Did the land escheat?
14 The foundation of land tenure in Australian law was identified by Brennan J (with whom Mason CJ and McHugh J expressly agreed) inMabo v Queensland [No 2] (1992) 175 CLR 1 at 47-48 as being derived from the grant of tenure of some kind by the Crown; see too at 81 per Deane and Gaudron JJ. Brennan J said that one incident of such tenure was the Crown's right to escheat: Mabo 175 CLR at 48; see too at 80 per Deane and Gaudron JJ. And in Wik Peoples v Queensland (1996) 187 CLR 1 at 90-91 Brennan CJ explained that the doctrines of tenure, of which escheat is an incident, and of estate, ensure that no land in which the Crown has granted an interest is ever without a legal owner. Escheat was abolished in England by s 45(1)(d) of Administration of Estates Act 1925 (Imp). What escheat involves at common law was elegantly explained by the Earl of Selborne LC giving the opinion of the Judicial Committee in Attorney-General of Ontario v Mercer (1883) (8 App Cas 767) at 772. First, the Lord Chancellor quoted the following from Coke on Littleton 13a:
" 'Escheat' is a word of art, and signifieth properly when by accident the lands fall to the lord of whom they are holden, in which case we say the fee is escheated."
His Lordship then continued:
"The writ of escheat, when the tenant died without heirs, was in this form:- 'The King to the Sheriff, &c. Command A., &c., that he render to B. ten acres of land, with the appurtenances, in N., which C. held of him, and which ought to revert to him, the said B., as his escheat, for that the said C. died without heirs' (F. N. B., 144 F.). If there was a mesne lord, the escheat was to him; if not, to the King.
From the use of the word 'revert', in the writ of escheat, is manifestly derived the language of some authorities which speak of escheat as a species of 'reversion'. There cannot, in the usual and proper sense of the term, be a reversion expectant upon an estate in fee simple. What is meant is that, when there is no longer any tenant, the land returns, by reason of tenure, to the lord by whom, or by whose predecessors in title, the tenure was created. Other writers speak of the lord as taking it by way of succession or inheritance, as if from the tenant, which is certainly not accurate. The tenant's estate (subject to any charges upon it which he may have created) has come to an end, and the lord is in by his own right."
15 Secondly, as the Lord Chancellor identified, escheat did not authorise the Crown (or mesne lord) to make a new grant of the land as an automatic or immediate consequence of there being no one to take land on the death of its owner. Title to land by escheat did not appear to be acquired by the mesne lord or the Sovereign automatically without an act of the superior tenant (the lord or the Sovereign). As Blackstone explained in his Commentaries on the Laws of England (15th Ed; 1809) Vol 2 at pp 244-245; see also at pp 72, 88, 246 (citations omitted):
"…in order to complete this title by escheat, it is necessary that the lord perform an act of his own, by entering on the lands and tenements so escheated, or suing out a writ of escheat: on failure of which, or by doing any act that amounts to an implied waiver of his right, as by accepting homage or rent of a stranger who usurps the possession, his title by escheat is barred. It is therefore in some respect a title acquired by his own act, as well as by act of law."
16 At least after the Escheat (Procedure) Act 1887 (Imp) came into force, in England and Wales (excluding the position in the Duchy of Lancaster) escheat could only occur after a process of inquiry: 10 Halsbury's Laws of England (2nd Ed) at 617-618 [910]. The Clerk of the Crown in Chancery would issue a commission of inquiry after a suggestion that land had escheated to the Crown. The commissioners were directed to inquire in public by a jury of twelve whether, in substance, the deceased died without heirs and had held any land not disposed of by will and, if so, to identify who presently held the land and whether it had devolved to the Crown by escheat. The inquisition that stated the findings of the commission had to be in writing under the hand and seals of the commissioners and jurors who concurred in the result: 9 Halsbury's Laws of England (2nd Ed) pp 699-700 [1192]-[1198].
17 In re Stone; Read v Dubua (1936) 36 SR (NSW) 508 at 517 Jordan CJ, with whom Davidson J agreed, said that at common law if a cestuis que trust or mortgagor of land died without heirs and intestate, the trustee or mortgagee in whom the legal estate had vested henceforth held the land free from the trusts or from the equity of redemption and the doctrine of escheat did not apply. Escheat could not occur if the Crown or the mesne lord had a tenant: 10 Halsbury's Laws of England (2nd ed) 616 [907]. In Beale v Symonds (1853) 16 Beav 406 at 413 [51 ER 835 at 838] Sir John Romilly MR held that no escheat occurred if a legal tenant was in possession of land (even if he or she were originally a trustee and the cestuis que trust had died without heirs and no further beneficiary had been identified in the trust deed or conveyance to take the beneficial interest). He followed the decision of Lord Henley (Lord Keeper) and Clarke MR, Lord Mansfield CJ dissenting, in Burgess v Wheate (1759) 1 Eden 177 [28 ER 652] finding that a mortgagee, who held the legal title in fee to land in consequence of a mortgage from a deceased who died intestate without heirs, first, did not lose the title by escheat but, secondly, could not deal with it as absolute owner free of the equity of redemption being available to discharge any subsisting (enforceable) debts of the deceased: Beale 16 Beav at 415-416; [51 ER at 839].
18 When he dealt with a mortgagee's position after a disclaimer of land by a trustee in bankruptcy of the mortgagor under s 23 of the Bankruptcy Act 1869 (Imp), Sir George Jessel MR despaired that there was no one entitled to take the estate except the Crown, and continued in In re Mercer and Moore (1880) 14 Ch D 287 at 295-296:
"This, however, is no way of getting out of the difficulty -- indeed you get into a worse difficulty here, for how are you to get the estate out of the Crown again? There are no means that I know of except by actual grant or by the will of the Crown to get back a legal estate, which would be a very awkward result and very prejudicial to many titles in this part of the country, especially where these titles are very common. If that is not so, I do not know where the estate is."
19 After noting up these difficulties with the operation of the doctrine his Lordship commented:
As I have said before, I am not sure here that the estate is in the Crown, but if it is not in the Crown I do not know where it is. At all events it is not in the trustee in bankruptcy, and has not been conveyed, therefore, to the present vendors. Therefore they cannot convey to the present purchasers. I have looked into the Trustee Act , and I do not see any mode of getting in the legal estate. The Trustee Act does not provide for want of an heir.
20 The English legislation provided that after a disclaimer, any person interested in any disclaimed property could apply to the court and it could make orders for the possession of the property (see 14 Ch D at 290).
21 The position identified by Jessel MR was accepted as correct in relation to disclaimers by liquidators and trustees in bankruptcy in a series of Australian cases decided prior to the enactment of ss 13H and 13J of the RP Act, and collected by Bowen CJ in Eq in Re Middle Harbour Investments Ltd and the Companies Act [1977] 2 NSWLR 652 at 662A-G, see too at 662G-664G; and Needham J in Re Tulloch Ltd 3 ACLR at 812-813 (followed by Madgwick J in In the Matter of Woo; National Australia Bank v Leroy [2003] FCA 862 at [10]); see too the discussions by Napier CJ in Ex parte Cleland & Teesdale Smith [1960] SASR 199 at 209,Bryson J in Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (in liq) (1998) 45 NSWLR 556 at 563B-566A (who did discuss ss 13H and 13J) and by EM Heenan J in Rams Mortgage Corporation Ltd v Skipworth (No 2) (2007) 239 ALR 799 at 800-802 [6]-[11]. In Re Condobolin Bila CDEP Ltd (deregistered); Commonwealth v New South Wales (2006) 59 ACSR 682, Gyles J held that where land had been purchased by a company using grant moneys from a Commonwealth body that later was wound up and the liquidator disclaimed the land, it should be ordered pursuant to s 568F of the Corporations Act 2001 (Cth) to vest in the Commonwealth, the State having submitted to any order the Court might make.
22 Bryson J noted that under s 13J where Crown land was brought under the provisions of the RP Act, the State's title was recorded as held for an estate in fee simple: Sandhurst45 NSWLR at 563F. And, he observed that only the interest of the owner of the fee simple went out of existence on an escheat under the RP Act so that the land reverted to the Crown subject to any mortgages or charges: Sandhurst45 NSWLR at 564E. Bryson J concluded that the Crown owned the fee simply as the consequence of an escheat on a disclaimer even if no recording reflecting these events had been made in the Register under s 13H. He said (Sandhurst45 NSWLR at 565G-566H):
"Proof of ownership has stepped outside or beyond the Torrens System; when the whole facts are seen they show that the person who, according to the register, is apparently the fee simple owner in truth is not."
23 I think that the better view may be that by force of a disclaimer under the Bankruptcy Act (or Div 7A of Pt 5.6 of the Corporations Act)the title to the fee simple or other property does not escheat absolutely to the Crown in right of the State because the Court can make an order vesting that title in someone else. The Court's power to make such a vesting order is created by a law of the Commonwealth (s 133(9) of the Bankruptcy Act or s 568F(1) of the Corporations Act). By force of s 109 of the Constitution that law supplants any inconsistent automatic operation of a law of a State to the extent that some form of immediate and indefeasible escheat to the Crown in right of the State would otherwise have occurred. As I have observed, the ordinary incidents of an escheat are not readily seen as conformable with its suggested application to disclaimers. However, it is not necessary to express a final view, since this matter was not argued and I do not need to decide it.
24 In the administration of bankrupt or insolvent estates, there is good reason for the Court to be cautious before uncritical acceptance of the application of the ancient doctrine of escheat, in light of its power to vest the disclaimed property in a person the Court considers (judicially) appropriate. An order divesting the Crown in right of the State of property that fell in to its radical title by escheat, may entitle the Crown to compensation on just terms for the loss of that title under s 51(xxxi) of the Constitution, where, for example, the Court concluded under s 133(9) of the Bankruptcy Act that any surplus after a mortgagee sale should be distributed to the bankrupt's unsecured creditors. The permanent deprivation of that asset from the estate merely because the trustee in bankruptcy disclaimed may work an unfairness to the unsecured creditors and give a windfall to the Crown in right of the State.
25 In addition, given that now such disclaimers and vesting orders occur under laws of the Commonwealth, the question may arise as to whether any escheat or remaining interest in the property after a disclaimer should be treated as falling into the Crown in right of the Commonwealth rather than the State: cf Attorney-General of Ontario 8 App Cas 767. And, in The King v Attorney-General of British Columbia [1924] AC 213 at 218-219 esp at 219 Lord Sumner observed that the principles upon which escheat and bona vacantia fall to the Crown are that where there is no private person entitled, the Crown takes: see too Land Law (5th ed) where at pp 76-77 Professor Butt suggests that the only remnants in Australia of the doctrine of escheat are in the case of disclaimers by trustees in bankruptcy or liquidators. Because s 133(9) of the Bankruptcy Act preserves the possibility that the Court may vest disclaimed property in a person these doctrines may not operate in an unqualified way in the current legislative scheme. Once again, this is not the occasion to decide these questions, but they will require attention at some time.