nicols was concerned with moveable property. Subsequently Kekewich J came to deal with the immovable property of the marriage. (In Re De Nicols [1900] 2 Ch 410.) Referring to the House of Lords decision with respect to moveable property, Kekewich J said at 413:
"Albeit so restricted, the decision proceeded on the broad principle that a contract operating by force of law in the absence of expression by the parties is as complete and as obligatory as a contract expressed, and must have effect given to it on the same footing."
105 His Honour went on to say, at 414, that the issue before him was whether "in enforcing the contract" immovable property would be treated in the same way as moveable property. The first question was whether or not the real estate was "within the scope of the contract" found to exist on the evidence in the previous proceedings. He held, on the evidence, that immovable property situated abroad was within the provision in the Code.
106 Justice Kekewich then considered the issue of the application of the lex situs and said, at 416:
"According to the decision of the House of Lords, there is here a special nuptial contract between the parties ascertained by reference to the Code, but not less precisely ascertained because it was not reduced into writing in connection with the particular marriage. It ought, therefore … to be carried into effect everywhere, but under the limitations and exceptions belonging to all other classes of contracts, one of which is, that as regards immovables, the lex rei sitae must prevail. There is nothing in the common law of England to make the contract, which we have already seen to be definite, unenforceable respecting the freeholds and leaseholds in question, and if there be any obstacle, it must be found in some statutory provision."
107 He went on to hold that there was no such provision. Similarly, no inhibition arising under the law of New South Wales has been suggested to exist in the present proceedings.
108 Justice Kekewich concluded at 418:
"It is established here by evidence that land acquired by either of the two parties to the contract would by force of the contract be held by him or her on certain terms described briefly by the phrase, community of goods."
109 Justice Kekewich was correct to proceed on the basis that the House of Lords held that, in accordance with French law, there was an implied contract with respect to the distribution of property of the marriage. He held that property included both moveables and immovables.
110 It has been suggested that the "implied contract" approach of De Nicols is both "impracticable and contrary to principle". (Collins et al, Dicey, Morris & Collins: The Conflict of Laws, 14th ed (2006) Vol 2, Thomson, at [28-023].) The learned authors accordingly doubt whether the principle that the law of the matrimonial domicile determines the rights to moveable property also applies to immovable property. They doubt the practicability and the appropriateness of an implied contract approach.
111 There is a hint of an academic turf battle in this analysis - conflicts scholars resenting the intrusion of contracts scholars. In the latter context such issues would usually arise when asking whether there was an intention to enter contractual relations. In my opinion, in contemporary circumstance it is no longer appropriate to act on any presumption that there is no such intention in the context of a marriage. (Cf Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 esp at [24]-[28] with respect to a similar presumption in the context of employment of clergy.)
112 Statutory regimes for distribution of property are so all encompassing that relevant case law does not exist. Subject to any mandatory law of the forum, I do not see any reason why the courts should be reluctant to infer the existence of a marriage contract. (See generally G B Goldberg, "The Assignment of Property on Marriage" (1970) 19 International and Comparative Law Quarterly 557.)
113 There appears to be a drift away from the traditional approach to marriage as a relationship based on status, to a relationship including contractual rights and obligations. (See, eg, Scott and Scott, "Marriage as a Relational Contract" (1998) 84 Virginia Law Review 1225; Keyes and Burns, "Contract and the Family: Whither Intention?" (2002) 26 Melbourne University Law Review 577.) No doubt this reflects changes in society about the expectations of the parties to a marriage.
114 The learned authors of Dicey, Morris & Collins (14th ed) state (at [28-027]) that In Re De Nicols cannot be reconciled with the judgment in Welch v Tennent [1891] AC 639. In Welch v Tennent, the House of Lords decided that the rights of a couple, who married in Scotland and separated, over immovable property in England were governed by the lex situs. The authors reject the suggestion that In Re De Nicols applies where the law of the domicile adopts the "implied contract" theory. The authors disapprove of this distinction because they disapprove of the "implied contract" approach. However, this approach is supported by authority and is, in my opinion, a proper basis for distinguishing Welch v Tennent, upon which the appellant primarily relied in this Court for the proposition that New South Wales law applies to the determination of rights and interests with respect to real estate situated in this jurisdiction.
115 The learned authors of the basic Australian conflicts text do not suggest that there is any conflict between In Re De Nicols and Welch v Tennent. They clearly distinguish the former as a case of what they call a "tacit contract". (See P E Nygh and M Davies, Conflict of Laws in Australia, 7th ed (2002) LexisNexis Butterworths, at [26.7].) They go on to state, on the authority of Welch v Tennent and Callwood v Callwood [1960] AC 659, at [26.8] that:
"Where there is no marriage contract, express or implied, the lex situs determines the application of the matrimonial property regime."